Federal Reserve Bulletin, 1997-07

VOLUME 83 • NUMBER 7 • JULY 1997 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 G J. Virgil Mattingly, Jr. • Michael J. Prell LJ 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 543 SURVEY OF FINANCE COMPANIES, 1996 federal funds rate around the level desired by the Federal Open Market Committee (FOMC). As Finance companies are major suppliers of credit was the case last year, the need for permanent to consumers and businesses. The sector is made reserve additions was relatively modest as up of roughly 1,250 nondepository financial demand for currency grew moderately and institutions, with 20 firms accounting for threereserve requirements declined because of the fourths of the receivables. The Federal Reserve continued spread of sweep programs at commer- System has been surveying the assets and liabilicial banks. The decrease in operating balances ties of finance companies, typically at five-year of depository institutions at Reserve Banks had intervals, since June 1955. This article summaan impact on bank reserve management straterizes the results of the 1996 survey. Special gies and the Desk's choice of operations. The features of that survey are a breakdown of auto- Desk paid close attention to the daily pattern of mobile leases into consumer and business comreserve demands and, by tailoring its operations ponents and, relative to previous surveys, greater accordingly, maintained funds trading close to detail on the composition of real estate credit the FOMC's desired rate. and more information on securitized loans and leases. 575 INDUSTRIAL PRODUCTION AND CAPACITY UTILIZATION FOR MAY 1997 557 THE ISSUANCE OF SERIES-]996 $100 FEDERAL RESERVE NOTES: GOALS, Industrial production increased 0.4 percent in STRATEGY, AND LIKELY RESULTS May, to 119.7 percent of its 1992 average, after an upward-revised increase of 0.3 percent in In March 1996, the Federal Reserve began issu- April. The utilization of industrial capacity ing series-1996 $100 Federal Reserve notes. edged up 0.1 percentage point in May, to Culminating a cooperative effort by the U.S. 83.7 percent. Department of the Treasury and the Federal Reserve System that dated from the 1980s, the 578 STATEMENT TO THE CONGRESS series-1996 note was the first major design change in U.S. currency in sixty-six years. The Alan Greenspan, Chairman, Board of Governew note was developed to provide better pro- nors, presents the views of the Board of Govertection for users of U.S. currency against the nors of the Federal Reserve System on the growing threat of counterfeiting, especially that Financial Services Competitiveness Act of 1997, posed by increasingly affordable and capable a bill proposed to reform the Glass-Steagall color scanning and printing systems. This article prohibitions to permit the affiliation of banks discusses the Federal Reserve's strategy for and securities firms, and says that the Board issuing newly designed $100 notes and says that believes that this bill would improve the effiit appears likely to achieve its objectives: a ciency and competitiveness of the financial serreplacement of pre-series-1996 $100 notes that vices industry and result in better service to is timely in relation to the developing threat of consumers but opposes the authorization of socounterfeiting, with a minimum impact on called operating subsidiaries of banks to engage holders and users of those notes throughout the in some financial activities not permitted to their world. parent bank, before the House Committee on Banking and Financial Services, May 22, 1997. 565 OPEN MARKET OPERATIONS DURING 1996 584 ANNOUNCEMENTS During 1996, the Trading Desk at the Federal Reserve Bank of New York managed reserve Amendment to Regulation C. conditions with the objective of maintaining the Proposal to amend Regulation J. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Publication of 83rd Annual Report, 1996. AI FINANCIAL AND BUSINESS STATISTICS Change in Board staff. These tables reflect data available as of May 28, 1997. 585 MINUTES OF THE MEETING OF THE FEDERAL OPEN MARKET COMMITTEE HELD ON MARCH 25, 1997 A3 GUIDE TO TABULAR PRESENTATION A4 Domestic Financial Statistics At its meeting on March 25, 1997, the Commit- A42 Domestic Nonfinancial Statistics tee adopted a directive that called for a slight A50 International Statistics increase in the degree of pressure on reserve positions and that did not include a presumption about adjustments to policy during the inter- A63 GUIDE TO STATISTICAL RELEASES AND meeting period. SPECIAL TABLES 591 LEGAL DEVELOPMENTS A66 INDEX TO STATISTICAL TABLES Various bank holding company, bank service A68 BOARD OF GOVERNORS AND STAFF corporation, and bank merger orders; and pending cases. A70 FEDERAL OPEN MARKET COMMITTEE AND 631 COMBINED FINANCIAL STATEMENTS OF STAFF; ADVISORY COUNCILS THE FEDERAL RESERVE BANKS A72 FEDERAL RESERVE BOARD PUBLICATIONS These financial statements were prepared by an independent accounting firm and certify the A74 MAPS OF THE FEDERAL RESERVE SYSTEM combined statement of condition of the Federal Reserve Banks as of the end of 1996 together with related statements of income and changes A76 FEDERAL RESERVE BANKS, BRANCHES, in capital. AND OFFICES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Survey of Finance Companies, 1996 James D. August, Michael R. Grupe, Charles Luckett, the sources of funds for these companies.2 This article and Samuel M. Slowinski, of the Board's Division of summarizes the results of the most recent survey, Research and Statistics, prepared this article. Wayne which covers balance sheet information as of C. Cook, Pamela F Gerbino, and Hank Leddon pro- June 30, 1996.3 Special features of the 1996 survey vided research assistance. are a breakdown of automobile leases into consumer and business components and, relative to previous Finance companies are major suppliers of credit to surveys, greater detail on the composition of real businesses for motor vehicles and other equipment estate credit and more information on securitized and to individuals for motor vehicles and other con- loans and leases.4 (See appendix A for details of the sumer goods and services. Finance companies also survey's sampling procedures and for balance-sheet participate to a lesser extent in the provision of home results by size of company.) equity loans and commercial mortgages. At year-end 1996, the value of assets owned or securitized by finance companies—total business and consumer RECEIVABLES REPORTED BY FINANCE loans and leases and real estate-related receivables— COMPANIES was slightly more than $800 billion. In funding these receivables, finance companies have a sizable pres- Over the period bounded by the last two surveys ence as borrowers in the markets for commercial (1990-96), the total value of receivables owned or paper and corporate bonds and as issuers of asset- securitized by finance companies increased more than backed securities. 50 percent, to $771 billion (table 1) (all survey data Roughly 1,250 nondepository financial institutions reported here are as of June 30 of the relevant year). make up the finance company sector. These institu- Over that period, which encompassed an economic tions cover a broad range of types, from highly recession and subsequent recovery and expansion, diversified providers of financial services to narrowly industry receivables grew at a compound annual rate specialized firms and from multibillion-dollar organi- of 7.3 percent, about 3 percentage points faster than zations with nationwide operations to local small- the growth of nominal GDP. Of special note in the loan companies with less than $10 million in assets. 1996 survey data is the shift in the share of total Despite the diversity among firms, however, asset receivables from business, which declined seven perownership is heavily concentrated: More than three- centage points, to consumers, which rose six points. fourths of the industry's receivables are owned or Even so, business receivables remained the largest securitized by the 20 largest firms (see box "Industry component as of mid-1996. The share of receivables Concentration," p. 548).' related to real estate in 1996, 13.5 percent, was roughly the same as it was in 1990. The Federal Reserve System has been surveying the assets and liabilities of finance companies, typi- Another important development during the period cally at five-year intervals, since June 1955. The was the growth of securitization as an alternative to quinquennial survey is designed primarily to estab- on-balance-sheet financing. Securitization involves lish benchmark data for the System's monthly pub- pooling loans together, selling securities with the lished series on the outstanding receivables of finance companies and to provide a comprehensive update on 2. Monthly data on finance company activities are collected on the Domestic Finance Company Report of Consolidated Assets and Liabilities (FR 2248; OMB No. 7100-0005) and published in the G.20 Federal Reserve Statistical Release, "Receivables Outstanding at Finance Companies." I. Owned receivables are those assets that are held and financed 3. The survey was originally scheduled for June 1995, but delays in directly on the balance sheet. Securitized receivables—also referred to implementation caused a one-year postponement. within the finance company industry as "managed" receivables—are 4. The confidentiality of data on individual companies precludes those assets that have been securitired with servicing rights retained, reference to the position of particular firms in the various credit thereby generating fee income as off-balance-sheet items. markets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

544 Federal Reserve Bulletin • July 1997 pooled loans as collateral, and removing the loans As business credit grew as a share of finance from the balance sheet. Securitized receivables company activity in the 1980s, finance companies jumped from $25 billion (5 percent of total receiv- increased their share of all short- and intermediateables) in 1990 to $126 billion (16 percent of the total) term business credit, from about 19 percent in 1985 in 1996. Although consumer receivables continued to to 25 percent at the time of the 1990 survey (table 3). represent more than half of total securitized receiv- Numerous factors played a role in the shift in market ables at mid-1996, securitized business receivables shares between commercial banks and finance comexpanded more rapidly over the period. panies. Although the relative importance of each is not entirely clear, they likely included financial deregulation, which created a more competitive envi- Business Receivables ronment between bank and nonbank lenders; industry consolidation, which sharply reduced the number of Decades ago, consumer loans formed the largest part commercial banks; risk-based capital regulations, of finance company assets, but business finance sur- which increased the capital required of large portions passed consumer finance in the mid-1970s, and has of the banking industry; and substantial loan losses, exceeded consumer finance each year since then. At which led many banks initially to tighten the terms $341 billion, or 44 percent of total receivables, busi- and standards for underwriting business loans and to ness receivables in 1996 were the largest part of strengthen their capital positions.5 finance company operations. But in terms of growth The slowing in the growth of business receivables rate, business lending has fallen back; its 4.7 percent at finance companies during the current decade compounded annual growth rate over the 1990-96 reflects a less rapid pace of short- and intermediateperiod was about half that of total consumer term business borrowing in general, but also more receivables. gradual gains in market share by these firms. A factor The financing of non-automotive capital equipthat likely contributed to the latter development was ment formed the largest and fastest growing of the the opportunity perceived by the industy for substanthree components of business finance, accounting for tial profits in such consumer products as credit cards 60 percent of total business receivables in the 1996 and "subprime" (higher risk) lending. survey, compared with about half in the 1990 survey Ironically, another factor helping to slow the (table 2). The other two components of business growth of business receivables at finance companies receivables at finance companies are motor vehicles may have been the relatively favorable macroand a miscellaneous category ("other") that includes economic conditions over the second half of the the financing of accounts receivable and whose share 1990-96 period. The strengthening economy of 1992 dropped considerably from the earlier survey. and beyond likely boosted the demand for financial services by new and expanding small businesses, a Major categories of finance company receivables segment of the economy to which commercial banks outstanding, owned and securitized, by category, 1990 historically have been the major providers of credit and 1996 and other financial services. Data from the 1993 Billions Growth Share of total National Survey of Small Business Finances of dollars (percent) (percent) (NSSBF) indicate that 41 percent of small businesses Category 1990 1996 Cumu- Annual 1990 1996 obtained credit lines, loans, and leases from deposilative rate tory lenders, including commercial banks and thrift Total 50S.3 771.4 52.7 7.3 100 100 institutions, but only 19 percent of these businesses Owned 480.4 645.0 34.3 5.0 95.1 83.6 turned to nondepository lenders, primarily finance Securitized 24.9 126.4 408.4 31.1 4.9 16.4 Business 258.9 341.3 31.8 4.7 51.2 44.2 Owned 255.8 305.7 19.5 3.0 50.6 39.6 Securitized 3.1 35.6 1,051.5 50.3 .6 4.6 5. For a more complete discussion of factors affecting bank and Consumer ....... 185,2 326.3 76.2 9.9 36.7 42.3 Owned 163.4 259.0 58.5 8.0 32.3 33.6 nonbank competition, see Rebel A. Cole, John D. Wolken, and Securitized 21.8 67.3 209.2 20.7 4.3 8.7 R. Louise Woodburn, "Bank and Nonbank Competition for Small Business Credit: Evidence from the 1987 and 1993 National Surveys Real estate 61.2 103.8 69.5 9-2 12.1 13.5 of Small Business Finances," Federal Reserve Bulletin, vol. 82, Owned 61.2 80.4 31.2 4.6 12.1 10.4 Securitized .... n.a. 23.5 n.a. n.a. n.a. 3.0 November 1996, pp. 983-95, and other references contained therein. See also Mark Carey, Mitchell Post, and Steven A. Sharpe, "Does MEMO Corporate Lending by Banks and Finance Companies Differ? Evi- Total net assets .. 530.7 824.6 55.4 7.6 dence on Specialization in Private Debt Contracting," revision of NOTE. AS of June30. Finance and Economics Discussion Series 96-25 (Board of Governors n.a. Nor available. of the Federal Reserve System, January 1997). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Survey of Finance Companies, 1996 545 companies, for such credit products.6 Strengthening changes may have prompted some depository lenders balance sheets of business firms since 1993 may have to be more aggressive in seeking out opportunities for encouraged banks to ease lending standards for their lending to small businesses. business customers, and bank lending to businesses in general has rebounded strongly since 1993 Equipment Finance (although the bank share declined over the 1990-96 period as a whole). Equipment finance maintained a relatively strong As is true for business lending in general, the level growth rate of 8 percent between benchmarks of business receivables at finance companies may be (table 2). Details are not collected on the specific understated to some extent by business use of credit types of capital goods covered by equipment finance, instruments treated in the statistics as consumer or but computers, other office machines, airplanes, and real estate loans. Many small business owners rely construction equipment probably form the largest on mortgages and personal credit cards to provide subcategories. Leasing has long been the most compart of their overall financing needs. For example, mon form of equipment finance provided by these 39 percent of the respondents to the 1993 NSSBF companies; in both the 1990 and 1996 surveys, about reported using a personal credit card for business two-thirds of equipment receivables were leases. purposes. Finally, 1995 revisions to the Community Reinvestment Act of 1977 require larger depository Motor Vehicle Finance institutions to disclose information about their small business lending, thereby sharpening the focus on Motor vehicle finance reached nearly $90 billion in such lending in the assessment of the performance June 1996. The wholesale category consists mainly of creditors covered by the act.7 These regulatory of inventory ("floor plan") financing for automobile and truck dealers, provided chiefly by the finance subsidiaries of the car and truck manufacturers. In the 6. The 1993 survey was cosponsored by the Federal Reserve Board 1996 survey, finance companies had $32 billion in and the U.S. Small Business Administration to collect information about the sources and types of financial services obtained by smalj wholesale motor vehicle receivables, about the same businesses. See Rebel A. Cole and John D. Wolken, "Financial as in 1990. However, a notable change from the Services Used by Small Businesses: Evidence from the 1993 National previous survey was the additional $22 billion of Survey of Small Business Finances," Federal Reserve Bulletin, vol. 81, July 1995, pp. 629-67. securitized wholesale receivables. At the time of the 7. The acl was intended to encourage depository institutions to 1990 survey, the practice of securitizing wholesale meet the credit needs of households and small businesses in the receivables had just been initiated, and the total of communities where the institutions are chartered. For a description of the act and its evolution during the 1980s and 1990s, see Griffith L. such instruments then amounted to only about $1 bil- Garwood and Dolores S. Smith, "The Community Reinvestment Act: lion. About one-fourth of all business motor vehicle Evolution and Current Issues," Federal Reserve Bulletin, vol. 79, credit is now funded by securitization. April 1993, pp. 251-67. 2. D'lNtribuiion of busint•ss receivables outstanding at finance •ompanics, by category, 1990 ami iyy Share of category Share of total Billions of dollars Growth (percent) (percent) (percent) Category Annual 1990 1996 Cumulative 1990 1996 1990 1996 rate Total 258.9 3413 31.8 4.7 100 100 100 100 129.4 205.0 58.4 8.0 100 100 50.0 60.1 Loans ,. 40.0 58.2 45.5 6.4 30.9 28.4 15.5 17.1 Leases 89.4 137.9 54.2 7.5 69.1 67.3 34.5 40.4 Securitized n.a. 8.9 n.a. n.a. n.a. 4.4 n.a. 2.6 Motor vehicle 67.1 89.3 33.0 4.9 100 100 25.9 26.2 Wholesale 32.9 32.3 -1.8 -03 49.0 36.2 12.7 9,5 1.0 22.2 2,143.8 67.9 1.5 24.9 .4 6.5 Retail Loflm . .. . 29.2 250 -14.1 -2.5 43.4 28.0 11.3 7.3 2.0 7.8 291.4 25.5 3.0 8.7 .8 2.3 Securl liied 2.1 1.9 -7.6 -1.3 3.1 12 .8 .6 Other 62.4 47.1 -24.5 -4.6 100 100 24.1 13.8 62.4 44.6 -28.5 -S.4 100 94.7 24.1 13.1 Secuciiized n.a. 2,5 n.a. n.a. n.a. 5.3 n.a. .7 NOTE. AS of June 30. n.a. Not available. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

546 Federal Reserve Bulletin • July 1997 Retail finance of motor vehicles for business two-thirds of total consumer finance in the latest customers consists mainly of loans and leases to survey. Revolving credit (mainly credit card receivrelatively small businesses operating small fleets of ables) doubled during the period, but at $47 billion vehicles. (Larger companies typically obtain their still constituted a relatively small part of total confunds for financing such capital expenditures from sumer finance. "Other" consumer loans, composed earnings and the direct issuance of debt in capital of personal cash loans, sales finance contracts, and markets.) As of June 1996, finance companies had other, smaller pieces, lagged a bit in growth. The lag $25 billion in retail vehicle loans to businesses and partly reflects the more widespread availability and about $8 billion in retail leases; an additional $2 bil- use of credit cards, which have become more convelion of retail loans and leases had been securitized. nient substitutes for many types of consumer loans in the "other" category. Other Business Receivables Motor Vehicle Finance Little detail is available on the composition of "other" business receivables. It includes commercial The "captive" subsidiaries of the motor vehicle accounts receivable, factored commercial accounts, manufacturers are by far the largest source of motor floor-plan loans for dealers in non-automotive goods, and small cash loans to businesses or farms.8 The vehicle finance among finance companies. Through financial incentives and innovative products, the capcategory declined over the period between benchtives help their parent manufacturers smooth fluctuamarks, dropping from $62 billion in 1990 to $47 biltions in motor vehicle demand arising from changes lion in 1996. in macroeconomic and financial market conditions. In this regard, they have played a key role since the mid-1980s in popularizing the motor vehicle lease as Consumer Receivables a consumer product. In 1985, revisions to the federal tax code phased Consumer finance has been the fastest growing segout the deducibility of interest payments on conment of finance company activities in the current sumer loans and thus boosted the relative appeal to decade, expanding at a 9.9 percent compound annual consumers of leases for financing the acquisition of rate between the 1990 and 1996 surveys (table 4). automobiles, light trucks, and sport utility vehicles. Consumer receivables, including securitized loans In the latter part of the decade, automakers began and leases, reached $326 billion at mid-year 1996, up offering highly attractive lease terms as a marketing from $185 billion at mid-1990. On the strength of a tool through their finance company subsidiaries. They three-fold increase in car and truck leasing, motor reduced monthly lease payments by calculating them vehicle finance has been the main force behind the with relatively low implicit interest rates and high expansion of consumer receivables; it accounted for residual values (the latter of which results in less depreciation to be financed by the lease payment); this approach is a marketing strategy comparable to 8. "Other" business receivables refers to any loans or other types that for sales earlier in the decade, in which they used of credit (including equipment operating leases) a survey respondent reports after being queried about commercial vehicle loans, "floor below-market interest rates on loans and cash rebates plan" financing (financing of inventory of motor vehicle dealers), to spur auto sales. Vigorous promotion of leasing was loans for business, industrial, and farm equipment, and most types of extended to the light truck segment in the early leasing. See appendix B for added detail on "other" business 1990s. As a result of these developments, consumer receivables. 3. .Selected domestic source* of .short- and inierniedkiie-ierm business credit, selected years. 1980—96 Outstanding (billions of dollars) Share of total (percent) Source 1980 1985 1990 1996 1980 1985 1990 1996 Total 423.9 787.6 1,020.4 1,215.5 100 100 100 100 297.3 568.6 619.3 676.9 70.1 72.2 60.7 55.7 Direct (commercial paper) .. 40.5 71.7 142.2 197.3 9.6 9.1 13.9 16.2 Finance companies 86.1 147.3 258.9 341.3 20.3 18.7 25.4 28.1 No IE. As of June 30. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Survey of Finance Companies, 1996 547 motor vehicle leases outstanding at finance com- Revolving Credit panies (including securitized leases) grew from an estimated $22 billion in mid-1990 to a reported Revolving credit at finance companies consists $94 billion in mid-1996 (about 27 percent compound almost entirely of balances outstanding on credit card annual growth).9 accounts (revolving home equity loans are classified The surge in lease receivables has reestablished as real estate debt). These receivables, including a bit finance companies as the largest supplier of motor more than $6 billion of securitized credit card debt, vehicle financing to consumers, a position that amounted to $47 billion in the 1996 survey, double commercial banks had held since the late 1950s. the level of outstandings in 1990. A substantial part Total consumer automotive receivables rose from of these receivables—about $18 billion in mid- $118 billion to $217 billion at finance companies 1996—are originated and carried at bank subsidiaries from 1990 to 1996, whereas at banks such receiv- of large, diversified finance companies. However, in ables rose during the period from $132 billion to only view of the more than $450 billion of revolving credit $160 billion.10 Although the lion's share of such balances outstanding at all lenders as of mid-1996, growth at finance companies was attributable to leas- finance companies play a relatively small role in this ing, loans outstanding (both on book and securitized) sector of the consumer finance market. expanded 28 percent, a $27 billion increase that nearly matched the increase at banks over the sixyear period. Finance companies took advantage of Other Consumer Receivables continuing strong investor demand for asset-backed securities to securitize most of the loan growth, "Other" consumer receivables comprises a diverse thereby restraining the growth of assets carried on mix of nonmortgage consumer loans, and they registheir balance sheets and thus minimizing the need for tered only slow growth over the 1990-96 period. direct financing. This move was probably instrumen- Personal cash loans, once the preeminent loan prodtal in allowing the companies to maintain highly uct of non-automotive finance companies, is probably favorable debt ratings while significantly expanding the largest component of "other."11 Sales finance their role as suppliers of motor vehicle finance. contracts—loans made to finance the purchase of specific items (such as furniture or appliances) and usually originated by retail stores and sold to finance 9. The 1990 survey did not collect information on motor vehicle leases separately for consumers and businesses; only the total was reported. However, for comparison with results of the 1996 survey, 11. "Other" consumer receivables refers to loans and other types individual consumer and business components were estimated using of credit that a survey respondent reported after being queried about the distribution reported in 1996. loans to purchase motor vehicles, revolving lines of credit, and loans 10. The bank data for these years do not include leases, but banks secured by real estate. Companies were not requested to report any have not been very heavily involved in that form of consumer detail for "other" consumer receivables; see definitions (appendix B) finance. for more information on this category. 4. Distribution of consumer receivables at finance companies.by category, WO and 1W6 Outstanding Growth Share of category Share of total (billions of dollars) (percent) (percent) (percent) Category 1990 1996 Cumulative Annual rate 1990 1996 1990 1996 Total 185.2 326.3 76.2 9.9 100 100 100 100 Motor vehicle 118.2 217.3 83.8 10.7 100 100 63.9 66.6 96.1 123.0 28.0 4.2 81.3 56.6 51.9 37.7 Owned 79.8 86.3 8.1 1.3 67.5 39.7 43.1 26.4 Securitized 16.2 36.7 125.7 14.5 13.7 16.9 8.7 11.2 22.2 94.3 325.4 27.3 18.7 43.4 11.9 28.9 Owned 22.2 86.7 291.3 25.5 18.7 39.9 11.9 26.6 Securitized n.a. 7.6 n.a. n.a. n.a. 3.5 n.a. 2.3 23.3 46.5 99.1 12.2 100 100 12.6 14.2 22.5 40.1 78.7 10.2 96.2 86.4 12.1 12.3 Securitized .9 6.3 621.5 39.0 3.8 13.6 .5 1.9 Other 43.6 62.5 43.3 6.2 100 100 23.6 19.2 39.0 45.8 17.4 2.7 89.4 73.2 21.1 14.0 Securitized 4.6 16.7 260.9 23.9 10.6 26.8 2.5 5.1 No IK. As of June 30. n.a. Nol available. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

548 Federal Reserve Bulletin • July 1997 companies—are also a sizable element of this category. The importance of sales finance contracts and Industry Concentration cash loans has dwindled over the years as banks have steadily moved toward the riskier end of the credit- Like surveys in previous years, the 1996 survey revealed risk spectrum in their marketing of credit cards and as further concentration among finance companies. For the twenty largest firms ranked by total net assets, total a number of the large finance companies have estabreceivables as a share of total industry receivables lished credit card operations of their own. Mobile increased a bit, from 69 percent in 1990 to 71 percent in home loans also are classified as "other" consumer 1996 (table). Among the major categories of receivables, receivables and constitute the collateral behind most only business receivables became less concentrated of the securitized receivables labeled "other." among the twenty largest firms, but by only 4 percentage points. The concentration of consumer receivables and real Real Estate Receivables estate receivables jumped during the intrasurvey period, about 8 and 10 percentage points respectively. However, With $104 billion in real estate receivables under the largest increase in concentration came in securitized receivables, which rose 13 percentage points, to 55 permanagement in mid-1996 (table 1), finance compacent. As noted, the growth in both business and consumer nies inhabit only a small corner of the $5 trillion motor vehicle loans was financed in large part by market for residential and commercial mortgage increased securitization. Larger, more well-established credit. Nevertheless, real estate lending has grown securitization programs are likely to provide the greatest vigorously at finance companies in recent years; cost benefits for their sponsoring companies because the receivables increased at a 9.2 percent compound market yields on their securities generally require the annual rate between the 1990 and 1996 surveys.12 smallest risk premiums. The latest survey elicited more detail than did the preceding surveys concerning types of real estate Proportion of finance company receivables, by loans outstanding. Loans to individual homeowners category, held at twenty largest firms, 1990 and 1996 on one- to four-family properties make up the largest Outstanding receivable* at Outstanding element of real estate lending, consisting in 1996 of receivables twenty largest finance companies' $47 billion in loans on book and another $23 billion at all finance Share of all companies Amount securitized. Commercial mortgages, including those Category (billions (billions finance companie* of dollars) of dollars) on farm and multifamily properties, amounted to (percent) $33 billion. 1990 1996 1990 1996 1990 1996 Nearly all of the $71 billion in loans to individuals Total SOS-} 771.4 346.9 547.2 68.6 70.9 represents home equity loans rather than loans to Business 277.9 305.7 186.7 "194.5 67.2 63.6 purchase homes. Most commonly, the home equity Consumer 141.3 259.0 109.6 221.9 77.6 85.7 loans held by finance companies are closed-end with Real estate 61.2 80.4 40.1 61.1 6S.S 76.0 Securitized 243 126.4 10.4 69.8 41.8 55,2 fixed interest rates, but some companies also issue MEMO home equity lines of credit, usually with adjustable Tola! net assets ,.. 530.7 824.6 379.6 638.3 71.5 77.4 interest rates (separate figures on open- and closed- NOTE. AS of June 30. end loans were not collected). Banks have the largest 1. Ranked by total owned assets (excludes securitized assets). presence in the home equity loan market; for June 1996, banks reported $146 billion of open- and closed-end home equity loans on their books. Figures Although home equity loans extended by a finance for lenders other than banks and finance companies company typically rank below the top tier in credit are less precisely measured, but home equity credit in quality, interest rates for these collateralized loans total is estimated to have been about $320 billion in still tend to be lower than most credit card rates. mid-1996; finance companies were thus serving about Moreover, home equity loans also feature longer one-fifth of that segment of the mortgage market. repayment periods than credit card debt. Thus finance companies have marketed home equity loans, in part, as a means of consolidating credit card debt because doing so can reduce the borrower's monthly pay- 12. The quinqennial survey does not collect information on the lending activities of mortgage banking companies. These specialized ments substantially. Moreover, interest paid on a home mortgage lenders function primarily as mortgage originators, home equity loan is a tax-deductible expense, providfinancing their lending activities almost entirely through securitization ing an additional attraction for those who can itemize and generally carrying loans on their balance sheets pending future securitization. such expenses on their tax returns. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Survey of Finance Companies, 1996 549 Home equity lending at finance companies has Subprime loans include those with more lenient grown markedly in the past three years or so, after a underwriting standards (such as high loan-to-value period of sluggish growth in the overall market for ratios), those made to borrowers with blemished such credit. In the early part of the current decade, credit histories, and those with both characteristics. stagnant or declining home values in many areas and One such product introduced in just the past year is the recession's overall damping effect on consumer the so-called one-twenty-five home equity loan, in spending and borrowing deterred households from which the creditor will lend an amount that raises the taking on much additional home equity debt; more- homeowner's total mortgage debt to 125 percent of over, when interest rates fell to twenty-year lows in the home's estimated market value (a condition that 1993, many homeowners liquidated outstanding effectively places at least part of the mortgage outside home equity loans in the course of refinancing all the coverage of the collateral). their mortgage debt into one first-lien mortgage.13 By To assess the level of credit risk associated with 1995, home values were advancing moderately, the subprime lending, finance companies and other lendeconomy was stronger, and the wave of refinancing ers have come to rely increasingly on credit scoring had ebbed: Households were once again using home models as well as on more traditional methods of equity to collateralize debt. Home equity loans from evaluating credit risk. Credit scoring techniques have all sources increased an estimated 11 percent in 1995 been used by many lenders to increase underwriting and 17 percent last year, to a year-end total of about efficiency and reduce loss rates. These models use $350 billion. Growth at finance companies apparently statistical techniques to estimate the probability of exceeded these aggregate increases in both years.14 default on the basis of a variety of loan and borrower Finance companies appear to have increased their characteristics.16 presence in home equity lending even more rapidly following the 1996 survey, funnel ing much of this debt into securitized pools.15 Part of the recent growth SOURCES OF FINANCING AT FINANCE represents an attempt by finance companies to com- COMPANIES pete for business going to the highly profitable credit card segment of consumer lending, which is domi- Finance companies traditionally have operated on a nated by banks; to do so, the finance companies have relatively narrow base of equity. That base remained expanded their use of subprime home equity loans as remarkably stable at around 11 percent of total liabilia logical extension of their traditional business of ties and capital over the 1990-96 period (table 5). In lending to individuals on a largely unsecured basis. addition, borrowings from parent companies as a share of total liabilities and capital also remained unchanged at about 7 percent over the period. 13. For a more complete discussion of the factors that limited The most striking change in the industry's major borrowing against home equity in the early 1990s, see Glenn B. sources of financing since 1990 was the fairly sharp Canner, Thomas A. Durkin, and Charles A. Luckett, "Home Equity Lending: Evidence from Recent Surveys," Federal Reserve Bulletin, decline in its reliance on commercial paper. Its use of vol. 80, July 1994, pp. 571-83. bank loans also slipped. The decline was more than 14. Precise estimates of growth in home equity lending at finance offset by increases in other borrowings in capital companies cannot be made for 1995 and 1996. As noted, the statistics on real estate credit at finance companies were not disaggregated into markets—debt not elsewhere classified (NEC)—and home mortgage and commercial components until the June 1996 in miscellaneous categories of borrowing. survey, nor were comprehensive data on real estate securitizations at In part, the shift in industry financing from comthese companies compiled until that time. Over the second half of 1996, the home mortgage component expanded at a 31 percent annual mercial paper and bank loans to debt NEC and misrate. cellaneous debt likely reflected a pickup among the 15. The types of loans characterized by the "home equity" label highly rated companies in the use of medium-term have expanded significantly in recent years. In the 1980s, the defining characteristic of these loans was their status as second lien real estate notes. The use of this type of financing increased loans. They were used primarily for debt consolidation or home sharply over the 1990-96 period, especially since improvement and also were characterized by relatively low balances, 1992, as many companies used their medium-term shorter maturities, and low overall loan-to-value ratios when combined with other mortgage debt of the borrower. In addition, most note programs to lock in relatively low financing borrowers were considered A-quality credits. costs for periods longer than those typically available More recently, home equity loans have come to be defined primarily by their status as nonconforming loans—including subprime loans—owing either to their more flexible underwriting standards or to the lower overall credit quality of the borrower. Thus, home equity 16. For a more complete discussion of credit scoring models, see loans currently include first or junior lien loans that have fixed or Robert B. Avery, Raphael W. Bostic, Paul S. Calem, and Glenn B. adjustable rates, that have relatively high loan-to-value ratios, and that Canner, "Credit Risk, Credit Scoring, and the Performance of Home Digitizeda rfoe ru FseRdA foSrE hRo me purchase, debt consolidation, or refinancing. Mortgages," Federal Reserve Bulletin, vol. 82, July 1996, pp. 622-48. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

550 Federal Reserve Bulletin • July 1997 5. rinance company nubilities ant capital, I'WO Hid 1 Wfi Outstanding (billions of dollars) i Growth (percent) Share of total (percent) Item 1990 19% Cumulative Annual rate 1990 1996 Bank loans 31.5 17.7 -43.8 -9.2 5.9 2.1 164.0 169.6 3.4 .6 30.9 20.6 36.6 57.1 56.1 7.7 6.9 6.9 Debt not elsewhere classified 171.7 323.7 88.5 11.1 32.3 39.3 Other 649 165.5 155.2 16.9 12.2 20.1 Total liabilities 468.6 733.6 56.5 7.8 88.3 89.0 Capital, surplus, and undivided profits 62.1 91.0 46.4 6.6 11.7 11.0 Total 530.7 824.6 55.4 7.6 100 100 Noir. As ol June 30. in the commercial paper market. For example, a moderately, but the composition of business credit Federal Reserve survey found that medium-term growth changed considerably. Equipment finance— notes outstanding at finance companies, excluding by far the strongest component between the the auto finance companies, doubled from $39 billion surveys—contracted slightly, and "other" business at the end of 1992 to $78 billion at the end of 1996.17 credit reversed a long-term decline by growing at a As discussed above, finance companies have made 13 percent rate. extensive use of securitization in recent years as a Consumer receivables at finance companies grew means to fund the financial services they provide to at a substantially slower pace in the 1996-97 period the business and household sectors. The standard than they did in the preceding six years, a decline that accounting practice is to treat the securitized receiv- was in line with the trend in consumer borrowing ables and the related securities as off-balance-sheet generally. Each component of consumer receivables items; viewed functionally, however, securitization slowed to some extent in the latest period, particuis best understood as a means of financing lending larly motor vehicle finance. Leasing continued to operations that is closely akin to the issuance of grow rapidly but the amount of motor vehicle loans collateralized company debt. outstanding was somewhat below its June 1996 level. Securitization was supporting 13'/4 percent of the Real estate finance has expanded rapidly since the industry's total (balance sheet plus securitized) opera- middle of last year because of hefty gains in the tions as of mid-1996, compared with 4'/2 percent at volume of home equity lending, as discussed above. mid-1990. The proportions of total funding obtained through traditional on-balance~sheet sources were reduced accordingly. For instance, in the June 1996 survey, commercial paper was funding 173/4 percent 6. Major categories of finance company receivables, 1990, 1096. and March 1997 of total finance company activities, compared with 29 Vi percent in the June 1990 survey. Outstanding Annual growth rate (billions of dollars) (percent) Category 1990 1996 March 31. 1990-96 I996-971 1997 DEVELOPMENTS SINCE THE JUNE 1996 BENCHMARK Total 505.3 771.4 800.7 73 S.I Business 258.9 341.3 348.4 4.7 2.8 Equipment 129.4 205.0 202.4 8.0 -1.7 In the nine months between June 30, 1996, and the Motor vehicle .. 67.1 89.3 94.3 4.9 7.5 end of March 1997, the growth of finance company Other 62.4 47.1 51.7 -4.6 13.0 receivables slowed marginally, as a surge in home Consumer 185.2 326.3 336.8 9.9 4.3 Motor vehicle .. 118.2 217.3 224.2 10.7 4.2 equity lending only partly offset a cooling of con- Revolving 23.3 46.5 49.6 12.2 8.9 sumer and business finance (table16). The growth rate Other 43.6 62.5 63.0 6.2 1.1 of the business receivables component slackened only Real estate 61.2 103.8 115.5 9.2 15.0 Households n.a. 70.7 85.1 n.a. 27.2 Commercial n.a. 33.1 30.4 n.a. -10.9 NoTb. Includes leases and securitized receivables as well as loans on company balance sheets. Data for 1990 and 1996 are as of June 30. 17. See Michael P. 0'Ma.lley and Joyce A. Payne, "1996 Survey of 1. Annualized percentage change from June 30, 1996, to March 31, 1997 (not Corporate Medium-Term Notes," Board of Governors of the Federal seasonally adjusted). Reserve System, April 1997. n.a. Not available. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Survey of Finance Companies, 1996 551 Loans to households grew at a 27 percent rate from Follow-up surveys of both the nonrespondents and mid-1996 through March, but the overall gain in real the postal returns were taken to improve the sampling estate receivables was held to a 15 percent rate by a frame and estimate additional companies that belong decline in commercial real estate loans. Much of the in the population. With telephone follow-up methods new volume was securitized: Finance company mort- to expedite the data collection and improve the gages in asset pools increased at a 50 percent annual results, a stratified random sample of 184 nonresponrate. dents yielded 60 usable companies. This outcome As suggested by the developments in real estate allowed the addition of 263 companies to the populafinance, securitization continued to find favor with tion in the same proportion as existed in the sample finance companies as a means to fund the growth of regarding size and specialty class. receivables. In addition to their making sizable In a like manner, a stratified random sample of increases in the amount of home equity loans they 120 postal returns yielded 16 usable companies. pooled as backing for securities, finance companies Applying frequency rates to the usable postal returns also securitized substantial amounts of credit card by size and specialty added an estimated 115 comreceivables and non-automotive consumer loans. panies to the population. Combining these estimates Across all major categories of finance, securitized with the number of usable companies from the prereceivables grew at an 8V2 percent annual rate in the survey mailing, the total number of finance companine months through March 1997, while loans on nies in the population on June 30, 1996, was estibook increased about one-half that rate. mated at 1,237. The June 30, 1996, benchmark survey consisted of two sample groups of companies: the 74 finance APPENDIX A: SAMPLING PROCEDURES companies surveyed monthly for the Domestic Finance Company Report (FR 2248) and a stratified Pre-survey questionnaires were mailed to 3,017 com- random sample of 526 additional companies from panies (the population-frame mailing list) that were the population-frame mailing list. All of the identified from the 1990 survey mailing list, the 74 monthly reporters responded. A total of 157 of the Equipment Leasing Association of America, the 526 sampled companies responded, producing an American Financial Services Association, and vari- effective sample size of 231 companies. Despite the ous publications. Responses to the pre-survey ques- low overall sample response rate of 38 percent, large tionnaire, as well as responses from follow-up sur- companies are well represented. Data were collected veys, determined the sampling frame. Data were from 58 of the 63 companies with assets greater than collected on the size of the company, its primary type $1 billion. These 63 companies are estimated to hold of activity or specialty, and the classification of its about 95 percent of the total net assets of the industry. parent, if any. Companies were deleted from the Population estimates of assets and liabilities were mailing list if they responded to the questionnaire produced using the stratified mean expansion estimawith information that showed they were out of busi- tor. Strata were based on the size and specialty of the ness, were sold to another firm, were not a finance company. The estimator is defined as company, or were a subsidiary of another finance company (table A.I). N(h) * y(h) E n{h) A.I. Responses to tiiuuxje company survey, ny disposition where of forms, 1996 Disposition Number Percent N(h) = total number of companies in stratum h Tool moiled 3,017 100 Retorned.... 2.209 73.2 n(h) - number of sample companies in stratum h Usable 859 28.5 Ntauwble 1,350 44.7 Posml return 836 27.7 y{h) - sample aggregate total for companies in Not a finance company 93 3.1 stratum h Out or business 231 7.6 Finance company •ubadiary 120 4.0 Y(h) = estimated aggregate total for stratum h Bank subsidiary 55 1.8 Other 15 .5 808 26.8 Y = estimated national total. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

552 Federal Reserve Bulletin D July 1997 A,2, Assets and luihihiies outstanding at liiuncc o. by -izc oi romp.my, June 30, Millions of dollars Size of company (net assets, millions of dollars) Item All 5,000 and more 1.000-4,999 20O-999 50-199 10-49 Less than 10 ASSETS Consumer receivables 258,961 234,441 14,566 4,230 3.009 1,494 1,221 Motor vehicle financing ... 173,062 160,380 5.822 4,013 1,828 463 557 Loans 86,333 76.712 2,764 4,013 1,824 463 557 Leases 86,729 83,668 3,058 0 3 0 0 Capital and leveraged 20,736 17.679 3,058 0 0 0 0 Operating 65,993 65.990 0 0 3 0 0 Revolving credit 40.132 38.034 1,983 0 1 99 15 Other 45,767 36,027 6,761 216 1,180 933 649 Loans secured by real estate 80,353 68,101 10,020 1,245 419 371 197 One-to-four family homes 47,258 38.526 8,086 6 217 257 165 Commercial and farm 33,095 29,575 1,934 1.238 203 113 32 Business receivables 305,722 225,528 54,752 17.501 5,430 1,544 967 Motor vehicle hnancing 65.098 58.829 5,080 374 614 59 142 Wholesale 32.294 31,387 785 102 0 0 20 Retail 32,804 27,442 4,295 272 614 59 122 Loans 25,034 21,904 2,786 0 193 29 122 Leases 7,770 5,538 1,509 272 421 30 0 Capital and leveraged 5,879 4,005 1,340 147 362 26 0 Operating 1,891 1,534 169 125 59 4 0 Business, industrial, and farm equipment 161,872 113.569 33,659 11,086 2.502 834 221 Loans (retail and wholesale) 58,169 45,151 9.413 2,960 170 326 148 Leases (capital and leveraged) 103,703 68.418 24,246 8.127 2,332 507 73 Other 44.602 23.797 13,858 5,172 703 467 604 Non-motor vehicle operating leases .. 34,149 29,332 2,155 868 1,610 184 0 All other assets and receivables 251,521 230,266 10,453 7,636 1,978 633 556 Total assets, gross 896,557 758,336 89,792 30,611 10,836 4,042 2,941 Less reserves for unearned income . 58,874 46,150 8,806 2,236 980 347 355 Less reserves for losses 13,106 9.998 1,612 912 356 166 63 Total assets, net 824,576 702,188 79373 27,462 9,500 3,529 2,523 LIABILITIES AND CAPITAL Bank loans 17,690 4,914 6,502 2,532 2,109 928 705 Commercial paper 169,568 152,210 12.484 4,324 440 35 75 Debt due to parent 57,121 25,071 23,438 6,622 1.605 339 47 Debt not elsewhere classified 323,673 300,490 16.637 3,581 1.710 588 668 All other liabilities 165,538 146,252 10.039 6.940 1,414 601 293 Capital, surplus, and undivided profits 90,985 73,252 10,272 3,464 2.222 1,038 736 Total liabilities and capital 824,576 702,188 79,373 27,462 9,500 3,529 2,523 MEMO SECURITIZED RECEIVABLES Consumer receivables 67,304 62,373 479 3,751 655 44 0 Motor vehicle financing 44.241 39,865 107 3,751 518 0 0 Loans 36,675 32.298 107 3.751 518 0 0 Leases (capital and leveraged) ... 7,566 7,566 0 0 0 0 0 Revolving credit 6.320 6,276 0 0 0 44 0 Other consumer receivables 16,742 16,233 372 0 137 0 0 Loans secured by real estate 23,455 21,074 2.380 0 0 0 0 One-lo-four family 23,445 21,074 2.371 0 0 0 0 Commercial and farm 10 0 10 0 0 0 0 Business receivables 35,594 26,960 7.175 1,257 69 115 17 Motor vehicle financing 24,155 21.510 2,592 12 37 4 0 Wholesale 22,214 21.339 875 0 0 0 0 Retail 1,941 171 1,717 12 37 4 0 Loans 1,888 171 1,717 0 0 0 0 Leases 53 0 0 12 37 4 0 Capital and leveraged 12 0 0 12 0 0 0 Operating 41 0 0 0 37 4 0 Business, industrial, and farm equipment 8,944 4,468 3.630 702 33 111 0 Loans (retail and wholesale) . 4,864 1,234 3,630 0 0 0 0 Leases (capital and leveraged) 4.081 3.234 0 702 33 111 0 Other 2,495 983 953 543 0 0 17 Total securitized receivables 126^52 110,408 10,034 5,009 725 160 17 Number of companies responding to survey 231 30 28 23 32 41 77 Estimated number of companies in population 1.237 30 33 54 87 138 895 NOTE. See definitions in appendix Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Survey of Finance Companies, 1996 553 APPENDIX B: DEFINITIONS OF CATEGORIES consumer goods other than passenger cars and mobile homes. A single contract governs multiple use of the For purposes of this survey, a finance company is account and purchases may be made with a credit defined as a company (including Morris Plan com- card. Generally, credit extensions can be made at the panies but excluding banks, credit unions, savings consumer's discretion, provided that they do not and loan associations, cooperative banks, and savings cause the outstanding balance of the account to banks) in which the largest portion of the company's exceed a prearranged credit limit. assets is in one or more of the following kinds of receivables: C. Other Consumer Receivables. All credit arising from retail sales of consumer goods other than pas- • Sales finance receivables. Installment paper aris- senger cars that is not extended under a revolving ing from retail sales of passenger cars and mobile credit line. Includes financing of general merchanhomes, other consumer goods, such as general mer- dise, apparel, furniture, household appliances; campchandise, apparel, furniture, and household appli- ers, trailers, mobile homes (when classified by state ances, or from outlays for home improvement loans law as personal property), motorcycles, airplanes, not secured by real estate. helicopters, and boats purchased for personal use; • Personal cash loans to individuals and families. loans for automobile repair; credit to finance alter- Unsecured cash loans (including loans to pay for ations or improvements in existing residential properinsurance policies) or cash loans secured by insur- ties occupied by the borrower; secured and unsecured ance policies, autos already paid for, and other loans made directly to the borrower for household, collateral. family, or other personal expenses; and unsecured • Short- and intermediate-term business receiv- loans to purchase auto insurance policies as well as ables. Loans on commercial accounts receivables, loans secured by insurance policies, automobiles inventory loans, factoring, lease financing, retail already paid for, and other collateral. It excludes installment sales (or purchases) of commercial, indus- loans for business purposes, rediscounted loans, loans trial, and farm equipment and commercial vehicles, secured by real estate, and wholesale and lease and wholesale financing of consumer and business financing. goods. • Real estate loans. Loans, whatever the purpose, secured by real property (as evidenced by deeds 2. Loans Secured by Real Estaic of trust, land contracts, or other instruments) and including junior-lien home-equity loans or second A. One- to Four-Family. Credit arising from revolvmortgages. ing or permanent loans secured by real estate as evidenced by mortgages (FHA, FmHA, VA, or conventional) or other liens (first or junior) on nonfarm property containing one to four dwelling units Assel hems (including vacation homes) or more than four dwelling units if each is separated from other units by Receivables include direct loans and loans purchased dividing walls that extend from ground to roof (row from manufacturers and retailers before deduction of houses, townhouses, or the like); mobile homes reserves for unearned income and reserves for losses. when state laws define the purchase or holding of a mobile home as the purchase or holding of real property and where the loan to purchase the mobile I. Consumer Receivables home is secured by that mobile home as evidenced by a mortgage or other instrument on real property; A. Motor Vehicle Financing. Credit arising from individual condominium dwelling units and loans retail sales of passenger cars and other vehicles such secured by an interest in individual cooperative units, as vans and pickup trucks. It excludes fleet sales, even if in a building with five or more dwelling units; personal cash loans secured by automobiles already vacant lots in established single-family residential paid for, loans to finance the purchase of commercial sections or in areas set aside primarily for one- to vehicles and farm equipment, and lease financing. four-family homes; and housekeeping dwellings with commercial units combined where use is primarily residential and where only one- to four-family dwell- B. Revolving Credit. Retail credit that is extended ing units are involved. on a credit-line basis and that arises from the sale of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

554 Federal Reserve Bulletin • July 1997 B. Multifamily. Credit arising from permanent non- (1) Retail and wholesale financing. Credit arising farm residential loans secured by real estate as evi- from the retail sale to business of (or for the purchase denced by mortgages (FHA or conventional) or other of) business, industrial, and farm equipment. It liens on nonfarm properties with five or more dwell- includes all off-the-road equipment for which motor ing units in structures (including apartment buildings vehicle licensing is not required as well as airplanes, and apartment hotels) used primarily to accommo- helicopters, and boats purchased for business use. date households on a more or less permanent basis; Loans may be secured by chattel mortgages or conhousekeeping dwellings of five or more units with ditional sales contracts (purchased money security commercial units combined where use is primarily agreements) on the machinery or equipment. It residential; cooperative-type apartment buildings excludes loans to purchase commercial land vehicles containing five or more dwelling units; and vacant for which motor vehicle licensing is required and lots in established multifamily residential sections or loans secured by real estate. It also excludes lease in areas set aside primarily for multifamily residential financing. Wholesale financing is credit arising from properties. transactions between manufacturers and dealers or other floor-plan loans secured by business, industrial, and farm equipment. It includes all off-the-road C. Commercial and Farm. Credit arising from loans equipment for which motor vehicle licensing is not secured by real estate as evidenced by mortgages or required, such as airplanes, helicopters, and boats. other liens on business and industrial properties, hotels, motels, churches, hospitals, educational and (2) Capital and leveraged leases. Lease receivcharitable institutions, dormitories, clubs, lodges, ables arising from the leasing of business, industrial, association buildings, care facilities for aged persons and farm equipment. It includes lease financing of all and orphans, golf courses, recreational facilities, and off-the-road equipment for which motor vehicle similar properties. It includes all other nonresidential licensing is not required and lease financing of airloans secured by real estate as evidenced by mort- planes, helicopters, and boats leased for business use. gages or other liens. Credit arising from loans secured It excludes lease financing of airplanes, helicopters, by farmland and improvements thereon, as evidenced and boats leased for personal or family use (included by mortgages or other liens. Farmland includes all in asset item 3.C), and excludes operating leases as land known to be used or usable for agricultural defined by Financial Accounting Standards Board purposes, such as crop and livestock production, Statement of Financial Accounting Standards 13 grazing or pasture land, whether tillable or not, and (SFAS 13). whether wooded or not. C. Other Business Receivables (Excluding Operating Leases). All other wholesale financing not 3. Business Receivables reported in asset items 3.A.2 and 3.B.I above, including floor-plan transactions between manufacturers A. Motor Vehicle Financing. Consists of retail cred- and dealers for items such as mobile homes, campers, its and wholesale credits. and travel trailers. Includes all other business capital (1) Retail (commercial vehicles). Credit arising and leveraged lease receivables not reported in asset from retail sales of commercial land vehicles to busi- items 3.B.2 above and not reported in asset items ness. It includes trucks, buses, taxicabs, truck trailers, 4.A.2, below, including credit arising from the leasand other on-the-road vehicles for which motor vehi- ing of mobile homes, campers, and travel trailers. cle licensing is required. It also includes fleet sales of Excludes operating leases as defined by SFAS 13 that passenger cars, but excludes lease financing and are included in asset items 4.B and 5 below. Includes paper on business, industrial, or farm equipment. business credit with original maturities of up to (2) Wholesale. Credit arising from transactions five years, including loans secured by commercial between manufacturers and dealers or other floor- accounts receivable less the balances withheld for plan loans secured by passenger cars and commercial customers pending collection of receivables; comland vehicles. It excludes paper secured by mobile mercial accounts receivable purchased from factored homes, passenger car trailers, boats, airplanes, heli- clients less any amount due and payable to factored copters, and business, industrial, and farm equipment. clients; and secured and unsecured advances of funds to factored clients. It includes dealer loans, capital loans, small loans used primarily for business or farm B. Business, Industrial, and Farm Equipment. Conpurposes, multicollateral loans, rediscounted receivsists of retail and wholesale credits and capital and ables of other finance companies less balances withleveraged leases. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Survey of Finance Companies, 1996 555 held, and all other business loans not elsewhere ent) should be netted against the consolidated comclassified. It excludes loans secured by real estate panies' investment. It excludes operating leases (unless included as part of a multicollateral loan) reported as asset items 4.B and 5 above and excludes which is included in asset items 2. overdrafts. 4. Motor Vehicle Leases 7. Reserves Lease receivables arising from leasing of passenger A. Reserves for Unearned Income. Includes uncars and commercial land vehicles, but excluding earned discounts and service charges on the above leasing of mobile homes, campers, motor trailers, receivables. boats, airplanes, helicopters, and business, industrial, and farm equipment. B. Reserves for Losses. Allowances for bad debts, unallocated charge-offs, and any other valuation A. Capital and Leveraged Leases. Consists of con- allowances except the amount of unearned income sumer and business leases. applicable to the receivables included above. (1) Consumer. Refer to credit on types of receivables covered by asset items 1 .A above. (2) Business. Refer to credit on types of receiv- 8. Total Assets, Net ables covered by asset items 3.A.I above. Sum of asset items l.A through 6 minus asset B. Operating Leases (as defined by SFAS 13). Conitems 7.A and 7.B. sists of consumer and business leases. (1) Consumer. Refer to credit on types of receivables covered by asset items l.A above. Securitized Asset Items (2) Business. Refer to credit on types of receivables covered by asset items 3.A.I above. Securitized assets include receivables that have been packaged and sold by the reporting finance company to a trustee or other third party who uses the receiv- 5. Non Moior Vehicle Operating Leases ables package as collateral for an asset-backed security that is sold to investors. These assets are no For business, industrial, and farm equipment, refer longer on the balance sheet of the reporting finance to credit on types of receivables covered by asset company and thus are not included in the asset items. items 3.B.1 above. For all other equipment, refer to Securitized assets consist of the total amount outcredit on types of receivables covered by asset standing, including all receivables securitized in the items l.C and 3.C above. It includes all operating current month and in prior months. They include leases as defined by SFAS 13 that are excluded from assets such as leases that were never on the company the asset items above. books, but whose securitizations may be counted as a managed asset, and exclude the amounts of outright A. Consumer. Refer to credit on types of receivables asset sales that have not been packaged to collateralcovered by asset items l.C above. ize an asset-backed security. Securitized assets are reported using the same definitions used for their B. Business. Refer to credit on types of receivables unsecuritized counterparts in asset items 1 through 5 covered by asset items 3.B.I and 3.C above. above. 6. All Oilier Assets and Accounts and Noies Receivable Liabilitics and Capital Items All assets not already included above, including con- 1. Bank Loans solidated companies' investments in nonconsolidated foreign and domestic subsidiaries and affiliates. Non- Short- and long-term loans and notes payable to consolidated subsidiary and affiliate company claims banks. Includes overdrafts but excludes commercial on consolidated companies (except debt due to par- paper and bank portions of participation loans. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

556 Federal Reserve Bulletin • July 1997 2. Commercial Paper 5. All Other Liabilities Promissory notes of large denominations sold directly All liabilities not already reported above or netted or through dealers to investors and issued for not against assets. It includes dealer reserves, all tax longer than 270 days. It includes short-term or accruals, short-term certificates of thrift or investdemand "master" notes and paper backed by letters ment, deposit liabilities (other than those not withof credit or other guarantees, but excludes non- drawable during term of loan), and all other liabilinegotiable promissory notes held by officers of the ties. It excludes liabilities of consolidated companies firm, their families, and other individuals (which are to nonconsolidated subsidiaries of affiliated compaincluded in liabilities and capital item 4). nies, which should be netted against assets in asset items 6 or shown in liabilities and capital items 3. It also excludes borrower repayment deposits accumu- 3. Debl Due to Parent lated but not credited against indebtedness until repayment is made in full, which should be netted For a company that is the subsidiary of another against appropriate receivables under asset items company (which is not a finance company), it above. includes all short- and long-term indebtedness owed to the parent company, but excludes the parent company's equity (which is included in liabilities and 6. Capital, Surplus, and Undivided Protii.s capital item 6). All common and preferred stock and other capital or surplus accounts, including undivided profits. 4. Debt Not Elsewhere Classified All other short- and long-term loans, notes, certificates, negotiable paper, or other indebtedness not 7. Total Liabilities and Capital elsewhere classified. It excludes bank debt already included in liabilities and capital items 1 and 3. Sum of liabilities and capital items 1 through 6. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

557 The Issuance of Series-1996 $100 Federal Reserve Notes: Goals, Strategy, and Likely Results Theodore E. Allison and Rosanna S. Planalto, of the because the old-design notes would be taken out of Office of Board Members, prepared this article. circulation before the end of their otherwise useful life. But it might be considered desirable if a prompt In March 1996, the Federal Reserve began issuing withdrawal of old-design notes could avert what series-1996 $100 Federal Reserve notes. Culminating otherwise might have been a serious counterfeiting a cooperative effort by the U.S. Department of the problem. Treasury and the Federal Reserve System that dated At the other extreme, an issuing authority might from the 1980s, the series-1996 note was the first replace old-design notes only as they became unfit major design change in U.S. currency in sixty-six (that is, too soiled) for further circulation. This option years. The new note was developed to provide better would likely be the least inconvenient to the public protection for users of U.S. currency against the and the least costly to the central bank; but under growing threat of counterfeiting, especially that posed certain conditions it might be unacceptable because it by increasingly affordable and capable color scan- would not achieve replacement quickly enough. ning and printing systems. Assessing the impact of a strategy on public conve- The Federal Reserve's strategy for issuing newly nience requires knowledge of where, by whom, and designed $100 notes involves neither a recall of notes for what purposes the currency is held. Whether the with the old design nor a deadline for exchanging timeliness of the likely replacement of old-design them. The Federal Reserve is, however, withdrawing notes resulting from a potential strategy is acceptable pre-series-1996 notes when they are deposited at depends on two things: the nature of the counterfeit- Federal Reserve Banks. ing threat to the old-design notes and the pace at which old-design notes may be expected to be deposited at the central bank under various strategies. THE CHOICE OF AN ISSUING STRATEGY FOR NEWLY DESIGNED CURRENCY NOTES FEDERAL RESERVE GOALS AND STRATEGY Central banks have a range of available strategies for FOR INTRODUCING SERIES-1996 $100 NOTES introducing new currency designs, and no single strategy is appropriate in every circumstance. In general, In developing plans for issuing series-1996 $100 when issuing new currency designs, central banks notes, the Federal Reserve likewise was guided by wish to minimize the inconvenience to the public, to the goals of (1) imposing as little disruption as posminimize their own costs, and to achieve a timely sible on business firms and households, both within replacement of old-design notes. These objectives are and outside the United States, and (2) carrying out seldom mutually attainable, however, so choosing a the introduction so as to achieve an expeditious substrategy requires the central bank to assess the stitution of new-design notes for the pre-series-1996 tradeoffs carefully, especially between convenience notes. In pursuing those objectives, the Federal to the public and timeliness of the replacement of Reserve adopted a strategy for issuing the newold-design notes. design $100 notes that has several components: At one extreme, an issuing authority might establish a relatively brief period—perhaps as short as a • There was to be no recall of pre-series-1996 few months—during which the public would have to $100 notes, no requirement that the public exchange exchange notes of the old-design series for those of old-design $100 notes for new-design notes, and, for the new. After the period ended, old-design notes any holder who might wish to make such an might no longer be valid or might be valid only at the exchange, no time limit for doing so. No U.S. curcentral bank. This option could be quite inconvenient rency note has ever been recalled from circulation or for the public and relatively costly to the central bank invalidated. All genuine $100 notes now in circula- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

558 Federal Reserve Bulletin O July 1997 Two Alternative Strategies for Issuing New Currency Series To provide perspective on the strategy adopted by the status of legal tender. However, the "promise to pay the Federal Reserve for issuing the 1996 series $100 notes— bearer the sum of . . ." on Bank of England notes stands which, in brief, is to permit notes of previous series to good for all time, and the Bank will pay out in notes of the remain in circulation, as legal tender, for as long as holders series then current the face value of any genuine Bank of are willing to use them but to withdraw and replace England note, no matter how old. previous-series $100 notes at the Federal Reserve at the first opportunity—here are the issuing policies used recently by two major European central banks: the Bank of England Germany and the German Bundesbank. Each bank has issued a new design for the highest-denomination note in its currency The Bundesbank introduced a newly designed 100within the last few years. deutchmark note in October 1990 (as well as a new DM200 note at the same time and newly designed DM10, DM20, and DM50 notes in 1991 and 1992). In an approach similar England to that used by the Bank of England, the Bundesbank informed the public in advance that previous-series notes The Bank of England introduced a redesigned £50 note on would remain legal tender for some time but would eventu- April 20, 1994 (as part of a series of new designs that began ally be recalled from circulation. Previous-series notes were in 1990 with a new £5 note). The public was informed that withdrawn by the Land Central Banks (whose functions are the old series of £50 notes would remain legal tender for similar to those of Federal Reserve Banks in the United some lime but that eventually legal tender status would States) and replaced with new-design notes as they were be withdrawn. In fact, previous-series £50 notes and new- deposited by commercial banks. By September 1992, newdesign £50 notes circulated together for about twenty-nine series DM100 notes accounted for 85 percent of the total months. During that period, the Bank of England withdrew DM100 circulation (although lower denominations had not previous-series notes as they were returned to the Bank and at that point reached the same level of replacement). In June replaced them with new-design notes, achieving a replace- 1994, the Bundesbank announced a recall of the old^series ment of about 80 percent of the old series. In early 1996, notes of all denominations. Notes of the previous series still the Bank announced that, effective September 20, 1996, retain their value and may be exchanged at the Bundesbank £50 notes of the previous series would no longer have the free of charge for notes of the new series. tion will remain legal tender and will be accepted for domestic deposits within five business days of receipt deposit at full face value at all Federal Reserve in order to be able to report promptly on any counter- Banks. feit notes that the deposits may contain. The Federal • The Federal Reserve has taken steps to ensure Reserve detects virtually all counterfeit notes in the availability of an adequate supply of series-1996 deposits and charges the institution for them. $100 notes worldwide, primarily through commercial • Soon after introducing the series-1996 $100 note banks that are active buyers and sellers of currency. in March 1996, the Federal Reserve began contacting • The Treasury Department, with the participation larger depository institutions to encourage them to of the Federal Reserve and of U.S. embassies abroad, deposit their entire inventories of $100 notes at the has provided substantial information to the public Federal Reserve in order to replace them with invenabout the introduction of the new-design notes wher- tories of the new-design notes. This process is likely ever Federal Reserve notes are used to a significant to continue and to be gradually extended to smaller extent. This information has been disseminated partly depository institutions. Depository institutions are not to reassure holders of old-design $100s that those required to sort their $100-note deposits according to notes will remain valid and to discourage them from series, nor are they prohibited from paying pre-seriesexchanging the notes unnecessarily rapidly. 1996 $100 notes to customers. • The Federal Reserve is withdrawing pre-series- As previously indicated, various alternatives for 1996 $100 notes as soon as they are deposited at introducing the new-design $100 notes were avail- Federal Reserve Banks by depository institutions and able to the Federal Reserve (see box "Two Alternareplacing them with series-1996 $100 notes. tive Strategies for Issuing New Currency Series"). • The Federal Reserve has promised depository This particular strategy was chosen in consideration institutions that it will process all international depos- of the quantity of $100 notes in circulation, where its of $100 notes within two business days and all and for what purposes they are held, the nature of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Issuance of Series-1996 $100 Federal Reserve Notes: Goals, Strategy, and Likely Results 559 counterfeiting threat, and the pace at which the strat- I. Value of Federal Reserve notes in circulation, 1970-96 egy could be expected to achieve a timely replacement of old-design notes. All notes $1 to $100 /— 400 THE GROWTH AND LOCATION OF US. CURRENCY IN CIRCULATION — 300 The value of Federal Reserve notes in circulation — 200 has grown rapidly in the past twenty-five years and especially since 1990 (chart I).1 That growth has $1-$20 notes — 100 been fueled in large part by a strong demand for $50 notes $100 notes, which also has been especially robust since 1990. By the end of 1995, just before the 1972 1976 1980 1984 1988 1992 1996 introduction of series-1996 $100 notes, the value of Federal Reserve notes in circulation had reached about $400 billion and that of $100 notes about $240 billion. "Dollarization" of economies outside the United The growth both of total Federal Reserve notes and States is not a new phenomenon, but it has become of $100 notes has been propelled by growth in the significantly more common in the 1990s with the use of U.S. currency outside the United States. The liberalization and democratization of economic sys- Board's staff estimates that, by 1995, the proportion tems around the globe. The process of so changing of the growth in Federal Reserve notes outstanding the economic system, which typically fosters new that was accounted for by international flows had business firms, more business and personal transacclimbed to 74 percent (chart 2).2 It also estimates that tions, and new household saving within the nation, as much as $250 billion, or more than 60 percent, of has at the same time often been accompanied by high the approximately $400 billion of U.S. currency in rates of inflation and inadequately developed financirculation at the end of 1995 was held outside the cial sectors. Rapid inflation makes domestic currency United States and that as much as $160 billion, or an unattractive medium for saving and transacting two-thirds, of the $240 billion of $100 notes in circu- and, at the extreme, impractical even as a unit of lation may have been held abroad. account. Consequently, the demand in these nations for "hard" currencies, especially dollars in many The U.S. currency that is held outside the United cases, has been strong (see box, "How Federal States appears to be quite dispersed. Data for origins Reserve Notes Enter Circulation in a Country outside of deposits and destinations of withdrawals of Fedthe United States"). eral Reserve notes at Reserve Banks since 1990 indicate that U.S. currency is used to a significant extent in parts of Latin America, in parts of the former Soviet Union, elsewhere in Eastern Europe, in parts 2. Net international payments of U.S. currency of the Middle East and of North Africa, and in as a proportion of annual growth in total circulation several countries in Southeast Asia. of notes, 1981-95 Ptrctnl 1. In this article, the terms "U.S. currency" and "FederaJ Reserve notes" are used synonymously even though a small proportion of the former consists of coins and of banknotes other than Federal Reserve notes. The terms "U.S. currency in circulation" and "Federal Reserve notes in circulation" refer to Federal Reserve notes held outside the Federal Reserve System—that is, including amounts held by commercial banks. 2. For more detail on the use of U.S. currency outside the United Stales and on the Board staffs estimates of the amount of such currency, see Richard D. Porter and Ruth A. Judson, "The Location of U.S. Currency: How Much Is Abroad?" Federal Reserve Bulletin, vol. 82 (October 1996), pp. 883-903. For an analytical treatment of the impact of the new $100 notes on counterfeiting, see Edward J. Green and Warren E. Weber, "Will the New $100 Bill Decrease Counterfeiting," Working Paper 571 (Federal Reserve Bank of Minne- 1 1 1 1 ) 11 I ! 1 I apolis, September 1996). 1980 1985 1990 1995 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

560 Federal Reserve Bulletin n July 1997 How Federal Reserve Notes Enter Circulation in a Country outside the United States The following scenario concerning the mythical emerging Day 3 nation of Costa Blancastan illustrates the usual process by which Federal Reserve notes enter circulation in another The $1 million in $100 Federal Reserve notes arrives at country. The scenario begins with the ABC Bank in Costa XYZ Bank on the morning of the third day. XYZ Bank Blancastan anticipating a demand from its customers for verifies the quantity and forwards the shipment to $1 million of $100 Federal Reserve notes. Costa Blancastan, again by overnight air. (In practice, XYZ Bank may have obtained considerably more than $1 million of Federal Reserve notes from FR Bank of Day 1 New York in order to meet obligations to various customers, like ABC Bank, that are located in a variety Using its Costa Blancastani currency resources, ABC of countries. These Federal Reserve notes would be Bank, in the foreign exchange market in Costa Blan- repackaged into smaller lots at the XYZ Bank's facility castan, buys a dollar balance at a major western bank, in Zurich. XYZ Bank may also have purchased Fed- DEF Bank, in the amount of about $1,005,000. ABC eral Reserve notes from other customers, also Bank now calls several banks that it knows are regular located in various countries, which it would have buyers and sellers of Federal Reserve notes and asks shipped to FR Bank of New York for credit to its for offers on $1 million in $100 banknotes to be account there.) delivered to its office in Costa Blancastan three days later. After receiving offers, ABC Bank decides to buy from XYZ Bank, which is based in, say, Zurich, Swit- Day 4 zerland, and has a branch in New York, which branch in turn has a deposit account at the Federal Reserve In the morning of the fourth day the Federal Reserve Bank of New York (FR Bank of New York). XYZ notes arrive in Costa Blancastan, where XYZ Bank has Bank has quoted a price of $100.50 per $100 nole— arranged for their delivery by armored carrier to ABC that is, the face value of the notes plus 0.5 percent of Bank. Upon receiving and verifying the notes, ABC the value for handling. As is customary in such transac- Bank places them on sale at its offices, anticipating tions, the handling fee covers transportation to ABC selling them at a price, in Costa Blancastani currency, Bank's facility. ABC Bank orders a transfer of that will exceed their cost. $ 1,005,000 from its deposit account at DEF Bank to its account at XYZ Bank. XYZ Bank orders $1 million In macroeconomic terms, the description above presents the in $100 Federal Reserve notes from FR Bank of transactions of an individual Costa Blancastani financial New York for pickup the following day. institution and leaves the international accounts of Costa Blancastan "out of balance." In fact, there must have been an ultimate counter party to ABC Bank's original foreign Day 2 exchange transaction who either was purchasing an exported good from Costa Blancastan (for example, a com- On the second day, XYZ Bank's armored carrier picks modity or a manufactured good) or was making a capital up $1 million of $100 Federal Reserve notes at investment in that nation (for example, buying an owner- FR Bank of New York and sends the package by ship interest in a firm there) and therefore needed to acquire, overnight air shipment to XYZ Bank in Zurich. FR using a dollar balance, a deposit balance denominated in Bank of New York charges XYZ Bank's deposit Costa Blancastani currency. In the final macroeconomic account in the amount of $1 million. analysis, then, the citizens (including the central bank) of Costa Blancastan must have parted with $1 million worth of commodities or manufactured goods, or have otherwise reduced their net foreign asset position, to have acquired $1 million of U.S. currency. Moreover, our research suggests that, within many Businesses are likely to find U.S. currency useful not dollarized countries, Federal Reserve notes are only as a hedge against local-currency inflation but widely held and used both by households and by also for settling firm-to-firm transactions where clearbusiness firms of all sizes. Households use U.S. cur- ing and settlement systems for other payment media rency for short-term and long-term saving and in (such as checks and electronic transfers) are not well transactions for a variety of higher-priced goods and developed or where the existence of more than one services, such as consumer durables and real estate. local currency would unduly complicate a transac- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Issuance of Series-1996 $100 Federal Reserve Notes: Goals, Strategy, and Likely Results 561 How Federal Reserve Notes in Circulation Provide a Benefit to Taxpayers Depository institutions keep deposit accounts at one of the reserve balances or clearing balances, requirements for both twelve Federal Reserve Banks (collectively, the Federal of which are fixed in the short run. The result, without an Reserve), both to satisfy their legal reserve requirements offsetting action by the Federal Reserve, would be a tighten- {reserve balances) and to cover charges and credits arising ing of conditions in the federal funds market and an increase from payments made by and to the depository institutions in the federal funds rate. That result would be inconsistent that are cleared through the Federal Reserve (clearing bal- with the Federal Reserve's monetary policy objectives, ances). A depository institution may obtain Federal Reserve which are expressed in the very short run in terms of a notes from the Federal Reserve in exchange for a deduction particular value for the federal funds rate. To prevent that from its deposit account and may deposit Federal Reserve result, and thus preserve existing conditions in the federal notes at the Federal Reserve in exchange for a credit to its funds market, the Federal Reserve would purchase $1 bildeposit account. lion of securities (through an open market operation) in Here is an abbreviated balance sheet of the Federal order to provide $1 billion of new reserves. The Federal Reserve for December 31, 1996 (amounts are in billions of Reserve's resulting balance sheet position would show dollars): liabilities for depository institution deposits restored to the original level; liabilities for Federal Reserve notes in cir- Federal Reserve Banks culation up $1 billion; and holdings of U.S. government securities up $1 billion: U.S. government securities 420 Depository institution Other securities 20 deposits 30 Other isscis - 20 Federal Reserve notes in circulation 410 Federal Reserve Banks Other deposits 10 Capital accounts ]0 U.S. government Depository 460 460 securities 426 421 Other securities 20 deposit* 36 29 30 Let's say that customers of depository institutions Other assets 20 Federal Reserve notes m increase their demand for Federal Reserve notes by $1 bil- circulation 446 411 lion. Depository institutions would obtain that quantity of Other deposits J 1 O 0 Capital accounts Federal Reserve notes from the Federal Reserve against a 468 461 466 466 461 $1 billion charge to their deposit accounts. Hie first round of accounting entries for the Federal Reserve would show In the new position, and for as long as the $1 billion of an increase in Federal Reserve notes in circulation and additional Federal Reserve notes remain in circulation, the a decrease in depository institution deposits, both of Federal Reserve's earnings will be higher by the amount of $1 billion: earnings on the additional $1 billion of assets. At, say, S percent per year, the addition to earnings would be Federal Reserve Banks $50 million per year. Since, at the margin, all of the Federal Reserve's earnings US.gbvaiuaenl«e<rarities 420 Depositary institution Other securities 20 deposits 36 29 are paid to the U.S. Treasury, Treasury receipts likewise Other assets 20 Federal Reserve notes will benefit by $50 million annually. Because mat $50 milin circulation 4W 411 Other deposits 10 lion would pay the Treasury's annual debt servicing cost on Capital accounts 10 $1 billion of outstanding government debt, it may be said 460 466 460 that an extra $1 billion of Federal Reserve notes outstanding This transaction would, however, leave depository insti- has an effect equivalent to that of a $1 billion interest-free tutions, in the aggregate, with a $1 billion deficiency in loan to Treasury. tion, as in cross-border transactions within the former United States, not least of which is that it provides Soviet Union. significant revenue—perhaps as much as $15 billion Quite apart from the phenomenon of the dollarized per year—to the U.S. Treasury (see box, "How Fedcountries, U.S. currency is widely used and accepted eral Reserve Notes in Circulation Provide a Benefit to internationally for business and leisure travel as well Taxpayers"). However, it also imposes certain obligaas for salaries of and remittances by migrant workers tions: Care must be taken not to disrupt the lives and of many nationalities. Federal Reserve notes are also livelihoods of the hundreds of millions of households a preferred medium for holding stores of wealth in and business firms outside the United States that have some countries in which gold once played a large role chosen to hold a significant portion of their wealth or for that purpose. working capital in U.S. currency. The extent of the worldwide dispersion of its In view of the widely dispersed holdings of Federal currency notes bestows important benefits on the Reserve notes throughout the world and the consider- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

562 Federal Reserve Bulletin • July 1997 able extent to which they are used by households for Moreover, the Federal Reserve is confident that it saving and by business firms for working capital, it has a reasonably clear and up-to-date picture of the seems appropriate that the Federal Reserve's issuing extent of counterfeiting of U.S. currency, both domesstrategy would seek to minimize the inconvenience tically and abroad, so that any material change would to holders of $100 notes. A more aggressive strategy become evident fairly quickly. The clarity and timelicould have been significantly disruptive to holders of ness of the Federal Reserve's picture of the counterthose notes and possibly even have raised questions feiting situation are provided by, first, the large proabout the long-term desirability of holding U.S. cur- portion of outstanding notes that the Federal Reserve rency notes as a vehicle for transactions and saving. Banks receive from circulation each year and are Another question is whether the strategy will therefore able to examine and, second, the ability of achieve an acceptably timely replacement of old- note-verifying equipment and the staff at Federal design notes. The answer depends in part on an Reserve Banks to accurately distinguish between assessment of the counterfeiting threat and in part on genuine and counterfeit notes. the pace at which Federal Reserve notes can be Counterfeits in $100 deposits at the Federal expected to be deposited at Federal Reserve Banks. Reserve during 1995 amounted to 0.0075 percent. That is, the Federal Reserve Banks found, on average, seventy-five counterfeit $100 notes in every THE COUNTERFEITING THREAT one million $100 notes processed. In value, counterro U.S. CURRENCY feits amounted to $6.9 million in $100 receipts of $93 billion. For 1995 deposits at Federal Reserve The worldwide acceptance of U.S. currency has made Banks that originated outside the United States, the it a favorite target of counterfeiters. Indeed, Federal rate of detection of counterfeit $100 notes was lower Reserve notes are under attack from various sources, than the overall rate, at fifty-four per million. most of them located outside the United States, and The seventy-five-per-million detection rate of $100 various reprographic methods, ranging from home counterfeits in deposits at Federal Reserve Banks in scanners and printers to commercial-type printing 1995 was slightly lower than the rate in 1994, which presses. was eighty per million, and up slightly from the Fortunately, thanks to good law enforcement, a seventy-one-per-million rate in 1991. generally good design, and, especially, a watchful Although Federal Reserve notes are relatively free public, the currency of the United States is relatively from counterfeiting now, the security features of the free from counterfeits, both domestically and interna- pre-1996 design were considered inadequate for dealtionally. The current value of counterfeits passed on ing with the emerging counterfeiting threats, espethe public in the United States is on the order of cially those from computer-based scanners, printers, $30 million per year, which is less than 15 cents per and copiers that will be available to large numbers of U.S. citizen.3 Thus counterfeiting, though the cost of people and that will require little skill to operate. which is too high in principle, has no discernible That threat, however, is not yet critical. Indeed, syseffect on the U.S. economy. The successful passing of tems that use scanners—driven either by copiers or counterfeit U.S. currency outside the United States by computers—though becoming gradually better appears not to be appreciably different from that and cheaper, still account for a small percentage within the United States, in relation to the quantity of (7 percent) of the total $30 million in counterfeits genuine notes in circulation.4 passed on the public in the United States.5 Clearly, neither the current counterfeiting situation nor the likely threat over the coming several years 3. Counterfeits "passed" are those that are detected in circulation, argues for causing significant inconvenience or dishaving been successfully used in a transaction. Passed counterfeits do not include those that are seized by law enforcement agencies before ruption to the public in order to remove pre-serieshaving entered circulation. 1996 notes from circulation. Nevertheless, the design 4. More information about the security of U.S. currency against features of series-1996 notes provide the public with counterfeiting may be found in "Statement by Theodore E. Allison, Assistant to the Board, Board of Governors of the Federal Reserve better security against the future threat of counterfeit- System, before the Subcommittee on General Oversight and Investi- ing by scanner-based tools and other methods, and gations of the Committee on Banking and Financial Services, U.S. old-design notes will, therefore, need to be replaced House of Representatives, February 27, 1996," Federal Reserve Bulletin, vol. 82 (April 1996), pp. 320-22; and "Statement by Edward W. over time. The rapidity of the replacement of old- Kelley, Jr., Member, Board of Governors of the Federal Reserve System, before the Committee on Banking, Finance and Urban Affairs, U.S. House of Representatives, July 13, 1994" Federal 5. Fiscal year 1995. Data provided by Counterfeit Division, U.S. Reserve Bulletin, vol. 80 (September 1994), pp. 789-91. Secret Service. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Issuance of Series-1996 $100 Federal Reserve Notes: Goals, Strategy, and Likely Results 563 design notes that the Federal Reserve's issuing strat- 4. Issuance of series-19SI0 and series-19% S100 notes: egy will achieve depends on the frequency with Proportion of worldwide circulation and of Federal Reserve receipts of all SI00 notes which $100 notes are deposited at Federal Reserve Banks and thereby can be withdrawn and replaced. Percent S-1990, percentage of Federal Reserve )100-nolc receipts RAPIDITY or REPLACEMENT OF PRE-1996 75 $100 NOTES AT FEDERAL RESERVE BANKS The Federal Reserve's experience in introducing S-1990, percentage of 50 series-1990 $100 notes can provide a basis for evalworldwide $100-note circulation uating the rapidity of replacement of pre-1996 S-19%. percentage of $100 notes with those of series-1996. The issuance of Federal Reserve SSOO-nme receipts — 25 series-1990 notes began in August 1991 and con- S-1996. percentage cluded in March 1996 with the introduction of their of worldwide JlOO-note circulation successors. In issuing series-1990 notes, the Federal iiiiiiiiimiiiMiiiiii 0 5 10 15 20 25 30 35 40 45 50 55 Reserve followed essentially the same procedure that Months after initial issuance was just described for the 1996 series. The extent of replacement of pre-1990 notes with series-1990 notes is indicated by the proportion of $100 notes in circulation at any point that is To estimate the rate of replacement of pre-1990 accounted for by notes of the new design. The Sys- $100 notes within the United States, one can look at tem's accounting records allow the Federal Reserve the deposits of $100 notes at Federal Reserve Banks. to calculate this measure with high precision.6 The These deposits in any period represent the $100 notes proportion of $100 notes in worldwide circulation that were taken in by depository institutions from that was accounted for by series-1990 notes rose their customers and were considered to be in excess continuously after the initial introduction, reaching of the institutions' needs in that period; therefore, 50 percent in August 1993 (twenty-four months after they are assumed to be a good indicator of the general initial introduction) and 75 percent at the end of 1995 circulation of such notes within the United States. In (fifty-two months after initial introduction) (see the period following the introduction of series-1990 charts 3 and 4). $100 notes, the proportion of these notes in $100 receipts at Federal Reserve Banks rose steadily and more quickly than the proportion for total circulation. 6. Because the denominator of the fraction just described is the Series-1990 $100 notes accounted for more than cumulative total of all $100 Federal Reserve notes issued in the past and because some of those notes have been lost, destroyed, or taken 75 percent of such deposit receipts by August 1993 permanently out of circulation for numismatic purposes, the account- (the twenty-four-month point) and more than 85 pering approach slightly understates the true extent of replacement. cent by the end of 1995 (after fifty-two months). The extensive replacement of pre-1990 $100 notes 3. Issuance of series-1 WO SI 00 notes: Proportion of worldwide circulation and of Federal Reserve within only 4VS years was made possible by a large receipts of all $100 notes, 1991-96 volume of $100 deposits by depository institutions at Federal Reserve Banks. Throughout the period, annual Reserve Bank receipts of $100 notes consis- Percentage of Federal Reserve tently amounted to more than 30 percent of the receipts of $100 notes average worldwide circulation of $100 notes. During - 75 1994 and 1995, receipts at Reserve Banks identified by customers as coming from outside the United States amounted to about 10 percent and 15 percent, 50 respectively, of the amounts estimated to be in circu- Percentage of worldwide lation outside the country during those periods; the circulation of $100 notes corresponding ratios for $100 deposits from domestic -• 25 sources were 80 percent and 90 percent. Thus, the propensity of depository institutions to make frequent liiLulilij deposits at the Federal Reserve of $100 notes consid- 1992 1993 1994 1995 ered excess to their needs—on average, more than Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

564 Federal Reserve Bulletin LI July 1997 30 percent of the total circulation of $100 notes each exchange those notes and (b) pre-1996 $100 notes are year and more than 80 percent of the domestically withdrawn as soon as they are deposited at Federal circulating $100 notes—gives the Federal Reserve an Reserve Banks and are replaced with new-design opportunity to remove a great many notes of the prior notes. series and replace them with new-series notes, with The outstanding $100 notes are widely dispersed. no disruption to the public. Perhaps two-thirds of all $100 notes are held outside For the issuance of series-1996 $100 notes, thir- the United States, chiefly by a great many households teen months of available data are presented in chart 4. and small business firms in countries in which U.S. At the end of April 1997, series-1996 $100 notes currency is viewed as preferable to the local currency composed 40.1 percent of all $100 notes in world- for household saving and for many household and wide circulation, well ahead of the 35.5 percent level business transactions. The issuing strategy is miniachieved after thirteen full months in the series-1990 mizing inconvenience to these holders; a more introduction. At the same point, series-1996 notes aggressive strategy, in terms of inducing a faster composed 56.7 percent of the domestic circulation return of old-design $100 notes, could have been of $100 notes, as indicated by deposits at Federal significantly disruptive to holders abroad, possibly Reserve BanJcs; this was close to (and, in a sense, even raising questions about the long-term desirabilbetter than) the 60.4 percent observed at the same ity of using U.S. currency for saving and for business point in the series-1990 introduction (better because transactions. Neither the current counterfeiting situait gives the Federal Reserve an opportunity to replace tion nor the likely threat over the coming several even more pre-1996 notes). years argues for causing significant inconvenience or disruption to the public in order to remove pre- It does not seem overly optimistic to project that series-1996 $100 notes from circulation. the circulation of series-1996 $100 notes will reach 75 percent of worldwide $100-note circulation and As demonstrated in the introduction of the series- 85 percent of domestic circulation, ahead of the point 1990 $100 notes, the large volume of $100 notes at which those levels were achieved in the series- deposited by depository institutions at Federal 1990 introduction—that is, in fewer than fifty-two Reserve Banks makes possible an extensive and relamonths or by early in the year 2000. tively prompt replacement, at the Reserve Banks, of earlier-series $100 notes with notes of the new series. By the year 2000, series-1996 $100 notes may well SUMMARY compose 75 percent of worldwide $100-note circulation and 85 percent of $100-note circulation within In its choice of issuing strategies for the series-1996 the United States. $100 note, the Federal Reserve was trying to balance In view of these circumstances, the Federal Rethe objectives of achieving a sufficiently rapid serve's choice of issuing strategy appears likely to replacement of pre-1996 $100 notes while imposing achieve its objectives: a replacement of pre-seriesas little disruption as possible on the holders of those 1996 $100 notes that is timely in relation to the notes. The essential features of the strategy adopted developing threat of counterfeiting, with a minimum are that (a) there is no recall of pre-series-1996 impact on holders and users of those notes through- $100 notes or any other requirement that the public out the world. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

565 Open Market Operations during 1996 This article is adapted from a report to the Federal the case last year, the need for permanent reserve Open Market Committee by Peter R. Fisher, Execu- additions was relatively modest as demand for curtive Vice President of the Federal Reserve Bank of rency grew moderately and reserve requirements New York and Manager of the System Open Market declined because of the continued spread of sweep Account. Gerald D. Cohen of the Domestic Money programs at commercial banks. The decrease in bal- Markets Staff was primarily responsible for the ances of depository institutions at Reserve Banks preparation of this report. Many other members (operating balances) had an impact on bank reserve of the Markets Group assisted in the preparation; management strategies and the Desk's choice of Cassandra Bryant and Drew Matus deserve special operations. The Desk paid close attention to the daily recognition for their invaluable research support. pattern of reserve demands and, by tailoring its operations accordingly, maintained funds trading close to During 1996, the Trading Desk at the Federal the FOMC's desired rate. Reserve Bank of New York (the Desk) managed At the start of 1996, available evidence indicated reserve conditions with the objective of maintaining that a moderating economic expansion over the prethe federal funds rate around the level desired by the ceding months had reduced potential inflationary Federal Open Market Committee (FOMC). As was pressures going forward while price and cost trends were already subdued. The FOMC eased monetary policy slightly at its first meeting of the year, lowering the intended federal funds rate from 5Vi percent 1. Specifications horn Directives of the Federal Open to 5'/4 percent (table 1). On the same day, the Board Market Committee and related information, December 19, 1994-Decembcr 17, 1996 of Governors approved a reduction in the discount rate from 5[A percent to 5 percent. By midyear, Expected Borrowing allowance concern that inflation pressures were building caused Discount rate federal funds for deriving Date of meeting (percent) rate NBRpath the FOMC to adopt an asymmetric directive. How- (percent) (millions of dollars;1 ever, although the pace of economic expansion was 12/19/94 5.25 5.50 75 generally robust, inflation remained quiescent, and 50 on I/I82 the Federal Reserve took no further policy actions to 1/30 to 1/31/96 . 5.00 on 1/31 5.25 on 1/31 50' affect interest rates in reserve markets. 3/26/96 5.00 5.25 75 75on4/252 100 on 5/9* 5/21/96 . . 5.00 5.25 100 IMPLEMENTATION OF POLICY !50on5/232 175 on 6/62 225 on 6/20* Reserve Management Procedures and Practices 7/2to7/3/96 ... 5.00 5.25 225 300 on 7/5" Operating Procedures 325 on 7/182 8/20/96 5.00 5.25 325 In carrying out the FOMC's policy directives, the 9/24/96 5.00 5.25 325 Desk seeks to maintain the federal funds rate around 300 on 9/262 250 on 10/102 the level indicated by the Committee. Current operat- 200onlO/242 100 on ll/7» ing procedures control the supply of reserves so that they conform to the aggregate demand that banks H/13/96 5.00 5.25 100 75 on 11/21 have for holding these balances at the FOMC's desired funds rate. 12/17/96 5.00 5.25 •75 The average estimated demand that banks have for 1. The borrowing allowance associated with the expected federal funds rate. 2. Change in borrowing assumption reflects technical adjustment to account holding reserves in each two-week maintenance for actual or prospective behavior of seasonal borrowing. period is embodied in the nonborrowed reserve objec- 3. The allowance was unchanged because the spread between the discount rate and the expected federal funds rate was not changed. tive or path. The path is a projection of the reserves— Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

566 Federal Reserve Bulletin • July 1997 balances held at the Federal Reserve plus applied be updated to reflect actual levels from the previous vault cash—that banks must hold to meet their day and the effects of any open market operations reserve requirements, plus any excess balances they arranged the previous day and to reflect revisions to wish to hold, less an amount of reserves that the Desk projected changes in the behavior of factors affecting anticipates will be provided by borrowing at the nonborrowed reserves in upcoming days. Utilizing discount window. Open market operations are the such daily reserve information, the Desk maintains tool used to close any estimated gap between this the federal funds rate in a range around the expected demand for nonborrowed reserves and the supply level through its open market operations. The forthcoming from market factors. observed behavior of the funds rate is also used in The borrowing allowance has retained a formal formulating operations to the extent that it is believed role in the construction of the nonborrowed reserve to be indicative of the true level of demand or supply. objective even though the link between the adjust- However, deviations in the funds rate may reflect ment component and the spread between the federal market participants' own perceptions about the balfunds and discount rates has virtually disappeared. ance between aggregate reserve supply and demand, In constructing the nonborrowed reserve objective, which at times may be based on a misreading of the Desk now expects borrowing to meet just a very market conditions. Thus, the Desk considers both the small fraction of total reserve demand in most reserve forecasts and funds market conditions when maintenance periods, even with the seasonal compo- planning open market operations. nent added. Nevertheless, adjustment borrowing can In 1996, the Desk arranged outright purchases of increase to substantial levels in reaction to large, securities and occasional matched-sale transactions, inadvertent reserve shortages that would otherwise but the largest share of its operations was repurchase leave banks in overdraft positions or short of meeting agreements (RPs). As in past years, the usual time for their reserve requirements on settlement days. arranging temporary operations was 11:30 a.m. eastern time, shortly after revisions to reserve projections became available. Because activity in the RP market Daily Formulation and Execution of Open Market peaks much earlier in the morning, operations always Operations carry some risk that available collateral will be insufficient to meet the Desk's reserve objective for the day, an outcome that in fact has occurred from time Open market operations are used to bring reserve to time in recent years. For this reason, on days when supplies in line with demand on a daily basis to the Desk intended to arrange fairly large-sized RPs, keep the funds rate at or near the level desired by operations would sometimes be preannounced or the FOMC. However, while period-average demands arranged an hour or so ahead of the usual intervention are captured in the nonborrowed reserve objective, time to help ensure adequate propositions. daily levels of demand may fluctuate. Reserve supplies can also vary from day to day because of Late in 1996, following a number of changes to changes in numerous underlying factors. As a result, the methods and times for compiling reserve data reserve imbalances may develop on any day, poten- within the Federal Reserve System, the New York tially causing the federal funds rate to deviate from and Board staffs began preparing their reserve foreits intended level. Banks' ability to average their casts on an earlier schedule. In December, the Desk reserve holdings over a two-week maintenance period announced that, starting in 1997, its normal market to meet requirements can temper the pressure on the entry time for temporary operations would be federal funds rate when imbalances in supply and advanced one hour, to between 10:30 a.m. and 10:45 demand develop. a.m.1 Also starting in 1997, the Desk would begin Each morning the Desk receives updated estimates announcing the total par value of all accepted propoof daily reserve supplies. The nonborrowed reserve sitions on each market operation, temporary and outpath may be adjusted formally or informally to right, just after their completion. Before this change, account for revisions to required reserves or updated the Desk would indicate only the intended size of judgments about the level of excess reserves that "customer" operations. banks wish to hold. Following episodes of high adjustment borrowing, the nonborrowed reserve objective may also be adjusted to reflect the increased supply of reserves that are forthcoming from this source. Meanwhile, estimates of nonborrowed 1. In conjunction with this change, the deadline for accepting dealers' withdrawals on term RPs that are not fixed was to be reserve supply over the same two-week period will advanced one hour, to 10:00 a.m. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Open Market Operations during 1996 567 OPEN MARKET OPERATIONS changes, together with a slight ($0.4 billion) increase in applied vault cash, was a $5.5 billion decline in The general pattern of Desk activity during 1996 required operating balances, from $24.1 billion in closely followed that of 1995, with seasonal increases late 1995 to $18.6 billion in December 1996.4 in required reserves and currency demand creating reserve needs that were addressed, in part, with outright operations. The remaining needs were met with Permanent Activity for the. System Open temporary operations. One factor that had an impact Market Account on the formulation of open market operations in 1996 was the growth in retail deposit sweep accounts and Reserve Patterns the associated decrease in required reserves and required operating balances. The decline in required Changes in the size of the System's portfolio of reserves lessened the need for outright purchases. domestic securities are designed to offset movements The lower required operating balances at times in operating factors that affect reserve supplies as seemed to affect the intra-period demand for reserves. well as to accommodate shifts in reserve demand. For example, on days of heavy payment flows, the Over time, most of the permanent expansion of the demand for excess reserves seemed to be greater than System Open Market Account (SOMA) has served to in the past. The Desk was sensitive to the pattern of support the growth of currency. Shifts in other factors reserve demands and tailored its operations accord- and in levels of reserve requirements, although sigingly. Overall, banks appeared to adjust to lower nificant in some years, over time have been of lesser required operating balances without any meaningful importance. In 1996, currency in circulation grew change in the amount of excess reserves held. $25.0 billion, up about $4.2 billion from its growth in In 1996, banks and their affiliated branches swept 1995 but still well below the increases registered in an estimated $170 billion from reservable transaction each of the preceding three years. The need for a account balances, $116 billion more than in the pre- permanent expansion in the portfolio to support the ceding year.2 Estimates indicate that these sweeps growth in currency was moderated by a $6.8 billion scaled back reserve requirements by between $10 bil- decline in required reserves.5 Movements in other lion and $11 billion.3 Recognizing that the decline in factors affecting nonborrowed reserve supply or reserve requirements could complicate their reserve demand did not contribute significantly, on net, to the management, banks increased their clearing balance need for permanent changes in the portfolio. requirements $1.6 billion. The net effect of these 2. A retail sweep is initiated when balances in either a demand Outright Open Market Operations deposit or a negotiable order of withdrawal (NOW) account are transferred by the financial institution to a nonreservable money To provide reserves on a permanent basis, the Sysmarket deposit account (MMDA). Depending on the specific sweep arrangements, those funds may be "swept" into the MMDA either for tem's portfolio of domestic securities expanded an entire month, unless presentments exceed the account holder's $14.7 billion over 1996, measured from year-end demand deposit or NOW account balances, or for ihe weekend. For a to year-end and excluding all temporary operations more in-depth discussion of sweep programs, see "Open Market Operations during 1995" in Federal Reserve Bank of New York, (Appendixes B and C). A total of $17.1 billion of Annual Report, 1995. U.S. Treasury securities was bought outright in the All sweep estimates refer to amounts initially swept by the deposimarket, with purchases arranged when large and sustory institution. These figures are not updated to include any subsequent shifts in the underlying balances. tained reserve shortages were projected to develop. The increase in initial sweeps during 1996 was distinguished from Two bill passes were arranged, the first in June and the activity of earlier years by two factors. First, a larger population of the second—a record-sized $6.5 billion purchase— banks and branches opted either to initiate or to expand their sweep operations. Second, sweep activity was increasingly augmented to in November. There were also two sets of coupon include demand deposits. In December 1995, initial sweeps from passes, the first spread over two business days in demand deposits were minimal, at $230 million, or just 0.4 percent of April and the second spread over four business days the total. Twelve months later, these sweeps rose to $17.1 billion, approaching 10 percent of all recorded sweeps. 3. The effect of sweeps on reserve requirements is calculated in the following manner. First, we take the level of initial sweeps, which 4. Required reserve balances (required reserves less applied vault rose $116 billion in 1996, from $54 to $170 billion. Second, we apply cash) are those balances held at the Federal Reserve to meet required reserve requirement ratios that are based on the level of deposits at reserve needs. Required operating balances include both required each bank, with a 3 percent reserve requirement on the first $52 mil- reserve balances and required clearing balances. lion of deposits and a 10 percent requirement on any additional 5. The decrease induced by sweep accounts was partially offset by deposits. Since some smaller banks initiated sweep programs, the growth in other reservable deposits. Thus, required reserves fell about 10 percent requirement does not apply to all $116 billion of sweeps. $4 billion less than the estimated sweep effect. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

568 Federal Reserve Bulletin • July 1997 in August. Each set of coupon passes consisted of tic portfolio in a manner that ensured the liquidity of three separate operations covering different sectors of the portfolio. Liquidity was maintained by holding the yield curve. Only a very small amount of securi- Treasury bills and Treasury coupon securities in ties was purchased directly from foreign accounts. In roughly equal proportions. At the same time, to miniaddition to providing the reserves necessitated by mize any influence over the available public holdings movements in operating factors, outright purchases of specific issues and thereby leave debt management offset $2.4 billion of redemptions of securities. These in the domain of the Treasury, the acquisition of bills redemptions primarily reflected original issue seven- and coupons largely mirrored the distribution of Treayear Treasury notes and some holdings of federal sury issues within these two general classes of instruagency securities that matured on dates when no ments. As of the end of 1996, the net impact of all the suitable replacement securities were available. Desk's activities affecting its permanent holdings, After the bill pass in November, no further outright including rollovers of maturing securities, left the purchases were made in 1996. In previous years, a average maturity of Treasury securities in the SOMA greater portion of the reserve needs caused by the at 41 months, about two months greater than it was late-year seasonal buildup in currency and required one year earlier but below the 61-month average reserves was met with permanent additions to the maturity of total marketable Treasury debt. The SOMA, with the Desk typically arranging one addi- Treasury's expanded issuance of 10-year notes and tional outright operation over the balance of the year.6 30-year bonds contributed to the slight increase in These acquisitions also usually left the Desk in a maturity of the SOMA portfolio. position of having to drain reserves with temporary In late October, the Treasury announced that it (and sometimes even permanent) operations in late would change the treatment of SOMA's noncompeti- January or early February of the following year when tive bids at Treasury bill auctions. Beginning in the the seasonal increases in currency and required first part of 1997, SOMA rollovers would be treated reserves unwound. This time of year is also typically as add-ons to the publicly auctioned amount rather marked by seasonally low levels of required reserve than deductions from the total auctioned size. This balances because levels of vault cash remain high change would provide better information to market when the level of reserve requirements declines participants about the amount of bills available sharply. for sale to the public, with the only remaining The absence of further outright operations in late uncertainty being the rollover amount of foreign 1996 was intended to place the Desk in a position of institutions. needing to add reserves with temporary operations when required reserve balances reached their seasonal low level early in 1997. Two factors motivated Temporary SOMA Activity this decision. First, the Desk did not want to drain reserves during periods when low operating balances Reserve Patterns might lead to late-day firmness in the money market. Second, bank reserve managers had all their experi- Temporary, or self-reversing, operations are an imence with new lows in operating balances in 1996 in portant tool used to meet reserve needs not addressed the context of net reserve shortages. The Desk felt by outright operations. These residual needs can vary that it would be better situated to respond to any considerably in size from period to period, as well as resultant change in funds market conditions with RPs from day to day, and in 1996 ranged from moderate rather than matched-sale transactions. "drain" to sizable "add" needs. In a typical maintenance period with an add need, the Desk often arranged successive multiday RPs spanning the entire SOMA Portfolio Management period. These operations would be supplemented by shorter-term operations as circumstances warranted. Over the course of the year, the Desk continued to In particular, overnight operations were frequently manage the permanent holdings in the SOMA domes- employed on the settlement day to address all remaining period needs. Most multiday RPs were of the nonwithdrawable variety, but after the second week- 6. Over the final quarter of 1995, on net, the SOMA increased its end withdrawable operations were sometimes used to securities holdings $9.7 billion to help meet the $15.0 billion seasonal increase in currency growth and reserve requirements. In the fourth provide more flexibility in dealing with possible reviquarter of 1996, the system met only $6.4 billion of the $18.0 billion sions to estimates of reserve supply or demand during seasonal increase in currency and required reserves through permathe brief time that remained in the period. If substannent increases in its portfolio. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Open Market Operations during 1996 569 tial reserve needs were projected in a maintenance temporary basis. Most of the reserve additions were period, overlapping term operations were sometimes in the range of $2.5 billion to $7.5 billion per mainteused. nance period. Larger operations occurred near the From the demand side, reserve needs were skewed end of the year, when the reserve drain caused by the toward the second half of maintenance periods, con- seasonal increase in currency demand necessitated tinuing a pattern seen in recent years. This pattern temporary operations that added as much as seems to be related to the decrease in required oper- $16.3 billion of reserves on a period average basis. ating balances, which increases the likelihood that The largest reserve drain periods occurred in late everyday uncertainties will bring a bank's reserve January and early February, when currency demand position closer to one of two extremes: either ending was at its yearly seasonal trough. the day overdrawn or holding an excess position that The projections of open market operations that is difficult to work off on subsequent days. Thus, were needed to meet path for each reserve maintebanks delay fully meeting their reserve requirements nance period have varied over the past two years and until late in a maintenance period. were revised within each period as required reserves The profile of demand within a maintenance period and market factor projections were updated. In most was not necessarily constant throughout 1996. For periods in 1996, the revisions between the initial example, during the second quarter, banks on average estimates and the final estimates were small, but large held negative cumulative excess reserves until rela- revisions—most notably the $2.7 billion revisions in tively late in a maintenance period. One reason the the maintenance periods ending mid-January and daily pattern of excess demand within maintenance early December—occasionally arose. periods varied over the year is that days of heavy On average, the size of market factor forecast payment flows that heightened the demand for errors made when comparing the estimates at the reserves, such as Treasury security settlement days, beginning of the period with the final projections fell within maintenance periods at different times made at the end of the period were somewhat larger over the course of the year. The Desk attempted to during 1996 than during 1995. The main reason for accommodate banks' increased demand for reserves this apparent deterioration in forecasting accuracy on these days as well as their desire on surrounding was a significant increase in the error for applied days to offset these elevated holdings.7 vault cash, although float and currency in circulation Fluctuations in the funds rate may arise late in the also showed larger errors. day as banks attempt to avoid either overdrafts or The deterioration in the projections of applied vault excess reserves, especially when low reserve require- cash is attributable to an increase in the proportion of ment levels limit their flexibility. One way to observe depositories that are not bound or only intermittently this is through the intraday range in the funds market. bound by reserve requirements as a result of sweep The intraday range rose during early 1991, when accounts.8 For a bound institution, the level of vault reserve requirements were sharply reduced; in con- cash that can be applied to reserve requirements trast, the increase over the past two years has been (applied vault cash) is equal to the total vault cash modest. Another measure of intraday funds rate held by that institution in the previous maintenance movements is the volume-weighted standard devia- period. Data on applied vault cash are available for tion of daily trading. This statistic captures the level these banks early in the maintenance period. Howof variation of trading around the effective rate. The ever, for institutions that are nonbound, applied vault standard deviation of daily trading in the funds mar- cash equals the current level of required reserves, for ket increased modestly over the past two years. which final numbers are known only after the maintenance period ends. As more institutions have become nonbound because of sweep arrangements, projec- Reserve Forecasts tions of aggregate applied vault cash have depended more heavily on forecasts of aggregate required Throughout most of 1996 the Desk was in a position reserves and less on known amounts of lagged total of having to add a moderate amount of reserves on a vault cash. Moreover, sweep accounts have increased the number of institutions that switch between being 7. Actual excess holdings are affected by the Desk's own reserve management decisions and are subject to unexpected movements in 8. A bank is said to be "bound" by reserve requirements if its reserve supply arising from operating factors. The Desk's operations holdings of vault cash are insufficient to meet all of its reserve are designed to provide a level of reserve supply consistent with its requirement and it consequently must hold positive balances in its best estimate of demand. account with the Federal Reserve. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

570 Federal Reserve Bulletin • July 1997 bound and nonbound from maintenance period to extent necessary, to carry out the most recent domestic maintenance period, complicating the projection policy directive adopted at a meeting of the Committee: problem. Staff have mitigated the forecast errors (a) To buy or sell U.S. government securities, including securities of the Federal Financing Bank, and securities somewhat by modifying procedures and software to that are direct obligations of, or fully guaranteed as to take full advantage of incoming data on individual principal and interest by, any agency of the United States in institutions so that applied vault cash projections are the open market, from or to securities dealers and foreign updated as the maintenance period progresses. How- and international accounts maintained at the Federal ever, errors are likely to remain somewhat larger Reserve Bank of New York, on a cash, regular, or deferred delivery basis, for the System Open Market Account at under the current reserve requirement structure. market prices, and, for such Account, to exchange maturing U.S. government and federal agency securities with the Treasury or the individual agencies or to allow them to mature without replacement; provided that the aggregate Temporary Open Market Operations amount of U.S. government and federal agency securities held in such Account (including forward commitments) at As a result of the issues discussed above and the the close of business on the day of a meeting of the effect of low operating balances, the Desk relied on a Committee at which action is taken with respect to a larger number of overnight system operations. These domestic policy directive shall not be increased or decreased by more than $8.0 billion during the period were used to tailor reserve positions to the day-to-day commencing with the opening of business on the day fluctuations in the intra-period demand for reserves, a following such meeting and ending with the close of busidemand that was often revealed by the behavior of ness on the day of the next such meeting; the funds rate. The number of multiday operations (b) When appropriate, to buy or sell in the open was similar to that in recent years, but the Desk market, from or to acceptance dealers and foreign accounts lengthened the maturity of many of the operations maintained at the Federal Reserve Bank of New York, on a this year. cash, regular, or deferred delivery basis, for the account of the Federal Reserve Bank of New York at market discount The total volume of arranged RPs exceeded that in rates, prime bankers acceptances with maturities of up to 1995, in part because of a decision by the Manager of nine months at the time of acceptance that (1) arise out of the System Open Market Account to conduct fewer the current shipment of goods between countries or within outright operations late in the year. The Desk met the the United States, or (2) arise out of the storage within the United States of goods under contract of sale or expected larger need at the end of 1996 by layering a number to move into the channels of trade within a reasonable time of sizable, relatively long-lived, temporary operaand that are secured throughout their life by a warehouse tions. Although this strategy received a fair amount receipt or similar document conveying title to the underof attention from market participants, empirical lying goods; provided that the aggregate amount of bankanalysis suggests that the funds market traded much ers acceptances held at any one time shall not exceed $100 million; as it had in previous years when the temporary need was smaller and much as it had been trading in 1996 (c) To buy U.S. government securities, obligations that are direct obligations of, or fully guaranteed as to before the seasonal add need developed. principal and interest by, any agency of the United States, and prime bankers acceptances of the types authorized for purchase under l(b) above, from dealers for the account of the Federal Reserve Bank of New York under agreements Al'l'HNDlX A: AUTHORIZMIUN FOR DOMESTIC for repurchase of such securities, obligations, or accep- OPEN MARKET OPERATIONS tances in fifteen calendar days or less, at rates that, unless otherwise expressly authorized by the Committee, shall be determined by competitive bidding, after applying reason- Open market operations during 1996 were conducted able limitations on the volume of agreements with indiunder the Authorization for Domestic Open Market vidual dealers; provided that in the event government Operations. No temporary change was made to the securities or agency issues covered by any such agreement authorization during 1996, and the authorized limit are not repurchased by the dealer pursuant to the agreeon intermeeting-period changes in System account ment or a renewal thereof, they shall be sold in the market or transferred to the System Open Market Account; and holdings of U.S. government and federal agency provided further that in the event bankers acceptances securities was held to $8 billion throughout the year. covered by any such agreement are not repurchased by the The Authorization for Domestic Open Market seller, they shall continue to be held by the Federal Reserve Operations in effect for 1996 is reprinted below: Bank or shall be sold in the open market. 2. In order to ensure the effective conduct of open Authorization for Domestic Open Market Operations market operations, the Federal Open Market Committee authorizes and directs the Federal Reserve Banks to lend 1. The Federal Open Market Committee authorizes and U.S. government securities held in the System Open Mardirects the Federal Reserve Bank of New York, to the ket Account to government securities dealers and to banks Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Open Market Operations during 1996 571 participating in government securities clearing arrange- by such accounts of those securities within fifteen calendar ments conducted through a Federal Reserve Bank, under days on terms comparable to those available on such such instructions as the Committee may specify from time transactions in the market; and (b) for New York Bank to time. account, when appropriate, to undertake with dealers, sub- 3. In order to ensure the effective conduct of open ject to the conditions imposed on purchases and sales of market operations, while assisting in the provision of short- securities in paragraph l(c), repurchase agreements in U.S. term investments for foreign and international accounts government and agency securities, and to arrange corremaintained at the Federal Reserve Bank of New York, the sponding sale and repurchase agreements between its own Federal Open Market Committee authorizes and directs the account and foreign and international accounts maintained Federal Reserve Bank of New York (a) for System Open at the Bank. Transactions undertaken with such accounts Market Account, to sell U.S. government securities to such under the provisions of this paragraph may provide for a foreign and international accounts on the bases set forth in service fee when appropriate. paragraph l(a) under agreements providing for the resale APPENDIX B B. I. Operations in U.S. Treasury securities and federally sponsured agency securing hy the Fedentl Reserve Bunk of New York, December 31, 1W5-December 31, 1996 Thousands of dollars Type of issue Holdings. Purchases Sales Redemptions Exchanges J^ ™3$6 and maturity category 12/31/95 Operations for the System Open Market Account Government securities Treasury bills Outright transactions 9,900.700 0 0 -426,928,496 9.900,700 426,928,496 Matched sale—purchase transactions 3,092,399,472 3,094,769,379 0 0 -2.369,907 14,706,039,000 12.336,132,000 Market 52,874,000 52,874.000 0 0 0 0 0 Foreign official 3 039.525,472 3.041,895,379 0 0 -2,369.907 14,706,039.000 12,336.132,000 Total Treasury bills Including matched transactions .. 3,102,300.172 3,094.769,379 0 0 7,530,793 190,646,505 183.115,712 Excluding matched transactions .. 9,900,700 0 0 0 9,900,700 205.352,544 195,451,844 Treasury notes and bonds Within 1 year 524,200 0 2,014,839 -41,395,214 -42,885,853' 29,045,221 41,419,243 1 to 5 years 3,898.400 0 0 31,459,662 35.358,062' 95,607,624 85,272,558 5 to 10 years 1,116,100 0 0 6,665,552 7.781,652' 33.781.913 31,469,096 More than 10 years 1,655,000 0 0 3,270,000 4,925,000' 41,825,857 39,920,857 Total notes and bonds 7,193.700 0 2,014.839 0 5,178,861 200,260,615 195,081,754 Total Treasury securities Including matched transactions 3.109,493,872 3,094,769.379 2,014,839 0 12,709,654 390,907,120 378.197,466 Excluding matched transactions .... 17,094.400 0 2,014,839 0 15.079,561 405,613,159 390,533.598 Federally sponsored agency issues Rollovers -3,006,000 Within 1 year 0 0 244,295 2,906,000 -344,2952 1.223.050 1,241.295 1 to 5 years 0 0 130,000 100,000 -3O.OO02 519,900 840,950 5 to 10 years 0 0 35.000 0 -35.0002 456.750 526,750 More than 10 years 0 0 0 0 02 25,000 25,000 Total agency issues 0 0 409,295 0 -409,295 2,224.700 2,633.995 Total System Account Including matched transactions 3,109,493.872 3,094.769,379 2,424,134 0 12,300,359 393,131,820 380,831.461 Excluding matched transactions 17,094.400 0 2,424,134 0 14,670,266 407.837,859 393,167.593 Operations for the Federal Reserve Bank of New York Account Repurchase agreements (RPs) by the Federal Resene Bank of New York For the System 532,921,000 -525,200,000 0 0 7,721,000 21,583,000 13,862,000 Customer-related, passed through to the market 64.920,000 -64,920,000 0 0 0 0 0 1. Does not include the following maturity shifts (in thousands of dollars): 2. Does not include the following maturity shifts (in thousands ot dollars): Within I year I to 5 years 5 to 10 years More than 10 years Within 1 year 1 to 5 years 5 to 10 years More than 10 years 30,511,831 -25,022,996 -5,468,835 -20,000 326,050 -291 i050 -35,000 0 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

572 Federal Reserve Bulletin • July 1997 APPENDIX C C.3. U.S. Treasury notes held in the System Open Market Account, December 31, 14% Thousands of dollars, except as noted C.I. Total U.S. Treasury and federally sponsored agency securities held in the System Open Market Account, Issue outstanding Percentage December 31, 19% Holdings, of total Net change since Thousands of dollars Coupon Ma d t a u t r e ity 12/31/96 outs is ta s n u d e ing 12/31/95 Net change Item Holdings since Total that 1251/95 matured in 1996 0 -41,189.243 Total agency issues 2,224,700 -409,295 8.000 1/15/97 606,500 6.3 8.000 6.250 1/31/97 150.000 1.6 0 Total US. Treasury securities 390.907,120 12,709,654 7.500 1/31/97 400.000 2.2 0 Bills 190,646,505 7,530.784 4.750 2/15/97 1.794.796 9.1 95.000 Notes 150,921.721 1,588.571 6.750 2/28/97 472.000 4.8 0 Bonds 49,338,894 5,27030 6.875 2728/97 597,000 3.2 22,000 6.625 3/31/97 1,050.000 5.4 0 Total US. Treasury and 6.875 3/31/97 484.000 4.3 0 agency issues 393.131,820 12300,359 8.500 4/15/97 775,700 9.8 114,200 6.500 4/30/97 735.000 4.0 385,000 6.875 4/30/97 965.000 8.5 0 6.500 5/15/97 3.665,000 16.9 250.000 8.500 5/15/97 564.000 5.7 0 6.125 5/31/97 725,000 3.8 0 6.750 5/31/97 403.000 3.7 0 5.625 6/30/97 692.435 3.6 0 6.375 6/30/97 430,000 3.9 0 8.500 7/15/97 997.710 11.9 127,000 5.500 7/31/97 400,000 3.3 0 5.875 7/31/97 286,970 1.5 0 C.2. U.S. Treasury bills held in Ihe System Open Market 6.500 8/15/97 2.282,945 11.4 20,000 Account. December 31.1996 8.625 8/15/97 497.000 5.3 0 5.625 8/31/97 574,000 5.2 0 Thousands of dollars, except as noted 6.000 8/31/97 719,830 3.7 50.000 5.500 9/30/97 541.000 4.5 0 Percentage 5.750 9/30/97 536,380 2.8 25.000 Maturity date of Holdings of total 8.750 10/15/97 756,000 8.6 25.000 issue outstanding 12/31/96 issue 5.625 10/31/97 552,000 2.9 2,000 outstanding 5.750 10731/97 315,000 2.8 0 7375 11/15/97 3.218,000 15.5 308.000 8.875 11/15/97 600,000 6.1 0 1/02/97 7,161,430 25.1 1/09/97' 107,320s 25.8 5.375 11/30/97 602,475 3.2 200.000 1/I6/971 4.580,821* 26.8 6.000 11/30/97 275.700 2.4 0 1/23/97 6,832,500 25.2 5.250 12/31/97 880,000 4.6 880.000 6.000 12/31/97 500.780 4.1 0 1/30/97 6,957,815 25.4 7.875 1/15/98 877.800 9.6 50.000 2/06/97.. . . .. 13,208.010 28.6 5.000 , 1/31/98 956.730 5.0 956.730 2/13/97 6.825,485 25.7 5.625 1/31/98 646.000 5.3 50.000 2/20/97 6,828,664 25.2 7.250 2/15/98 3.288.560 15.7 173,000 2/27/97 7.135,180 27 3 8.125 , 2/15/98 440,000 4.8 50,000 3/06/97 .. . 11.995,955 26.7 3/IT/97 ... . 6.946,501 28.7 5.125 2/28/98 1,357,320 4.4 903,320 3/20/97 6.473,243 26.9 5.125 3/31/98 1.295.000 9.9 0 3/27/97 6.304,235 25.7 6.125 3/31/98 1498,220 7.4 1,598.220 4/03/97 8355,000 25.6 7.875 4/15/98 584.500 6.6 0 4/10/97 3,617,000 27.5 5.125 4/30/98 495.000 4.1 0 4/17/97 3,400.000 26.1 5.875 4/30/98 926.000 4.3 926.000 4/24/97 3,200,000 24.4 6.125 5/15/98 3,451317 16.3 7,500 5/01/97.... . ... 8,723.000 26.1 9.000 5/15/98 478.000 5.2 0 5/08/97 . . 4,200,000 29.4 5.375 5/31/98 805,000 6.5 0 5/15/97 3.600,000 25.6 6.000 5/31/98 671.000 3.2 671,000 5/22/97 3.500.000 24.8 5.125 660/98 1,471,000 11,7 0 5/29/97 8.916,000 26.7 6.300 6/30/98 1.177,000 5.4 1.177,000 6/05/97 3,750.000 26.6 8.250 7/15/98 1.275,140 13.1 55,000 6/12/97 . . . 3.732,826 28.5 5.250 7/31/98 472,000 4.0 0 6/19/97 3,491.067 26.8 6.250 7/31/98 866.750 4.0 866,750 6/26/97 . . 8,375.000 25.6 5.875 8/15/98 4.489.808 20.0 310.000 7/24/97 4.950,000 24.5 9.250 8/15/98 1,011.000 8.9 177.000 8/21/97 5,200.000 25.3 4.750 8/31/98 591.000 4.5 0 9/18/97 . 5,325.000 26.8 6.125 8/31/98 784,300 3.6 784,300 10/16/97 6.425,000 31.8 4.750 9/30/98 944,000 7.5 44.000 U/13/97 5.000,000 24.8 6.000 9/30/98 931,000 4.4 931.000 12/11/97 5,527,453 26.9 7.125 10/15/98 968,593 9.5 0 4.750 10/31/98 857,900 6.6 0 Total 190,646,505 5.875 10/31/98 825,000 3.9 825,000 5.500 11/15/98 2319,635 12.2 35.000 8.875 11/15/98 535,000 5.4 25.000 Net change from 12/31/95 7,530,784 5.125 11/30/98 929.000 7.7 50.000 5.625 11/30/98 285,000 1.4 285.000 1. Holdings of the January 9 Treasury bills were reduced SI 1,900,000 and •5.125 12/31/98 1379,662 12.7 0 holdings of the January 16 Treasury bills by 52,806,039 reflecting sales under 5.750 12/31/98 875,000 4.2 875.000 matched sale-purchase agreements. 6.375 1/15/99 892,045 8.5 36,500 2. The percentages include the amounts that were sold under matched sale- 5.000 1/31/99 377,000 2.9 0 purchase transactions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Open Market Operations during 1996 573 C.3.— l.:>. IVo.^ii:v hmuU ik'lii in ri Accouii! Uwmlvr 31. 19v'> Thousands of dollars, except as noted Thousands of dollars, except as noted Issue outstanding Percentage Net change Holdinas. of total since Coupon Ma d t a u t r e ity 12/31/96 outs is ta s n u d e ing 12/31/95 5.000 2/15/99 3,472,140 15.8 3.472,140 8.875 2/15/99 845,000 8.7 152,000 5.500 2/28/99 435,01X1 3.7 0 5.875 3/31/99 1.875,000 14.6 0 3.500 11/15/98 30.750 10.3 0 7.000 4/15/99 1.073,700 10.5 0 11.750 2/15/01 160.803 10.7 0 6.500 4/30/99 1.219.620 9.9 0 13.125 5/15/01 165,726 9.2 0 6.375 5/15/99 2,602.124 11.2 2,602.124 8.000 8/15/01 0 0 -505.810 9.125 5/15/99 1.127,500 11.3 0 13.375 8/15/01 256.092 14.2 0 6.750 5/31/99 586,990 4.8 0 15.750 11/15/01 172,904 9.6 0 6.750 6/30/99 1,644.820 12.6 1,000 14.250 2/15/02 159,800 8.9 0 6.375 7/15/99 349,000 3.5 2,000 11.625 11/15/02 347,850 12.4 0 6.875 7/31/99 1,146,400 9.3 117,400 10.750 2/15/03 739,250 24.6 85,000 6.000 8/15AJ9 1,780,110 7.8 1,780,110 10.750 5/15/03 256,000 8.0 50.000 8.000 8/15/99 797,600 7.8 29,600 11.125 8/15/03 432,500 12.4 6,100 6.875 8/31/99 701,480 5.7 100.000 11.900 11/15/03 505,240 6.9 56,000 7.125 , 9/30/99 1.078,752 8.4 0 12.375 5/15/04 769,786 20.3 121,000 6.000 . 10/15/99 406.115 3.9 0 13.750 8/15/04 367,000 9.2 176,000 7.500 10/31/99 508,315 4.2 1O.(XX) 11.625 11/15/04 519,200 6.3 0 5.875 11/15/99 2,715,968 11.9 2,715,968 8.250 5/15/05 1.513,660 36.0 0 7.875 11/15/99 687,000 6.4 20,000 12.000 5/15/05 214,476 5.0 0 7.750 11/30/99 412,145 3.5 77,300 10.750 8/15/05 882,000 9.5 357.000 7.750 12/31/99 1,354,665 10.9 25.000 9.375 2/15/06 20,000 .4 0 6.375 1/15/00 689,545 6.8 0 7.625 2/15/07 1,396,164 33.2 0 7.750 1/31/00 612,440 5.1 80,000 7.875 11/15/07 378,500 25.2 0 8.500 2/15/00 832,000 7.8 0 8.375 8/15/08 788,500 37.5 0 7.125 2/29/00 935.290 7.5 65.000 8.750 11/15/08 1,588.500 30.5 0 6.875 3/31/00 1.205.510 9.2 60.000 9.125 5/15/09 891.205 19.4 20,000 5.500 4/15/00 360.000 3.4 0 10.375 11/15/09 1,075,939 25.6 0 6.750 4/30/00 767.750 6.2 115.1X10 11.750 2/15/10 717,400 28.7 0 8.875 5/15/00 480,000 4.6 0 10.000 5/15/10 1,176,556 39.2 0 6.250 5/31/00 642,460 5.1 15,000 12.750 11/15/10 1.260,865 26.8 0 5.875 6/30/00 740.100 5.9 i5.i cm 13.875 5/15/11 1.073.542 23.3 30.000 6.125 7/31/00 385,000 3.1 10,000 14.000 11/15/11 885,091 18.1 0 8.800 8/15/00 844,400 7.6 0 10.375 11/15/12 1,611,741 14.7 0 6.250 8/31/00 515,000 4.3 0 12.000 8/15/13 3,040.772 20.5 25,000 6.125 9/30/00 724,000 6.0 199,000 13.250 5/15/14 869,450 17.4 259,000 5.750 10/31/00 537,430 4.4 0 12.500 8/15/14 905,720 17.8 50,000 S.500 11/15/00 841,000 7.3 25.000 11.750 11/15/14 1,195,000 19.9 0 5.625 11/30/00 380.000 3.1 30,000 11.250 2/15/15 1,335,733 10.5 0 5.500 12/31/00 800.000 6.3 SOO.0O0 10.625 8/15/15 905,000 12.7 0 5.250 1/31/01 800.000 6.3 800,000 9.875 11/15/15 501,500 7.3 35,000 7.750 2/15/01 677,500 6.0 0 9.250 2/15/16 780,000 10.7 0 5.625 2/28/01 800,000 6.3 800,000 7.250 5/15/16 995,000 5.3 0 6.375 3/31/01 1,500.000 10.6 1.500,00ft 7.500 11/15/16 1.185.000 6.3 140,000 6.250 4/30/01 865.000 6.3 865.000 8.750 5/15/17 744,000 4.1 200,000 8.000 5/15/01 892,000 7.2 I) 8.875 8/15/17 820.000 5.9 0 6.500 5/31/01 655,000 4.8 655.000 9.125 5/15/18 296,900 3.4 0 6.625 6/30/01 1,100.000 7.7 1,100,000 9.000 11/15/18 256,000 2.8 0 6.625 7/31/01 7011.000 5.0 700,000 8.875 2/15/19 583,000 3.0 0 7.875 8/15/01 1,115,000 9.1 20,000 8.125 8/15/19 1,574,900 7.8 130,000 (..500 8/31/01 525,000 3.8 525,000 8.500 2/15/20 590,879 5.8 0 6.375 9/30/01 650,000 4.5 650,000 8.750 5/15/20 605,000 5.9 165.000 6.250 10/31/01 570.000 3.9 570,000 8.750 8/15/20 1.113,000 10.1 348,000 7.500 11/15/01 1,543,000 6.4 175,000 7.875 2/15/21 463,000 4.2 38,000 5.875 11/30/01 190,000 1.4 190.000 8.125 5/15/21 610,000 5.1 120,000 6.125 12/31/01 600,000 4.3 600.000 8.125 8/15/21 360,000 3.0 0 7.500 5/15/02 981,009 8.4 0 8.000 11/15/21 855,000 2.6 50,000 6.375 8/15/02 2,190.000 9.2 0 7.250 8/15/22 445,000 4.3 45,000 6.250 2/15/03 2,095,000 8.9 0 7.625 11/15/22 470,000 4.4 0 5.750 8/15/03 3,620,000 12.9 0 7.125 2/15/23 982,000 5.3 0 5.875 2/15/04 550,000 4.2 0 6.250 8/15/23 980.000 4.3 0 7.250 5/15/04 1.880,550 13.1 0 7.500 11/15/24 450,000 3.9 0 7.250 8/15/04 810.000 6.1 60,000 7.625 2/15/25 700.000 6.0 0 7.875 11/15/04 1.613,040 11.3 10.000 6.875 8/15/25 1.100,000 8.7 0 7.500 2/15/05 1.150.000 8.3 0 6.000 2/15/26 900,000 7.0 900,000 6.500 5/15/05 2.000,000 13.6 0 6.750 8/15/26 900.000 8.3 900,000 6.500 8/15/05 1,800,000 12.9 0 6.500 11/15/26 1,470,000 12.8 1,470,000 5.875 11/15/05 1.700,000 11.2 0 5.625 2/15/06 1,500,000 9.7 1.500,000 Total Treasury 6.875 5/15/06 1,700,000 10.6 1,700.000 bonds 49,338,894 5.270,290 7.000 7/15/06 1.620.752 7.1 1.620,752 6.500 10/15/06 1,844,800 8.2 1,844,800 1. Called issue. Total Treasury notes 150,921,721 1,588,571 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

574 Federal Reserve Bulletin • July 1997 C.5. Federal Home Loan Bank securities held in the C.7. Federal Farm Credit Bank securities held in the System Open Market Account, December 31, 19% System Open Market Account, December 31, 1996 Thousands of dollars, except as noted Thousands of dollars, except as noted Issue outstanding Percentage Issue outstanding Percentage Net change Net change Holdings. of total Holdings, of total Coupon M d at a u t r e ity 12/31/96 outs is ta s n u d e ing 12 s / i 3 n 1 c / e 95 Coupon Ma d t a u t r e ity 12/31/96 outs is ta s n u d e ing 12 s / i 3 n 1 c / e 95 Total that matured Total that matured in 1996 -116,000 in 1996 0 ... -887,000 6.850 2/25/97 26,700 .6 0 5.330 1/02/97 195.000 12.4 195,000 7.650 3/25/97 12,000 2.6 0 5.560 1/02/97 85,000 12.4 85,000 9.150 3/25/97 5,000 1.7 0 5.320 2/03/97 125,000 7.9 125,000 6.990 4/25/97 14,000 3.8 0 5.660 2/03/97 36,000 7.4 36,000 5.260 4/27/98 14.000 4.7 0 5.220 3/03/97 270,000 16.0 270,000 9.250 11/25/98 5.000 I.I 0 5.430 3/03/97 50,000 14.7 50,000 9.300 1/25/99 2,000 .6 0 5.450 4/01/97 40,000 13.3 40,000 8.600 6/25/99 3,900 1.2 0 5.340 5/01/97 29.000 7.0 29.000 8.450 7/26/99 5,000 2.0 0 5.290 6/02/97 57.000 15.8 57,000 8.600 8/25/99 11,000 4.5 0 11.900 10/20/97 15.000 3.3 0 8.375 10/25/99 10,000 3.7 0 8.650 10/01/99 10.000 2.9 0 8.600 1/25/00 6,000 2.0 0 Total 912,000 ... 0 Total 114,600 -116,000 (\f>. Federal National Mortgage Association securities held in Ihe System Open Market Account, C.8. Federal Land Bank securities held in the System December 31, 1996 Open Market Account, December 31, 1996 Thousands of dollars, except as noted Thousands of dollars, except as noted Issue outstanding I Percentage Issue outstanding Percentage Net change Net change Holdings, of total Holdings, of total Coupon Ma d t a u t r e ity 12/31/96 outs is ta su n e ding 12 s / i 3 n 1 c / e 95 Coupon M d at a u t r e ity 12/31/96 outs is ta su n e ding 12 s / i 3 n 1 c / e 95 Total that matured Total that matured in 1996 0 -188.500 in 1996 0 ... -49,795 7.600 1/10/97 160,000 9.7 0 7.350 1/20/97 16,650 3.7 0 9.200 6/10/97 27,000 4.5 0 8.950 7/10/97 10,000 1.7 0 Total 16,650 . . . -49,795 9.550 9/10/97 35,000 7.0 0 5.700 9/11/97 0 0 -45.000' 5.350 10/10/97 4.700 .6 0 8.650 2/10/98 10,000 1.6 0 5.300 3/11/98 50,000 6.3 0 9.150 4/10/98 30.000 5.0 0 9.400 8/10/98 50,000 10.0 0 7.850 9/10/98 48,000 7.4 0 5.300 12/10/98 15,000 2.1 0 7.050 12/10/98 30,000 2.7 0 9.550 3/10/99 25,000 3.6 0 7.500 3/10/99 0 0 -50.000' 8.700 6/10/99 23,000 2.8 0 8.450 7/12/99 5.000 1.0 0 7.000 8/11/99 15,000 3.0 0 6.450 10/14/99 100,000 25.0 100,000 8.350 11/10/99 7,000 .4 0 6.100 2/10/O0 25,000 5.0 0 9.050 4/I0/O0 10,000 1.3 0 9.200 9/11/00 10,000 2.5 0 8.625 4/10/01 0 0 -35,000' 8.700 6/11/01 0 0 -20.000' 8.875 7/10/01 0 0 -5.000' 7.200 1/10/02 10.000 2.0 0 7.900 4/10/02 10,000 1.4 0 7.800 6710/02 40,100 6.7 0 7.300 7/10/02 12,000 2.4 0 6.950 9/10/02 35,000 5.4 0 6.625 4/10/03 30,000 4.3 0 6.450 6/10/03 25,000 5.0 0 6.200 7/10/03 15.000 3.0 0 5.800 12/10/03 10.000 1.3 0 7.600 4/14/04 100,000 12.5 0 7.550 6/I0/O4 24.650 3.1 0 8.050 7/14/04 5,000 .8 0 8.250 10/12/04 30,000 7.5 0 6.850 9/12/05 20.000 5.0 0 6.700 11/10/05 100,000 25.0 0 10.350 12/10/15 10.000 4.0 0 8.200 3/10/16 15,000 3.7 0 Total 1,181,450 -243,500 Digitized fo1r. FCRallAedS iEssRue . http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

575 Industrial Production and Capacity Utilization for May 1997 Released for publication June 17 and the high-technology sector also contributed to the widespread gains among durable manufacturing Industrial production increased 0.4 percent in May, industries. In addition, coal production jumped subabout the same as in the previous two months; April stantially, apparently in response to demand by elecgrowth was revised up to 0.3 percent, and March tric utilities to replenish inventories. At 119.7 percent growth was revised down to 0.4 percent. The produc- of its 1992 average, industrial production in May was tion of motor vehicles partially rebounded in May, as 4.3 percent above its level of May 1996. The rate of one of the strikes that had begun in April ended in industrial capacity utilization edged up 0.1 percentearly May. Continued strength in commercial aircraft age point, to 83.7 percent. Industrial production indexes Twelve-month percent change Twelve-month percent change Manufacturing 5 0 \/ 5 1 1 I II Materials Durable 10 ~ manufacturing 10 5 5 + / \ v» / 0 0 Products Nondurable 5 manufacturing ~~ 5 _L _L _L _L 1 1 1 1 1991 1992 1993 1994 1995 1996 1997 1991 1992 1993 1994 1995 1996 1997 Capacity and industrial production Ratio scale, 1992 production = 100 Ratio scale. 1992 production = 100 "Total industry 160 — Manufacturing - 160 140 Capacity 140 120 -- 120 • .- 100 _ 100 —-"—• »v-^— Production : 80 - 80 I I I 1 1 1 1 1 1 1 1 Percent of capacity Percent of capacity Total industry Manufacturing 90 Utilization - 90 Utilization 80 70 - 70 I I I I I I I I 1 1 1 1 1 1 1 1 1 1 1983 1985 1987 1989 1991 1993 1995 1997 1983 1985 1987 1989 1991 1993 1995 1997 All series are seasonally adjusted. Latest series. May. Capacity is an index of potential industrial production. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

576 Federal Reserve Bulletin • July 1997 Industrial production and capacity utilization. May 1997 Industrial production, index, 1992 = 100 Percentage change Category 1997 1997' May 1996 to Feb.' Mar.' Apr.' Feb.' Mar.' Apr.r May P May 1997 Total 118.4 118.8 119.2 119.7 .5 .4 .3 4.3 Previous estimate 118.4 119.0 119.0 .5 .6 .0 Major market groups Products, total2 114.8 115.3 115.3 115.5 .4 .0 3.7 Consumer goods 111.6 112.2 111.7 111.6 .5 -.4 1.4 Business equipment . 133.8 134.4 135.7 136.4 1.3 .5 1.0 9.2 Construction supplies 120.0 121.4 120.4 120.8 2.5 1.2 4.0 Materials 124.1 124.5 125.5 126.4 .6 .3 5.2 Major Industry groups Manufacturing 120.1 120.5 120.8 121.4 .6 .4 2 5.0 Durable 130.8 131.7 132.4 133.4 1.0 .7 .6 6.6 Nondurable 108.6 108.7 108.5 108.8 .1 .1 -.2 3.1 Mining 106.3 107.6 107.1 109.2 26 1.3 -.5 2.0 5.8 Utilities 110.2 109.9 112.4 110.2 -2.3 -.3 2.3 -1.9 -3.8 Capacity utilization, percent MEMO Capacity, percentage 1996 1997 change, Average, Low, High, May 1996 1967-96 1982 1988-89 to May Feb.' Mar.' Apr.' Mayf May 1997 Total 82.1 71.1 85.3 83.2 83.5 83.6 83.6 83.7 3.7 Previous estimate ... 83.5 83.7 83.4 Manufacturing 81.2 69.0 85.7 82.0 82.6 82.7 82.6 82.7 4.1 Advanced processing 80.6 70.4 84.2 80.3 80.7 80.7 80.6 80.7 5.0 Primary processing 82.3 66.2 88.9 85.9 86.9 87.2 87.1 87.5 Mining 87.5 80.3 86.8 90.7 93.4 94.6 94.0 95.9 .1 Utilities 87.2 75.9 92.6 92.0 87.1 86.8 88.6 86.9 1.9 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. When analyzed by market group, the data show tion with the rebound in business autos and trucks that the output of consumer goods was about boosted the production of transit equipment. The unchanged; gains in the production of durable goods output of industrial equipment, which is now estiwere offset by declines in nondurable consumer mated to have jumped in April, edged down, while goods. Among durables, the output of motor vehicles the other equipment category advanced solidly for recovered about one-fifth of the strike-related decline another month, led by further strength in service in April. The production of appliances and of home industry machinery and office furniture. computing, video, and audio equipment regained The output of construction supplies reversed about two-thirds of April's decline. The production slightly less than one-half of April's loss, putting it of nondurable consumer goods other than energy near the upper end of its range during the past several products—namely food, clothing, and consumer months. The production of materials rose 0.7 percent, chemical products—eased slightly. A decrease in led by another sizable gain in the output of durable residential electricity sales more than accounted for a goods materials. Among the components of durable 1 percent decrease in the output of consumer energy materials, the output of equipment parts, particularly products; temperatures were relatively cool in May, semiconductors, rose sharply. The production of reducing the need for air conditioning. parts for consumer durables, mainly for motor vehicles, also increased. Energy materials rose 0.3 per- The output of business equipment rose 0.5 percent, cent, as the large increase in coal production more with most major categories posting gains. The output than offset the decline in electricity generation. The of information processing equipment continued to output of nondurable goods materials was about contribute to the growth in this sector. In addition, the unchanged. ongoing strength in commercial aircraft in combina- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Industrial Production and Capacity Utilization 577 When analyzed by industry group, the data show The factory operating rate edged up 0.1 percentage that manufacturing output increased 0.5 percent after point, to 82.7 percent; the level has changed little in a 0.2 percent increase in April. Excluding motor recent months. The utilization rate for advancedvehicles and parts, the output in manufacturing rose processing industries increased 0.1 percentage point, 0.5 percent, just slightly faster than in the previous to 80.7 percent, which is just slightly above its longtwo months. Much of the strength in the past few term average. The rate for primary-processing indusmonths reflects the increased output of durable goods; tries rose 0.4 percentage point, to 87.5 percent, but the production of nondurables is little changed from remained below its recent high of 89.6 percent in the end of last year. Gains were widespread within December 1994. Among the primary-processing the durable goods sector, with only miscellaneous industries, the rate of utilization increased for all manufacturing and the stone, clay, and glass industry industries except primary chemicals; stone, clay, and declining. Increases were especially strong in electri- glass; and fabricated metals. cal machinery and primary metals. The production Note. The data published in this release reflect the of nondurables increased 0.2 percent, recovering semiannual revision to seasonal factors for motor all of the April decline. Gains in the output of petro- vehicle assemblies and for series that use productionleum, rubber and plastics, paper, textile mill products, worker hours as their monthly indicator. Seasonal and printing more than offset weakness in other factors were not changed before February 1997. • categories. A pickup in oil and gas drilling activity as well as sharply higher coal production raised mining output, but utility output fell. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

578 Statement to the Congress Statement by Alan Greenspan, Chairman, Board of statutory prohibitions result in higher costs and lower Governors of the Federal Reserve System, before the quality services for the public. Their removal would Committee on Banking and Financial Services, U.S. permit banking organizations to compete more effec- House of Representatives, May 22, 1997 tively in their natural markets. The result would be a more efficient financial system providing better ser- I am pleased to be here today to present the views of vices to the public. the Board of Governors of the Federal Reserve Sys- Indeed, the Board urges that, as you consider the tem on the financial modernization legislation intro- reforms before you, the focus not be on which set of duced by chairman Leach, H.R.10, the Financial Ser- financial institutions should be permitted to take on a vices Competitiveness Act of 1997. This bill would new activity or which would, as a result, get a new reform the Glass-Steagall prohibitions to permit the competitor. All are doing similar things now and are affiliation of banks and securities firms. It would also currently in competition with each other, offering permit bank and insurance company affiliations and similar products. Securities firms have for some time provide the flexibility for banking organizations to offered checking-like accounts linked to mutual engage in other "financial" or "incidental" activi- funds, their affiliates routinely extend significant ties. The Competitiveness Act would facilitate the credit directly to businesses, and they are becoming ownership of banks by other financial firms by creat- increasingly important in the syndicated loan market. ing a category of uninsured wholesale banks that may Banking organizations are already conducting a secuhave some commercial affiliations. H.R.10 would rities business. Although indicative of the need for produce identical rules for banks and federally char- reform, which institution has hurdled some earlier tered thrift institutions and rationalize their regulation restraint is not the issue. The Board believes that the and supervision. focus should be as follows: Do H.R.10 and the other proposed bills promote a financial system that makes The Board strongly supports the approach to finanthe maximum contribution to the growth and stability cial modernization embodied in H.R.10. We believe of the U.S. economy? Is the removal of existing it would improve the efficiency and competitiveness restraints in these bills consistent with a safe and of the financial services industry and result in more sound banking system and containment of the federal choices and better service for consumers. However, safety net? Do the proposals increase the compatibilas the committee knows, the Board opposes one ity of our laws and regulations with the changing aspect of the bill, the authorization for so-called technological and global market realities to ensure operating subsidiaries of banks to engage in some that these goals are achieved? Are they consistent financial activities not permitted to their parent bank. with increased alternatives and convenience for the Our concern is the transference of the safety net public at a manageable risk to both the bank insursubsidy directly to those activities that the bill would ance fund and financial market stability? With the authorize for subsidiaries of banks. previously noted caveat, the Board believes that these questions can be answered in the affirmative for the bill. BETTER SERVICES TO THE PUBLIC Banking organizations are in a particularly good position to provide securities underwriting, insur- The Board believes that the Congress should widen ance, and other financial services to investors. They the permissible range of affiliations for banking orga- are knowledgeable about the institutional structure of nizations to expand the choices for consumers and the market, skilled at evaluating risk, knowledgeable increase the efficiency of financial markets. Financial about the financial needs of their customers, and modernization should remove outdated restrictions operate from locations that are convenient for the that serve no useful purpose, that decrease economic public. Moreover, for centuries, the special expertise efficiency, and that, as a result, limit choices and of banking organizations has been to accumulate borrower-specific information that they can use to options for the consumer of financial services. Such Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

579 make credit and related judgments that less well- dealt with by H.R. 10, such as authorizing merchant informed savers and depositors cannot make. Using banking and mutual fund sponsorship. such information asymmetries has been the value The convenience and cost savings for companies added of banking on the credit side. issuing securities will also accrue to individuals seek- It would appear that many companies and individu- ing other financial services. There are real potential als want to deal with a full-service provider that can benefits to consumers of "one-stop shopping" for handle their entire range of financing needs. This loans, deposits, money market accounts, securities, preference for "one-stop shopping" is easy to under- and insurance. It is only artificial and outdated restricstand. Starting a new financial relationship is costly tions that stand in the way of lower cost and convefor companies and individuals and, by extension, for nient delivery systems for our citizens. the economy as a whole. It takes considerable time and effort for a customer to convey to an outsider a deep understanding of its financial situation. This THE NEED FOR CONGRESS TO SHAPE process, however, can be short-circuited by allowing DEVELOPMENTS the customer to rely on a single organization for deposit services, loans, strategic advice, the under- Three major forces are rapidly changing our financial writing of debt and equity securities, and other finan- system and rendering old structures obsolete. These cial services. As evidence that there are economies forces offer the Congress the opportunity to restrucfrom this sharing of information, most of the sec- ture the financial services industry in a way that will tion 20 underwriting has been for companies that had serve the public interest by assuring minimum cost, a prior relationship with the banking organization. maximum service, and prudent risk management. The economic benefits of "one-stop shopping" can The most profound force is, of course, technology: readily be seen for small and medium-sized firms. the rapid growth of computers and telecommunica- These firms, as a rule, do not attract the interest of tions. Their spread has lowered the cost and broadmajor investment banks, and regional brokerage ened the scope of financial services, making possible houses do not provide the full range of financial new product development that would have been services these companies require. Rather, their pri- inconceivable a short time ago and, in the process, mary financial relationship is with the commercial challenging the institutional and market boundaries banking organizations where they borrow and obtain that in an earlier day seemed so well defined. their services. From the borrower's perspective, it Technological innovation has accelerated the secmakes sense to leverage this relationship when the ond major trend, financial globalization, that has been time comes to access the capital markets for financ- in process for at least three decades. Both developing. It is thus reasonable to anticipate that if securities ments have expanded cross-border asset holdings, activities are authorized for bank affiliates, banking trading, and credit flows, and, in response, both secuorganizations, especially regional and smaller bank- rities firms and U.S. and foreign banks have increased ing organizations, would use their information base their cross-border locations. Under a congressional to facilitate securities offerings for smaller, regional mandate, foreign offices of U.S. banking organizafirms. The same efficiencies are likely to benefit local tions have for some time been permitted, within municipal revenue bond issues. limits, to meet the competitive pressures of the local The Board's recent action to raise the section 20 markets in which they operate by conducting activilimits on ineligible revenues to 25 percent of the total ties not permitted to them in the United States. In the will increase the number of banking organizations evolving international environment, these offshore that can engage in securities underwriting. However, activities have included global securities underwritthere are still a large number of banks that do not ing and dealing, through subsidiaries, an activity in have the necessary volume of government, agency, which U.S. banking organizations have been among and municipal bonds transactions to meet the other the world leaders, despite limitations on their author- 75 percent of the total that would permit them to ity to distribute securities in the United States. engage in an economically viable volume of corpo- Such a response to competition abroad is an examrate or municipal revenue bond underwriting and ple of the third major trend reshaping financial hence to service their smaller customers. Investment markets—market innovation—which has been as banking services are now available for some of these much a reaction to technological change and globalsmaller issuers but at a relatively high cost. More- ization as an independent factor. These developments over, the Board's recent decision does not address make it virtually impossible to maintain some of the other important aspects of securities activities that are rules and regulations established for a different eco- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

580 Federal Reserve Bulletin • July 1997 nomic environment. As a result, the kinds of activi- Leach bill would permit securities firms that acquire ties our banking organizations are conducting no commercial banks, as well as securities firms longer fit the traditional paradigms of deposit-taking acquired or established by bank holding companies, and loan-making. to engage in all of these activities—underwriting and Technological change, globalization, and regula- dealing in securities, as well as merchant and investtory erosion will eventually make it impossible to ment banking through equity investment in any busisustain outdated restrictions. That is what we are here ness without becoming involved in the day-to-day today to discuss—the need to remove outdated operations of that business. These powers are crucial restrictions and to rationalize our system for deliver- to permit securities firms to remain competitive ing financial services. domestically and internationally. Under the bill, the Board could establish rules to ensure that these activities do not pose significant risks to banks affiliated RISKS IN MODERNIZATION with securities firms, serve as a "back door" to the commingling of banking and commerce, or unduly To be sure, with the benefits of financial moderniza- spread the subsidy impact in the safety net. tion come some risks, but the Board believes the As for insurance, the evidence is clear that, where evidence indicates that the risks in securities under- risk is diversifiable and, hence, predictable, such as writing and dealing are manageable. Underwriting life and certain property insurance lines, the resultant primarily is a deals-oriented, purchase and rapid business risks are manageable. The evidence is less resale, mark-to-market business in which losses, if clear for catastrophe-related property insurance. any, are quickly cut as the firm moves to the next Other risks come from the same sorts of credit and deal. Since the enactment of the Securities Acts— interest rate risks about which banks are already with their focus on investor protection—the broker- knowledgeable. Life, automobile, and other insurdealer regulator, the Securities and Exchange Com- ance sales are virtually riskless, and authorizing inmission (SEC), is quick to liquidate a firm with surance brokerage sales by banks is likely to add insufficient capital relative to the market value of its additional convenience and service, as well as lower assets, constraining the size of any disturbance to the prices, for the public. market or affiliates. The SEC now applies such super- H.R. 10 would continue the holding company vision to section 20 affiliates, and it would do so to framework for nonbank activities, which the Board securities affiliates under H.R. 10 and similar bills believes is important to limit the direct risk of new introduced in this Congress. Section 20 affiliates have financial activities to banks and the safety net. The operated during a period in which sharp swings have Board is of the view that the risks from securities and occurred in world financial markets, but they still insurance underwriting are manageable using the were able to manage their risk exposures well with no holding company framework proposed in the Commeasurable risks to their parent or affiliated banks. petitiveness Act. But there is another risk: the risk Indeed, to limit the exposure of the safety net, the of transference to nonbank affiliates of the subsidy supervisors have insisted that securities affiliates have implicit in the federal safety net—deposit insurance, risk management and control systems that assure that the discount window, and access to the payments risk can be managed and contained. As would be the system—with the attendant moral hazard. As the case for securities affiliates with the Competitiveness committee knows, the Board believes that the sub- Act, the Federal Reserve has required that such an sidy is more readily transferred to a subsidiary of an infrastructure exist before individual section 20 affili- insured depository institution than to its affiliates and ates are authorized and that organizations engaging in that the holding company structure creates the best these activities through nonbank affiliates have bank framework for limiting this leakage. We have consubsidiaries with strong capital positions. cluded accordingly that the further the separation The bill proposed by chairman Leach attempts to from the bank, the better the insulation. We are accommodate the merchant banking business cur- concerned that conducting securities and similar rently conducted by independent securities firms. activities as principal in subsidiaries of U.S. banks Both bank holding companies with section 20 subsid- does not create sufficient distance from the bank. iaries and independent securities firms engage in Let me be clear that bank holding companies and securities underwriting and dealing activities. How- their subsidiaries also benefit from the subsidy imever, independent securities firms also directly pro- plicit in the safety net. Their capital costs are lower vide equity capital to a wide variety of companies since a portion—currently a large part of—the conwithout any intention to manage or operate them. The solidated assets of the organization are in subsidiary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statement to the Congress 581 depository institutions that have direct access to the ered by the federal safety net. Providing banklike safety net. This transfer, of course, is significantly supervision to nonbank affiliates of banks in the smaller than the direct transfer to a bank subsidiary. context of financial reform would send the wrong But it is large enough to suggest that we should be signal, creating difficult moral hazard issues. For cautious about extending permissible activities of these reasons, the agency charged with consolidated bank or financial services holding companies to oversight should have a clearly defined role—one include nonfinancial commercial enterprises. Gener- that permits it to protect affiliated banks and the ally, public policy should give wide range to free safety net from abuse and excessive risk, while permarket competition, including business decisions on mitting operational synergies and imposing minimal affiliations. However, when such affiliations may interference with the growth or activities of the imply subsidy transfers at best—and taxpayer sup- bank's affiliates. port at worst—we should be very careful. The world is changing rapidly, and it may well become increasingly difficult to distinguish between CONSOLIDATED OVERSIGHT banking and aspects of commerce. However, the free and open legal association of banking and commerce The Board believes that combination of the holding would be a profound and surely irreversible structural company vehicle and Federal Reserve supervision change in the U.S. economy. We should, as a result, and regulation under the Bank Holding Company Act be careful to assure ourselves that whatever changes has limited the transfer of the safety net from the are made in our financial system do not distort our banks to the holding company parent and its nonbank continued evolution to the most efficient financial subsidiaries. The historical experience in supervising system. In earlier testimony, I suggested that we bank holding companies also has shown that knowlwould have to review carefully the kinds of combina- edge of the financial strength and risks inherent in a tions that could occur with a permissible basket for consolidated holding company can be critical to prononfinancial firms. As we have done so, the problems tecting an insured subsidiary bank and resolving exposed have led us to a more cautious position. problems once they arise. Examples are easy to More generally, the subsidy transfer concerns and our recall: Bank of Credit and Commerce International, uncertainty about the ultimate impact of free affilia- Continental Illinois, Barings PLC, thrift institutions, tion between banking and commerce on our financial and Texas banks all exhibited problems that spread system suggest to the Board that at least any wider quickly among their affiliates or required a consoliauthorization of banking and commerce should be dated approach to resolve the problems at least cost postponed while we focus on financial moderniza- and disruption to the financial system. By approachtion. Concerns about ensuring a two-way street ing matters from the perspective of a consolidated should be addressed without attempting to make final organization, the Federal Reserve, the agency historidecisions now about any future wider combinations cally charged with conducting consolidated overof banking and commerce. sight, has also helped to prevent banking problems by The legislation proposed by chairman Leach also addressing operational or capital deficiencies within a provides for oversight of the consolidated activities subsidiary bank, or elsewhere in the organization. of a financial services holding company. The Board Moreover, continued gains in technology and in believes such oversight is essential to a sound finan- innovative risk-management techniques permit orgacial system in which the public can have confidence. nizations of all kinds to manage and control their Some, however, have expressed concerns that such activities on an increasingly centralized basis, with oversight is incompatible with an institution that less attention paid to the individual legal entities that owns a number of otherwise unregulated subsidiaries. make up the organization. In that environment, it That view is presumably directed at an expected level seems to the Board that oversight on a consolidated of significant supervisory intrusion and possibly from basis of an organization's broad-based activities fear of new regulatory constraints by those acquiring becomes more crucial, not less. Bank supervisors a bank for the first time. throughout the world recognize this point and have The Board also has concerns about excessive over- adopted consolidated oversight as a fundamental sight, although for somewhat different reasons. In an principle. The Congress also recognized the necessity environment of greater deregulation and financial of consolidated oversight for the U.S. banking sysreform, market discipline becomes ever more critical. tem, by requiring, as a condition for a foreign bank's Such discipline requires that market participants cor- entry into this country, that the bank be subject to rectly perceive that nonbanking entities are not cov- consolidated home country supervision. What is nee- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

582 Federal Reserve Bulletin • July 1997 essary for foreign banks entering the United States is published financial reports, agency reviews of existsurely just as necessary for U.S. banks and the U.S. ing management information, examinations by other banking system. supervisors, and evaluations by market analysts when While important, consolidated oversight need not assessing the overall strength and potential riskiness become unduly intrusive to financial services holding of a bank's parent and affiliates. Such information companies. The necessity to understand and review can alert the oversight agency to look more closely at centralized risk management and control mecha- the organization and, if necessary, take steps to pronisms, and similarly to review intraorganizational tect an affiliated bank. Indeed, that agency should be fund transfers involving the insured depositories, empowered and expected to prevent or curtail abudoes not require banklike supervision of nonbank sive practices and undue risks in an organization affiliates. H.R.10 recognizes this. It would require the when they threaten affiliated banks and the safety net. banking agencies to rely to the fullest extent possible Similarly, it should be just as responsible to assure on examination reports and other information col- that the transfer of the subsidy of the safety net from lected by supervisors of other regulated entities. It the bank to its affiliate, through intraorganizawould also provide for quite limited consolidated tional funds transfers and other means, is kept to a oversight for those organizations in which the bank minimum. subsidiaries represent a modest part of the overall I believe the United States currently has a strong organization and do not exceed a maximum size. In and effective supervisory process and one that has addition, the bill would require the banking agencies also permitted its banking and financial system to to defer to the SEC in interpretations and enforce- fuel economic growth to a degree unmatched in the ment of the federal securities laws. It further elimi- world today. Although we have had our problems, nates the current legal requirements for applications most notably with thrift institutions, we must not for nonbanking activities by holding companies that forget our experience as we work toward a still better own relatively small banks, an approach we believe approach. Our domestic banking system is also could also be extended quite usefully to bank acquisi- widely recognized as the most innovative and best tion proposals. These are extremely important provi- capitalized system in the world, and its profits have sions both for existing bank holding companies and reached new record levels in recent years. As I have for securities firms and insurance companies that pointed out previously, advancing technology will wish to affiliate with banks. Such provisions would inevitably require increasing reliance on private greatly enhance the "two-way street" by eliminating counterparty surveillance to contain credit and marunnecessary burden and red tape. ket risks. Nonetheless, we should recall that just six The Board not only supports these changes but also or seven years ago, events created pressures to recognizes that its own traditional approach to super- expand and increase government banking supervision vising and regulating bank holding companies must at all levels. In the present environment of prosperity change as technology changes. Indeed, such changes and financial stability, it is easy to forget that experiare already well under way. They include a much ence and to believe that little or no oversight is now streamlined application process; a more risk-focused, needed for consolidated entities. less transaction-testing approach to inspections; fewer We must move forward, but with proper balance— firewalls between banking and securities affiliates of with a balance that I believe the bill maintains, with bank holding companies to accommodate operating the exception noted. The agency conducting consolisynergies; and greater reliance on internal and exter- dated oversight must be permitted to monitor both the nal auditors. In anticipation of financial moderniza- financial condition of the organization and the potention legislation, the Board is considering alternative tial transfer of risks to its insured depository affiliapproaches to evaluating the capital adequacy of ates. Moreover, we reiterate our concern that, regardheterogeneous financial conglomerates, when bank- less of how restructuring is addressed, the Congress ing is not the dominant activity. Such flexibility not impair the ability of the Federal Reserve to moniwould be required to ensure that banklike standards tor large banking organizations and respond effecare not indirectly imposed on insurance or securities tively to systemic crises. firms and that the standards of their primary regulator prevail and allow them to compete effectively. As the affiliates of banks increasingly conduct a CONCLUSION nonbanking business, the desirability of avoiding the extension of banklike regulation will require that the Mr. Chairman, members of the committee, the quesagency with oversight responsibility rely heavily on tion is not whether we will have changes in financial Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statement to the Congress 583 markets. Technology, globalization, and market inno- proposal—excluding authorization for new activities vations are bringing rapid changes that cannot be in bank subsidiaries—accomplishes a balancing of reversed. The open questions are how banking orga- the risks and benefits of banks' participation in finannizations will participate and will they do so in ways cial modernization. The Board also urges that the that appropriately balance the tradeoffs among risk, Congress resist efforts to so limit consolidated overminimal use of the sovereign credit, and maximum sight of banking organizations as to raise questions competition, public benefit, and convenience? If the about our ability to limit risk exposures of insured Congress does not act, the balancing will be done by depositories, to limit the transference of the safety net market forces and, when possible, regulators forced subsidy, or to prevent and manage financial market to take positions by events. The Board believes that crises. • the Congress needs to act and that the Leach Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

584 Announcements REGULATION C: AMENDMENT PROPOSED ACTION The Federal Reserve Board on May 20, 1997, issued The Federal Reserve Board on May 15, 1997, issued an amendment to its Regulation C (Home Mortgage proposed amendments to Regulation J (Collection of Disclosure), making final an interim rule that raised Checks and Other Items by Federal Reserve Banks the exemption level for small institutions. and Funds Transfers through Fedwire) to help ease The interim rule was adopted last January, rais- the transition to interstate branching in the check ing the exemption threshold from S10 million to collection area. Comments should be received by $28 million in assets. Institutions with assets totaling July 21. Comments had already been requested on $28 million or less are not required to collect HMDA regulatory proposals to define the location of a data in 1997. depository institution for purposes of maintaining a The final rule also establishes an alternative way single reserve account for a multi-District institution for covered institutions to provide disclosure state- and for Federal Reserve membership. ments in metropolitan areas where they have branch offices, which they may begin using immediately. Disclosure statements for individual institutions are ANNUAL REPORT: PUBLICATION prepared by the Federal Financial Institutions Examination Council. Within three business days of receiv- The 83rd Annual Report, 1996, of the Board of ing the statement from the Council, an institution Governors of the Federal Reserve System, covering must make a complete copy of its disclosure state- operations for the calendar year 1996, is available for ment available to the public, at its home office. distribution. Copies may be obtained on request to For branch offices located in other metropolitan Publications Services, Mail Stop 127, Board of areas, the institution will now have the option of Governors of the Federal Reserve System, Washingposting a notice informing the public that disclosures ton, DC 20551. Also available from Publications will be provided upon written request and indicating Services is a separately printed companion document, the address for sending requests. Previously, the rule Annual Report: Budget Review, 1996-97, which derequired that, within ten calendar days of receipt scribes the budgeted expenses of the Federal Reserve from the Council, disclosures for these branch offices System for 1997 and compares them with expenses be available for public inspection at one office in each for 1995 and 1996. Both reports are also available at metropolitan area. http://www.bog.frb.fed.us/—the Board's World Wide Individual disclosure statements pertaining to 1996 Web site. mortgage lending activity will likely be sent to reporting institutions starting in early June. Institutions may begin using the new branch disclosure approach CHANGE IN BOARD STAFF immediately, both for the 1996 statements and for earlier years' data. The Board of Governors announced that James 1. Both the branch disclosure rule and the change in Garner, Deputy Associate Director in the Division of the asset threshold carry out amendments to the Banking Supervision and Regulation, retired on Home Mortgage Disclosure Act that were signed into June 3, 1997, after twenty-seven years of service to law in September 1996. the Federal Reserve System. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

585 Minutes of the Federal Open Market Committee Meeting Held on March 25, 1997 A meeting of the Federal Open Market Committee Ms. Low, Open Market Secretariat Assistant, was held in the offices of the Board of Governors of Division of Monetary Affairs, Board of Governors the Federal Reserve System in Washington, D.C., on Tuesday, March 25, 1997, at 9:00 a.m. Messrs. Dewald, Hakkio, Lang, Rolnick, and Rosenblum, Senior Vice Presidents, Federal Present: Reserve Banks of St. Louis, Kansas City, Mr. Greenspan, Chairman Philadelphia, Minneapolis, and Dallas Mr. McDonough, Vice Chairman respectively Mr. Broaddus Messrs. Altig, Bentley, Judd, and Kopcke, Mr. Guynn Vice Presidents, Federal Reserve Banks of Mr. Kelley Cleveland, New York, San Francisco, and Mr. Moskow Boston respectively Mr. Meyer Mr. Parry By unanimous vote, the minutes of the meeting of Ms. Phillips the Federal Open Market Committee held on Febru- Ms. Rivlin ary 4-5, 1997, were approved. Messrs. Hoenig, Jordan, Melzer, and Ms. Minehan, The Manager of the System Open Market Account Alternate Members of the Federal Open Market reported on recent developments in foreign exchange Committee markets. There were no System open market transactions in foreign currencies during the period since the Messrs. Boehne, McTeer, and Stern, Presidents of the meeting on February 4-5, 1997, and thus no vote was Federal Reserve Banks of Philadelphia, Dallas, required of the Committee. and Minneapolis respectively The Manager also reported on developments in Mr. Kohn, Secretary and Economist domestic financial markets and on System open mar- Mr. Bernard, Deputy Secretary ket transactions in U.S. government securities and Mr. Coyne, Assistant Secretary federal agency obligations during the period Febru- Mr. Gillum, Assistant Secretary ary 5, 1997, through March 24, 1997. By unanimous Mr. Mattingly, General Counsel Mr. Baxter, Deputy General Counsel vote, the Committee ratified these transactions. Mr. Prell, Economist The Manager advised the Committee that he con- Mr. Truman, Economist tinued to anticipate a pattern of reserve needs that might require another unusually large addition to the Messrs. Eisenbeis, Goodfriend, Hunter, Lindsey, System's outright holdings of U.S. government secu- Mishkin, Siegman, and Stockton, Associate rities during the relatively long intermeeting period Economists ahead. The limit on increases in outright holdings between meetings had been raised to $12 billion at Mr. Fisher, Manager, System Open Market Account the February meeting, and the Manager requested that the higher limit be retained for the upcoming Mr. Winn, Assistant to the Board, Office of Board Members, Board of Governors period. By unanimous vote, the Committee amended Mr. Ettin, Deputy Director, Division of Research and paragraph I (a) of the Authorization for Domestic Statistics, Board of Governors Open Market Operations to raise the limit on inter- Messrs. Madigan and Simpson, Associate Directors, meeting changes in such holdings from $8 billion to Divisions of Monetary Affairs and Research and $12 billion for the period ending with the close of Statistics respectively, Board of Governors Mr. Hooper, Assistant Director, Division of business on the date of the next meeting, May 20, International Finance, Board of Governors 1997. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

586 Federal Reserve Bulletin • July 1997 The Committee then turned to a discussion of the the two months were concentrated in sales of durable economic outlook and the implementation of mone- goods, including motor vehicles and building materitary policy over the intermeeting period ahead. A als. Spending on services rose strongly in January summary of the economic and financial information (latest data) but may have moderated in February available at the time of the meeting and of the Com- when milder-than-normal weather held down heating mittee's discussion is provided below, followed by costs. Recent surveys indicated that consumer confithe domestic policy directive that was approved by dence had risen to the highest levels in many years. the Committee and issued to the Federal Reserve Housing construction rose sharply in February after Bank of New York. two months of relatively depressed activity. On bal- The information reviewed at this meeting sug- ance, various indicators of housing activity had been gested that the economy had continued to expand at a mixed over the past several months and did not relatively robust pace in early 1997 after having suggest any clear trend in spending for new housing. strengthened markedly in the fourth quarter of 1996. Recent trends in orders and shipments pointed to a Much of the more recent growth reflected further sizable further rise in outlays for producers' durable acceleration in consumer spending, but business equipment in early 1997, largely reflecting continued capital expenditures, housing activity, and an upturn rapid growth in purchases of computers and some in inventory investment also had contributed to the further increase in spending for communications recent increase in total expenditures. By contrast, equipment. Expenditures for other types of equipavailable data pointed to a sharp drop in net exports ment remained little changed. In the nonresidential after a surge in the fourth quarter. To meet the strong construction sector, trends in contracts suggested aggregate demand, employment had recorded another some further spending gains in most market segments large advance in early 1997 and industrial production after strong advances in the fourth quarter. Manufachad risen somewhat further. The underlying trend in turing and trade inventories rose somewhat in Januconsumer price inflation had remained subdued, but ary, roughly offsetting small declines over the previthe increase in average hourly earnings had continued ous two months. With sales and shipments rising to edge higher early this year. rapidly in January, inventory-sales ratios for a wide Private nonfarm payroll employment rose substan- range of industries dropped further from already low tially further in January and February. The gains levels. continued to be led by sizable advances in the ser- The nominal deficit on U.S. trade in goods and vices and trade industries. Employment in construc- services widened substantially in January from its tion increased considerably over the two months, temporarily depressed rate in the fourth quarter. largely because of unseasonably warm weather across Nearly all the deterioration in the trade balance much of the country in February that led to an earlier- reflected a sharp rise in imports; that increase was than-usual pickup in building activity. Aggregate largely the result of a rebound in automotive shiphours of private production workers, which were also ments from Canada, which had been temporarily affected by changing weather conditions, were up reduced by a strike. Recent information on economic appreciably on balance over the two months, and the activity in the G-7 countries suggested continued average workweek increased considerably, reaching a expansion at a moderate rate on average in early new recent high in February. The civilian unemploy- 1997, but rates of expansion had continued to diverge ment rate, at 5.3 percent in February, was unchanged among those economies. Growth in output still from its average level in the second half of 1996. appeared to be relatively strong in Japan, Canada, Industrial production rose appreciably in February and the United Kingdom, while much weaker ecoafter having declined slightly in January. The Febru- nomic performances were indicated for the major ary advance resulted from a surge in the manufactur- continental European countries. The economies of ing of durable goods that was only partly offset by a the major developing countries in Latin America and plunge in the output of utilities associated with unsea- eastern Asia apparently continued to expand in late sonably mild weather in that month. The utilization 1996. of total manufacturing capacity was unchanged on Data for January and February were consistent balance over the two months at a level slightly above with the continuation of a subdued trend in underits long-term average. lying price inflation. Overall consumer price inflation Consumer spending strengthened considerably fur- moderated somewhat over the two months from its ther in early 1997 after having registered a sizable pace in the fourth quarter; smaller increases in energy increase over the fourth quarter. Nominal retail sales prices were an important factor in the slowdown, but rose sharply in January and February. The gains over prices of consumer items other than food and energy Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 587 also advanced at a slower rate over the first two possible buildup in inflation pressures, and perhaps months of the year. For the twelve months ending in disappointment over the prospects for legislation to February, consumer prices excluding food and energy reduce the federal budget deficit. In these circumrose somewhat less than they had over the preceding stances, expectations built that monetary policy twelve months; a development contributing impor- would be tightened. The rise in most market interest tantly to the deceleration was a smaller rise in non-oil rates was accompanied by slight declines in a number import prices associated with the appreciation of the of major indexes of stock market prices, although dollar. At the producer level, overall prices of fin- stock prices in some industries posted more proished goods declined somewhat in January and Feb- nounced declines. ruary, reflecting an appreciable drop in the food and In foreign exchange markets, the trade-weighted energy components. For the twelve months ending in value of the dollar in terms of the other G-10 curren- February, the increase in the overall index of finished cies rose further over the intermeeting period. The goods prices was little changed from that over the dollar's appreciation appeared to reflect spreading preceding twelve months, but excluding food and perceptions of a relatively strong U.S. expansion and energy prices, which had registered sizable advances associated increases in U.S. interest rates compared in 1996, the rise was considerably smaller over the with those abroad. The dollar's rise was most prolatest twelve-month period. At early stages of pro- nounced against the continental European currencies. cessing, however, some producer prices had moved Growth of M2 moderated somewhat in January up in recent months. Average hourly earnings of and February from a brisk pace in late 1996, while production and nonsupervisory workers posted small expansion of M3 remained rapid in both months. further increases in January and February but were up Data for the first part of March suggested diminished appreciably more over the twelve months ending in growth of both aggregates. The appreciable further February than over the preceding twelve months. expansion of these broad aggregates thus far this year At its meeting on February 4-5, 1997, the Commit- probably continued to reflect elevated income growth, tee issued a directive that called for maintaining the and the relative strength of M3 was associated to an existing degree of pressure on reserve positions. The important extent with heavy bank reliance on largedirective included a bias toward the possible firming denomination time deposits to fund robust asset of reserve conditions, reflecting a consensus among growth. M3 also continued to be boosted by the rapid growth of money market mutual funds. The expanthe members that the risks were clearly in the direcsion of total domestic nonfinancial debt appeared to tion of an upward trend in inflation and that the next have slowed in the early part of the year in conpolicy move was more likely to be toward some junction with reduced borrowing by both federal and tightening than toward easing. In this regard, the state governments, which were drawing down cash directive stated that in the context of the Committee's balances. long-run objectives for price stability and sustainable economic growth, and giving careful consideration to The staff forecast prepared for this meeting sugeconomic, financial, and monetary developments, gested that the expansion in economic activity would somewhat greater reserve restraint would be accept- slow in coming quarters to a pace somewhat above able and slightly lesser reserve restraint might be that of the economy's estimated potential and would acceptable during the intermeeting period. The re- moderate a bit further in 1998. Growth in consumer serve conditions associated with this directive were spending was expected to decline appreciably from expected to be consistent with some slowing of the its recent pace but to remain fairly brisk over the growth of M2 and M3 over coming months. quarters ahead, supported by further projected gains Over the period since the February meeting, open in employment and incomes. Expansion in busimarket operations were directed toward maintaining ness spending on equipment and structures also was the existing degree of pressure on reserve positions. projected to moderate, but to a still relatively high Federal funds continued to trade mainly at rates close rate, in association with smaller increases in sales and profits. Housing construction was forecast to to the 5V4 percent level expected with an unchanged drift lower over coming quarters, partly reflecting the policy stance, though the rate did at times fall below rise that already had occurred in mortgage interest that level in conjunction with unanticipated shortfalls rates. The staff continued to anticipate that fiscal in demands for excess reserves. Most other market policy and the external sector would exert mildly interest rates rose somewhat over the intermeeting restraining effects on economic activity over the period in apparent response to indications of strongeryear ahead. With resource utilization high and than-expected economic activity, perceptions that the labor compensation rising, core consumer price Federal Reserve had become more concerned about a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

588 Federal Reserve Bulletin • July 1997 inflation was forecast to increase slightly over the stimulus to the overall economic expansion. Growth year ahead. in expenditures for business equipment was forecast In the Committee's discussion of current and pro- to decline from the extraordinary pace of recent spective economic developments, members referred years, despite continuing brisk demand for computers to the widespread statistical and anecdotal evidence and communications equipment. With regard to the that the surprising strength in economic activity over outlook for nonresidential building activity, anecdotal the closing months of 1996 was persisting in 1997. reports from several regions pointed to a further Some observed that it was difficult to detect signs of pickup in commercial construction associated with weakness or imbalances in domestic sectors of the declining vacancy rates, rising property values and economy. While the members believed that some rents, and readily available financing. Indeed, reports slowing in the expansion was inevitable, they felt that from a few areas indicated the emergence of speculasubstantial uncertainty surrounded the timing and tive building activity. On the other hand, in some extent of such slowing in the quarters ahead. Contin- regions, signs of slowing nonresidential construction ued growth near, or even somewhat below, the recent were reported. pace would raise resource utilization rates further Housing construction activity had fluctuated in from their already high levels. Although labor mar- recent months, largely in response to changing kets already were tight, inflation had remained rela- weather conditions, but such construction appeared to tively subdued, and there were no signs in price data be little changed on balance. Recent anecdotal reports that it was picking up. However, the risks of a rise in pointed to improving housing markets in several inflation down the road had increased appreciably as regions and to some easing in a few. Looking ahead, a result of the strength of aggregate demand and the the members generally anticipated that housing activincrease in pressures on resources that likely would ity would be maintained at a relatively high level, accompany it absent a firming in financial conditions. perhaps slightly below that prevailing on average in In their discussion of the outlook for spending in recent quarters, barring unanticipated developments key sectors of the economy, members emphasized the in the broader economy or in financial markets. strength of consumer spending in recent months. Although the rise that had occurred in mortgage They noted that anecdotal reports from numerous interest rates was a somewhat inhibiting influence on parts of the country and surveys indicating very high the prospects for housing, favorable factors noted levels of consumer confidence tended to confirm during the meeting included the ongoing effects of statistical evidence of an ebullient consumer sector. the large gains in stock market wealth, sizable While the recent surge in consumer demand probably increases in employment and incomes, and a still was supported mainly by rapid growth in employ- relatively favorable cash-flow affordability of home ment and labor income, it seemed possible that con- ownership. sumers also were responding increasingly to the The persisting efforts by business firms to econorun-up in household net worth stemming from the mize on their inventories had reduced the latter to earlier buoyant performance of the stock market. The quite low levels in relation to sales. In the circumeffects of rising financial wealth on consumer spend- stances, current inventory levels were viewed as an ing were difficult to isolate, and they were undoubt- upside risk to the expansion that could be triggered edly restrained by efforts to accumulate savings for by unexpected strength in final demand. Absent an future expenditures such as college expenses and upside surprise in demand, inventories might be retirement. Moreover, the constraints on spending expected to remain a slightly positive factor in the imposed by the high debt burdens of many house- economic outlook; and if growth in final demand holds tended to exert at least a partly offsetting influ- were to moderate more than anticipated, the currently ence on overall consumer spending. On balance, lean inventories could be viewed as minimizing the however, the members believed that the consumer risks of accumulating weakness in the near term. sector was likely to provide major ongoing support to The outlook for fiscal policy remained one of modthe expansion, though the increases in consumer est restraint; on the basis of existing legislation, spending probably would diminish in the context of reductions were anticipated in constant-dollar purmore restrained growth in jobs and incomes. A num- chases of goods and services by the federal governber of members expressed the view, however, that the ment in fiscal years 1997 and 1998. A key element in risks to such a forecast were in the direction of more the potential impact of fiscal policy was the uncertain robust consumer spending. outcome of the current effort to eliminate the federal Business fixed investment, which had remained on deficit over time. Although success in that effort a steep uptrend for an extended period, also was probably would have little effect on the government's expected to provide continuing though moderating budget position over the next few years, it likely Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 589 would have some beneficial repercussions on busi- be in the process of shifting to a flat, if not a rising, ness and consumer confidence and possibly also on gradient according to informed observers. Moreover, financial markets. Financial markets would be espe- as the rise in labor force participation depleted the cially positively affected by an agreement to reduce pool of available workers, less productive workers significantly the growth of entitlements, which would would tend to be hired, with adverse effects on prodamp government spending and deficits over the ductivity and costs. The members recognized that longer run. even though aggregate demand pressures seemed to The unwinding in the early months of 1997 of be pressing increasingly on available producer special factors that had boosted net exports in the resources, it was not possible to forecast with confifourth quarter of 1996 was offsetting some of the dence when the period of favorable price behavior effects on production of the persisting strength in would end. Even so, it was clear that inflationary domestic demand. Beyond the near term, the appreci- developments in the economy had become a matter ated value of the dollar was expected to hold down of more urgent concern for monetary policy. net exports, restraining overall demand and growth. In light of this concern, in the Committee's discus- Some members observed in this regard that the dete- sion of policy for the intermeeting period ahead, the rioration in net exports might be substantial. While members supported or could accept a proposal to such an outcome would help to moderate inflationary adjust policy toward a slightly less accommodative pressures on domestic resources in coming quarters, stance and to move to symmetry in the directive. it also would exacerbate the longer-term problem of They noted that continued relatively rapid growth of very large foreign trade and current account deficits. economic activity in the first quarter suggested In their review of developments bearing on the greater persisting strength in demand than they had outlook for inflation, members commented that the anticipated. With resource use already at high levels, risks now seemed to be tilted more clearly toward further rapid growth risked greater pressures on higher inflation. They acknowledged that it was diffi- resources and rising inflation. Although inflation cult to find indications of rising inflation in broad remained remarkably subdued and any increase in inflationary pressures likely would tend to emerge measures of consumer or GDP-related prices; indeed, only slowly, the strength in demand had developed such measures still could be viewed as consistent against the backdrop of financial conditions that, with a slightly declining trend in price inflation. Even broadly considered, were not substantially different so, prospects for a substantial period of economic from those now prevailing. In this situation, they saw expansion at a rate that exceeded the estimated a clear need for a preemptive policy action that would growth of potential had generated increasing conhead off any pickup of inflation, and it was noted that cerns of rising inflationary pressures in an economy a shift to a tighter policy stance would seem to pose that already was operating at high levels of resource little risk to the expansion. Indeed, by countering any utilization. Members observed in this regard that tendency for inflation to rise and for higher inflation while there was little evidence of growing demand expectations to become embedded in financial marpressures on capital resources, the tightness in labor kets and economic decision-making more generally, markets appeared to be intensifying. Indications of such action would help head off a more abrupt ecosuch a development included not only widespread nomic slowing, or even a downturn, and thereby anecdotal reports but a variety of data such as initial would help sustain the expansion and preserve the claims, insured unemployment, and help-wanted firm labor markets and their associated benefits. advertising. The rise in labor force participation to a high percentage of the working age population had A few members argued that a more substantial helped to keep the unemployment rate from falling, tightening was needed at this juncture to provide a but the unexpected increase in participation was itself better calibrated response to the persisting strength of suggesting tight conditions that were inducing mar- the economy and the related risk of intensifying ginal workers into the job market. inflationary pressures. In their view, a more vigorous The data on worker compensation were somewhat action would lessen the need for tightening in the mixed, but they suggested some acceleration on bal- future and also would foster a financial setting that ance. Members noted that the damping effects of would be more conducive to sustained expansion. some temporary factors on labor costs could well Other members acknowledged that a smaller policy move would have less effect in curbing inflationary begin to wane soon, if they had not already begun to pressures, but they felt that a cautious approach to do so. These included the possibility that job security policy was desirable at a time when the outlook for concerns might be diminishing after an extended economic activity and inflation remained subject to period of rapid job growth and low unemployment. substantial uncertainties. Some noted that a shift in The downward trend in medical cost increases might Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

590 Federal Reserve Bulletin • July 1997 policy direction, as the Committee was about to ian unemployment rate, at 5.3 percent in February, was undertake, often can have exaggerated effects in unchanged from its level in the second half of 1996. Industrial production rose moderately on balance in Janufinancial markets, making it difficult to judge how ary and February. Nominal retail sales increased sharply much additional restraint, if any, might be needed. further over January and February after a considerable In their discussion of possible adjustments to pol- advance in the fourth quarter. Housing activity strengthicy during the intermeeting period, a majority of the ened markedly over January and February, though much of the rise probably related to unusually favorable weather. members favored a symmetric directive. While addi- Recent data on orders and contracts point to a further tional policy tightening might be needed at some sizable gain in business fixed investment in the first quarpoint, it did not appear very likely that developments ter. The nominal deficit on U.S. trade in goods and services during the intermeeting period would require a fur- widened substantially in January from its temporarily ther policy move. Some added that inflation remained depressed rate in the fourth quarter. Underlying price inflation has remained subdued. quiescent and the near-term onset of an appreciable slowing of the expansion to a rate more in line with Most market interest rates have risen somewhat since the Committee meeting on February 4-5, 1997. In foreign the economy's potential could not be ruled out. exchange markets, the trade-weighted value of the dollar in Accordingly, they felt that the directive should not terms of the other G-10 currencies increased further over establish a presumption about further near-term pol- the intermeeting period. icy tightening. Other members believed that growth Growth of M2 moderated somewhat in January and of the economy was not likely to slow enough to February from a brisk pace over the fourth quarter while the expansion of M3 remained relatively robust; data for alleviate excess demands for resources and that addithe first part of March pointed to diminished growth in tional tightening would be needed sooner rather than both aggregates. Total domestic nonfinancial debt has later to moderate inflationary pressures and prolong expanded moderately on balance over recent months. the expansion. In their view, the outlook called for The Federal Open Market Committee seeks monetary vigilance and the maintenance of an asymmetric and financial conditions that will foster price stability and directive with a bias toward tightening, but they promote sustainable growth in output. In furtherance of these objectives, the Committee at its meeting in February could accept a symmetric directive with careful moniestablished ranges for growth of M2 and M3 of 1 to toring of new developments for any signs of the need 5 percent and 2 to 6 percent respectively, measured from for prompt action. the fourth quarter of 1996 to the fourth quarter of 1997. The monitoring range for growth of total domestic non- At the conclusion of the Committee's discussion, financial debt was set at 3 to 7 percent for the year. The all the members indicated that they supported or behavior of the monetary aggregates will continue to be could accept a directive that called for a slight evaluated in the light of progress toward price level stabilincrease in the degree of pressure on reserve posi- ity, movements in their velocities, and developments in the economy and financial markets. tions and that did not include a presumption about In the implementation of policy for the immediate future, adjustments to policy during the intermeeting period. the Committee seeks to increase slightly the existing Accordingly, in the context of the Committee's longdegree of pressure on reserve positions. In the context of run objectives for price stability and sustainable eco- the Committee's long-run objectives for price stability and nomic growth, and giving careful consideration to sustainable economic growth, and giving careful considereconomic, financial, and monetary developments, ation to economic, financial, and monetary developments, slightly greater reserve restraint or slightly lesser reserve the Committee decided that slightly greater reserve restraint might be acceptable in the intermeeting period. restraint or slightly lesser reserve restraint might be The contemplated reserve conditions are expected to be acceptable during the intermeeting period. The re- consistent with some moderation in the expansion of M2 serve conditions contemplated at this meeting were and M3 over coming months. expected to be consistent with some moderation in the expansion of M2 and M3 over coming months. Votes for this action: Messrs. Greenspan, McDonough, Broaddus, Guynn, Kelley, Meyer, Moskow, Parry, The Federal Reserve Bank of New York was autho- Mses. Phillips and Rivlin. Votes against this action: rized and directed, until instructed otherwise by the None. Committee, to execute transactions in the System Account in accordance with the following domestic It was agreed that the next meeting of the Commitpolicy directive: tee would be held on Tuesday, May 20, 1997. The meeting adjourned at 12:20 p.m. The information reviewed at this meeting suggests that relatively strong economic growth has continued in the first quarter. Private nonfarm payroll employment increased Donald L. Kohn substantially further in January and February, and the civil- Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

591 Legal Developments FINAL RULE—AMENDMENT TO REGULATION C a. Paragraph (b) is revised; b. Under paragraph (c), the last sentence is revised; and The Board of Governors is amending 12C.F.R. Part 203, c. Paragraph (e) is revised. its Regulation C (Home Mortgage Disclosure). The revi- The revisions and additions read as follows: sions implement the amendments to the Home Mortgage Disclosure Act included in the Economic Growth and Regulatory Paperwork Reduction Act of 1996. The action makes final an interim rule adopted in January, which set Section 203.5—Disclosure and reporting. the asset-exemption threshold for depository institutions at $28 million. The final rule also establishes an alternative way for institutions to provide disclosure statements in metropolitan areas where they have branch offices, which (b) Public disclosure of statement. (1) A financial instituthey may begin using immediately. In addition, the Board tion shall make its mortgage loan disclosure statement is extending its information collection authority under the (to be prepared by the Federal Financial Institutions Paperwork Reduction Act for another three years, and Examination Council) available to the public at its home making technical amendments to the transmittal sheet ac- office no later than three business days after receiving it companying the loan/application register. from the Examination Council. (2) In addition, a financial institution shall either: Effective July 1, 1997, 12 C.F.R. Part 203 is amended as (i) Make its disclosure statement available to the follows: public (within ten business days of receiving it) in at least one branch office in each additional MSA where Part 203—Home Mortgage Disclosure (Regulathe institution has offices (the disclosure statement tion C) need only contain data relating to the MSA where the branch is located); or 1. The authority citation for Part 203 continues to read as (ii) Post the address for sending written requests for follows: the disclosure statement in the lobby of each branch office in an MSA where the institution has offices, and Authority: 12 U.S.C. 2801-2810. mail or deliver a copy of the disclosure statement, within fifteen calendar days of receiving a written 2. Section 203.3 is amended by revising paragraph request (the disclosure statement need only contain (a)(l)(ii) to read as follows: data relating to the MSA for which the request is made). Including the address in the general notice required under paragraph (e) of this section satisfies this requirement. Section 203.3—Exempt institutions. (c) Public disclosure of loan application register. * * * The modified register need only contain data relating to the (a) Exemption based on location, asset size, or number of MSA for which the request is made. home purchase loans. (1) * * * (ii) The institution's total assets were at or below the asset threshold established by the Board. For data collection in 1997, the asset threshold is $28 million as of December 31, 1996. For subsequent (e) Notice of availability. A financial institution shall post a years, the Board will adjust the threshold based on the general notice about the availability of its HMDA data in year-to-year change in the average of the Consumer the lobby of its home office and of each branch office Price Index for Urban Wage Earners and Clerical located in an MSA. It shall promptly upon request provide Workers, not seasonally adjusted, for each twelve- the location of the institution's offices where the statement month period ending in November, with rounding to is available for inspection and copying, or it may include the nearest million. The Board will publish any adjust- the location in the notice. ment in the asset figure in December. 4. In Appendix A to Part 203 under the heading Paperwork Reduction Act Notice, the undesignated paragraph is re- 3. Section 203.5 is amended as follows: vised to read as follows: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

592 Federal Reserve Bulletin • July 1997 APPENDIX A TO PART 203—FORM AND INSTRUCTIONS a. Paragraph D. is revised; FOR COMPLETION OF HMD A LOAN I APPLICATION b. Under paragraph E., paragraph 2. is revised and a new REGISTER paragraph 3. is added; c. Paragraph F. is removed; and Paperwork Reduction Act Notice d. Paragraph G. is redesignated as paragraph F., and in newly redesignated paragraph F, the first paragraph fol- Public reporting burden for collection of this information is lowing the heading is designated as paragraph 1. and a new estimated to vary from 10 to 10,000 hours per response, heading is added to the newly designated paragraph 1.. and with an average of 202 hours per response for state mem- paragraph 2. is added after the Home Mortgage Disclosure ber banks and 160 hours per response for mortgage bank- Act Notice. ing subsidiaries, including time to gather and maintain the The revisions and additions read as follows: data needed and to review instructions and complete the information collection. This report is required by law III. Submission of HMDA-LAR and Public Release of (12U.S.C. 2801-2810 and 12C.F.R. Part 203). An agency may not conduct or sponsor, and an organization is not Data required to respond to, a collection of information unless it displays a currently valid OMB Control Number. The OMB Control number for this information collection is D. Availability of disclosure statement. 7100-0247. Send comments regarding this burden estimate 1. The Federal Financial Institutions Examination or any other aspect of this collection of information, includ- Council (FFIEC) will prepare a disclosure stateing suggestions for reducing the burden, to Secretary, ment from the data you submit. Your disclosure Board of Governors of the Federal Reserve System, Wash- statement will be returned to the name and address ington, D.C. 20551; and to the Office of Information and indicated on the transmittal sheet. Within three Regulatory Affairs, Office of Management and Budget, business days of receiving the disclosure statement, Washington. D.C. 20503. you must make a copy available at your home office for inspection by the public. For these purposes a business day is any calendar day other than a Satur- 5. Paragraph 1 of Appendix A to Part 203 is amended as day, Sunday, or legal public holiday. You also must follows: either: a. Paragraph A. is amended by redesignating the introduc- a. Make your disclosure statement available to tory text, paragraph 1., and paragraph 2., as paragraph 1., the public, within ten business days of receiving paragraph l.a., and paragraph l.b., respectively; it from the FFIEC, in at least one branch office in b. Newly designated paragraph l.a. is revised; each additional MSA where you have offices (the c. A new paragraph 2. is added; and disclosure statement need only contain data relatd. The undesignated paragraph EXAMPLE, is designated ing to properties in the MSA where the branch as paragraph 3. and revised. The addition and revisions office is located); or read as follows: b. Post in the lobby of each branch office in an MSA the address where a written request for the disclosure statement may be sent, and mail or I. Who Must File a Report deliver a copy of the statement to any person A. Depository Institutions requesting it, within fifteen calendar days of re- I * * * ceiving a written request. The disclosure statea. Had assets of more than the asset threshold for ment need only contain data relating to the MSA coverage as published by the Board each year in for which the request is made. December, and 2. You may make the disclosure statement available b * ** in paper form or, if the person requesting the data 2. For data collection in 1997, the asset threshold is agrees, in automated form (such as by PC diskette $28 million in total assets as of December 31, 1996. or computer tape). 3. Example. If on December 31 you had a home or E. Availability of modified loan application register. I * * * branch office in an MSA and your assets exceeded the asset threshold, you must complete a register 2. You may make the modified register available in that lists the home-purchase and home- paper or automated form (such as by PC diskette or improvement loans that you originate or purchase computer tape). Although you are not required to (and also lists applications that did not result in an make the modified loan application register availorigination) beginning January 1. able in census-tract order, you are strongly encouraged to do so in order to enhance its utility to users. 3. You must make your modified register available 6. Paragraph III. of Appendix A to Part 203 is amended as following the calendar year for which the data are follows: complied, by March 31 for a request received on or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developmen' before March 1, and within 30 days for a request received after March 1. You are not required to prepare a modified loan application register in advance of receiving a request from the public for this ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT information, but must be able to respond to a request within 30 days. A modified register need only Orders Issued Under Section 3 of the Bank Holding reflect data relating to the MSA for which the Company Act request is made. F. Posters. NationsBank Corporation 1. Suggested language. * * * Charlotte, North Carolina 2. Additional language for institutions making the disclosure statement available upon request. For an NB Holdings Corporation institution that makes its disclosure statement avail- Charlotte, North Carolina able upon request instead of at branch offices must post a notice informing the public of the address to Order Approving the Ownership of Bank Shares In a which a request should be sent. For example, the Fiduciary Capacity institution could include the following sentence in its general notice: 'To receive a copy of these data NationsBank Corporation and NB Holdings Corporation, send a written request to [address].' both of Charlotte, North Carolina (collectively, "NationsBank"), bank holding companies within the meaning of the Bank Holding Company Act ("BHC Act"), have 7. In Appendix A to Part 203, the LOAN/APPLICATION requested the Board's approval under section 3 of the BHC REGISTER Transmittal Sheet is revised to read as follows: Act (12 U.S.C.§1842) to retain, in a fiduciary capacity with sole voting authority, more than 5 percent, but less than SEE APPLICATION FORM NEXT PAGE 25 percent, of the voting shares of First National Security Company, De Queen, Arkansas; Calvin B. Taylor Bankshares, Inc., Berlin, Maryland; First Perry Bancorp, Inc., 8. Supplement I to Part 203 is amended as follows: Pinckneyville, Illinois; and The First National Bank in a. Under Section 203.3—Exempt Institutions, under 3(a) Falfurrias, Falfurrias, Texas (collectively, the "Banks").1 Exemption based on location, asset size, or number of The voting shares of the Banks are held by the trust home-purchase loans, the second sentence of Paragraph 1. departments of two NationsBank subsidiary banks, General is revised; and NationsBank, N.A., Charlotte, North Carolina, and b. Under Section 203.5—Disclosure and Reporting, under NationsBank of Texas, N.A., Dallas, Texas, and were 5(e) Notice of availability, the parenthetical at the end of acquired in connection with previous acquisitions by Paragraph 1. Poster—suggested text is revised. The revi- NationsBank.2 sions read as follows: Supplement I to Part 203—Staff Commentary Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (62 Federal Register 7784 (1997)). The time for filing comments has expired, and the Board has considered the applications and all comments received in light of the Section 203.3—Exempt Institutions factors set forth in the BHC Act. NationsBank, with total consolidated assets of approximately $226 billion, is the fourth largest commercial bank- 3(a) Exemption based on location, asset size, or number of ing organization in the United States, controlling approxihome-purchase loans. mately 5.5 percent of total banking assets of insured 1. General. * * * For example, a bank whose assets are commercial banks ("total banking assets").3 Its subsidiary at or below the threshold on December 31 of a given year reports data for that full calendar year, in which it was covered, but does not report data for the succeeding calendar year. * * * 1. NationsBank would retain not more than the following percentages of voting shares of the Banks: (1) 15.6 percent of First National Security Company; (2) 8 percent of Calvin B. Taylor Bankshares; (3) 13.1 percent of First Perry Bancorp; and (4) 15.5 percent of The First National Bank in Falfurrias. Section 203.5—Disclosure and Reporting 2. The interests were acquired in connection with NationsBank's acquisition of MNC Financial, Inc., Baltimore, Maryland, and as successor to two failed institutions, First Republic Bank Midland, N.A., Midland, and NBC Bank-San Antonio, N.A. San Antonio, both 5(e) Notice of availability. in Texas. 1. Poster—suggested text. * * * 3. Consolidated asset data are as of December 31, 1996. and include (Appendix A of this part, paragraph III.F.) the acquisition of Boatmen's Bancshares, Inc.. St. Louis, Missouri. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

594 Federal Reserve Bulletin • July 1997 Form FR HMDA-LAR. OMB No. 7100-0247. Approval expires May 31, 2000. LOAN/APPLICATION REGISTER TRANSMITTAL SHEET You must complete this transmittal sheet (please type or print) and attach it to the Loan/Application Register, required by the Home Mortgage Disclosure Act, that you submit to your supervisory agency. Agency Total line entries contained in Reporter's Identification Number Code Reporter's Tax Identification Number attached Loan/Application Register I I I i-I | I I - I I I I The Loan/Application Register that is attached covers activity during the year and contains a total of pages. Enter the name and address of your institution. The disclosure statement that is produced by the Federal Financial Institutions Examination Council will be mailed to the address you supply below: Name of Institution City, State, ZIP Enter the name, telephone number, and facsimile number of a person who may be contacted about questions regarding your register: Name Telephone Number Facsimile Number (if applicable) If your institution is a subsidiary of another institution or corporation, enter the name of your parent: Name Address City, State, ZIP An officer of your institution must complete the following section. I certify to the accuracy of the data contained in this register. Name of Officer Signature Date Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 595 banks operate in North Carolina, Arkansas, Delaware, the Oklahoma.'' Consummation of the proposal would exceed District of Columbia, Florida, Georgia, Illinois, Iowa, Kansas, the threshold levels of market concentration, as measured Kentucky, Maryland, New Mexico, Oklahoma, South Caro- by the Herfindahl-Hirschman Index ("HHI"), in the Scott lina, Tennessee, Texas, and Virginia. State deposit and rank- County and Worcester County banking markets.6 ing data in light of the proposal are contained in Appendix A. A number of considerations indicate that the market NationsBank holds the shares of the Banks in a fiduciary concentrations as measured by the HHI tend to overstate capacity as trustee for predominately family trusts. the competitive effects of this proposal in Scott County and NationsBank did not acquire or express an interest in Worcester County. In Scott County, for example, where acquiring any shares of the Banks on its own behalf, but NationsBank and First National Security Company ("First instead, NationsBank received shares that had been pur- Security") compete, the largest principal shareholders of chased and placed in trust by the grantors. The trusts were the banking organization and grantors of the trust holding only acquired by NationsBank in connection with the ac- First Security shares that are administered by NationsBank, quisition of the banking organization that was serving as control more than 72 percent of First Security's the voting trustee when it was acquired. In almost every case, the shares. The shareholders also serve as officers of First trusts were established by current or former officers or Security. In Worcester County, ten competitors, including directors of the Banks. NationsBank eventually will be three of the largest commercial banking organizations in required to distribute the trusts' assets, over which it tem- Maryland, would remain and the banking market has charporarily holds legal title, to the descendants of the current acteristics that make it attractive for entry and expansion beneficiaries of the trusts. There are no director or officer by potential competitors.7 interlocks between NationsBank and Banks.4 Based on Based on these and other facts of record, including the these facts and all other facts of record, including commit- fiduciary nature of NationsBank's interest and its commitments made by Nationsbank in connection with this pro- ments to remain a passive shareholder, the Board conposal, it is the Board's judgment that, for purposes of the cludes that the proposal would not have a significantly BHC Act, NationsBank's retention of less than 25 percent adverse effect on competition or concentration of banking of the voting shares of the Banks would not result in resources in the Scott County or Worcester County bankcontrol of the Banks by NationsBank. ing markets, or any relevant banking market. Accordingly, the Board concludes that competitive considerations are Competitive Considerations consistent with approval of the proposal. In reviewing the competitive aspects of the proposal, the Supervisory Factors Board notes that NationsBank controls a relatively small percentage of the voting shares of the Banks. The Board In light of all the facts of record, including supervisory has, nevertheless, considered this proposal on the basis that reports of examination, the Board also concluded that the NationsBank would have the ability to alter the market financial and managerial resources and future prospects of behavior of Banks in an anticompetitive manner. the institutions involved in this proposal, and consider- NationsBank and the Banks compete directly in the ations relating to the convenience and needs of the commufollowing banking markets: Scott County, Arkansas nities to be served, are consistent with approval, as are the ("Scott County"); Eastern Shore and Worcester County other supervisory factors the Board must consider under ("Worcester County"), Maryland; and McCurtain County, section 3 of the BHC Act. 4. NationsBank also has made a number of commitments that are 5. The banking markets are described in Appendix A. similar to commitments previously relied on by the Board to deter- 6. The HHI would increase 844 points to 5141 in Scott County, and mine that an investing bank holding company would not exercise a 299 points to 2045 in Worcester County. The increases in the HHI for controlling influence over another bank holding company or bank for the remaining banking markets are contained in Appendix A. Under purposes of the BHC Act. See, e.g.. North Fork Bancorporation, Inc., the revised Department of Justice Merger Guidelines, 49 Federal 81 Federal Reserve Bulletin 734 (1995) (acquisition of 19.9 percent of Register 26.823 (June 29, 1984). a market in which the post-merger the voting shares of a bank holding company); Mansura Bancshares, HHI is over 1800 is considered to be highly concentrated. The Inc.. 79 Federal Reserve Bulletin 37 (1993) (acquisition of 9.7 percent Department of Justice ("DOJ") has informed the Board that a bank of the voting shares of a bank holding company); and SunTrust Banks, merger or acquisition generally will not be challenged (in the absence Inc., 76 Federal Reserve Bulletin 542 (1990) (acquisition of up to of other factors indicating anticompetitive effects) unless the post- 24.99 percent of the voting shares of a bank). NationsBank has merger HHI is at least 1800 and the merger increases the HHI by more committed, for example, except to the extent required in its capacity than 200 points. The DOJ has stated that the higher than normal HHI as a fiduciary, not to exercise or attempt to exercise a controlling thresholds for screening bank mergers for anticompetitive effects influence over the management or policies of the Banks; not to seek or implicitly recognize the competitive effect of limited-purpose lenders accept representation on the board of directors of the Banks; not to and other non-depository financial entities. challenge a nominee of management for the board of directors of the 7. From 1990 to 1995, the population in Worcester County in- Banks; and not to have any representative of NationsBank serve as an creased by 15.1 percent whereas the average increase in population officer, agent or employee of the Banks or any of their affiliates. The statewide was 6.1 percent. In the last five years, deposits in Worcester Board concludes that these commitments adequately limit County increased by 1 percent whereas the average increase in depos- NationsBank's ability to weaken or eliminate independent action by its for non-Metropolitan Statistical Area counties in the state like the Banks. Worcester County was approximately 0.01 percent. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

596 Federal Reserve Bulletin • July 1997 Conclusion (1) Scott County, Arkansas banking market— approximated by Scott County, Arkansas. Based on the foregoing and all the facts of record, the Board has determined that the application should be, and (2) Eastern Shore, Maryland banking market— hereby is, approved. The Board's approval of the proposal approximated by Accomack County and Northampton is conditioned on compliance by NationsBank with the County Virginia; and the towns of Pocomoke City and commitments made in connection with this application, Snow Hill, Maryland. The HHI would increase 66 points including the commitments referred to in the order. The to 1480. commitments and conditions relied on by the Board in reaching this decision shall be deemed to be conditions (3) Worcester County, Maryland banking market— imposed in writing by the Board in connection with its approximated by Worcester County, Maryland. findings and decision, and, as such, may be enforced in proceedings under applicable law. (4) McCurtain County, Oklahoma banking market— By order of the Board of Governors, effective May 12, approximated by McCurtain County, Oklahoma. The 1997. HHI would increase 179 points to 1865. Voting for this action: Vice Chair Rivlin and Governors Kelley. Southern National Corporation Phillips, and Meyer. Absent and not voting: Chairman Greenspan. Winston-Salem, North Carolina JENNIFER J. JOHNSON Order Approving the Merger of Bank Holding Deputy Secretary of the Board Companies Southern National Corporation, Winston-Salem, North APPENDIX A Carolina ("Southern"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), A. State deposit and ranking data if NationsBank were has requested the Board's approval under section 3 of the considered to control the Banks.1 BHC Act (12 U.S.C. § 1842) to merge with United Carolina Bancshares Corporation, Whiteville, North Carolina Arkansas. NationsBank would be the largest commercial ("United Carolina"),1 and thereby acquire United Carolina banking organization, controlling deposits of $3.5 billion, Bank, Whiteville, North Carolina, and United Carolina representing 13.1 percent of the total deposits in commer- Bank of South Carolina, Greer, South Carolina. cial banking organizations in the state. Notice of the proposal, affording interested persons an opportunity to submit comments, has been published Maryland. NationsBank would be the largest commer- (62 Federal Register 10,271 (1997)). The time for filing cial banking organization, controlling deposits of $9.6 bilcomments has expired, and the Board has considered the lion, representing 23.9 percent of the total deposits in application and all comments received in light of the commercial banking organizations in the state. factors set forth in section 3 of the BHC Act. Southern is the third largest depository institution in Illinois. NationsBank would be the 17th largest commer- North Carolina, controlling deposits of $11.1 billion, reprecial banking organization, controlling deposits of approxisenting 14.5 percent of total deposits in depository institumately $ 1 billion, representing less than 1 percent of the tions in that state, and is the third largest depository institotal deposits in commercial banking organizations in the tution in South Carolina, controlling deposits of state. $2.89 billion, representing 9.4 percent of total deposits in depository institutions in the state.2 United Carolina is the Oklahoma. NationsBank would be the largest commereighth largest depository institution in North Carolina, cial banking organization, controlling deposits of $3.1 bilcontrolling deposits of $3.4 billion, representing 4.4 perlion, representing 10.6 percent of the total deposits in cent of total deposits in depository institutions in that state, commercial banking organizations in the state. and is the fourteenth largest depository institution in South Carolina, controlling deposits of $332 million, representing Texas. NationsBank would be the largest commercial banking organization, controlling deposits of $25.6 billion, representing 16.6 percent of the total deposits in commercial banking organizations in the state. 1. Southern and United Carolina have granted each other an option to purchase, under certain circumstances, outstanding common stock of the other company. These options would terminate on consumma- B. Local banking markets where NationsBank and the tion of the proposal. United Carolina would be required to obtain the Banks compete: Board's approval under section 3 of the BHC Act before exercising its option. 2. Slate and market data are as of June 30, 1996. In this context, depository institutions include commercial banks, savings banks, and 1. State deposit data are as of June 30, 1996. savings associations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 597 1.1 percent of total deposits in depository institutions in institutions5 in the markets ("market deposits") as meathat state. sured by the Herfindahl—Hirschman Index ("HHI") under On consummation of this proposal and all proposed the Department of Justice Merger Guidelines ("DOJ divestitures, totalling $529.5 million, Southern would be- Guidelines"),6 and commitments made by Southern to come the largest depository institution in North Carolina, divest certain branches.7 Consummation of the proposal, controlling 18.2 percent of total deposits in depository without divestitures, would be consistent with the DOJ institutions in that state, and would remain the third largest Guidelines in seven banking markets in North Carolina and depository institution in South Carolina, controlling all three of the banking markets in South Carolina.8 10.5 percent of total deposits in depository institutions in In order to mitigate the potential anticompetitive effects that state. of the proposal in other markets, Southern has committed to make a number of divestitures.9 With the proposed Interstate Analysis divestitures, the concentration levels in eight additional North Carolina banking markets would be consistent with Section 3(d) of the BHC Act, as amended by Section 101 the DOJ Guidelines following consummation of the proof the Riegle-Neal Interstate Banking and Branching Effi- posal.10 The divested branches hold deposits of approxiciency Act of 1994, allows the Board to approve an application by a bank holding company to acquire control of a bank located in a state other than the home state of such 5. Market concentration calculations include deposits of thrift instibank holding company, if certain conditions are met. For tutions at 50 percent. The Board previously has indicated that thrift purposes of the BHC Act, the home state of Southern is institutions have become, or have the potential to become, significant competitors of commercial banks. See Midwest Financial Group, 75 North Carolina, and Southern proposes to acquire a bank in Federal Reserve Bulletin 386 (1989); National City Corporation, 70 South Carolina.3 The conditions for an interstate acquisi- Federal Reserve Bulletin 743 (1984). Thus, the Board has regularly tion enumerated in section 3(d) are met in this case,4 and included thrift deposits in the calculation of market share on a the Board is permitted to approve this proposal under 50-percent weighted basis. See, e.g., First Hawaiian Inc., 77 Federal Reserve Bulletin 52 (1991). section 3(d) of the BHC Act. 6. Under the revised DOJ Guidelines, 49 Federal Register 26,823 (June 29. 1984). a market in which the post-merger HHI is less than Competitive Considerations 1000 is considered unconcentrated, and a market in which the postmerger HHI is between 1000 and 1800 is considered moderately concentrated. The Justice Department has informed the Board that a The BHC Act prohibits the Board from approving an bank merger or acquisition generally will not be challenged (in the application under section 3 of the BHC Act if the proposal absence of other factors indicating anticompetitive effects) unless the would result in a monopoly, or would substantially lessen post-merger HHI is at least 1800 and the merger increases the HHI by competition in any relevant banking market, unless the more than 200 points. The Justice Department has stated that the Board finds that the anticompetitive effects of the proposal higher than normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effect of are clearly outweighed in the public interest by the probalimited-purpose lenders and other non-depository financial instituble effect of the proposal in meeting the convenience and tions. needs of the community to be served. 7. With respect to each market in which Southern has committed to Southern and United Carolina compete directly in divest offices to mitigate the anticompetitive effects of the proposal, Southern has committed to execute sales agreements prior to consum- 22 banking markets in North Carolina and 3 banking mation of the acquisition of United Carolina and to complete the markets in South Carolina. The Board has carefully redivestitures within 180 days of consummation of the acquisition. viewed the competitive effects of the proposal in these Southern also has committed that, in the event it is unsuccessful in banking markets in light of all the facts of record, including completing any divestiture within 180 days of consummation of the the number of competitors that would remain in the mar- proposal, Southern will transfer the unsold branch(es) to an independent trustee that is acceptable to the Board and that will be instructed kets, the characteristics of the markets, the projected into sell the branches promptly. BankAmerica Corporation, 78 Federal crease in the concentration of total deposits in depository Reserve Bulletin 338 (1992); United New Mexico Financial Corporation, 11 Federal Reserve Bulletin 484 (1991). Southern has also committed to submit to the Board, no later than 60 days prior to the expiration of the 180-day divestiture period, an executed trust agree- 3. Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding ment acceptable to the Board stating the terms of the divestitures. company's home state is thai state in which the operations of the bank 8. These banking markets are discussed in Appendix A. holding company's banking subsidiaries were principally conducted 9. Southern has committed to divest a total of 23 branches in on July 1, 1966, or the date on which the company became a bank 11 North Carolina banking markets. In these markets. Southern has holding company, whichever is later. committed to make divestitures to an out-of-market competitor or to a 4. 12U.S.C. §§ 1842(d)(l)(A) and (B) and 1842(d)(2)(A) and (B). competitively suitable purchaser. Southern is adequately capitalized and adequately managed. On con- 10. These banking markets are described in Appendix B. Southern summation of this proposal. Southern and its affiliates would control contends that the relevant banking market for Anson County, North less than 10 percent of the total amount of deposits of insured Carolina, should be either (1) the Charlotte-Rock Hill banking market, depository institutions in the United States and less than 30 percent of or (2) the area within a 30-mile radius surrounding Wadesboro, the the total amount of deposits in South Carolina. In addition, United largest community in Anson County. The Board and the courts have Carolina Bank of South Carolina has been in existence and in contin- concluded that the relevant banking market for analyzing the competuous operation for at least five years as required by South Carolina itive effects of a proposal must reflect commercial and banking law. All other requirements of section 3(d) of the BHC Act also would realities and should consist of the local area where the banks involved be met on consummation of the proposal. offer their services and where local customers can practicably turn for Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

598 Federal Reserve Bulletin • July 1997 mately $521.9 million, which represents 14 percent of the market competitor. After consummation of the proposal total deposits held by United Carolina.11 and the proposed divestiture. Southern would become the In the seven remaining North Carolina banking markets, largest depository institution in the market, controlling consummation of the proposal, adjusted to take account of 63.8 percent of market deposits, and the HHI would inproposed divestitures in these markets, would exceed the crease 277 points to 4493. DOJ Guidelines, as measured by the HHI. The Board has The high level of concentration in the Columbus County previously indicated that HHI levels are only guidelines banking market after consummation of the proposal, as that are used by the Board, the Department of Justice, and measured by the HHI, raises a significant competitive other banking agencies to help identify cases in which a issue. The Board is particularly concerned when the domimore detailed competitive analysis is appropriate to assure nant position of a banking organization is increased in a that the proposal would not have a significantly adverse market with high levels of concentration, as in this case. effect on competition in any relevant market. A proposal The Board believes, on balance in this particular case, that fails to pass the HHI market screen may, nonetheless, that a number of factors indicate that the effect of the be approved because other information may indicate that transaction on competition in this market is not likely to be the proposal would not have a significantly adverse effect significantly adverse. The increase in market share conon competition. trolled by the largest competitor in the market is small, as The Board believes that a number of additional factors in measured by the percentage of market deposits. Southern these seven banking markets indicate that the increase in has proposed significant divestitures in this market to an concentration levels, as measured by the HHI, tends to out-of-market competitor with substantial resources. This overstate the competitive effects of this proposal. The purchaser ranks among the ten largest commercial banking mitigating factors in two of these markets are discussed in organizations in North Carolina, with banking assets Appendix C. The remaining five North Carolina banking greater than $6 billion. The magnitude of the proposed markets, which include banking markets with significant divestiture and the acquiror's size and resources help enincreases in the HHI or in the resulting post-merger HHIs, sure that the out-of-market competitor would effectively are discussed below. replace Southern as the second largest competitor in the Columbus County Banking Market. United Carolina is market. In addition, five competitors would remain in the the largest of the five depository institutions in the Colum- market, including the out-of-market competitor that would bus County banking market, and controls deposits of purchase three branches divested by Southern. $336.2 million, representing 60.7 percent of market depos- Although population, deposit, and other economic data its.12 Southern is the second largest depository institution traditionally relied on by the Board do not indicate that the in the market, and controls deposits of $105.8 million, market is attractive for entry in comparison to other marrepresenting 19 percent of market deposits. In order to kets in the state, two new depository institutions have mitigate the competitive effects in this market, Southern already indicated their intent to enter the market in 1997. has committed to divest three branches, representing ap- One competitor is a newly chartered commercial bank with proximately 16 percent of market deposits, to an out-of- three offices that was formed by local residents concerned about the elimination of the largest community based banking organization in their market. The other competitor is a alternatives. See St. Joseph Valley Bank. 68 Federal Reserve Bulletin South Carolina commercial bank from a neighboring 673, 674 (.1982). The key question to be considered in making this county that already obtains a substantial volume of its decision "is not where the parties to the merger do business or even lending business from the Columbus County market and is where they compete, but where, within the area of competitive overlap, the effect of the merger on competition will be direct and extending its market presence into Columbus County. If immediate." United States v. Philadelphia National Bank, 374 U.S. the two new banks succeed in obtaining a total of 321, 357 (1963); United States v. Phillipsburg National Bank. 399 U.S. $5 million of the deposits currently held by Southern, 350, 364-65 (1969). The Board has considered Southern's contenwhich is less than I percent of the total market deposits, tions in light of all the facts of record, and concludes that the appropriate market for analyzing the competitive effects of the pro- the effect of the proposal on the HHI for the Columbus posal is an area that is approximated by Anson County and those County market would be within the DOJ Guidelines.11 portions of Union County not included in the Charlotte-Rock Hill The Board has carefully weighed the competitive effects Ranally Metro Area ("RMA"). This market has been defined by the of the proposal in the Columbus County banking market in Federal Reserve Bank of Richmond ("Reserve Bank") as the Monroe, North Carolina, banking market. The Board bases this conclusion on light of these and all the facts of record. Although the an analysis of employment commuting data, traffic patterns, and proposal presents a close case, the Board concludes that interviews with local bankers and other officials that were conducted entry by an out-of-market competitor with a significant in March 1997 as part of an investigation of the area by the staff of the share of market deposits through the proposed divestiture, Reserve Bank, as well as other facts of record that indicate that commuting, travel and competition between Anson County and the and by two additional new competitors, indicates that Charlotte-Rock Hill banking market is limited. competition continues to develop in the Columbus County 11. Southern has also committed to divest $8 million of deposits banking market and that, on balance, consummation of the and associated lending relationships in the Goldsboro, North Carolina, banking market that are not currently allocated to any of the branches to be divested. 12. The Columbus County banking market is approximated by Columbus County, North Carolina. 13. The HHI would potentially increase 163 points to 4379. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 599 proposal would not substantially lessen competition in that representing 31.8 percent of market deposits.18 United market. Carolina is the fourth largest depository institution in the Statesville Banking Market. Southern is the third largest market, and controls deposits of $79.6 million, representof ten depository institutions that compete in the Statesville ing 9.4 percent of market deposits. Southern proposes to banking market, and controls deposits of $139.3 million, divest three branches, with deposits of $47.5 million, to representing 19.5 percent of market deposits.14 United two smaller competitors in the banking market. After con- Carolina is the fourth largest depository institution in the summation of the proposal and the proposed divestiture, market, and controls deposits of $73.4 million, represent- Southern would control 35.6 percent of the market deposing 10.3 percent of market deposits. On consummation of its, and the HHI would increase 248 points to 2295. the proposal, Southern would become the second largest The divestitures would allow each of the two smaller depository institution in the market, controlling 29.8 per- competitors to increase their share of market deposits by cent of market deposits. The HHI would increase 400 approximately 3 percentage points. In addition, eight compoints to 2265. mercial banking organizations, including the six largest Nine competitors would remain in the Statesville bank- commercial banking organizations in North Carolina, ing market after consummation of the proposal, including would remain in the banking market after consummation North Carolina's five largest commercial banking organiza- of the proposal. The Goldsboro banking market is attractions, all with significant market shares. In addition, a tive for entry, and a savings bank established a presence in number of factors indicate that the Statesville market is the market within the past two years. attractive for entry and expansion.15 The rate of increase in Sanford Banking Market. Southern is the largest of seven deposits and population, for example, and the banking depository institutions that compete in the Sanford banking market's average per capita income and total deposits per market, and controls deposits of $153.6 million, representbanking office, were greater in the Statesville banking ing 29.2 percent of market deposits. United Carolina is the market, which is primarily composed of a non-MSA area, fifth largest depository institution in the market, and conthan in the state's other non-MSA counties.16 Two com- trols deposits of $42.3 million, representing 8.1 percent of mercial banks entered the market by acquisition, one in market deposits.19 Southern proposes to divest one branch 1994 and another in 1996, and a newly chartered commer- to an out-of-market competitor. After consummation of the cial bank is expected to commence operations in 1997.17 proposal and the proposed divestiture, Southern would Goldsboro Banking Market. Southern is the largest of control 34.8 percent of the market deposits. The HHI nine depository institutions that compete in the Goldsboro would increase 296 points to 2195. banking market, and controls deposits of $270 million, Seven competitors would remain in the market after Southern's divestiture to an out-of-market competitor, and the market is attractive for entry. During the past three years, the average rate of growth in population, the level of per capita income, and the amount of deposits per banking 14. The Statesville banking market is approximated by Statesville, office in the Sanford market exceeded the rate of growth in North Carolina, including the portion of Iredell County not included other non-MSA counties of the state.20 Two competitors in within the Charlotte-Rock Hill RMA. 15. Depository institutions in Iredell County have the largest amount the market opened new branches in 1996, and a commerof total deposits held by depository institutions in all non- metropoli- cial bank entered the market de novo in May 1997. In tan statistical area ("non-MSA") counties in North Carolina. In 1996. addition, a newly chartered commercial bank plans to enter The New Observer, a large Charlotte newspaper, awarded Iredell the market in 1997. It is anticipated that the attractiveness County the highest rating in its review of the North Carolina business climate. The rating was based on several economic factors, including of the market will increase when a four-lane highway job growth, change in employment, the level and change in per capita between Sanford and Raleigh is completed within the next income, the level and change in unemployment, and the level and two years. change in per capita retail sales. In addition, Statesville, which is the Fayetteville Banking Market. Southern is the largest of economic center of the market, is located at the intersection of two interstate highways (U.S. Interstates 77 and 40), a fact that contributes 11 depository institutions that compete in the Fayetteville to the attractiveness of the market for commercial enterprises and banking market, controlling deposits of $358.4 million. access to major population centers, including Charlotte and Winston- Salem. 16. Between 1993 and 1996. deposits increased on average in Iredell County by 2.9 percent as compared to 1.4 percent for other non-MSA counties in North Carolina. The average population in- 18. The Goldsboro banking market is approximated by the Goldscrease for the same period was 2.5 percent in Iredell County as boro, North Carolina, RMA, including the remainder of Wayne compared to 1.5 percent for other non-MSA counties. In 1994, per County. capita income in Iredell County was $14,005 compared to $12,007 in 19. The Sanford banking market is approximated by Lee County, other non-MSA counties. Total deposits per banking office in 1996 North Carolina. were $29.9 million compared to $25.9 million in the other non-MSA 20. Between 1993 and 1996, the population of Lee County incounties. creased at a rate of 2.7 percent as compared to 1.5 percent for other 17. In interviews with the Reserve Bank, bankers in the Statesville non-MSA counties in North Carolina. Per capita income in the county banking market indicated their belief that the market would remain was $14,304 in 1995 compared to $12,007 in other non-MSA councompetitive after consummation of the proposal. Data also indicate ties. The rate of growth of deposits in the market was 1.8 percent that concentration in the market, as measured by the HHI, has de- between 1993 and 1996, compared to a rate of growth of 1.4 percent creased in the past five years. in other non-MSA counties. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

600 Federal Reserve Bulletin • July 1997 representing 26.0 percent of market deposits.21 United the divestiture commitments discussed in the order. The Carolina is the fifth largest depository institution in the commitments and conditions relied on by the Board in market, controlling deposits of $132.9 million, represent- reaching this decision are deemed to be conditions iming 9.6 percent of market deposits. On consummation of posed in writing by the Board in connection with its the proposal, Southern would control 35.6 percent of the findings and decision, and, as such, may be enforced in market deposits. The HHI would increase 500 points to proceedings under applicable law. 2019. The acquisition shall not be consummated before the Ten competitors would remain in the market after con- fifteenth calendar day following the effective date of this summation of the merger, including North Carolina's five order, or later than three months after the effective date of largest commercial banking organizations, all with signifi- this order, unless such period is extended for good cause by cant market shares. The market also has characteristics, the Board, or by the Federal Reserve Bank of Richmond, including its size, that make it attractive for entry and acting pursuant to delegated authority. expansion. The Fayetteville banking market, for example, By order of the Board of Governors, effective May 29, contains an MSA and the state's fourth largest population 1997. center. The Board sought comments from the United States Voting for this action: Chairman Greenspan and Governors Kelley Attorney General ("Attorney General"), the Office of the and Phillips. Voting against this action: Vice Chair Rivlin and Governor Meyer. Comptroller of the Currency ("OCC"), and the Federal Deposit Insurance Corporation ("FDIC") on the competi- WILLIAM W. WILES tive effects of the proposal. The Attorney General has Secretary of the Board advised the Board that, subject to the proposed divestitures, consummation of the proposal would not likely have any significantly adverse effects on competition in any relevant market. The OCC and the FDIC also have not APPENDIX A objected to consummation of the proposal. Based on all the facts of record, including the proposed Banking markets in which consummation of the proposal divestitures and for the reasons discussed above and ex- would not exceed DOJ Guidelines without divestitures: plained in the appendixes, the Board concludes that consummation of the proposal would not have a significantly North Carolina banking markets adverse effect on competition or the concentration of banking resources in any relevant banking market. Charlotte-Rock Hill: Approximated by the Charlotte, North Carolina, and Rock Hill, South Carolina, RMA. After Other Considerations consummation of the proposal, Southern would control 9.3 percent of the market deposits and would become the The Board has carefully considered the financial and man- third largest depository institution in the market. The HH1 agerial resources of Southern, United Carolina, and their would increase 43 points to 2481. respective subsidiaries, and the effect of the proposed ac- Durham-Chapel Hill: Approximated by the Durhamquisition on the future prospects of these organizations, Chapel Hill, North Carolina, RMA. including the remainand other supervisory factors in light of the facts of record. der of Durham and Orange Counties, and Chatham County Based on all the facts of record, the Board concludes that excluding the Burlington RMA. After consummation of the financial and managerial resources and future prospects the proposal, Southern would control 1 1.7 percent of the of Southern and United Carolina, and their respective market deposits and would remain the fourth largest desubsidiaries, are consistent with approval of the proposal, pository institution in the market. The HHI would increase as are the other supervisory factors the Board must con- 16 points to 1702. sider under section 3 of the BHC Act. Considerations Greensboro-High Point: Approximated by the Greensbororelating to the convenience and needs of the communities High Point, North Carolina, RMA, including the remainder to be served are also consistent with approval. of the counties of Davidson and Randolph, excluding the Based on the foregoing, including the commitments Winston-Salem RMA. After consummation of the promade to the Board by Southern in connection with the posal. Southern would control 21 percent of the market application, and in light of all the facts of record, the Board deposits and would remain the largest depository instituhas determined that this application should be, and hereby tion in the market. The HHI would increase 98 points to is, approved. The Board's approval is specifically condi- 1239. tioned on compliance by Southern with all the commit- New Bern: Approximated by New Bern, North Carolina, ments made in connection with this application, including the counties of Carteret, Craven, and Pamlico, and the eastern half of Jones County. After consummation of the proposal, Southern would control 24.7 percent of the market deposits, and would remain the third largest depos- 21. The Fayetteville banking market is approximated by the Fayetitory institution in the market. The HHI would increase teville, North Carolina. RMA, including the remainder of Cumberland County. 136 points to 2201. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 601 Raleigh: Approximated by the Raleigh, North Carolina, divestiture to an out-of-market competitor, Southern would RMA, including the remainder of Franklin, Harnett, control 56.5 percent of the market deposits and would Johnston, and Wake Counties. After consummation of the replace United Carolina as the largest depository institution proposal, Southern would control 17.2 percent of the mar- in the market. The HHI would not increase. ket deposits and would become the second largest deposi- Martin County: Approximated by Martin County, North tory institution in the market. The HHI would increase Carolina. After consummation of the merger and the pro- 139 points to 1391. posed divestiture to an out-of-market competitor, Southern Wilmington: Approximated by the Wilmington, North would control 27 percent of the market deposits and would Carolina, RMA, including the remainder of Brunswick remain the second largest depository institution in the County and Pender County. After consummation of the market. The HHI would not increase. proposal, Southern would control 29.9 percent of the mar- Monroe: Approximated by Anson and Union Counties, ket deposits, and would become the largest depository North Carolina, excluding the portion of Union County institution in the market. The HHI would increase included in the Charlotte-Rock Hill RMA. After consummation of the merger and the proposed divestitures to an 396 points to 1695. out-of-market competitor, Southern would control Winston-Salem: Approximated by the Winston-Salem, 40.8 percent of the market deposits and would remain the North Carolina, RMA, including the remainder of Davie largest depository institution in the market. The HHI would and Stokes Counties. After consummation of the proposal, increase 156 points to 2188. Southern would control 32.1 percent of the market deposits and would remain the second largest depository institution Richmond County: Approximated by Richmond County, in the market. The HHI would increase 19 points to 2975. North Carolina. After consummation of the merger and the proposed divestitures to an out-of-market competitor and South Carolina banking markets an in-market firm, Southern would control 38.3 percent of the market deposits and would replace United Carolina as Greenville: Approximated by the Greenville, South Caro- the largest depository institution in the market. Following lina, RMA, including the remainder of Greenville and the proposed divestitures, the HHI would increase Pickens Counties. After consummation of the proposal, 179 points to 2272. Southern would control 23.7 percent of the market deposits Robeson County: Approximated by Robeson County, North and would remain the largest depository institution in the Carolina, except for the portion of the county included in the market. The HHI would increase 186 points to 1331. Fayetteville RMA. After consummation of the merger and the Myrtle Beach-Conway Area: Approximated by the Myrtle proposed divestitures to an out-of-market competitor, South- Beach-Conway, South Carolina, RMA, including the re- ern would control 37.2 percent of the market deposits and mainder of Horry County. After consummation of the would become the largest depository institution in the market. proposal, Southern would control 9.2 percent of the market The HHI would increase 183 points to 2205. deposits and would become the fifth largest depository Sampson County: Approximated by Sampson County, institution in the market. The HHI would increase North Carolina. After consummation of the merger and the 37 points to 1131. proposed divestitures to an out-of-market competitor, Spartanburg: Approximated by the Spartanburg, South Southern would control 29.8 percent of the market deposits Carolina, RMA, including the remainder of Spartanburg and would remain the second largest depository institution County, excluding the Greenville RMA portion. After con- in the market. Following the proposed divestitures, the summation of the proposal, Southern would control HHI would increase 99 points to 3207. 10.2 percent of the market deposits and would become the Washington County: Approximated by Washington County, third largest depository institution in the market. The HHI North Carolina. After consummation of the merger and the would increase 29 points to 1230. proposed divestitures to an out-of-market competitor, Southern would control 29.7 percent of the market deposits and would remain the largest depository institution in the market. The HHI would not increase. APPENDIX B North Carolina banking markets in which consummation of the proposal would not exceed DOJ Guidelines with APPENDIX C divestitures: North Carolina banking markets in which consummation of Duplin County: Approximated by Duplin County, North the proposal would exceed DOJ Guidelines. However, other Carolina. After consummation of the merger and the pro- factors substantially mitigate the competitive effect of the posed divestitures to an out-of-market competitor, South- increases in market concentration as measured by the HHI: ern would control 46.1 percent of the market deposits and would become the largest depository institution in the Moore County: Approximated by Moore County, North market. The HHI would increase 36 points to 2761. Carolina. After consummation of the merger, Southern Hoke County: Approximated by Hoke County, North Caro- would control 37.7 percent of the market deposits and lina. After consummation of the merger and the proposed would remain the largest depository institution in the mar- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

602 Federal Reserve Bulletin • July 1997 ket. The HHI would increase 330 points to 1988. Ten We believe that strong mitigating factors would be recompetitors would remain in this market following con- quired to justify an acquisition resulting in further concensummation, including North Carolina's five largest com- tration of such a highly concentrated market. In this case, mercial banking organizations. One of the thrifts in the while two firms propose to enter the market, this new entry market is the second largest competitor for deposits. In is not sufficient to mitigate the increased concentration that addition, the market has features that make it attractive for would result from this transaction. Relevant data do not entry and expansion. The rate of growth in population and indicate that the market is likely to attract sufficient new market deposits, and the level of per capita income exceed, entry to check the competitive influence of Southern as the on average, that of other non-MSA counties in the state. dominant firm after this acquisition. We do not find any Pitt County: Approximated by Pitt County, North Carolina. other factors that would mitigate the potentially significant After consummation of the merger, Southern would control adverse effect that this acquisition is likely to have on 27.3 percent of the market deposits and would become the competition in the Columbus County banking market. Aclargest depository institution in the market. The HHI would cordingly, we conclude that additional divestitures are necincrease 325 points to 1886. Following consummation, ten essary in the Columbus County banking market before the competitors would remain in the market, including North proposal warrants approval. Carolina's six largest commercial banking organizations. The Statesville and Goldsboro markets are much less In addition, the market has features that make it attractive highly concentrated than the Columbus County market. for entry and expansion. Pitt County is the second largest Nevertheless, the proposed transaction would still, in our non-MSA county in the state with respect to total deposits. view, result in significantly adverse effects on competition The rate of growth in deposits and the level of per capita in each of these markets. The increase in concentration in income exceed, on average, that of other non-MSA coun- the Statesville market is the largest of any of the three ties. The record indicates that one thrift in the market fully markets in question. This transaction would move this competes with commercial banks in making commercial market from one with a reasonable degree of competitiveand retail loans. If this thrift's deposits are given ness to one that is highly concentrated. The Goldsboro 100 percent weight, consistent with the Board's precedent, market involves combining the largest and fourth largest the HHI would increase 319 points to 1850. banks in the market and results in a post-merger market share of 35.6 percent without any mitigating factor. Al- Dissenting Statement of Vice Chair Rivlin and Governor though the threat of adverse competitive effects in the Meyer Statesville and Goldsboro cases appears less dramatic than in the case of the Columbus County market, the competi- We believe the proposed transaction would have a signifi- tive effects in the Statesville and Goldsboro push the outer cantly adverse effect on competition in at least three local limits of what the Board has approved in the past and in banking markets: Columbus County, Statesville and Golds- our judgement exceed the limits of what the Board should boro. Without additional divestitures to reduce the prospect approve. of significantly adverse competitive effects in these mar- May 29, 1997 kets, we believe the application should be denied. Our concern is greatest about the Columbus County Orders Issued Under Section 4 of the Bank Holding market. This is a case of a market that is initially very Company Act highly concentrated and, in our view, extreme caution should be exercised in connection with any merger that Bane One Corporation, Inc. further increases market concentration. The failure to reject Columbus, Ohio the merger or to make the merger conditional on further divestitures in this market, in our view, sets an undesirable Order Approving Notice to Acquire a Savings precedent and allows a level of concentration and market Association and to Engage in Certain Nonbanking share that is too high to warrant Board approval. Activities Consummation of the transaction in the Columbus County banking market would increase the HHI from over Bane One Corporation, Inc., Columbus, Ohio ("Bane 4200 to nearly 4500. Southern would become the dominant One"), a bank holding company within the meaning of the banking organization in the market and would increase its Bank Holding Company Act ("BHC Act"), has requested share of market deposits to approximately 64 percent. In the Board's approval under section 4(c)(8) of the BHC Act addition to enhancing the dominant position of the largest (12U.S.C. § 1843(c)(8)) and section 225.24(a) of the competitor, the proposal would increase the gap between Board's Regulation Y (12 C.F.R. 225.24(a)) to merge with the share of market deposits controlled by the two largest First USA, Inc., Dallas, Texas ("First USA"), and to accompetitors. After consummation of the proposal, the sec- quire First USA's wholly owned subsidiary, First USA ond largest competitor would control only 16 percent of Federal Savings Bank, Wilmington, Delaware ("First USA market deposits, a market share less than Southern cur- FSB"). Bane One also has requested the Board's approval rently controls as the market's second largest competitor. under section 4(c)(8) of the BHC Act to acquire the direct None of the remaining three competitors would control as and indirect nonbank subsidiaries of First USA listed in the much as a 10 percent share of the market deposits. Appendix and thereby to operate nonbank depository insti- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 603 tutions, and to engage in activities related to extending The Board also has determined by regulation that operatcredit and data processing.1 ing nonbanking depository institutions and engaging in Notice of the proposal, affording interested persons an activities related to extending credit and data processing, as opportunity to submit comments, has been published discussed in the Appendix, are closely related to banking (62 Federal Register 11,895 (1997)).- The time for filing within the meaning of section 4(c)(8) of the BHC Act. comments has expired, and the Board has considered the Applicant has committed to conduct these activities subject notice and all comments received in light of the factors set to the limitations set forth in Regulation Y. forth in section 4(c)(8) of the BHC Act.3 Bane One, with total consolidated assets of approxi- Competitive Considerations mately $102 billion, is the tenth largest commercial banking organization in the United States. Bane One operates In order to approve the proposal, the Board also must subsidiary banks: Arizona, Colorado, Illinois, Indiana, determine that the performance of the proposed activities is Kentucky, Louisiana, Ohio, Oklahoma, Texas, Utah, West a proper incident to banking, that is, that the proposed Virginia, and Wisconsin, controlling approximately transaction "can reasonably be expected to produce bene- 2.7 percent of total banking assets in the United States.4 fits to the public . . . that outweigh possible adverse effects, Bane One also engages through its subsidiaries in a broad such as undue concentration of resources, decreased or range of permissible nonbanking activities in the United unfair competition, conflicts of interests, or unsound bank- States. First USA, with total consolidated assets of $10.2 ing practices." As part of the Board's evaluation of these billion, controls deposits of $1.7 billion in its subsidiary factors, the Board has carefully considered the competitive depository institutions.5 After consummation of the pro- effects of the proposed transaction in light of all the facts of posal, Bane One would be the eighth largest commercial record, including comments contending that the proposal banking organization in the United States, with consoli- would have an adverse effect on competition in the credit dated assets of $112.2 billion. card industry. The Board has determined that operating a savings asso- Bane One and First USA compete as issuers of credit ciation by a bank holding company is closely related to cards and as merchant credit card processors.7 Credit card banking for purposes of section 4(c)(8) of the BHC Act. issuers compete nationally for credit card customers. First The Board requires a savings association acquired by a USA is the fourth largest credit card issuer in the United bank holding company to conform its direct and indirect States, controlling approximately 6.8 percent of outstandactivities to those permissible for a bank holding company ing credit card balances.8 Bane One is the 11th largest under section 4(c)(8) and Regulation Y. Bane One has credit card issuer, controlling approximately 3.1 percent of committed to conform all activities of First USA FSB to outstanding credit card balances. After consummation, those requirements.6 Bane One would become the third largest credit card issuer, controlling approximately 10 percent of outstanding credit card balances. The market would remain unconcentrated as measured by the Herfindahl-Hirschman Index 1. Bane One and First USA have granted each other an option to purchase up to approximately 19.9 percent of the outstanding common ("HHI"),9 and numerous competitors would remain.10 stock of the other company under certain circumstances. These options would terminate on consummation of the proposal. First USA would be required to obtain the Board's approval under section 3 of bus, Ohio. The merger is subject to the approval of Office of the the BHC Act before exercising its option. Comptroller of the Currency ("OCC") under section 18(c) of the 2. Notice of the proposed acquisition of First USA FSB also was Federal Deposit Insurance Corporation Act (12 U.S.C.§ 1828(c), the published in appropriate newspapers in accordance with the Board's Bank Merger Act), and the Board has consulted with the OCC on the policy regarding applications to acquire a savings association. proposed merger. 3. Commenters on the proposal, including Inner City Press/ 7. Merchant card processing consists of three primary activities: Community on the Move, the Delaware Community Reinvestment (1) Merchant contract acquisition, Action Council, and the Black Citizens for Justice, Law & Order (2) Front-end network processing, and (collectively "Commenters") contend that the Board should not con- (3) Back-end merchant accounting. sider the substance of Bane One's submissions filed after time periods Merchant contract acquisition includes the marketing and sale of prescribed in the Board's Rules of Procedure for an applicant's card transaction processing services to merchants. Front-end network response to comments. See 12 C.F.R. 262.3(e). The Board notes that processing includes card authorization at the time of a purchase and both Bane One and Commenters filed information and comments after the electronic capture of sales drafts. Back-end merchant accounting the period provided in the Board's Rules of Procedure. The Board has includes recording the number and amount of all sales drafts and the sole discretion under its Rules of Procedure to consider comments credits submitted by each merchant, managing and reporting transacand responses, including late submissions of information. This notice tion information, resolving charge backs, and investigating fraudulent was filed and many of the comments and responses were submitted activity. before the effective date of the Board's recent revision to Regula- 8. Market share is measured by the dollar amount of credit card tion Y. Accordingly, in reviewing this proposal, the Board has consid- balances outstanding as of December 31, 1996, and is based on data ered all the submissions filed, including submissions filed by Com- provided by the 50 largest issuers of Visa and MasterCard credit menters and by Bane One after the relevant time periods. cards. 4. Asset and deposit data are as of December 31, 1996. 9. The HHI would increase 42 points to 642. Under the revised 5. In this context, the term depository institution includes commer- Department of Justice guidelines, 49 Federal Register 26,823 cial banks, savings banks, and savings associations. (June 29, 1984), a market in which the post-merger HHI is less than 6. Bane One intends to merge First USA FSB with and into Bane 1000 is considered unconcentrated. and a market in which the post- One's subsidiary national bank, Bank One, Columbus. N.A, Colum- merger HHI is between 1000 and 1800 is considered moderately Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

604 Federal Reserve Bulletin • July 1997 Merchant credit card processors also compete nationally. In acting on applications to acquire a savings associa- First USA is the third largest merchant credit card pro- tion, the Board has traditionally reviewed the records of cessor, with approximately 7.3 percent of the total credit performance by the institutions involved under the Comand debit transactions processed, and Bane One is the tenth munity Reinvestment Act (12 U.S.C. § 2901 et seq. largest processor, with approximately 2.7 percent of the ("CRA")).15 Commenters have criticized aspects of the total credit and debit transactions processed.11 After con- CRA performance records of both institutions and the summation, Bane One would become the third largest record of compliance with fair lending laws by Bane One. processor, controlling approximately 10 percent of the total The Board has considered in detail almost identical comcredit and debit transactions processed. Market concentra- ments relating to Bane One in connection with its proposal tion as measured by the HHI would remain moderately to acquire Liberty Bancorp, Inc., Oklahoma City, Oklahoconcentrated,12 and numerous competitors would remain. ma.16 Based on all the facts of record, including the facts Based on all the facts of record, the Board concludes that consummation of this proposal would not have a significantly adverse effect on competition among credit card Americans in management positions at Bane One and First USA are issuers or merchant credit card processors, or in any other disproportionately low. As noted, the Board reviewed these comments in light of all the relevant market. facts of record, including supervisory assessments of the financial and managerial resources of Bane One and relevant First USA subsidiar- Other Considerations ies, and concluded that financial and managerial considerations are consistent with approval. The Board also previously has stated that its limited jurisdiction to review applications under the BHC Act does As part of its evaluation of the public interest factors, the not authorize the Board to adjudicate disputes involving an applicant Board has carefully reviewed the financial and managerial that arise under statutes, other than banking laws, that are adminisresources of Bane One, First USA, and their subsidiaries, tered and enforced by another federal regulatory agency. See, e.g., and the effect the transaction would have on such resources Norwest Corporation, 82 Federal Reserve Bulletin 580 (1996); see in light of all the facts of record.13 The facts of record also Western Bancshares v. Board of Governors, 480 F.2d 749 (10th Cir. 1973). Bane One and First USA are required to file an annual include confidential financial information from Bane One report with the Equal Employment Opportunity Commission and reports of examination and other supervisory informa- ("EEOC") covering all employees in its corporate structures under tion received from the primary federal and state supervi- the Department of Labor's regulations. See 41 C.F.R. 60-1.7(a) and 60-1.4. The Department of Labor, and the EEOC in particular, have sors of the organizations assessing the financial and manasufficient statutory authority to address disputes regarding unfair or gerial resources of the organizations. Based on all the facts illegally discriminatory labor practices. of record, the Board concludes that the financial and mana- 15. Bane One contends that recent changes in laws other than the gerial resources of the organizations involved in this pro- CRA have made the CRA. by its terms, inapplicable to the acquisition posal are consistent with approval.14 of a savings association by a bank holding company. Section 2203 of the Economic Growth and Regulatory Paper Reduction Act of 1996 ("section 2203") eliminated the requirement for approval by the Office of Thrift Supervision ("OTS") of acquisitions of savings associations by bank holding companies. There is no indication that concentrated. The Justice Department generally will not challenge an section 2203 was intended to alter the applicability of the CRA. First acquisition (in the absence of other factors indicating anticompetitive USA FSB is an insured depository institution that is subject to effects) unless the post-merger HHI is at least 1800. evaluation under the CRA. Bane One's contention also is inconsistent 10. Commenters contend that the market for credit card issuers is with the Board's long-standing policy of considering the CRA record too concentrated and that credit card issuers are able to charge higher of bank holding companies in reviewing applications by bank holding than normal interest rates. If the competitive effect of the proposal companies to acquire savings associations. In this light, the Board were considered only with respect to the 11 largest credit card issuers concludes that the language and intent of the CRA support taking (Bane One is the 11th largest credit card issuer), the proposal still CRA performance into account in an application by a bank holding would be within the DOJ merger guidelines. The post-merger HHI company to acquire a savings association such as First USA FSB. would increase by 88 points to 1176. and Bane One would control 16. Bane One Corporation, 82 Federal Reserve Bulletin 520 (1997) approximately 14.4 percent of the outstanding credit card balances. ("Bane One/Liberty Order"). The Board has carefully reviewed addi- 11. Market share is measured by the dollar amount of Visa and tional contentions by Commenters that Bane One's 1996 HMDA data MasterCard credit and debit transactions processed by the 75 largest show: firms in 1996. (1) Disparities in denial rates to minorities compared to the denial 12. The HHI would increase by 40 points to 1013 as a result of the rates for nonminority borrowers; proposal. (2) Significant HMDA reporting errors by Bane One, particularly 13. The Board has carefully reviewed the effect of the downward Bane One Financial Services ("BOFS"); and revision of earnings recently announced by First USA on the financial (3) Misrepresentations of Bane One's referral program among its considerations of the proposal. The Board concludes that the revision affiliates, including loan purchases by BOFS. would not have a materially adverse effect on the financial resources The Board has reviewed the 1996 HMDA data and Bane One's of Bane One. overall CRA performance record in light of these allegations and the 14. Commenters contend that an anonymously written employee limitations noted in the Bane One/Liberty Order that make HMDA newsletter provides evidence of unfair and discriminatory labor prac- data an inadequate basis, absent other information, for concluding that tices at a subsidiary of First USA. In addition, some commenters an institution has engaged in illegal lending discrimination. The Board contend that service by a senior First USA executive as a director of also has considered Commenters' allegations about the accuracy of an unaffiliated subprime lender that recently reorganized in a bank- Bane One's HMDA data, particularly data from BOFS. The Board ruptcy proceeding raises adverse managerial considerations. The com- notes that BOFS accounts for less than 1 percent of Bane One's ments do not provide facts that indicate wrongdoing by the executive. consolidated net income, and that the Board has sufficient supervisory One commenter also generally alleges that the numbers of African authority to address inaccuracies in HMDA reporting by BOFS or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 605 and reasons discussed in the Bane One/Liberty Order, addition, combined credit card operations of Bane One and which are specifically incorporated herein by reference, the First USA would enhance the services and products cur- Board concludes that Bane One's record of performance rently provided by each of these organizations. Additionunder the CRA and record of compliance with fair lending ally, there are public benefits to be derived from permitting laws are consistent with approval of the proposal.17 capital markets to operate so that bank holding companies First USA FSB commenced operations in 1996, and has may make potentially profitable investments in nonbank ing not yet been evaluated for CRA performance by the Office companies when those investments are consistent, as in of Thrift Supervision, its primary federal supervisor. As this case, with the relevant considerations under the BHC noted, Bane One intends to merge First USA FSB with and Act, and from permitting banking organizations to allocate into its lead subsidiary bank, Bank One, Columbus, N.A., their resources in the manner they believe is most efficient. Columbus, Ohio ("Columbus Bank"), which received an Based on all the facts of record, the Board has determined "outstanding" rating at its most recent CRA performance that consummation of this proposal can reasonably by evaluation from the bank's primary federal supervisor, the expected to produce public benefits that would outweigh any likely adverse effects under the proper incident to OCC. First USA's other insured depository institutions, banking standard of section 4(c)(8) of the BHC Act. First USA Bank and First USA Financial Services, Inc., received "satisfactory" ratings for CRA performance from their primary federal supervisor, the Federal Deposit Insur- Request for a Hearing ance Corporation C'FDIC"), as of August 1996 and September 1996, respectively.18 Commenters contend that their allegations raise issues of Based on all the facts of record, and for the reasons disputed material facts and that a hearing is necessary in discussed above and in the Bane One/Liberty Order, the order for commenters to obtain and to provide additional Board concludes that considerations relating to the CRA information relevant to their allegations, particularly reperformance records of the institutions involved are consis- garding Bane One's record of CRA performance and comtent with approval of the proposal.19 pliance by Bane One's nonbanking subsidiaries with fair The record indicates that consummation of the proposal lending laws. Commenters also cite the examination of would result in benefits to both consumers and merchants. Bane One Mortgage Company ("BOMC"), a nonbank The proposal would enable Bane One to provide First USA subsidiary of Bane One, which was discussed in the Bane customers with access to a broad range of services. In One/Liberty Order, as evidence of disputed material facts. The Board's rules provide for a hearing on notices under section 4 of the BHC Act to acquire a savings association if there are disputed issues of material fact relating to the other Bane One nonbank affiliates if the reports are found to contain acquisition of the savings association that cannot be reinaccuracies. The Board also has considered the contention that alleged HMDA inaccuracies would constitute a misrepresentation of solved in some other manner. See 12 C.F.R. 225.25(a)(2). Bane One's referral program in light of Bane One's managerial record After a careful review of all the facts of record, the and the Board's long experience with supervising the organization. Board has concluded that Commenters' arguments amount Accordingly, and as explained in the Bane One/Liberty Order, Bane One's overall performance records under the CRA and fair lending to a dispute with the weight that should be accorded to, and laws, including the most recent CRA performance examination ratings the conclusions that the Board should draw from, the facts of its subsidiary banks, and Bane One's history of addressing areas of of record, but do not identify disputed issues of fact that weakness in its performance, are consistent with the Board's approvare material to the Board's decision. In addition, interested ing an application under the BHC Act. parties have had an opportunity to present their views, and 17. As noted, the Board has also considered these allegations and Bane One's record of performance in evaluating managerial factors. commenters have submitted substantial written comments 18. A customer of First USA Bank contends that the bank breached that have been considered by the Board. Commenters' its credit card agreement and has violated Truth in Lending Act request fails to show why a written presentation would not requirements. The FDIC, the primary supervisor of First USA Bank, is suffice and to summarize what evidence would be preaddressing the customer's complaint. The Delaware Community Reinsented at a hearing or meeting. See 12 C.F.R. 262.3(e). vestment Action Council contends First USA Bank's most recent CRA evaluation reflects substantial assistance from First USA FSB. The examination discussed in the Bane One/Liberty Bane One responds that, after the merger of First USA FSB into Order is intended to resolve a question about fair lending Columbus Bank, First USA Bank would continue to assist in meeting oversight, procedures and practices at Bane One Mortgage the credit needs of its communities through qualified investments or Company ("BOMC") based on certain preliminary inforthrough the assistance of Bane One affiliates such as Bane One Community Development Corporation. mation that was developed in the course of the Board's 19. Commenters requested additional time in which to comment on supervision of Bane One and on other complaints against 1996 data filed by Bane One under the Home Mortgage Disclosure Bane One's operations. The Board fully expects that Bane Act (12 U.S.C. § 2801 et seq.)("HMDA"). Based on all the facts of One will take all necessary steps, including adopting and record, including the fact that Commenters did not request the 1996 implementing practices and procedures developed in con- HMDA data from Bane One. and that Bane One voluntarily provided the information to Commenters, the Board concludes that Commenl- sultation with the Board, to ensure that any areas of weakers' request for additional time to file comments was properly denied. ness in its fair lending policies and practices that may be See, e.g., the Board's Regulation C (12 C.F.R. Part 203) on disclosure identified through the Board's examination are adequately of HMDA data. The Board also notes that Commenters have provided addressed, and the Board conditions its action on this substantial submissions on the 1996 HMDA data that have been considered as part of this proposal. proposal on Bane One taking such actions. Based on all the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

606 Federal Reserve Bulletin • July 1997 facts of record, including the fact that BOMC accounts for Voting for this action: Vice Chair Rivlin and Governors Kelley, less than 1 percent of Bane One's consolidated net income, Phillips, and Meyer. Absent and not voting: Chairman Greenspan. the fact that the Board has supervisory authority to require JENNIFER J. JOHNSON bank holding companies and their subsidiaries to address Deputy Secretary of the Board compliance deficiencies, Bane One's record of addressing supervisory and other issues identified by its supervisor, the condition stated in this order, and Bane One's overall record of performance under the CRA and fair lending laws, the Board does not believe that completion of the APPENDIX BOMC examination, or receipt of additional information at a public hearing or meeting, would provide facts material Nonbanking Subsidiaries to the Board's consideration of the proposal at this time. On the basis of all the facts of record, the Board has Bane One proposes to acquire all of the voting shares of determined that a public hearing or public meeting is not the following nonbanking subsidiaries of First USA: required or necessary to clarify the factual record in this proposal, or otherwise warranted in this case. Accordingly, (a) First USA Bank, Wilmington, Delaware, a credit card the request for a public hearing or meeting on the proposal bank, and thereby engage in making revolving extensions is hereby denied. of credit in connection with the issuance of its consumer credit cards, and conducting activities incidental to its Conclusion credit card business, pursuant to section 225.28(b)(2); (b) First USA Financial Services, Inc., Murray, Utah, an Based on the foregoing and all the facts of record, the industrial loan company, and thereby engage in making Board has determined that the notice should be, and hereby extensions of credit in connection with the issuance of is, approved. The Board's approval of the proposal is commercial credit cards to businesses, governmental units specifically conditioned on compliance by Bane One with and other entities, pursuant to sections 225.28(b)(2) and the commitments made in connection with this notice and 225.28(b)(4); conditions referred to in this order.20 The Board's determi- (c) First USA Merchant Services, Inc., Dallas, Texas, and nation also is subject to all the conditions in Regulation Y, thereby engage in processing credit and debit card transacincluding those in sections 225.7 and 225.23(g) (12 C.RR. tions for merchants directly and indirectly through finan- 225.7 and 225.23(g)) and to the Board's authority to re- cial institutions and independent sales organizations, inquire such modification or termination of the activities of a cluding card transaction authorization ("authorization"), holding company or any of its subsidiaries as the Board processing of card transactions ("capture"), settlement of finds necessary to assure compliance with, or to prevent card transactions ("settlement"), and arranging for deposit evasion of, the provisions and purposes of the BHC Act of funds in merchants' accounts ("merchant funds deposand the Board's regulations and orders issued thereunder. it"), pursuant to sections 225.28(b)(2) and 225.28(b)(14); The commitments and conditions relied on by the Board in (d) First USA Technology, Inc., Dallas, Texas, and thereby reaching this decision shall be deemed to be conditions engage in serving as licensor for software provided to imposed in writing by the Board in connection with its merchants in connection with credit and debit card profindings and decision, and, as such, may be enforced in cessing activities, pursuant to sections 225.28(b)(2) and proceedings under applicable law. 225.28(b)(14); This transaction shall not be consummated later than (e) First Virtual Holdings Incorporated, San Diego, Califorthree months after the effective date of this order, unless nia, and thereby engage in providing merchants selling such period is extended for good cause by the Board or the their products and services over the Internet with a pay- Federal Reserve Bank of Cleveland, acting pursuant to ment system that verifies the identity of the purchaser and delegated authority. the seller to a credit card transaction, and engage in provid- By order of the Board of Governors, effective May 14, ing processing services, including authorization, capture, 1997. settlement, and merchant funds deposit activities for the credit card transaction; and operating a shared website on the Internet for sellers of information products by managing all aspects of the selling process such as confirmation of purchases, distribution of information products, accounting, settlement, and collection and payment of proceeds, pursuant to section 225.28(b)(14); 20. Commenters also have requested that the Board delay action on the proposal and investigate its allegations against Bane One and its (f) Gensar Technologies, Inc., Tampa, Florida, and thereby nonbanking subsidiaries through an on-site examination. Based on all engage in providing certain credit and debit card transacthe facts of record, and for the reasons discussed in the Bane One/ tion processing services and equipment for merchants di- Liberty Order which, as noted, have been specifically incorporated rectly and indirectly through financial institutions and indeherein, the Board concludes that delay or denial of the proposal until the Board investigates Commenters' allegations or completes its ex- pendent sales organizations, and acting as licensor of amination of BOMC is not warranted. personal computer-based software designed for the pro- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 607 cessing of financial data, pursuant to sections 225.28(b)(2) plicants also have requested the Board's approval under and225.28(b)(14); section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) (g) Merchant Link, Inc., Bethesda, Maryland, and thereby and section 225.24 of the Board's Regulation Y (12 C.F.R. engage in providing specialized help-desk services only in 225.24) to acquire the nonbanking subsidiaries of Dauphin connection with the operation of the bank card modules of and thereby engage in the nonbanking activities listed in certain integrated hotel, restaurant, and retail financial man- the Appendix. agement systems, pursuant to section 225.28(b)(14); and Notice of the proposal, affording interested persons an cialized credit and debit card transactions processing ser- opportunity to submit comments, has been published vices, including authorization, capture, settlement, and (62 Federal Register 16,579 (1997)). The time for filing merchant funds deposit activities, and providing special- comments has expired, and the Board has considered the ized personal computer-based software that is used by proposal and all comments received in light of the factors direct response merchants in connection with the entry of set forth in sections 3 and 4 of the BHC Act. customer card data and card transaction processing, pursu- Allied Irish, with total consolidated assets equivalent to ant to sections 225.28(b)(2) and 225.28(b)(14). approximately $43.9 billion, is the largest banking organization in Ireland, and it provides a full range of banking, Other Interests financial, and related services primarily in Ireland, the United Kingdom, and the United States.2 Allied Irish oper- Bane One proposes to acquire the following interest of ates a branch in New York; through First Maryland, con- First USA:1 trols three banking subsidiaries in Delaware, Maryland, 50 percent ownership interest in PHH/Paymentech, and Pennsylvania; and engages through other subsidiaries Wilmington. Delaware, a limited liability company in various nonbanking activities. First Maryland, with total that is a joint venture with Paymentech Fleet Ser- consolidated assets of $10.8 billion, is the 57th largest vices, Inc., a First USA subsidiary, and PHH Vehi- commercial banking organization in the United States, cle Management Services Corp., and thereby en- controlling $7.5 billion in deposits. gage in providing credit card marketing, transaction Allied Irish is the 18th largest commercial banking orgaprocessing and other services to organizations that nization in Pennsylvania, controlling $872.6 million in operate fleets of vehicles, pursuant to section deposits, representing less than 1 percent of all deposits in 225.28(b)(2). commercial banking institutions in the state.3 Dauphin is the seventh largest commercial banking organization in Orders Issued Under Sections 3 and 4 of the Bank Pennsylvania, controlling $3.96 billion in deposits, repre- Holding Company Act senting approximately 2.9 percent of all deposits in commercial banking institutions in the state. On consummation Allied Irish Banks, pic of the proposal, Allied Irish would become the sixth largest Dublin, Ireland commercial banking organization in Pennsylvania, controlling deposits of $4.8 billion, representing approximately First Maryland Bancorp 3.5 percent of all deposits in commercial banking institu- Baltimore, Maryland tions in the state. Order Approving Acquisition of a Bank Holding Interstate Banking Analysis Company Section 3(d) of the BHC Act, as amended by section 101 of Allied Irish Banks, pic, Dublin, Ireland ("Allied Irish"), the Riegle-Neal Interstate Banking and Branching Effiand its subsidiary, First Maryland Bancorp, Baltimore, ciency Act of 1994, allows the Board to approve an appli- Maryland ("First Maryland") (collectively, "Applicants"), cation by a bank holding company to acquire a bank bank holding companies within the meaning of the Bank located in a state other than the home state of such bank Holding Company Act ("BHC Act"), have requested the holding company if certain conditions are met.4 For pur- Board's approval under section 3 of the BHC Act poses of the BHC Act, the home state of Allied Irish and (12U.S.C. § 1842) to acquire Dauphin Deposit Corpora- First Maryland is Maryland, and Applicants propose to tion ("Dauphin") and thereby indirectly acquire Dauphin's acquire a bank in Pennsylvania. The conditions for an subsidiary bank, Dauphin Bank and Trust Company ("Dauphin Bank"), both of Hanisburg, Pennsylvania.1 Ap- Dauphin. The option would terminate on consummation of this proposal. 2. Asset and national deposit and ranking data are as of Decem- 1. Bane One also proposes to acquire the inactive subsidiaries of ber 31, 1996. First USA, however, Bane One has committed not to engage in any 3. State deposit and ranking data are as of June 30, 1996. activities through these inactive subsidiaries without the prior ap- 4. Pub. L. No. 103-328, 108 Stat. 2338 (1994). A bank holding proval of the Board or the Federal Reserve Bank of Cleveland. company's home state is the state in which the operations of the bank holding company's banking subsidiaries were principally conducted 1. Applicants also have requested the Board's approval to exercise on July 1. 1966, or the date on which the company became a bank an option to purchase up to 19.9 percent of the voting shares of holding company, whichever is later. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

608 Federal Reserve Bulletin • July 1997 interstate acquisition under section 3(d) are met in this ("HHI").8 After considering the number of competitors case.5 In view of all the facts of record, the Board is that would remain in the market, the resulting market permitted to approve the proposal under section 3(d) of the concentration as measured by the HHI, and all other facts BHC Act. of record, the Board has concluded that consummation of this proposal would not have a significantly adverse effect on competition or the concentration of banking resources Competitive Considerations in any relevant banking market. Certain Supervisory Considerations The BHC Act prohibits the Board from approving an application under section 3 of the BHC Act if the proposal Under the Foreign Bank Supervision Enhancement Act of would result in a monopoly or if the eifect of the proposal 1991,9 the Board may not approve an application under may be substantially to lessen competition in any relevant section 3 of the BHC Act involving a foreign bank unless market, unless the Board finds that the anticompetitive the bank is "subject to comprehensive supervision or regueffects of the proposal are clearly outweighed in the public lation on a consolidated basis by the appropriate authorities interest by the probable effect of the proposal in meeting in the bank's home country."10 The Board previously has the convenience and needs of the community to be served.6 determined, in an application under the BHC Act, that the Allied Irish and Dauphin compete directly in the Hager- Bank of Ireland, Dublin, Ireland, was subject to comprestown, Maryland; Lancaster, Pennsylvania; and York, hensive consolidated supervision by its home country au- Pennsylvania, banking markets.7 On consummation of this thorities." In this case, the Board has determined that proposal, those markets would remain moderately concen- Allied Irish is supervised on substantially the same terms trated as measured by the Herfindahl-Hirschman Index and conditions as the Bank of Ireland. Based on all the facts of record, the Board has concluded that Allied Irish is subject to comprehensive supervision and regulation on a consolidated basis by its home country supervisor. The BHC Act also requires the Board to determine that the applicant has provided adequate assurances that it will make available to the Board such information on its operations and activities and those of its affiliates that the Board deems appropriate to determine and enforce compliance 5. See 12 U.S.C. §§ 1842(d)(l)(A) and (B) and 1842(d)(2)(A) and (B). Allied Irish and First Maryland are adequately capitalized and with the BHC Act. The Board has reviewed the restrictions adequately managed. In addition, on consummation of the proposal. on disclosure in jurisdictions where Allied Irish has mate- Allied Irish and First Maryland would control less than 10 percent of rial operations and has communicated with relevant govthe total amount of deposits of insured depository institutions in the ernment authorities concerning access to information. Al- United States and less than 30 percent of the total amount of deposits of insured depository institutions in Pennsylvania. Pennsylvania does not have a minimum age requirement or a statewide concentration limit. AH other requirements of section 3(d) of the BHC Act also 8. Under the revised Department of Justice Merger Guidelines, would be met on consummation of the proposal. 49 Federal Register 26,823 (June 29, 1984), a market in which the 6. In evaluating the competitive effects of this proposal, the Board post-merger HHI is between 1000 and 1800 is considered moderately has carefully considered comments received from an individual concentrated. The Justice Department has informed the Board that a ("Protestant") and a petition submitted by a number of individuals bank merger or acquisition generally will not be challenged (in the contending that the proposal would have adverse competitive effects absence of other factors indicating anticompetitive effects) unless the in the area between Harrisburg, Pennsylvania, and Baltimore. Mary- post-merger HHI is at least 1800 and the merger or acquisition land, identified as the "Interstate 83 corridor." and adverse effects on increases the HHI by at least 200 points. The Justice Department has small Pennsylvania banks. As indicated below, the Board has con- stated that the higher than normal threshold for an increase in the HHI cluded that the relevant geographic banking markets for analyzing the when screening bank mergers and acquisitions for anticompetitive competitive effects of this proposal are the Hagerstown. Lancaster, effects implicitly recognizes the competitive effect of limited-purpose and York banking markets. In reaching this decision, the Board has. as lenders and other nondepository financial entities. On consummation in previous cases, considered the location of the relevant banks, of this transaction, the HHI in the relevant banking markets would worker commuter patterns (as indicated by census data), and other increase as follows: Hagerstown (12 points to 1375). Lancaster indicia of economic integration and the transmission of competitive (8 points to 1270). and York (633 points to 1654). forces among large and small depository institutions. See "Third 9. Pub. L. No. 102-242, § 201 et seq., 105 Stat. 2286 (1991). District Banking Markets," Federal Reserve Bank of Philadelphia 10. 12 U.S.C. § 1842(c)(3)(B). As provided in Regulation Y. the (August 1995). Sec also Chemical Banking Corporation, 82 Federal Board determines whether a foreign bank is subject to consolidated Reserve Bulletin 239. 241 (1996). See United States v. Philadelphia home country supervision under the standards set forth in Regulation National Bank, 374 U.S. 321. 357 (1963); United States v. Phillips- K (International Banking Operations). 12C.F.R. 225.13(a)(4). Regulaburg National Bank, 399 U.S. 350 (1969). tion K provides that a foreign bank may be considered subject to 7. The Hagerstown. Maryland, banking market is approximated by consolidated supervision if the Board determines that the bank is the Hagerstown Rand McNally Area ("RMA"). which includes por- supervised or regulated in such a manner that its home country tions of Maryland, Pennsylvania. West Virginia, and the portions of supervisor receives sufficient information on the worldwide operations Washington County, Maryland, not in the Hagerstown RMA. The of the foreign bank, including the relationship of the bank to its Lancaster, Pennsylvania, banking market is approximated by Lan- affiliates, to assess the foreign bank's overall financial condition and caster County. Pennsylvania. The York. Pennsylvania, banking market compliance with law and regulation. 12 C.F.R. 211.24(c)(l)(ii). is approximated by Adams and York Counties, both in Pennsylvania. 11. See Bank of Ireland, 81 Federal Reserve Bulletin 511(1995). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 609 lied Irish has committed that, to the extent not prohibited of record, including assessments of their managerial reby applicable law, it will make available to the Board such sources by United States and Irish banking authorities.13 information on the operations of Allied Irish and any of its Based on the foregoing and all the facts of record, the affiliates that the Board deems necessary to determine and Board has concluded that considerations relating to the enforce compliance with the BHC Act, the International financial and managerial resources and future prospects of Banking Act (12 U.S.C. § 3101 et seq.), and other applica- Allied Irish. First Maryland, Dauphin, and their respective ble federal laws. Allied Irish also has committed to cooper- subsidiaries are consistent with approval of the proposal, as ate with the Board to obtain any waivers or exemptions are the other supervisory factors the Board must consider that may be necessary in order to enable Allied Irish to under section 3 of the BHC Act. make any such information available to the Board. In light Convenience and needs considerations, including the of these commitments and other facts of record, the Board records of performance of the banking subsidiaries of has concluded that Allied Irish has provided adequate Allied Irish and Dauphin under the Community Reinvestassurances of access to any necessary information the ment Act (12 U.S.C. § 2903 et seq.) ("CRA"), also are Board may request.12 For these reasons, and based on all consistent with approval.14 the facts of record, the Board has concluded that the supervisory factors the Board is required to consider under Nembanking Activities section 3(c)(3) of the BHC Act are consistent with approval. A. Activities Approved by Regulation Financial, Managerial, and Convenience and Needs The Board previously has determined by regulation that Considerations the proposed lending, financial and investment advisory, tax preparation, securities brokerage, riskless principal, In considering the financial and managerial factors in this private placement, data processing, and credit-related incase, the Board notes that the Central Bank of Ireland has surance activities, and underwriting and dealing in bankimplemented the European Union's capital adequacy direc- eligible securities are closely related to banking within the tive, which follows the Basle risk-based capital standards meaning of section 4(c)(8) of the BHC Act.15 Allied Irish with minor variations that conform with local accounting proposes to conduct these activities in accordance with practices. Thus, Allied Irish is subject to capital standards that conform to the Basle Capital Accord. Allied Irish's 13. In considering the financial and managerial factors in this case, capital levels comply with those standards and are considthe Board has carefully weighed comments by Protestant, including ered equivalent to the capital that would be required of a comments that: United States banking organization. The Board also has (1) Dauphin has invested in technology, training programs, and considered other aspects of Allied Irish's financial condi- other items to remain an independent financial institution; tion, as well as the capital position and other aspects of the (2) officials and representatives of Dauphin and Allied Irish have made inconsistent statements about the competitive and other factors financial condition of First Maryland and the other instituin this case; and tions involved in this transaction. (3) Protestant's company incurred substantial financial losses be- The proposed transaction is not expected to have a cause Fanners Bank. FSB, Baltimore. Maryland, a thrift institution significant adverse effect on the financial resources of sold by Dauphin in 1994. violated state law by failing to record documentation of the thrift's loan to the company. Allied Irish, First Maryland, or the other institutions in- The Board has considered these contentions in light of all the facts volved. Allied Irish and First Maryland, and their subsid- of record, including the alleged inconsistent statements themselves iary depository institutions, are well-capitalized and ex- and supervisory reports of examination assessing the financial and pected to remain so on consummation of this proposal. The managerial resources of Allied Irish. Dauphin, and their respective subsidiaries. These examination reports have reviewed, among other Board also has considered the size of this acquisition matters, the loan documentation policies and procedures of the relerelative to the assets of Allied Irish and First Maryland, the vant institutions. financing for this proposal, and the effect of this proposal 14. In considering the convenience and needs factor in this case, the on the liquidity position of these institutions. Board has carefully weighed comments by Proiestant that Dauphin Bank's customer service would become less personal after the acquisi- The Board also has carefully considered the managerial tion. The Board has reviewed this contention in light of all the facts of resources of Allied Irish, First Maryland, and the other record, including CRA performance examinations of the relevant institutions involved in this proposal in light of all the facts institutions. The Board notes that Allied Irish's lead subsidiary bank. First National Bank of Maryland, Baltimore, Maryland, received an "outstanding" rating in its most recent examination for CRA performance from its primary federal supervisor, the Office of the Comptroller of the Currency, as of October 7, 1996. The Board also notes that Allied Irish has not proposed to change the management of Dauphin and intends to retain certain senior officers and directors. Allied Irish has indicated that the proposed transaction would improve the ability of the combined organization to meet the business credit needs of the 12. In previous cases, the Board has reviewed relevant provisions of communities it serves through higher aggregate credit limits and confidentiality, secrecy, and other laws in jurisdictions in which Allied improved underwriting and asset syndication capabilities, among other Irish has material operations. See Bank of Ireland. 81 Federal Reserve things. Bulletin 511 (1995); HSBC Holdings pit. 81 Federal Reserve Bulletin 1037(1995). 15. See 12 C.F.R. 225.28(b)(1), (6), (7), (8), (II). and (14). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

610 Federal Reserve Bulletin • July 1997 Regulation Y and relevant Board interpretations and or- will conduct its underwriting and dealing activities in bankders. ineligible securities subject to the 25-percent revenue test.19 B. Underwriting and Dealing in Bank-Ineligible C. Other Nonbanking Considerations Securities In order to approve this proposal, the Board also must Applicants also have proposed to acquire Dauphin's sec- determine that the proposed activities are a proper incident tion 20 subsidiary, Hopper Soliday & Co., Inc., Lancaster, to banking, that is, that the proposed transaction "can Pennsylvania ("Company"). The Board previously autho- reasonably be expected to produce benefits to the pubrized Company to engage in underwriting and dealing in lic ... that outweigh possible adverse effects, such as bank-ineligible securities on a limited basis.16 This authori- undue concentration of resources, decreased or unfair comzation was based upon the Board's prior determination petition, conflicts of interests, or unsound banking practicthat, subject to the prudential framework of limitations es."20 established in previous decisions to address the potential As part of the Board's evaluation of these factors, the for conflicts of interests, unsound banking practices, or Board considers the financial and managerial resources of other adverse effects, the activities of underwriting and the notificant, its subsidiaries, and any company to be dealing in bank-ineligible securities are so closely related acquired, and the effect the transaction would have on such to banking as to be a proper incident thereto within the resources.21 As noted previously. Allied Irish's capital rameaning of section 4(c)(8) of the BHC Act.17 Allied Irish tios satisfy applicable risk-based standards under the Basle has committed that Company will conduct the proposed Accord and are considered equivalent to the capital levels underwriting and dealing activities subject to the frame- that would be required of a United States banking organizawork, including the prudential limitations, established by tion. The Board also has reviewed the capitalization of the Board in the Section 20 Orders. Allied Irish and Company in accordance with the standards In addition, the Board has determined that the conduct of set forth in the Section 20 Orders and finds the capitalization of each to be consistent with approval. The determinathese securities underwriting and dealing activities is contion on the capitalization of Company is based on all the sistent with section 20 of the Glass-Steagall Act facts of record, including projections of the volume of (12 U.S.C. § 377), provided that the company engaged in Company's underwriting and dealing activities in bankthe underwriting and dealing activities derives no more ineligible securities. The Board also has reviewed other than 25 percent of its total gross revenues from underwritaspects of the financial condition and resources of Allied ing and dealing in bank-ineligible securities over any twoyear period.18 Allied Irish has committed that Company Irish, Dauphin, and their respective subsidiaries, including the effect of this proposal on the financial condition and resources of these entities. 16. Sec Dauphin Deposit Corporation, 77 Federal Reserve Bulletin On the basis of its supervisory experience with Appli- 672 (1991). Company is registered as a broker-dealer with the Securicants, Dauphin, and Company, the commitments provided ties and Exchange Commission ("SEC") under the Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.) and is a member of the in this case, and the proposed management of Company, National Association of Securities Dealers. Inc. ("NASD"). Accord- the Board also has determined that Applicants and Comingly, Company is subject to the recordkeeping and reporting obliga- pany have established policies and procedures to ensure tions, fiduciary standards, and other requirements of the Securities compliance with this order and the Section 20 Orders, Exchange Act of 1934. the SEC, and the NASD. including computer, audit, and accounting systems, inter- 17. See Canadian Imperial Bank of Commerce, et al., 76 Federal Reserve Bulletin 158 (1990); J.P. Morgan & Co. Incorporated, et al., nal risk management controls, and the necessary opera- 75 Federal Reserve Bulletin 192 (1989), ag'd sub nom. Securities tional and managerial infrastructure. The Board also has Industries Ass' n v. Board of Governors of the Federal Reserve System, reviewed other aspects of the managerial resources of the 900 F.2d 360 (D.C. Cir. 1990); Citicorp, et al., 73 Federal Reserve entities involved in this proposal, including the expected Bulletin 473 (1987). aff'd sub nom. Securities Industry Ass'n v. Board effect of this proposal on such resources. of Governors of the Federal Reserve System. 839 F.2d 47 (2d Cir. 1988), cert, denied. 486 U.S. 1059 (1988); as modified by Review of Restrictions on Director. Officer and Employee Interlocks, Cross- Marketing Activities, and the Purchase and Sale of Financial Assets Between a Section 20 Subsidiary and an Affiliated Bank or Thrift, adopted the Board's alternative indexed-revenue test to measure com- 82 Federal Reserve Bulletin 113 (1996) (collectively, "'Section 20 pliance with the revenue limitation on bank-ineligible securities activ- Orders"). ities, and, absent such election, will continue to employ the Board's 18. See Revenue Limit on Bank-Ineligible Activities of Subsidiaries standard 25-percent revenue test. of Bank Holding Companies Engaged in Underwriting and Dealing in 19. Company also may engage in activities that are necessary Securities, 61 Federal Register 68,750 (1996). See also Section 20 incidents to the proposed underwriting and dealing activities. Unless Orders. Compliance with the 25-percent revenue limitation will be Company receives specific approval under section 4(c)(8) of the BHC calculated in accordance with the method stated in the Section 20 Act to conduct the activities independently, any revenues from the Orders, as modified by the Order Approving Modifications to the incidental activities must be counted as ineligible revenues subject to Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989): and the Board's revenue limitation. 10-Percent Revenue Limit on Bank-Ineligible Activities of Subsidiar- 20. See 12 U.S.C. § 1843(c)(8). ies of Bank Holding Companies Engaged in Underwriting and Deal- 21. See 12C.F.R. 225.26; see also The Fuji Bank, Limited. ing in Securities, 61 Federal Register 48.953 (1996) (collectively, 75 Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, "Modification Orders"). The Board notes that Company has not 73 Federal Reserve Bulletin 155 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 611 On the basis of the foregoing and all the facts of record, proval is specifically conditioned on compliance by Allied the Board has concluded that financial and managerial Irish with all the commitments made in connection with considerations are consistent with approval of this pro- this proposal and with the conditions stated or referred to posal. in this order, and on receipt by Applicants of all necessary The Board expects that the proposed acquisition would approvals from state and federal regulators and other auprovide added convenience to customers of Dauphin and thorities. Allied Irish. Allied Irish also has indicated that the pro- The Board's determination on the nonbanking activities posed transaction would result in operational efficiencies is also subject to all the terms and conditions set forth in that would allow it to be a more effective competitor and Regulation Y, including those in sections 225.7 and thereby provide improved services at a lower cost to its 225.25(c) of Regulation Y (12 C.F.R. 225.7 and 225.25(c)), customers. and to the Board's authority to require such modification or The Board also has carefully considered the competitive termination of the activities of a bank holding company or effects of the proposed acquisition of Dauphin's nonbank- any of its subsidiaries as the Board finds necessary to ing subsidiaries. Allied Irish operates nonbanking subsid- ensure compliance with, and to prevent evasion of, the iaries that compete with certain nonbanking subsidiaries of provisions of the BHC Act and the Board's regulations and Dauphin. In each case, the markets for these nonbanking orders issued thereunder. The commitments and conditions services are unconcentrated, and there are numerous pro- relied on by the Board in reaching this decision are deemed viders of these services. As a result, consummation of this to be conditions imposed in writing by the Board in conproposal would have a de minimis effect on competition for nection with its findings and decision, and, as such, may be these services, and the Board has concluded that the pro- enforced in proceedings under applicable law. If any reposal would not result in a significantly adverse effect on strictions on access to information on the operations or competition in any relevant market. activities of Allied Irish and its affiliates subsequently Under the framework established in this and prior deci- interfere with the Board's ability to obtain information to sions, including the prudential limitations established by determine the compliance by Allied Irish and its affiliates the Board in the Section 20 Orders, moreover, consumma- with applicable federal statutes, the Board may require tion of the proposal is not likely to result in any signifi- termination of any of Allied Irish's direct or indirect activcantly adverse effects, such as undue concentration of ities in the United States. resources, decreased or unfair competition, conflicts of The acquisition of Dauphin shall not be consummated interests, or unsound banking practices that would out- before the fifteenth calendar day following the effective weigh the public benefits of this proposal. date of this order, and the proposal shall not be consum- Accordingly, based on all the facts of record, the Board mated later than three months after the effective date of this has determined that the balance of public benefits that it order, unless such period is extended for good cause by the must consider under the proper incident to banking stan- Board or by the Federal Reserve Bank of Richmond, acting dard of section 4(c)(8) of the BHC Act is favorable and pursuant to delegated authority. consistent with approval of the proposal. By order of the Board of Governors, effective May 19, 1997. Conclusion Voting for this action: Chairman Greenspan, Vice Chair Rivlin. and Based on the foregoing and all the other facts of record, the Governors Kelley. Phillips, and Meyer. Board has determined that the applications and notices should be, and hereby are, approved.22 The Board's ap- JENNIFER J. JOHNSON Deputy Secretary of the Board 22. Protestant has requested that the Board hold a public hearing or APPENDIX meeting on all aspects of this proposal, particularly the effect of the transaction on small banks in Pennsylvania. A number of other Nonbanking Subsidiaries and Activities: individuals have signed a petition to join this request. Section 3(b) of the BHC Act does not require the Board to hold a public hearing on an application unless the appropriate supervisory authority for the bank (1) Dauphin Life Insurance Company. Harrisburg, Pennto be acquired makes a timely written recommendation of denial of sylvania, which would engage in reinsuring life, health, the application. In this case, the Board has not received such a and accident insurance directly related to extensions of recommendation from any state or federal supervisory authority. Under its rules, the Board also may, in its discretion, hold a public hearing or meeting on an application or notice to clarify factual issues related to the proposal and to provide an opportunity for testimony. review of all the facts of record, the Board has concluded that See 12 C.F.R. 225.25(a)(2), 262.3(e), and 262.25(d). The Board has Protestant's request fails to identify any genuine dispute about facts carefully considered Protestant's request for a hearing or meeting in that are material to the Board's decision or any other basis on which a light of all the facts of record. In the Board's view, Protestant has had hearing or meeting would be warranted. Based on all the facts of ample opportunity to submit views, and has, in fact, provided written record, the Board has determined that a public hearing or meeting is submissions that have been considered by the Board in acting on this not necessary to clarify the factual record in the proposal and is not proposal. Protestant's request fails to demonstrate why the written otherwise warranted in this case. Accordingly, the request for a public submissions do not adequately present his allegations. After a careful hearing or meeting on the proposal is hereby denied. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

612 Federal Reserve Bulletin • July 1997 credit made by Dauphin Bank or other subsidiaries of ("bank-ineligible securities'"). See Dauphin Deposit Allied Irish, pursuant to section 225.28(b)(l l)(i) of Reg- Corporation, 77 Federal Reserve Bulletin 672 (1991). ulation Y (12 C.F.R. 225.28(b)(l 1)(i)); Applicants also propose to acquire certain inactive non- (2) Loans USA, Incorporated, Pasadena, Maryland banking subsidiaries of Dauphin. ("Loans USA"),1 which would engage in: (a) Making, acquiring, brokering, or servicing loans or other extensions of credit (including factoring, issu- ORDERS ISSUED UNDER BANK MERGER ACT ing letters of credit, and accepting drafts) for its own account or for the account of others, pursuant to Banco Popular de Puerto Rico section 225.28(b)(l) of Regulation Y (12 C.F.R. Hato Rey, Puerto Rico 225.28(b)(l)); (b) Providing tax preparation services to any person, Order Approving the Merger of Banks and Establishment pursuant to section 225.28(b)(6)(vi) of Regulation Y of Bank Branches (12 C.F.R. 225.28(b)(6)(vi)); (cl Providing data processing and data transmission Banco Popular de Puerto Rico, Hato Rey ("Banco Popuservices, pursuant to section 225.28(b)(14) of Regula- lar"), a state member bank, has requested the Board's tion Y (12 C.F.R. 225.28(b)( 14)); approval under section 18(c) of the Federal Deposit Insur- (d) Engaging in insurance agency and underwriting ance Act (12 U.S.C. § 1828(c)) (the "Bank Merger Act") activities with respect to life, health, and accident to merge with Roig Commercial Bank, Humacao ("Roig"), insurance directly related to extensions of credit made both in Puerto Rico. Banco Popular also has requested the by Loans USA or other subsidiaries of Allied Irish, Board's approval under section 9 of the Federal Reserve pursuant to section 225.28(b)(l l)(i) of Regulation Y Act (12 U.S.C. § 321) to establish branches at the current (12 C.F.R. 225.28(b)(l l)(i)); and locations of the main office and branches of Roig.1 (e) Engaging in insurance agency activities with re- Notice of the application, aifording interested persons an spect to collateral insurance directly related to exten- opportunity to submit comments, has been given in accorsions of credit made by Loans USA or other finance dance with the Bank Merger Act and the Board's Rules of company subsidiaries of Allied Irish, pursuant to sec- Procedure (12 C.F.R. 262.3(b)). As required by the Bank tion 225.28(b)(H)(ii) of Regulation Y (12 C.F.R. Merger Act, reports on the competitive effects of the 225.28(b)(ll)(ii));and merger were requested from the United States Attorney (3) Hopper Soliday & Co., Inc., Lancaster, Pennsylva- General, the Office of the Comptroller of the Currency, and nia, which would engage in: the Federal Deposit Insurance Corporation. The time for (a) Providing investment and financial advisory ser- filing comments has expired, and the Board has considered vices to any person, pursuant to section 225.28(b)(6) the application and all comments received in light of the of Regulation Y (12 C.F.R. 225.28(b)(6)); factors set forth in the Bank Merger Act and section 9 of (b) Providing discount and full-service securities bro- the Federal Reserve Act. kerage services, pursuant to section 225.28(b)(7)(i) of Banco Popular, with total assets of approximately Regulation Y (12 C.F.R. 225.28(b)(7)(i)); $14 billion, is the largest commercial banking organization (c) Buying and selling all types of securities on the in Puerto Rico, controlling deposits of approximately order of customers as a riskless principal, pursuant to $8.1 billion, representing 33.8 percent of total deposits in section 225.28(b)(7)(ii) of Regulation Y (12 C.F.R. commercial banks in the commonwealth.2 Roig, with total 225.28(b)(7)(ii)); assets of approximately $888 million, is the tenth largest (d) Acting as agent in the private placement of securi- commercial banking organization in Puerto Rico, controlties, pursuant to section 225.28(b)(7)(iii) of Regula- ling deposits of approximately $647 million, representing tion Y (12 C.F.R. 225.28(b)(7)(iii)); 2.7 percent of total deposits in commercial banks in the (e) Underwriting and dealing in obligations of the commonwealth. On consummation of the proposal, Banco United States, general obligations of states and their Popular would remain the largest commercial banking political subdivisions, and other obligations that state organization in Puerto Rico, controlling deposits of approx.member banks of the Federal Reserve System may be imately $8.8 billion, representing 36.5 percent of total authorized to underwrite and deal in under deposits in commercial banks in the commonwealth. 12U.S.C. §§ 24 and 335 ("bank-eligible securities"), pursuant to section 225.28(b)(8)(i) of Regulation Y Competitive Considerations (12 C.F.R. 225.28(b)(8)(i)): and (f) Underwriting and dealing, on a limited basis, in all The Bank Merger Act prohibits the Board from approving types of debt and equity securities other than securi- an application if the proposal would result in a monopoly ties issued by open-end investment companies or if the effect of the proposal may be substantially to 1. The locations of the branches that Banco Popular proposes to 1. This entity is a join! venture in which Dauphin holds a establish are listed in the Appendix. 33.33 percent equity interest. 2. Asset and deposit data are as of December 31, 1996. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 613 lessen competition in any relevant market, unless the Board Fifteen commercial banks and two thrifts would remain finds that the anticompetitive effects of the proposal are in the market following consummation of the proposal. In clearly outweighed in the public interest by the probable addition, more than 71 savings and credit union cooperaeffect of the proposal in meeting the convenience and tive societies ("cooperatives") compete in the San Juan needs of the community to be served.3 banking market, of which 30 have more than $20 million Banco Popular and Roig compete directly in the San of deposits.7 The Board has previously recognized that Juan, Puerto Rico, banking market.4 Banco Popular is the cooperatives are significant competitors of commercial largest depository institution in the market, controlling banks in Puerto Rico.8 If cooperatives are factored into the approximately $6.8 billion of deposits, representing calculation of the market indexes, the proposal does not 32.8 percent of total deposits in depository institutions in exceed the thresholds in the DOJ Guidelines in the San the market ("market deposits").5 Roig is the eighth largest Juan banking market.9 In addition, the Department of Jusdepository institution in the market, controlling approxi- tice has reviewed the proposal and advised the Board that mately $647 million of deposits, representing 3.1 percent consummation of the proposal would not be likely to have of market deposits. any significantly adverse competitive effect in the San Juan On consummation of the proposal, Banco Popular would banking market or in any other relevant banking markets. remain the largest depository institution in the San Juan The Puerto Rico banking commissioner and the other fedbanking market, controlling approximately $7.5 billion of eral banking agencies also have not objected to the prodeposits, representing 35.9 percent of market deposits. The posal. Board has carefully reviewed the competitive effects of the Based on all the facts of record, and for the reasons proposal in the market in light of all the facts of record, discussed in this order, the Board concludes that consumincluding the number of competitors that would remain in mation of the proposal would not have a significantly the market, the characteristics of the market, and the pro- adverse effect on competition or the concentration of bankjected increase in the concentration of market deposits, as ing resources in any relevant banking market. measured by the Herfindahl-Hirschman Index ("HHI") under the Department of Justice Merger Guidelines ("DOJ Other Factors Guidelines"). The HHI in the San Juan banking market would increase by 203 points to 1950.6 The Bank Merger Act also requires the Board to consider the financial and managerial resources and future prospects of the existing and proposed institutions and the convenience and needs of the community to be served. The 3. 12 U.S.C. § 1828(c)(5)(b). Board has carefully considered these factors in light of all 4. Banco Popular contends that the relevant banking market is the entire island of Puerto Rico. The Board recently considered the proper the facts of record. The facts of record include supervisory delineation of banking markets in Puerto Rico, including the San Juan reports of examination assessing the financial and managebanking market. See Statement by the Board of Governors of the rial resources of the organizations and their performance Federal Reserve System Regarding the Application of Banco Sanunder the Community Reinvestment Act, and financial and tander, S.A., 82 Federal Reserve Bulletin 833 (1996) ("Statement"). other information provided by Banco Popular. Based on For the reasons discussed in the Statement, which are incorporated herein, the Board concludes that the relevant banking market to assess these and all other facts of record, the Board concludes that the competitive effects of the proposal is the San Juan banking market. all the supervisory factors, and all considerations related to The San Juan banking market consists of the San Juan-Caguas- the convenience and needs of the community to be served, Arecibo Consolidated Metropolitan Statistical Area and the municipalare consistent with approval under the Bank Merger Act. ities of Aibonito, Barranquitas, Ciales, Jayuya, Lares, Maunabo, Orocovis, Quebradillas, Utuado, and Vieques. The Board also concludes that all the factors that must be 5. In this context, market deposits include deposits at commercial considered under the Federal Reserve Act are consistent banks and savings and loan institutions. Market share data are based with approval. on calculations in which the deposits of thrift institutions are included at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. See Midwest Financial Group, 75 Federal Reserve Bulletin 386 (1989); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Thus, the Board has regularly included thrift deposits in the calculation of market share on a 50-percent weighted basis. See, e.g., First Hawaiian, Inc., 77 Federal Reserve Bulletin 52 (1991). 7. Deposit data for cooperatives are as of December 31, 1996. 6. Under the revised DOJ Guidelines, 49 Federal Register 26,823 Cooperatives with less than $1 million of deposits have not been (June 29. 1984). a market in which the post-merger HHI is more than included in this analysis. 1800 is considered highly concentrated. The Department of Justice 8. For a detailed discussion of the activities of cooperatives, incorhas informed the Board that a bank merger or acquisition generally porated herein by reference, see BanPonce Corporation, 11 Federal will not be challenged (in the absence of other factors indicating Reserve Bulletin 43, 45 (1991); Statement at 834-835. anticompetitive effects) unless the post-merger HHI is at least 1800 9. Based on the asset composition of cooperatives, the Board and the merger increases the HHI by more than 200 points. The believes that cooperatives are at least as significant as thrift institu- Department of Justice has stated that the higher than normal HHI tions as competitors of commercial banks, and should be weighted at thresholds for screening bank mergers for anticompetitive effects 50 percent in the San Juan banking market. See Statement at 835 n.13. implicitly recognizes the competitive effect of limited-purpose lenders If deposits of cooperatives are weighted at 50 percent, the HHI for the and other non-depository financial entities. San Juan banking market would increase by 188 points to 1613. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

614 Federal Reserve Bulletin • July 1997 Conclusion (24) Tetuan & Cruz Streets, San Juan (25) I Degetau Street, Yabucoa Based on the foregoing and all the facts of record, the Board has determined that this application should be, and Westamerica Bank hereby is, approved. The Board's approval of the proposal San Rafael, California is conditioned on compliance by Banco Popular with all the commitments made in connection with this application. Order Approving the Merger of Banks and Establishment The commitments and conditions referred to in this order of Bank Branches shall be deemed to be conditions imposed in writing by the Board in connection with its finding and decision, and, as Westamerica Bank, San Rafael, California, a state member such, may be enforced in proceedings under applicable bank, has requested the Board's approval under section law. 18(c) of the Federal Deposit Insurance Act (12U.S.C. The proposed merger shall not be consummated before § 1828(c)) (the "Bank Merger Act") to merge with Vallithe fifteenth day after the effective date of this order, or Wide Bank, Fresno, California. Westamerica Bank also has later than three months after the effective date of this order, requested the Board's approval under section 9 of the unless such period is extended by the Board or by the Federal Reserve Act (12 U.S.C. § 321) to establish Federal Reserve Bank of New York, acting pursuant to branches at the former branch locations of ValliWide delegated authority. Bank.1 By order of the Board of Governors, effective May 27, Notice of this proposal, affording interested persons an 1997. opportunity to submit comments, has been given in accordance with the Bank Merger Act and the Board's Rules of Voting for this action: Chairman Greenspan. Vice Chair Rivlin, and Procedure (12C.F.R. 262.3(b)). As required by the Bank Governors. Kelley. Phillips, and Meyer. Merger Act, reports on the competitive effects of the merger were requested from the United States Attorney WILLIAM w. WILES General and the Federal Deposit Insurance Corporation. Secretary of the Board The time for filing comments has expired, and the Board has considered the applications and all the facts of record in light of the factors set forth in the Bank Merger Act and section 9 of the Federal Reserve Act. APPENDIX Westamerica Bank and ValliWide Bank are wholly owned subsidiaries of Westamerica Bancorporation, San Branches to be established by Banco Popular de Puerto Rafael, California ("Westamerica"), and the proposal rep- Rico resents a reorganization of two affiliated banks. Westamerica, with total assets of $2.5 billion, is the tenth largest (1) Road 2, Km. 11.9 (Service Road), Bayamon commercial banking organization in California, controlling (2) Road 1. Km. 32.9, Caguas deposits of approximately $3.2 billion, representing (3) Sixty-fifth Infantry Avenue, Km. 10.2, Carolina 1.4 percent of the total deposits in commercial banking (4) 10 Pedro M rquez Street, Culebra organizations in California.2 (5) Garrido Morales and Victoria Streets, Fajardo (6) 55 Antonio Lopez, Humacao Convenience and Needs Factor (7) Carreras & Georgetti Streets, Humacao (8) 55 Font Martelo Avenue, Centra Comercial, The Board has carefully considered the effect of the pro- Humacao posal on the convenience and needs of the community to (9) Palmanova Condominium, Palmas del Mar, be served in light of all the facts of record. In particular, the Humacao Board has considered the performance record of West- (10) Road 3, Km. 81.6, Vista del Rio Plaza, Humacao america Bank and ValliWide Bank and the programs for (11) Almodovar & Delfaus Streets, Juncos helping serve the banking needs of the community as (12) 63 J.C. Barbosa Street, Las Piedras explained in the Board's order approving the acquisition of (13) 64 San Patricio, Loiza ValliCorp Holding, Inc., Fresno, California, by West- (14) Road 3, Km. 36.2, Plaza del Oriente, Luquillo america,3 and the fact that the transaction under review in (15) 1 Santiago Iglesias, Maunabo (16) 19 J uan R. Garzot, Naguabo (17) Road 3, Km. 22.2, Plaza del Yunque, Rio Grande (18) Arzuaga & First Streets, San Juan 1. The locations are contained in the Appendix. (19) 1472 Ashford Avenue, San Juan 2. Deposit data are as of June 30, 1996. and incorporate structural (20) 355 De Diego Avenue, Stop 22, San Juan changes through January 1997 and asset data are as of September 30, 1996. (21) 1500 F.D. Roosevelt Avenue, San Juan 3. See Westamerica Bank. 82 Federal Reserve Bulletin 435 (1997) (22) 269 Ponce de Leon Avenue, San Juan ("Westamerica Order"). The acquisition of ValliCorp Holdings, Inc., (23) 1600 Ponce de Leon Avenue, Stop 23, San Juan by Westamerica was consummated on April 12, 1997. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 615 this case represents a reorganization of affiliated institu- The California Superintendent of Banks ("Superintentions. dent") has reviewed the proposed branch closings and has The Board also has considered that Westamerica Bank approved the closure of these branches after reviewing the received an "outstanding" rating at the most recent exami- potential effect on the public convenience in the areas nation of its CRA performance by the Federal Reserve served by the branches in light of substantially similar Bank of San Francisco ("Reserve Bank"), as of May 13, comments submitted to the Superintendent. 1996 ("Westamerica Examination"). ValliWide Bank also The Board notes that Federal banking law addresses received an "outstanding" rating for CRA performance at branch closing by specifically requiring an insured deposiits most recent examination by the Reserve Bank, as of tory institution to provide notice to the appropriate regula- January 22, 1996 ("ValliWide Examination"). tory agency prior to closing a branch.e The statute, how- Westamerica has indicated that it plans to introduce ever, does not authorize the federal regulators to prevent many of its Community Access Loan ("CAL") products in the closing of any branch. Similarly, the Bank Merger Act the communities currently served by ValliWide Bank. Sev- does not make approval of a proposal contingent on an eral of those programs are designed for low-income bor- applicant maintaining open all branch offices of the resultrowers and include the CAL Program, which provides ing institution. The availability of bank services and offices home equity loans, automobile loans, and home improve- after a merger must be reviewed in the context of the effect ment loans with lower monthly payment terms. West- of the merger on the convenience and needs of communiamerica plans that the merged bank would offer the CAL ties served by the institution and is one of several factors PAL Loan program, which provides residential mortgage the Board must consider in assessing the effect of the loans with flexible underwriting criteria, lower down pay- acquisition on the convenience and needs of the communiments, and no private mortgage insurance, and the CAL ties to be served. Business Loan Program, which offers "microenterprise" or Four of the branches to be closed, which serve the "incubator" business loans to minorities and women communities of Caruthers, Coalinga, Hanford and through local agencies that also provide technical support Lemoore, are located in middle income census tracts, and to the borrowers. As explained more fully in the West- each affected community would continue to be served by at america Order, Westamerica has implemented several pro- least one insured depository institution in the community.7 grams that help serve the banking needs of the community, The four other branches that are proposed to be closed are including low- and moderate-income neighborhoods. located in moderate-income census tracts in the communi- After the proposed merger, Westamerica would operate ties of Lamont, Dos Palos, Firebaugh, and Mendota. Lamapproximately 85 branches throughout California. As part ont would continue to be served by a savings association in of its review of the applications, the Board also has consid- that community, and several insured depository institutions ered submissions by commenters ("Commenters")4 stating that are a short distance from Lamont. Dos Palos and that the proposed closing of certain branches of ValliWide Firebaugh would also have an insured depository institu- Bank would reduce access to banking facilities in several tion in each community. The Board also notes that a communities and adversely affect the local businesses and California state-chartered bank has provided notice to the residents that currently rely on these branches.5 As noted in Superintendent of its intention to open a branch in Firethe Westamerica Order, examiners have reviewed West- baugh.8 Although no other depository institution would america's branch closing policy, and found the policy to be effective. 6. Section 42 of the Federal Deposit Insurance Act (12US.C. § 1831r-U ("section 42"). as implemented by the Joint 4. Commenters included a Congressman, a California state senator, Policy Statement Regarding Branch Closing (58 Federal Register a cily manager and mayor, officials from the Board of Supervisors for 49,083 (1993)), requires that a bank provide the public with at least 30 two counties, the California Reinvestment Committee ("CRC"), and days notice and the primary federal supervisor with at least 90 days local businesses and residents. notice before the date of the proposed branch closing. The bank also is 5. Commenters raised concerns about certain branches in Caruthers, required to provide reasons and other supporting data for the closure, Coalinga. Dos Palos, Firebaugh, Hanford. Lamont, Lemoore and consistent with the institution's written policy for branch closing. Mendota, all in California. CRC also contends that 1995 data filed Westamerica has provided the Reserve Bank with all the information under the Home Mortgage Disclosure Act (12 U.S.C. § 2801 et seq.) required by section 42 for the proposed branch closing identified by ("HMDA") show that Westamerica and ValliWide Bank made few the Commenters and in the California communities of Atwater, loans to minorities and that the outreach and marketing efforts of the Bakersfield, Livingston, and Visalia. organizations were ineffective. The Board previously considered these 7. The Hanford community is currently served by two branches of contentions in the Westamerica/ValliCorp proposal in light of all the ValliWide Bank. After the closure of one Hanford bank branch, facts of record relating to both organizations, including their most Westamerica would continue to serve the Hanford community. recent satisfactory or better ratings for performance under the Commu- 8. Commenters assert that the insured depository institution that nity Reinvestment Acl (12 U.S.C. § 2901 et seq.) (CRA). their overall would remain in Dos Palos and Firebaugh intends to sell its branch in CRA-related activities such as lending and ascertainment, and their each community. If the branches are sold, bank branches could, compliance with fair lending laws. In light of the facts discussed in therefore, continue to be operated in Dos Palos and Firebaugh. In the detail in the Westamerica Order, the Board concluded that consider- event that the branches are not sold, but instead are closed by the ations relating to the convenience and needs of the community, institution, the closing would be reviewed under section 42 by the including the CRA performance records of Westamerica Bank and institution's primary federal supervisor, the Office of the Comptroller ValliWide Bank, were consistent with approval for all the reasons, of the Currency. Dos Palos is nine miles from Firebaugh, and the which are incorporated herein. record indicates that residents in this rural area of California are likely Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

616 Federal Reserve Bulletin • July 1997 remain in Mendota, an on-site inspection conducted by the The Bank Merger Act also requires the Board to con- Reserve Bank indicates a substantial degree of economic sider the financial and managerial resources and future integration between the communities of Mendota and Fire- prospects of the existing and proposed institutions. The baugh, which are located within eight miles of each other Board notes that the proposal represents a corporate reorgain a rural area in which residents travel to obtain necessary nization for Westamerica and its subsidiaries, which would services. As noted, Firebaugh is currently served by one result in a more efficient organization and does not involve insured depository institution located in the community, an expenditure of additional resources. Based on all the and another insured depository institution has filed with the facts of record, the Board concludes that all supervisory Superintendent its intent to establish a branch in that com- factors under the Bank Merger Act are consistent with munity. approval. The Board also concludes that all factors re- The Board also has considered confidential financial quired to be considered under the Federal Reserve Act are information provided by Westamerica regarding the profit- consistent with approval." ability of the branches proposed to be closed. These data show that these ValliWide Bank branches have been un- Conclusion profitable for several years. The Board has carefully considered the proposed closing Based on the foregoing and all the facts of record, the of each of these branches in light of these and all the other Board has determined that these applications should be,12 facts of record including concerns that residents will, in and hereby are, approved.13 The Board's approval of this some cases, have to travel a greater distance for banking proposal is conditioned on compliance by Westamerica services if certain ValliWide Bank branches are closed. Bank with the commitments made in connection with this The Board believes that the CRA performance record of proposal. For purposes of this action, the commitments and Westamerica Bank and ValliWide Bank, the programs conditions relied on in reaching this decision are both Westamerica proposes to offer through the merged institution, the availability of banking services from other insured depository institutions, the unprofitability of the branches, other benefits offered by the merger, and the other facts 11. Commenters also contend that the closure of certain branches indicate that, on the whole, the convenience and needs of would increase unemployment in the local economy or possibly raise the community weigh in favor of approval of this proposal. crime due to the availability of cash in homes and businesses. The commenters provide no evidence that the proposed branch closing would have any effect on the crime rate in communities, and, as Other Factors indicated above, branches of other insured depository institutions would remain in many of the relevant communities. The Bank Merger The Bank Merger Act provides that the Board may not Act specifically enumerates the factors the Board may consider in approve an application if the effect of the acquisition of reviewing a proposal under that Act. These factors relate to the effect of the proposal on competition, the financial and managerial resources another bank is to substantially lessen competition in any of the institutions involved, certain supervisory factors, and the convesection of the country unless the Board finds that the nience and needs of the communities served by the institutions inanticompetitive effects of the proposal are clearly out- volved. The effect of the proposed acquisition on employment is not weighed in the public interest by the probable effect of the among the factors the Board is to consider under the Bank Merger proposal in meeting the convenience and needs of the Act. community.9 The proposal represents a reorganization of 12. Commenters have requested that the Board delay action until other insured depository institutions are identified that can compete Westamerica's existing banking operations. Based on all with, or replace, the ValliWide Bank branches that would be closed. the facts of record, consummation of the proposal would As discussed above, the Board has carefully reviewed the record in not have any significantly adverse effects on competition or this case; and, based on all the facts of record, including the Commentconcentration of banking resources in any relevant banking er's submissions, reports of examination, and Westamerica's remarket.10 sponses, the Board concludes that the record is sufficient to act on this proposal at this time. 13. Commenters have requested a hearing on the proposal. The Board is not required under the Bank Merger Act or the Federal to drive reasonable distances to obtain services. Accordingly, if the Reserve Act to hold a public hearing or meeting in this case. Under its branches are not sold to another depository institution, the residents of rules, the Board may, in its discretion, hold a public hearing or Dos Palos could still have reasonable access to an insured depository meeting on an application to clarify factual issues related to the institution in Firebaugh. application and to provide an opportunity for testimony, if appropri- 9. 12U.S.C. § 1828(c)(5)(B). ate. The Board has carefully considered the request for a hearing. In 10. One commenter maintains that the proposal would reduce the the Board's view, interested parties have had a sufficient opportunity number of competitors and thereby substantially lessen competition in to present written submissions, and have submitted substantial written the areas where the branches proposed to be closed are located. In comments that have been considered by the Board. The request fails reviewing the competitive effects of the proposal, the Board notes that to show why a written presentation would not suffice in lieu of a this merger would not cause Westamerica to increase its market share hearing, identifying specifically any questions of fact that are in in any relevant banking market, and represents a reorganization of dispute, and summarizing what evidence would be presented at a Westamerica's existing subsidiaries. In addition, there is no evidence hearing. See 12 C.F.R. 262.3(e). On the basis of all the facts of record, that the branch closures are the result of agreements or understandings the Board has determined that a public meeting or hearing is not by market participants to increase their market share. The branches to necessary to clarify the factual record in these applications, or otherbe closed, moreover, are unprofitable, and may have been closed wise warranted in this case. Accordingly, the request for a public regardless of the proposed merger. meeting or hearing on these applications is hereby denied. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 617 conditions imposed in writing by the Board and. as such, ORDERS ISSUED UNDER INTERNATIONAL BANKING ACT may be enforced in proceedings under applicable law. The merger of Westamerica Bank and ValliWide Bank Agricultural Bank of China may not be consummated before the fifteenth calendar day Beijing, People's Republic of China following the effective date of this order, and the proposal may not be consummated later than three months after the Order Approving Establishment of a Representative effective date of this order, unless such period is extended Office by the Board or by the Federal Reserve Bank of San Francisco, acting pursuant to delegated authority. By order of the Board of Governors, effective May 27, Agricultural Bank of China ("Bank"), Beijing, People's 1997. Republic of China ("China"), a foreign bank within the meaning of the International Banking Act ("IBA"), has Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and applied under section 10(a) of the IBA (12U.S.C. Governors Kelley, Phillips, and Meyer. § 3107(a)) to establish a representative office in New York, New York. The Foreign Bank Supervision Enhancement WILLIAM W. WILES Act of 1991, which amended the IBA, provides that a Secretary of the Board foreign bank must obtain the approval of the Board to establish a representative office in the United States. Notice of the application, affording interested persons an opportunity to comment, has been published in a newspa- APPENDIX per of general circulation in New York (The New York Times, January 6, 1997). The time for filing comments has Branch Offices of Valliwide Bank to be established by expired, and the Board has considered the application and Westamerica Bank all comments received. Bank is the second largest of the four specialized banks 1255 Grand Avenue, Arroyo Grande, California 93420 in China and is wholly owned by the Chinese government. 540 Wall Street, Auburn, California 95603 As of December 31,1996, Bank had total assets of approx- 1810 Chester Avenue, Bakersrield, California 93302 imately $177 billion. Bank operates numerous offices and 101 Main Street, Buttonwillow, California 93026 owns two subsidiaries in China. Outside China, Bank oper- 1835 Shaw Avenue, Clovis, California 93612 ates branches in Singapore and Hong Kong and representa- 1172 E. Shaw Avenue, Fresno, California 93755 tive offices in London, England, and Tokyo, Japan. 790 W. Shaw Avenue, Fresno, California 93755 Until recently, one of Bank's primary activities was 1315 Van Ness Avenue, Fresno, California 93721 receiving funds from China's federal, regional, and local 3006 W. Bullard Avenue, Fresno, California 93711 authorities and other sources and lending such funds to 10375 Brunswick Boulevard, Grass Valley, California support the development of agricultural and rural industrial 95645 production and expand the circulation of commodities. In 400 N. Irwin Street, Hanford, California 93230 connection with ongoing efforts to modernize the financial 36582 Dinero Way, Huron, California 93234 system, however. Bank now engages in more traditional 215 S. Madera Road, Kerman, California 93630 commercial banking activities. 27 Big Blue Road, Kernville, California 93283 The activities of Bank's proposed representative office 1400 Draper Street, Kingsburg, California 92631 would include marketing, research, and liaison activities. 6100 Lake Isabella Road, Lake Isabella, California 93240 In addition, the representative office would engage in cer- 401 W. Yosemite Avenue, Madera, California 93637 tain loan solicitation and servicing activities. All decisions 1666 'N' Street, Merced, California 95341 regarding loans would be made by Bank's head office and 310 Morro Bay Boulevard, Morro Bay, California 93442 the representative office would not receive or handle any 126 W. F Street, Oakdale, California 95361 funds in connection with its loan servicing activities. 1204 Spring Street, Paso Robles, California 93446 In acting on an application to establish a representative 2893 Sunrise Boulevard, Rancho Cordova, California office, the IBA and Regulation K provide that the Board 95742 shall take into account whether the foreign bank engages 545 Higuera Street. San Luis Obispo, California 93401 directly in the business of banking outside of the United 1601 Seventh Street, Sanger, California 93657 States and has furnished to the Board the information it 3700 McCall Avenue. Senna, California 93662 needs to assess the application adequately. The Board also 600 James Street, Shafter, California 93263 shall take into account whether the foreign bank and any 172 W. Stockton Rd., Sonora. California 95370 foreign bank parent is subject to comprehensive supervi- 14729 Mono Way, Sonora, California 95370 sion or regulation on a consolidated basis by its home 811 Center Street, Taft, California 93283 country supervisor (12U.S.C. § 31O7(a)(2); 12C.F.R. 255 E. King Avenue, Tulare, California 93274 211.24(d)). The Board may also take into account addi- 701 W. Main Street, Visalia, California 93291 tional standards as set forth in the IBA (12 U.S.C. 100 W. Court Street, Woodland, California 95695 § 3105(d)(3)-(4)) and Regulation K (12 C.F.R. 21 l.24(c)). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

618 Federal Reserve Bulletin • July 1997 The Board previously has stated that the standards that tion K (see 12U.S.C. § 3105(d)(3)-(4); 12C.F.R. apply to the establishment of a branch or agency need not 211.24(c)(2)). As noted above, the PBOC has authorized in every case apply to the establishment of a representative Bank to establish the proposed representative office. office, because representative offices do not engage in a Taking into consideration Bank's record of operations in banking business and cannot take deposits or make loans.1 its home country, its overall financial resources, and its In evaluating an application to establish a representative standing with its home country supervisors, the Board also office under the IBA and Regulation K, the Board will take has determined that financial and managerial factors are into account the standards that apply to the establishment consistent with approval of the proposed representative of branches and agencies, subject generally to the follow- office.4 Bank appears to have the experience and capacity ing considerations. With respect to supervision by home to support the proposed representative office and also has country authorities, a foreign bank that proposes to estab- established controls and procedures for the proposed reprelish a representative office should be subject to a significant sentative office to ensure compliance with U.S. law. degree of supervision by its home country supervisor.2 A Finally, with respect to access to information on Bank's foreign bank's financial and managerial resources will be operations, the Board has reviewed the relevant provisions reviewed to determine whether its financial condition and of law in China and has communicated with appropriate performance demonstrate that it is capable of complying government authorities regarding access to information. with applicable laws and has an operating record that Bank has committed to make available to the Board such would be consistent with the establishment of a representainformation on the operations of Bank and any of its tive office in the United States. Finally, all foreign banks, affiliates that the Board deems necessary to determine and whether operating through branches, agencies or represenenforce compliance with the IBA, the Bank Holding Comtative offices, will be required to provide adequate assurpany Act of 1956, as amended, and other applicable federal ances of access to information on the operations of the law. To the extent that the provision of such information to bank and its affiliates necessary to determine compliance the Board may be prohibited or impeded by law, Bank has with U.S. laws. committed to cooperate with the Board to obtain any necessary consents or waivers that might be required from The Board has considered the following information third parties in connection with disclosure of such informawith respect to home country supervision of Bank. The tion. In addition, subject to certain conditions, the PBOC People's Bank of China (the "PBOC") is the licensing, may share information on Bank's operations with other regulatory, and supervisory authority for banks and all supervisors, including the Board. In light of the commitother financial institutions in China and, as such, is the ments provided by Bank and other facts of record, and home country supervisor of Bank. The PBOC, which has subject to the condition described below, the Board conauthorized Bank to establish the proposed representative cludes that Bank has provided adequate assurances of office, supervises the foreign and domestic activities of access to any necessary information the Board may re- Bank and its subsidiaries. The Board previously has deterquest. mined, in connection with an application involving another bank from China, the Industrial and Commercial Bank of On the basis of all the facts of record, and subject to the China ("1CBC"), that ICBC was subject to a significant commitments made by Bank, as well as the terms and degree of supervision by the PBOC The Board has deter- conditions set forth in this order, the Board has determined mined that Bank is supervised by the PBOC on substan- that Bank's application to establish a representative office tially the same terms and conditions as ICBC. Based on all should be, and hereby is, approved. Should any restrictions the facts of record, the Board concludes that factors relat- on access to information on the operations or activities of ing to the supervision of Bank by its home country supervi- Bank or any of its affiliates subsequently interfere with the sor are consistent with approval of the proposed representa- Board's ability to determine the compliance by Bank or its tive office. affiliates with applicable federal statutes, the Board may The Board also has determined that, for purposes of the require termination of any of Bank's direct or indirect IBA and Regulation K, Bank engages directly in the busi- activities in the United States. Approval of the application ness of banking outside of the United States through its is also specifically conditioned on compliance by Bank operations in China. Bank has provided the Board with the information necessary to assess the application through submissions that address relevant issues. The Board also has taken into account the additional standards set forth in section 7 of the IBA and Regula- 1. Sec Federal Register 6348, 6351 (1993). 4. One comment was received from Delta Tanning Corporation. 2. See Citizens National Bank, 79 Federal Reserve Bulletin 805 North Bergen, New Jersey. The Board has reviewed the information (1993). submitted, which involves a commercial dispute with Bank, and 3. See Industrial and Commercial Bank of China, 83 Federal determined that the information does not warrant denial of the applica- Reserve Bulletin 212 (1997). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 619 with the commitments made in connection with the appli- decision, and may be enforced in proceedings under cation and with the conditions in this order.5 The commit- 12 U.S.C. § 1818 against Bank and its affiliates. ments and conditions referred to above are conditions By order of the Board of Governors, effective May 14, imposed in writing by the Board in connection with its 1997. Voting for this action: Vice Chair Rivlin and Governors Kelley, Meyer, and Phillips. Absent and nol voting: Chairman Greenspan. JENNIFER J. JOHNSON Deputy Secretary of the Board 5. The Board's authority to approve the establishment of the proposed representative office parallels the continuing authority of the State of New York to license offices of a foreign bank. The Board's Department (the "Department"), to license the proposed representaapproval of this application does not supplant the authority of the tive office of Bank in accordance with any terms or conditions that the State of New York and its agent, the New York State Banking Department may impose. INDEX OF ORDERS ISSUED OR ACTIONS TAKEN BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (JANUARY 1,1997-MARCH 31,1997) Bulletin Volume Applicant Merged or Acquired Bank or Activity Date of Approval and Page AMCORE Financial, Inc., First National Bancorp, Inc., March 17, 1997 83, 429 Rockford, Illinois Monroe, Wisconsin First National Bank & Trust, Monroe, Wisconsin Bane One Corporation, Bane One Capital Corporation, March 24, 1997 83, 439 Columbus. Ohio Columbus, Ohio The Bank, of New York Company, Inc.. BNY Capital Markets, Inc., February 12, 1997 83, 323 New York, New York New York, New York Bank of Taiwan, First Commercial Bank, February 24, 1997 83, 314 Taipei, Taiwan Taipei, Taiwan FCB Taiwan California Bank, Alhambra, California Canadian Imperial Bank, of Commerce, CIBC Investment Corporation, February 18, 1997 83, 324 Toronto, Ontario, Canada New York, New York First Alamogordo Bancorp of Nevada, First Alamogordo Bancorp, Inc., March 24, 1997 83, 432 Inc., Alamogordo, New Mexico Alamogordo. New Mexico First National Bank of Alamogordo, Alamogordo, Alamogordo, New Mexico First National Bank of Ruidoso, Ruidoso, New Mexico First Commercial Bank, FCB Taiwan California Bank, February 24, 1997 83,315 Taipei, Taiwan Alhambra, California HSBC Holdings PLC, CTUS, Inc., February 3, 1997 83, 326 London, United Kingdom Wilmington, Delaware HSBC Holdings BV, First Federal Savings and Loan Amsterdam, The Netherlands Association of Rochester. HSBC Americas, Inc., Rochester, New York Buffalo, New York Industrial and Commercial Bank of To establish a representative office in January 27, 1997 83, 212 China, New York, New York Beijing, People's Republic of China Land Bank of Taiwan, To establish a state-licensed branch in February 24, 1997 83, 336 Taipei. Taiwan Los Angeles, California Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

620 Federal Reserve Bulletin • July 1997 Continued—Index of Orders Issued Bulletin Volume Applicant Merged or Acquired Bank or Activity Date of Approval and Page Marine Midland Bank, First Federal Savings and Loan February 3, 1997 83, 326 Buffalo, New York Association of Rochester, Rochester. New York Norwest Corporation. Central Bancorporation, Inc., January 13, 1997 83, 209 Minneapolis, Minnesota Fort Worth, Texas Central Bank and Trust Company, Fort Worth, Texas Pontotoc BancShares Corp.. First National Bank, of Pontotoc, March 3, 1997 83, 434 Pontotoc, Mississippi Pontotoc. Mississippi Royal Bank of Canada. To establish a representative office in March 31, 1997 83, 442 Montreal, Quebec, Canada Houston, Texas Stichting Prioriteit ABN AMRO Holding, Citicorp Futures Corporation, March 19. 1997 83, 441 Amsterdam, The Netherlands New York, New York Stichting Administratiekantoor ABN CitiFutures Limited, AMRO Holding, London, England Amsterdam, The Netherlands Citicorp Futures Limited, ABN AMRO Holding N.V., Singapore, China Amsterdam. The Netherlands ABN AMRO Bank N.V., Amsterdam, The Netherlands Susquehanna Bancshares, Inc., Atcorp, Inc., February 3, 1997 83, 317 Lititz, Pennsylvania Marlton, New Jersey Equity National Bank, Atco, New Jersey Farmers Bane Corp., Mullica Hill, New Jersey Farmers National Bank, Mullica Hill, New Jersey Swiss Bank Corporation, To establish a state-licensed branch in January 21, 1997 83, 214 Basle, Switzerland Stamford, Connecticut The Toronto-Dominion Bank, Marketware International. Inc., February 18, 1997 83, 335 Toronto, Ontario, Canada Holmdel, New Jersey Waterhouse Investor Services, Inc.. New York, New York Union Planters Corporation, First National Bank. February 24, 1997 83, 320 Memphis, Tennessee Pontotoc, Mississippi Westamerica Bancorporation, Vallicorp Holdings, Inc., March 19, 1997 83, 435 San Rafael, California Fresno, California Valliwide Bank, Fresno, California Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 621 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 Bancorp Hawaii, Inc.. CU Bancorp. May 13, 1997 Honolulu, Hawaii Encino, California California United Bank. Encino. California Citizens Banking Corporation. CB Financial Corporation, May 16. 1997 Flint, Michigan lackson, Michigan City Bank and Trust Company, Jackson, Michigan City Bank, St Johns, Michigan CB-North, Charlevoix, Michigan Compass Bancshares, Inc., Central Texas Bancorp, Inc., May 21, 1997 Birmingham, Alabama Waco, Texas Compass Banks of Texas, Inc., Texas National Bank of Waco, Birmingham, Alabama Waco. Texas Compass Bancorporation of Texas, Inc.. Wilmington. Delaware Eggemeyer Advisory Corp., California Commercial Bankshares, May 16, 1997 San Diego, California Newport Beach, California Castle Creek Capital, L.L.C., National Bank of Southern California, San Diego, California Newport Beach, California Castle Creek Partners Fund - I, L.P., San Diego, California Monarch Bancorp. Laguna Nigel, California First Security Corporation, American Bancorp of Nevada, Inc., May 30. 1997 Salt Lake City, Utah Las Vegas, Nevada Whipple Family Limited Partnership, Horizon Bancorp, Inc., May 30. 1997 Arkadelphia, Arkansas Arkadelphia, Arkansas 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 Adams Bancshares, Inc., Employee Adams Bancshares, Inc., Minneapolis April 29, 1997 Stock Ownership Plan with Adams. Minnesota 401 (k) Provision, Adams, Minnesota Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

622 Federal Reserve Bulletin • July 1997 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date BanPonce Corporation, CBC Bancorp, Ltd., New York April 25, 1997 Hato Rey, Puerto Rico Chicago, Illinois Popular International Bank, Inc., Hato Rey, Puerto Rico BanPonce Financial Corp., Wilmington, Delaware BanPonce Corporation, National Bancorp, Inc., New York April 25, 1997 Hato Rey, Puerto Rico Streamwood, Illinois Popular International Bank, Inc., AmericanMidwest Bank and Trust, Hato Rey, Puerto Rico Melrose Park, Illinois BanPonce Financial Corp., Wilmington, Delaware BNB Bancorp, Inc., Brookville National Bank, Clevelnd May 15, 1997 Brookville, Ohio Brookville, Ohio BonState Bancshares, Inc., Bonham Financial Services, Inc., Dallas May 1, 1997 Bonham, Texas Dover, Delaware Bonham State Bank, Bohnam, Texas Bonham Financial Services, Inc.. Bonham State Bank, Dallas May 1, 1997 Dover, Delaware Bonham, Texas Castle Creek Capital Partners Castle Creek Capital. L.L.C., San Francisco May 5, 1997 Fund-I, L.P., San Diego, California San Diego, California Eggemeyer Advisory Corporation, San Diego, California Rancho Santa Fe National Bank, Rancho Santa Fe, California Central Bancompany, Inc., Warrensburg Bancshares, Inc., St. Louis May 13, 1997 Jefferson City, Missouri Warrensburg, Missouri Bank of Warrensburg, Warrensburg, Missouri CH and JD Byrum, L.L.C., American State Corporation, Chicago April 23, 1997 Indianapolis, Indiana Lawrenceburg, Indiana American State Bank, Lawrenceburg, Indiana Citizens Bancorp, Citizens Bank, San Francisco May 16, 1997 Corvallis, Oregon Corvallis, Oregon The Colonial BancGroup, Inc., Great Southern Bancorp, Atlanta May 21, 1997 Montgomery, Alabama West Palm Beach, Florida First Commercial Banks of Florida, Inc., Winter Haven, Florida Commercial Bancshares, Inc., Commercial Bank, Clevelnd April 15, 1997 West Liberty, Kentucky West Liberty, Kentucky Commercial Bancshares Savings and Commercial Bancshares, Inc., Clevelnd April 15, 1997 Employee Stock Ownership Plan, West Liberty, Kentucky West Liberty, Kentucky Concordia Capital Corporation, Concordia Bank & Trust Company, Dallas May 14, 1997 Vidalia, Louisiana Vidalia, Louisiana Conrad Company, National Mercantile Bank, Minneapolis May 16, 1997 Minneapolis, Minnesota Los Angeles, California Country Bancorporation, Hiawatha Bank and Trust Company, Chicago May 15, 1997 Crawfordsville, Iowa Hiawatha, Iowa Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 623 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Covenant Bancorp, Inc., Covenant Bank, Philadelphia May 2, 1997 Haddonfield, New Jersey Haddonfield, New Jersey Cumberland Bancorp, Inc., Bank of Mason, Atlanta April 29, 1997 Carthage, Tennessee Mason, Tennessee Eden Financial Corporation, The First State Bank of Rankin, Dallas April 25, 1997 San Angelo. Texas Rankin, Texas First Coastal Bancshares. First Coastal Bank, N.A., San Francisco May 5, 1997 El Segundo, California El Segundo, California First Commercial Corporation, First Central Corporation, St. Louis May 14, 1997 Little Rock, Arkansas Searcy, Arkansas First National Bank, Searcy. Arkansas First National Security Company, First National Bancshares of Hempstead St. Louis May 9, 1997 DeQueen, Arkansas County, Inc., Hope, Arkansas First Robinson Financial First Robinson Savings and Loan, F.A., St. Louis May 22, 1997 Corporation, Robinson, Illinois Robinson, Illinois First Robinson Savings Bank, National Association, Robinson, Illinois First Security Corporation Employee First Security Corporation, Atlanta May 16, 1997 Stock Ownership Plan, Norcross, Georgia Norcross, Georgia Florida Bancshares, Inc., First National Bank of Pasco, Atlanta May 2, 1997 Dade City, Florida Dade City, Florida F & M Bancorporation, Inc., Citizen's National Bancorporation, Inc., Chicago May 15, 1997 Kaukauna, Wisconsin Darlington, Wisconsin F & M Merger Corporation, Citizen's National Bank of Darlington, Kaukauna, Wisconsin Darlington, Wisconsin F & M Bancorporation, Inc., Wisconsin Ban Corp, Chicago May 15, 1997 Kaukauna, Wisconsin Prairie Du Chien, Wisconsin F & M Merger Corporation, Prairie City Bank, Kaukauna, Wisconsin Prairie Du Chien, Wisconsin GBC Bancorp, Inc., Gwinnett Banking Company, Atlanta May 2, 1997 Lawrenceville, Georgia Lawrenceville, Georgia Hawkins Financial Corporation, The First State Bank of Hawkins, Dallas May 21, 1997 Hawkins, Texas Hawkins, Texas Hawkins Delaware Financial Corporation, Wilmington, Delaware Kremlin Bancshares, Inc., Bank of Kremlin, Kansas City May 6, 1997 Kremlin, Oklahoma Kremlin, Oklahoma Medina Bankshares. Inc., Medina Financial, Inc., Dallas May 22, 1997 D'Hanis. Texas Carson City, Nevada D'Hanis State Bank, D'Hanis, Texas Medina Financial, Inc., D'Hanis State Bank, Dallas May 22, 1997 Carson City, Nevada D'Hanis, Texas Northeast Kansas Bancshares, Inc., Valley Falls Insurance, Inc., Kansas City May 16, 1997 Valley Falls, Kansas Valley Falls, Kansas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

624 Federal Reserve Bulletin • July 1997 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Norwest Corporation, The First National Bankshares, Inc., Minneapolis May 21, 1997 Minneapolis, Minnesota Tucumcari, New Mexico The First National Bank of Tucumcari, Tucumcari, New Mexico Parkway Bancorp, Inc., Jefferson Holding Corp., Chicago April 23, 1997 Harwood Heights, Illinois Chicago, Illinois Jefferson State Bank, Chicago, Illinois Penns Woods Bancorp. Inc., Columbia Financial Corporation, Philadelphia May 2, 1997 Williamsport, Pennsylvania Bloomsburg, Pennsylvania Pierce County Bancorp, Pierce Commercial Bank. San Francisco April 24, 1997 Tacoma, Washington Tacoma, Washington Pinnacle Bancorp, Inc., First Ogallala Investment. Inc., Kansas City May 5, 1997 Central City, Nebraska Ogallala, Nebraska Pinnacle Bancshares, Inc., McDuffie Bank & Trust, Atlanta May 8, 1997 Thomson, Georgia Thomson, Georgia Poteau Bancshares, Inc., First Poteau Corporation, Kansas City May 21, 1997 Poteau, Oklahoma Poteau, Oklahoma Poteau State Bank, Poteau, Oklahoma Regions Financial Corporation, First Bankshares, Inc., Atlanta May 8, 1997 Birmingham, Alabama East Point, Georgia First Bank of Georgia, East Point, Georgia Regions Financial Corporation, The New Iberia Bancorp, Inc., Atlanta May 14, 1997 Birmingham, Alabama New Iberia, Louisiana The New Iberia Bank, New Iberia, Louisiana Regions Financial Corporation, First Mercantile National Bank, Atlanta April 30, 1997 Birmingham, Alabama Longwood, Florida Regions Financial Corporation, SB&T Corporation, Birmingham, Alabama Smyrna, Georgia Atlanta May 8, 1997 Smyrna Bank & Trust Company, Smyrna, Georgia Sankovitz Family Limited Frankson Investment Corporation, Partnership, Waseca, Minnesota Minneapolis May 8, 1997 Waseca, Minnesota Bank of Ellendale, Ellendale, Minnesota Southeast Bancorp, Inc., First Bank of East Tennessee, NA, Corbin, Kentucky La Follette, Tennessee Clevelnd May 7, 1977 The Union Illinois 1995 Investment Union Illinois Company, Limited Partnership, Swansea, Illinois St. Louis May 13, 1997 Swansea, Illinois West Point Bancorp, Inc., Dakota Bancshares, Inc., Kansas City May 5, 1997 West Point, Nebraska West Point, Nebraska Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 625 Section 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Carolina First Corporation. Net.B@nk, Inc., Richmond April 30, 1997 Greenville, South Carolina Roswell, Georgia Atlanta Internet Bank, Marietta, Georgia Community Trust Financial Services Cash Transactions, L.L.C., Atlanta May 16, 1997 Corporation, Hiram, Georgia Hiram, Georgia Deutsche Bank AG, Ganis Credit Corporation, New York May 16, 1997 Frankfurt, Germany Newport Beach, California Deutsche Financial Services Corporation, St. Louis. Missouri First Citizens Bancorp, The Home Bank, F.S.B., Atlanta May 2, 1997 Cleveland, Tennessee Ducktown, Tennessee The Home Bank, Ducktown, Tennessee Firstrust Corporation, Automated Technology Machines, Inc., Atlanta May 21, 1997 New Orleans, Louisiana New Orleans. Louisiana Fishback Financial Corporation, To engage de nova in lending activities Minneapolis May 21, 1997 Brookings, South Dakota Mellon Bank Corporation, Boatmen's Trust Company. Cleveland April 24, 1997 Pittsburgh, Pennsylvania St. Louis, Missouri ChaseMellon, L.L.C., Ridgefield Park, New Jersey Norwest Corporation, Ohio Executive Mortgage Company. Minneapolis May 13, 1997 Minneapolis, Minnesota Mansfield, Ohio Norwesl Corporation, Trinity Mortgage Affiliates, Minneapolis May 13, 1997 Minneapolis, Minnesota Atlanta, Georgia Norwest Corporation, Trinity Mortgage Company, Minneapolis May 14, 1997 Minneapolis, Minnesota Cedar Rapids, Iowa Southern National Corporation, Phillips Factors Corporation, Richmond May 7, 1997 Winston-Salem, North Carolina High Point, North Carolina Phillips Financial Corporation, High Point, North Carolina United Community Banks, United Family Finance, Atlanta May 2, 1997 Blairsville, Georgia Blue Ridge, Georgia Vermont Financial Services Corp., Eastern Bancorp, Inc., Boston April 30, 1997 Brattleboro, Vermont Dover, New Hampshire Vermont Federal Bank, FSB, Williston, Vermont Sections 3 and 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date First Bank System, Inc., First Bank of South Dakota, Minneapolis May 9, 1997 Minneapolis, Minnesota Sioux Falls, South Dakota First Interim Bank of Casper, fsb, Casper, Wyoming First Interim Bank of Cheyenne, fsb, Cheyenne, Wyoming First Virginia Banks, Inc., Premier Bankshares Corporation, Richmond May 8, 1997 Falls Church, Cirginia Bluefield, Virginia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

626 Federal Reserve Bulletin • July 1997 Sections 3 and 4—Continued Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Premier Bancshares, Inc., Central and Southern Holding Atlanta May 21, 1997 Atlanta, Georgia Company, Milledgeville, Georgia Central and Southern Bank of Georgia, Milledgeville, Georgia Central and Southern Bank of North Georgia, Greensboro, Georgia Seacoast Banking Corporation of Port St. Lucie National Bank Holding Atlanta May 14, 1997 Florida, Corporation. Stuart, Florida Port St. Lucie, Florida Port St. Lucie National Bank, Port St. Lucie, Florida Spirit Mortgage Corporation, Port St. Lucie, Florida Tehama Bancorp, Tehama Bank, San Francisco May 15, 1997 Red Bluff, California Red Bluff, California Bancorp Financial Services, Inc., Sacramento, California 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 Citizens Bank, City Bank and Trust Company, May 16, 1997 Flint, Michigan Jackson, Michigan City Bank. St. Johns, Michigan CB-North, Charlevoix, Michigan First Security Bank of Nevada, American Bank of Commerce, May 30, 1997 Las Vegas, Nevada Las Vegas, Nevada Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 627 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 Bank of White Sulphur Springs, Bank of Marlinton, Richmond April 28. 1997 White Sulphur Springs, West Marlinton, West Virginia Virginia Colonial Bank, Colonial Bank, Atlanta May 14, 1997 Montgomery, Alabama Ardmore, Tennessee Colonial Bank, Lawrenceville, Georgia Colonial Bank, Orlando, Florida Colonial Bank, Great Southern Bank, Atlanta May 21, 1997 Montgomery, Alabama West Palm Beach, Florida First Commerce Bank of Polk County, Winter Haven, Florida Consolidated Bank and Trust First Union National Bank of Virginia, Richmond May 22, 1997 Company, Roanoke, Virginia Richmond, Virginia Dacotah Bank, Dacotah Bank, Minneapolis May 5, 1997 Aberdeen, South Dakota Clark, South Dakota Dacotah Bank, Faulkton, South Dakota Dacotah Bank, Lemmon, South Dakota Dacotah Bank, Mobridge, South Dakota Dacotah Bank, Webster, South Dakota First Interstate Bank of Commerce, First Interstate Bank of Montana, N.A.. Minneapolis May 14, 1997 Billings, Montana Kalispell, Montana Mountain Bank, Whitefish, Montana First Virginia Bank-Southwest, First Virginia Bank - Highlands, Richmond May 5, 1997 Roanoke, Virginia Covington, Virginia The George Mason Bank, George Mason Bank, Richmond May 7, 1997 Fairfax, Virginia National Association, Bethesda, Maryland Huron Community Bank, Citizens Bank, Chicago May 16, 1997 East Tawas, Michigan Flint, Michigan Johnstown Bank and Trust National City Bank of Pennsylvania, Philadelphia May 9, 1997 Company, Pittsburgh, Pennsylvania Johnstown, Pennsylvania M&I Bank of Janesville, M&I Bank of Beloit, Chicago May 2, 1997 Janesville, Wisconsin Beloit, Wisconsin M&I Bank of Delavan, Delavan, Wisconsin M&I Madison Bank, M&I Bank Southwest, Chicago April 28, 1997 Madison, Wisconsin Spring Green, Wisconsin Minden Bank & Trust Company, First Federal Savings Bank, Dallas April 29, 1997 Minden, Louisiana Shreveport, Louisiana Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

628 Federal Reserve Bulletin • July 1997 Federal Reserve Banks—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Old Kent Bank, The Algonac Savings Bank, Chicago April 24, 1997 Grand Rapids, Michigan Algonac, Michigan The Commercial and Savings Bank of St. Clair County, St. Clair, Michigan Security Savings Bank. Boone Bank & Trust Company. Chicago May 14, 1997 Gowrie, Iowa Boone, Iowa PENDING CASES INVOLVING THE BOARD OF September 11, 1996, prohibiting John K. Snyder and GOVERNORS Donald E. Hedrick from further participation in the banking industry. On May 8, 1997, the court of appeals granted the This list of pending cases does not include suits against the Board's motion to dismiss the petition. Petitioners filed a Federal Reserve Banks in which the Board of Governors is not petition for rehearing or rehearing en bane on May 15, named a party. 1997. American Bankers Insurance Group, Inc. v. Board of Governors, No. 96-CV-2383-EGS (D.D.C., filed October 16, Vickery v. Board of Governors, No. 97-1344 (D.C. Cir., filed 1996). Action seeking declaratory and injunctive relief in- May 9, 1997). Petition for review of a Board order dated validating a new regulation issued by the Board under the April 14, 1997, prohibiting Charles R. Vickery, Jr., from Truth in Lending Act relating to treatment of fees for debt further participation in the banking industry. cancellation agreements. On October 18, 1996, the district Wilkins v. Board of Governors, No. 3:97CV331 (E.D. Va., court denied plaintiffs' motion for a temporary restraining filed May 2, 1997). Customer dispute with bank. order. On January 17, 1997, the parties filed cross-motions Pharaon v. Board of Governors, No. 97-1114 (D.C. Cir., filed for summary judgment. February 28, 1997). Petition for review of a Board order Clifford v. Board of Governors, No. 96-1342 (D.C. Cir., filed dated January 31, 1997, imposing civil money penalties and September 17, 1996). Petition for review of Board order an order of prohibition for violations of the Bank Holding dated August 21, 1996, denying petitioners' motion to Company Act. dismiss an enforcement action against them. On May 6, Research Triangle Institute v. Board of Governors, No. 97- 1997, the court of appeals granted the Board's motion to 1282 (4th Cir., filed February 24, 1997). Appeal of district dismiss the petition. court's dismissal of contract claim. Artis v. Greenspan, No. 96-CV-02105 (D. D.C, filed Septem- Jones v. Board of Governors, No. CV97-O198 (W.D. Louisiber 11, 1996). Class complaint alleging race discrimination ana, filed January 30, 1997). Complaint alleging violations in employment. On December 20. 1996, the Board moved of the Fair Housing Act. to dismiss the action. The New Mexico Alliance v. Board of Governors, No. 96- Leuthe v. Board of Governors, No. 96-5725 (E.D. Pa., filed 9552 (10th Cir., filed December 24, 1996). Petition for August 16, 1996). Action against the Board and other review of a Board order dated December 16, 1996, approv- Federal banking agencies challenging the constitutionality ing the acquisition by NationsBank Corporation and NB of the Office of Financial Institution Adjudication. On Janu- Holdings Corporation, both of Charlotte, North Carolina, of ary 24, 1997, the agencies filed a motion to dismiss the Boatmen's Bancshares, Inc., St. Louis, Missouri. Also on action. December 24, 1996, petitioners moved for an emergency stay of the Board's order. The motion for a stay was denied Long v. Board of Governors, No. 96-9526 (10th Cir., filed by the 10th Circuit on January 3, 1997; on January 6, 1997, July 31, 1996). Petition for review of Board order dated petitioners' application for emergency stay was denied by July 2, 1996, assessing a civil money penalty and cease and the Supreme Court. desist order for violations of the Bank Holding Company Artis v. Greenspan, No. L96CV02619 (D.D.C., filed Novem- Act. Oral argument was heard on May 12, 1997. ber 19, 1996). Employment discrimination action. On Interamericas Investments, Ltd. v. Board of Governors, No. May 30, 1997, the court granted the Board's motion to 96-60326 (5th Cir., filed May 8, 1996). Petition for review dismiss the action. of order imposing civil money penalties and cease and Snyder v. Board of Governors, No. 96-1403 (D.C. Cir., filed desist order in enforcement case. On August 20, 1996, October 23, 1996). Petition for review of Board order dated petitioners' motion for a stay of the Board's orders pending Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 629 judicial review was denied by the Court of Appeals. On FINAL ENFORCEMENT ORDERS ISSUED BY THE BOARD April 16, 1997, the court denied the petition for review. OF GOVERNORS Inner City Press/Community on the Move v. Board of Governors, No. 96-4008 (2nd Cir., filed January 19, 1996). Peti- Toshihiko Araki tion for review of a Board order dated January 5, 1996, Yokohama, Japan approving the applications and notices by Chemical Banking Corporation to merge with The Chase Manhattan Cor- The Federal Reserve Board announced on May 30, 1997, poration, both of New York, New York, and by Chemical the issuance of an Order of Assessment of a Civil Money Bank to merge with The Chase Manhattan Bank, N.A., both Penalty against Toshihiko Araki, an officer and institutionof New York, New York. Petitioners' motion for an emeraffiliated party of the New York Branch of The Bank of gency stay of the transaction was denied following oral Yokohama, Ltd., Yokohama, Japan. argument on March 26, 1996. The Board's brief on the merits was filed July 8, 1996. The case was consolidated for Francisco Moncaleano oral argument and decision with Lee v. Board of Governors, Bogota, Colombia No. 95^-134 (2d Cir.); oral argument was held on January 13, 1997. The Federal Reserve Board announced on May 16, 1997, Lee v. Board of Governors, No. 95^4134 (2nd Cir., filed the issuance of an Order of Prohibition against Francisco August 22, 1995). Petition for review of Board orders dated Moncaleano, a former vice president and institution- July 24, 1995, approving certain steps of a corporate reorga- affiliated party of the Miami agency of Banco Ganadero, nization of U.S. Trust Corporation, New York, New York, S.A., Bogota, Colombia. and the acquisition of U.S. Trust by Chase Manhattan Corporation, New York, New York. On September 12, Michael L. Riddle 1995, the court denied petitioners' motion for an emergency John Averett stay of the Board's orders. The Board's brief was filed on Park Jones April 16, 1996. Oral argument, consolidated with Inner City T. Stuart Ducote PresslCommunity on the Move v. Board of Governors, took Dallas,Texas place on January 13, 1997. Beckman v. Greenspan, No. 95-35473 (9th Cir., filed May 4, The Federal Reserve Board announced on May 22, 1997, 1995). Appeal of dismissal of action against Board and the issuance of consent Orders of Assessment of Civil others seeking damages for alleged violations of constitu- Money Penalties against Michael L. Riddle, John Averett, tional and common law rights. The court of appeals af- Park Jones, and T. Stuart Ducote, former officers and firmed the dismissal on April 12, 1996, and denied the directors of Provident Bancorp of Texas, Inc., Dallas, appellant's request for rehearing on July 15, 1996. Texas, formerly a bank holding company. In re Subpoena Duces Tecum, Misc. No. 95-06 (D.D.C., filed January 6, 1995). Action to enforce subpoena seeking predecisional supervisory documents sought in connection with an action by Bank of New England Corporation's trustee in WRITTEN AGREEMENTS APPROVED BY FEDERAL bankruptcy against the Federal Deposit Insurance Corpora- RESERVE BANKS tion. The Board filed its opposition on January 20, 1995. Oral argument on the motion was held July 14, 1995. Marin National Bancorp Board of Governors v. Pharaon, No. 91-CIV-6250 (S.D. New San Rafael, California York, filed September 17, 1991). Action to freeze assets of individual pending administrative adjudication of civil The Federal Reserve Board announced on May 21, 1997, money penalty assessment by the Board. On September 17, the execution of a Written Agreement by and between 1991, the court issued an order temporarily restraining the Marin National Bancorp, San Rafael, California, and the transfer or disposition of the individual's assets. Federal Reserve Bank of San Francisco. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

631 Combined Financial Statements of the Federal Reserve Banks The financial statements of the Federal Reserve Banks were audited by Coopers & Lybrand, L.L.P., independent public accountants, for the years ended December 31, 1996 and 1995. Coopers Coop«r« & Lybrand L.L.R &Lybrand a professional services firn REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Governors of The Federal Reserve System and the Board of Directors of The Federal Reserve Banks: We have audited the accompanying combined statements of condition of The Federal Reserve Banks (the "Reserve Banks") as of December 31, 1996 and 1995, and the related combined statements of income and changes in capital for the years then ended. These financial statements are the responsibility of the Reserve Banks' management. Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note 3, the combined financial statements were prepared in conformity with the accounting principles, policies, and practices established by the Board of Governors of The Federal Reserve System. These principles, policies, and practices, which were designed to meet the specialized accounting and reporting needs of The Federal Reserve System, are set forth in the Financial Accounting Manual for Federal Reserve Banks and constitute a comprehensive basis of accounting other than generally accepted accounting principles. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of the Reserve Banks as of December 31, 1996 and 1995, and combined results of their operations for the years then ended, on the basis of accounting described in Note 3. Washington, D.C. March 31, 1997 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

632 Federal Reserve Bulletin • July 1997 FEDERAL RESERVE BANKS COMBINED STATEMENTS OF CONDITION December 31, 1996 and 1995 (in millions) ASSETS 1996 1995 Gold certificates $ 11,048 $ 11,050 Special drawing rights certificates 9,718 10,168 Coin 591 425 Items in process of collection 12,761 4,769 Loans to depository institutions 85 135 U.S. government and federal agency securities, net 416,875 396,491 Investments denominated in foreign currencies 19,264 21,099 Accrued interest receivable 3,891 4,101 Bank premises and equipment, net 1,757 1,646 Otherassets 1,309 1,271 Totalassets $477,299 $451,155 LIABILITIES AND CAPITAL LIABILITIES Federal Reserve notes outstanding, net $426,522 $400,935 Deposits Depository institutions 24,524 29,611 U.S. Treasury, general account 7,742 5,979 Other deposits 400 669 Deferred credit items 7,464 4,538 Statutory surplus transfer due U.S. Treasury 660 . . . Interest on Federal Reserve notes due U.S. Treasury ... 650 Accrued benefit cost 712 672 Other liabilities 177 169 Total liabilities 468,201 443,223 CAPITAL Capital paid-in 4,602 3,966 Surplus 4,496 3,966 Totalcapital 9,098 7,932 Total liabilities and capital $477,299 $451,155 The accompanying notes are an integral part of these financial statements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Combined Financial Statements of the Federal Reserve Banks 633 FEDERAL RESERVE BANKS COMBINED STATEMENTS OF INCOME for the years ended December 31, 1996 and 1995 (in millions) 1996 1995 Interest income Interest on U.S. government securities $23,884 $23,826 Interest on foreign currencies 443 784 Interest on loans to depository institutions 1_1 H Total interest income 24,338 24,621 Other operating income Income from services 787 739 Reimbursable services to government agencies 216 221 Foreign currency gains (losses), net (1,668) 1,005 Government securities gains, net 32 6 Other income 60 56 Total other operating income (loss) (573) 2,027 Operating expenses Salaries and other benefits 1,283 1,226 Occupancy expense 177 165 Equipment expense 259 243 Cost of unreimbursed Treasury services 38 38 Assessments by Board of Governors 565 532 Other expenses 468 452 Total operating expenses 2,790 2,656 Income before cumulative effect of accounting changes 20,975 23,992 Cumulative effect of changes in accounting principles _^_^^_ (89) Net income prior to distribution $20,975 $23,903 Distribution of net income Dividends paid to member banks $ 256 $ 231 Transferred to surplus 636 283 Payments to U.S. Treasury as interest on Federal Reserve notes 14,565 23,389 Payments to U.S. Treasury as required by statute 5,518 $20,975 $23,903 The accompanying notes are an integral part of these financial statements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

634 Federal Reserve Bulletin • July 1997 FEDERAL RESERVE BANKS COMBINED STATEMENTS OF CHANGES IN CAPITAL for the years ended December 31, 1996 and 1995 (in millions) Capital Total paid-in iurplus capital Balance at January 1, 1995 (73 million shares) $3,683 $3,683 $7,366 Net income transferred to surplus 283 283 Net change in capital stock issued (6 million shares) 283 283 Balance at December 31, 1995 (79 million shares) $3,966 $3,966 $7,932 Net income transferred to surplus 636 636 Statutory surplus transfer to U.S. Treasury (106) (106) Net change in capital stock issued (13 million shares) 636 636 Balance at December 31, 1996 (92 million shares) $4,602 $4,496 $9,098 The accompanying notes are an integral part of these financial statements. NOTES TO COMBINED FINANCIAL STATEMENTS OF THE FEDERAL RESERVE BANKS, DECEMBER 31, 1996 AND 1995 (1) ORGANIZATION AND BASIS OF PRESENTATION Corporate Structure The twelve Federal Reserve Banks (Reserve Banks) are part of The Reserve Banks serve twelve Federal Reserve Districts nationthe Federal Reserve System (System) created by Congress under wide. In accordance with the Federal Reserve Act, supervision the Federal Reserve Act of 1913 (Federal Reserve Act) which and control of each Reserve Bank is exercised by a Board of established the central bank of the United States. The Reserve Directors chosen partly by nomination and election by member Banks are chartered by the federal government and possess a banks and partly by the Board of Governors. Banks that are unique set of governmental, corporate, and central bank character- members of the System include all national banks and any state istics. Other major elements of the System are the Board of chartered bank that applies and is approved for membership in the Governors of the Federal Reserve System (Board of Governors), System. the Federal Open Market Committee (FOMC), and the Federal Advisory Council. The Reserve Banks are exempt from federal, Board of Directors state, and local taxes except for taxes on real property. Although the Reserve Banks are chartered as independent orga- The Federal Reserve Act specifies the composition of Reserve nizations overseen by the Board of Governors, the Reserve Banks Bank boards of directors. Each board is composed of nine memwork jointly to carry out their statutory responsibilities. The bers serving three-year terms: three directors, including those majority of the assets, liabilities, and income of the Reserve designated as Chairman and Deputy Chairman, are appointed by Banks is derived from central bank activities and responsibilities the Board of Governors and six directors are elected by member with regard to monetary policy and currency. For this reason, the banks. Of the six elected by member banks, three represent the accompanying combined set of financial statements for the twelve public and three represent member banks. Member banks are independent Reserve Banks is prepared, adjusted to eliminate divided into three classes according to size. Member banks in interdistrict accounts and transactions. each class elect one director representing member banks and one Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Combined Financial Statements of the Federal Reserve Banks 635 representing the public. In any election of directors, each member from those estimates. Unique accounts and significant accounting bank receives one vote, regardless of the number of shares of policies are explained below. Reserve Bank stock it holds. (A) Gold Certificates (2) OPERATIONS AND SERVICES The Secretary of the Treasury is authorized to issue gold certificates to the Reserve Banks to monetize gold held by the U.S. The System performs a variety of services and operations. Func- Treasury. Payment for the gold certificates by the Reserve Banks tions include formulating and conducting monetary policy; partici- is made by crediting equivalent amounts in dollars into the pating actively in the payments mechanism, including large-dollar account established for the U.S. Treasury. These gold certificates transfers of funds, automated clearinghouse operations, and check held by the Reserve Banks are required to be backed by the gold processing; distribution of coin and currency; fiscal agency func- of the U.S. Treasury. The U.S. Treasury may reacquire the gold tions for the U.S. Treasury and certain federal agencies; serving as certificates at any time and the Reserve Banks must deliver them the federal government's bank; providing short-term loans to to the U.S. Treasury. At such time, the U.S. Treasury's account is depository institutions; serving the consumer and the community charged and the Reserve Banks' gold certificate account is lowby providing educational materials and information regarding ered. The value of gold for purposes of backing the gold certificonsumer laws; supervising bank holding companies and state cates is set by law at $42% a fine troy ounce. member banks; and administering other regulations of the Board of Governors. The Board of Governors' operating costs are funded (B) Special Drawing Rights Certificates through assessments on the Reserve Banks. Special drawing rights (SDRs) are issued by the International Monetary Fund (the Fund) to its members in proportion to each (3) SIGNIFICANT ACCOUNTING POLICIES member's quota in the Fund at the time of issuance. SDRs serve as a supplement to international monetary reserves and may be Specialized accounting principles for entities with the unique transferred from one national monetary authority to another. powers and responsibilities of the nation's central bank have not Under the law providing for U.S. participation in the SDR system, been formulated by the Financial Accounting Standards Board. the Secretary of the U.S. Treasury is authorized to issue SDR The Board of Governors has developed specialized accounting certificates, somewhat like gold certificates, to the Reserve Banks. principles and practices that it believes are appropriate for the At such time, equivalent amounts in dollars are credited to the significantly different nature and function of a central bank as account established for the U.S. Treasury, and Reserve Banks' compared to the private sector. These accounting principles and SDR certificate account is increased. The Reserve Banks are practices are generally documented in the Financial Accounting required to purchase SDRs, at the direction of the U.S. Treasury, Manual for Federal Reserve Banks (the Financial Accounting for the purpose of financing SDR certificate acquisitions or for Manual), which is published by the Board of Governors. All financing exchange stabilization operations. Reserve Banks are required to adopt and apply accounting policies and practices that are consistent with the Financial Account- (C) Loans to Depository Institutions ing Manual. The financial statements have been prepared in accordance with the Financial Accounting Manual. Differences exist between the policies of the Reserve Banks and generally The Depository Institutions Deregulation and Monetary Control accepted accounting principles (GAAP). The primary differences Act of 1980 provides that all depository institutions that maintain are the presentation of all security holdings at amortized cost reservable transaction accounts or nonpersonal time deposits, as rather than at the fair value presentation requirements of GAAP, defined in Regulation D issued by the Board of Governors, have and the accounting for matched sale-purchase transactions as borrowing privileges at the discretion of the Reserve Banks. separate sales and purchases, rather than secured borrowings with Borrowers execute certain lending agreements and deposit suffipledged collateral, as is required by GAAP. Accounting policies cient collateral before credit is extended. Loans are evaluated for and practices for U.S. government and federal agency securities collectibility, and currently all are considered collectible and fully and investments denominated in foreign currencies are further collateralized. If any loans were deemed to be uncollectible, an described in note 3(D). In addition, the Board of Governors and appropriate reserve would be established. Interest is recorded on the Reserve Banks have elected not to include a Statement of the accrual method and is charged at the discount rate established Cash Flows, as the liquidity and cash position of the Reserve at least every fourteen days by the Boards of Directors of the Banks are not of primary concern to users of these financial Reserve Banks, subject to review by the Board of Governors. statements. However, Reserve Banks retain the option to impose a surcharge above that rate in certain circumstances. Other information regarding the Reserve Banks' activities is provided in. or may be derived from, the Statements of Condition, Income, and Changes in Capital. Therefore, a Statement of Cash (D) U.S. Government and Federal Agency Securities and Flows would not provide any additional useful information. There Investments Denominated in Foreign Currencies are no other significant differences between the policies outlined in the Financial Accounting Manual and GAAP. The preparation The FOMC is composed of members of the Board of Governors, of financial statements in conformity with the Financial Account- the president of the Federal Reserve Bank of New York (FRBNY) ing Manual requires management to make estimates and assump- and, on a rotating basis, four other Reserve Bank presidents. The tions that affect the reported amounts of assets and liabilities and FOMC has designated the FRBNY to execute open market transdisclosure of contingent assets and liabilities at the date of the actions on its behalf and to hold the resulting securities in the financial statements and the reported amounts of income and portfolio known as the System Open Markets Account (SOMA). expenses during the reporting period. Actual results could differ The FOMC establishes policy regarding open market operations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

636 Federal Reserve Bulletin • July 1997 oversees these operations, and issues authorizations and directives net Federal Reserve notes outstanding. At December 31,1996 and to the FRBNY for its execution of transactions. Authorized trans- 1995, domestic securities with par values of $406 billion and action types include direct purchases and sales of securities, $380 billion, respectively, were pledged as collateral. No investmatched sale-purchase transactions, and the purchase of securi- ments denominated in foreign currencies were required as collatties under agreements to resell. These transactions are conducted eral at December 31, 1996 and 1995. in U.S. government and federal agency securities. Specifically, the FRBNY provides or absorbs reserve deposits of depository institutions by purchasing or selling government (E) Bank Premises and Equipment securities, respectively, in the open market. While the application of current market prices to the securities currently held by the Bank premises and equipment are stated at cost less accumulated Reserve Banks may result in values substantially above or below depreciation. Depreciation is calculated on a straight-line basis their carrying values, these unrealized changes in value would over estimated useful lives of assets ranging from two to fifty have no necessary effect on the quantity of reserves available to years. New assets, major alterations, renovations, and improvethe banking system or on the prospects for future Reserve Bank ments are capitalized at cost as additions to the asset accounts. earnings or capital. Maintenance, repairs, and minor replacements are charged to Matched sale-purchase transactions are generally overnight operations in the year incurred. transactions in which FRBNY sells a security and buys it back the next day at the rate specified at the commencement of the transaction. These transactions are accounted for as separate sale and (F) Federal Reserve Notes purchase transactions. At December 31, 1996 and 1995, matched sale-purchase transactions involving U.S. government securities Federal Reserve notes are the circulating currency of the United with par values of $15 billion and $12 billion respectively were States. These notes are issued through the various Federal Reserve outstanding. agents to the Reserve Banks upon deposit with such agents of In addition to authorizing and directing operations in the certain classes of collateral security, typically U.S. government domestic securities market, the FOMC authorizes and directs the securities. These notes are identified as issued to a specific FRBNY to execute operations in foreign exchange markets for Reserve Bank. The Federal Reserve Act provides that the collatmajor currencies and, to the extent possible, invest the resulting eral security tendered by the Reserve Bank to the Federal Reserve balances. The portfolio for each foreign currency shall generally agent must be equal to the sum of the notes applied for by such have an average duration of no more than eighteen months. Reserve Bank. The collateral value is equal to the par value of the Balances and changes in balances arise from transactions to securities tendered. The Board of Governors may, at any time, call counter disorderly conditions in exchange markets and other upon a Reserve Bank for additional security to adequately collatneeds specified by the FOMC in carrying out the System's central eralize the Federal Reserve notes. To satisfy the obligation to bank responsibilities. provide sufficient collateral for its outstanding Federal Reserve Although the portfolios of U.S. government and federal agency notes, the Reserve Banks have entered into an agreement that securities and investments denominated in foreign currencies gen- provides that certain assets of the Reserve Banks are jointly erate interest income and the transactions can result in gains or pledged as collateral for the Federal Reserve notes of all Reserve losses when holdings are sold prior to maturity, decisions regard- Banks. In the event that this collateral is insufficient, the Federal ing these securities and investments, including their purchase and Reserve Act provides that Federal Reserve notes become a first sale, are motivated by monetary policy objectives rather than and paramount lien on all the assets of the Reserve Banks. Finally, profit. Accordingly, earnings and any gains or losses resulting as obligations of the United States, Federal Reserve notes are from the sales of such securities and investments are incidental to backed by the full faith and credit of the U.S. government. The the open market and foreign currency operations and do not "Federal Reserve notes outstanding, net" account represents Fedmotivate activities or policy decisions. eral Reserve notes reduced by cash held in the vaults of the Reserve Banks of $100 billion and $80 billion at December 31, In order to ensure the effective conduct of the domestic securi- 1996 and 1995, respectively. ties market, the FOMC authorizes the Reserve Banks to lend U.S. government securities held in SOMA to securities dealers and to banks participating in U.S. government securities clearing arrangements conducted through a Reserve Bank, under such instructions (G) Capital Paid-in as the FOMC may specify from time to time. At December 31. 1996 and 1995, U.S. government securities with par values of The Federal Reserve Act requires that each member bank sub- $489 million and $1 billion, respectively, were loaned. These scribe to the capital stock of the Reserve Bank in an amount equal securities-lending transactions are fully collateralized by other to 6 percent of the capital and surplus of the member bank. As a U.S. government securities. FOMC policy requires the Reserve member bank's capital and surplus changes, its holdings of the Banks to take possession of the collateral in amounts in excess of Reserve Bank's slock must be adjusted. Member banks are those the market values of the securities loaned. The market values of state-chartered banks that apply and are approved for membership the collateral and the securities loaned are monitored by the in the System and all national banks. Currently, only one-half of Reserve Banks on a daily basis, with additional collateral obtained the subscription is paid-in and the remainder is subject to call. as necessary. The securities loaned continue to be carried in These shares are nonvoting with a par value of $100. They may SOMA. Income earned by the Reserve Banks on securities- not be transferred or hypothecated. lending transactions is reported as a component of "Other By law, each member bank is entitled to receive an annual income." dividend of 6 percent on the paid-in capital stock. This cumulative In accordance with the Federal Reserve Act, and as further dividend is paid semiannually. A member bank is liable for explained in note 3(F). all domestic securities and investments Reserve Bank liabilities up to twice the par value of stock subdenominated in foreign currencies are available as collateral for scribed by it. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Combined Financial Statements of the Federal Reserve Banks 637 (H) Surplus Ongoing operating expenses for the year ended December 31, 1995, were not materially affected by the change in accounting for The Board of Governors requires Reserve Banks to maintain a these costs. surplus equal to the amount of capital paid-in as of December 31 Effective January 1, 1995, the Reserve Banks began recognizof the prior year. This amount is intended to provide additional ing impairment losses consistent with SFAS No. 121, "Accountcapital and reduce the possibility that the Reserve Banks would be ing for the Impairment of Long-Lived Assets and for Long-Lived required to call on member banks for additional capital. Reserve Assets to Be Disposed Of." Prior to 1995, the Reserve Banks did Banks are required by the Board of Governors to transfer to the not recognize impairment losses. The cumulative effect of this U.S. Treasury excess earnings, after providing for the costs of change in accounting for impairment losses was recognized as a operations, payment of dividends, and reservation of an amount one-time charge to expense of $15 million. The impairment loss necessary to equate surplus with capital paid-in. Prior to Octo- represented the impairment in value of certain bank buildings. ber 1, 1996, this payment represented payment of interest on Fair value of the buildings was based on management's estimate Federal Reserve notes outstanding. of market value. The impairment recognized was a result of The Omnibus Budget Reconciliation Act of 1993 (Public Law management's intention to relocate and resulted from structural 103-66, Section 3002) codified the existing Board surplus poli- defects and asbestos. An additional impairment loss was recogcies as statutory surplus transfers, rather than as payments of nized during 1995, as discussed in note 6. interest on Federal Reserve notes, for federal government fiscal years 1997 (which began on October 1, 1996) and 1998. In addition, the legislation directs the Reserve Banks to transfer to (4) U.S. GOVERNMENT AND FEDERAL AGENCY the U.S. Treasury additional surplus funds of $106 million and SECURITIES $107 million during fiscal years 1997 and 1998 respectively. Reserve Banks are not permitted to replenish surplus for these U.S. government and federal agency securities include securities amounts during this time. The Reserve Banks transferred held under agreements to resell and securities bought outright, $106 million to the U.S. Treasury on October 1, 1996. which are held in the SOMA at the FRBNY. These securities are In the event of losses, payments to the U.S. Treasury are recorded at cost on a settlement-date basis, adjusted for the suspended until such losses are recovered through subseamortization of premiums and accretion of discounts. Gains and quent earnings. Weekly payments to the U.S. Treasury vary losses resulting from sales of securities are determined for each significantly. specific issue based on average cost. Interest income is recorded on the accrual method. Interest income and gains and losses on the sale of these securities are reported as "Interest on U.S. (I) Cost of Unreimbursed Treasury Services government securities" and "Government securities gains, net" respectively. Reserve Banks are required by the Federal Reserve Act to serve as The U.S. government and federal agency securities bought fiscal agents and depositories of the United States. By statute, the outright, which are held in the SOMA, at December 31 were as Department of the Treasury is permitted, but not required, to pay follows (in millions): for these services. The costs of providing fiscal agency and depository services to the Treasury Department that have been billed but will not be paid are reported as the "Cost of unreim- 1996 1995 bursed Treasury services." Par value Federal agency $ 2,225 $ 2,634 US. government Bills 190,646 183,116 (J) Accounting Changes Notes 150,922 151.013 Bonds 49,339 44,069 Effective lanuary 1, 1995, the Financial Accounting Manual was Tolal par value 393,132 380,832 changed to require that Reserve Banks use the accrual method of Unamortized premiums; 4,677 4,508 accounting to recognize the obligation to provide benefits to Unaccreted discounts (3,548) (3,477) former or inactive employees consistent with Statement of Finan- $394,261 $381,863 cial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits." Prior to 1995, the U.S. government and federal agency securities held in SOMA Reserve Banks recognized costs for postemployment benefits under agreements to resell at December 31 were as follows (in when paid. The cumulative effect of this change in accounting for millions): benefits was recognized by the Reserve Banks as a one-time charge to expense of $55 million. Additionally, the Reserve Banks 1996 1995 recognized an increase in 1995 operating expenses of approxi- Par value mately $5 million, net of a one-time credit of $1 million that Federal agency $ 1,612 $ 1,11)0 reflects the effect of a special early retirement benefit offered by U.S. government 19,971 12,762 one District during 1995. Total par value 21,583 13.862 Effective January 1, 1995, the Reserve Banks also began accru- Unamortized premiums 1,327 903 ing a liability for employees" rights to receive compensation for Unaccreted discounts (296) (137) future absences consistent with SFAS No. 43, "Accounting for $22,614 $14,628 Compensated Absences." Prior to 1995, the Reserve Banks recognized these costs when paid. The cumulative effect of this change The maturities of U.S. government and federal agency securiin accounting for compensated absences was recognized by the ties bought outright, which are held in the SOMA, at Decem- Reserve Banks as a one-time charge to expense of $19 million. ber 31, 1996. were as follows (in millions): Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

638 Federal Reserve Bulletin • July 1997 Par value extend beyond two days from the trade date. FRBNY generally enters into spot contracts, with any forward contracts generally U.S. Federal Maturities of government agency limited to the second leg of a swap/warehousing transaction. securities held securities obligations Tots Foreign currency exchange contracts may involve off-balance- Within 15 days $ 7,875 $ 450 $ 8,325 sheet market risk for the future settlement of currencies and 16 days to 90 days 89,036 541 89,577 counterparty credit risk. The FRBNY controls credit risk by 9 O 1 v e d r a y 1 s y t e o a r 1 t y o e 5 a r y ears 1 9 2 5 2 , , 6 7 0 8 8 0 2 52 3 0 2 1 9 2 6 3 , , 1 0 2 1 8 2 obtaining credit approvals, establishing transaction limits, and Over 5 years to 10 years 33,782 457 34,239 performing daily monitoring procedures. As of December 31, Over 10 years 41,826 25 41,851 1996 and 1995, the FRBNY had no open foreign exchange Total $390,907 $2,225 $393,132 contracts except as noted below. At the direction of the FOMC, the FRBNY is authorized to The resell date for securities purchased under agreements to maintain reciprocal currency arrangements (F/X swaps) for resell does not exceed 15 days after the purchase date. periods up to a maximum of twelve months with various foreign central banks. An F/X swap arrangement is a renewable, short- (5) INVESTMENTS DENOMINATED IN FOREIGN term reciprocal currency arrangement, generally for up to one year, between two parties, the FRBNY, on behalf of the Reserve CURRENCIES Banks, and an authorized foreign central bank, who agree to exchange their currencies up to a prearranged maximum amount The FRBNY, on behalf of the Reserve Banks, holds foreign and for an agreed upon period of time, at an agreed upon interest currency deposits with foreign central banks and the Bank for rate. These arrangements give the Federal Reserve temporary International Settlements and invests in foreign government debt access to the foreign currencies that it needs for intervention instruments. Foreign government debt instruments held include operations to support the dollar or give the partner foreign central both securities bought outright and securities held under agreebank temporary access to dollars it needs to support its own ments \o resell. These investments are guaranteed as to principal currencies. Drawings under the F/X swap arrangements can be and interest by the foreign governments. Investments denomiinitiated by either the FRBNY or the partner foreign central nated in foreign currencies are recorded at cost on a settlement banks. date basis, adjusted for amortization of premiums and accretion of discounts. Foreign currency-denominated assets of the Reserve The F/X swaps are structured so that the party initiating the Banks are revalued monthly at current market exchange rates in transaction (the drawer) bears the exchange rate risk upon maturorder to report these assets in U.S. dollars. Gains and losses ity. The FRBNY will generally invest the foreign currency resulting from sales of securities are determined using the average received under an F/X swap in interest-bearing instruments. Intercost method. Realized and unrealized foreign currency gains and est income on the resulting foreign currency holdings is accrued losses are reported as "Foreign currency gains (losses), net." and reported as "Interest on foreign currencies." Unrealized gains Interest income is recorded on the accrual basis and is reported as and losses on revaluation of the resulting currency holdings are "Interest on foreign currencies." reported as a component of "Other assets" or "Other liabilities," since there is no exchange rate risk to the Reserve Banks at the Total investments denominated in foreign currencies, valued at maturity of the F/X swap. As of December 31, 1996, there were current exchange rates at December 31, were as follows (in no open F/X swaps. As of December 31, 1995, there was an open millions): F/X swap of $650 million, which was drawn at the direction of the Bank of Mexico. 1996 1995 The FOMC has an agreement to "warehouse" foreign curren- German Marks cies for the U.S. Treasury and the Exchange Stabilization Fund Foreign currency deposits $10,253 $12,329 (ESF). This is an arrangement under which the FOMC agrees to Government debt instruments, including agreements to resell 2,777 1,186 exchange, at the request of the Treasury, U.S. dollars for foreign currencies held by the Treasury or ESF over a limited period of Japanese Yen Foreign currency deposits 637 739 time. The purpose of the warehousing facility is to supplement the Government debt instruments, including U.S. dollar resources of the Treasury and ESF for financing agreements to resell 5,515 6,130 purchases of foreign currencies and related international opera- Mexican Pesos tions. This facility was $20 billion, with nothing outstanding, as of Foreign currency swap . . . 602 December 31, 1996 and 1995. Accrued interest 87 118 Total foreign currencies $19,269 j$g2M1,1jJ0J4: (6) BANK PREMISES AND EQUIPMENT A summary of bank premises and equipment at December 31 is In addition to the balances reflected above, S5 million in unearned as follows (in millions): interest collected on certain foreign currency holdings was also reflected as "Investments denominated in foreign currencies" at 1996 1995 December 31, 1996 and 1995. Bank premises and equipment The FRBNY is authorized by the FOMC to hold balances of Land $ 192 $ 167 and to execute spot and forward foreign exchange contracts to Buildings 934 883 receive or to deliver the currencies of fourteen foreign countries. Building machinery and equipment 242 231 Construction in progress 195 129 Foreign exchange contracts are contractual agreements between Furniture and equipment 1,230 1,192 two parties to exchange specified currencies, at a specified price, 2,793 2,602 on a specified date. Spot foreign contracts normally settle two days after the trade date, whereas the settlement date on forward Accumulated depreciation (1,036) (956) contracts is negotiated between the contracting parties but will Bank premises and equipment, net $1,757 $1,646 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Combined Financial Statements of the Federal Reserve Banks 639 Depreciation expense was $192 million and $180 million for the The Reserve Banks are involved in certain legal actions and years ended December 31, 1996 and 1995, respectively. claims arising in the ordinary course of business. Although it is difficult to predict the ultimate outcome of these actions, in Bank premises and equipment at December 31 include the management's opinion, based on discussions with counsel, the following amounts for leases that have been capitalized (in aforementioned litigation and claims will be resolved without millions): material adverse effect on the financial position or results of operations of the Reserve Banks. 1996 1995 Bank premises and equipment $96 $93 Accumulated depreciation ^56) (29) (8) RETIREMENT AND THRIFT PLANS Capitalized leases, net $40 $64 Retirement Plans Certain of the Reserve Banks lease unused space to outside tenants. Those leases have terms ranging from one to fifteen The Reserve Banks currently offer two defined benefit retirement years. Rental income from such leases was $16 million for each of plans to their employees, based on length of service and level of the years ended December 31, 1996 and 1995. Future minimum compensation. Substantially all of the Reserve Banks' employees lease payments under agreements in existence at December 31, participate in the Retirement Plan for Employees of the System 1996, were (in millions): (the System Plan) and the Benefit Equalization Retirement Plans offered by each individual Reserve Bank (the BEPs). 1997 $13 1998 12 The System Plan is a multi-employer plan. FRBNY acts as the 1999 II sponsor of the System Plan. The prepaid pension cost is reported 2000 11 on the Combined Statement of Condition as a component of 2001 8 Thereafter J9 "Other assets." The prepaid pension cost includes amounts related $74 to the participation of employees of the twelve Reserve Banks, the Board of Governors, and the Plan Administrative Office in the plan. The net pension credit is reported on the Combined State- During 1995, one Reserve Bank recognized impairment losses ment of Income as a component of "Other expenses." of $16 million on the value of bank buildings. Fair value of the buildings was based on appraised value. The impairment was Contributions to the System Plan are actuarially determined and recognized as a result of management's intention to relocate and fully funded by participating employers at amounts prescribed by resulted from a general decline in real estate values in the area in the Plan Administrator (with the exception of a mandatory contriwhich the buildings were located. This loss is included on the bution of 7 percent of salary by certain employees of the Board of Statement of Income as a component of "Other expenses." Governors that participate in the plan). No separate accounting is maintained of assets contributed by the participating employers. It is the System's policy to fund the pension liability as accrued. (7) COMMITMENTS AND CONTINGENCIES No contributions were required to the System Plan during 1996 or 1995. At December 31, 1996, the Reserve Banks were obligated under The BEPs are unfunded plans that were established January 1, noncancelable leases for premises and equipment with terms 1996. Net pension cost for the period is actuarially determined ranging from one to approximately ten years. These leases pro- and is based on the same economic and mortality assumptions vide for increased rentals based upon increases in real estate taxes, used for the System Plan. The Reserve Banks' projected benefit operating costs, or selected price indices. obligation and net pension costs for the BEPs at December 31, Rental expense under operating leases for certain operating 1996, and for the year then ended are not material. facilities, warehouses, data processing, and office equipment Following is a reconciliation between the funded status of the (including taxes, insurance, and maintenance when included in System Plan and amounts included in the Combined Statement of rent), net of sublease rentals, was $68 million and $64 million for Condition at December 31 (in millions): the years ended December 31, 1996 and 1995, respectively. Certain of the Reserve Banks' leases have options to renew. Future minimum rental payments under noncancelable operat- 1996 1995 ing leases, net of sublease rentals with terms of one year or more, Accumulated benefit obligation at December 31, 1996, were (in millions): Vested $1,758 $1,679 Nonvested 85 91^ 1997 $ 8 Total $1.843 $1,770 1998 17 1999 15 Plan assets at fair value, primarily listed 2000 13 stocks and bonds $4,153 $3,628 2001 13 Actuarial present value of projected benefit obligation ^2,270) (2,130) Thereafter 12 Plan assets in excess of projected benefit obligation _[,883 1,498 Less: Unrecognized net transition obligation 226 272 Unrecognized net gain 884 606 At December 31, 1996, the Reserve Banks had contractual Unrecognized prior service cost (144) (156) commitments through the year 2007 totaling $263 million for the Prepaid pension cost $ 917 $ 776 maintenance of currency processing machines, none of which has been recognized. One Reserve Bank contracts for maintenance for these machines on behalf of the System and allocates the costs The assumptions used in developing the pension benefit obligaannually to each other Reserve Bank. tion for the System Plan and BEPs are as follows: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

640 Federal Reserve Bulletin • July 1997 1996 1995 The assumptions used in developing the postretirement benefit Discount rate 7.25% 7.00% obligation are as follows: Rate of compensation increase 5.00% 5.00% Long-term rate of return on plan assets 9.00% 9.00% 1996 1995 The components of the net pension credit for the years ended Discount rate 7.25% 7.00% December 31 are shown below (in millions): Rate of increase in health care costs—initial 9.50% 10.00% Rate of increase in health care costs—ultimate 5.50% 5.50% 1996 1995 The ultimate health care cost rate is expected to be achieved in Service costs—benefits earned during the year .. $ 71 $ 49 2004. Interest cost on projected benefit obligation 152 133 Actual return on plan assets (634) (842) Net amortization and deferral 269 537 The following is a summary of the components of net periodic Cost of special termination benefits 1 4 postretirement cost for the years ended December 31 (in millions): Net pension (credit) $(141) $(119) 1996 1995 Thrift Plan Service cost $16 $13 Interest cost of accumulated benefit obligation 40 42 Employees of the Reserve Banks may also participate in the Thrift Net amortization and deferral (5) (5) Plan for Employees of the Federal Reserve System (the Thrift Cost of special termination benefits 1 Plan). The Thrift Plan is a qualified, defined contribution plan. Net periodic postretirement cost $51 $51 Under the Thrift Plan, employees may contribute a percentage of their salaries up to a maximum 19 percent limit as prescribed by These costs are reflected on the Combined Statement of Income as the Internal Revenue Service. Matching contributions by the a component of "Salaries and other benefits." Reserve Banks are based on a fixed percentage of each employee's basic contribution. Currently, the Reserve Banks match Changing the assumed health care cost trend rates by one 80 percent of the first 6 percent of salary contributed by the percentage point in each year would change the accumulated employee. The Reserve Banks' Thrift Plan contributions totaled postretirement benefit obligation at December 31, 1996 and 1995, $40 million and $38 million for the years ended December 31, by approximately $118 million and $111 million respectively and 1996 and 1995, respectively, and are reflected on the Combined would change the aggregate service and interest cost components Statement of Income as a component of "Salaries and other of net periodic postretirement benefit cost for the years ended benefits." December 31, 1996 and 1995, by approximately $18 million and $12 million respectively. (9) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS AND POSTEMPLOYMENT BENEFITS Postemployment benefits Postretirement Benefits Other Than Pensions The Reserve Banks began using the accrual method of accounting to recognize the obligation to provide benefits to former or inac- In addition to the Reserve Banks' defined benefit retirement plans, tive employees, consistent with SFAS 112, "Employers' Accountemployees who have met certain age and length of service requireing for Postemployment Benefits," effective January 1, 1995. ments are eligible for both medical benefits and life insurance Benefits include medical and dental insurance, survivor income, coverage during retirement. The retiree medical plan is contribudisability income, and those workers' compensation expenses tory and provides benefits to retirees, their covered dependents, self-insured by individual Reserve Banks. Costs were projected and beneficiaries. The life insurance plan is noncontributory and using the same discount and health care trend rates as were used covers retirees only. for projecting postretirement costs. The accrued postemployment The Reserve Banks fund benefits payable under the medical benefit costs recognized by the Reserve Banks at December 31, and life insurance plans as due. Net postretirement benefit cost is 1996 and 1995, were $68 million and $60 million respectively. actuarially determined using a January 1 measurement date. The This cost is included as a component of "Accrued benefit cost" on following is a reconciliation between the plans' funded status and the Combined Statement of Condition. Net periodic postemploythe amounts recognized in the Reserve Banks' Combined Statement benefit costs included in 1996 and 1995 operating expenses ment of Condition as of December 31 (in millions): were $17 million an. $14 million respectively. 1996 1995 Accumulated postretirement benefit obligation Retirees and covered spouses $303 $303 Actives eligible to retire 53 55 Other actives and disabled 226 238 Total accumulated postretirement benefit obligation _582 J96 Unrecognized net (loss) (23) (61) Unrecognized prior service cost 84 77 Accrued postretirement benefit cost $643 $612 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Al Financial and Business Statistics A3 GUIDE TO TABULAR PRESENTATION Federal Finance A25 Federal fiscal and financing operations DOMESTIC FINANCIAL STATISTICS A26 U.S. budget receipts and outlays 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 credit A10 Condition and Federal Reserve note statements Al 1 Maturity distribution of loan and security Real Estate holdings A34 Mortgage markets A35 Mortgage debt outstanding Monetary and Credit Aggregates A12 Aggregate reserves of depository institutions Consumer Credit and monetary base A13 Money stock, liquid assets, and debt measures A36 Total outstanding A15 Deposit interest rates and amounts outstanding— A36 Terms commercial and BIF-insured banks Flow of Funds Commercial Banking Institutions— A37 Funds raised in U.S. credit markets Assets and Liabilities A39 Summary of financial transactions A40 Summary of credit market debt outstanding A16 All commercial banks A41 Summary of financial assets and liabilities A17 Domestically chartered commercial banks A18 Large domestically chartered commercial banks A19 Small domestically chartered commercial banks DOMESTIC NONFINANCIAL STATISTICS A20 Foreign-related institutions 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

A2 Federal Reserve Bulletin • July 1997 DOMESTIC NONFINANCIAL STATISTICS- Reported b\ 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 Interest and Exchange Rates A50 U.S. international transactions—Summary 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 A63 GUIDE TO STATISTICAL RELEASES AND institutions SPECIAL TABLES Reported by Banks in the United States A52 Liabilities to and claims on foreigners SPECIAL TABLE A53 Liabilities to foreigners A64 Pro forma balance sheet and income statements A55 Banks' own claims on foreigners for priced service operations, March 31, 1997 A56 Banks' own and domestic customers' claims on foreigners A56 Banks' own claims on unaffiliated foreigners A66 INDEX TO STATISTICAL TABLES A57 Claims on foreign countries— Combined domestic offices and foreign branches Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A3 Guide to Tabular Presentation SYMBOLS AND ABBREVIATIONS c Corrected G-10 Group of Ten e Estimated GNMA Government National Mortgage Association n.a. Not available GDP Gross domestic product n.e.c. Not elsewhere classified HUD Department of Housing and Urban P Preliminary Development r Revised (Notation appears on column heading IMF International Monetary Fund when about half of the figures in that column 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 smal lest 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 Financial Statistics • July 1997 1.10 RESERVES, MONEY STOCK. LIQUID ASSETS, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted1 Monetary or credit aggregate 02 Q4 Qi Mar. Apr. Reserves of depositors institutions' 1 Total -6.6 -16.4 7.2 -8.3 6.1 -13.1 -12.3 -17.0' -21.8 2 Required -5.9 -16.5 8.5 -8.4 -3.4 -8.5 -7.9 -20.7 -18.6 3 Nonborrowed -79 - 17.0 6.2 -7.2 7.5 -10.5 -12.3 -19.9 -24.4 4 Monetary base3 10 5.3 5.1 5.6 8.8 3.9 5.7 3.5 1.7 Concepts of money, liquid assets, and debt* 5 Ml ' -1.4 -6.5 7.3 -.7 1.0' -6.0' 6 M2 4.5 3.4 5.0 5.9 7.5 5 1 5.1' 6.7 7 M3 6.4 5 4 7.9 7.7 10.5' 5 5' 9.11' 6.8 8.9 8 L 6.3 5.5 6.6' 6.7 7.2 3.1' 10.1' 8.5 9 Debt 5.9 5.3 4.8' 4,3 4.1 3.4 4.9 5.2 Nontransaction components 10 lnM25 7.0 7.7 io.r 8.5 10.0 7.8' 6.7' 9.4' 13.6 11 In M3 only* 13.9 12.8' 18.5' 14.2 21.0' 6.4' 22.8' 12.8' 16.4 Time and savings deposits Commercial banks 12 Savings, including MMDAs 12.1 12.(1 17.0 14.0' 15.1' 13.4' 9.1 n.r 20.0 13 Small time' -1.0 3.7' 4 7' 2.8' 4.3' 1.0' 1.8' 5.4 14 Large timeag 18.6 18.0 22.2 12.5 24.2 -.3 16.7 4.9' 32.8 Thrift institutions 25.4' 15 Savings, including MMDAs 6.5 .8 2.7' 2.6 4.6' 2.9' 2.3' 11.0 16 Small time -3.0 2.1 -1.7 -2.7 .3 1.0 -11.9 -4.8 17 Large nine* -3.0 9 1 12.8 -3.0 28.8 11.8 1.5 7.3 Money market muttial funds 18 Retail' ', 16.3 16.3 17.2 16.3 21.fi 13.0 13.9 19.9 24.5 19 Institution-only 12.0 20.7 19.8 15.5 30.O -12.0 36.9 25.1 -.S Repurchase agreements and Eurodollars 20 Repurchase agreements"' 16.3' -4.4' 1.8' 8.4' -9.9 21.1' 23.8' -9.6' 9.7 21 Eurodollars'" 10.9 8.5 40.2' 28.0' 56.9 39.4 14.4 -17.3' 18.6 Debt compotients^ 22 Federal 47 3.S 32 1.8 2.9 -.6 1.8 4.7 23 Nonfederal 6.3 5.8 5.4' 5.2 4.5 4.8' 6.0 5.3 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 nonlinancial 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 US. 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, nontinancial corporate and nonfarm commercial banks other than those owed to depository institutions, the US. 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 accounls, 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 adjuslcd separately. money fund balances, each seasonally adjusted separately. M2: Ml plus (1) savings (including MMDAs), (2) small-denomination time deposils (time 6. Sum of (I) 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 [RA and Keogh account balances at commercial banks and thrift institutions savings deposits, small-denomination time deposits, and retail money fund balances, each arc subtracted from small time deposits. seasonally adjusted separately, and adding this result to seasonally adjusted Ml. 8. Large time deposils are those issued in amounts of $ 100,000 or more, excluding those M3: M2 plus (I) 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. anil (4) Eurodollars (overnight and term) held by US. residents at foreign branches of US 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 CREDIT' Millions of dollars Average of Average i dailv figures for week ending on dateindicated daily figures Factor 1997 1997 Feb. Mar. Apr. Mar. 19 Mar. 26 Apr. 2 Apr. 9 Apr. 16 Apr. 23 Apr. 30 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 433,% 1 437.437' 448.874 438,267 438,421 438.612 442,176 443.099 445,861 466.371 U.S government securities" 2 Bought outright—System account 392,105 395.970 400.786 397.082 397.707 396,821 400.792 401.182 400,720 401.462 3 Held under repurchase agreements 6,772 7.388 13.357 7,243 6.782 6,166 7.602 8,243 10,182 28.701 Federal agency obligations 4 Bought outright 2.034 2,008 1.985 2,011 2,006 1.994 1.994 1,984 1,984 1.972 5 Held under repurchase agreements 1.726 1,387 817 966 1,233 2.147 901 685 730 691 6 Acceptances 0 0 0 0 0 0 0 0 (1 Loans to depository institutions 7 Adjustment credit 23 199 95 299 13 566 1 51 235 119 8 Seasonal credit 21 37 85 3,s 41 57 64 76 95 114 9 Extended credit (1 0 0 0 0 0 0 0 0 (I 10 Float . 526 413 643 510 454 426 331 231 887 S2S 11 Other Federal Reserve assets 30.753 30,035' 31.107 30,122 30.184 30,435 30,491 30.648 31.028 32.483 12 Gold stock 11.050 11,051 11,052 11.051 11,051 11,050 11,051 11.052 11.052 11,052 13 Special drawing rights certificate account 9,400 9,226 9,200 9,200 9.200 9,200 9.200 9.200 9.200 9,200 14 Treasury currency outstanding 25,075r 25.142' 25,205 25.142' 25,157' 25.173 25.187 25,201 25,215 25.229 ABSORBING RESERVE FUNDS 15 Currency in circulation 441,044' 441 404' 446,041 443.579' 443,357' 444.478 446,201 446,626 445.824 445.564 16 Treasury cash holdings 262 297 301 302 308 308 284 108 308 305 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 4,998 5.840 12.996 7.479 5.376 5.535 4,826 7,837 8,660 32.937 18 Foreign 182 202 174 166 167 304 164 176 164 187 19 Service-related balances and adjustments 7,137 7,058 7,038 7,029 7.069 6.945 6,961 7.021 7.108 7.090 20 Other 360 394 376 419 373 182 413 401 150 337 21 Other Federal Reserve liabilities and capital 14.069 14,501 15,040 14.633 14,663 14.630 14,975 15,012 15,026 15.243 22 Reserve balances with Federal Reserve Banks4 11,433 11.158' 12,366 10.051 12,515 11.452 13.789 11,152 13,887 10.188 End-of-month figures Wednesday figures Feb. Mar. Apr. Mar. 19 Mar. 26 Apr. 2 Apr. 9 Apr. 16 Apr. 23 Apr 30 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 435.272 442.403' 489,362 442.025 444.123 440.353 446.724 449.550 459,936 489.362 U.S. government securities2 2 Bought outright—System account 390,797 395.076 402,513 397,206 397.580 397.056 401.320 400.719 401.155 402.513 3 Held under repurchase agreements 10.778 10.485 50,378 9.889 10.948 8.211 10,947 13.512 21.072 50.378 Federal agency obligations 4 Bought outright 2,01 1 1.994 1,970 2,011 1,994 1.994 1,994 1.984 1,984 1,970 5 Held under repurchase agreements 1,626 1.096 989 1,205 2,471 1.731 1.671 785 2.034 989 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 8 3.943 28 1,154 9 2 2 104 1.161 28 8 Seasonal credit 29 55 128 40 52 60 69 79 107 128 9 Extended credit 0 0 0 0 0 0 0 0 0 0 10 Float 684 -519' 241 212 644 906 58 1,599 592 241 11 Other Federal Reserve assets 29.339 30.272' 33.115 30.308 30,424 30.393 30.663 30,768 31.830 33,115 12 Gold stock 11.051 11.050 11.051 11,050 11,050 11,050 11.052 H.O52 11,052 11,051 13 Special drawing rights certificate account 9,400 9.200 9.200 9 200 9,200 9.200 9 200 9.200 9,200 9.200 14 Treasury currency outstanding 25.111' 25.173' 25.229 25,142' 25,157' 25,173 25.187 25.201 25,215 25.229 ABSORBING RESERVE FUNDS IS Currency in circulation 441.655' 444,544' 446.630 444 185' 444,333' 446,057 447 526 447.005 446 243 446,610 16 Treasury cash holdings 280 313 309 '307 313 280 308 308 305 309 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 5 258 5.945 52,215 9.035 4.420 5.092 3.446 17.884 15,863 52,215 18 Foreign 229 916 169 163 162 230 161 178 156 169 19 Service-related balances and adjustments 7,131 6 945' 7,090 7,029 7 069 6.945 6,961 7.021 7.108 7.090 20 Other 345 350 348 412 362 377 392 366 323 348 21 Other Federal Reserve liabilities and capital 14,135 14.816 14.977 14.498 14,515 14.369 14.861 14.997 14.993 14,977 22 Reserve balances with Federal Reserve Banks4 11,801 13.997' 13,104 11.787 18,356 12.427 18.507 7.244 20.411 13.104 1. Amounts of cash held as reserve;) are shown in table 1.12, line 2. 3. Includes compensation that adjusts for the effects of inflation on the principal of 2. Includes securities loaned—fully guaranteed by U.S. governmeni securities pledged inflation-indexed securities. with Federal Reserve Banks—and excludes securities sold and scheduled lo be bought back 4. Excludes required clearing balances and adjustments to compensate for float. under matched sale-purchase transactions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A6 Domestic Financial Statistics • July 1997 1.12 RESERVES AND BORROWINGS Depository Institutions' Millions of dollars Prorated monthly averages of biweekly averages Reserve classification 1994 1995 19% 1996 1997 Dec. Dec. Dec. Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 Reserve balances with Reserve Banks2 24,658 20,440 13,395 12,800 12,895 13,395 11.710 11,455 11,515' 12,309 2 Total vault cash 40.378 42,094 44,426 42,925 42,745 44,426 47.172 43,375 42,116 41,381 3 Applied vault cash4 36.682 37,460 37,848 36,749 36,862 37,848 38,932 36,588 36,029 .35,574 4 Surplus vault cashs 3.696 4,634 6,578 6,175 5,883 6,578 8.240 6,788 6.087 5,806 5 Total reserves'1 61,340 57.900 51,243 49,550 49.756 51.243 50 642 48,041 47.543 47,883 6 Required reserves 60.172 56,622 49.819 48,556 48,721 49,819 49.419 47,012 46.383 46,869 7 Excess reserve balances at Reserve Banks 1,168 1,278 1,424 994 1,035 1.424 1.223 1,031 1.160 1,014 8 Total borrowings at Reserve Banks8 209 257 155 287 214 155 45 42 156 261 9 Seasonal borrowings 100 40 68 212 109 68 19 21 37 88 10 Extended credit' 0 0 0 0 0 0 0 0 0 0 Biweekly averages of daily figures for two week periods ending on dates indicated 1997 Jan. 1 Jan. 15 Jan. 29 Feb. 12 Feb. 26 Mar. 12 Mar. 26 Apr. 9' Apr. 23 May 7 1 Reserve balances with Reserve Banks" 14,063 13.060 10.285 11,052 11,817 11,341 11,269 12,620 12,516 11,496 2 Total vault cash1 44.615 46.140 48.679 45,130 41,948 42.841 41,665 41,640 40,986 41,838 3 Applied vault cash4 38,070 39,029 39.078 37,673 35,672 36,490 35,674 35,916 35,359 35,566 4 Surplus vault cash-^ 6,545 7,112 9.601 7,458 6,276 6,351 5,991 5.724 5,627 6,272 5 Total reserves'1 52,132 52,089 49,363 48.724 47.489 47,831 46,943 48,536 47,874 47,062 6 Required reserves 50,595 50,859 48.142 47.688 46,493 46,593 45,872 47,313 47,209 45,619 7 Excess reserve balances at Reserve Banks 1.537 1.230 1.036 996 1.238 1.071 1,223 665 1.443 8 Total borrowings at Reserve Banks* 143 53 32 34 50 35 194 344 228 219 9 Seasonal borrowings 64 18 18 18 23 27 38 61 86 127 10 Extended credit4 0 0 0 0 0 0 0 0 0 0 I Dala in this table also appear m 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 tront 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 "iis-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 period*, 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 m;»inienance period for weekly reporters ends, sixteen lished tor the extended credit program to help depository institutions deal with sustained days after the lagged compulation 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 thiriy 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 "'hound" 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. tlio.se whose vault cash exceeds their required reserves) to satisfy current reserve requirements. 1.13 SELECTED BORROWINGS IN IMMEDIATELY AVAILABLE FUNDS Large Banks1 Millions of dollars, averages of daily figures 1997 Source and maluriry Mar. 3 Mar. 10 Mar. 17 Mar. 24 Mar. 31 Apr. 7 Apr. 14 Apr. 21 Apr. 28 Federal funds purchased, repurchase agreements, and olher selecled borrowings From commercial banks in the Unircd States 1 For one day or under continuing contract 79,923 86,313 81.310 80.216 H4.27I 93,667 89,857 83,122 78,170 2 For all other maturities 14,342 13.669 13,850 15.140 15,913 14,756 15,401 15,737 16,344 From other depository institutions, foreign banks and oflicial institutions, and U.S. government agencies 3 For one day or under continuing contract 17,779 18,779 18,299 18,498 20,288 22,338 21,674 16,614 16,375 4 For all other maturities 19,713 19,461 20.268 18,569 18.487 17,924 19,014 21,350 25,144 Repurchase agreements nn U.S. government ami federal agency wcunfics Brokers and nonbank dealers in secunlies 5 For one day or under continuing contract 14,968 12,846 13,816 15,093 13,938 13,716 13,788 13,927 12,193 6 For all other maturities 35,645 36,676 37.758 35,299 37,965 34,876 37.558 39,659- 41,519 All other customers 7 For one day or under continuing contract 42.364' 42,574' 44,828' 46,089' 40,985' 44,791 45.877 46,373 46,792 8 For all other maturities 13,916 14.125 14,055 14,068 19,462 14,479 13.762 14,138 14,200 MEMO Federal funds loans and resale agreements in immediately available funds in maturities of one day ot under continuing contract 9 To commercial banks in the United States 73,239' 70,633' 73,036' 70,988' 76,602' 81,187 75.802 76,355 81.087 10 To all other specitied customers2 24,134 20,959 23,726 23,771 23,046 25,408 23.052 24,232 23.078 1. Banks with assets of $4 billion or more as of Dec. 31. ] 988. 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 covei 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 credit1 Federal Reserve Bank On Effective date Previous rate On Effective date Previous rate On Effective date Previous rate 6/6/97 6/6/97 6/6/97 Boston 5.00 2/1/96 5.25 5.60 6/5/97 5.60 6.10 6/5/97 6.10 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 Citv 2/1/96 Dallas " 1 1/31/96 1 1 S.»n Francisco 5.00 1/31/96 5.25 5.60 6/5/97 5.60 6.10 6/5/97 6.10 Range of rates for adjustment credit in recent years4 Range (or RR. Bank Range (or RR. Bank Range(or F.R. Bank Effective date level)—All of Effective date level)—All of Effective date level)—All of RR. Banks N.Y. RR. Banks N.Y. F.R. Banks N.Y. In effect Dec. 31. 1977 6 6 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 Mav 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 II 1990—Dec. 19 6.5 6.5 10 7.25 7.25 3 11 II Aug. 21 7.75 7.75 16 10.5 10.5 1991— Feb. 1 6-6.5 6 Sept. 22 8 8 27 10-10.5 10 4 6 6 Oct. 16 8-8.5 8.5 30 10 10 Apr. 30 5.5-6 5.5 20 8.5 8.5 Oct. 12 9.5-10 9.5 Mav 2 5.5 5.5 Nov. 1 8.5-9.5 9.5 13 9.5 9.5 Sept. 13 5-5.5 5 3 9.5 9.5 Nov. 22 9-9.5 9 17 5 5 26 9 9 Nov. 6 4.5-5 4.5 1979—July 20 10 10 Dec. 14 8.5-9 9 7 4.5 4.5 Aug. 17 10-10.5 10.5 15 8.5-9 8.5 Dec. 20 3,5^1.5 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-^1 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 4-3 75 4.75 June 13 11-12 11 17 4.75 4.75 16 1 ] 11 1986—Mar. 7 7-7.5 7 July 28 10-11 HI 10 7 7 1995—Feb. 1 4.75-5.25 5 75 29 10 10 Apr. 21 6.5-7 6.5 9 5.25 5.25 Sept. 26 11 11 23 6.5 6.5 Nov. 17 12 12 July 11 6 6 1996—Jan. 31 5.00-5.25 5.00 Dec. 5 12-13 13 Aug 21 5.5-6 5.5 Pet). 5 5.00 5.00 8 13 13 22 5.5 5.5 19M— May 5 13-14 14 In effect June 6, 1997 5.00 5.00 X 14 14 1987—Sept 4 5.5-6 6 II 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 mav be shortened. Beyond this initial period, a funds that cannot be met through reasonable alternative sources. The highest rate eslablislied flexible rale somcwhai above rales charged on market sources of funds is charged. The rate for loans to depository institutions may be charged on adjustment credit loans oi unusual size ordinarily is reestablished on the firs! 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 adjustmeni credit plus 50 basis 2. Available to help relatively small depository institutions meet regular seasonal needs foi points. tunds that arise tram a clear pattern of intraycarly movements in their deposit* and loans arid 4. For earlier data, see the tallowing 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. 1914-194!, and 1941-1970: and the Annual Sraraticuf Digest, 1970into account rales 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 1481, 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 nude available to depository institutions when .similar assislance is noi successive weeks or in more than tour weeks in a calendar quarter. A 1 percent surcharge was leasonobly available from other sources, including special industry lenders Such credit may be provided when exceptional circumstances (including sustained deposit drains, impaired access to money market funds, or sudden deterioration in loan repayment performance) or practices involve only a particular institulion. or to meet the needs of institutions experiencing difficulties adjusting to changing market conditions over a longer period (particularly at times ot deposit disintermediation). The discount rate applicable to adjustment credit ordinarily is surcharge was eliminated on Nov. 17. 198 ] charged on extended-credit loans ouKlanding less than ihiriv days; however, ai ihe discretion Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Financial Statistics • July 1997 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS' Requirement Type of deposit Percentage of deposits Effective date Net transaction accounts 1 $0 million $49 1 million3 3 1/2/97 2 More than $49.3 million4 10 1/2/97 0 12/27/90 0 12/27/90 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-ihrough 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 Ihe Annual Report or the Federal accounts thai would be subject to a 3 percent reserve requirement. Effective with the reserve Reserve Bulletin. Under the Monetary Control Act of 1980, depository institutions maintenance period beginning January 2, 1997, for depository institutions that report weekly, include commercial banks, mutual savings banks, savings and loan associations, credit and with the period beginning January 16, 1997, for institutions that report quarterly, the unions, agencies and branches of foreign banks, and Edge Act corporations. exemption was raised from $4.3 million to $4.4 million. 2. Transaction accounts include all deposits against which the account holder is permitted 4. The reserve requirement was reduced from 12 percent to 10 percent on to make withdrawals by negotiable or transferable instruments, payment orders of wilh- Apr 2, 1992. for institutions that report weekly, and on Apr. 16, 1992, for institutions that drawal, or telephone or preauthorized transfers for the purpose of making payments to third report quarterly. persons or others. However, accounts subject to the rules (hat permit no more than six 5. For institutions that report weekly, the reserve requirement on nonpersonal time deposits preauihorizcd. automatic, or other transfers per month (of which no more than three may be with an original maturity of less than 1 [A years was reduced from 3 percent to 1 x/i percent for b> check, draft, debit card, or similar order payable directly to third parties) are savings the maintenance period that began Dec. 13, 1990, and to zero for the maintenance period that deposits, not transaction accounts. began Dec. 27, 1990. For institutions that report quarterly, the reserve requirement on 3. The Monetary Control Act of 1980 requires that the amount of transaction accounts nonpersonal time deposits with an original maturity of less than 1 ]/2 years was reduced from 3 against which the 3 percent reserve requirement applies be modified annually by 80 percent of percent to zero on Jan. 17, 1991. the percentage change in transaction accounts held by all depository institutions, determined The reserve requirement on nonpersonal lime deposits with an original maturity of P/t> as of June 30 of each year Effective with the reserve maintenance period beginning January 2, years or more has been zero since Oct. 6. 1983. 1997, for depository institutions that report weekly, and with the period beginning January 16. 6. The reserve requirement on Eurocurrency liabilities was reduced from 3 percent to zero 1997. for institutions that report quarterly, the amount was decreased from S52.0 million to in the same manner and on the same dates as the reserve requirement on nonpersonal time $49..1 million. deposits with an original maturity of less than 1 lA 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 Type of transaction and maturity Sept. Oct. Jan. U.S. TREASURY SECURITIES" Outright translations (exrhidins matched transactions'! Treasury bills 1 Gross purchases 17.484 10,932 9,901 0 6,502 0 0 ft 0 2 Gross sales 0 0 0 0 0 0 0 0 0 0 3 Exchanges 376.277 398,487 426,928' 32,791 38,661 34,037' u,2n' 40.346 33,997' 31.770 4 For new bills 376.277 398,487 426,928' 32.791 38.661 34,037' 34,211' 40 346 33,647 31.770 5 Redemptions 0 900 0 0 0 0 0 0 0 0 Others within one year 6 Gross purchases 1.238 390 524' 0 0 0 0 0 818 0 7 Gross sales 0 0 0 0 0 0 0 0 0 0 8 Maturity shifts 0 43.574 30,512' 2,371 1,623 3,818 2,259 2.481 5,086 3.143 9 Exchanges -21,444 -30.771 -41.394 -2.890 -1.770 -5.655 -1.950 -550 -2,864 -1,534 10 Redemptions 0 0 2.015 0 0 0 0 607 0 0 One lo five years 11 Gross purchases 9.168 4.966 3,898' 0 0 0 0 0 1,125 2,861 12 Gross sales 0 0 0 0 0 0 0 0 0 0 13 Maturity shifts -6.004 -34,646 -25,022' -2.371 -1,623 -2.102 -2,259 -2,481 -4,926 -3,143 14 Exchanges 17.801 22,912 31,459' 2,890 1.395 2.716' 1,950 550 1,874 1.534 Five to ten years 15 Gross purchases 3,818 1.239 1.116' 0 0 0 0 0 0 0 16 Gross sales 0 0 0 0 0 0 0 0 0 0 17 Maturity shifts -3,145 -3,093 -5,469' 0 0 -1,716' 0 0 1,236 0 18 Exchanges 2,903 8.266 6.666 0 375 1,470 0 0 890 0 More than ten years 19 Gross purchases 3,606 3.122 1.655' 0 0 0 0 0 0 1,117 20 Gross sales 0 0 0 0 0 0 0 0 0 0 21 Maturity shifts -918 -2,253 -20 0 0 0 0 0 -1,396 0 22 Exchanges 775 1,800 3.270 0 0 1,470 0 0 450 0 All maturities 23 Gross purchases 35,314 20,649 17,094 0 0 6,502 0 0 1,943 3,978 24 Gross sales 0 0 0 0 0 0 0 0 0 0 25 Redemptions 2,337 2,376 2,015' 0 0 0 0 607 0 0 Matched transactions 26 Gross purchases 1,700,836 2.197.736 3.092,399' 234.992 268,304 227.577 272,117 285.667 250,867 288 373 27 Gross sales 1,701,309 2.202.030 3.094,769' 238.036 267.128 226,505 273,872 283.240 254,741 288,073 p Gross purchases 309,276 331.694 457,568 36.014 33.836 36,383 85,924 74,422 48,805 60,425 1 Gross sale-, 311,898 328,497 450,359 33,374 33,020 36.665 73,501 86,673 45,747 60.718 I Net change in U.S. Treasury securities 3,984 FEDERAL AL5KNCY OBLIGATIONS Outrit'll! tmnsactions Gross purchases 0 0 0 0 0 0 0 0 '. Gross sales 0 0 0 0 0 0 0 0 Redemptions 1.002 1,303 409' 27 63 187 27 17 Repurchase a^ieements • Gross purchases 52,696 36,851 75,354 4,536 12.683 9,264 7,796 I7.66R 9,795 14,300 Gross sales 52,696 36.776 74,842 4,436 11.051 9,471 8,947 17.995 9,454 14,830 36 Net change in federal agency obligations -1.228 103' 73 1,569 -1,163 -514 314 -547 37 Total net change in System Open Market Account . 28.880 15.948 20,021 -331 3,562 7.076 9,506 -10,944 1,441 3,437 1. Sales, redemptions, and negative figures reduce holdings r>f !be System Open Market 2. Transactions exclude changes in compensation for the effects of inflation on the principal counl: all other figures increase such holdings of intlacion-indexed securities Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic Financial Statistics • July 1997 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements' Millions of dollars Wednesday End of month Account 1997 1997 Apr. 2 Apr. 9 Apr. 16 Apr. 23 Apr 30 Feb. 28 Mar, 3 1 Apr. 30 Consolidated condition slalemcnt ASSETS 1 Gold certificate account 11,050 11,052 11.052 11.052 11.051 11.051 11,050 11.051 2 Special drawing rights certificate account 9.200 9,200 9.200 9 200 9.200 9.400 9.200 9.200 3 Coin 660 65.3 646 6.33 619 740 673 619 Loans 4 To depository institutions 62 71 183 1.268 156 36 3.998 156 5 Other ... .' 0 0 0 0 0 0 0 0 6 Acceptances held under repurchase agreements 0 0 0 (I 0 0 0 0 7 Bought outright 1.994 1.994 1,984 1.984 1,970 2.011 1,994 1,970 8 Held under repurchase agreements 1.731 1.671 785 2.034 989 1,626 1,096 989 9 Total US. Treasury securities 405,267 412,267 414,231 422,227 452.891 401,575 405.561 452,891 10 Bought oiimghr 397.056 401,320 400,719 401.155 402.513 390.797 395.076 402.513 11 Bills 191.130 195.393 195,165 195,601 195,034 188.850 189.149 195,034 12 Noles 154,527 154,527 154.154 154.155 156.079 151,665 154,527 156,079 13 Bonds 51,399 51,399 51,399 51,399 51.399 50.282 51,399 51,399 14 Held under repurchase agreements 8.211 10,947 13.512 21,072 50,378 10.778 10.485 50,378 15 Total loans and securities 409.055 416,003 417,183 427,513 456,006 405,249 412,649 456,006 16 Items in process of collection 7,876 6,537 7,89] 7,009 6.294 4,404 1.955 6,294 17 Bank premises 1,242 1,245 1.247 1,248 1.238 1,244 1,249 1,238 Other assets 18 Denominated in foreign currencies1 17,952 17.959 17,966 17 973 17,420 17.917 17.950 17.420 19 All other4 11,177 11.453 11.576 12.695 14.61)6 10.203 11,076 14,606 20 Total assets 468.212 474,102 476,761 487,325 516,434 460,209 465,803 516,434 LIABILITIES 21 Federal Reserve notes 421,824 423.300 422.759 421.967 422.329 4I7.5M 420,357 422,329 22 Total deposits 25,460 29,757 31.936 44,264 73,266 24,707 29,056 73,266 23 Depository institutions 19,761 25,757 13.508 27.921 20.514 18.876 21.845 20.534 24 U.S. Treasury—General account .... 5.092 3,446 17.884 15 863 52.215 5.258 5,945 52.215 25 Foreign—Official accounts 230 161 178 156 169 229 916 169 "»6 Other 377 392 366 V3 345 350 348 27 Deferred credit items 6,559 6,184 7.069 6,102 5,862 3.803 1.574 5,862 4,553 4,951 5 059 5.040 5.551 4.691 4.661 5,551 29 Total liabilities 458,396 464.192 466.823 477,373 507.008 450,765 455,648 507,008 CAPITAL ACCOUNTS 30 Capital paid in 4,762 4,790 4.792 4,793 4,796 4.725 4.762 4.796 31 Surplus 4,496 4.496 4.496 4.496 4.475 4,414 4,496 4.475 558 624 650 663 155 305 898 155 33 Total liabilities and capital accounts 468,212 474,102 476,761 487,325 516.434 460,209 465,803 516.434 MLMO 34 Marketable U.S. Treasury securities held in custody tor foreign and international accounts 651.516 650.613 653.295 646.761 648,245 644.307 653,897 648,245 Federal Reservenote slatemcn 35 Federal Reserve notes outstanding (issued to Banks) 525.782 526.396 527,330 528.534 529,350 525,220 525,843 529,350 36 LESS: Held by Federal Reserve Banks 103.958 103.096 104,571 106.567 107.022 107.657 105,486 107,022 37 Federal Reserve notes, net 421.824 423.300 422,759 421,967 422.329 417,564 420.357 422,329 Collateral held against notes, net 38 Gold certificate account 11.050 11.052 11,052 11,052 11,051 11,051 11,050 11.051 39 Special drawing rights certificate account 9.200 9.200 9,200 9.200 9.200 9,400 9,200 9.200 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. Treasury and agency securities 401.574 403.049 402.507 401.715 402.077 397,112 400,107 402.077 42 Total collateral 421.824 423.300 422,759 421,967 422.329 417,564 420,357 422.329 1. Some of the data in this table also appear in the Board's 11.4.1 (503) weekly statistical 3. Valued monthly al market exchange rates. release. For ordering address, see inside tronl cover. 4. Includes special investment account at the Federal Reserve Bank of Chicago in Treasury 2. Includes securities loaned-—fully guaranleed by U.S. Treasury securities pledged with bills malunng within nineiydays. Federal Reserve Banks—and includes compensation thai adjusts for Ihe effects of inflation on 5. Includes exchange-iranslation account reflecting the monthly revaluation al market the principal of inflation-indexed securities. Excludes securities sohl and scheduled to he exchange rates of foreign exchange commitments. bought back under matched sale-purchase transactions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Reserve Banks A11 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holding Millions of dollars Wednesday End of month Type of holding and maturity 1997 1997 Apr. 2 Apr. 9 Apr. 16 Apr. 23 Apr. 30 Feb. 28 Mar. 31 Apr. 30 1 Total loans 62 71 183 1,268 156 36 3,998 156 2 Within fifteen days' 20 -n 171 1.260 106 25 3,977 106 3. Sixteen days to ninety days 42 49 12 8 50 11 21 50 4 Total I'.S. Treasury securities" 405.267 412,267 414.231 422.227 452,891 390,797 405,561 452.891 5 Wilhin fifteen dj\s' 21.717 19,251 28,381 36.593 68.449 5,442 23,476 68.449 6 Sixteen days to ninety davs 94,717 95.929 S9.773 89,222 90.h60 98.72<i 92.382 90.660 7 Ninety-one days to one year 117.727 125.980 125.152 125.487 12(1.653 117.893 118.849 120.653 8 One year to hve years 92.382 92.382 91.797 91.797 94.000 91,130 92.381 94 000 9 Five years to ten years 36.608 36,608 37.011 37.011 37.012 36,607 36.608 37.012 10 More than ten years 42,117 42,117 42.117 42.117 42,117 41,000 42.117 42,117 11 Total federal agency obligations 3,725 3,665 2,769 4,018 2.959 2,011 3,090 2,959 12 Within title™ days' 1,741 1,681 951 2,200 1.141 320 1,378 1.141 I 3 Sixteen days to ninety days 760 760 604 604 604 455 500 604 14 Nineu-one days to one year 293 293 313 313 327 245 281 327 15 One year to rive years 460 460 430 430 416 510 460 416 16 Five years to ten years 447 447 447 447 447 457 447 447 17 More than ten years 25 25 25 25 25 25 25 25 ], Holdings under repurchase agreements arc classified ;i maturing within fifteen days in 2. Includes compensation that adjusts for ihe effects of inflation on the principal of accordance with maximum maturity of the agreements. inflation-indexed securities Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A12 Domestic Financial Statistics • July 1997 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 1996 1997 1993 1994 1995 1996 Hem Dec. Dec. Dec. Dec. Sept. Oct. Nov. Dec. Ian. Feb. Mar. Apr. Seasonall/ adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS- 1 Total reserves 60.55 59.40 56. *9 50.06 51.28 50.08 49.81 50.06 49.52 49.01 48.31 47.44 2 Nonborrowed reserves4 60.46 59.20 56.13 W)l 50.91 49.79 49.60 49/) 1 4947 48^97 48M6 47.17 3 Nonborrowed reserves plus extended credit 60.46 59.20 56.13 49.91 50.91 49.79 49.60 49.91 49.47 48 97 48.16 47.17 4 Required reserves 59.48 58.24 55.11 48.64 50.24 49.08 48.78 48.64 48.29 47.98 47.15 46.42 5 Monetary base6 386.88 418.48 434.52 452.67 445.81 447.08 449.37 452.67 454.14 456.28' 457.62 458.27 Not seasonally adjusted 6 Total reserves7 62.37 61.13 58.02 51.52 51.21 49.78 50.01 51.52 50.67 48.12 47.69 48.09 7 Nonborrowed reserves 62.29 60.92 57.76 51.37 50.84 49.49 49.79 51.37 50.62 48.08 47.53 47.83 8 Nonborrowed reserves plus extended credit5 62.29 60.92 57 76 51.37 50.84 49.49 49.79 51.37 50.62 48.08 47.53 47.83 9 Required reserves8 61.31 59.96 56.74 50.10 50.17 4X.78 48.97 50.10 49.44 47.09 46.53 47.08 10 Monetary base 390.59 422.51 439.03 456.72 445.49 445.38 449.20 456.72 455.55 452.56 455.26' 458.20 NOT ADJUSTED FOR CHANCES IN RESERVE REQUIREMENTS10 11 Total reserves" 62.86 61.34 57.90 51.24 51.00 49.55 49.76 51.24 50.64 48.04 47.54 47.88 12 Nonborrowed reserves 62.78 6i.n 57.64 51.09 50.63 49.26 49.54 51.09 50.60 48 00 47.39 47 62 13 Nonborrowed reserves plus extended credit5 62.78 61.13 57.64 51.09 50.63 49.26 49.54 51.09 50.60 48.00 47.39 47.62 14 Required reserves 61.80 60.17 56.62 49.82 49.96 48.56 48.72 49.82 49.42 47.01 46.38 46.87 15 Monetary base12 397.62 427.25 444.45 463.49 451 72 451.91 455.90 463.49 462.71 459.64 462.22' 465.10 16 Excess reserves13 1.06 1.17 1.28 1.42 1 04 .99 1.04 1.42 1.22 1.03 1.16 1.01 17 Borrowings from the Federal Reserve .08 .21 26 .16 37 .29 .21 .16 05 .04 .16 .26 1. Latest monthly and biweekly figures are available from the Board's H.3 (502) weekly statistical release. Historical data starting in 1959 and estimates of the effect on required reserves of changes in reserve requirements are available from the Money and Reserves Projections Section. Division of Monetary Affairs, Board of Governors of the Federal Reserve 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 changes in reserve requirements. (See also table 1.10.) 3. Seasonally adjusted, break-adjusted total reserves equal seasonally adjusted, breakadjusted required reserves (line 4) plus excess reserves (line 161. 4. Seasonally adjusted, break-adjusted nonborrowed reserves equal seasonally adjusted. break-adjusted total reserves (line 1) less total borrowings of depository institutions from the requirement. 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. wilh sustained liquidity pressures. Because there is not the same need to repay such 11. Reserve balance^ with Federal Reserve Banks plus vault cash used to satisfy reserve borrowing promptly as with traditional short-term adjustment credil. 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 oi (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 vaull 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 dHiiffffj^errpemn*c*e" bKe*»ttw\ti/*e**e»nn cmuirrrr-ei^nntt vvaauulht craicshh yannrdl rthhj-e* iammrtoHurnUt 'aJrp*pnlli*i»eHd ttro* cs^attiiscffvy ccnurrrpnt rr>^a><ira requirements. Since the introduction of contemporaneous reserve requirements in February requirements. 1984. currency and vaull 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 [Une 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 1995 1996 Dec. Dec. Apr. Seasonally adjusted Measures 1 Ml 1,129.8 1,150.7 1,129.0 1,081.0 1,079.7 1.080.6 1,075.2 1.065.2 2 M2 3 486 6 3,502.1 3,655.0 3,833.0' 3.849.7 3,866.0 3,882.4 3,904.1 3 M3 4,254.4 4,328.7 4,594.8 4,927.7' 4,950.1 4,987.3 5,015.7 5,052.9 4 L 5,167.8 5,309.8 5,699.8' 6,058.1' 6.073.6 6,124.5 6,167.7 n.a. 5 Debt 12.514.6 13.156.4 13,875.3 14,622.0' 14,663.3 14,722.9 14.786.3 n.a. MI components 6 Currency3 322.2 354.4 395.2 397.0 400.5 402.4 403.7 7 Travelers checks4 7.9 8.5 8.6 8.6 8.6 8.5 8.3 8 Demand deposits* 385.2 384.1 391.1 402.4 401.7 404.2 402.8 395.3 9 Other checkable deposits6 414.5 403.8 356.5 274.8 272.5 267.3 261.6 257.9 Nontransaction components 10 In M27 2,356.8 2,351.4 2,526.0 2,752.0' 2,769.9 2.785.4 2 807 2 2.838.9 11 In M3 only" 767.8 826.6 939.8 1,094.6' 1,100.4 1.121.3 1.133.3 1,148.8 Commercial banks 12 Savings deposits, including MMDAs. . . 785.2 752.4 776.0 903.9' 914.0 921.1 934.2 949.8 13 Small time deposits 468.3 503.2 576.0 592.0 592.5 593.4 595.8 598.5 14 Large time deposits10- " 271.9 298.4 344.7 410.4 410.3 416.(1 424.8 436.4 Thrift institutions 15 Savings deposits, including MMDAs.. . 434.0 397.2 361.1 367.1 368.5 369.4 370.1 373.5 16 Small time deposits 314.3 314.3 357.7 352.4 352.5 352.8 349.3 347.9 17 Large time deposits10 61.5 64.7 75.1 79.2 81.1 81.9 82.0 82.5 Monev market mutual funds 18 Retail 354.9 384.3 455.2 536,6 542.4 548.7 557.8 569.2 19 Institution-only 209.5 198.5 246.9 299.3 296.3 305.4 311.8 311.6 Repurchase agreements and Eurodollars 20 Repurchase agreements ~ 158.6 182.9 182.1 193.0' 196.4 200.3 198.7 200.3 21 Eurodollars1' 66.4 82.1 91.0 112.7' 116.4 117.8 116.1 117.9 Debt components 22 Federal debt 3,323.3 3,492.2 3,638.8 3.780.4 3,778.6 3,784.2 3,799.1 23 Nonfederal debi 9,191.2 9.664.2 10.236.6 10.841.6' 10.884.7 10,938.7 10,987.2 Not seasonally adjusted Measures 24 Ml 1.153.7 1.1744 1,152.8 1,103.0 1,086.0 1.066.4 1,067.2 1,071.7 25 M2 3,506.6 3,522.5 3,675.3 3,851.5 3.851.4 3,850.3 3,887.3 3,921.1 26 M3 4,274.8 4,348.8 4,614.3 4,944.7' 4.955.7 4.978.5 5.022.5 5,060.6 27 L 5,197.7 5,340.2 5,731.7' 6,086.4' 6,086.4 6.119.5 6,183.9 n.a. 28 Debt 12,516.6 13,158.0 13,875.8 14,621.3' 14,643.3 14.683.7 14,756.0 Ml components 29 Currency' 324.8 357.5 376.2 397.9 397.7 403.4 30 Travelers checks4 7.6 8.1 8.5 8.3 8.3 8.2 31 Demand deposits5 401.8 400.3 407.3 418.8 405.6 394.6 396.0 396.3 32 Other checkable deposits6 419.4 408.6 360.8 278.fl 276.5 265.8 262.0 263.9 Nontransaction components 33 In M27 2,352.9 2,348.1 2.522.6 2,748.5' 2,765.4 2,783.9 2.820.1 !.849.4 34 In M3 only8 768.2 826.3 939.0 1,093.2' 1,104.4 1,128.2 1.135.3 1.139.5 Commercial banks 35 Savings deposits, including MMDAs.. 784.3 751.7 775.3 902.9 908.9 915.4 935.1 951.3 36 Small lime deposits'1 466.8 501.5 573.8 589.8 591.7 593.8 597 3 600.3 37 Large time deposits10- " 272.0 298.9 345.7 411.9 406.7 414.3 424.0 432.4 Thrift institutions 38 Savings deposits, including MMDAs.. 433 4 396.8 360.8 366.7 366.5 367.1 370.5 374.0 39 Small time deposits9 313.3 313.2 356.3 351.1 352.1 353.1 350.2 349.0 40 Large time deposits10 61.5 64.8 75.4 79.5 80.4 81.6 81.8 81.7 Monev market mutual funds 41 Retail 355.0 385.0 456.3 538.1 546.2 554.6 567.1 574.8 42 Institution-only 210.6 199.8 248.2 300.5 304.8 315.5 316.4 309.2 Repurchase agreements and Eurodollar 43 Repurchase agreements12 156.6 179.6 178.0 187.8' 194.4 197.7 196.0 199.1 44 Eurodollars12 67.6 83.2 91.8 113.5 118.1 119.1 117.2 117.1 Debt components 45 Federal debt 3,329.5 3,499.0 3 645 9 3,787.9 3,773.4 3,783.0 3,815.4 n.a. 46 Nonfederal debt 9,187.1 9,659.0 10.229.8 10.833.4' 10.869.9 10,900.8 10,940.6 n.a. Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Financial Statistics • July 1997 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 (!) 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 v<ith 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 Keogli owed to depository institutions, the U.S. government, and foreign banks and official institubalances at depository institutions and money market lunds- 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 tune deposits (in amounts of $100,000 or more) money fund balances. issued by all depository institutions, (2) balances in institutional money funds (money funds S. 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. i;ivings 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 1996 1997 Item 1995 1996 Dec. Dec. Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar.' Apr. Interest rates (annual effective yields) INSURED COMMERCIAL BANKS 1 Negotiable order^of withdrawal accounts2 1.91 n.a. 1.91 1.90 1.91 1.98 n.a. n.a. n.a. n.a. n.a. 2 Savings deposits"' 3.10 n.a. 2.86 2.84 2.85 2.85 n.a. n.a. n.a. n.a. n.a. Interest-bearing time deposits with balances of less than $100,000, by maturity 3 7 to 91 days * 4.10 4.03 4.17 4.11 4.11 4.08 4.03 4.03 4.05 4.02 4.01 4 92 to 182 days 4.68 4.63 4.60 4.61 4.60 4.60 4.63 4.63 4.62 4.67 4.72 5 183 days to 1 year 5.02 5.00 5.00 5.04 5.02 4.99 5.00 5.01 5.02 5.08 5.13 6 More than 1 year to 2'/2 years 5.17 5.22 5.25 5.29 5.27 5.23 5.22 5.25 5.27 5.36 5.44 7 More than 2]A years 5.40 5.46 5.50 5.54 5.52 5.48 5.46 5.49 5.51 5.61 5.70 BIF-INSURED SAVINGS BANKS4 8 Negotiable ordcr^of withdrawal accounts" 1.91 n.a. 1.81 1.84 1.90 1.92 n.a. n.a. n.a. n.a. n.a. 9 Savings deposits"1 2.98 n.a. 2.86 2.84 2.80 2.82 n.a. n.a. n.a. n.a. n.a. Interest-bearing time deposits with balances of less than $100,000, by maturity 10 7 to 91 days 4.43 4.66 4.64 4.59 4.64 4.67 4.66 4.75 4.73 4.78 4.81 11 92 to 182 days 4.95 5.02 5.06 5.11 5.08 5.03 5.02 5.05 5.04 5.05 5.12 12 183 days to 1 year 5.18 5.28 5.26 5.33 5.32 5.29 5.28 5.31 5.31 5.34 5.39 5.33 5.53 5.59 5.61 5.60 5.56 5.53 5.58 5.59 5.66 5.72 14 More than 2]/l years 5.46 5.72 5.80 5.82 5.79 5.76 5.72 5.77 5.78 5.81 5.85 Amounts outstanding (millons of dollas) INSURED COMMERCIAL BANKS 15 Negotiable order of withdrawal accounts" 248,417 n.a. 190,696 190.033 188.803 167,503 n.a. n.a. n.a. n.a. n.a. 776,466 n.a. 860.719 852.336 859.524 896.820 n.a. n.a. n.a. n.a. n.a. 17 Personal 615,113 n.a. 683.081 675.576 680.596 713,672 n.a. n.a. 18 Nonpersonal 161,353 n.a. 177.638 176.759 178.928 183,148 n.a. n.a. n.a. n.a. n.a. Interest-bearing time deposits with balances of less than $100,000, by maturity 19 7 to 91 days 32 170 32 931 32 907 32 691 32 428 32 044 32 931 32 799 32 796 34 979 34 669 20 92 to 182 days 93,941 92,301 91,235 91.167 91,195 92,503 92,301 94,955 95,235 94,010 92,515 21 183 days to 1 year 183,834 201,449 200,038 200.008 199,397 201,281 201,449 201,491 202,329 202,805 205,864 208,601 213,198 209,618 211.234 213,012 214,405 213,198 213,875 212.970 213,921 215,925 23 More than 2'/^ years 199,002 199,906 199,755 198,324 199.126 198.539 199.906 198,077 197,958 197,061 196,238 150 067 15] 275 151 048 151 309 151 276 151 389 151 275 150 442 150 356 150 467 149 610 BIF-INSURED SAVINGS BANKS4 25 Negotiable order of withdrawal accounts2 11,918 n.a. 10.682 9,838 9,938 9,710 n.a. n.a. n.a. n.a. n.a. 68.643 n.a. 67,431 67,980 67,975 68,102 n.a. n.a. n.a. n.a. n.a. 27 Personal 65,366 n.a. 63,927 64,425 64,326 64,369 n.a. n.a. n.a. n.a. n.a. 3 277 3 504 3 555 3 649 3 733 Interest-bearing time, deposits with balances of less than $100,000, by maturity 29 7 to 91 days ' 2,001 2,428 2,316 2.540 2.503 2,405 2,428 2,542 2,535 2,561 2,550 30 92 to 182 days 12,140 13,013 13,440 13,474 13.300 13,074 13,013 13,112 13.099 12,749 12,716 11 183 days to 1 year 25,686 28,792 29,339 29,383 29.659 29,329 28,792 29,503 29,510 29,572 29,562 32 More than 1 year to 2'/2 years 27,482 29,095 26,199 27,192 28,063 28,573 29,095 29,163 29,699 30,164 30,702 33 More than 2]/l years 22,866 22,254 22,477 22,348 22,156 21,823 22.254 21,828 21.877 21,977 22,172 34 IRA and Keogh plan accounts 21,408 21,365 21,052 21,002 20,983 20,627 21,365 20,405 20,423 20,489 20,496 1. BIF, Bank Insurance Fund. Data in this table also appear in the Board's H.6 (508) 2. Owing to statistical difficulties associated in part with the implementation of sweep Special Supplementary Table monthly statistical release. For ordering address, see inside accounts, estimates for NOW and savings accounts are not available beginning December fronl cover. Estimates are based on data collected by the Federal Reserve System from a 1996. stratified random sample of about 425 commercial banks and 75 savings banks on the last day 3. Includes personal and nonpersonal money market deposits. of each month. Data are not seasonally adjusted and include IRA and Keogh deposits and 4. Includes both mutual and federal savings banks. foreign currency-denominated deposits. Data exclude retail repurchase agreements and deposits held in U.S. branches and agencies of foreign banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Financial Statistics • July 1997 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1 A. All commercial banks Billions of dollars Monthlyaverages Wednesday figures Account 1996 1996 1997 1997 Apr. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Apr. 9 Apr. 16 Apr. 23 Apr. 30 Seasonally adjusted Assets 1 Bunk credit 3,667.6 3718 ' 3,744.5 3,772.5 3,808.0 3 847 1 3,869.0 3,905.0 3,888.4 3.902.1 3,903.9 3.935.3 2 Securities in bank credit 990.4 969.2 980.1 989.4 1,005.0 1.020.8 1.014.6 1,033.7 1,032.9 1,035.8 1.031.6 1.038.6 3 U.S. government securities 707.8 703.4 707.2 706.5 706.7 704.1 708.3 722.5 720.2 720.5 721.8 729.6 4 Other securities 282.6 265.9 272.9 282.9 298.3 316.7 306.4 311.2 312.8 315.3 309.8 309.1 5 Loans and leases in bank credit- . . . 2.677.2 2,748.9 2,764.4 2,783.2 2,803 0 2,826.? 2,854.4 2,871.3 2.855.5 2.866.4 2,872.3 2,896.7 6 Commercial and industrial 732.1 770.6 774.7 783.9 787.1 796.6 802.1 808.9 803.4 810.6 810.1 814.0 7 Real estate 1.100.1 1,115.6 1.121.5 1,127.8 1.134.4 1,140.4 1,153.8 1.162.6 1.160.4 1.160,1 1,163.1 1.168.1 8 Revolving home equity 80.1 83.3 84.3 85.3 85.7 86.5 87.9 89.2 88.7 89.1 89.4 89.8 9 Other 1.020.0 1,032.2 1,037,3 1,042.5 1,048,7 1,053.8 1,065.9 1,073.4 1,071.7 1.071,0 1,073.7 1.078.3 10 Consumer 504.7 519.5 5217 522.7 523.2 523.0 5217 5195 518.6 519.2 519 1 521 1 11 Security3 85.0 76.9 77.9 79.7 83.4 84.7 88.8 89.5 86.8 87.7 89.8 95.1 12 Other loans and leases 255.3 266.4 268.6 269.0 275.0 281.7 288.0 290.9 286.3 288.7 290.2 298.4 13 Interbank loans 208.9 204 6 212.2 204.1 197.9 2O4.0 219.7 215.9 211.5 213.1 222.8 214.0 14 Cash assets4 221.4 226.1 232.7 230.9 231.1 231.0 236.3 242.5 243.1 233.8 248.3 247.0 15 Other assetss 240.6 253.3 259.8 269.0 262.0 273.1 282.1 281.9 284.1 280.0 281.4 282.2 16 Total assets6 4,281.4 4345.5 4392.5 4,419.9 4,442.9 4,499.2 4351.2 4389.1 4370.9 4372.8 4.600.1 4,622.1 Liabilities 17 Deposits 2.712.2 2 774 2 2.804.8 2.832.0 2,846.4 2,872.0 2,906.4 2,945.0 2,936.5 2,965.5 2,934.5 2.948.3 ! 8 Transaction 764.6 712.7 715.1 712.9 709.6 701.0 698.5 701.8 684.3 704.5 701.7 719.2 19 Nontransaction 1,947.6 2,061.5 2,089.7 2,119.1 2,136.7 2.171.0 2,207.9 2,243.2 2,252.3 2,261.0 2,232.8 2,229.1 20 Large time 433.7 479.6 489.4 507.7 518.7 535.2 541.8 559.2 559.9 561.2 559.1 560.3 21 Other 1.513.9 1.581.9 1.600.3 1,611.5 1,618.0 1,635.8 1.666.1 1.684.0 1,692.3 1.699.8 1.673.7 1,668.8 22 Borrowings 706.4 689.4 709.2 707.2 727.8 742.9 759.2 773.6 767.4 766.9 777.6 791.2 23 From banks in the US 301.4 292.0 303.2 306.9 302 2 307.3 315.7 315.5 323.8 309.5 312.6 319.4 24 From others 405.0 397.4 406.0 400.3 425.6 435.7 443.4 458.1 44 \b 457.4 464.9 471.7 25 Net due to related foreign offices 258.0 244.2 238.1 231.4 222 9 218.6 210.4 212.9 215.4 191.9 226.6 217.9 26 Other liabilities 226.2 242.7 253.7 262.6 272X) 289.8 280.4 270.3 273.7 267.5 268.5 272.2 27 Total liabilities 3.902.8 3,950.6 4,005.9 4,033.2 4,069.0 4,123.4 4,1563 4,201.8 4.192.9 4.191.7 4.207.1 4,229.7 28 Residual (assets less liabilities)7 378.6 395.0 386.6 386.7 373.9 375.8 394.9 387.3 378.0 381.0 393.0 392.4 Not seasonally adjusted Assets 29 Bank credit 3,667.3 3,719.8 3.748.8 3.771.5 3.806.3 3.840.0 3,859.6 3,904.6 3,884.1 3,904.5 3,902.2 3,938.0 30 Secunttes in bank credit 992.6 969.1 978.7 975 4 996.1 1.017.4 10174 1,036.3 1.038.8 1,038.0 1,031.2 1.040.8 31 U.S. government securities 710.5 703.9 707.6 702.3 700.7 702.8 712.9 725.2 724.1 724.3 723.0 730.9 12 Other securities 282.0 265.2 2712 273.1 295.5 3146 304 6 311.1 314.7 313.6 308.3 309.9 33 Loans and leases in bank credit: . . 2,674.7 2,750.7 2,770.0 2,796.1 2,810.2 2.822.6 2,842.1 2,868.3 2,845.3 2.866.5 2,871.0 2,897.2 34 Commercial and industrial 738.6 767.0 772.8 780.9 784.8 796.2 804.7 816.2 807.5 818.0 818.7 823.5 35 Real estate 1,095.9 1,118.7 1,125.8 1,132.7 1,136.4 1.137.3 1,147.9 1,158.1 1.155.6 1,156.5 1,158.4 1,163.6 36 Revolving home equity 79.5 83.9 84.7 85.5 85.7 86.1 87.1 88.5 87.6 88.3 88.9 89.5 37 Other 1,016.4 1.034.8 1.041.1 1,047.3 1,050.7 1,051.2 1.060.8 1,069.6 1,068.0 1,068.3 1,069.5 1.074.1 38 Consumer 502.4 5iy.7 522.1 527.5 528.8 523.6 517.1 517.0 514.1 516.4 518.0 520.4 39 Security-1 86.2 76.7 79.3 81.0 82.6 85.8 88.4 90.0 85.2 89.7 90.7 96.5 40 Other loans and leases 251.7 26H.6 270.0 274.0 277.6 279.6 284.1 287.0 283.0 285.9 285.1 293.2 41 Interbank loans 3)7.8 199.4 216.5 213.3 207.6 208.3 216.2 214.3 216.3 216.1 214.1 207.9 42 Cash assets4 217.2 227.1 239.7 246.9 241.4 232.2 227.3 237.9 231.9 235.0 238.2 247.6 43 Other assets-* 238.1 250.8 258.6 269.0 262.6 272.9 277.4 279.5 279.3 277.2 276.4 285.0 44 Total assets6 4.273.4 4,340.5 4,406.8 4,444.1 4,462.1 4,497.5 43243 4380.1 43553 4376.7 4374.7 4,622.2 Liabilities 45 Deposits 2,712.7 2,779 0 2 821 8 2,863.9 2,850.3 2,857.2 2,895.2 2 942 3 2 947 1 2978 9 2 907 1 2 936 9 46 Transaction 768.4 710.4 725.2 745.7 721.0 694.1 686.3 705.0 690.7 7243 687.8 mo 47 Nontransaction 1.944.3 2.068.6 2,096.5 2.118.2 2.129.3 2.163.1 2,208.8 2.237.3 2.256.3 2,254.6 2.219.3 2,218.9 48 Large time 431.7 485.0 493.9 507.8 515.4 533.1 541.3 555.1 552.6 555.1 556.5 559.6 49 Other 1 512.6 1.583.6 1,602.6 1,610.3 1,613.9 1,629.9 1,667.6 1,682.2 1,703.7 1.699.5 1,662.8 1.659.2 50 Borrowings 706.2 681.8 699.0 699.5 722.0 727.1 738.9 774.1 748.9 769.1 787.2 798.6 51 From banks in the US 300.8 285.4 297.0 301.6 296.4 295.3 303.8 314.1 311.8 311.3 312.6 320.6 52 From others 405.4 3964 402.0 397.9 425.7 431.8 435.2 459.9 437 1 457.8 474 7 478.0 53 Net due to related foreign offices 255.8 245.8 235.2 230.1 233.3 229.4 219.3 211.2 203.9 182.4 227.9 229.5 54 Other liabilities 226.0 241.8 257.5 258.5 269.2 291.7 278.5 270.6 274.2 267.4 266.9 274.8 55 Total liabilities 3,900.8 3,948.4 4,013.4 4,051.9 4,074.8 4,105.4 4,131.9 4.198.1 4,174.1 4,197.9 4,189.1 4X39.7 56 Residual (assets less liabilities)1 372.6 392.0 393.4 392.1 387.3 392.1 392.6 382.0 381.4 378.8 385.6 382.4 MEMO 57 Revaluation gains on off-balance-sheet items1* n.a. 62.4 65.5 69.3 89.0 102.8 92.0 91.9 96.6 93.3 88.0 91.3 58 Revaluation losses on off-balancesheet items* na 58.3 60.4 64.3 84.8 98.1 86.3 87.2 90.5 89.2 83.6 87.6 Footnotes appear on page A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities A17 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'—Continued B. Domestically chartered commercial banks Billions of dollars Monthlyaverages Wednesday figures Account 1996 1996 1997 1997 Apr. Oct. Nov. Dec. Jan. Feb. Mar. Apr Apr. 9 Apr. 16 Apr. 23 Apr. 30 Seasonally adjusted Assets 1 Bank credit 3,213.9 3,237.7 3,250.7 3,267.4 3,291.1 3,314.5 3,340.7 3,367.5 3,360.2 3,365.4 3.369.2 3,379.6 2 Securities in bank credit 844.5 820.7 822.3 824.9 834.9 844.2 842.3 856.2 857.4 859.2 857.1 854.3 3 U.S. government securities 635.2 620.7 620.1 618.9 624.9 618.9 625.0 635.0 633.4 635.0 635.9 637.1 4 Other securities 209.3 199.9 202.1 206.0 209.9 225.3 217.4 221.2 224.0 224.1 221.1 217.2 5 Loans and leases in bank credit- 2,369.5 2.417.0 2,428.4 2.442.5 2.456.3 2.470.3 2,498.4 2,511.3 2,502.8 2,506.3 2,512.2 2,525.3 6 Commercial and industrial 545.9 564.8 566.6 570.8 572.2 578.4 584.3 590.2 586.1 591.0 590.8 594.2 7 Real estate 1,066.4 1,082.8 1,089.1 1,095.8 1,102.4 1,108.0 1,121.8 1,130.6 1,128.7 1,128.1 1,130.8 1,136.3 8 Revolving home equity 80.1 83.3 84.3 85.3 85.7 86.5 87.9 89.2 88.7 89.1 89.4 89.8 9 Other 986.3 999.5 1.004.8 1.010.5 1.016.8 1,021.5 1,033.9 1,041.4 1.040.0 1,038.9 1,041.4 1.046.6 10 Consumer 504.7 519.5 521.7 522.7 523.2 523.0 521.7 519.5 518.6 519.2 519.1 521.1 11 Security1 52.8 44.0 42.9 43.6 45.3 45.1 49.3 46.5 48.4 45.1 47.0 44.7 12 Other loans and leases 199.6 206.0 208.2 209.6 213.2 215.9 221.2 224.5 221.0 222.9 224.5 229.0 13 Interbank loans 186.8 184.0 192.0 182.3 174.6 181.6 194.8 195.1 192.1 197.4 200.9 190.3 14 Cash assets4 195.0 196.4 201.8 199.8 199.9 197.8 203.5 209.3 210.1 201.7 214.3 212.5 15 Other assets5 195.8 219.6 223.6 232.1 223.3 231.0 239.9 241.5 242.8 240.6 240.4 242.0 16 Total assets 1714 5 3,781.1 3,811.6 3,825.2 3.832.9 3.869.1 3,923.2 3,957.4 3,949.2 3,949.1 3,968.8 3,968.3 Liabilities P Deposits 2,541.1 2,576.8 2,600.9 2,612.5 2,619.4 2.631.2 2,659.2 2,682.2 2,674.6 2,700.4 2,671.4 2,683.5 754.3 702.3 704.9 702.7 699.2 691.1 687.7 690.7 673.0 693.4 690.4 708.2 19 Nontransaction 1,786.8 1,874.5 1.896.0 1,909.8 1,920.2 1,940.1 1,971.5 1,991.5 2,001.6 2,007.0 1,980.9 1,975.2 20 Large time 275.7 295.2 299.4 302.6 302.3 306.6 308.5 311.3 312.3 311.5 310.1 311.8 21 Other 1,511.1 1,579.3 1,596.6 1,607.3 1,617.9 1.633.4 1.663.1 1,680.2 1,689.2 1,695.5 1,670.8 1,663.5 22 Borrowings 577.8 572 5 584 1 585.9 597.3 599.0 617.9 632.0 632.1 622.0 638.1 641.9 23 From banks in the U.S 264.5 260.2 270.5 274.5 274.5 273.4 280.9 282.3 289.8 273.8 282.9 285.8 24 From others 313.3 312.3 313.6 311.5 322.8 325.6 337.0 349.7 342.2 348.2 355.1 356.1 25 Net due to related foreign offices 85.8 76.5 71.0 69.1 72.0 78.2 68.2 77.5 74.4 65.3 89.7 84.6 26 Other liabilities 152.8 168.1 173.8 179.7 182.1 190.3 187.1 179.0 182.8 178.6 178.9 175.4 27 Total liabilities 3,357.6 3.393.9 3.429.7 3,447.3 3,470.8 3,498.7 3,532.4 3,570.6 3.563.8 3,566.3 3,578.1 3,585.3 28 Residual (assets less liabilities)7 376.9 387.2 381.9 377.9 362.1 370.4 390.8 386.7 385.4 382.8 390.7 382.9 Not seasonally adjusted Assets 29 Bank credit 32146 1240 7 1 255 4 1 270 4 1292 4 1 306 7 3,331.4 3,366.9 3,353.8 3,368.7 3,368.3 3,382.4 30 Securities in bank credit 847.1 820.7 821.2 817.4 830.1 839.8 844.4 858.2 859.9 862.3 857.7 855.5 31 U.S. government securities 638.7 621.8 620.6 617.2 618.0 615.8 626.6 638.2 637.6 639.6 638.8 638.5 32 Other securities 208.4 198.8 200.7 200.2 212.1 224.0 217.7 220.0 222.3 222.7 218.9 217.1 33 Loans and leases in bank credit- 2,367.5 2,420.0 2,434.1 2,453.0 2,462.3 2,466.9 2,487.0 2,508.7 2,493.9 2,506.4 2,510.7 2,526.9 34 Commercial and industrial 551.8 562.4 564.9 567.4 570.0 578.1 587.3 596.8 590.4 597.4 598.3 602.8 35 Real estate 1,062.7 1,085.8 1.092.9 1.100.5 1.104.4 1.104.9 1,115.8 1,126.6 1.124.2 1,124.9 1,126.6 1.132.3 36 Revolving home equity 79.5 83.9 84.7 85.5 85 7 86.1 87.1 88.5 87.6 88.3 88.9 89.5 37 Other 983.2 1,001.9 1.008.2 1,015.1 1,018.8 1,018.8 1.028.8 1.038.1 1,036.6 1,036.6 1,037.7 1,042.8 38 Consumer 502.4 519.7 522.1 527.5 528.8 523.6 517.1 517.0 514.1 516.4 518.0 520.4 39 Security3 51.9 41.8 44.3 44.8 44.5 46.2 48.9 47.0 46.8 47.1 47.9 46 1 40 Other loans and leases 196.7 208.4 209.9 212.8 214.6 214.1 217.8 221.3 218.5 220.6 219.8 225.2 41 Interbank loans 185.8 178.7 196.3 191.6 184.3 186.0 191.3 193.5 196.9 200.4 192.2 184.1 42 Cash assets4 191.4 197.0 208.5 2147 209.8 199.8 195.1 205.5 200.4 203.5 205.2 213.7 43 Other assets5 194.9 217.3 222.1 231.3 224.6 229.9 235.8 240.6 241.1 239.3 236.9 244.7 44 Total assets6 3.729.8 3,777.3 3,825.8 3,851.5 3.855.4 3,866.7 3,897.8 3,950.6 3,936.2 3,955.9 3,946.7 3,968.9 Liabilities 45 Deposits 2,545.7 2,576.3 2.615.3 2,641.7 2,623.2 2.619.5 2,648.2 2,686.0 2,694.5 2.722.8 2,649.7 2.675.1 46 Transaction 758.5 700.0 715.1 734.9 710.6 684.0 675.8 694.4 680.1 713.8 677.2 707.1 47 Nontransaction 1 787 2 1 876 3 1 900 2 1 906.8 1,912.7 1,935.5 1,972.5 1,991.6 2.014.4 2,009.0 1,972.6 1,967.9 48 Large time 277.0 295.0 300.0 299.3 301.0 309.4 308.4 312.7 313.1 312.6 312.2 314.2 49 Other 1,510.2 1,581.3 1.600.2 1,607.6 1,611.7 1,626.1 1.664.0 1,678.9 1,701.3 1,696.4 1.660.4 1,653.7 50 Borrowings 576.0 568.2 577.1 579.4 594.8 589 7 603.6 610 0 611 2 620.0 644.0 648.1 51 From banks in the U.S 263.8 256.0 264.2 268.5 267.6 263.7 270.5 280.8 277.5 273.7 283.9 287.6 52 From others 312.1 312.1 313.1 310.9 327.2 126 0 3310 349 2 133.7 146.2 360.1 360.6 53 Net due to related foreign offices 85.8 78.2 68.4 66.2 73.6 79.9 72.5 78.8 71.4 61.5 93.8 92.2 54 Other liabilities 152.9 168.8 176.9 177.0 180.1 189.7 185.4 179.5 183.8 179.1 178.2 176.7 55 Total liabilities 3,360.4 3,391.4 3,437.9 3,464.3 3,471.8 3,478.9 3,509.7 3,574.2 3,560.9 3,583.4 3.565.7 3,592.1 56 Residual (assets less liabilities)7 369.4 386.0 387.9 387.2 383.6 387.8 388.1 376.4 375.3 372.6 380.9 376.8 MEMO 57 Revaluation gains on off-balance-sheet items* n.a. 32.5 33.1 35.9 47.4 55.8 48.9 49.5 52.3 51.7 47.4 47.7 58 Revaluation losses on off-balancesheet items8 n.a. 28.9 28.9 31.8 44.0 50.9 43.2 44.6 47.0 47.1 42.3 43.1 59 Mortgage-backed securities9 n.a. 236.8 238.3 241.4 244.0 243.6 245.8 249.3 248.2 249.0 250.3 250.2 Footnotes appear on page A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Financial Statistics • July 1997 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'—Continued C. Large domestically chartered commercial banks Billions of dollars Monthly averages Wednesday figures Account 19% 1996 1997 1997 Apr. Oct. Nov. Dec. Jan, Feb. Mar. Apr. Apr. 9 Apr. 16 Apr. 23 Apr. 30 Seasonally adjusted As lets 1 BanV credit 1.845.1 1.826.7 1.831.0 1.839.9 1.854,5 1.873.3 1,884.4 1.901.1 1,897.0 1,901.0 1,902.9 1 906.0 2 Securities in hank credit 435.8 408.9 411.9 414.5 420.5 430.9 424.8 435.2 436.1 438.9 436.4 432.2 3 U.S. government securities 306.6 289.2 289.9 288.4 291.3 286.1 289.4 297.9 296.0 298.4 299.4 299.1 4 Trading account 19.8 21.2 21.5 19.4 17.2 16.1 17.7 20.1 21.0 20.2 19.8 19.7 5 Investment account 286.8 268.0 268.4 269.0 274,1 269.9 271.6 277.8 275.0 278.2 279,6 279.5 6 Other securities 129 3 119.7 122.0 126.1 129.1 144.8 135.4 137.4 140,2 140,5 137 0 133.1 7 Trading accounl 58.9 55.1 57.8 60.7 64,6 79.9 69.8 72.1 75,0 75.5 71.3 67.7 8 Inveslmeni account 70.4 64.6 64.2 65.4 64.6 64.9 65.6 65.3 65,1 65,0 65.7 65.4 4 Stale and local government. . 21.1 20.2 20.2 20.3 20.5 21.1 20.7 20.7 20,5 20,5 20.8 20.9 10 OlhiT 49.2 44.4 44.0 45.1 44.1 43.8 44.9 44.6 44,6 44,4 44.9 44.4 11 Loans and leases in bank credii: . . . 1.409.2 1.417.8 1.419.1 1 425.4 1.434.0 1,442.4 1,459.6 1,465.9 1,460,8 1.462,1 1.466.6 1.473.9 12 Commercial and industrial 373.8 385.7 385.8 388.1 388.6 392.8 397.0 401.4 398.1 402.4 401.8 404.3 13 Real estate 570.2 563.7 565.1 5674 567.6 568.4 573.9 577.0 576,9 575.3 576.3 579.5 14 Revolving home equity 54.7 55.4 559 56,5 56.5 56.9 57.6 58.3 58,1 iR.3 58.4 58.6 15 Other 515.5 508.3 509.2 510.9 511.1 511.5 516.3 518.6 518.8 517.1 517.8 520.9 16 Consumer 280.7 287.1 286.8 287.1 290.2 291.9 290.8 289.3 288.7 289.5 289.2 x» 1 17 Security' 47.4 39.1 37 9 38.5 40.4 40.0 43.9 41.4 43.4 39.8 42,0 39.6 IS State and local government 11.3 11.0 11.3 11.4 11.2 11.2 11.1 10.9 109 10.8 10.8 10.9 19 All other 125.7 131.2 132.3 132.9 136.0 138.2 142.9 145.9 142.8 144.3 146.5 149.5 20 Interbank loans 131.9 133.5 1 W.9 127.6 120.5 124.5 133.4 139.9 138.4 139.9 147.1 1.35.5 2 I Cash assets-1 129.7 129.6 133.8 131.9 131.7 128.7 134.1 138.6 140.5 131.3 143.7 140.4 ''"' Other assets'" 147.1 164.0 167.4 174.3 167.0 172.8 175.0 175.9 175.0 174.7 175.2 178.4 23 Total assets' 2,216.9 2,217.7 2.235.2 2.237.7 2.238.2 2.263.9 2,291.4 2319.8 2315.0 2,311.2 2333.2 2324.6 Lnibitiruw 24 Deposits 1.345.3 1.371.1 1.382.6 1,390.0 1.382.5 1.380.5 1.388.2 1.399.8 1.394.5 1.409.3 1.397.1 1,399.0 25, Transaction 426.1 390.6 391.2 390.0 386.9 377.4 370.9 370.6 360.2 370.2 372.0 380.7 2h Non transact ion 919.2 9804 991.4 1.(01.0 995.6 1,003.1 1,017,3 1.029.2 1.034.3 1.039.1 1.025.1 1.018.3 27 Lame time 128.0 152.5 154.2 155.9 154.2 157.0 157.9 161.9 162.6 162.8 160.7 161,9 2K Olher 791.2 827.9 837.2 844.1 841.4 846.1 859.4 867.3 871.8 876.3 864.4 856.4 29 Borrowings 436.2 410.0 419.0 419.4 429.5 429.7 443,0 453.9 455.3 448.1 458.7 456.9 30 From banks in the U.S 185.5 173.4 183.2 189.2 188.1 187.2 193,3 1947 1(P6 190.2 193.9 193.2 31 From others 250.7 "•36 6 235.9 ~>M\2 241.4 242.5 249,8 259.2 252.7 257.9 264.8 263.7 32 Net due to related foreien offices 80.8 73.2 68.8 66.4 68.0 74.3 64,3 73.1 69,7 61.1 85.7 79.9 33 Other liabilities 126.4 140.1 145.5 151.3 154.9 163.1 160 1 153.8 157.5 154.0 153.0 150.6 34 Total liabilities 1.988.6 1.994.3 2.016.0 2.027.1 2,034.8 2,047.6 2.055.6 2,080.6 2.077.0 2,072.5 2,094.5 2.086.4 35 Residual (assets less liabilities)7 228.4 223.4 219.2 210.6 203.4 216.3 235.8 239.2 238.0 238.7 2.38,7 238,2 Not seasonslly adjuste< Assets 36 Bank credit 1.845.1 1,827.2 1.834.2 1,840.1 1,857.7 1.871.0 1.879.6 1,900.2 1.892.2 1,902.9 1.899.8 1,908.7 37 Securities in bank credit 434.7 410.0 412.5 407.4 417.2 428.2 425.4 433.8 436.1 438.2 432.5 430.1 306.6 291.4 292 1 287.1 285.6 284.4 ^89 9 "•97 9 297.8 299 5 •*98 0 297.6 39 Trading account 20.0 "22JI "217 ~18J 163 16.3 18.8 20.2 22.0 211) 19^2 19.0 40 Investment account 286.6 269.4 269,4 269.0 269.3 268,1 271.1 277.7 275.8 278.5 278.7 278 5 41 Other securities 128.1 118.6 120.4 120.2 131.6 143,8 135.5 135.8 138.3 138.7 134.6 132.6 42 Trading account 58.1 53.5 55.4 54.2 66.5 78.8 70.2 70.9 73.4 74.0 69.4 67.6 43 Investment account 70.0 65.1 65 0 66.0 65.1 65.0 65.3 64.9 64.9 64.7 65.1 65.0 44 State and local government. . 21.3 20.2 20.3 20.4 20.5 21.1 207 20.8 20.6 20 7 21.0 21.1 45 Olher 48.7 44.9 44.7 45,6 44 5 43.9 44.5 44.1 44.1 44.0 44.1 43.9 4fi Luans and leases in bank credit . . . 1.410.3 1.417.2 1.421.7 1.432,8 1.440.5 1.442.9 1.454.2 1,466.4 1,456.2 1,464.7 1.467.2 1.478.6 47 Commercial and industrial 378.5 383.9 384.8 385,1 3864 392.8 399.5 406.8 401.7 407.6 407.6 411.3 4S Real estate 569 1 564.4 566.7 570,1 S70.0 567 9 571 0 575.6 575.7 574.7 574 7 578.(1 4^ Revoh ing home equity 54.4 55.7 56.2 56,6 56.6 56.7 57.1 57.9 57.3 57.8 58.2 58.5 50 Olher ' 514.7 508 7 510.4 513,6 513.4 5112 513.9 517.7 518.4 516.9 516.5 519 5 51 Consumer 278.9 286.6 286.5 291.0 294 8 291.7 288.0 287.3 285.6 287,2 287.6 289.0 52 Security' 48.5 39.0 39.0 39.6 39.5 40.9 43,6 41.9 41.3 41,7 43.2 41.5 53 Slale and local government 11.3 11.1 11.3 11.4 11.1 11.1 11.1 10.8 10.9 10,7 10.8 10.9 54 All olher 124.0 132.2 133.3 135.6 138.7 138.4 141.1 1440 I4I.0 142,8 143.4 147.8 55 Interbank loans 130.4 128.0 138.4 133.8 129.0 126.8 130.0 137.9 133,9 139,4 143.2 136.4 S6 Cash asseis4 127.5 129.1 137.8 143.2 139.5 131.4 127.7 136.1 I'2.1 133.3 138.1 142.0 57 Other assets5 147.0 162.0 165.4 172.9 167.4 170.4 171.8 176.0 174.9 174.9 174.4 179.8 58 Total assets'1 2.213.4 2,210.2 2,239.7 2,253.9 2,258.3 2,264.3 2273.6 2.114.6 2.297.5 2,315.0 2320.0 2331.4 Liabilities S<-) Deposits 1.347,4 1.368.2 1.389.5 1,406.1 1.388.7 1.378.5 1,382.1 1.401.3 1.401.2 1.423.8 1,382.8 1.396.9 60 Transaction 429.8 387.8 397,8 411.2 '394.5 .374.1 .363.3 '.374/) 36 U 385.4 364.8 384.3 61 N on transact ion 917.6 980.5 991,7 994.8 994.2 1.004.5 1.018.8 1,027.4 l.04f).l 1.038 4 1.018.0 1.012.6 6^ L artJe time 128.3 151.9 154.5 153.5 154.1 159.2 157.0 162.3 16~M) 162.9 162.0 163.6 63 Olher 789.4 8285 837.2 841.3 840.1 845.2 861.8 865.0 H1HA 875.5 856/) 849.0 64 Borrowings 437.0 405.5 413.8 413.4 425.3 421.8 434.5 454.7 442,2 450.0 465.2 463.7 65 From banks in the U.S 185.9 169.8 178.7 183.9 181.5 179.4 186.8 194.(1 194.5 190.8 194.8 195.1 66 From nonbanks in the US 251.1 235.7 235.1 229.5 243.8 242.4 247.7 260.7 247 7 259.2 270.5 268.6 67 Net due to related foreign offices 80.7 74.8 66.2 63.4 69.7 76.0 68,6 74.4 66.7 57.3 89.8 87.6 68 Other liabilities 126.2 140.8 148.8 149.0 152,7 162.1 158.0 154.1 158.3 154.2 152.1 151.6 69 Total liabilities 1.991.4 1,989.3 2,018.3 2,031.9 2.036.4 2.038.4 2,043.2 2,084.5 2,068.2 2.085.2 2,089.9 2,099 Jt 70 Residual (assets less liabilities)7 222.0 220.9 221.4 222.0 221.9 225.9 230,4 230.1 229.3 229.8 230.1 231.6 MEMO 71 Revaluation gains on off-balance-sheet items* n.a. 32.5 33.1 35.9 47.4 55.8 48.9 49.5 52.3 51.7 47.4 47.7 Digitized7 2f oRre vFaRluaAtioSn EloRss es on off-balancehttp://fra 7 s 3 e r M .s or t t l g soh a e g ue e it - s b i a ftee c m k d e s d *. o s r e g cu / r ities1' n n . . a a . . 1 2 8 8 8 . 9 9 1 2 9 8 0 3 9 1 3 9 1 2 . . 8 8 1 4 9 4 4 . . 0 4 1 5 9 0 4 . . 9 0 1 4 9 3 4 . . 2 8 1 4 9 4 7 . . 6 4 1 4 9 7 6 . . 0 5 1 4 9 7 7 . . 1 2 1 4 9 2 8 , . 3 3 1 4 9 3 8 . . 1 1 Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities A19 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'—Continued D. Small domestically chartered commercial banks Billions of dollars Monthly averages Wednesday figures Account 19% 1996' 1997' 1997 Apr. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Apr. 9 Apr. 16 Apr. 23 Apr. 30 Seasonally adjusted Assets 1 Bank credit 1.368.9 1.411.0 1.419.7 1.427.5 1,436.6 1,441.2 1,456.3 1,456.4 1,463.2 1,464.5 1,466.3 1,473.5 2 Securities in bank credit 408.6 411.8 410.4 410.5 414.4 413.3 417.6 421.0 421.2 420.3 420.7 422.1 3 U.S. government securities 328.6 331.5 330.2 330.5 333.6 332.8 335.6 337.1 337.4 336.7 336.6 337.9 4 Other securities 80.0 80.2 80.2 79.9 80.8 80.5 82.0 83.9 83.8 83.7 84.1 84.2 5 Loans and leases in bank credit2 960.3 999.2 1,009.3 1,017.1 1,022.2 1,027.9 1,038.7 1,045.4 1,042.0 1,044.2 1,045.6 1,051.4 6 Commercial and industrial 172.1 179.1 180.8 182.8 183.5 185.6 187.3 188.8 188.0 188.5 189.0 190.0 7 Real estate 496.2 519.1 524.0 528.4 534.8 539.6 547.9 553.7 551.8 552.7 554.5 556.8 8 Revolving home equity 25.3 27.9 28.4 28.8 29.1 29.6 30.3 30.9 30.6 30.9 30.9 31.2 9 Other 470.8 491.2 495.7 499.7 505.7 510.0 517.6 522.8 521.2 521.9 523.6 525.7 10 Consumer 224.0 232.4 234.9 235.6 233.0 231.1 231.0 230.1 230.0 229.8 230.0 231.0 11 Security3 5.4 4.9 5.0 5.0 4.9 5.1 53 5.1 5.0 5.2 4.9 5.1 12 Other loans and leases 62.6 63.8 64.6 65.2 66.0 66.5 67.2 67.7 67.2 67.9 67.2 68.6 13 Interbank loans 54.9 50.4 53.1 54.7 54.0 57.1 61.3 55.2 53.8 57.4 53.8 54.8 14 Cash assets4 65.3 66.8 68.0 67.9 68.2 69.1 69.5 70.7 69.7 70.4 70.6 72.1 15 Other assets5 48.7 55.6 56.1 57.8 56.2 58.2 64.9 65.6 67.8 66.0 65.2 63.6 16 Total assets6 1^17.6 1363.5 1376.4 1387.5 1394.7 1,605.2 1,631.8 1,637.6 1,634.2 1,637.9 1,635.5 1,643.6 Liabilities 17 Deposits 1.195.9 1.205.7 1,218.3 1.222.5 1.236.9 1.250.6 1,271.1 1.282.4 1.280.1 1,291.1 1,274.3 1.284.4 18 Transaction 328 2 311 7 3137 312.7 312.4 3137 3168 320 1 3129 323 2 3185 327 5 19 Nontransaction 867.6 894.1 904.6 909.8 924.6 936.9 954.3 962.3 967.2 967.9 955.8 956.9 20 Large time 147.8 142.7 145.2 146.6 148.1 149.6 150.6 149.4 149.7 148.8 1494 149.9 21 Other 719.8 751.4 759.4 763.2 776.4 787.4 803.7 812.8 817.5 819.2 806.4 807.0 22 Borrowings 141.7 162.5 165.1 166.5 167.8 169.3 174.8 178.1 176.8 173.9 179.4 185.1 23 From banks in the U.S 79.0 86.7 87.3 85.2 86.4 86.2 87.6 87.6 87.2 83.6 89.1 92.7 24 From others 62.6 75.8 77.7 81.3 81.5 83.1 87.2 90.4 89.6 90.3 90.3 92.4 25 Net due to related foreign offices 5.1 3.4 2.2 2.7 4.0 4.0 3.9 4.4 4.7 4.2 4.0 4.7 26 Other liabilities 26.4 28.0 28.2 28.5 27.2 27.2 27.0 25.2 25.3 24.6 25.9 24.8 27 Total liabilities 1369.0 13996 1,413.7 1,420.2 1,435.9 1,451.2 1,476.8 1,490.0 1,486.8 1,493.8 1,483.6 1,499.0 28 Residual (assets less liabilities)7 148.6 163.9 162.7 167.3 158.7 154.1 155.0 147.6 147.3 144.1 152.0 144.7 Not seasonally adjusted Assets 29 Bank credit 1,369.5 1,413.5 1,421.2 1,430.3 1,434.7 1,435.7 1,451.8 1,466.8 1,461.5 1,465.7 1,468.5 1,473.7 30 Securities in bank credit 412.4 410.7 408.7 410.0 412.9 4116 4189 424.4 423 8 424 1 425 1 425 4 31 U.S. government securities 332.1 330.5 328.5 330.0 332.4 331.4 336.7 340.3 339.8 340.1 340.8 340.9 32 Other securities 80.3 80.2 80.2 80.0 80.6 80.2 82.2 84.1 84.0 84.0 84.3 84.5 33 Loans and leases in bank credit2 957.2 1,002.8 1,012.5 1,020.3 1,021.8 1,024.0 1,032.8 1.042.3 1,037.8 1,041.7 1,043.4 1,048.3 34 Commercial and industrial 173.3 178.5 180.1 182.3 183.6 185.3 187.9 190.0 188.6 189.8 190.7 191.5 35 Real estate 493.6 521.3 526.3 530.4 534.4 537.0 544.9 551.0 548.5 550.2 552.0 554.3 36 Revolving home equity 25.1 28.1 28.5 28.9 29.1 29.4 30.0 30.6 30.3 30.5 30.7 31.0 37 Other 468.5 493.2 497.8 501.5 505.4 507.6 514.9 520.4 518.2 519.7 521.3 523.3 38 Consumer 223.5 233.0 235.6 236.5 234.0 231.9 229.1 229.8 228.5 229.2 230.4 231.4 39 Security3 5.4 4.8 5.2 5.2 5.0 5.2 5.3 5.1 5.5 5.4 4.7 4.7 40 Other loans and leases 61.4 65.2 65.3 65.8 64.8 64.6 65.7 66.5 66.6 67.1 65.6 66.5 41 Interbank loans 55.4 50.7 57.9 57.8 55.3 59.1 61.3 55.6 63.0 61.0 49.0 47.7 42 Cash assets4 63.9 67.9 70.7 71.6 70.4 68.4 67.4 69.4 68.3 70.2 67.1 71.8 43 Other assets5 47.9 55.4 56.7 58.4 57.2 59.6 64.0 64.6 66.2 64.4 62.5 64.9 44 Total assets6 1316.4 1367.1 1386.1 1397.6 1397.2 1,502.4 1,624.2 1,636.0 1,638.7 1,640.9 1,626.7 1,637.5 Liabilities 45 Deposits 1,198.3 1.208.0 1.225.8 1.235.6 1,234.5 1,241.0 1,266.1 1,284.6 1,293.4 1,299.0 1,266.9 1,278.2 46 Transaction 328.7 312.2 317.3 323.6 316.1 309.9 312.5 320.4 319.0 328.4 312.4 322.8 47 Nontransaction 869.6 895.8 908.5 912.0 918.5 931.1 953.6 964.2 974.3 970.6 954.6 955.4 48 Large time 148.7 143.1 145.5 145.8 146.9 150.2 151.4 150.4 151.1 149.7 150.2 150.6 49 Other 720.8 752.7 763.0 766.2 771.6 780.9 802.2 813.8 823.2 820.9 804.3 804.8 50 Borrowings 139.0 162.6 163.5 166.0 169.5 167.9 169.1 175.3 169.0 170.0 178.8 184.4 51 From banks in the U.S 77.9 86.2 85.5 84.6 86.1 84.3 83.7 86.7 83.0 82.9 89.1 92.5 52 From others 61.1 76.4 78.0 81.3 83.4 83.6 85.3 88.6 86.1 87.1 89.7 91.9 53 Net due to related foreign offices 5.1 3.4 2.2 27 4.0 4.0 3.9 4.4 4.7 4.2 4.0 4.7 54 Other liabilities 26.7 28.0 28.1 28.0 27.4 27.7 27.3 25.4 25.5 24.9 26.1 25.1 55 Total liabilities 1369.0 1,402.0 1,419.6 1,4323 1,4353 1,4403 1,466.5 1.489.8 1,492.6 1,498.1 1,475.8 1,492.4 56 Residual (assets less liabilities)7 147.4 165.1 166.5 165.3 161.7 161.9 157.7 146.3 146.0 142.8 150.9 145.2 MEMO 57 Mortgage-backed securities9 n.a. 47.8 48.0 48.6 49.6 49.6 51.1 51.9 51.8 51.8 52.0 52.1 Footnotes appear on page A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Financial Statistics • July 1997 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued E. Foreign-related institutions Billions of dollars Monthlyaverages Wednesday figures Account 19% 1996 1997 1997 Apr. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Apr. 9 Apr. 16 Apr. 23 Apr. 30 Seasonally adjusted Assets 1 Bank credit. . , 453.7 480.5 493.8 505.1 516.9 532.6 528.3 537.5 528.3 536.7 534.6 555.7 2 Securities in bank credit 146.0 148.6 157.8 164.4 170.1 176.6 172.3 177.5 175.5 176.6 174.5 184.4 3 U.S. government securities 72.6 82.6 87.0 87.6 81.7 85.2 83.3 87.6 86.7 85.4 85.8 92.5 4 Other securities 73.4 65.9 70.8 76.9 88.4 91.4 89.0 89.9 88.8 91.1 88.7 91.9 5 Loans and leases in bank credit2 ... 307.7 331.9 336.0 340.6 346.7 356.0 356.0 360.0 352.7 360.1 360.1 371.4 6 Commercial and industrial 186.2 205.9 208.1 213.1 214.9 218.2 217.7 218.7 217.3 219.7 219.3 219.8 7 Real estale 33.6 32.7 32.4 32.0 32.0 32.3 32.0 31.9 31.7 32.1 32.3 31.8 8 Security-1 32.2 32.9 35.0 36.2 38.0 39.6 39.5 43.0 38.4 42 6 42.8 50.4 9 Other loans and leases 55.7 60.4 60.4 59.4 61.8 65.8 66.7 66.4 65.4 65.7 65.7 69.4 10 Interbank loans 22.0 20.6 20.2 21.8 23.4 22.3 24.9 20.8 19.4 15.7 21.9 23.8 11 Cash assets'* 26.4 29.7 30.9 31.1 31.2 33.1 32.8 33.2 33.0 32.1 34.0 34.5 12 Other assets5 44.8 33.7 36.2 37.0 38.7 42.2 42.2 40.4 41.3 39.4 41.0 40.1 13 Total assets6 546.9 564.4 580.9 594.7 609.9 630.0 627.9 631.7 621.7 623.6 6313 653.9 Liabilities 14 Deposits 171.1 197.4 203.9 219.5 227.1 241.0 247.2 262.8 261.9 265.1 263.1 264.9 15 Transaction 10.3 10.4 10.2 10.2 10.4 9.9 10.8 11.1 11.2 11.i 11.3 11.0 16 Nontransaction 160.8 187.0 193.7 209.3 216.7 231.1 236.4 251.7 250.7 254.0 251.9 253.9 17 Large time 158.0 184.4 190.0 205 1 216.5 228.6 233.4 247.8 247 6 249 6 248 9 248.5 18 Other 2.9 2.6 3.7 4.2 0.1 2.4 3.0 3.9 3.1 4.3 2.9 5.4 19 Borrowings 128.5 117.0 125.1 121.3 130.6 144.0 141.3 141.6 135.3 144.9 139.5 149.2 20 From banks in the US 36.9 31.8 32.7 32.4 27.8 33.8 34.8 33.2 33.9 35.7 29.7 33,6 21 From others 91.6 85.1 92.4 88.8 102.8 110.1 106.5 108.4 101.4 109.2 109.8 115.6 22 Net due to related foreign offices 172.2 167.7 167.1 162.3 150.6 140.1 142.0 135.4 141.0 126.7 136.8 1334 23 Other liabilities 73.4 74.6 80.0 82.S 89.9 99.6 93.3 91.3 90.9 88.S 89.5 96.9 24 Total liabilities 545.2 556.6 576.1 585.9 598.1 624.6 623.8 631.2 629.1 625.4 629.0 644.4 25 Residual (assets less liabilities)7 1.7 7.7 4.7 8.8 11.8 5.4 4.1 0.5 -7.4 -1.8 2.3 9.5 Not seasonally adjusted Assets 26 Bank credit 452.7 479.2 493 4 501 0 5139 533 2 528 2 537 7 530 3 515 8 533 9 555.6 27 Securities in bank credit 145.5 148.5 157.5 158.0 166.0 177.6 173.1 178.1 178.9 175.7 173.6 185.3 28 U.S. government securities 71.8 82.1 87.0 85.1 82.7 86.9 86.2 87.0 86 5 84 8 84.2 92.4 29 Trading account 5.1 18.7 21.8 19.9 17.0 21.4 19.9 18.6 18.8 17.2 16.7 20.8 30 Investment account 66.8 63.4 65 2 65 3 65.7 65.6 663 68 5 67 6 Ci7.6 67.5 71.7 31 Other securities 73.6 66.3 70.5 72.9 83.3 90.6 86.9 91.1 92.4 90.9 89.4 92.9 32 Trading account 39.1 47.9 51.6 54.0 61.4 67.9 63.2 64.2 65.8 64.2 62.3 65.6 33 Investment account 145 18.4 18.9 18.9 22.0 22.7 23.7 26.8 26.6 26.8 27.0 27.2 34 Loans and leases in bank credit- . . . 307.2 330.7 335.9 343 0 347 9 355.6 355.1 359.6 351.4 360.2 3603 370.3 35 Commercial and industrial 186.8 204.7 207.9 213.5 214.8 218.1 217.3 219.4 217.1 220.6 220.4 220.7 36 Real estate 33.2 32.9 32.9 32.2 32.0 32.4 32.0 31.5 11.4 31.7 31.8 31.2 37 Security3 32.2 32.9 35.0 36.2 38.0 39.6 39.5 43.0 38.4 42.6 42.8 50.4 38 Other loans and leases 550 60.2 60.1 61.2 63.1 65.5 66.3 65.7 64.5 (63 65.3 68.0 39 Interbank loans 22.0 20.6 20.2 21 8 23 4 22 3 24.9 20.8 194 157 21 9 ">3 8 40 Cash assets4 25.7 30.1 31.1 32.2 3L6 32A 32.2 32.4 31.6 31.5 33fl 319 41 Other assets5 43.2 33.4 36.5 37.7 38.0 43.0 4L6 38.9 38.2 37.9 39.5 40.3 42 Total assets6 543.6 563.1 581.0 592.5 606.6 630.7 626.7 629.5 619.3 620.8 628.0 653J Liabilities 43 Deposits 167.0 202.7 206.5 222.2 227.2 237.8 247.0 256.3 252.5 256.1 257.4 261.8 44 Transaction 9.9 10.4 10.2 109 10.4 10 2 10.6 10.7 10.6 10.5 10.7 10.9 45 Nontransaction 157.1 192.3 196.3 211.3 216.7 227.6 236.5 245.7 241.9 245.6 246.7 250 9 46 Large time 154.7 190.0 193.9 208.6 214.5 223.7 232 9 242 4 239.5 242.5 244.3 245.4 47 Other 2.4 2.3 24 28 22 4.0 3.6 3.3 2.4 3.1 24 5.5 48 Borrowings 130.3 113.6 121.7 120.1 127.3 137.4 135.4 144.1 137.7 149.1 143.2 150.4 49 From banks in the US 37.0 29.4 32.8 33.1 28.8 31.6 ?3.2 33.4 34.3 37.5 2S.7 33.0 50 From others 93.3 84.3 88.9 87.0 98 5 105.8 102.2 110 7 103 4 111.6 114.5 117.5 51 Net due to related foreign offices 170.0 167.6 166.8 163.9 159.3 149.1 146.6 132.4 132.6 120.9 134.0 137.2 52 Other liabilities 73.1 73.1 80.6 81.5 89.1 102.0 93.1 91.1 90.4 88.4 88.7 98.1 53 Total liabilities 540.4 557.0 575.5 587.7 602.9 626.4 622.2 623.9 613.2 614.5 623.3 647.6 54 Residual (assets less liabilities)7 3.2 6.1 5.5 4.9 3.7 4.3 4.5 5.6 6.1 6.2 4.7 5.7 MEMO 55 Revaluation gains on off-balance -sheet ltems^ n.a. 29.9 32.4 33.4 41.6 47.0 43.0 42.4 44.3 41.7 40.6 43.6 56 Revaluation losses on off-balancesheet iterns^ n.a. 29.3 31.5 32.5 40.8 47.2 43.1 42.7 43.5 42.1 41.3 44.5 Footnotes appear on page A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities A21 NOTES TO TABLE 1.26 NOTE. Tables 1.26, 1.27, and 1.28 have been revised to reflect changes in the Board's H.8 quantities of balance sheet items acquired in mergers are removed from past data for the bank statistical release, "Assets and Liabilities of Commercial Banks in the United States." Table group that contained the acquired bank and put into past data for the group containing the 1.27, "Assets and Liabilities of Large Weekly Reporting Commercial Banks," and table 1.28, acquiring bank. Balance sheet data for acquired banks are obtained from Call Reports, and a "Large Weekly Reporting U.S. Branches and Agencies of Foreign Banks," are no longer ratio procedure is used to adjust past levels. being published in the Bulletin. Instead, abbreviated balance sheets for both large and small 2. Excludes federal funds sold to, reverse RPs with, and loans made to commercial banks domestically chartered banks have been included in table 1.26, parts C and D. Data are both in the United States, all of which are included in "Interbank loans.'" merger-adjusted and break-adjusted. In addition, data from large weekly reporting U.S. 3. Consists of reverse RPs with brokers and dealers and loans to purchase and carry branches and agencies of foreign banks have been replaced by balance sheet estimates of all securities. foreign-related institutions and are included in table 1.26, part E. These data are break- 4. Includes vault cash, cash items in process of collection, balances due from depository adjusted. institutions, and balances due from Federal Reserve Banks. The nol-seasonally-adjusted data for all tables now contain additional balance sheet items. 5. Excludes the due-from position with related foreign offices, which is included in "Net which were available as of October 2, 1996. due to related foreign offices." 1. Covers the following types of institutions in the fifty states and the District of 6. Excludes unearned income, reserves for losses on loans and leases, and reserves for Columbia: domestically chartered commercial banks that submit a weekly report of condition transfer risk. Loans are reported gross of these items. (large domestic): other domestically chartered commercial banks (small domestic); branches 7. This balancing item is not intended as a measure of equity capital for use in capital and agencies of foreign banks, and Edge Act and agreement corporations (foreign-related adequacy analysis. On a seasonally adjusted basis this item reflects any differences in the institutions). Excludes International Banking Facilities. Data are Wednesday values or pro seasonal patterns estimated for total assets and total liabilities. rata averages of Wednesday values. Large domestic banks constitute a universe; data for 8. Fair value of derivative contracts (interest rate, foreign exchange rate, other commodity small domestic banks and foreign-related institutions are estimates based on weekly samples and equity contracts) in a gain/loss position, as determined under FASB Interpretation No. 39. and on quarter-end condition reports. Data are adjusted for breaks caused by reclassifications 9. Includes mortgage-backed securities issued by U.S. government agencies, U.S. of assets and liabilities. government-sponsored enterprises, and private entities. The data for large and small domestic banks presented on pp. A18 and A19 are adjusted lo remove the eslimated effects of mergers between these two groups. The adjustment for mergers changes past levels to make them comparable with current levels. Estimated Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic Financial Statistics • July 1997 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING Millions of dollars, end of period Year ending December 1992 1993 1994 1995 1996 Dec. Dec. Dec. Dec. Dec. Commercial paper (seasonally adjusted unless noted otherwise) 1 All issuers 545,619 555,075 595,382 674,904 775,371 757,718 766,556 775,371 804,644 813,168 836,979 Financial companies' 2 Dealer-placed paper", lotal 226,456 218,947 223,038 275,815 361,147 349.288 354,400 361,147 376.908 387,164 402,291 3 Directly placed paper3, total 171,605 180.389 207.701 210,829 229,662 225,977 228,553 229,662 238,133 239,509 246.215 4 Nonfinancial companies4 155,739 188.260 184.563 182,454 186,495 Bankers dollar acceptances (not seasonally adjusted) 5 Total 38,194 32,348 29.242 25,754 fly holder 6 Accepting banks 10,555 12,421 11.783 7 Own bills 9,097 10,707 10,462 8 Bills bought from other banks . 1,458 1,714 Federal Reserve Banks6 9 Foreign correspondents 1,276 725 410 10 Others 26,364 19,202 17,642 By ham 11 Imports into United States 12,209 10.217 10.062 12 Exports from United States. . . . 8,096 7,293 6,355 13 All other 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 c\cry January. Beginning January 1995, data for Bankers insurance underwriting; and other investment activities. dollar acceptances are 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, construclion. manufacturing, mining, wholesale and retail trade, transportation, and services. 1.33 PRIME RATE CHARGED BY BANKS Short-Term Business Loans' Percent per year Average Average Average Dale of change Rate Period rate Period rate Period 1994—Mar. 24 6.25 1994 7.15 1995—Jan 8.50 1996—Jan 8 50 Apr. 19 6.75 1995 8.83 Feb 9.00 Feb 8.25 May 17 7.25 1996 8.27 Mar. 9.00 Mar 8.25 Aug. 16 7.75 Apr. 9.00 Apr. 8.25 Nov. 15 8.50 1994—Jan 6.00 May 9.00 May 8.25 Feb 6.00 June 9.(10 June 8.25 1995—Feb. 1 9.00 Mar 6.06 July 8.80 July 8.25 Julv 7 8.75 Apr 6.45 Aua 8.75 Aug 8.25 Dec. 20 8.50 May 6.W Sept 8.75 Sept 8.25 June 7.25 Oct 8.75 Oct 8.25 1996—Feb. 1 8.25 July 7.25 Nov 8.75 Nov 8.25 1997—Mar. 26 8.50 Aug 7.51 Dec 8.65 Dec 8.25 Sept 7 75 Oct 7.75 1997—Jan 8.25 Nov 8.15 Fcb 8.25 Dec 8.50 Mar 8.30 Apr 8.50 May 8.50 I. The prime rale 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 rale came to he the predominant one quoted monthly statistical releases. For ordering address, see inside front cover. by a majority of Ihe Iwenty-live 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 olherwise noted 1997 1997. weekending Hem 1994 1995 I9i)6 Jan. Feb. Mar. Apr. Mar. 28 Apr. 4 Apr. 11 Apr. 18 Apr. 25 MoNFY MARKH1 INSTKI'MLNTS 1 Federal funds'2' 4.21 5.83 5.10 5.25 5.19 5.39 5.51 5.40 5.86 5.37 5.48 5.48 2 Discount windou borrim JJILT J 3.60 5.21 5.02 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 3 1 -month 4.43 5.93 5.43 5.43 5 19 5.51 5.61 5.66 5.67 5.62 5.60 5.59 4 3-month 4 66 5.93 5.41 5.45 5.40 5.56 5.71 5 70 5.72 5.69 5.71 5.70 5 6-monlh 4.93 5.93 5.42 5.48 5.42 5.61 5.79 5.75 5.77 5.77 5.80 5.80 lithim c piijH't. iliinlh />/</( ri/' 6 1 -mnnlh ... . . . .. 4 13 5.81 5.31 5.31 5.27 5.39 5.51 5 54 5.55 5.51 5.50 5.50 7 1-mnnlh 4.51 5.78 5.39 5.28 5 42 5.61 5.55 5.59 5.58 5.62 5.62 8 6-monlh 4.56 5.68 5.21 5.30 5.27 5.41 5.60 5.52 5.55 5.58 5.61 5.63 Hunkers in i cpuiin r'.v ^* 9 3-monlh 4.56 5.81 5.11 5.34 5.29 5.44 5.62 5 58 5.60 5.62 5.62 5.63 10 6-monlh 4.83 5.80 5.31 5.35 5.30 5.50 5.71 5.65 5.66 5.70 5.73 5.74 t'erti/iiates ol deposit. seeomkus nuukel"' 1 1 l-itiomh 4.38 5 87 5.35 5.35 5.31 5.44 5.57 5.61 5.60 5.57 5.56 5.55 12 3-nionlh 4.63 5.92 5.39 5.43 5.37 5.53 5.71 5.65 5.70 5.70 5.72 5.71 13 6-inonlh 4.96 5.98 5.47 5.54 5.47 5.69 5.90 5.81 5.87 5.88 5.93 5.91 14 Eurodollai deposits. 3-month1"1 4.63 5.93 5.38 5.44 5.36 5.50 5.70 5.61 5.68 5.69 5.70 5.70 a.S 7r,vw,M /«//., Secondar> ntarkel 15 3-nionlh 4.25 5.49 5.01 5.03 5.01 5.14 5.16 5.25 5.17 5.14 5.16 5.19 16 6-month 4.64 5.56 5.08 5.10 5.06 5.26 5.37 5.36 5.32 5 37 5.40 5.40 17 1-ycar 5.02 5,60 5.22 5.30 5.23 5.47 5.64 5.59 5.65 5.65 5.64 5.66 Auction average • • 18 3-monlh .' 4.29 5.51 5.02 5.05 5.00 5.14 5.17 5.26 5.18 .5.14 5.15 5.21 19 6-month 4.66 5.59 5 09 5.05 5.24 5.35 5.33 5.31 5.30 5.42 5.38 20 1 -year 5.02 5.69 5.23 531 5.34 5.36 5.66 n.a. 5.66 n.a. n.a. n.a. U.S. TREASURY NOTF.S AM) BONDS Constant malitntie*'' 21 l-ycar 5.32 5.94 5.52 5.61 5.53 5.80 5.99 5.94 5.99 5.99 5.98 6.01 22 2-year 5.94 6.15 5.84 6.01 5.90 6.22 6.45 6.36 6.43 6.46 6.47 6.48 23 3-year 6.27 6.25 5.99 6.16 6.03 6.18 6.61 6.52 6.58 6.62 6.63 6.64 24 5-year 6.69 6.38 6.18 6.33 6.20 6.54 6.76 6.66 6.75 6.78 6.78 6.79 25 7-year 6.91 6 50 (•.34 6 47 6.32 6.65 6.86 6.76 6.87 6.88 6.87 6.87 26 10-year 7.09 6.57 6.44 6.58 6.42 6 69 6.89 6.79 6.90 6.92 6 89 6.89 27 20-year 7.49 6 95 6.83 6.91 6.77 7.05 7.20 7.11 7.21 7.23 7.21 7.21 28 30-year 7.37 6.88 6.71 6.83 6.69 6.93 7.09 7.00 7.10 7.12 7.10 7.10 Composite 29 More lhan 10 years (lore-term) 7.41 6.93 6.80 6.89 6.76 7.03 7.18 7.09 7.20 7.21 7.19 7.18 STATE AND LOCAL NOTES AND BONDS Moods'i series'1 30 Aaa ' 5.77 5.80 5.52 5.40 5.36 5.55 5.66 5 59 5.68 5.66 5.62 5.66 31 Baa 6.17 6.10 5.79 5.71 5.60 5.75 5.85 5.76 5.85 5.87 5.83 5.83 32 Bond Rtrser scries'4 6.18 5.95 5.76 5.72 5.61 5.76 5.88 5.81 5.88 5.88 5.87 5.87 CORPORA IF. BONDS 13 Seasoned issues, all industries * 8.26 7.83 7.66 7.71 7.59 7.83 7.99 7.90 7.98 8.01 8.00 8.01 Ruling group 14 Aaa 7.97 7.59 7.37 7.42 7.31 7.55 7.73 7.63 7.71 7.74 7.73 7.75 35 Aa 8.15 7.72 7.55 7 63 7.54 7.77 7.93 7.84 7.92 7.95 7.94 7.95 36 A 8.28 7.83 7.69 7.71 7.59 7.82 7.98 7.88 7.97 8.00 7.99 8.00 17 Baa 8.63 8.20 8.05 8 09 7.94 8.18 8.34 8.24 8.33 8.36 8.34 8.35 38 Vrated. recently offered utility bonds"' 8.29 7.86 7.77 7.93 7.81 8.08 8.23 8.22 8.26 8.27 8.19 8.24 P M i E v M id O eitil-pme ratio'1 39 Common stocks 2.82 2.56 2.19 1.95 1.91 1 91 1.98 1.92 2.03 2.00 1.99 1.97 1. I"he daily effective federal funds rale is a weighted average of rates on trades through 12. Yields on actively traded issues adjusted to constant maturities. Source: U.S. Dcpart- 'New York brokers. menl of the Treasury. 2. Weekly figures are averages of seven calendar days ending tin 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 genera! obligation bonds maturing in twenty years arc used 3. Annualized using a 360-day year lor bank interest. in compiling this index. The twenty-bond index has a rating roughiy equivalent to Moodys1 4. Rate tor the Federal Reserve Bank of New York. AI rating. Based on Thursday figures. .'i. Quoted on a discount basis. 15. Daily figures from Moody's Investors Service. Based on yields lo maturity on selected d. An average ot offering rates on commercial paper placed by several leading dealers for long-iiTm bonds. linns whu.se bond rating is AA or the equivalent. 16. Compilation of the Federal Reserve. This scries is an estimate of the yield on recently 7. An average of offering rates on paper directly placed by finance companies. offered, A-r;tied utility bonds with a thirty-year maturity and live years of call protection. H. Representative closing yields tor acceptances of the highest-raled money center banks. Weekly dala arc based on Friday quotations. u. An average of dealer offering rates on nationally traded certificates of deposit. 17. Siandard & 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 arc the price index. for indication purposes only. NoiK. Some of Ihe data in Ihis table also appear in the Board's H.15 (519) weekly and I I. Auction dale for dailv data; weekly and monthly averages computed on an issue-date G. M (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 Financial Statistics • July 1997 1.36 STOCK MARKET Selected Statistics 19% 1997 Indicator 1994 1995 19% Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Prices and trading volume (averages of daily figures)' Common slock prices (indexes) 1 New York Slock Exchange (Dec. 31, 1965 - 50) 254.16 291.18 357.98 354.59 360.96 373.54 388.75 391.61 403.58 418.57 416.72 401.00 2 Industrial 315.32 367.40 453.57 444.91 459.69 473.98 490.60 494.38 509.18 524.30 523.08 506.69 3 Transportation 247 17 270.14 327.30 321.61 323.12 332.80 348.32 352.28 359.40 364.15 372.37 366.67 4 Utility 104.96 110.64 126.36 122.37 121.12 130.04 135.88 128.55 131.95 142.88 132.38 126.66 5 Finance 209.75 238.48 303.94 302.95 308.16 324.42 345.30 350.01 361.45 388.75 387.19 364.25 6 Standard & Poor's Corporation d<)4L-43 = 10)! 460.42 541.72 670.49 662.68 674.88 701.46 735.67 743.25 766.22 798.39 792.16 763.93 7 American Stock Exchange (Aug. 31. 1973 = 50)' 449.49 498.13 570.86 554.88 564.87 574.46 583.21 582.96 585.09 593.29 593.64 554.13 Volume of trading (thousands of shares) 8 New York Stock Exchange 290,652 345,729 409,740 333,343 400.951 420 R35 443.521 431,538 526,631 508.199 496,241 473,094 9 American Stock Exchange 17,951 20.387 22,567 17,916 19,449 18,780 22.151 23,648 24,019 21.250 19,232 19,121 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers4 61.160 76,680 97,400 82,980 89,300 88.740 91.680 97,400 99,460 100,000 100,160 98,870 Free credit balance1; at brokers^ 11 Margin accounts6 14,095 16,250 22,540 17,520 17,940 19.890 20,020 22,540 22,870 22.200 22,930' 22,700 12 Cash accounts 28,870 34,340 40,430 32,680 35,360 36,610 36,650 40,430 41,280 40,090 41,050 37,560 Margin requirements (percent of market value and effective date) Mar. 11, 1968 June 8. 1968 May 6. 1970 Dec. 6, 1971 Nov. 24. 1972 Jan. 3, 1974 13 Margin stocks 70 80 65 55 65 50 14 Convertible bonds 50 60 50 50 50 50 15 Short sales 70 80 65 55 65 50 1. Daily data on prices are available upon request to the Board of Governors. For ordering 6. Series initiated in June 1984. address, see inside front cover. 7. Margin requirements, stated in regulations adopted by the Board of Governors pursuant 2. In July 1976 a financial group, composed of banks and insurance companies, was added to the Securities Exchange Act of 1934, limit the amount of credit that can be used to to the group of stocks on which the index is based. The index is now based on 400 industrial purchase and carry "margin securities" (as defined in the regulations) when such credit is stocks (formerly 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and collateralized by securities. Margin requirements on securities are the difference between the 40 financial. market value (100 percent) and the maximum loan value of collateral as prescribed by Ihe 3. On July 5, 1983, the American Stock Exchange rebased ils index, effectively cutting Board. Regulation T was adopted effective Oct. 15, 1934; Regulation U, effective May I. previous readings in half. 1936, Regulation G, effective Mar. 11. 1968; and Regulation X, effective Nov. 1, 1971. 4. Since July 1983, under the revised Regulation T, margin credit at broker-dealers has On Jan. 1, 1977, the Board of Governors for the first time established in Regulation T the included credit extended against stocks, convertible bonds, stocks acquired through the initial margin required for writing options on securities, setting it at 30 percent of the current exercise of subscription rights, corporate bonds, and government securities. Separate report- market value of the stock underlying the option. On Sept. 30, 1*985. the Board changed the ing of data for margin stocks, convertible bonds, and subscription issues was discontinued in required initial margin, allowing it to be the same as the uptiun maintenance margin required April 1984. by the appropriate exchange or self-regulatory organisation; such maintenance margin rules 5. Free credit balances are amounts in accounts with no unfulfilled commitments to must be approved by the Securities and Exchange Commivsicm. broker^ and are subject to withdrawal by customers on demand. 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 Type of account or operation 1996 Apr. U.S. budget1 1 Receipts, total 1,258,627 1,351,830 1,453,062 97,849 148,489 150,718 90,293 108,099 228,588 2 On-budget 923,601 1,000,751 1,085,570 70,018 119,528 113,841 59,673 73,869 187,997 3 Off-budget 335,026 351,079 367,492 27,831 28,961 36,877 30,620 34,230 40,591 4 Outlays, total 1,461,731 1,515,729 1,560,330 135,727 129,666 137,354 134,303 129,422 134,650 5 On—budget 1,181,469 1,227,065 1,259,872 106,327 120,429 110,552 104,964 100,427 107,842 6 Off-budget 279,372 288,664 300,458 29,400 9,237 26,802 29,339 28,996 26,807 7 Surplus or deficit (-), total -203,104 -163,899 -107,268 -37,878 18,823 13,364 -44,010 -21,323 93.939 8 On-budget -258,758 -226,314 -174,302 -36,309 -901 3,289 -45,291 -26,558 80.155 9 Off-budget 55.654 62.415 67.034 -1,569 19,724 10,075 1,281 5,234 13.784 Source of financing (total) 10 Borrowing from the public 185,344 171,288 129,712 45,459 -12,321 -16,776 35,968 28,833 -39,001 11 Operating cash (decrease, or increase (-)). 16,564 -2,007 -6,276 -673 -6,488 -3,785 21,357 -18,274 -55,908 12 Other2 1,196 -5,382 -16,168 -6,908 -14 7,197 -13,315 10,764 970 MEMO 13 Treasury operating balance (level, end of period) 35,942 37,949 44,225 26,306 32,794 36,579 15,222 33,496 89,404 14 Federal Reserve Banks 6,848 8,620 7,700 4,857 7,742 6,770 5,258 5,945 52,215 15 Tax and loan accounts 29,094 29,329 36,525 21,449 25,052 29,809 9,965 27,551 37,189 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 Financial Statistics • July 1997 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS1 Millions of dollars Fiscal year Calendar year Source or type 1995 1996 1997 1995 1996 HI H2 HI H2 Feb. Mar. Apr. RF.CEIP1S ] All sources 1,351,830 1,453,062 711,003 656,865 767,099 707,551 90,293 108,099 228,588 2 Individual income taxes, net 590.244 656,417 307,498 292.193 347,285 323,884 37 400 36,434 134,291 .1 Withheld 499 927 533,080 251,398 256.916 264,177 279,988 48.351 49.994 45,582 4 Nonwithheld 175.855 212,168 132,001 45.521 162,782 53,491 2,948 6.380 110.878 5 Refunds 85.538 88,897 75,959 10.058 79,735 9.604 13.906 19.955 22.177 Corporation income taxes 6 Gross receipts 174.422 189,055 92.132 88.302 96,480 95,364 4.014 21,059 29,547 7 Refunds 17,418 17,231 10.399 7.518 9,704 10,053 1.777 2,335 2,125 8 Social insurance taxes and contributions, net . . . 484,473 509,414 261.K37 "•24 269 277,767 240.326 41.784 44,197 54,644 9 Employment taxes and contributions" . . 451,045 476,361 241.557 211323 257,446 227,777 38.969 43,547 50,771 10 Unemployment insurance 28.878 28.584 18,001 10.702 18,068 10,302 2.42? 311 3,532 11 Other net receipts1 4,550 4,469 2.279 2.247 2,254 2.245 391 339 341 12 Excise taxes 57,484 54,014 27.452 30.014 25.682 27.016 5,106 3,998 4,768 13 Customs deposits 19,301 18,670 8,848 9.849 8,731 9.294 1,379 1,315 1,492 14 Estate and gift taxes 14,763 17.189 7.425 7,718 8.775 8,835 1,180 1.468 3,308 15 Miscellaneous receipts4 28.561 25,534 16,211 11.839 12.087 12,888 1,208 1,962 2,662 OUTLAYS 16 All types 1,515,729 1,560.330 761,289 752,856 785,368 799,851 134.303r 129,422 134,650 17 National defense 272,066 265,748 135,648 132.887 132,598 138,350 20,897 19,854 21,789 18 International affairs 16.434 13,496 4,797 6,908 8,074 8.895 898 1.094 1,654 19 General science, space, and technology 16.724 16,709 8.61 1 7.970 8,897 9.498 1,417 1.478 1,395 20 Energy 4.936 2,836 2.358 1 992 1.356 806 211 490 28 21 Natural resources ant! environment 22,(178 21,614 10,273 11.392 10.254 11,642 1.508 1.410 1.545 22 Agriculture 9.778 9.159 4,039 3.065 72 10,699 -96 26 -206 23 Commerce and housing credil -17,808 -10.646 1.VP1 -3 947 -6,885 -6,198 - 1.460 -2.986 -2,314 24 Transportation 39.350 39,565 18.193 20.725 18,290 21,205 2 842 2,810 2,955 25 Community and regional development , , 10,641 10.685 5.073 5,569 5.245 6,192 608 920 1,067 26 Education, training, employment, and social services 54.263 52,001 25,893 26.212 25,979 26.032 5,100 3,843 4,123 27 Health 115.418 119.378 59.057 57.128 59,989 61,466 9,169 10,478 10,439 28 Social security and Medicare 495,701 523,901 251.975 251.388 264,647 269,409 44,973 43,935 46,823 29 Income security 220.493 225,989 117,190 104.847 121,187 107,181 26,346 23,639 20,706 30 Veterans benefits and services 37,890 36,985 19,269 18.678 18,140 21,107 3,384 1,772 3,342 31 Administration of justice 16,216 17.548 8.051 8.091 9,015 9.595 2,074 1.612 1,454 32 General government 13,835 11,892 5,796 7.601 4,641 6,544 119 1,447 1,519 33 Net interest5 232.169 241,090 116,169 1 19.348 120,576 122,568 19,362 20,410 21,132 34 Undistributed offsetting receipts6 -44.455 -37,620 - 17,631 -26.995 -16,716 -25.140 -3.049 -2.810 -2,803 1 Functional details do not sum to total outlays tor calendar year data because revisions to 4. Deposits of earnings by Federal Reserve Banks and other miscellaneous receipts. monthly totals have nol been distributed among functions. Fiscal year lotal 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 .kvounts Soi. RCE. Fiscal year totals' U.S. Office of Management and Budget, Budget of the US 3 Federal employee ret ire men I conin but ions and civil service retirement and (iovenwwni. Fiscal Year 199K, monthly and half-year totals: U.S. Department of the Treadisability fund. sury. Motuhlv Treasury Suitemeni of Receipts and Outlays of the U.S. Government Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance All 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars, end of month 1995 [996 1997 Item Mar 31 June 30 Sept. 30 Dec. 31 Mar 31 June 30 Sept. 30 Dec. 31 Mar. 31 4 891 4 978 5 001 5 017 5 153 5 197 5 260 5 357 5 415 2 Public debl securities 4,864 4,951 4.974 4.989 5.1 IS 5.161 5.225 5.323 5.381 3 Held by public 3,610 3,635 3.653 3,684 3.764 3 739 3,778 3.826 n.a 4 Held by agencies 1,255 1.317 1,321 1.305 1.354 1.422 1,447 1.497 n.a 5 Agency securities 27 27 27 28 >6 ^6 15 34 34 6 Held by public 26 27 27 28 28 28 27 27 n.a. 7 Held by agencies 0 0 0 0 8 8 8 8 n.a. 8 Debt subject to statutory limit 4,775 4,861 4,885 4,900 5,030 5,073 5,137 5,237 5.294 4,774 4.861 4.885 4.900 5,030 5,073 5,137 5.237 5,294 lOOcherdebt1 I) 0 0 0 0 0 0 0 0 MEMO 11 Statutory debt limit 4,900 4.900 4 900 4.900 5,500 5.500 5,500 5.500 5,500 1. Consists iif guaranieed debt of U.S. Treasury and olher federal agencies, specified SOURCE. U.S. Department of the Treasury, Monthh Statement of the Public Dcht 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 Type and holder Q2 03 Q4 1 Total gross public debt 4,535.7 4,800.2 4,988.7 5,323.2 5,161.1 5,224.8 5,323.2 5,380.9 By type 2 Interest-beanng 4,532.3 4,769.2 4.964.4 5.317.2 5,126.8 5.220.8 5.317.2 5,375.1 3 Marketable 2,989.5 3.126.0 3,307.2 3,459.7 3,348.4 3,418 4 3 459 7 3,504.4 4 Bills 714.6 733.8 760.7 777.4 773.6 761.2 777.4 785.6 5 Notes 1,764.0 1.867.0 2.010.3 2.112.3 2,025.8 2,098.7 2,112.3 2.131.0 6 Bonds 495.9 510.3 521.2 555.0 534.1 543 5 555.0 565.4 7 Inflation-indexed notes' n.a. n.a n.a. n.a. n.a n.a. 7.4 8 Nonmarkelable" 1.542.9 1.643.1 1.657.2 1.857.5 1,778.3 1.802 4 1.857.5 1.870.8 9 State and local government series 149.5 132.6 104.5 101 3 97.8 95 7 101.3 104.8 10 Foreign issues" 43.5 42.5 40.8 37.4 37.8 37.5 37.4 16.8 11 Government 43.5 42.5 40.8 47.4 37.8 37.5 47.4 36.8 12 Public .0 .0 .0 0 .0 .0 .0 .0 13 Savings bonds and notes 169.4 177.8 181.9 IH2.4 183.8 184.2 182.4 182.6 14 Government account series4 1.150.0 1,259.8 1,299.6 1,505.9 1,428.5 1.454.7 1,505.9 1.516.6 15 Non-interest-bearing 3.4 3 1.0 24.3 6.0 34.3 4.0 6.0 5.8 By holder^ 16 U.S. Treasury and other federal agencies and trust fund; 1,153.5 1.257.1 1.304.5 1.497.2 1.422.4 1.447.0 1.497.2 17 Federal Reserve Banks 334.2 374.1 591.0 410.9 391.0 390.9 410.9 18 Private investors 3,047.4 3.16X0 3,294.9 3,411.: 3.347.3 3,386.2 3,411.2 19 Commercial banks 322.2 290.4 278.7 272.0 280 2 274.X 272.0 20 Money market funds 80.8 67.6 71.3 92.1 82.1 85.2 92.1 21 Insurance companies 234.5 240.1 241.5 234.0 234.4 234.5 234.0 22 Other companies 213.0 226.5 228.8 258.5 230.9 249.1 258.5 23 Stale and local treasuries67 590.8 468.3 344.1 290.0 316.8 29X5 290.0 Individuals 24 Savings bonds 171.9 180.5 185.0 187.0 186.5 186.8 187.0 25 Other securities 137.9 150.7 162.7 169 6 161.1 167.0 169.6 26 Foreign and international 623.0 68X6 862.2 1,131.5 959.8 1,030 9 1.131.5 27 Other miscellaneous investors7'9 673.3 855 3 920.6 776.5 895.5 859 4 776.5 I The U.S. Treasury first issued inflation-indexed notes during the first quarter of 1997 8 Consists of inveslmcnts of foreign balances and international accounts in Ihe Uniled 2. Includes (not shown separately) securities issued to the Rural Electrification Administra- Slates. tion, depository bonds, retirement plan bonds, and individual retirement bonds. 9. Includes savings and loan associations, nonproht institutions, credit unions, mutual 3. Nonmarketable series denominated in dollars, and series denominated in foreign cur- savings banks, corporate pension trust funds, dealers and brokers, certain U.S. Treasury rency held by foreigners. deposit accounts, and federally sponsored agencies. 4. Held almost entirely by U.S. Treasury and other federal agencies and trust funds. SOURCE. U.S. Treasury Department, data by type of security. Monthly Statement of the 5. Data for Federal Reserve Banks and U.S. government agencies and trust funds are actual Public Debt of the United Slates, data by holder. Treasury Bulletin holdings; data for other groups are Treasury estimates. 6. Includes state and local pension funds 7. In March 1996. in a redefinition of series, fully defeased debt backed by nonmarketable federal securities was removed from "Other miscellaneous investors" and added lo "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 Financial Statistics • July 1997 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions' Millions of dollars, daily averages 1997 1997, week ending Mar. 5 Mar. 19 Apr. 2 Apr. 9 Apr. 16 Apr. 23 Apr. 30 OUTRIGHT TRANSACTIONS By type of security 1 U.S. Treasury bills 45.941 43,025 51,477 57,425 46,179 45,170 57.182 57,308 48.797 56,123 41,435 47.730 Coupon securities, by maturity 2 Five years or less 110.875 108,283 116,859 125,323 104,384 108,231 132,151 118,691 101,182 97,085 105,669 120,966 3 More than five years 55,797 66.967 56,149 67,771 53,631 53,512 55,090 54,252 50,739 50,914 43.433 51.596 4 Federal agency 35,624 36.070 36,352 36,842 33,366 36.004 36,538 43,487 34,627 30.995 36,003 49.033 5 Mortgage-backed 45,018 45.373 41,420 44.647 54,640 35.581 31.773 42,243 ami 37.574 34,216 33.270 flv tvpe of counterparty With interdealer broker 6 U.S. Treasury 122,621 122,673 127,746 138,676 116,349 118,810 141,227 128,483 113.629 118.529 106,416 125,095 7 Federal agency 1,141 1,338 1,117 1,283 1,406 849 1,123 801 1.215 923 1,200 866 8 Mortgage-backed 14,419 15,872 15,314 16.722 18,741 13,083 12.382 17,546 17,354 12.511 11,631 12,747 With other 9 U.S. Treasury 89,993 95,602 96,739 111,843 87.846 88,104 103,195 101,767 87,089 85.592 84,121 95,196 10 Federal agency 34,483 34,732 35,235 35,559 31,960 35,155 35,414 42,686 33,412 30.072 34,803 48,168 11 Mortgage-backed 30,598 29,501 26,105 27,925 35,898 22,498 19.390 24,696 45,418 25.064 22,585 20,523 FUTURES TRANSACTIONS3 flv type of deliverable security 12 U.S.'Treasury bills 206 296 433 272 272 435 747 287 213 222 Coupon securities, by maturity 13 Five years or less 1,489 1,797 2,150 3,316 1,845 2.059 1,681 2,561 1,407 1,532 1,798 1,806 14 More than five years 14,518 13,442 14,670 15,867 14,100 15,972 13,807 13,205 12,417 12,617 10,399 13,467 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 fiv txpe of underlying security 17 U.S. Treasury bills 0 0 0 0 n.a. 0 0 0 0 0 0 Coupon securities, by maturity 18 Five years or less 3.288 3,770 3,469 4,496 2,588 3,618 4,056 3,300 3,475 3,319 3,049 19 More than five years 5.045 5,196 4.649 5,079 4.568 4,658 4,118 5,513 4,207 3,461 3,586 5,360 20 Federal agency 0 0 0 0 0 0 0 0 0 0 0 0 21 Mortgage-backed 455 734 578 274 469 626 786 663 559 917 438 392 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 US. 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 tor which delivery is scheduled in thirty business series as of the week ending July 6, 1994. days or less. Stripped securities are reported at market value by maturity of coupon or corpus. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A29 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Millions of dollars 1997 1997. week ending Item Jan. Feb. Mar. Mar. 5 Mar. 12 Mar. 19 Mar 26 Apr. 2 Apr. 9 Apr. 16 Apr. 23 Positions2 NET OUTRIGHT POSITIONS1 fiv type nf \ecunlv 1 U.S.'Treasury hills 5,582 5.047 14,352 15,465 14,794 8,298 10,344 26.710 16.311 3,724 -7.XK3 Coupon securities, by maturity 2 Five years or less -8.518 -8,602 -20,140 -19,249 -13.783 -26.300 -19.581 -22,088 -22.454 -28,635 -21.512 3 More than live years -24,851 -20,818 -28,545 -23,742 -26,745 -28,827 -31,508 -31,328 -29.141 -28.769 -27,939 4 Federal agency 25,134 22,896 24.380 19,595 25,946 24,816 24,272 26,516 29.322 27.781 31,474 5 Mortgage-backed 37.786 39.289 40.292 41,819 38,726 43,914 39,745 36.652 36,155 34.737 34,286 NET FUTURES POSITIONS4 By type of deliverable security 6 U.S. Treasury bills ." - 2.074 -3 437 -2 494 -2 848 -2 920 -2 186 -2 029 -2 625 -2 870 - ^ °25 - •> ^2^ Coupon securities, by maturity 7 Five vears or less 388 851 3,130 2,406 2,403 3,893 3,093 3,855 4,792 4.883 4 067 8 More than live years -7.784 -11.153 -5,256 -8.454 -5,803 -4,903 -3,899 -3.686 -2,955 -5.794 -5.822 9 Federal agency 0 0 0 0 0 0 0 0 0 0 0 10 Mortgage-backed 0 o Q o Q y o o o 1) NET OPTIONS POSITIONS By tvpe 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 -3.148 - 2.518 -2 512 -2.063 -2,078 -2,184 -3,574 -2,665 - 3,793 -2.135 -'.121 13 More than five years -5 382 -433 -242 -327 -517 181 -1,515 -1,592 - 1,187 -974 14 Federal agency 0 0 0 0 0 0 0 0 0 0 0 15 Mortgage-backed 1.123 1,383 1.405 701 656 1,420 2,088 2,180 2.124 2.439 :.472 Financing Reverse repurchase agreements 16 Overnight and continuing 276,107 298.371 284.574 291.399 292.233 276.570 281 084 283,120 276.493 269,801 274,540 17 Term 486.628 487.843 503.687 478.859 503.643 524,732 516.788 480,771 536.000 532,910 570,364 Se< unties borrowed 18 Overnight and continuing 199,784 205,656 213.214 206,506 218,683 213,561 211,626 214,001 213.709 211,511 211,807 19 Term 80,149 83,514 77.877 80.628 79.553 79.443 74,917 74,734 78.199 81,905 85,447 Securities received as pledge 20 Overnight and continuing 5,298 3,204 5,937 3.088 4,267 7,316 7.248 7,356 7,588 8,428 5,722 21 Term 45 43 n.a. n.a. n.a. n.a. n.a. n.a. n.a n.a. n.a. Repurchase agreements 22 Overnight and continuing 578,791 604.841 599.641 608.923 611.677 590,616 588.444 601,817 610.038 609.606 586,782 23 Term 443.233 453.814 456.464 433.452 458.238 481,060 475.466 415,957 471,071 475,738 515,663 Securities kxined 24 Overnight and continuing 4.481 6.881 5.321 6,071 4,699 5,045 5.764 5,207 5.289 6.535 5.135 25 Term 4.864 6.746 6.057 7,155 7.174 7,201 4,062 4,585 4,189 3,912 4.595 Securities pledged 26 Overnight and continuing 58.140 57.526 62,775 57 720 60,739 62,787 68,035 63,301 56,671 56,443 60,220 27 Term . 2.391 2.245 2,026 1.702 1.809 2,297 2.470 1,653 2,359 2,570 2,325 Collaterulized 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. u a n.a. n.a n.a. n.a. n.a. n.a 30 Total 9.386 13.457 10.604 11.763 13,223 12,553 6.327 9.037 13.482 14,008 11.298 MEMO' Matched book6 Securities in 31 Overnight and continuing 279,556 294,190 281.495 276.941 291,987 284,004 274,067 278,245 276.500 272,708 285,844 32 Term 485,466 487.344 487.773 469.602 491,281 507,351 494,039 464.853 515,407 527,157 551,947 Securities out 33 Overnight and continuing 351,842 367.612 358.2W 356.156 370.533 357,073 344 713 363,626 357,959 365,058 363,043 34 Term 392,408 400.188 393.532 372.589 395.991 414.850 409.064 359,443 407,422 409.212 448.247 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- diiia 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 b. 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 ibe "matching" of securities of different values or different types of collaieralizadelivered or are scheduled to be delivered in thirty business days or less. tiun. Forward positions reflect agreements made in the over-the-counter market that specify NOTF. "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 Bled 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 .luly 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 Financial Statistics • July 1997 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, emi of period 1996 1997 Agency 1993 1994 1995 1996 Oct. Nov. Dec Jan. Feb. 1 Federal and federally sponsored agencies 570,7 II 7.18,928 844.611 "(25,823 901.089 912,100 925,823 939,416 127,400 2 Federal agencies 45.193 39,186 57,347 29.380 30.800 29.9119 29,380 29.481 29.303 3 Defense Department 5 (•, 6 6 6 6 (> 6 4 Export-Import Bank2'3 5,315 3.455 2.1)511 1.447 1.828 1,828 1,447 1,437 1.437 5 Federal Housing Administration 255 116 97 84 82 84 84 144 146 6 Government National Mortgage Association certificates ot participation'^ n.a. n.a. n.a n.a. n.a. n.a. n a. n.a. n.a. 7 Postal Serv ice" 9,732 X.O73 5.765 n.a. n.a. n.a. n.a. n.a n.a. 8 Tennessee Valley Authority 29,885 27.536 29,429 27.853 28,884 27.991 27.853 27.8.31 27.714 9 United States Railway Association 11.j. n.a n.a 523 45"1 699.742 807 '64 806.443 870 289 88"1 191 896.445 yl)uou8 898.097 11 Federal Hume Loan Banks 139,512 205.817 243.194 263,404 253,hb 252.S68 263,404 257JI55 255 407 12 Federal Home Loan Mortgage Corporation 49,993 93.279 119.961 156.980 148,435 158,158 156.980 163,171 lfil.532 13 Federal National Mortgage Association 201.1 12 257.230 299 174 331.270 321,1 10 324.378 331.270 333.302 332.046 14 Farm Credit Banks8 53.123 53,175 57.579 60,053 59.712 59,797 60.053 67,610 60.075 15 Student Loan Marketing Association^ 39.784 50,335 47.529 44.763 47,225 46.991 44.765 48.788 48.7U7 16 Financing Corporation 8,170 8,170 8.171) 8.170 8.170 8,170 8.170 8 170 8.170 17 Farm Credit Financial Assistancc^Corporalion L261 L261 f.261 1,261 L26I 1,261 1.261 L261 1,261 18 Resolution Funding Corporation'' 29,996 29.996 29.996 29,996 29.996 29.996 29.99b 29,996 29,99<i MEMO 19 Federal Financing Bank debt13 128,187 103.817 78,681 58,172 01,051 58,921 58.172 57,635 57,625 Li'tidmx ID fcderul and federally sponsored agencies 20 Export-Import Bank' 5,309 3,449 2 044 1,431 1.822 1,822 1,431 1,431 1.43 I 21 Postal Service 9,732 8,073 5.765 n.a. n.a. n.a. n.a. n.a. n.a. 22 Student Loan Marketing Association 4,760 n.a. n.a n.a. n.a. n.a ii.a i\.L\. 11.a. ?3 Tennessee Valley Authority 6,325 3,200 3.2OU n.a. n.a. n.a. n.a. n.a. 11.a. 24 United States Railway Association*" n.a. n.a. u a n a. n.a. n.a. n.a. n.a n.a. Ollm lending" 25 Farmers Home Administration 38,619 31,719 21.015 18 i25 18.700 18,(25 18.325 17.875 17.875 26 Rurai L'lcclriucation Administration 17,578 17.392 17.144 16.702 16.753 16.772 16.702 16 702 16,710 27 Other 45.864 37.984 29.513 21,714 23,776 22.002 21,714 21.627 21.609 1. Consists of mortgages assumed by Ihe Defense Department between 1957 and !9n3 10 The Financing Corporation, established in August 1"S7 i» rcvapiiah/.e 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 reclassihcd as debl beginning Oct. 1, 1976. 11. The Farm Credit Financial Assistance Corporation. esMblKhu-d in January 1988 lo 3. On-budget since Sept. 30, 1976. pioude assistance to the Farm Credit System, undertook it:- first borrowing in July 1988, 4. Consists of debentures issued in payment of Federal Housing Administration insurance 12. Ihe Resolution Funding Corporation, established h\ the Financial Institution-. Relorm. claims. Once i.ssued, these securities may be sold privately on the securities market. Reeou-i\. und Enforcement Act of 1989. undertook its first bumming in October I9S9. 5. Certificates of participaiion issued before tiseal year 1969 by the Go\ernment National 13. The FFB, which began operations in 197-4. is authorized to purchase or sell obligations Mortage Association acting as trustee for the Farmers Home Administration, the Department issued, suld, or guaranteed by other federal agcneie.s. Because FFB incurs debt solely for ihe of Health. Education, and Welfare, the Department of Housing and Urban Development, the purpose of lending lo other agencies, its debt is not included in the main portion of the table lo Small Business Administration, and Ihe Veierans Administration. avoid double counting. 6. Off-budget. 14. Includes FFB purchases of agency assets and guaranteed loans; the latter are loan.s 7. Includes outstanding noncontingent liabilities: notes, bonds, and debentures. Includes guaranteed by numerous agencies, with the amounts guaranteed by an) one agency generally Federal Agricultural Mortgage Corporation; therefore details do not sum to total. Some Jala being small The Farmers Home Administration entry consists exclusively of agency assets, are estimated. uhereas the Rural Flectnlicalion Administration entry consists ol both .igency assets and 8. Excludes borrowing by the Farm Credit Financial Assistance Corporation, which is guaranteed loans. shown on line 17. 9 Before late 19S2, the association obtained financing through ihe 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 Markets and Corporate Finance A31 1AS NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1996 1997' I ypc ot issue or issuer. 1994 1995 1946 Sept. Oct. Nov Dec, Jan. Feb. Mar. Apr 1 All issues, new and refunding1 153,950 145.657 171,222 11,693 16,750 14,520 17,431 10,340 12,052 13,771 14,697 By type of i\sue 2 General obligation 54.404 56,980 60,409 3.024 5.467 5,134 4,755 4,160 4.287 5,479 6,232 3 Revenue 99.546 88.677 110.813 8.669 11.283 9,386 12.676 6,180 7.765 8,292 8.465 flv t\pe at issuer 4 Stale .^ 19,186 14,665 13,651 874 1,769 1,351 663 728 713 4,037 1,127 5 Social district or statutory authority" 95.S96 93,500 113,228 8,137 10.923 9.091 12,315 6,306 8.341 7,316 10.188 6 Municipality, county, or township 38,868 37,492 44.343 2,682 4,058 4,078 4,453 3,306 2,998 2,418 3,382 7 Issues for new capital 105,972 102,390 112.298 7.837 12,113 8,656 12,311 6,106 8,409 8,853 11,551 By use of proceeds 8 Education 21,267 23,964 26,851 1.522 2,693 1.530 2.306 1.974 1.924 2,321 3,203 9 Transportation 10,836 11.890 12,324 850 2.907 1,164 736 808 639 393 1,858 10 Utilities and conservation 10,192 9.618 9,791 720 1,441 1.102 1.006 749 901 952 346 1 I Social welfare 20,289 19.566 24,581 2,100 1.573 1.974 3,294 1,265 1,281 2,605 1,869 12 Indiisriul ,iid . . 8,161 6,581 6.287 439 556 460 1,081 231 481 295 724 13 Other piuposes 35.227 30,771 32.462 2.206 2,943 2.426 3.888 1,079 3,183 2.287 3.551 1. Far amounts of long-term issues based on date of sale. SOURCE. Securities Data Company beginning January 1990; Investment Dealer's 2. Includes -school districts. Digest before then. 1.46 NEW SECURITY ISSUES U.S. Corporations Millions of dollars 1996 1997 Type of issue, offering, 1994 1995 1996 or issuer Aug. Sept. Ocl. Nov. Dec. Jan. Feb. Mai 1 All issues' . 583.240 n.a. n.a. 44.447 60,578 60,387 57,937 48,747 57,186r 46,976r 53,984 2 bunds 498.039 573,206 n.a. 38,685 53,875 47,498 44,569 39,585 44,027 38,976 46,301 flv type of tiftentiti 3 Public, domestic 365.222 408,804 386,280 32,605 44,658 39.855 38,948 37,108 35,449 32.827' 41,863 4 Private placement, domestic1 76.065 87,492 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5 Sold abroad 56,755 76,910 74,793 6.081 9.218 7,643 5,621 2.477 8.577 6,149 4.438 6 Manufacturing 43,423 61.070 41.959 3,092 4.045 5,969 2.720 5.096 4,088 4,791 3,003 7 Commercial and miscellaneous 40,735 50.6S9 34,076 2,661 3,195 5.010 4.282 1,727 4,926 1,829 1,227 8 Transportation 6,867 8.430 5,111 293 620 436 270 341 366 100 324 9 Public utility 13,322 13.751 8,161 174 279 1.067 773 680 858 1.477 1.185 10 Communication 13,340 22.999 13,320 1,450 829 802 475 628 1,210 655 2,877 1 1 Real estate and financial 380,352 416.269 358,446 31,016 44,908 34,215 36,049 31.113 32,578 30.124 37,685 P Stniks: 85 155 100 573 5,762 6 703 12,889 13 368 9,162 13,159 8,000 7,683 H\- Irpr nt offering 13 Public preferred 12,570 10,917 33.208 1.16R 1.890 3,855 5.656 5,452 8.048 1.504 2,889 14 Common 47.828 57,556 83.052 4.594 4.813 9,034 7,712 3,710 5.111 6,496 4,794 15 Private placement' 24.X00 32.100 n.a u.a. n.a. n.a. n.a. n.a. n.a. n.a. 1 by iiulnstr\ ^roup 16 Manufacturing 17,798 21.545' 1,050 787 1,588 1,530 899 608 2,008 1.034 17 Commercial and miscellaneous 15,713 27,844 2.143 3,080 5.752 3.974 2,922 1,827 3,041 2,022 18 Transportation 2.203 804 n.a. 143 0 42 367 54 250 258 50 19 Public utility 2,214 1,936 306 212 100 210 103 1,847 96 7<J3 20 Communication 494 1,077 51 0 480 42 23 0 28 0 21 Real estate and linaneial 46,733 47,367 2,070 2,624 4.928 7,219 5,161 8,292 2,588 3.745 1. Figures represent gross proceeds of issues maturing in more than one year; they are the 2 Monthly data cover only public offerings. principal aninuni or number of units calculated by multiplying by the offering price. Figures 3. Monthly daia 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, indacorporatc 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 • July 1997 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Assets' Millions of dollars 1996 1997 Item 1995 1996 Sept. Oct. Nov. Dec Jan. Feb. Mar.' Apr. 1 Sales of own shares2 871,415 1,149,918 84,171 92,730 87,958 122,792 134,460 102,169 101,390 110,431 2 Redemptions of own shares 699,497 853,460 65,601 72,537 65,949 87,949 96,243 73,871 79,976 100,135 3 Net sales3 171,918 296,458 18,570 20,193 22,009 34,843 38,218 28,298 21.413 10,296 4 Assets4 2,067,337 2,637,398 2,474,339 2,517,049 2,652,884 2,637,398 2,752,273 2,772,715 2,700,474 2,782,127 5 Cash5 142,572 139,396 156,689 149.937 146,044 137,973 152,297 153,525 160,570 178,704 6 Other 1,924,765 2,498,002 2,317,651 2,367,112 2,506,840 2,499,425 2,599,976 2,619,189 2,539.906 2,603,423 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 1995 1996 1997 Account 1994 1995 1996 Q2 Q3 Q4 01 Q2 Q3 Q4 Ql 1 Profits with inventory valuation and 554.1' 604.8' 670.2' 580.8' 630.0' 628.3' 661.2' 672.1' 677.3' 670.1' n.a. 2 Profits before taxes 531.2 598.9 639.9 589.6 607.2 604.2 642.2 644.6 635.6 637.1 n.a. 195.3 218.7 233.0 214.2 224.5 218.7 233.4 236.4 233.4 228.9 n.a. 4 Profits after taxes 335.9 380.2 406.8 375.3 382.8 385.5 408.8 408.1 402 2 408.2 n.a. 211.0 227.4 244.2 224.6 228.5 234.7 239.9 243.1 245.2 248.7 254.2 6 Undistributed profits 124.8 152.8 162.6 150.8 154.3 150.8 168.9 165.1 156.9 159.5 n.a. 7 Inventory valuation -13.3 -28.1 -8.9 -42.3 -9.3 ~ 8.8 -17.4 -11.0 2.0 -9.2 3.0 8 Capital consumption adjustment 36.2' 34.0' 39.2' 33.5' 32.1' 32.9' 36.4' 38.6' 39.7' 42.2' 44.2 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 A33 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities' Billions of dollars, cnti of period: not seasonally adjusted 1995 1996 Account l')94 l«95 1996 Q2 03 Q4 Ql Q2 Q3 04 ASSITS 1 Aeeounls receivable, iiross" 551.(1 614.6 658.3' 586.9 594.7 614.6 621.8 631 4 642.0 658.3' 2 Consumer . . . 1(4.8 152.0 154.5' 141.7 146.2 152.0 151.9 1546 154.8 154.5' 3 Business (37.6 375 9 <98 I1 361.8 3624 375.9 380.9 383.7 387.0 398.1' 4 Real esl.ile 78.5 86.6 105.7 83 4 86.1 K6.6 89.1 93,1 100.2 105.7 5 LLSS Reserves loi unearned income 55.0 63.2 59.1 62.1 61.2 63.2 61.5 59.6 58.9 59.1 6 Rescues Tot losses 12.4 14.1 14.8 13.7 13.8 14.1 14.2 14.1 14.7 14.8 7 Accounts receivable, net . 483.5 537.3 584.4' 511.1 519.7 537.3 546.1 557.7 568.4 584.4' 8 All other 183.4 210.7 242.5 198.1 198.1 210.7 212.8 216.1 226.8 242.5 9 lotal assets 666.9 748.0 826.91" 709.2 717.8 748.0 758.9 773.8 795.2 826.9r 1.1 Mill Illt-.S \NL) C\PITM 111 Rank liiacis . . 21.2 23.1 27.8 21.5 218 23.1 23 5 26.2 27.5 27 8 1 1 Coiuiucicial paper 184.0 184.5 192.9 181.3 178.0 184.5 184.8 186.9 189.4 192 9 Debt 12 Owed to parent 51.0 62.3 79.2 57.5 59.0 62.3 62.3 68.4 71.9 79 2 13 Not elsewhere elassilied 235.0 284.7 120.0 264.4 272.1 284 7 291.4 301 3 311.5 320.0 14 All other liabilities 99 5 106.2 109.1' 102.1 102.4 106.2 105.7 100.1 102.8 109.1' 15 Capital, suqilus. and undivided profits 75.7 87.2 97.9 82.5 84.4 87.2 91.1 909 92.1 97.9 16 Total liabilities and capital 666.9 748.0 826.9r 709.2 717.8 748.0 758.9 773.8 795.2 826.1*' I. Includes Imancc company subsidiaries of hank holding companies but noC of retailers 2 Before deduction for unearned income and losses and banks. Data urv amounts carried on the balance sheets of finance companies: securitized pools are not shown, as they art' not on the books. I ..52 DOMESTIC FINANCE COMPANIES Consumer, Real Estate, and Business Credit1 Millions of dollars, amounts outstanding, end of period 1996 1997' 1 vpe ol credit 1994 1995 1996 Oct. Nov. Dec. Jan. Feb. Mar. Seasonally adjusted 1 Tnlal . . 615.618 691.616 755.827r 749,165 757.064 755,827' 762,305 763,525 766.110 2 Consumer 176.085 198,861 213.513' 212,511 212.775 213,513' 213.504 213,429 209.196 3 Real estate-' 78,910 87,077 106.100 102.933 104.776 106.31X1 108,476 110,841 111,180 4 Business 360.624 405,678 436,014' 433,720 439,514 436,014' 440.325 439,255 443.734 Not easonally adjusted 5 Total 620.975 697,340 761.756' 747,970 757.079 761,756' 763.714 764,717 768,186 6 C'oiiMimer . 178.999 202.101 216.886' 213.(126 214,227 216,886' 215.122 213,058 208.059 7 Motor vehicles.. 61.609 70.061 73,484' 75.917 75.304 73,484' 73.93.1 74,337 73.1.39 8 Other consumer 73,221 81.988 80,984 77,527 77,868 80,984 80,927 79,798 77.274 9 Securiu/ed motor vehicles4 . . 31.897 11 633 15 644 34,603 34,177 35,644 13,976 33,069 32.101 10 Seeunli/ed other consumer ... . 12.272 16^419 26.774' 24,979 26,878 26,774' 26,286 25,854 25 545 1 1 Real estate' 78,479 86.606 105.728 103,184 104,943 105.728 108,980 111,265 112,630 12 Business 363.497 408 633 439,142' 431,760 437.909 439.142' 439,612 440,394 447.497 13 Motor vchiilcs 118.197 133.277 142.009' 139,966 142.210 142,009' 145,329 148,334 152.037 14 Retail loans' 21.514 25,304 27.S68' 29,088 2K.H25 27,868' 28 549 28,629 28.617 15 Wholesale loans" 35.037 36.427 32.337 30.515 32.262 32 337 33.8)1 36,259 38,846 16 Leases 61.646 71,546 81.8(14 80.363 81.123 81,804 82.969 83,446 84,574 17 Cqtupnien! . . 157,953 177.297 184.942 179.997 182 229 184.942 182.484 181.949 183.155 18 Loans' 49.358 59.109 60.991 58,735 60.167 60.991 57,977 56.785 57.366 19 Leases 108.595 118,188 123.951 121,262 122.062 123,951 124.507 125.164 125.789 20 Other business* 61.495 65.363 71.1 10 74.055 7.1,999 71.110 71,784 72,718 74,434 2] Securiti/ecl business assets4 25,852 32 696 4I.0SI 37 742 39 471 41.081 40 015 37.393 37,871 22 Retail loans 4.494 4.72? 5.250 4.650 5,402 5,250 5.086 4.778 4,470 23 Wholesale loans 14,826 21.327 24.732 23,183 23,391 24.732 24.143 21.699 22.247 24 Leases 6,532 6,646 1 1.099 9,909 10.678 11.099 10.786 10,916 11,154 1. Includes finance companv subsidiaries ul bank holding companies hut not ot retailers ?. Passenger car fleets' and commercial land vehicles for which licenses are required. and banks. l),ii,i ,uv belore deduction lor unearned income and losses. Dal.i in thi-* l.thlc also h. Credit arising from transactions between manufacturers and dealers, thai is. floor plan appear in the Board s G.2U (422) monthly statistical release. For ordering addrcs.s see inside financing front cover. 7, Beginning with the June iy% data, retail and wholesale business equipment loans have 2. Includes all leans secured by liens on any type of rea! estate, for evample. first and junior heen combined and are no longer separately available. mortgages and home equity loans. S Includes loans on commercial accounts receivable, factored commercial accounts, and 3. Includes personal cash loans, mobile home loans, and loan.s lo 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 iravel trailers. 4. Outstanding balances of pools upon which securilies have been issued; these balances aie no longer carried on the balance sheets of the loan originator. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A34 Domestic Financial Statistics • July 1997 1.53 MORTGAGE MARKETS Mortgages on New Homes Millions of dollars except as noted 1996 1997 Oct. Nov. Dec. Jan. Feb. Mar. Apr. Terms and y elds in primary and secondary markets PRIMARY MARKETS Term' 170.4 175.8 182.4 183.9 188.1 170.8 172.4 166.6 169.2 172.5 2 Amount of loan (thousands of dollars) 130.8 134.5 139.2 1 39.0 143.3 129.9 133.6 130.9 132.1 134.8 78.8 78.6 78.2 77.7 78.0 79.3 79.7 80.9 80 8 81.1 4 5 M Fe a e t s u r a i n ty d ( c y h e a a r r g s e ) s (percent of loan amount) v: 2 1 7 .2 . 9 5 2 1 7 .2 . 1 7 2 1 7 .2 .2 1 2 1 7 .1 . 1 4 2 1 7 .1 .4 9 2 1 7 .0 . 1 5 2 1 7 .0 .9 2 2 1 8 .0 . 3 2 0 2 . 8 9 . 9 0 2 1 7 O .8 4 Yield {percent per year! 6 Contracl rate' ' 7.26 7.65 7.56 7.76 7.60 7.63 7.65 7.61 7.72 7.86 7 Etfective rate1' 7.47 7.85 7.77 7.95 7.80 7.79 7.81 7.78 7.88 8.03 8 58 8.05 8.03 8.01 7.73 7.91 7.94 7 94 8.25 8.19 SECONDAKY MARKETS Yield {percent per year) 9 FHA mortgages (Section 203 r 8.68 8.18 8.19 8.00 8.14 8.06 8.06 8.08 8.55 8.56 10 ONMA securities" 7.96 7.57 7.48 7.53 7.19 7.33 7.51 7.37 7.69 7.80 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings {end of period) 1 [ Total 2'"2,057 253,511 287,052 279.544 283.835 '87,052 288,504 288,951 297 115 295.804 [2 FHA/VA insured 27,558 28,762 30,592 30,815 30.744 30,592 30,352 30,119 30.100 30,839 13 Conventional 194,499 224,749 256,460 248.729 253,091 256,460 258.152 258,832 262.015 264.965 14 Mortgage transactions purchased (during period) 62,389 56.598 68.618 4.235 6.805 6,178 4,128 3.029 5,839 6.683 Mortgage commitments {during period) 54 038 56 092 65 859 s 199 6 533 3 991 4 384 4.407 8.299 3,898 16 To sell8 1.820 360 130 0 4 28 71 0 1 0 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)* 17 Total'. .' ' 72.693 107,424 137 715 132.259 135,270 1.37,755 138.935 139.925 144,558 147,190 18 FHA/VA insured 276 267 220 227 223 220 216 213' 209' n.a. 19 Conventional 72,416 107.157 137.535 132.032 135,047 137,535 138,719 139,712' 144,349' n.a. Mortgage transactions {during period) 20 Purchases 124,697 98.470 128.566 9 538 9.198 9,943 9,507 8,204 7,403 8.981 21 Sales 117,110 85.877 119,702 8,797 8,456 9,220 9,204 10,271 6,796 8,269 22 Mortgage commitments contracted (during period)9 136.067 118,659 128,995 8.214 9,032 9,905 9,021 7,537 7,595 9,746 I. 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 •'poini»*' paid (by the borrower or the Federal Housing Administration ur guaranteed b> ihe Department uf Veterans AJTairv seller"! lo obtain a loan. 7. Docs 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 rirst 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 Type of bolder and property Q4 Ql Q2 Q3 1 All holders 4,275,217 4.48] ,075 4,714,346 4,714,346 4,792,478 4.889,980 4,975,730 5.054,447 By type of property 2 One- lo four-family residence1; 3.233,830 3.437.781 3,634.060 3,634,060 3.699.671 3.778.471 3.853,772 3.912,079 3 Multifamily residences 270.824 275,705 287,993 287,993 291,893 297,223 301.635 309,266 4 Nonfarin. nonresidcntial 689,365 684,618 707,673 707,673 715,696 727,743 732,905 744.994 5 Farm 81,198 82.971 84.620 84.620 85.217 86,544 87.418 88.108 By type of holihr 6 Major linancial mstilutions 1.768,093 1.815.845 1,888.970 1,888,970 1.901,524 1,925.056 1,953,214 1,977,208 7 Commercial banks2 940.595 1,004.322 1.080,366 1.080,366 1.087.207 1.099.643 1.112,961 1,136.139 8 Olid- Co four-family 556,660 611,391 663.614 663,614 665,935 670.756 679,254 696.340 9 Multifamily 38.657 39,360 43,842 43,842 44,700 45,368 46,530 47,026 10 Nonfann. nonresidential 324,413 331,004 349.081 349,081 352,641 358.956 362.362 367,893 11 Farm 20,86b 22.567 23,829 23,829 23,931 24,563 24,815 24,880 12 Savings institutions3 598,437 596.191 596,789 596,789 602,631 612,849 628,037 628.719 13 One- to four-family 470,000 477,626 482,351 482,351 489,634 499.021 513,291 513,644 14 Multifamily.. . . .' 67.367 64 343 61,988 61.988 60.540 60.820 61,434 61,670 15 Nonfami, nonresidenlial 60.765 53.933 52,162 52.162 52.155 52.688 52,991 53.073 16 Farm 305 289 288 288 302 320 320 3 M 17 Life insurance companies 229,061 215,332 211,815 211.815 211,686 212,565 212.216 212.351 18 One- to four-family 9,458 7,910 7,476 7,476 7,472 7,503 7.488 7,493 19 Multifamily ." 25,814 24,306 23,920 23,920 23,906 24,007 23.959 2.3,972 20 Nonfann. nonresidential 184,305 173,539 170.783 170,783 170.681 171,402 171.059 171,152 2 1 Farm 9,484 9,577 9,636 9,636 9.627 9.653 9,710 9,735 22 Federal and related agencies 327,014 319,327 313,760 313,760 312,950 314.694 311.697 308.708 23 Government National Mortgage Association . . 22 6 2 2 24 One- to four-family 15 6 2 2 2 2 6 5 Fan M n u e l r t s i fa H m o i m ly e Administration4 41.38 7 6 41.78 0 1 41,79 0 1 41,79 0 1 41.59 0 4 41,54 0 7 41,57 0 5 41,59 0 6 27 One- to four-family 15.303 13.826 12.643 12,643 12,327 11,982 11.630 11.319 28 Multifamily 10,940 11.319 11,617 11,617 11,636 11.645 11.652 11.685 29 Nonfann. nonresidential 5.406 5.670 6.24B 6.248 6.365 6 552 6,681 6,841 JO Farm 9,739 10,966 11.282 11.282 11,266 11.369 I 1,61.1 11.752 31 Federal Housing and Veterans' Administrations 12.215 10,964 9.809 9.809 8.439 8,052 6.627 5,977 32 One- to four-family 5,364 4.753 5,180 5,180 4,228 3.861 3 190 3,258 33 Multifamily * 6,851 6,211 4,629 4,629 4,211 4.191 3,438 2,719 34 Resolution Trust Corporation 17,284 10.428 1.864 1.864 0 0 0 0 35 One- to four-family 7.203 5.200 691 691 0 0 0 0 36 Multifamily 5.327 2.859 647 647 0 0 0 0 37 Nonfami, nonresidenlial 4,754 2.'69 525 525 0 0 0 0 18 Fami 0 0 0 0 0 0 0 0 39 Federal Deposit Insurance Corporation 14,112 7.821 4,303 4,303 5.553 5,016 4.025 1,277 40 One- to four-family 2.367 1.049 492 492 839 840 675 231 41 Multifamily 1,426 1,595 428 428 1.099 955 766 194 42 Nonfami. nonresidential 10,319 5.177 3,383 3 383 3.616 3.221 2.584 853 43 Farm 0 0 0 0 0 0 0 0 44 Federal National Mortgage Association 166.642 178.059 183,782 183,782 18.3,531 186.041 185.221 184,445 45 One- to four-family 151.310 162,160 168.122 168.122 167.895 170 572 170.083 169,765 46 Multifamily 15.332 15,899 15.660 15,660 15,636 15,469 15,138 14,680 47 Federal Land Banks 28,460 28,555 28.428 28,428 28,891 29,362 29,579 29.973 48 One- lo four-family 1,675 1,671 1,673 1,673 1,700 1.728 1,740 1,764 49 Farm .' 26,785 26,885 26.755 26,755 27,191 27,634 27,839 28.210 50 Federal Home Loan Mortgage Corporation . . . 46.892 41.712 43.781 43.781 44.939 44 674 44,668 45,437 51 One- to four-family 44,345 38.882 39,929 39,929 40,877 40.477 40,304 40.691 52 Mulnfamily 2.547 2.830 3,852 3,852 4,062 4.197 4.3(,4 4.746 53 Mortgage pools or trusts' 1.570.666 1.726.833 1.861.864 1.861.864 1,905,515 1.963 909 2,008,229 2,055,077 54 Government National Mortgage Association . . 414.066 450.934 472,292 472.292 475.829 485.441 497.248 505,977 55 One to four-family 404.864 441,198 461,447 461.447 464,650 473.950 485,303 493 795 56 Multifamily 9,202 9.736 10,845 10,845 11,179 11,491 11,945 12.182 57 Federal Home Loan Mortgage Corporation . . . 447,147 490.851 515,051 515,051 524,327 536.671 545.608 554.260 58 One- lo four-family 442.612 487 725 512,238 512.238 521,722 534.238 543341 551,513 59 Mulnfamily " 4,535 3,126 2.813 2,813 2.605 2.433 2.267 2.747 60 Federal National Mortgage Association 495,525 530 343 582,959 582,959 599,546 621.285 636,362 650.780 61 One- to four-family 486,804 520.763 569.724 569 724 585,527 606.271 619,869 633.210 62 Multifamily 8,721 9.580 13.235 13,235 14,019 15,014 16,493 17,570 63 Farmers Home Administration4 28 19 10 9 7 3 64 One- to four-family 5 3 I I 0 0 65 Multifamily 0 0 0 0 (I 0 0 0 66 Nonfarm. nonresidential 13 9 5 5 5 4 4 0 67 Fami 10 7 4 4 4 4 3 3 68 Private mortgage conduits 213.901 254 686 291.551 291,551 305,803 320,502 329.003 144,057 69 One- to four-family6 179,730 202,987 222.892 222.892 230,221 239.153 244 527 246,904 70 Multifamily 8,701 14,925 21.279 21,279 24,477 26.809 28,141 33,689 71 Nonfann, nonresidential 25,469 36,774 47.380 47.380 51,104 54,541 56,336 63,464 72 Farm 0 0 0 0 0 0 0 0 73 Individuals and olhers7 609.444 619,069 649 752 649,752 672.488 686.321 702,590 713,454 74 One- 10 four-family 456,115 460.632 485.584 485.584 506,641 518.1 16 533,074 542.151 75 Multifamily 65,398 69.615 73.239 73,239 73,823 74.824 75.510 76,387 76 Nonfarm, nonresidenlial 73,922 76,142 78,105 78,105 79.129 80,379 80,888 81.718 77 Farm 14,009 12.681 12,824 12,824 12.896 13.002 13.118 13.198 1. Multifamily debt refers to loans on structures of rive or more units. 6. Includes securitized home equity loans. 2. Includes loans held by nondeposit Irust companies but not loans held by bank trust 7. Other holders include mortgage companies, real cslale investment trusts, slale and local departments. credit agencies, state and local retirement funds, noninsured pension funds, credit unions, and 3. Includes savings banks and savings and loan associations. finance companies. 4. FmHA-guaranteed securities sold to the Federal Financing Bank were reallocated from SOURCE. Based on data from various institutional and government sources. Separation of FmHA mortgage pools to FmHA mortgage holdings in 1986:Q4 because of accounting nonfami mortgage debt by type of property, if not reported directly, and interpolations and changes by the Farmers Home Administration. extrapolations, when required for some quarters, are estimated in part by the Federal Reserve 5 Outstanding principal balances of mortgage-backed securities insured or guaranteed by Line 69 from Inside Mortgage Securilies and other sources. the agency indicated. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A36 Domestic Financial Statistics • July 1997 1.55 CONSUMER CREDIT1 Millions of dollars, amounts outstanding, end of period 1996 1997' Holder and type of credit 1994 1995 1996r Oct. Nov. Dec' Jan. Feb. Mar Seasonally adjusted 1 Total 966,457 1,103,296 1,193,205 1,185,340' 1,190,219' 1,193,205 1,203,454 1.210,203 1.212,229 317,182 350,848 375,182 375.174' 374,635' 375.182 376,149 376,368 375,344 319 317 413,894 467,854 458,440' 464,267' 467.854 476 261 481.288 482,764 4 Other2 309,939 338,554 350,169 351,726' 151,317' 350,169 351,044 352.548 354.120 Not seasonally adjusted 5 Tulal 990,247 1.131,881 1,225,101 1,187,081' 1,198,107' 1,225,101 1,214.650 1,206.901 1,200.956 By major holder 6 Commercial bank* 462.923 507.753 530,081 521.258 522,973 530.081 527,210 521.292 515.186 7 Finance companies 134,830 152,624 154,468 153,44-1 153.172 154,468 154,860 154.135 150.413 119,594 131,939 144,148 143.018' 143,296' 144.148 144,432 143.788 143.942 9 Savings institutions 38,468 40,106 44,711 44,860 44,786 44.711 44.636 44,563 44,488 10 Nontinancial business' 86,621 85,061 79.745 67.954' 69.S08' 79,745 75,631 72 639 74.559 1 1 Pools ol securitized assets4 147,811 214.398 271.948 256.547 264.072 271,948 267,881 270,484 272.368 By major type of credir 12 Automobile 319,715 354,055 378 791 379.457' 378.788' 378.791 375.740 374,012 371.351 13 Commercial banks 141,895 149,094 153,983 154.841 154.837 153,983 153,256 152,311 151,186 14 Finance companies 61,609 70.626 73.4R4 75.917 75.304 73.484 73.933 74,337 73,139 15 Pools of securitized assets4 36.376 44.411 51,171 48.020 48.242 51.171 48,473 47,070 46,266 357,307 435,674 492,367 457.926' 467.958' 492.367 483,966 479,935 476,744 17 Commercial banks 182,021 210,298 228.615 214,995 217,924 228.615 224,153 217.709 210,157 18 Nontinancial business" 56,790 53,525 46.901 38,105 19.275 46.901 43.900 41,813 43.979 19 Pools of securitized assets4 96.130 147.934 188.712 178.590 183,987 188,712 187,865 192,332 194,823 20 Other 313,225 342,152 353.943 349,698' 151.361' 153,943 354.944 352,954 352,861 21 Commercial banks 139,007 148,361 147,483 151,422 150,212 147,483 149.801 151.272 153,843 22 Finance companies 7.3,221 81,998 80.984 77,527 77,868 80,984 80.927 79,798 77,274 23 Nonnnancial business1 29,831 31,536 32,844 29,849' 30,533' 32,844 31.731 30,826 30.580 24 Pools of securilized assets4 15,305 22.053 32.065 29.937 31,843 32,065 31,543 31,082 31.279 1. The Board's series on amounts of credit covers mosl short- and intermediate-term credit 3. Includes retailers and gasoline companies. extended to individuals. Data in this table also appear in the Board's G.19 (421) monthly 4. Outstanding balances of pools upon which securities have been issued; these balances statistical release. For ordering address, see inside front cover. are no longer carried on the balance sheets of the loan originator. 2. Comprises mobile home loans and all oiher loans that are not included in automobile or 5. Totals include estimates for certain holders for which only consumer credit totals are revolving credit, such as loans for educalion, boals, trailers, or vacations. These loans may be available. secured or unsecured. 1.56 TERMS OF CONSUMER CREDIT1 Percent per year except as noted 1996 1997 Item 1994 1995 1996 Sept. Oct. Nov. Dec. Jan. Feb. Mar. INTEREST RATES Commercial banks~ 1 48-month new car 8.12 9.57 9.05 n.a. n.a. 9.03 n.a. n.a. 8.92 n.a. 2 24-month personal 13,19 13.94 13.54 n.a. n.a. 13.62 n.a. n.a. 13.46 n.a. Credit card plan 3 All accounts 15.69 16.02 15.63 15.62 n.a. 15.88 n.a 4 Accounts assessed interest 15.77 15 79 15.50 n.a. n.a. 15.52 n.a. n a. 15.13 n.a. Auto finance companies 5 New car 9.79 11.19 9.84 10.52 10.40 10.31 8.60 7.17 744 8 08 6 Used car 13.49 14.48 13.53 13.87 13.75 13.56 13.42 12.93 13.08 13.18 OTHER TERMS3 Maturity {months) 7 New car 54,0 54.1 51.6 51.9 52.5 52.3 52.3 55.1 54.6 53.5 8 Used car Li?an-to-va!tif ratio 9 New car 92 92 91 91 89 90 90 92 92 90 10 Used car 99 99 100 100 101 102 99 99 99 99 Amount financed (dollars) 11 New car 15,375 16,210 16,987 17,182 17,435 17.719 17,670 17,090 16,837 17.198 12 Used car 10,709 11,590 12.182 12,108 12,326 12,393 12,492 12,362 12,202 12.194 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. Data in this table also appear in the Board's G.19 (421) monthly 3. At auto finance companies statistical release. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A37 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS' Billions of dollars; quarterly data at seasonally adjusted annual rates Transaction categorv or sector 19%' Q3 Q4 Ql Q2 Q3 Q4r Nonfinancial sectors 1 Total net borrowing by domestic nonfinancia] sectors. 545.6r 628.8r 621.6r 719.7' 751.8 571.r 590.2' 886.1' 715.0' 712.7' 693.2 fiv sector and instrument 2 Federal government 304.0 256.1 155.9 144 4 145.0 86.0 59.3 239.9 62.4 161.3 116.5 3 Treasury securities 303.8 248.3 155.7 142.9 146.6 85.6 54.1 242.2 60.2 164.4 119.8 4 Budget agency securities and mortgages 7.8 2 1.5 -1.6 .4 5.1 -2.3 2.2 -3.1 -3.3 f> Nonfederal 372.7' 465.8' 575.31 606.7 485.1' 530.9' 646.3' 652.6' 551 4' 576.7 By instrument (j Commercial paper 8.6 10.0 21.4 18.1 -.9 18.1 14.1 30.3 11.0 -16.1 -29.0 7 Municipal securities 30.5 74.8 -29 3 -44.2 1.5 -107.2 -12.6 -18.9 37 7 -76.2 63.5 8 Corporate bonds 67.6 75.2 23.3 73.3 72.5 59.8 82.0 60.9 71.5 67.8 89.9 9 Bank loans n.e.c -13.7 3.6 73.2 99.5' 70.2 75.0' 77.9' 40.6' 75 0' 134.3" 31.0 10 Other loans and advances 10.1 -9 4 54.4 59.0 38.8 35.2 61.0 32.9 26.8 79.4 16.2 11 Mortgages 133.5' 157.0' 196.4' 228.0 331 4 247.7' 191.0r 377.9' 319 4' 268.0' 340.2 12 Home mongayes 190.3' 186.4' 203.9' 197.1' 281.6 219.2 161.4' 333.5' 276.1' 248.4' 268.5 13 Multifamily residential -10.7' -5.9' 1.7 10.5 18.9 11.6' 11.3 14.7' 18.3' 13.4' 29.1 14 Commercial -47.5' -23.9' — 11 0' 18.7' 27.4 14.8' 15.2' 27.4' 39.7' 2.7' 39.9 15 Farm 1.4 .5 1.8 1.7' 3.4 2.2 1.1 2.3' 5.3 3.5 2.6 16 Consumer credit 5.0 61.5 126.3 141.6 93.2 156.4 117.5 122.5' 91.2' 94.2' 65.0 Bv borrowing sector 17 Household 201.0' 256.5' 372 4 381.9' 403.4 413.8' 334 6' 473.5' 420.3' 372.1' 347.7 (H Nonfinancial business 19.5' 539' 133.2' 232.4' 190.5 172.5' 207.0' 176.4' 187 8' 240 9' 156.8 IS> Corporate 34.1' 47.7' 118.5' 197.0' 146.4 133.8' 174.9' 130.9' 148 3' 211.8' 94.6 20 Nonfarm noncorporate -160 4.2 11.9 33.7' 40.8 35.2' 3.3.1' 45.5' 32.4' 30.2' 55.0 2 I Farm 1.3 2.0 2.8 1.6 3.3 1.5 -1.0 .1 7 1' -1.2 7.2 22 State and local government. . . . 21.1 62.3 -39.8 -39.0' 12.9 -101.3 -10.8' -3.6 44.4 -61.6 72.2 23 Foreign net borrowing in United States 23.7 70.4 -15.3 69.5 67.4 88.3 76.9 49.1 36 b 106.0 77.8 24 Commercial paper 5.2 -9 0 -27.3 13.6 10.9 23.7 -3.9 -8.5 9.5 38.6 3.8 25 Bonds 16.8 82.9 12.2 48.3 46.8 55.2 72.7 47.9 1 I.I 59.7 68.4 26 Bank loans n.e.c 23 .7 1.4 8.5 9.1 8.2 11.9 8.7 15.1 4.7 7.8 27 Other loans and advances -.6 -4.2 -1.6 -.8 .7 1.3 -3.9 1.1 .7 3.1 -2.2 28 Total domestic plus foreign 569.3' 699.3' 606.4r 789.1' 819.1 659.4r 6<i7.r 935.3r 751.5' 818.71" 771.0 Financial sectors 29 Total net borrowing by financial sectors . . 291.3 467.7 447.2' 531.2 506.3r 574.3' .»0.9r 689.3' 497.2' 607.2 By instrument 30 Federal government-related 155.8 165.3 287.5 204.1 231.1 227.7 305.5 137.8 296.0 240.4 2S0 0 31 Government-sponsored enterprise securitie: 40.3 80.6 176.9 105.') 90.4 101.5 132.1 31.4 126.9 80.0 123.3 32 Mortgage pool securities I15.fi 84.7 115.4 "8.2 140.7 126.2 173.4 106.5 169.1 160.4 126.8 33 Loans from U.S. government .0 0 -4.8 .0 .0 .0 .0 .0 .0 .0 0 34 Private 84.2 126.0 180.2 24.3.1' 300.1 278.6' 268.8' 193.1' 393.3' 256.8' 357.2 35 Open market paper -.7 -6.2 41.6 42.6 92.7 43.7 55.1 17.8 105.7 85.2 162.0 36 Corporate bonds 82.7 119.2 118.4 185.6' 154.3 217.3' 175.1' 147.6' 204.7' 120.7' 144.1 37 Bank loans n.e.c 2.2 -13.0 - 12.3 5.6' 14.5 8.2' -1.2' 25.4' 23.5r 4.1' 5.0 38 Other loans and advances -.6 22.4 22.6 3.4 27.2 4.9 32.0 -5.5 486 13.9 31.8 39 Mortgages .6 3.6 9.8 5.9' 11.4 4.5' 7.7" 7.7' 10.8' 12.9' 14.3 By borrowing sector 40 Commercial banking 10 0 13.4 20.1 22.5 11.6 38.9 -9.7 -32.5 40.1 15.7 41 Savings institutions -7.0 11.3 12.8 2.6 26.0 5.1 31.5 11.0 42.1 26.4 24.7 42 Credit unions 0 .2 %2 -.1 .1 .1 .0 -.1 _ T .3 3 43 Life insurance companies .0 3 -I 1.1 -.1 - 4 2.5 .3 -.4 :.o 44 Government-sponsored enterprises 40.2 80.6 172.1 105.9 90.4 101.5 132 1 11 4 126 9 80 0 123.1 45 Federally related mortgage pools 115.6 84.7 115.4 98.2 140.7 126.2 173.4 106.5 169.1 160.4 126.8 46 Issuers of asset-backed securities (ABSs) . . . 58.5 82.4 69.5 131.2 130.2 164.8 187 5 137.1 I3I.I' 101.8' 150.6 47 Finance companies -1.6 50.2 51.6 48.4 19.8 54.3 47.1 68.4 56.9 21.1 48 Mortgage companies 8.0 .0 -11.5 .4 9.9 4.0 -10.0 20.0 16.0 1.6' 1.8 49 Real estate investment trusts (RFJTs) .3 34 13.7 6.0' 12.8 4.5' 8.1' 8.2' 11.5' 13.7' 17.7 50 Brokers and dealers 2.7 120 .5 -5.0 -2 0 2 1 7.7 -31.8 13.2 5.7 4.9 51 Funding corporations 13.2 2.9 24.2 32.0 62.! 39.4 - 4 31.6 70.9 35.0 110.9 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Financial Statistics • July 1997 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS1—Continued 1995 1996 1997 Transaction category or sector 1992 1993 1994 1995 1996' Q3 Q4 Ql Q2 03 Q4' Ql All s ctors 52 Total net borrowing, all sectors 809.3' 990.6' 1,074.1' 1,236.3' 1,350.3 l,l«S.7r 1,241.4' 1,266.2' 1,440.8' 1.315.9' 1,378.2 1,124.7 53 Open market paper 13.1 -S 1 35.7 74.3 102.6 85.5 65.3 39.6 126.3 107.6 136.8 203.4 54 U.S. government securities 459 8 421.4 448.1 148.5 376.1 313.7 364.8 377.7 358.4 401.7 366.5 206.2 55 Municipal securities 30. * 74.8 -29.3 -44.2 1.5 -107.2 -12.6 -18.9 37.7 -76.2 63.5 26.8 56 Corporate and foreign bonds 167.1 277.3 153.9 307.2' 273.6 332.2' 329.9' 256.4' 287.4' 248.2' 302.4 142 4 57 Bank loans n.e.c -9.3 -8.6 62.3 113.5 93.8 91.4 88.6 74.7 113.6 143.1' 43.8 135.4 58 Other loans and advances 8.9 8.7 70.7 61.6 66.7 41.3 89.1 28.6 76.1 116.5 45.8 17.9 59 Mortgages 134.1' 160.6' 20f).2r 233.8' W2.8 252.2' 198.7' 385 6' 350.1' 280.9' 354.5 312.4 60 Consumer credit 5.0 61.5 126.3 141.6 93.2 156.4 117.5 122.5' 91.2' 94.2' 65.0 80.2 Funds raised through mutual funds and corporate equilies 61 Total net issues 312.5 453.9' 153.0' 156.3' 240.1 197.1' 228.6' 306.3' 396.7' 91.9' 165.4 184.3 62 Corporate equities 103.4 130.1' 24.1' -17.7' -18.5 -4.9' -15.9' 2 5' 51.0' -106.3' -23.2 -54.5 63 Nonfinancial corporations 27.0 21.3 -44.9 -73.8' -81.2 -92.8 -71.2' -92 A -27.2 -138.8 -66.4 -84.8 64 Foreign shares purchased by U.S. residents 32.4 63.4 48.1 50.7 57.8 88.2 57.4 89.8 69 7 32.1 39.5 47.3 65 Financial corporations 44.0 45.4' 20.9' 5.5' 4.9 -.3' — 2 "*T 5.1' 10.5' .5' 3.7 -17.0 66 Mutual funds 209.1 323.7 128.9 173.9 258.6 202.0 244.5 303.8' 343.7' 198.2' 188.6 238.8 I. Data in ihis table also appear in the Board's Z.l (780) quiidcrly slalishcal r 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 TRANSACTIONS' Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1995 1996' 1997 1 ransaclion category or sector 1992 1993 1994 1995 19y6' Q3 Q4 Ql Q2 Q3 Q4 01 NET LENDING IN CREDIT MARKETS2 ] Total net lending in credit markets 809.3r 990.6' 1.074.1' 1.236.3r 1,350.3 1,165.7' 1,241.4' 1,266.2 1.440.8 1,315.9 1.378.2 1,124.7 2 Domestic nonledeial nonhnaticial sectors 115.4' 76.0' 252.8' -98.5' 6 -82.4' - 189.9' -78.0 110 1 -179.9 -69.9 - 113.8 3 Households 86.0' 15. 1' 289.9' -19.1' 18.1 84.6' -93 6' -121.1 110 5 -74.7 -42.4 -187.8 4 Nonfinancial corporate business 27.8 9.1 17.7' -2.4' 18.3 -38.8' -12.9' 40,4 39.9 14.8 -21.8 81.1 % Nonfann noncorporate business -.[ - 1 1 2 .1 .4 .3 3 .4 .4 .4 .4 .5 f> Stale and local ^overnmenls 1.7 ?2.6 -55.0 -77.4 -36.2 -128.5 -83.7 2.4 -20.8 -120.4 -6.2 -7.6 7 Federal governmeni -11.9 -18.4 -24.2 -21.5 -21.9 -24.3 -244 -20.7 -15.2 -26.4 -25.1 -18.7 X Rest of the world 98.4 129 3 132.3 272.7 405.6 361.0 157.6 341.1 268.2 484.4 528.5 360.3 9 Financial sectors 607.4' 803.7' 713.2' 1.083.7' 966.0 911.3' 1.298.0' 1,023.8 857 7 1,037 8 944 8 896.8 10 Monetary authority 27.9 36.2 31 5 12.7 P 1 -4.1 197 16.9 9.4 19.1 1.6 37.5 11 Commercial banking 95.3 142.2 163.4 265.9 187 9 244.8 166.2 121.7 190.2 202.0 237.7 310.3 12 U.S. chartered banks 69.5 149.6 148.1 186.5 119.7 227.0 118.1 80.5 125.5 123.6 149.2 210.0 13 Foreign banking offices in United States 16.5 -9.8 11.2 75.4 63.3 25.6 36.1 44.2 57.5 72.9 78.5 92.1 14 Bank holding companies 5.6 .0 .9 -.3 3.9 -9.6 4.6 -5.1 54 4.8 10.6 2.2 15 Banks in U.S. affiliated areas 3.7 2.4 3.3 4.2 10 1.8 74 2.1 1.7 .7 -.6 6.0 16 Savings institutions -79.0 -23.3 6.7 -7.5 19.9 32.2 -68.4 34.1 40.5 53.7 -48.8 -10.0 17 Credit unions 17 7 21.7 28.1 16.2 25.5 11.0 19.5 22.1 34.8 20.3 24.8 15.4 8 0 7 1 1 9 ?o •> 3 5 4 2 7 8 j •) 8 i 19 Life insurance companies 79.5' 100^9 66.7' 9«2r 59.7 73.1' 53.1' 48.7 2^5 120J 67.6 56.1 20 Othei insurance companies 6.7 27.7 24.9 21.5 24.4 21.9 22.3 23.6 23.7 24 9 25.3 26.2 21 Private pension tunds 37.5' 49.5' 47.7' 63.1' 46.6 59.9' 81 1' 69.5 45.4 41.9 29.5 57.6 22 Stale and local yoveminent retirement funds 59 ^1 1 30 7 •>2 7 34 5 2 6 '0° 62 1 50 6 8.0 17.3 -2 8 23 Money rnarkci mutual funds 4.7 20.4 30.0 86.5 88. K 30.0 125.1 175.0 18.4 88 5 73 4 77 1 24 Mutual hinds 126.2 159 5 -7 1 52.5 48.9 58.0 141 9 81.8 54.1 38.3 21.5 37.9 25 Closed-end kinds 18.2 14.4 -3.1 13.3 9.1 16.7 13.2 10.9 9.8 9.0 7.5 6.7 26 Government sponsored enterprises 68.8 8S.6 120.6 87.9 91 8 50.0 186.5 33.4 122.2 82.1 137.5 63.2 27 Federally related mortgage pooh 115.6 84.7 1154 98.2 140.7 126.2 173 4 106.5 169.1 160.4 126.8 101.8 2K Asset-backed securities issuers (ABSs) 53.7 79.9 62.8 113.0 105.2 154.4 141.4 117.3 120.9 75.1 107.3 27.6 2l> Finance companies 7.5 -9.0 68.2 64.2 43.1 50.8 53 7 40.9 41.3 55.9 34 3 72.3 30 Mortgage companies . .1 .0 -24.0 -3.4 8.2 7.3 -364 51.8 -26.8 3.4 4.1 -5.0 31 Real LMJH' investment trusts (REITs) 1 1 .6 4.7 3.0 1.8 3.4' 3.4 3.4 3.4 2.0 2.0 12 Brokers and dealers . . -1..1 14.8 -44.2 90.1 -17.1 -5.2 189.1 -109.0 - 72.0 35.5 77.0 -11.8 13 Funding LurpuuiUons 13.3' -35.6' -16.7' 4.3" 27.5 3.7' 12.8' 116.7 !5.9 -11.9 -10.9 26.6 RELATION OF LIABILITIES ru FINANCIAL ASSETS U Net flows through credit markets 809.3' 990.6' 1,074.1r 1.236.3' 1,350.3 l,165.7r 1,241.4' 1,266.2 1,440.8 1,315.9 1,378.2 1,124.7 Other financial sources 35 Official foreign exchange .... -1.6 .8 - 5.8 8.8 6.3 9.0 -1 0 - 9 1.6 -26.6 7 _2i "> 36 Special drawing rights certificates -2.0 .0 .0 2.2 -.5 8.6 .0 .0 .0 - 1.8 .0 -2.1 37 Treasury currency .2 .4 .7 .6 .0 .8 .0 .0 .0 2.3 -2.3 .4 38 Foreign deposits -3.5 -18.5 54.0 33.5 47 7 -29 5 1S2 85.0 .9 113.2 -8.5 59.4 39 Net interbank transactions 49.4 50.5 89.8 9.9' -52.7 -13.1 80.9' -90.4 -54 3 -113.0 47.0 -126.3 40 Checkable deposit1- and currency 111 5 117.3 -9.7 -12.8 16.0 -113.1 -69.3 43.3 4.5 107 1 -91.0 123.4 41 Smait time and savings deposits -57.2 -70.1 -40.0 96.5 97.0 145.6 114.9 212.5 -4 6 84.6 95.6 170.8 42 Large time deposits -73.2 -23.5 19.6 65.6 113.9 80.2 -.9 55.1 83.5 182.5 134.4 45.8 43 Money market fund shares 4.5 20.2 43.3 142.3 145.8 122.9 151.1 244.0 4.1 147.4 187.7 201.8 44 Security repurchase agreements 43.1 71.2 78.3 110.7 38.6 92.6' -19.1 117.9 -29.4 85 3 .10.7 45 Corporate equities 103.4 i.iru' 24 1' 17.7' -18.5 -4.9' - 151)' 2.5 53.0 -106.3 -23.2 -54.5 46 Mutual fund shares 209.1 323.7 128.9 171.9 258.6 202.0 244.5 101 8 343 7 198 2 188.6 238.8 47 Trade payable1; 46.6 52.4 91.0' 102.5' 74 3 147.0' 98.7' "62.3 137.4 -7.2 104.9 77.3 48 Security credit . . 4.6 61.4 -.] 26.7 52.4 32.1 50.1 120.6 -37 7 -4.1 131 1 103.4 49 Life insurance reserves 28.0 36.0 34.5 44.9 40.(1 33.1 18 1 19.0 32.5 56.6 51.8 58.5 50 Pension fund reserves 233.8' 259.1' 257 T 247.6' 2747 250 8' 196 2' 260.9 218.3 291.1 108.5 290.9 51 Taxes payable 9.7 5.2 3.2 1.3 26 1.4 -10.2 5.6 6.6 -1.2 -.6 -8.2 52 invL-sLment in bank personal trusts -7.1 .9 17.8 -49.7 12.5 -65.8 -39.2 -.6 11.8 19.2 19.8 23.5 53 Noncorporate proprietors' equity 29.9' 35.5' 27.9' 33.5' 25.7 16.4' 29 8' 26.0 14.8 43.2 18.8 32.2 54 Miscellaneous 267.8' 363.9' 290.2' 564.0' 500.8 510.2' 899.1' 596.8 329.6 424.6 652.3 660.2 "i5 Total financial sources l.sas.y 2,407.0' 2,179.5' 2,82(>.(ir 2,972.'> 2,613.9' .1.(1X7.9' .1,192.3 2.724.3 2.696.0 *,279.2 3,028.5 Liuhihiii-s nor iJcniifh'J «.i assets ( - ) 56 Treasury currency _ 2 — 2 - .2 -.5 -1.0 -.3 -1.0 l.i 1.0 1.3 -1.1 -.1 57 Foreign deposits -2.8 -1.0 44.0' 26.7' 29.7 - 56.0' 10 1' 62.7 31.3 88 6 -63.9 41.6 58 Net interbank liabilities -4.9 4.2 -2.7 -3.1 -3.4 12.3 -21.6 10.9 -26.9 -9.2 11.6 26.9 59 Securil) repurchase agreements 4.7' 46.1' 57.3' 55.1' 28.9 75.7' 30.9' 27.2 115 1 -112.0 85.2 -70 1 f>0 Taxes payable 11 9 11.1 8.6 87 37 10.3 2 2 -23.2 24.9 99 3.2 -34 2 61 Miscellaneous -37.9' -147 1' -1.VJ.2' -4.3' -71.0 -45.1' 2463' -147.1 -217.5 -62.4 143.0 -28.5 Floaty nor included in assets <-) 62 Federal government checkable deposits .7 -1.5 -4.8 -6.0 .5 3.8 - 13.8 8.6 -10.5 28.0 -24 2 -3.9 63 Other checkable deposits 1.6 -1.3 -2.8 -3.8 -4.0 -32 -4 7 -3.8 -4.2 -4.0 -4.0 -4.1 64 Trade credit 11.3 -4.0 K.V -27.3' -32.0 -43.3' -149.1' 45.1 26.6 -98.6 -101.0 -.8 65 Total identified lo sectors as assets 1,824.0' 2.506.8' 2.2)1.1' 2.775.0r 3,021.6 2,659.7' 2,981.6' 3.212.9 2.786.6 2,854.5 3.232.3 3.101.9 !. Data in this table also appear in the Board's Z. I (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual lund 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 • July 1997 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1 Billions of dollars, end of period 1995 1996 1997 Transaction category or sector 1903 1994 1995 1996' Q3 04 Ql Q3 04' 01 Nonfinaneial sectors 1 Total credit market debt owed by domestic nonfinaneial sectors 12,538.Sr 13.166.6' 13.886.3' 14,638.1 13,702.9' 13,886.3' 14,084,8' 14,237.3' 14,424.5' 14,638.1 14,808.2 B\ sector and instrument 1 Federal government 3,336.5 3 492 3 3 636 7 3 781.8 3 603 4 3 636 7 3,717.2 3.693.8 3,733.1 3,781.8 3,829 8 3 Treasury securities 3^309.9 3,465.6 3.608.5 X755.1 1576.5 3.(M.5 3689.6 3.665.5 3J05.7 3J55.1 3.803.5 4 Budget agency set-unties and mortgages .... 26.6 26.7 28.2 266 26.9 28.2 27.6 28.2 27 4 26.6 26.3 5 Nnnfederal 9,202.3' 9.674.3' 10,249.6' 10.856.3 10.099.5' 10,249.6' 10.367.6' 10.543.5' 10,691.4' 10,856.3 10,978.4 By insuiininn o Commercial paper 117.8 139.2 157.4 156.4 163 3 157.4 174.2 181.7 173.0 156.4 168.7 7 Municipal securities and loans 1,377.5 1,348.2 1,304.0 1,305.5 1,308.2 1,304.0 1,300.8 1,306.8 1,290.6 1,305.5 1,314.2 8 Corporate bonds 1,229.7 1,253.0 1,326.3 1.398.8 1,305.8 1,326.5 1.341.5 1.359.4 1.376.4 1.398.8 1.418.7 9 Bank loans n.e.u 675.9 749.0 848.4' 918.6 824.3 848.4' 856.4' 878.4' 906.3' 918.6 953.1 10 Other loans and advances 677.1 737.8 796.8 835.6 782.1 796.8 809.3 815.7 831.8 835.6 848.7 11 Mortgage* 4.260.4' 4,456.8' 4,684.8' 5,016.2 4.637.6' 4,684.8' 4,762.4' 4.853.5' 4,931.7' 5,016.2 5.073.0 12 Home mortgages 3.232.8r 3.436.7' 1 633 8' 39154 3 594 0' 3 633 8' 3 700 i' 3 775 6' 3,848.9' 3,915.4 3.966.8 1 3 Multitamily residential 267.4' 269.1' 279.6' 298.5 276.3' 279.6' 283.3' 287.9' 291.2' 298.5 300.1 14 Commercial 679.0' 668.1' 686.8' 714.2 683.0' 686.8' 693.6' 703.5' 704.2' 714.2 717.8 15 Farm 81.2 83.0 84.6 88.1 84.4 84.6 85.2 86.5 87.4 88.1 88.4 16 Consumer credit 863.9 990.2 1,131.9 1.225.1 1.078.2 1,131.9 1.123.0 1,147.9 1,181.6' 1,225.1 1,202.0 By hoirawim- sector 17 Households 4,287.0' 4,659.0' 5,040.9' 5,444.3 4,932.1' 5.040.9' 5.103.4' 5,216.2' 5,329.0' 5,444.3 5.482.8 18 Nimtinanaal busings 3,757 I' 3.896.9' 4,1293' 4.319.7 4084.3' 4,129.3' 4.184.2' 4]239.6' 437.3' 4.3! 9.7 4,391.3 19 Corporate 2,495.7' 2.620.8' 2,817.8' 2,964.2 2.779.6' 2,817.8' 2,863.9' 2,906.1' 2,945.9' 2,964.2 3,026.3 2(1 Nonfarm noncorporate 1,123.1' 1,135.0' 1,168.7' 1,209.5 1,159.9' 1,168.7' 1,180.0' 1.188.2' 1,195.2' 1,209.5 1,221.6 2 1 Farm 138.3 141.1' 142.7 146.0 144.8 142.7 140.3 145.3 146.2 146.0 143.5 11 State and local government 1.158.2 1.118.4 1,079.4' 1.092.3 1.083.1' 1,079.4' 1.080.0' 1.087.7' 1,075.1' 1.092.3 1,104.3 23 Foreign credit market debt held in United States 385.6 370.4 439.9 507.2 419.8 439.9 450.8 459.6 487.1 507.2 513.3 24 Commercial paper 68.7 41.4 55 0 65.8 55.8 55.0 51.5 5s 4 64 8 65 8 67 9 25 Bonds 230.1 242.3 290.6 337.3 272.4 290.6 3025 305.3 3207 337.3 341J 26 Bank loans n.c.c 24.6 26.1 34.6 43.7 31.6 34.6 36.8 40.5 41.7 43.7 43.5 27 Other loans and advances 62.1 60.6 59.7 60.4 60.0 59.7 60.0 60.4 60.4 60.4 60.3 2S Total credit market debt owed by nonfinaneial setturs, domestic and foreign 12,924.3' 1.1.537.0' 14,326.2' 15.145.3 14.122.7' 14,326.2' 14,535.6' 14,696.9' 14.911.6' 15.145.3 15.321.5 Financial sectors 29 Total credit market debt owed by financial sectors 3,321.7 3,794.6 4,244.4' 4.775.6 4,096.3 4,244.4' 4,325.4' 4,497.8' 4,619.7' 4,775.6 4.857.9 By instrument 30 Federal government-related 1,885.2 2.172.7 2,376.8 2,607.9 2,300.1 2,376.8 2,414.1 2,489.5 2,545.1 2,607.9 2,639.7 31 Government-sponsored enterprises securities... . 523.7 700.6 806.5 896.9 773.5 806.5 814.4 846.1 866.1 896.9 899.6 32 Mortgage pool secunhes 1,356.8 1.472.1 1,570.3 1,711.0 1.526.6 1,570.3 1,599.7 1,643.4 1.679.2 1,711.0 1,740.1 33 Loans from U.S. government .... 4.8 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 34 Private 1.436.4 1.621.9 1,867.6' 2,167.7 1.796.2 1,867 6' 1.91 1.4' 2,008.3' 2,074.4' 2.167.7 2.2IH.2 35 Open market papei 393.5 442.8 488.0 580.7 473 6 488.0 491 9 518.5 5396 5807 624.5 36 Corporate bonds 857.6 973.5 1,159.1' 1.313.4 ' 1,112.6 1,159.1' 1.192.7' 1,242.4' 1.274.8' 1.313.4 1.321.2 37 Bank loans nr.c 67 6 55.3 60.9' 75.4 60.3 60.9' 66.7' 72.4' 73.3' 75.4 74.3 38 Other loans and advances 108.9 131.6 135 0 162.2 127.0 135.0 13.3.6 145 8 154.2 162.2 158.2 39 Mortgages K.9 18.7 24.6' 36.0 22.7' 24.6' 26.5' 19 2' 32.4' 36.0 40.0 By fcjmwing scam 40 Commercial hanks 84.6 94.5 102.6 112.2 102.0 102.6 100.5 103.6 106.7 112.2 114.5 41 Bank holding companies 121.4 133 6 148.0 150.0 150.3 148.0 141.4 148.4 149.1 150.0 152.0 42 Savings institutions 996 112.4 115.0 141.1 107.2 115.0 117.8 128.3 134.9 141 1 137.4 43 Credit unions -j .5 .4 .4 .4 .4 .4 .3 .4 .4 .4 44 Lite insurance companies .6 .5 1.6 .6 .5 1.1 1.2 I.I 1.6 1.8 45 Government-sponsored enterpriser 528 5 700.6 806.5 896.9 773.5 806.5 814.4 846.1 866.1 896.9 899.6 46 Federally related mortgage pools 1.356 8 1.472.1 1.570.3 1,711.0 1,526.6 1.570.3 1,599.7 1,643.4 1.679.2 1,711.0 1.740.1 47 Issuers of asset-hacked securities tABSsj 486.7 556.2 689.4 819.6 639.8 689.4 720.3 751.7' 779. V 819.6 829.1 48 Bnjkers and dealers 33.7 34.3 29.3 27.3 27.4 29.3 21.4 24.6 26.1 27.3 26.6 49 Finance companies 390.5 440.7 492.'' 540.7 471.9 492.3 499.8 514.4 528.4 540.7 546.9 50 Mortgage companies 302 18.7 19.1 29.0 21.6 19.1 24.1 28.1 28.5' 29.0 28.3 51 Real estate investment trusts (REITs) 17.4 31.1 37.1' 49.9 35.0 37.1' 39.1' 42.0' 45.4' 49.9 54.6 52 Funding corporations 169.9 199.3 233.9 296.0 239.9 233.9 245.6 265.6 274.5 296.0 326.6 All sectors 53 Total credit market debt, domestic and foreign. . . . 16,246.0' 17,331.7' 18,570.6' 19.920.9 18,219.0' 18,570.6' 18,861.0' 19.194.7' 19,531.3' 19,920.9 20,179.4 54 Open market paper 580.0 623.5 700.4 803.0 692.7 700.4 717.6 753.6 777.4 803.0 861.1 55 US government securities 5,216.9 5.665.0 6,013.6 6,389.7 5,903.5 6,013.6 6,131.3 6,183.2 6,278.4 6,389.7 6.469.4 56 Municipal securities 1,377.5 1,348.2 1.304.0 1,305.5 1.308.2 1,304 0 1,300.8 1,306.8 1,290.6 1.305.5 1,314.2 57 Corporate and foreign bonds 2,317.4 2 468.8 2,776.0' 3,049.6 2.690.8 2.776.0' 2,836.7' 2.907.1' 2,971.4' 3,049.6 3,081.6 58 Bank loans n.e.c 768.0 830.4 943.9 1,037.7 916.2 943.9 959.9 991.4 1,021.3 1,037.7 1,070.9 59 Other loans and advances 852.9 929.9 991.5 1,058.2 969.1 991.5 1,002.9 1,021.8 1,046.5 1,058.2 1,067.2 60 Mortgages 4.269.3' 4,475.6' 4.709.4' 5,052.2 4,660.3' 4,709.4' 4.788.9' 4,882.7' 4.964.1' 5,052.2 5.113.1 6] Consumer credit 863.9 990.2 1,131.9 1,225.1 1.078.2 1,131.9 1.123.0 1.147.9 1,181.6' 1.225.1 1,202.0 1. Data in this (able also appear in the Board's Z. 1 (780) quarterly statistical release, tables L.2 through L.4. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A41 1.60 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES' Billions of dollars except as noted, end of period 1995 1996' 1997 T ransaclion category or sector 1994 iyy_T IS96 Q3 Q4 01 Q2 Q3 04 Ql CREDIT MARKET DEBT OUTSTANDING2 1 Total credit market assets 16,246.0r 17,331.7r 18,570.6r 19.920.9 18,219.0' 18,570.6' 18,861.0 19,194.7 19,531.3 19,920.9 20.179.4 2 Domestic nonfederal nonfinancial sectors 2,786.5' 3.069.6' 2,935.9' 2.963.1 2.989.6' 2,935.9' 2,891.1 2.972.5 2.949.2 2.963.1 2.911 2 3 Households 1.693.0' 2 0133' 1.959.1' 2.003.8 2.005.5' 1,959.!' 1.928.1 1 999.9 2.0O2.4 2.003.8 1,958.8 4 Nonfinancial corporate business 27 1.5 289.2' 286.8' 305.1 273.8' 286.8' 273.6 285.7 291.6 305.1 301.3 5 Nonfami noncorporate business 37.0 37.2 37.5 37.9 37.4 37.5 37.6 37.7 37.8 37.9 38.0 6 State and local governments 784.9 729.9 652.5 616.3 672.9 652.5 651.8 649.1 617.4 616.3 613.0 7 Federal government 231.7 207.5 186.1 164.2 192.2 186.1 180.8 177.0 170.5 164.2 159.5 8 Rest of the world 1,147.8 1 254 7 1.561.8 1,967.3 1.493.4 1,561.8 1,653.6 1.718.2 1 840.6 1,967 3 2,063 8 9 Financial sectors 12^080.0' 12/799^8' 13^886.9' K82&2 13*543.9' 13,886.9' 14J35!s 14.326J) I4*57l!o I4,t,2b2 15*045.0 10 Monetary authority 336.7 368.2 380.8 393.1 370.6 380.8 379.6 386.3 386.2 393.1 397.1 11 Commercial banking 3,090.8 3.254.1 3,520.1 3.708.0 3.473.2 3 520 1 3,541.6 3,590.8 3.643.3 3,708.0 3,778 8 12 U.S. chartered banks 2/721.5 2*869^6 3*056.1 3.1759 3fl23.7 3^056 1 J!068.8 3*101.3 3J353 3! 175.9 3!22o!9 13 Foreign banking offices in United Suites 326.0 337.1 412.6 475.8 401.1 412.6 422.2 437.1 454.2 475.8 499.5 14 Bank holding companies 17.5 18.4 18.0 22.0 16.9 18.0 16.8 18.1 19 3 22.0 22.5 15 Banks in U.S. affiliated areas 25.8 29.2 33.4 34.4 31.5 33.4 33.9 34.3 34.5 34.4 35 9 16 Savings institutions 914.1 920.8 913 1 933 2 930.4 913.3 921.8 932.0 945.4 933.2 930.7 17 Credit unions 218.7 246.8 263.0 288.5 258.5 263.0 267.0 276.9 282.6 288.5 290.9 18 Bank personal trusts and estates 240.9 248.0 229.2 233.1 234.2 229.2 228.3 229.4 231.3 233.1 235.2 19 Life insurance companies 1.416.0' 1 482.6' 1.581.8' 1,641.5 1,571.2' 1,581.8' 1,596.2 1.596.7 1,627.0 1,641.5 1,657.6 20 Other insurance companies 422/7 446.4 468.7 492^8 463.0 468.7 474.5 480^2 '4864 492^8 4993 21 Private pension funds 611.4' 659.2' 722.3' 768.8 701.9' 722.3' 739.6 751.0 761.4 768.8 783.2 22 State and local government retirement fund, 423.4 454.1 476.8 511.3 470.6 476.8 491.9 505.0 506.3 511.3 510.2 23 Money market mutual funds 429.0 459.0 545 5 634.3 505.7 545.5 595.6 594.7 606.6 634.3 659.0 24 Mutual funds 725.9 718.8 771.3 820.2 739.2 7713 795.9 809.0 818.3 820.2 834.2 25 Closed-end funds 82.0 78.7 92.0 101.3 88.7 92.0 94.8 97.2 99.5 101.3 101.0 26 Government-sponsored enterprises 546.4 667.0 755.D 822.5 708.4 755.0 762.7 767.6 788.2 822.5 837.6 27 Federally related mortgage pools 1,356.8 1.472.1 1.570.3 1,711.0 1,526.6 1,570.3 1,599.7 1,643.4 1,679.2 1,711.0 1,740.1 28 Asset-backed securities issuers (ABSs) 457.9 520.7 633.7 738.9 595.7 633.7 659.7 688.5 709.5 738.9 742.2 29 Finance companies 482.8 551.0 615.2 658.3 594.7 615 2 621.7 633 2 642.0 658.3 672 7 30 Mortgage companies 60.4 36.5 33.0 41.2 42.2 33.0 46^0 393 40^2 41.2 39^9 31 Real estate investment trusts (RElTs) 8.6 13.3 15.5' 18.5 14.7 15.5' 16.3 17.2 18.0 18.5 19.0 32 Brokers and dealers 137.5 93.3 183.4 166.3 136.1 183.4 156.2 138.2 147.1 166.3 163.4 33 Funding corporations 117.9' 109.0' 115.9' 143.4 118.3' 115.9' 146.5 150.3 152.6 143.4 151.1 RELATION OF LIABILITIES TO FINANCIAL ASSETS 34 Total credit market debt 16,246.0r 17.331.7r 18,570.6r 19,92(1.9 18,219.0' 18,570.6' 18,861.0 19,194.7 19,531.3 19,920.9 20,179.4 Other liabilities 35 Official foreign exchange 53.4 53.2 63.7 53.7 65.1 63.7 62.1 61.4 54.3 53.7 46.3 36 Special drawing rights certificates 8.0 8.0 10.2 9.7 10.2 10.2 10.2 10.2 9.7 9.7 9.2 37 Treasury currency 17.0 17.6 18.2 18.2 18.2 18.2 18.2 18.2 18.8 18.2 18.3 38 Foreign deposits 271.8 324.6 361.4 409 1 353 6 361 4 382 7 382.9 411.2 409 1 423.9 39 Net interbank liabilities 189.3 280J 290.7' 239^6 267^2 290.7' 266'o 249.1 223.6 239^6 204.0 40 Checkable deposits and currency 1,251.7 1.242.0 1,229.3 1.245.2 1.200.3 1.229.3 1,183.3 1,212.3 1,220.8 1,245.2 1.218.9 41 Small time and savings deposits 2,223.2 2.183.3 2,279.7 2.376.7 2,255.8 2.279.7 2,342.3 2,340.1 2.357.4 2,376.7 2,428.7 42 Large time deposils 391.7 411.2 476 9 590.8 477.5 476.9 493.6 511.1 557.6 590.8 605.4 43 Money market fund shares 559.6 602.9 745.1 891.1 702.7 745.3 816.9 809.5 838.1 891.1 950.8 44 Security repurchase agreements 471.1 549.4 660.1 698.7 654.8 660.1 666.1 692.1 687.6 698.7 717.1 45 Mutual fund shares 1.375.4 1.477.3 1,852.8 2,342.4 1.782.0 1.852.8 1,997.0 2,129.9 2,211.6 2.342.4 2,410.3 46 Security credit 279.0 279.0 305.7 358.1 286.1 305.7 326.9 318.6 317.8 358.1 374.4 47 Life insurance reserves 470.8 505.3 550.2 590 2 540 6 550.2 555 0 563.1 577 2 590.2 604.8 48 Pension fund reserves 4,642.9r 4,8484' 5,570.8' 6,285.9 5,442.0' 5,570.8' 5,748.3 5,883.4 6,013i2 6,285.9 6,396.7 49 Trade payables 1.048.2 1.139.2' 1,241.7' 1,316.0 1,192.2' 1,241.7' 1,229.1 1,264.4 1.263.9 1,316.0 1,307.7 50 Taxes payable 84.9 88.0 89.3 91.9 91.9 89 X 94.3 90.3 92.1 91 9 916 51 Investment in bank personal trusts 691.3 699.4 767.4 872.0 758.6 767.4 793.7 811.7 829.0 872.0 890.4 52 Miscellaneous 5.176.6' 5.462.9' 5,928.9' 6.274.4 5.757.3' 5,928.9' 6,067.5 6.089.1 6,197.3 6,274.4 6,387.6 53 Total liabilities 35,451.8r 37,503.8r 41.012.7r 44,584.6 40,075.1' 41,012.7' 41.914.0 42,632.0 43,412.6 44,584.6 4S.267.5 Financial ussets not included in liabilities (-*-) 54 Gold and special drawing rights , 20.1 21.1 22.1 21.4 22.1 22.1 22.1 22.0 21.2 21.4 20.9 55 Corporate equities 6,280.0 6.263.3 8,389.9 10,090.0 7,972.4 8,389.9 8.875.8 9,170.9 9,387.4 10,090.0 10,099.2 56 Household equity in noncorporate business 2,499.5r 2,591.5' 2,702.8' 2,740.7 2,657.7' 2,702.8' 2,739.5 2,762.5 2,787.2 2,740.7 2,827.2 Liabilities not identified as assets '—) 57 Treasury currency -5.1 -5.4 -5.8 -6.8 -56 -58 -6 1 -6.3 -6 0 -6.8 -69 58 Foreign deposits 232.6 277.8' 307.6' 337.2 299.7' 307.6' 323.2 331.1 353.2 337.2 347.6 59 Net interbank transactions -4.7 -6.5 -9.0 -10.8 .1 -9.0 -2.6 -8.0 -11.6 -10.8 1.8 60 Security repurchase agreements -1.61 55.7' 110.9' 139.8 115.1' 110.9' 121.7 141.4 129.7 139.8 125.3 61 Taxes payable 26.8 35.4 44.1 45.1 39.1 44.1 23.9 38.0 41.9 45.1 31.1 62 Miscellaneous -869.9r -959.9' -993.3' -1,240.4 -876.3' -993.3' -1,052.2 -1.145.9 -1,140.7 -1.240.4 -1,181.9 Floats not included in assets ( —) 63 Federal government checkable deposits 5.6 3.4 3.1 -1.6 .6 3.1 .0 -3.4 -1.7 -1.6 -9.7 64 Other checkable deposits 40.7 38.0 34.2 30.1 27.3 34.2 29.6 31.8 23.1 30.1 25.6 65 Trade credit -248.0 -240.7' -268.0' -299.9 -316.7' -268.0' -319.2 -329.7 -365.5 -299.9 -367.2 66 Total identified to sectors as assets 45,075.0r 47.181.7' 52,903.7r 58.444.0 51.444.0' 52,903.7' 54,433.1 55,538.4 56.586.0 58,444.0 59.252.7 1. Data in this ladle also appear in ihe Board's Z.I (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. L.6 and L.7. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • July 1997 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures Monthly data seasonally adjusted, and indexes 1992=100. except as noted 1996 1997' Measure 1994 1995 1996 Aug. Sept. Oct Nov Dec. Jan. Feb. Mar. Apr. 1 Industrial production' 108.6 112.1 115.2 115.8 116.0 116.2 117.2 117.7 117.8 118.4 119.0 119.0 Market groupings 2 Products, total 106.8 109.3 112.0 112.2 112.7 112.8 114.1 114.3 114.2 114.8 115.5 115.4 3 Final, total 107.1 109.9 112.8 113.0 113.3 113.6 114.8 115.3 115.1 1157 116.7 116.3 4 Consumer goods 107.4 10S.9 110.5 UU.l 110.5 110.8 112.3 112.7 111.7 111.7 112.5 111.8 5 Equipment 106.6 111.6 116.8 117.9 118.1 118.4 119.0 119.6 120.8 122.7 123.9 124.0 6 Intermediate 106.1 107.5 109.4 110.0 110.6 110.2 111.9 111.3 111.6 112.0 112.0 112.5 7 Materials 111.3 116.6 120.3 121.5 121.2 121.7 122.2 123.1 123.4 1240 124.6 124.7 Industry groupings 8 Manufacturing 109.4 113.2 116.3 117.2 117.4 117.h 118.5 119.2 119.3 120.1 120.8 120.5 9 Capacity utilization, manufacturing (percent)^. 83.1 83.1 82.1 82.3 82.1 82.0 82.4 82.5 82.4 82.7 82.8 82.4 10 Construction contracts'' 117.3 121.5' 130.3' 138.0 133.0 126.0 132.0' 128.0' 128.0 129.0 129.0 131.0 11 Nonagricullural employment, total4 112.0 115.0 117.3 117.8 117.8 118.0 118.2 118.4 118.7 119.0 119.1 119.2 12 Goods-producing, total 96.9 98.1 98.3 98.5 98.3 98.4 98.6 98.7 98.9 99.3 99.3 99.1 13 Manufacturing, total 96.4 97.2 96.2 96.3 96.0 96.1 96.1 96.2 96.3 96.3 96.4 96.3 14 Manufacturing, production workers 97.5 98.7 97.5 975 97.2 97.1 97.4 97.4 97.6 97.6 97.7 97 6 15 Service-producing 116.8 120.1 123.3 123.9 124.0 124.3 124.4 124.7 125.0 125.2 125.4 125.7 16 Personal income, total 148.2' 157.2' 165.9' 167.1' 168.1' 168.2' 169.3' 170.5' 171.1 172.5 173.5 n.a. 17 Wages and salary disbursements 142.6 150.9 159.7 161.1 162.2 162.0 163.4 165.1 165.0 167.2 168.4 n.a. 1H Manufacturing 124.9 130.4 135.3 136.9 136.7 136.7 137.4 139.2 138.6 139.3 140 6 n.a. 19 Disposable personal income 149 ]' 157.6' 165.5' 166 7' 167 6' 167 8' 168.8' 169 9' 171.1 172.4 173.4 n.a. 20 Retail sales5 144.6' 151J' 158^5' 1583' 159^6' isoy 160.5' 161.3' 163.9 166.1 166.1 165.5 Prices" 21 Consumer 11982-84== 100) 14R.2 152.4 156.9 157.3 157.8 158.3 15S.6 158.6 159.1 159.6 160.0 160.2 22 Producer finished goods (1982=100) 125.5 127.9 131.3 131.9 131.8 132.7 132.6 132.7 132.6 132.2 132.2 131.6 1. Data in this table also appear in the Board's G. 17 (419) monthly statistical release. For 4. Based on data from U.S. Department of Labor, Employment and Earnings. Series covers the ordering address, see the inside front cover. The latest historical revision of the industrial employees only, excluding personnel in the armed forces. production index and the capacity utilization rates was released in January 1997. See 5. Based on data from U.S. Department of Commerce. Survey of Current Business. "Industrial Pipduciion and Capacity Utilization: Historical Revision and Recent Develop- 6. Based on data not seasonally adjusted. Seasonally adjusted data for changes in the price ments." Federal Reserve Bulletin, vol. 83 (February 1997). pp. 6"'-92. The article contains a indexes can be obtained from the U.S. Department of Labor, Bureau of Labor Siatistics. description of the new aggregation system for industrial production and capacity utilization. Monthly Labor Review. For a detailed description of the industrial production index, see "Industrial Production: 1989 Developments and Historical Revision," Federal Reserve Bulletin, vol. 76 (April 1990), pp. 187-204. 1. Ratio of index of production to index of capacity. Based on data from the Federal Reserve, DRI McGraw-Hill, U.S. Department of Commerce, and other sources. 3. Index of dollar value of total construction contracts, including residential, nonresidential, and heavy engineering, from McGraw-Hill Information Systems Company, F.W. Dodge Division. 2.11 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT Thousands of persons; monthly data seasonally adjusted 1996 1997' Category !M94 1995 1996 Sept. Ocl. Nov. Dec. Jan. Feb. Mar. Apr, HOUSEHOLD SURVEY DATA1 1 Civilian labor iorce2 131,056 132,304 133,943 134,291 134,636 134,831 135.022 135,848 135,634 136,319 136.098 Etnplo vment 2 Nonagricultural industries' 119,651 121,460 123,264 123.768 124,167 124,290 124.429 125,112 125,138 125.789 125.887 3 Agriculture 3,4(14 3,440 3,443 3.480 3,450 3.354 3.426 3,468 3,292 3,386 3,497 li ncrnploxnwnt 4 Number ' 7.996 7,404 7,236 7.043 7,019 7.187 7.167 7,268 7,205 7.144 6,714 5 Rate (percent of civilian labor force) 6.1 5.6 5.4 5.2 5.2 5.3 5.3 5.4 5.3 5.2 4.9 ESTABLISHMENT SURVEY DATA 6 NimagriculturaE payroll employment4 114,172 117.203 119,549 120.050 120,311 120,492 120,723 120,982 121,296 121,435 121,577 7 Manufacturing 18 "PI 18.468 18,282 18.241 18,254 18.262 18.270 18,296 18.299 18,316 18.302 8 Mining 601 580 570 567 566 566 566 568 570 569 '570 9 Contract construction 4,986 5,158 5,405 5.449 5,464 5,491 5,520 5,535 5.639 5.614 5,570 10 Transportation and public utilities 5,993 6,165 6.318 6.337 6,338 6,350 6,340 6.378 6.403 6.416 6,434 11 Trade 26,670 27.585 28,178 28,321 28,446 28.508 28.586 28,584 28.630 28.702 28.735 12 Finance 6.896 6,830 6.977 7.009 7,026 7,038 7.052 7,062 7.077 7.095 7,118 13 Service 31,579 33.107 34,360 34,607 34,709 34,780 34,865 35,015 35,101 35,173 35,266 14 Government 19.128 19.310 19.459 19.519 19,508 19.497 19.524 19.544 19.577 19,550 19,582 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 Force* Monthly persons, household and unpaid family workers, and members of the armed forces. Data are figures are based on sample dala 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 dala from U.S. Department of Labor, Employment and Earnings. 3. Includes '.elf-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 1996 1997 1996 1997 1996 1997 Series 02 Q3 04 Qlr Q2 03 Q4 Ql Q2 Q3 Q4 01' Output (1992=100) Capacity (percent of 1992output) Capacity utilization rate (percent)' 1Total industry 114.8 115.8 117.0 118.4 137.9 139.2 140.5 141.8 83.3 83.2 83.3 83.5 ~)Manufacturing 115.8 117.2 1I8.J 120.1 141.0 142.5 143.9 145.3 82.) 82.3 82.3 82.6 3 Primary processing' 111.7 113.2 113.9 114.6 129.9 130.7 131.5 132.2 86.0 86 6 86.6 86.7 4 Advanced processing4 117.8 119.1 120.7 122.8 146.5 148.2 150.0 151.9 80.4 80.4 80.4 80.8 5 Durable goods 125.4 127.2 128.1 130.8 152.2 154.5 156.9 159.2 82.4 82.3 81.7 82.1 6 Lumber and products 111.0 110.5 110.1 111.1 128.2 129.1 130.0 131.0 86.6 85.6 84.7 84.8 7 Primary metals 116.5 118 6 119.8 1 19.2 128.7 129.8 131.0 132.1 90.5 91.4 91.5 90.2 8 Iron and steel 115.8 117.9 118.6 117.7 1303 131.9 133.5 134.9 88.8 89.4 88.9 87.2 9 Nonferrous 117.2 119.4 121.1 120.9 126.5 127.1 127.8 128.6 92.7 9V9 94.8 94.0 10 Industrial machinery and equipment 154.6 158.9 161.5 166.5 171.6 176.3 181.3 186.5 90! 90.1 89.1 89.3 11 Electrical machinery 162.3 164.5 167.2 172.6 193 2 200.6 208.5 216.4 84 0 82.0 80.2 79.8 12 Motor vehicles and pans 130.4 131.3 126.0 130.6 174.9 176.1 177.3 178.2 74 6 74.5 71.0 73.3 13 Aerospace and miscellaneous transportation equipment 83.8 86.7 90.4 93.5 120.6 120.2 119.8 119.6 69.5 72.2 75.5 78.2 14 Nondurable goods 105.5 106.5 108.1 108.7 129.0 129.6 130.1 130.6 81.8 82.2 83.0 83.2 15 Textile mill products 1O6\5 107.9 107^4 107.3 129^4 I3o'l 1.30.8 131.3 82.3 82^9 82.1 81 7 16 Paper and products 107.9 109.0 109.8 111.2 122.4 122.9 123.3 123.6 88.2 88.7 89.0 90.0 17 Chemicals and products 107.3 109.2 112.4 113.0 137.9 H9.2 140.3 141.5 77.8 78.4 80 1 79.9 18 Plastics materials 122.1 125.3 125.3 127.0 129.5 13L8 134 0 94.3 95.1 93.5 19 Petroleum products 106.0 106.7 107.7 108.3 113.5 113.7 113.8 113.9 93.4 93 9 94.6 95.] 20 Mining 103.5 103.7 103.8 105.3 113.7 113.7 113.7 113.7 91.0 91.2 91.3 92.6 21 Utilities 114.0 110.5 113.0 Mil 124.5 12^.2 125.9 126.5 91.6 88 2 89.8 87.9 22 Electric 114.0 110.8 112.4 112.0 122.8 123.6 124.4 125.1 92.8 89.6 90.4 89.5 1973 1975 Previous cycle Latest cycle6 1996 1996 1997 High Low High Low High Low Apr. Nov. Dec. Jan.' Feb.1 Mar. Apr >' Capacity utilization rate (percent)' 1Total industry 89.2 72.6 87.3 71.1 85.3 78.1 83.1 83.4 83.5 83.3 83.5 83.7 83.4 2 Manufacturing 88.5 70.5 86.1 69.0 85.7 76.6 82.0 82.4 82.5 82.4 82.7 82.8 82.4 3 Primary processing^* 91.2 68.2 88.1 66.2 88.9 77.8 85.6 86 5 86.6 86.2 86.9 87.0 86.8 4 Advanced processing^ 87.2 71.8 86.7 70.4 84.2 76.1 80.4 80.5 80.K 80.7 80.8 81.0 80 4 5 Durable goods 89.2 68.9 87.7 63.9 84.5 73.2 82.3 81.9 81.7 81 7 82 2 82.4 81.8 6 Lumber and products 887 61.2 87.9 60.8 93.6 75. s 86.2 87.0 82.9 83.1 85.6 85.8 R5.9 7 Primary metals KKI2 65.9 94.2 45.1 92.7 73.7 90.5 90.5 90.4 89.4 90.8 90.4 89 9 8 Iron and steel 105.8 66.6 95.8 37.0 95.2 71 8 88.3 86.8 87.1 87.7 87.6 86.4 85.6 9 Nonferrous 90.8 59.8 91.1 60.1 89.3 74.2 93.4 95.1 94.7 91.7 94.8 95.5 95.3 10 Industrial machinery and equipment 96.0 74.3 93.2 64.0 85.4 72.4 90 2 89 2 89.0 89.2 89.4 89 2 89.0 11 Electrical machinery 89 2 64.7 89.4 71.6 84.0 75.1 84.5 80.2 80.0 78.9 79.9 80.6 80.5 12 Motor vehicles and parts 93.4 51.3 95.0 45.5 89.1 55.9 74.7 72.7 71.9 74.1 72.8 72.8 67.8 13 Aerospace and miscellaneous transportation equipment 78.4 67.6 81.9 66.6 87.3 79.2 68.9 75.4 76.4 77.1 78.1 79.4 79.5 14 Nondurable goods 87.8 71.7 87.5 76.4 87.3 80.7 81.6 82.9 83.5 83.1 83.2 83.3 83.1 15 Textile mill product* 91.4 60.0 91.2 72.3 9(14 77.7 81.5 82.7 81.1 81.0 81.0 83 1 82.2 16 Paper and products 97.1 69.2 96.1 80.6 93 5 85.0 87 9 89.3 90 4 89.3 89.9 90.7 90.5 17 Chemicals and products 87.6 69.7 84.6 69.9 86.2 79.3 77.7 79.6 81.0 80.6 79.8 79.2 79.3 18 Plastics materials 102.0 50.6 90.9 63.4 97.0 74.8 93.6 92.4 94.0 93 5 93.3 19 Petroleum products 96.7 81.1 90.0 66.8 88.5 85.1 93.0 94.4 94.2 94.3 95.3 95.6 97 2 20 Mining 94.3 88.2 96.0 80.3 86.8 86.1 90.4 91.1 91.9 91.1 92.9 917 93.2 21 Utilities 96.2 82 9 89.1 75.9 92 6 83.4 91.3 91 0 89 3 89.3 86.8 87.5 89.1 22 Electric 99.0 82.7 88.2 78.9 95.0 87.1 92.3 90 6 90.3 90.7 88.7 89.3 90.2 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. For 3. Primary processing includes lexliles; lumber; paper, industrial chemicals; synthetic the ordering address, see the inside front cover. The lalest historical revision of the industrial materials; fertilizer materials; pelmleum products; rubber and plastics, slone. clay. and glass; production index and the capacity utilization rates was released in January 1997. See primary metals; and fabricated metals. "Industrial Production and Capacity Utilization: Hislorical Revision and Recent Develop- 4 Advanced processing includes foods: tobacco; apparel: furniture and fixtures; printing ments," Federal Reserve Bulletin, vol. 83 (February 1997), pp. 67-92. The article contains a and publishing; chemical products such as drugs and toiletries agricultural chemicals, leather description ol" the new aggregation system for industrial production and capacity utilization. and products; machinery; transportation equipment; instruments; and miscellaneous manufac- For a detailed description of the industrial production index, see "Industrial Production: 1989 tures. Developments and Hisiorical Revision." Federal Reserve Bulletin, vol. 7(> {April 1990), pp. 5. Monthly highs. 1978-80; monthly lows, 1982. 187-204. f>. Monthly highs, 1988-84; monthly lows, 1990-91. 2. Capacity ulilization is calculated a.s the ratio of the Federal Reserve's seasonally adjusted index of indusina) production to the corresponding index of capacity. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A44 Domestic Nonfinancial Statistics • July 1997 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value' Monthly data seasonally adjusted 1992 Group p po ro r- - 1 a 9 v 9 g 6 . tion Apr. May July Aug. Sept. Oct. No Jan.' Apr.p Index (1992 = 100) MAJOR MARKETS 100.0 115.2 114.3 114.8 115.5 115.5 115.8 116.0 116.2 117.2 117.7 117.8 118.4 119.0 119.0 60.5 112.0 111.0 111.4 112.3 112.3 112.2 112.7 112.8 114.1 114.3 114.2 114.8 115.5 115.4 3 Final products 46.3 112.8 112.1 112.2 113.1 113.4 113.0 113.3 113.6 114.8 115.3 115.1 115.7 116.7 116.3 4 Consumer goods, total 29.1 110.5 09.8 110.0 110.8 110.7 110.1 110.5 110.8 112.3 112.7 111.7 111.7 112.5 111.8 5 Durable consumer goods 6.1 126.2 125.7 126.9 129.9 129.7 128.0 127.1 124.5 127.1 128.4 127.3 129.4 131.7 127.0 6 Automotive products 2.6 125.8 26.0 126.9 130.0 132.1 128.7 127.7 122.0 127.4 127.2 129.6 130.9 132.2 123.6 7 Autos and trucks 1.7 1.32.6 135.0 135.0 137.7 145.7 138.7 134.6 125.7 133.8 135.5 138.7 139.2 141.2 125.3 8 Autos, consumer .9 120.2 126.1 129.0 133.3 137.8 132.5 129.9 112.3 123.5 115.9 120.1 122.8 125.3 114.6 9 Trucks, consumer .7 147.2 150.3 147.3 148.7 161.3 152.3 146.6 147.4 152.4 164.9 167.0 165.0 166.6 143.8 10 Auto parts and allied goods . . .9 114.5 111.9 114.0 117.4 112.4 113.5 116.2 114.4 116.4 114.0 115.5 117.6 117.9 118.5 II Other 3.5 126.3 125.3 126.7 129.7 128.0 127.5 126.6 126.2 126.8 129.1 125.5 128.2 131.2 129.2 12 Appliances, televisions, and ai conditioners 1.0 173.0 170.2 172.0 180.1 181.1 175.9 174.2 176.5 176.9 181.1 171.2 181.9 186.1 182.3 13 Carpeting and furniture .8 109.9 109.1 112.4 114.6 107.0 111.1 110.5 108.6 110.7 109.3 106.0 106.0 111.2 109.1 14 Miscellaneous home goods. .. 1.6 107.9 108.0 108.1 108.7 108.5 108.0 107.6 106.5 106.4 109.6 109.2 109.2 110.3 109.4 15 Nondurable consumer goods 23.0 106.5 105.9 105.8 106.0 106.0 105.6 106.3 107.3 108.5 108.7 107.8 107.3 107.8 108.0 16 Foods and tobacco 10.3 106.1 105.7 105.3 105.8 105.9 105.4 106.1 106.6 107.2 108.2 107.7 108.0 108.5 107.8 17 Clothing 2.4 95.5 96.1 95.9 95.6 95.4 95.4 95.1 95.5 95.0 94.9 94.0 93.5 93.7 93.4 18 Chemical products 4.5 112.7 110.0 110.5 110.6 112.6 111.3 113.5 115.5 117.3 118.8 117.9 116.6 116.1 116.7 19 Paper products 2.9 101.1 100.0 100.7 100.2 101.4 101.8 101.9 102.9 102.9 103.0 101.1 101.6 102.8 102.7 20 Energy 2.9 112.0 112.8 112.8 113.2 109.1 109.4 109.4 110.7 115.3 1U.8 110.4 107.5 108.6 111.9 21 Fuels .8 106.6 106.4 106.8 106.7 106.7 107.7 105.4 108.1 107.8 106.0 105.1 106.2 107.2 109.4 22 Residential utilities 2.1 114.3 115.5 115.4 116.0 109.9 110.0 110.9 111.7 118.5 114.2 112.6 107.8 109.0 112.9 23 Equipment 17.2 116.8 115.9 116.0 117.1 118.1 117.9 118.1 118.4 119.0 119.6 120.8 122.7 123.9 124.0 24 Business equipment 13.2 126.6 125.1 125.0 126.6 128.1 127.7 128.3 128.8 129.8 130.7 132.1 133.8 134.9 135.0 25 Information processing and related.. . 5.4 143.2 140.5 140.8 143.9 144.1 144.6 146.3 147.4 147.1 148.5 149.6 152.8 154.7 156.4 26 Computer and office equipment . . . 1.1 292.0 272.2 279.7 289.4 301.7 306.2 314.3 318.8 323.5 327.1 335.7 345.6 353.1 361.6 11 Industrial 4.0 126.9 127.5 126.5 126.3 127.2 126.7 126.3 127.0 127.1 127.3 127.9 127.9 127.9 128.8 28 Transit 2.5 100.0 97.5 97.5 100.6 104.1 103.0 103.8 101.9 106.6 107.2 109.8 112.0 113.7 109.9 29 Autos and trucks 1.2 115.3 118.5 118.0 120.8 126.5 120.9 117.7 109.4 115.9 113.7 117.2 119.1 119.6 110.0 30 Other 1.3 116.4 114.7 115.3 114.3 118.0 116.1 115.5 118.7 119.9 121.4 123.4 124.5 124.5 124.3 31 Defense and space equipment 3.3 77.0 77.4 77.9 77.0 77.7 77.9 77.7 77.0 76.1 76.2 74.7 75.5 75.7 75.7 32 Oil and gas well drilling .6 120.5 123.7 127.0 127.8 122.1 122.6 117.5 120.2 120.7 123.6 130.8 140.7 153.9 154.4 33 Manufactured homes .2 162.0 164.8 165.7 167.9 163.0 167.4 165.6 165.3 159.8 156.3 163.5 160.9 34 Intermediate products, total 14.2 109.4 107.7 108.9 109.7 108.9 110.0 110.6 110.2 111.9 111.3 111.6 112.0 112.0 112.5 35 Construction supplies 5.3 116.8 114.2 116.1 118.3 117.5 119.2 119.8 117.7 120.7 117.8 117.0 119.5 120.1 120.1 36 Business supplies 8.9 105.1 103.9 104.6 104.6 103.9 104.6 105.3 105.8 106.8 107.4 108.4 107.6 107.3 108.0 37 Materials 39.5 120.3 119.5 120.1 120.5 120.5 121.5 121.2 121.7 122.2 123.1 123.4 124.0 124.6 124.7 38 Durable goods materials 20.8 134.0 132.6 133.5 134.0 134.5 136.2 135.5 135.8 136.5 137.8 138.4 139.2 140.3 140.3 39 Durable consumer parts 4.0 128.8 130.1 130.6 130.4 131.1 133.9 128.3 126.6 129.7 130.3 132.1 129.8 129.7 126.5 40 Equipment parts 7.6 159.2 155.7 157.2 158.9 159.6 161.7 162.6 163.4 165.3 167.9 169.4 172.7 176.6 179.1 41 Other 92 118.2 117.2 117.8 117.9 118.2 119.2 119.2 120.0 119.1 119.9 119.3 119.8 119.6 119.3 42 Basic metal materials 3.1 113.1 112.1 112.2 112.6 112.9 113.6 114.7 117.2 114.4 115.7 114.9 116.1 115.6 115.3 43 Nondurable goods materials 8.9 106.4 105.5 105.9 106.2 107.4 106.5 106.9 108.0 108.4 109.5 109.6 110.5 110.7 110.6 44 Textile materials 1.1 106.3 105.6 106.1 106.3 109.9 107.4 107.1 108.4 108.5 105.9 106.8 107.8 107.6 107.5 45 Paper materials 1.8 107.4 106.9 106.4 105.2 109.1 108.2 107.0 108.0 110.9 112.5 111.5 113.3 114.1 113.5 46 Chemical materials 3.9 105.9 104.1 104.7 105.3 106.1 106.2 106.8 109.3 107.7 110.2 111.1 111.0 111.2 111.2 47 Other 2.1 106.1 106.5 107.1 108.0 107.1 104.7 106.2 103.9 106.8 106.3 105.3 107.6 107.4 107.6 48 Energy materials 9.7 103.9 104.2 104.6 104.8 102.4 104.0 103.9 103.9 104.0 103.9 103.8 103.6 103.6 104.2 49 Primary energy 6.3 102.6 104.0 103.5 103.5 101.7 103.2 102.2 102.0 101.6 102.6 101.6 102.6 102.6 102.5 50 Converted fuel materials 3.3 106.2 104.6 106.7 107.2 103.9 105.4 107.0 107.5 108.5 106.3 108.0 105.5 105.4 107.3 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.1 114.9 113.9 114.4 115.0 114.9 115.4 115.7 116.1 116.9 117.4 117.4 118.0 118.7 118.9 52 Total excluding motor vehicles and parts 95.1 114.6 113.5 114.0 114.7 114.6 115.0 115.4 115.9 116.6 117.2 117.1 117.8 118.5 118.8 53 Total excluding computer and office equipment 98.2 112.9 112.2 112.6 113.2 113.1 113.4 113.5 113.7 114.6 115.1 115.1 115.6 116.2 116.1 54 Consumer goods excluding autos and trucks 27.4 109.2 108.4 108.7 109.3 108.9 108.6 109.2 109.9 111.0 111.4 110.3 110.2 110.9 111.0 55 Consumer goods excluding energy 26.2 110.2 109.4 109.6 110.4 110.9 110.2 110.6 110.8 111.8 112.8 111.9 112.2 113.0 111.8 56 Business equipment excluding aulos and trucks 125.8 125.7 127.2 128.2 128.3 129.3 130.7 131.2 132.4 133.6 135.3 136.4 57 Business equipment excluding computer and office equipment 12.1 115.8 115.3 114.7 115.8 116.8 116.1 116.3 116.6 117.5 118.2 119.2 120.5 121.1 120.8 58 Materials excluding energy 29.8 125.4 124.2 124.9 125.4 126.1 127.0 126.6 127.1 127.8 129.0 129.4 130.3 131.1 131.1 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A45 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1-—Continued 1992 1996 1997 SIC2 pro- 1996 Group code por- avg. tion Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan.' Feh.' Mar. Apr.1' Index(1992 = 100) MAJOR INDUSTRIES V) Total index 100.0 115.2 114.3 114.8 115.5 115.5 115.8 116.0 116.2 117.2 117.7 117.8 118.4 119.0 119.0 60 Manufacturing R5.4 116.3 115.2 115.7 116.4 117.0 117.2 117 4 117.6 118.5 119.2 119.3 120.1 120.8 120.5 61 Primary processing 26.5 112.2 1110 111.7 112.6 113.0 113.1 113 5 113.8 113.8 114.0 113 8 114 8 115 2 62 Advanced processing 58.9 118.4 117.3 117.6 118.3 118.9 119.2 119 3 119.5 120.8 121.7 122.0 122.8 123.5 123.2 6^ Durable goods 45.0 125.7 124.6 125.2 126.3 126 9 127.5 127.2 127 1 128.4 128.8 129.5 130 9 131.9 131.5 61 Lumber and producLs. . 24 2.0 109J 110.3 110.4 112.4 109.3 111.4 1 10.7 109.2 113.1 108.0 108.6 112.1 112.6 113.0 65 Furniture and fixtures 25 1.4 108.9 108.1 110.3 109.5 108.1 108 8 108.8 110.4 1 10.5 110.5 109.7 110.0 1 10.2 1 10.2 66 Stone, clay, and glass products 12 2.1 111.0 108.5 109.8 111.3 114.1 111.8 113.1 111.7 111.8 111.3 112.7 112.6 11 1.4 III.8 67 Primary metals 31 3.1 117.2 116.1 116.3 117.0 118.0 118 3 119.5 122.1 118.5 118.8 117.8 120.0 119.8 119.4 68 Iron and steel 331,2 1 7 116.4 114.6 115.7 117.1 118.0 118 2 117.4 123.2 115.9 116.7 118.0 118.2 116.8 116.2 69 Raw steel 331PT I 112 2 112.1 112.9 114.9 113.3 113.6 112.6 111.5 108.7 112.5 111.7 112.3 114.2 114.1 70 Nonferrous 333-6.9 1.4 118.0 117.9 116.9 116.8 117.9 118 5 121 8 120.7 121.4 121.2 117.6 121.9 123.1 123.2 71 Fabricated metal products. . . 34 5.0 118.6 117.8 118.4 118.9 119.1 119.4 1 19.3 119.3 119.1 119.5 119.2 119.6 120.4 120.5 12 Industrial machinery and equipment 35 8.0 156.4 153.3 154.3 156.1 157.7 159.6 159.4 159.9 161.7 162.9 164.7 166.8 168.0 169.4 73 Computer and office equipment 357 1.8 296.9 277.3 284.7 294.3 306.5 310.8 319.0 323.6 328.3 332.5 340.3 350.5 357.8 366.5 1A Electrical machinery 3b 7.3 163.3 161.1 161.8 164.0 163.8 164.6 165.2 165.6 167.2 168.8 168.6 172.8 176.4 178.4 75 Transportation equipment. . . 37 9.5 106.1 106.4 106.8 107.1 109.5 109.3 107.3 105.3 109.5 109.6 111.9 111.6 112.5 108.3 76 Motor vehicles and parts . 371 4.9 126.9 130.3 130.5 130.4 134.1 132.8 127.0 121.2 128.9 127.9 132.0 129.8 129.9 121.1 77 Autos and light trucks . 371PT 2.6 124.6 127.1 127.6 130.4 137.3 131.0 127.4 117.3 125.7 125.6 128.8 129.7 131.7 117.5 7S Aerospace and miscellaneous transportation equipment 372-6.9 4.6 85.6 83.2 83.8 84.3 85.7 86.5 87.9 89.4 90.3 91.5 92.2 93.4 95.0 95.1 79 Instruments 38 5.4 102.8 102.3 102.4 103.3 102.3 103.0 103.0 103.4 103.0 104.1 103.3 104.6 105.1 105.4 80 Miscellaneous 39 1.3 112.9 112.0 112.2 113.1 113.0 112.9 113.0 113.0 114.1 116.6 116.3 117.4 116.8 116.0 SI Nondurable good^i 40.4 106.3 105.2 105.5 105.9 106.4 106.2 106.9 107.4 107.9 I0S.8 108.5 1087 108.9 108.8 82 Foods 20 9.4 106.3 105.9 105.6 106.1 106.5 105.5 106.2 107.1 107.6 108.2 108.2 108.6 108.9 108.3 83 Totxicco products 2| 1.6 |QS 6 106.3 103.7 105.1 102.5 104.1 104.9 104.0 105.4 108.9 104 6 105.3 106.8 105.5 84 Textile mill products 22 l.S 106.6 105.3 106.1 108.0 108.7 107.7 107.2 107.6 108.2 106.3 106.3 106.3 109J 108.0 85 Apparcl products 23 2 i 98.2 99.0 99.0 99.0 98.3 98.5 98.2 97.8 97.3 97.2 96.2 95 8 96.4 95.4 86 Paper and producLs 26 3.6 108i) 107^5 107^8 108.5 110.2 108.1 108.8 107.6 110.1 111.6 110.3 II 1.2 1I2J 112.0 87 Printing and publishing 27 6.7 98.4 96.9 97.9 97.1 97.6 97 9 99.1 99.7 100.0 99.8 100.5 100.7 100.5 101.0 88 Chemicals and products .... 28 9.9 108.9 106.9 107.2 107.9 109.0 108.7 109.7 111.3 111.8 114.0 113.7 112.9 112.4 112.8 89 Petroleum products 29 1.4 [06.5 105.5 106.2 106.3 105.3 107.8 106.9 108.4 107.4 107.3 107.4 108.5 108.9 110.7 90 Rubber and plastic producLs . 30 3.5 120.5 1 18.0 119.8 120 9 120 7 122 0 122 8 PI 4 PI 7 P2 6 121 1 123 3 123 9 P3 0 91 Leather and products 31 .3 80.0 81.1 80.7 81.0 80.0 79.5 79.4 78.4 77.3 80.1 78.3 77.6 78.4 77.2 9: Mining 6.9 102.9 102.9 103.2 104.4 103.1 104.5 103.4 103.4 103.5 104.5 103.6 105.7 106.6 106.1 93 Metal 10 .5 102.0 99.4 100.9 101.7 103.1 104.0 105.3 105.6 102.5 106.3 105.7 103.7 102.7 102.5 <M Coal 12 1.0 105.9 105.3 108 0 108.9 102.7 109.6 106.2 107.5 108.8 109.5 106.4 109.6 105.5 106.2 95 Oil and gas extraction 13 4.8 100.3 100.9 100.5 101.5 100.9 101.1 100.5 100.0 100.2 100.7 100.8 102.8 105.2 104.8 96 Slonc and earth minerals 14 .6 118.7 116.3 117.4 120.6 120.6 121.7 118.5 120.0 120.2 122.9 117.2 122.3 122.4 118.5 97 Ulllllics 7.7 112.8 113 5 114.6 114.0 109.4 110.8 111.1 111.9 114.5 112.6 112.7 109.8 110.8 1H.0 9S Electric 49I.493PT 6.2 112.7 113.1 114.8 114.2 110.1 111.5 110.9 112.0 112.7 112.6 113.2 110.9 111.8 113.1 99 Gas 492.493PT 1.6 113.2 115.0 113.6 113.6 107.1 108.5 111.8 111.3 120.9 112.7 110.9 106.0 107.2 112.4 SPECIAL A«iREc/vth.s 100 Manufacturing excluding motor vehicles and parts 80.5 115.7 114.3 114.8 115.6 1 16.0 1 16.3 116.8 117.3 117.9 118.6 118.6 119.5 12(1.2 120.4 101 Manufacturing excluding office and computing machines. . . 83.6 113.7 112.8 113.2 113.8 114.3 114.4 114.5 114.7 115.5 116.1 116.2 116.9 117.5 117.1 Gross value (billions of 1992 dollars, annual ates) MAJOR MARKETS 102 Products, total 2,001.9 2,258.7 2,249.1 2,255.7 2,274.2 2,276.1 2,272.9 2.273.4 2,270.7 2,303.5 2,301.1 2,302.9 2,316.9 2.332.5 2,322.1 103 Final 1,552.1 1.760.9 1,760.0 1,761.9 1,775.7 1,782.8 1,773.6 1.771 6 1.771.8 1.795.1 1,796.8 1,798.4 1,810.3 I.S25.2 1,812.2 104 Consumer goods 1,049.6 1.162.2 1.164.3 1,165.5 1,172.5 1,171.6 1,165.5 1.1b? 0 1.164.7 1,182.2 1,182.3 1.176.3 1.178.6 1.187.5 1.177.7 105 Equipment 502.5 598.0 595.0 595.7 602.4 610.5 607.4 607. B 606.3 612.1 613.7 621.4 631.1 637.0 633.9 106 Intermediate 449.9 498.2 489.9 494.4 499.0 494.3 499.7 502 1 W.3 508.6 504.9 505.1 507.2 508.2 510.4 I. Dala in thin table also appear in the Board's G.17 (41')) monthly statistical release. For ments," Federal Reserve Bullrim. \ol 83 (February 1997), pp. 67-92. For a detailed the ordering address, sec the inside front cover. The latest historical revision of the industrial description of the industrial production index, see "Industrial Production: 1989 Developproduction index and the capacity utilization rates was released in January 1997. See ment* and Historical Revision," Federal Reserve Bulletin, vol. 76, (April 1<W0), pp 187-204. "Industrial Production and Capacity Utilization: Historical Revision and Recent Develop- 2. Standard industrial classification. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics • July 1997 2.14 HOUSING AND CONSTRUCTION Monthly figures at seasonally adjusted annual rates except as noted 1996 1997 Item 1994 1995 1996 June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Private residential real estate activity (thousands of units exceptis noted) NEW UNITS 1 Permits authorized 1.372 1.333 1,426' 1.432' 1,454' 1,405' 1,391' 1,349' 1,391' 1.405' 1.395' 1.438' 1,457 2 One-family 1 069 997 I.0701 1.094' 1,077' 1,061' 1,029' 1,003' 1,016' 999' 1.052' 1.069' 1,034 3 Two-family or more 303 115 356' 338' 377' 344' 362' 346' 375' 406' 343' 369' 423 4 Started 1.457 1.354 1.477 1,488 1,492 1,515 1,470 1,407 1.486 1,353 1..375 1,554' 1,4,35 5 One-family 1.198 1.076 1,161 1,214 1,164 1,222 1,148 1.104 1,133 1,024 1.125 1,237' 1.11.5 6 Two-family or more . . 259 278 116 274 328 291 322 303 353 329 250 117' 3211 7 Under construction at end of period1. . . 755 775 819 826 825 820 825 825 828 815 818 825 819 8 One-family 584 554 584 594 593 593 592 588 584 571 V3 578 572 9 Two-family or more 171 221 235 232 232 227 233 237 244 244 245 247 247 10 Completed 1.346 1.319 1.407 1.426 1,463 1.449 1,156 1,375 1,431 1.484 1.362 1,563 1.40O 1 1 One-family 1.161 1.073 1.124 1,137 1.161 1,153 1,097 1.129 1.151 1.177 1 109 1,258 1,107 12 Two-family or more 185 246 283 289 302 296 259 246 280 107 253 305 293 13 Mobile homes shipped 305 341 362 372 366 169 372 364 354 338 339 353' 355 Merchant builder activity in one-family units 14 Number sold 670 667 757 732 782 814 768 706 788 794 825 834 813 15 Number for sale at end of period1 340 374 326 355 352 343 331 330 327 322 314 307 297 Price of units sold (thousands of dollars f 16 Median 130.0 133.9 140.0 140.0 144.2 1 37.0 139.0 143.8 143.5 144.9 145.0 141.0 142.5 17 Average 154.5 158.7 166.4 166.5 168.4 159.7 167.4 168.4 172.0 171.8 171 1 169.9 171.5 F.XISTING UNITS tone-family) 18 Number sold 3.967 3,812 4.087 4,160 4.150 4,100 4,020 4,000 4,060 3,950 3,yio 4,230 4.160 Price otKnits sold (thousands 19 Med t i > an J dollars r 109.9 113.1 118.2 122.9 121.5 122 3 1178 116.6 117.4 118.8 120.6 117.S 120.0 20 Average 136.8 139.1 145.5 150.2 149.6 1499 144.7 143.6 144.1 147.1 149.6 144.7 147.5 Value of new eontruction (millions of dollars V CONSTRUCTION 21 Total put in place 525,968 547.105 567,313 563.122 559,312 564,715 572,262 582.537 594,043 588.146 588.889 601,447 600,092 22 Private 399.427 410.643 426.518 423.106 419,293 426,703 428.361 437.034 446,059 44S.439 446.646 454.528 451,919 23 Residential 238.531 236,916 246,090 246.909 244,931 246.019 246,407 246.935 249.167 250.297 25(1,126 254,141 256,618 24 Nonresrdenlial 160.896 173.727 180.428 176,197 174,362 180.684 181.954 190 099 196.892 195.142 196.520 200.387 195,301 25 Industrial buildings 28.908 32.317 29.981 28,755 28,770 27.082 29,656 33.043 31.583 29,413 30,395 30,142 28.058 26 Commercial buildings 59.506 67,513 70.011 69,280 68,262 72,146 70,672 74 5^0 77,669 75.735 77,996 79.931 77.987 27 Other buildings 27.025 26.902 29,2.35 28,533 28.514 29,764 29,812 30.469 32,636 32,452 13 162 34.483 34,639 28 Public utilities and other 45,457 46.994 51.201 49.629 48,816 51.692 51.814 52.057 55,004 57.542 54.767 55.831 54,617 29 Public 126.541 116.462 140,795 140,016 140,020 138.012 143.901 145.503 147,983 142,707 142.244 146.919 148.174 30 Military 2.314 2,')77 2.906 3,140 2,439 2,307 2.58.1 2.774 2,350 2,423 2,524 2,618 2,333 31 Highway (7 127 37.820 19,399 3S.3OK 39.194 36.507 40.4S5 39.326 40 160 41.711 41.320 42,022 42.334 32 Conservation and development 6,378 6,412 5,753 6,004 5.793 5,660 5,473 6,095 5,974 5.708 5.838 5,558 6,029 33 Other 80,723 89,253 92,737 92,564 92.594 93.538 95,360 97,308 99,499 92.865 92,562 96,721 97,478 1. Not at annual rates. SoiJKCh. Bureau of the Census estimates for all series except (1) mobile homes, which are 2. Nut seasonally adjusted. pnvalc. domestic shipments as reported by the Manufactured Housing Inslrluk* and season- 3. Recent data on value of new construction may nol be strictly comparable with data for ally adjusted by the Census Bureau, and (2) sales and prices ol 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 Ihe 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 ealier months earlier (annual rate) Change rom 1 month earlier Index level, Item 1996 1997 1996 1997 Apr. 1996 1997 1997 ' Apr. Apr. June Sept. Dec.' Mar.' Dec. Jan. Feb. Mar. Apr. CONSUMER PRICES2 (1982-84=100) 2.9 25 29 3 1 1 8 3 1 * ] 160 2 2 Food 2.6 2.8 43 5.3 3.4 .3 .0 -.3 .3 .0 156.6 59 .0 4.9 1.1 16.2 -2.8 1.5 .8 .3 -1.7 -1.5 1 10.0 4 All items less food and energy 2.7 2.7 2.5 2.7 2.4 2.4 2 .1 .2 T .3 169.4 5 Commodities 1.6 1.1 .0 1.1 .9 I.I .1 .1 .1 .1 .3 143.5 } "» 1 3 34 3 4 1 ] 27 } 1 3 1 184 1 PRODI ICER PRICES (1982=100) 7 Finished goods 24 .8 2.5 2.5 4.3 -3.0 .5 -.3 -.4 -.1 -.6 131.6 8 Consumer foods 1.9 2.4 5.3 4.6 2.4 - 1.8 -.2 -1.0 -.3 .9 -.4 134.3 9 Consumer energy 6.5 -1.3 2.5 7.0 26.2 -17.3 3.3' .0' -I.' -3.4 -2.6 82.2 10 Other consumer goods 1.8 1.0 .6 .6 .6 2' - r -.1 .3 .0 145.2 1 4 1 6 1 2 - 6 1 2 0' - t - 4 138 5 I1 luwrmediale iiiatenals .0 -.2 .6 1.0 _ T T .6 .2 -I -.6 -.3 125.2 13 Excluding energy -1.0 .0 .0 - * .6 .1 .1 .0 .0 .0 134.2 Crude tihitenals 14 Foods 17.5 -2.3 47.4 -9.4 -28.5 -3.1 -2.7' -1.0 -1.9 2.1 3.3 1168 15 Energv 21.3 -9.9 -14.1 18.7 235 2 -67.1 19.3' 6.9' -12.4 -19.2 -5.2 78.7 16 Other -13.1 -1.0 -9.3 -2.6 -1.3 15.2 .0' 2.0 1.0 .6 -2.3 156.0 1. Not seasonally adjusted SOURCE. U.S. Department of Labor, Bureau of Labor Statistics. 2. Figures for consumer prices are for all urban consumers and reflect a rental-equivalence measure of homeownership. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • July 1997 2.16 GROSS DOMESTIC PRODUCT AND INCOME Billions of current dollars except as noted; quarterly dala at seasonally adjusted annual rates 1996 1997 01 Q2 Q1 Q4 Ql GROSS DOMESTIC PRODUCT 1 Total 6,935.7 7,253.8 7,576.1 7,426.8 7.545.1 7,616.3 7,716.1 7,866.0 By source 2 Personal consumption expenditures 4,700.9 4.924.9 5.151.4 5,060.5 5,139.4 5.165.4 5,240.3 5,346.4 580.9 606.4 6.32.1 625.2 637.6 630.5 635.2 661.1 4 Nondurable goods 1,429.7 1,485.9 1.545.1 1,522.1 1,544.7 1,546.5 1.566.8 1,600.2 5 Services 2,690.3 2,832.6 2.974.3 2.913.2 2,957.1 2.988.5 .1,038.3 3.085.1 6 Gross private domestic investment 1,014.4 1,065.3 1,117.0 1.068.9 1,096.0 1,156.2 1.146.6 1.202.8 7 Fixed investment 954.9 1.028.2 1,101.5 1.070.7 1.088 0 1.1 19.6 1.127.8 1,151.8 8 Nonrcsidential 667.2 738.5 791.1 769.0 773.8 807 0 814.5 833.3 9 Structures 180.2 199.7 214.3 208.4 207.4 213.5 227 8 234.3 10 Producers' durable equipment 487.0 538.8 576 8 560.6 566.3 593 5 586.7 599.0 11 Residential structures 287.7 289.8 310.5 301.7 314.2 312.6 1113 318.5 12 Change in business inventories 59.5 37.0 15.4 -1.7 8.0 36.6 18.8 51.0 39 6 17 3 15 4 19 7 50 1 -94.4 -94.7 -98.7 -86.3 -99.2 -120.2 -89.1 -111.4 15 Exports 719.1 807.4 855.2 839.5 850.0 844.3 887.0 899.3 953 9 964 5 976 0 1 0106 17 Government consumption expenditures and gross investment 1,314.7 1,358.3 1.406.4 1,383.7 1,408.8 1.414.8 1.418.3 1,428.2 18 Federal 516.4 516.6 523.1 518.6 529.6 525.5 518.5 519.9 19 Stale and local 798.4 841.7 883.3 865.1 879.2 889.3 899.8 908.3 Bv major l\pe of produci 20 Final sales, tolal 6,876.2 7,216.7 7,560.7 7,428.6 7,537.1 7.579.6 7.697.4 7,815.0 21 Goods 2,534.4 2,662.2 2,784.4 2,749.3 2,782.0 2.785.0 2,821.1 2,871.0 ">? Durable 1.086.2 1.147.3 1.219.6 1.192.1 1,219.1 1,225.5 1,241.7 1.263.2 1,448.3 1,515.0 1.564.8 1.557.1 1,562.9 1,559.5 1,579.5 1.607.9 14 Services 3.746.5 3.926.9 4.KI5.2 4,027 9 4.087,0 4.122.0 4,183.8 4.240.9 25 Structures 595.3 627.6 671.1 651 4 668.0 672.6 692.5 703.1 26 Change in business inventories 59.5 37.0 154 -1.7 8.0 36.6 18.8 51.0 27 Durable goods 31.9 34.9 12 7 12.3 9.9 34.7 -6.0 22.5 -> 7 140 -> o 24 8 28 5 MEMO 29 Total GDP in chained 1992 dollars 6 608 4r 6 742 2' 6,906.8' 6,813.8r 6,892 lr 6,928.1r 6,993.3r 7,089.4 NATIONAL INCOME 30 Total 5.535.2' 5,828.9' 6,164.2' 6,027.5r 6.132.2r 6,216.6r 6,280.6r n.a. 4.009.8 4,222.7 4,448.5 4,344.1 4.420.9 4,482.9 4.546.0 4,637.5 32 Wages and salaries 3,257.3 3,433.2 3.630.1 3,540.2 3,606.5 3,659.6 3,714.2 3,794.4 33 Government and government enterprises 602.5 621.7 641.2 634.0 638.9 644.6 647.2 656.7 34 Other 2,654.8 2,811.5 2.9S8.9 2,906.1 2.967.5 3.015.1 3,067.0 3,137.8 35 Supplement to wages and salaries 752.4 789.5 818.4 804.1 814.4 823.3 831.8 843.0 36 Employer contributions for social insurance 350.2 365.5 382.2 375.0 380.4 384.6 388.8 396.9 37 Other labor income 402.2 424.0 436.2 429.1 434.0 438.6 442.9 446.1 464.4' 486.1' 527.3' 508.1' 524.6' 535.6' 540.9' 548.7 39 Business and professional 430.0' 458.2' 482.6' 471.5' 480.5' 4855' 493.1' 503.6 40 Farm' 34 3' 27 9' 44 T 16 6' 44 1' 50 1' 47 9' 45 1 41 Rental income of persons' 112.1' 111.7' 115.0' 114.5' 112.4' 115.2' 117.9' 116.2 554.11 604.8' 670.2' 661.2' 672.1' 677.3' 670.1' n.a. 43 Profits before lax3 531.2 598.9 639.9 642.2 644.6 635.6 637.1 n.a. 44 Inventory valuation adjustment -13.3 -28.1 -8.9 -17.4 — 11.0 2.0 -9.2 3.0 45 Capital consumption adjustment 36.2' 34.0' 39.2' 36.4' 38.6' 39.7' 42.2' 44.2 46 Net interest 394.9 403.6 403.3 .199.5 402.3 405.6 405.7 n.a. 1. With inventory valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.48. 2. With capital consumption adjustment. SOURCE. U.S. Department of Commerce, Swrvrv 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 Ql Q2 03 Q4 Ql PERSONAL INCOME AND SAVING Total personal income 5.762.01" 6,112.4r 6.449.5r 6,304.5' 6,409.6' 6,498.9' 6,584.9' 6,701.3 Wage and salary disbursements .1.241.8 3,430.6 3.630.1 3.538.2 3.606.5 3.659.6 3,716.1 3.792.5 Commodity-producing industries 824.9 863.5 902.7 878.7 900.3 911.0 920.9 936.3 Manufacturing 621.1 648.4 672.5 654.8 671.8 678.5 685.0 693.6 Dislnbutive industries 739.2 783.7 827 9 810 5 822.3 832.4 846.5 862.5 Service industries 1,075.2 1,161.6 1,258.3 1.215.1 1.244.9 1,271.6 1,301.5 1.337.0 Government and government enterprises 602.5 621.7 641.2 634.0 638.9 644.6 647.2 656.7 Olhcr labor income 402.2 424.0 436 2 429.1 434.0 438.6 442.9 446.1 Proprietors" income1 464.41 486.1' 527.3' 508.1' 524.6' 535.6' 540.9' 548.7 Business and professional1 430.0' 458.2' 482.6' 471.5' 480.5' 485.5' 493.1' 503.6 Farm1 ^ 34.3' 27.9' 44.7' 36.6' 44.1' 50.1' 47.9' 45.1 Rental income of persons" 112.1' 111.7' 115.0' 114.5' 112.4' 115.2' 117.9' 116.2 Dividends 199.6 214.8 230.6 226.6 229.3 231.5 234.8 240.0 Personal inleresl income 663.7 717.1 738.2 726.1 733.1 742.9 750.5 758.3 Transfer payments 956.3 1,022.6 1.079.7 1,063.0 1,075.6 1,085.1 1,095.0 1,120.4 Old-age survivors, disability, and health insurance benefiis 472.9 548.2 562.2 507.4 539.1 529.9 536.3 541.7 LESS: Personal contributions for social insurance 278.1 313.4 320.9 294.5 307.5 301.0 305.8 309.7 EQUALS: Personal income 5.762.0' 6.584.9' 6,701.3 6,112.4' 6,449.5' 6.304.5' 6,409.6' 6.498.9' LESS: Personal tax and nontax payments 731.4 887.2 887.0 794.3 863.8 824.9 870.6 872.5 EQUALS: Disposable personal income 5,030.6' 5.697.7' 5,814.3 5,318.1' 5.585.7' 5.479.6' 5,539.0' 5.626.4' LESS Personal outlays 4,832.3 5.407.5 5.515.9 5,071.5 5,314.0 5,218.1 5,300.7 5,329.8 EQUALS: Personal saving 198.3' 290.2' 298.4 246,6' 271.6' 261.5' 238.3' 296,6' MEMO Per utpila uliamed 1992 dollars) Gross demesne product 25,348.7' 25.62(J.O' 26.014.3' 25,751.4' 25,988.4' 26,065 0' 26.251.3' 26.562.2 Personal consumption expenditures 17,158.4' 17.399.5' 17.667.4' 17,570.2 17.675.7 17,657 9 17.764.8 18,006.8 Disposable personal income 18,362.0' 18.789.0' 19.158.0' 19,028.0' 19.053.0' 19.233. If 19.315.0' 19.583.0 ' Saving rale (percent) 3.9' 4.6' 4.8 4.3 5.1 GROSS SAVING (iross saving l,055.9r l,152.3r 1,275.9' l,218.4r 1,245.0' 1.314.6r l,325.7r n.a. Gross private saving 1,006.3' 1,072.3' 1.161.0' 1,134.3' 1.196.7' 1,190.6' n.a. Personal saving 198.3' 246.6' 271.6' 261.5' 238.3' 296.6' 290.2' 298.4 Undistributed corporate profits' 147.8' 158.7' 192.9' 187.9' 192.6' 198.6' 192.5' n.a. Corporate inventory valuation adjustment -13.3 -28.1 -8.9 -17.4 -11.0 2.0 -9.2 3.0 Ciipikil consumption allowances Corporate 416.4' 435.9' 457.9' 449.6' 454 7' 461.1' 466.1' 471.6 Noncorporate 228.3' 228.5' 238.6' 233.5' 236.5' 240.5' 2*13.7' 246.1 Gross government saving 49.b 80.0 115.0 84.1 122.9 117.8 1350 n.a. Federal -I 19.6 -87.9 -54.6 -82.0 -54.1 -48.4 -34.CI n.a. i Consumption of fixed capital 70.6 73.8 72.5 73.2 72.6 72.3 71.9 72.2 Current surplus or deficit (-), national accounts. . . . -190.2 -161.7 -127.1 -155.2 -126.7 -120.8 -105.9 n.a State and local 169.2 167.9 169.6 166.1 177.0 166.3 169.0 n.a. 1 Consumption of fixed capital 69.4 72.9 76.6 75.1 76.0 77.1 78.1 79.1 i Current surplus or deficit f —). national accounts 99.7 95.0 93.0 91.0 101.0 90.9 Gross investment 1,090.4 1,150.9 1,200.8 1,167.9 1.187.0 1,215.9 1,232.5 Gross private domestic investment 1,014.4 1.065.3 1,117.0 1.068.9 1.096.0 1.156.2 1.146.6 1,202.8 Gross government investment 212.3 221.9 233.4 228.8 235.1 234.2 235.3 232.8 Net foreign investment -136.4 -136.3 -149.5 -129.9 -144.2 -174.6 -149.4 n.a. Statistical discrepancy 34.5r -58.r -98.7r 1. With inventory valualion and capital consumption adjustment: SOURCE. U.S. Department of Commerce, Survey of Current Business. ?. With capital consumplion adjustment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A50 International Statistics • July 1997 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data seasonally adjusted except as noted1 1995 1996 Q4 Ql 02 03 Q4p 1 Balance on current account -148.405 -148,154 -165,095 -30,435 -35,274 -40,593 -47.853 -41,380 -166,121 -173,424 -187,674 -38,026 -43,127 -47,370 -51,869 -45,308 3 Merchandise exports 502.463 575,940 611,669 149,422 150,032 153,120 150,144 158,373 4 Merchandise imports -668,584 -749,364 -799.343 -187,448 -193,159 -200,490 -202,013 -203,681 1,963 3,585 2.809 978 489 725 515 1,080 6 Other service transactions, net 59,779 64,776 70.658 17,657 18,008 17.687 17.075 17,883 -4,159 -8,016 -8,416 -1,890 311 -2.215 -4.098 -2,414 8 U.S. government grants -15,816 -10,959 -14.634 -2,799 -4,259 -2,364 -2.580 -5,431 9 U.S. government pensions and other transfers -4,544 -3,420 -4.233 -731 -1,012 -1,081 -1,064 -1,076 [0 Private remittances and other transfers -19,506 -20.696 -23.605 -5.624 -5,684 -5,975 -5.832 -6,114 1 1 Change in U.S. government assets other than official -341 -780 -665 -199 -152 -353 166 -326 12 Change in U.S. official reserve assets (increase, -) 5,346 -9,742 6,668 191 17 -523 7,489 -315 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -441 -808 370 -147 -199 -133 848 -146 15 Reserve position in International Monetary Fund 494 -2,466 - 1,280 -163 -849 -220 -183 -28 16 Foreign currencies 5,293 -6,468 7,578 501 1,065 -170 6,824 -141 17 Change in U.S. private assets abroad (increase, -) -155,700 -297,834 -312,833 -98,206 -68,588 -49,823 -80,968 -113,454 -8,161 -69,146 -88,219 -7,272 1,714 -74 -33,196 -56,663 19 Nonbank-reportcd claims -32,804 -34,219 -14,278 -12,707 -3,374 -15,696 20 U.S. purchases of foreign securities, net -60,270 -98,960 -104,533 -32,539 -34,420 -20,200 -22,933 -26,980 54 465 95 509 88 304 44 117 -23 175 -26 175 -9 143 -29 811 22 Change in foreign official assets in United States (increase, -H 40,253 109.757 122.778 11.369 52,021 13,566 24,235 32,956 23 U.S. Treasury securities 30,745 68,813 111.151 12,984 55,600 -3,384 25.472 33,463 6,077 3,734 4.331 764 52 1,258 1.217 1,804 25 Other U.S. government liabilities4 2,344 1.082 1.404 1,249 -156 220 1.061 279 26 Other U.S. liabilities reported by U.S. banks1 3,560 32.862 4.614 -3,908 -3,264 14,187 -1.930 -4,379 27 Other foreign official assets'' -2.473 3,266 1.278 280 -211 1,285 -1,585 1.789 28 Change in foreign private assets in United States (increase, +) . . .. 245,123 314.705 402,268 87.860 47,454 86,987 118.735 149,092 29 li.S bank-reported liabilities' 111.842 25.2R3 -1.558 32,765 -35.571 1,925 -1,151 33.239 30 U.S nonbank-reported liabilities -7,710 34.578 11,272 6,506 7.296 20,608 31 Foreign private purchases of U.S. Treasurv securities, net 34,225 99.340 153,784 1,734 11,832 31.212 43.402 67,338 32 Foreign purchases of other U.S. securities, net 57,006 95.268 131,682 27,321 35,993 29.122 34,820 31,747 33 Foreign direct investments in Uniled States, net 49.760 60.236 83,950 14,768 28,694 17.432 21,056 16,768 34 Allocation of special drawing rights 0 0 f) 0 0 0 0 0 35 Discrepancy 13,724 31.548 -53,122 29.420 4,522 -9.261 -21,804 -26,573 1,153 6,653 -449 -8,318 2,119 37 Before seasonal adjustment 13.724 31,548 -53.121 28.267 -2,131 -8,812 -13,486 -28.692 MEMO Changes in official assels 38 U.S. official reserve assets (increase, —) 5,346 -9.742 6.668 191 17 -523 7.489 -315 39 Foreign official assets in United States, excluding line 25 (increase, +-) 37.909 108,675 121.374 10.120 52,177 13,346 23.174 32,677 40 Change in Organization of Petroleum Exporting Countries otficial assets in United States (part ot line 22) -1.529 3.959 13.573 -1.435 -992 5,555 5,479 3,531 1. Seasonal factors are not calculated for lines 12-16, 18-20, 22-34. and 38^10. 4. Associated primarily with military sales contracts and other transactions arranged with 2. Data are on an international accounts basis. The data differ from the Census basis data, or through foreign official agencies. shown in table 3. II, for reasons of coverage and liming Military exports are excluded from 5. Consists of investments in U.S. corporate slocks and in debt securities of private merchandise trade data and are included in line 5. corporalions and state and local governments. "} Reporting banks include a]] types oi 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 dala seasonally adjusted 1996 1997 Item 1994 1995 1996 Sept. Oct. Nov. Dec. Jan. Feb. Mar.p 1 Goods and services, balance -104,381 -105.064 -114.299 -11,616 -8,066 -7,968 -10.489 -12,334 -10,537 -8.508 2 Merchandise -166.123 -173.424 -187,766 -17.639 -14.211 -14,404 -16,871 -18.614 -17,006 -15.063 3 Services 61.742 68.360 73,467 6.023 6.145 6,436 6.382 6.280 6,469 6.555 4 Goods and services, expom 698,301 786.529 835,414 68,816 71,758 72,566 71.210 70,645 73,472 76.479 5 Merchandise 502.462 575.939 611,507 50.317 52,893 53,302 51.924 51.358 54,060 56.614 6 Services 195.839 210,590 223.907 18,499 18,865 19,264 19,286 19.287 19,412 19,865 7 Goods and services, imports -802.6S2 -891.593 -949,714 -80.432 -79,824 -80,534 -81,699 -82.979 -84,009 - 84,987 8 Merchandise -668.585 -749.363 -799,274 -67.956 -67,104 -67,706 -68,795 -69,972 -71.066 -71,677 9 Services -134.097 -142.230 -150.440 -12.476 -12.720 -12,828 -12.904 -13,007 -12.943 -13.310 I. Data show monthly values consistent with quarterly figures in the U.S. balance of SOURCE. FT900. U.S. Department i ~ Commerce. Bureau of the Census and Bureau of payments accounts. Economic Analysis. 3.12 US. RESERVE ASSETS Millions of dollars, end of period 1996 1997 Asset 1993 1994 1995 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr.'' 1 Total 73,442 74,335 85.832 75.509 7* 5^8 75 444 7'090 68 200 67 482 67,222 65.873 2 Gold stock, including Exchange Stabilization Fund1 11,053 11,051 11.050 11.050 11.049 11.049 11.049 11,048 11.051 11,050 11.051 3 Special drawing rights*"1 9.039 10,039 11,037 10.177 10.226 10.386 10.312 9,793 9,866 9.879 9.726 4 Reserve position in International Monetary Fund2 11.818 12,030 14.649 15,421 15.517 15.516 15.435 14,372 14.037 13.846 13.660 5 Foreign currencies4 41,532 41.215 49.096 38,861 38.765 38,493 38,294 32,987 32,528 32,447 31,436 1. Gold held "under earmark" at Federal Reserve SDR holdings and reserve positions in the IMF also have been valued on this basis since July [Q74. 3. Includes allocations of SDRs by the International Monetary Fund on Jan. 1 of the year indicated, as follows: 197^>—$867 million; 1971—$717 million; 1972—$710 million: 1979— Sl.l» million; 1980—$1,152 million; 1981—$1,093 million; plus net transactions in SDRs. 4. Valued at current market exchange rates. ^1AV9. IXKII I0 tit. sJuiLxL> teJ eV^Jn UcIC uLrULr JeCnIIL cICi:Ne s{ft wIIeIUrrelli ruLI seV.dUU;[ LUsLiin;^. ceI LJUIa1! nJullalJ ryI 7 1t -f 98IT11LU,L 1fKiIIv eL /cC^u.Crl[rLelfCncies have been used. U.S 3.13 FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS1 Millions of dollars, end of period 1996 1997 Asset 1993 1994 1995 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr.1" 1 Deposits 386 250 386 265 176 170 167 167 229 16 169 Held in cuslod\ 2 U.S. Treasury securities" 379 394 441,866 522,170 609,801 619,987 634.165 638.049 646.130 662.375 672,059 668.536 3 F.arniarked gold' 12.327 12,033 11.702 11.210 11.204 11.198 1 1.197 11.197 11.175 11,034 10,944 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 iroy ounce; not organizations. included in the gold stock of the United Slates. 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 D July 1997 3.IS SELECTED US, LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period I9961 1997 Item 1994 1995 Sept. Ocl. Nov. Dec. Jan.1 Feb. Mar.P 1 Total1 520.934 630.918 719,615 722.761 737,524 752.552 763,058 771,938 780,512 By type 2 Liabilities reported by banks in the United States" 73,386 107,394 116,386 109,995 107,071 112,116 119.671 116,646 119.605 3 U.S. Treasury bills and certificates3 139,571 168.534 182,122 186,180 197,692 193,435 188,076 191,090 191,548 U.S. Treasury bonds and notes 4 Marketable 254,059 293.690 158 225 363,063 366,903 380.565 388,587 398,630 405.443 5 Nonmarketable4 6.109 6,4V I 6,057 5.892 5,929 5,968 6.007 6,043 6.084 6 US. securities other than U.S. Treasury securities5 47.809 54,809 56,82.5 57.631 59,929 60.468 60,717 59,529 57.832 Sv area 7 Europe1 215.374 222.406 246.342 246,542 250,872 253.099 262.145 261.052 265,324 8 Canada 17.235 19.473 21.351 21,764 21,360 21.343 21.151 21,237 21.9K3 9 Lalin America and Caribbean 41,492 66.721 69.338 70,481 76 977 81,74] 77.547 79,412 80.329 10 Asia 236,824 311.016 369.529 371,268 575311 383,062 390.671 399,060 400,184 11 Africa 4.180 6,296 6.944 6,587 7,034 7,379 6.717 7,411 7,908 12 Other countries 5.827 5.004 6,109 6.117 5,968 5,926 4.825 3,764 4.782 1. Includes the Bank for International Settlements Venezuela, beginning December 1990, 30-year maturity issue, Argentina, beginning April 2. Principally demand deposits, time deposils. bankers acceptances, commercial paper, 1993, 3(i-year maturity issue. negotiable time certificates of deposit, and borrowings under repurchase agreement;,. !i. Debt securities of U.S. government corporations and federally sponsored agencies, and 3. Includes nonmarketable certificates of indebtedness and Treasury bills issued lo 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 tlie 4. Excludes notes issued to foreign official nonre^erve 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 Ihe 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 1996 Item 1993 1994 1995 Mar June Sept Dec. 78 259 89.258 109,713 107.454 111,651 1 11,140 103,820 2 Banks" claims 62,017 60,711 74,016 69.164 65.825 68.120 66.455 3 Deposils 20.993 19,661 22.696 22.213 20.890 24,026 22,904 4 Other claims 41.024 41,050 51.320 46.951 44.955 44,094 43,551 5 Claims of banks' domestic customers2 12.854 10.878 6.145 6.3S4 7.554 7,190 14.613 Daia 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 represeni claims on foreigners held by reporting banks for the accounts or' the domestic customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Bank-Reported Data A53 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1 Payable in U.S. dollars Millions of dollars, end of period 1996 Sept. BY HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners 1,014,996 1,099,549 1,137,737' 1,091,897 1,124,315 1,116,775 1,137,737' 1,135,726' 1,158,001' 1,153,355 2 Banks' own liabilities 718,591 753,461 759,012' 724,792 757,645 740,998 759,012' 765,214' 782,035' 782,018 3 Demand deposits 23,386 24.448 27,034' 25,504 23,858 27,637 27,034' 26,228' 25.085' 28,012 4 Time deposits2 186,512 192,558 188,717 192,525 197,388 192,543 188,717 186,723' 189,753' 189,430 5 Other 113,215 140,165 141,733 150,230 150,302 143,690 141,733 158,871' 161,841' 151,849 6 Own foreign offices 395,478 396,290 401.528 356,533 386,097 377,128 401,528 393,392 405.356 412,727 7 Banks" custodial liabilities1' 296,405 346,088 378,725 367,105 366.670 375.777 378,725 370,512 375.966' 371,337 8 U.S. Treasury bills and certificates6 162,938 197,355 220.575 212,478 214.609 225.046 220,575 214,727 217.817 222,213 9 Other negotiable and readily transferable instruments7 42,539 52,200 64,040 57,702 54.045 54,568 64,040 62,971 59,668' 55,843 10 Other 90,928 96,533 94.110 96.925 98,016 96,163 94,110 92,814 98,481 93,281 11 Nonmonetary international and regional organizations* 8,606 11,039 13,864 14.443 16,666 14,772 13,864 14,849 14,626 12,192 12 Banks' own liabilities 8,176 10,347 13,355 13,843 15.835 13.434 13,355 14,170 14,297 11.793 13 Demand deposits 29 21 29 26 67 46 29 55 51 49 14 Time deposits" 3,298 4,656 5,785 5.441 6,005 4,906 5,785 5,792 5,035 6,952 15 Other' 4,849 5,670 7,541 8,376 9.763 8,482 7,541 8,323 9,211 4.792 16 Banks' custodial liabilities5 430 692 509 600 831 1,338 509 679 329 399 17 U.S. Treasury bills and certificates6 281 350 244 399 600 1,088 244 494 219 226 18 Other negotiable and readily transferable instruments7 149 265 201 231 226 265 185 110 158 19 Other 0 1 0 0 0 24 0 0 0 15 20 Official institutions9 212.957 275,928 305,551 298,508 296,175 304,763 305,551 307,747' 307,736' 311,153 21 Banks' own liabilities 59.935 83,447 79,340 86,027 83,706 82,714 79,340 88,220' 87,291' 90,425 22 Demand deposits 1.564 2,098 1,511 2,049 1,316 2,180 1,511 1.290 1,378 2,390 23 Time deposits 23,511 30,717 33,664 34,902 35,551 35,292 33,664 32,717' 34,472 32,658 24 Other3 34,860 50,632 44,165 49,076 46,839 45.242 44,165 54.213 51,441' 55,377 25 Banks' custodial liabilities5 153,022 192,481 226,211 212,481 212,469 222,049 226,211 219.527 220.445' 220,728 26 U.S. Treasury bills and certificates6 139.571 168.534 193.435 182,122 186.180 197,692 193,435 188.076 191,090 191,548 27 Other negotiable and readily transferable instruments 13.245 23,603 32.350 30,051 25,085 24,000 32,350 31.291 29,008' 28,797 28 Other 206 344 426 1,204 357 426 160 347 383 29 Banks10 678.532 691,412 681,007' 649,649 678,993 667,700 681,007' 669,279' 682,286' 683,425 30 Banks' own liabilities 563.617 567,834 562,996' 524,845 554,577 547,106 562.996' 553,704' 562,050' 567,277 3! UnafhTiated foreign banks 168,139 171,544 161,468' 168,312 168.480 169,978 161,468' 160,312' 156,694' 154,550 32 Demand deposits 10.633 11,758 13,692' 12,764 11,156 13,304 13.692' 12.898 11,642 13,310 33 Time deposits' 111,171 103.471 91,200 91,906 96,223 94,345 91,200 89.567' 89,263' 88,380 34 Other 46,335 56,315 56,576 63,642 61,101 62,329 56.576 57,847 55,789' 52,860 35 Own foreign offices4 395,478 396,290 401,528 356,533 386,097 377.128 401.528 393,392 405,356 412,727 36 Banks' custodial liabilities5 114,915 123.578 118,011 124,804 124,416 120,594 118,011 115,575 120,236 116,148 37 U.S. Treasury bills and certificates6 11,264 15,872 13,886 18,556 16,865 14,227 13.886 13,969 13,289 13,996 38 Other negotiable and readily transferable instruments 14,506 13,035 12.321 11.298 12,455 13,295 12,321 11,142 11,210 11,204 39 Other 89,145 94,671 91.804 94.950 95,096 93,072 91.804 90.464 95,737 90,948 40 Other foreigners 114,901 121,170 137.315 129,297 132,481 129,540 137,315 143,851' 153,353' 146,585 41 Banks' own liabilities 86,863 91,833 103.321 100,077 103,527 97,744 103,321 109,120' 118,397' 112,523 42 Demand deposits 11,160 10,571 11.802 10,665 11,319 12,107 11,802 11,985' 12,014' 12.263 43 Time deposits2 48,532 53,714 58,068 60,276 59,609 58,000 58,068 58,647' 60,983' 61.440 44 Other' 27,171 27,548 33,451 29,136 32,599 27,637 33,451 38.488' 45,400' 38,820 45 Banks' custodial liabilities5 28,038 29,337 33.994 29,220 28,954 31,796 33,994 34,731 34,956 34.062 46 U.S. Treasury bills and certificates6 11,822 12,599 13,010 11.401 10,964 12,039 13,010 12,188 13,219 16.443 47 Other negotiable and readily transferable instruments7. 14,639 15.221 19,104 16,152 16,274 17,047 19,104 20,353 19.340 15.684 48 Other 1.577 1,517 1,880 1.667 1,716 2,710 1,880 2,190 2,397 1,935 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 17,895 9,103 9,934 10,466 11,657 10.540 9,934 9,035 8,745' 9,332 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 centra] 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 D July 1997 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1—Continued Sept. Oct. Jan Feb. Mar.p 50 Total, all foreigners 1,014,996 1,099,549 l,137,737r 1,091,897 1.124,315 l,137,737r l,135,726r 1,158,001' 51 Foreign countries 1,006,390 1,088,510 l,123,873r 1,077,454 1,107,649 1,102,003 l,123,873r l,120,877r 1,143,375' 1,141,163 52 Europe 390,869 362,819 368,352 352,049 374,418 381,204 368,352 379.630' 379,556' 374,988 53 Austria 3,588 3,537 5,101 6.017 6,816 6,250 5,101 4,794 4.010 4,589 54 Belgium and Luxembourg 21,877 24,792 23,576 22,482 23,232 21,006 23,576 22.842' 23.537' 22,106 55 Denmark 2.884 2,921 2,450 2,652 1,801 2,790 2,450 2,213 1.594 1,691 56 Finland 1,436 2,831 1,463 812 1,509 1,557 1,463 1,583 1.338 1,017 57 France 44.365 39,218 34,365 37,637 42.346 40,021 34,365 34,558' 35.457' 34.860 58 Germany 27.109 24,035 24,554 23,599 23.522 21,650 24,554 24,871' 24.142' 25,400 59 Greece 1,400 2,014 1.810 1.854 1,666 2,222 1.810 2.080 1,930 2,392 60 Italy 10,885 10,868 10.701 12,509 12,793 10.262 10.701 10,366' 10,610' 8,674 61 Netherlands 16,033 13,745 10.995 9,626 12,017 11,132 10,995 9.760' 10.946' 11,000 62 Norway 2,338 1,394 1,288 1,622 1,552 1,882 1,288 1.860 1,538 1,891 63 Portugal 2,846 2,761 1.865 1,473 1,388 1,723 1,865 1,741' 1,661' 1,744 64 Russia 2,726 7,948 7,571 4,761 5,602 8,215 7,571 7.160 6,819 7,771 65 Spain 14,675 10,011 16,922 20,359 17.665 18,228 16,922 20.411' 17,963' 18,789 66 Sweden 3,094 3,246 1,291 1,814 1,424 1,656 1,291 2.269 1,527 1,921 67 Switzerland 40,724 43,625 44,215 42,226 32,541 37,981 44,215 43,266' 46,681' 43,319 68 Turkey 3,341 4,124 6,723 7,992 8,019 7,311 6,723 7.051 6,749 7,177 69 United Kingdom 163,733 139,183 151,385 133,614 159,878 165.814 151,385 157.357' 157,265' 154,223 70 Yugoslavia" 245 177 206 214 216 232 206 212 239 248 71 Other Europe and other former U.S.S.R.1 27,770 26,389 21,871 20.786 20.431 21,272 21,871 25,236 25.550' 26,176 72 Canada 24,768 30,468 38,111 33.199 35,147 33,035 38,111 34,830' 33,985' 37,116 73 Latin America and Caribbean 423,847 440,213 465,704' 433,796 444,847 438,574 465,704' 455,456' 471.897' 463,373 74 Argentina 17,203 12,235 13,794 11,989 11,701 13.860 13,794 16,475' 17,018' 16,739 75 Bahamas . . 104,014 94,991 88.299 86,880 101,414 91,494 88,299 90,460' 97.416' 88,680 76 Bermuda 8,424 4,897 5.299 4,880 4,910 6,443 5,299 5,103 8.803 8,203 77 Brazil 9,145 23,797 27.663 23,817 24,083 26,920 27,663 22 468' 23.859' 23,694 78 British West Indies 229,599 239,083 250.761 233.818 229,493 226,502 250,761 244.633' 248.571' 249.965 79 Chile 3.127 2,826 2,915 3.205 2,767 2 728 2,915 2.987' 1,459' 6,931 80 Colombia 4,615 3.659 3.256 2.S89 2,968 2.838 3.256 2.791' 2,855' 2,807 81 Cuba 13 8 21 33 17 18 21 19 19 19 82 Ecuador 875 1,314 1 767 1,449 1,383 1,574 1,767 1.617' 1,633' 1,484 83 Guatemala 1,121 1,276 1.282 1,181 1.207 1.235 1.282 1.348' 1,410' 1.378 84 Jamaica 529 481 628 623 580 564 628 576 577 585 85 Mexico 12,227 24,560 31,230 26,808 27.673 27,981 31,230 27.139' 27,442' 26.594 86 Netherlands Antilles 5,217 4,673 5,977 5,290 5.076 4,437 5,977 6.401' 6,085' 3,474 87 Panama 4,551 4,264 4,077 3,950 4,056 4,002 4,077 3.849' 4.134' 3.847 Peru 900 974 834 936 1,024 942 834 967' 917' 926 Uruguay 1,597 1,836 1,888 1,751 1,841 1,753 1,888 1,915' 1,857' 1,843 90 Venezuela 13,986 11,808 17,361 15,596 16,369 17,377 17,361 18.119' 18.100' 18,454 91 Other 6,704 7,531 8,652' 8.701 8,285 7,906 8,652' 8,589' 7,742' 7,750 92 Asia . . . 154,346 240,595 236,716 243.210 239,416 233,804 236,716 236,418' 244,507 250,686 China 93 Mainland 10,066 33,750 30,441 32,068 26.998 29.411 30,441 27,917' 31.634 31,374 94 Taiwan 9,844 11,714 15,990 15,721 15,449 16,613 15,990 16,682 15,621 15,797 95 Hong Kong 17,104 20,197 18,742 17,485 17,052 18,712 18,742 19,873 20,065 20,105 96 India 2,338 3,373 3.936 3,793 3,709 3,832 3,936 4,329 4,752 5.435 97 Indonesia 1,587 2,708 2,297 2,204 2.436 2,401 2,297 2.159 2,473 2,671 98 Israel 5,157 4,041 6,042 4,134 7,162 5,723 6,042 6.597 6.197 5,955 99 Japan 62.981 109,193 107,014 112,539 112.602 103.680 107,014 106,421 108.705 116,054 100 Korea (South) 5,124 5,749 5.973 5.908 5.545 5.897 5.973 6.048 6.276 6.534 101 Philippines 2,714 3.092 3.378 3,429 3,191 3.264 3,?78 2.340 2,437 2,389 102 Thailand 6,466 12,279 10.912 11,759 11,972 12,729 10.912 9.873 10,752 9,394 103 Middle Eastern oil-exporting countrie 15,494 15,582 14.303 14,715 13,032 13,145 14,303 12.924 12,767 13,408 104 Other 15,471 18.917 17.688 19,455 20,268 18,397 17,688 21.255 22,828 21,570 105 Africa 6,524 7,641 8,063 7,440 7,058 7,671 8,063 8,443 8,110 8,533 106 Egypt 1.879 2.136 2.012 1,894 1,904 1.901 2.012 1.933 2,033 2.000 107 Morocco 97 104 112 78 74 66 112 111 97 107 108 South Africa 433 739 458 482 435 641 458 610 720 827 109 Zaire 9 10 10 6 11 10 10 5 7 9 1 11 1 1 0 O Ot i h l- e e r xporting countries1^ 2 1 , , 7 34 6 3 3 2 1 , , 8 79 5 7 5 2 2. , 8 6 6 0 3 8 2 2 , , 0 9 5 2 1 9 2 1 . , 6 9 9 4 4 0 2 2, , 6 3 6 8 9 4 2 2 , , 6 8 0 6 8 3 2 3 , , 6 0 8 9 9 5 2 2 , , 4 7 6 8 7 6 2 2, . 6 9 6 2 1 9 112 Other 6,036 6,774 6,927' 7.760 6,763 7,715 6,927' 6,100 5,320 6.467 113 Australia 5.142 5,647 5.468 5.522 4,786 6,196 5,468 4,866 4,072 5,096 114 Other 894 1.127 1.459' 2.238 1.977 1,519 1.459' 1,234 1,248 1.371 115 Nonmonetary international and regional organizations 8,606 11,039 13,864 14.443 16.666 14,772 13,864 14,849 14.626 12,192 116 International15 7.537 9,300 11,991 12,761 14.887 12,974 11,991 13,230 13.100 10,414 117 Latin American regional16 613 893 1,339 1.193 1.304 1,172 1.339 1,103 1.120 1.317 118 Other regional17 456 846 534 489 475 626 534 516 406 461 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 PEmmir^iTrnaot el"Tsr iif(-»Tiolr u^tcoitdaol\ 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

Bank-Reported Data A55 3.18 BANKS' OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States' Payable in U.S. Dollars Millions of dollars, end of period Area or country Sept. Oct. Nov. Dec 1 Total, all foreigners. . . 485,432 532,444 600,692' 544,646 574,920 600,692' 608,506' 636,355 2 Foreign countries .. .. 4X0,841 530,513 598,088' 542,948 560,325 573,447 598.088' 606.734' 632.441 634,849 3 Europe 124,124 132,150 166,501 155,277 165,634 168,794 166,501 179,495' 194,236 205.420 4 Austria 692 565 1,662 988 1 197 1,097 1.662 1,643 1,284 1,911 5 Belgium and Luxembourg 6,923 7.624 6.727 6,903 6,828 6,403 6,727 7,611 6.855 8,439 6 Denmark 1.129 403 492 408 480 651 492 678 571 546 7 Finland 512 1,055 971 1,350 1,068 1,228 971 1,144 976 1,684 8 0 G Fr e a r n m c a e ny 1 7 2 , , 6 1 2 4 3 9 1 9 5 , , 2 0 6 3 3 3 1 8 5 . , 4 2 7 46 2 1 8 2 . , 6 0 7 78 0 1 8 2 , , 5 7 4 9 6 2 1 7 2 . , 1 1 9 9 5 8 1 8 5 , , 4 2 7 4 2 6 1 9 8 , , 6 11 59 1 ' 2 9 0 , . 0 5 7 7 7 6 2 1 4 1 . . 9 97 2 1 9 1100 GGreece 604 469 568 397 426 571 56S 636 530 750 11 Italy 6,044 5,370 6,457 5,870 5,007 5.957 6.457 5,419 5,587 6,437 12 Netherlands 2,960 5,346 7,080 6,956 7.386 7.350 7 080 8,119 8,658 7,783 13 Norway 504 665 808 1,199 1,617 1.894 808 1.058 766 1,226 14 Portugal 938 888 418 484 517 341 418 420 310 421 15 Russia 973 660 1,669 1.135 1,413 1.533 1.669 1,673 1,704 2.028 16 Spain 3,536 2,166 3,211 4,152 3.885 4.181 3 211 6,507' 5,407 6.633 17 Sweden 4.098 2,080 2,673 2.976 2,919 2.882 3^673 3.028 3,323 2.765 18 Switzerland 5.747 7,474 19 798 10,930 16.110 18.071 19,798 21,457' 25,258 20.853 19 Turkey 878 803 1,109 1,083 962 1,131 1,109 1.029 1,221 1,240 20 United Kingdom 66,863 67.784 85,057 85.732 89.961 92,143 85,057 86,711' 96,988 99,125 21 Yuggoslavia2 265 147 115 87 118 112 115 108 107 87 22 OOhth er EE urope andd other former U.S.S.R.3 . 1.686 4,355 3.968 3,879 4,402 3,856 3.968 4.484 5.038 6.592 23 Canada 18,490 20,874 26.436 25.343 23,066 22,013 26,436 26.348' 27,881 35.773 24 Latin America and Caribbean 224,229 256.944 274,127 240,683 243,634 253,761 274,127 271,654' 275,255 260.265 25 Argentina 5,854 6.439 7.400 7,101 7,057 7,212 7,400 6.987 6,952 6,999 26 Bahamas 66,410 58.818 71,871 61,830 61,991 64,911 71.871 62,679 66,771 67,714 27 Bermuda 8.533 5.741 4.103 3,680 4,438 5,019 4,103 4.444 5,980 6,305 28 Brazil 9,583 13,297 17,259 15,261 15,417 16.141 17,259 17.620 17,758 17,624 29 British West Indies 96,373 124,037 105,510 102,157 105,891 105.234 105.510 108,643' 110,143 98,205 30 Chile 3,820 4,864 5,136 4,397 4,288 4 554 5,136 5,509' 5.602 5,784 31 Colombia 4.004 4,550 6,247 4,723 4.81 I 4.960 6,247 6,166 6.033 6.022 32 Cuba 0 0 0 0 0 (I 0 0 0 0 33 Ecuador 682 825 1,031 965 957 952 1,031 1,079' 1.134 1.155 34 Guatemala 366 457 620 507 546 568 620 612 634 629 35 Jamaica 258 323 345 339 362 365 ?45 336 336 366 36 Mexico 17,749 18,024 18.425 17,715 17,742 17.993 18,425 18,323' 18,297 19.510 37 Netherlands Antilles 1.404 9,229 25.209 11.207 9,406 15,074 25.209 27.675 24,250 18.759 38 Panama 2,198 3,008 2.786 2,257 2,354 2.621 2,786 2,796' 2,911 3,099 39 Peru 997 1,829 2.721) 2,541 2 563 2.629 2 720 2.867 2.944 2.502 40 Uruguay 503 466 589 530 547 551 589 623 766 741 41 Venezuela 1,832 1,661 1,702 1,513 1,636 1 626 1.702 1,599' 1,452 1.512 42 Other 3.663 3,376 3.174 3,960 3.628 3.351 3.174 3,696' 3.292 3.330 43 Asia 107.800 115.336 122,538' 113.582 120.007 120.285 122.538' 121.362' 127,105 124,310 China 44 Mainland 836 1.023 1,401 1.700 1.420 1.292 1.401 2,035 1,766 1,456 45 Taiwan 1,448 1,713 1.894 1,700 1.305 1.413 1 894 1,249 1,201 1.709 46 Hong Kong 9.222 12.821 12.802 13.882 12 984 13.550 12,802 11.764 11,880 14,150 47 India 994 1,846 1,946 1,975 2.181 2.027 1.946 1.824 1,957 2.194 48 Indonesia 1,472 1,696 1.762r 1.653 1.577 1.636 1.762' 1,749' 1.896 2.080 49 Israel 688 739 633 576 1,017 624 633 692 617 635 50 Japan 59,569 61.468 59.967 52.326 59.343 59.886 59.967 59.843 64.175 56,374 51 Korea (South) 10,286 13,975 18,961 17.488 16.947 18.080 18.961 20.214 20.077 19,987 52 Philippines 663 1,318 1.697 1,255 1.335 1.519 i.697 1,492 I 794 1,600 53 Thailand 2,902 2,612 2.6791 2.705 2,699 2.820 2,679' 3,003 3.092 3.441 54 Middle Eastern oil-exporting countries4 . 13,982 9,639 10,424 10,111 11.372 10,311 10,424 8 582 8,889 10,078 55 Other 5,738 6,486 8.372 8.211 7.827 7.127 8,372 8.915 9.761 10.606 56 AlVi 3,053 2,742 2,777 2,757 2,638 2,557 2 777 2,731 2.772 2.735 57 Egypt 225 210 247 241 204 212 247 246 245 244 58 Morocco 429 514 524 565 543 587 524 489 522 473 59 South Africa 674 465 584 572 614 551 5X4 572 564 455 60 Zaire 1 0 1 1 0 0 0 0 0 61 Oil-exporting countries' 856 552 420 429 414 427 420 408 474 605 62 Other ....". 867 1,000 1,002 949 862 780 1.002 1.016 967 958 63 Other 3.145 2.467 5.709' 5 306 5.346 6.037 5 709' 5,144 5,192 6.346 64 Australia . 2,192 1,622 4,577 3,641 1.798 4,336 4.577 3.743 3.176 4.104 65 Other 953 845 1,132' 1.665 1,548 1.701 1,132' 1,401 2.016 2.242 66 Nonmonetary international and regional organizationsfi . 4,591 1.931 1.698 3,129 1.473 2.604 1.772 2.255 1.506 1. Reporting banks include all types ol depository institutions as well as some brokers and 4. Comprises Bahrain, Iran. Iraq. Kuwait, Oman. Qatar, Saudi Arabia, and United Arab dealers. Emirates (Trucial States'). 2. Since December 1992, has excluded Bosnia. Croatia, and Slovenia. 5. Comprises Algeria. Gabon, Libya, and Nigeria 3. Includes the Bank for International Settlements. Since December 1992. has included all 6. Excludes the Bank for International Settlements, which is included in "Other Europe." parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, and Slovenia. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A56 International Statistics • July 1997 3.19 BANKS' OWN AND DOMESTIC CUSTOMERS' CLAIMS ON FOREIGNERS Reported by Banks in the United States' Payable in U.S. Dollars Millions of dollars, end of period 1996 1997 Type of claim 1994 1995 1996 Sept. Oct. Nov. Dec' Jan.1 Feb. Mar.p 1 Total 601,814 655,211 744,136r 688,239 744,136 2 Banks' claims 485.432 532,444 600.692' 544.646 563.454 574,920 600,692 608,506 634.696 636,355 3 Foreign public borrowers 23.416 22,518 22,220 22.924 25.185 20,420 22,220 26,039 24.758 28.935 4 Own foreign offices" 283.015 307,427 342.511 311.588 330.377 335,089 342,511 331,276 361.490 360,126 5 Unafiiliated foreign banks 1 10.410 101.595 113.523' 109.546 108.701 107.928 113,523 121,203 118.058 118,355 6 Deposits 59.368 37,771 33.841' 35.377 36.142' 32.420' 33,841 39,271 38,135 37,298 7 Other 51.042 63.824 79,682' 74,169 72,559' 75.508' 79,682 81,932 79,921 81,057 8 All ntlier foreigners 68.591 100,904 122,438' 100.588 99,191 111.483 I22.43S 129,988 130,390 128,939 9 Claims of banks' domestic customers'. 116.382 122,767 143.444 143.59? 143.444 10 Deposits 64,829 58,519 77.650 80.695 77.650 11 Negotiable and readily transferable instruments4 36,11 1 44.161 50,659 46.491 50.659 12 Outstanding collections and other claims 15,442 20.087 15,135 16.407 15.135 MEMO 13 Customer liability on acceptances 8,427 8,410 9,624 9.396 9,624 14 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States5 32,796 30,717 42.679 34,125 40.326 41.581 42.679 43,452 47,185 37,418 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 cunsulidated in quarterly Consolidated Reports of Condition filed with bank regulatory 5. Includes demand and time deposits and negotiable and nonnegotianle certificates of atuiticiev 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 States' Payable in U.S. Dollars Millions of dollars, end of period 1996 Maturity, by borrower and area" 1993 1994 1995 Mar. June Sept. Dec. 1 Total 202,566 202,282 224,932 233.435 22R.534 232,997 257,935r Bv borrower 2 Maturity of one year or less 172.662 170,411 178,857 193,870 185 881 189,047 211.717' 3 Foreign public borrowers 17.828 15.435 14,995 19,645 14,982 16,003 15.390 4 All other foreigners.... 154.834 154.976 163.862 174,225 170.899 173.044 196.327' 5 Maturity of more than one yeai 29,904 31.871 46,075 39,565 42.653 43,950 46.218 6 Foreign public borrowers 10,874 7 838 7,522 8,131 8.126 6,922 6.815 7 All other foreigners 19,030 24.033 38,553 31,434 34.527 37.028 39.403 Bv area Maturity of one year or less 8 Europe . 57.413 56,381 55 622 57 979 57.138 58,545 55,490' 9 Canada. . 7.727 6 690 6,751 5 470 6,806 8,811 8,3.39 10 Latin America and Caribbean 60.490 59,581 72.504 84,385 78.622 79.622 103,253 41.418 40,567 40.296 40,312 38,078 37.199 38,136' 12 Africa 1.820 1.379 1,295 1,326 1 279 1.320 1 316 13 All other' 3.794 5.811 2,389 4,398 3,958 3.550 5,183 Maturity of more than one year 14 Europe 5,310 4.358 4 995 6835 8,193 7 117 6,963 15 Canada 2,581 3,505 2,751 2.563 3,689 3.533 2,645 16 Latin America and Caribbean 14,025 15.717 27.681 19,416 19,564 21.382 24,917 17 Asia 5,606 5.323 7,941 8.371 9,201 9,808 9.391 18 Africa 1.935 1.583 1,421 1,449 1,410 1,349 1,361 19 All other' 447 1,385 1,286 931 596 761 941 I. Reporting banks include all types of depository instiiuions 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 Area or country Sept. Sepl. 1 Total. . . 344.7 409.5 499.5 545.0 531.9 535.3 551.9 574.6 612.8r 586.0 2 G-10 countries and Switzerland . 131.3 161.9 191.2 212.1 206.5 203.0 206.0 203.4 226.9' 220.0 3 Belgium and Luxembourg. . . . 5.6 7.4 7.2 10.4 9.7 11.0 13.6 11.0 11.4' 11.3 4 France 15.3 12.0 19.1 19.9 19.9 18.0 19.4 17.9 18.0 17.4 5 Germany. ... 9.1 12.6 24.7 31.2 30.0 27.5 27.3 31.5 31.4 33.9 6 Italy 6.5 7.7 11.8 106 10.7 12.6 11.5 13.2 14.9 15.2 7 Netherlands 2.8 4.7 3.6 3.5 4.3 4.5 3.7 3.0 4.7 5.9 8 Sweden 2.3 2.7 2.7 3.1 3.1 2.9 2.7 3.3 2.7 30 9 Switzerland 4.R 5.9 5.1 5.7 6.2 6.6 6.7 5.2 6.3 6.2 10 United Kingdom 59.7 84.4 85.8 90.1 87.1 80.4 82.4 84.7 101.6 90.5 11 Canada 6.3 6.9 10.0 10.8 11.3 12.9 10.3 10.8 12.2 14.8 12 Japan 18.8 17.6 21.1 26.7 24.4 26.6 28.5 22.7 23.6 21.7 13 Other industrialized countries . . . 24.0 26.5 45.7 44.4 43.3 50.5 50.2 61.3 55.5 62.1 14 Austria 1.2 .7 1.1 9 .7 1.2 9 1.3 1.2 1.0 I? Denmark .9 1.0 1.3 1.7 I.I 1.8 2.6 3.4 3.3 1.7 16 Finland 1 .4 .9 1.1 .5 .7 .8 .7 .6 .6 17 Greece 3.0 3.2 4.5 4.9 5.0 5.1 5.7 5.6 5.6 6.1 Norway 1.2 1.7 2.0 2.4 1.8 2.3 3.2 2.1 2.3 3.0 Portugal .4 .8 1.2 1.0 1.2 1.9 1.3 1.6 1.6 1.4 20 Spain 8.9 9.9 13.6 14.1 13.0 13.3 11.6 17.5 13.6 16.1 21 Turkey 1.3 2.1 1.6 1.4 1.4 2.0 1.9 2.0 2.3 2.8 22 Other Western Europe. 1.7 3.2 3 2 2.8 2.9 3.3 4.7 3.8 3.4 4.8 23 South Africa 1.7 1.1 1.0 1.5 1.4 1.3 1.2 1.7 2.0 1.7 24 Australia 2.9 2.3 15.4 12.6 14.3 17.4 16.4 21.7 19.6 22.8 25 OPEC . 15.8 17.6 24.1 20.3 22.7 22.1 21.2 20.1 19.2 26 Ecuador .6 .5 .5 .7 .7 .8 .9 .9 27 Venezuela 5.2 5.1 3.7 3.5 3.5 3.0 2.7 2.9 2.3 2.3 28 Indonesia 2.7 3.3 3.8 4.1) 4.1 4.4 4.8 4.7 4.9 5.4 29 Middle East countries . 6.2 7.6 15.3 10.8 11.5 13.9 13.3 12.3 11.5 10.1 3ft African countries.... 1.1 1.2 9 .7 .6 .6 .6 .6 .5 31 Non-OPEC developing countries . 96.0 103.7 104.1 112.6 118.6 126.4 Latin America Argentina 6.6 7.7 11.2 11.4 12 3 10.9 12.9 12.7 14.1 15.0 Brazil 10.8 12.0 8.4 9.2 10.0 13.6 13.7 18.3 21 7 17.8 Chile 4.4 4.7 6.1 6.4 7.1 6.4 6.8 6.4 6.7 6.6 Colombia 1.8 2.1 2.6 2.6 2.6 2.9 2.9 2.9 2.8 3.1 Mexico 16.0 17.9 18.4 17.9 17.6 16.3 17.3 16.1 15.4 16.1 Peru .5 .4 .5 .6 .8 .7 .9 1.2 1.3 Other 2.6 3.1 2.7 2.4 2.6 2.6 3.1 3.0 3.0 Asia China 39 Mainland .7 2.0 1.1 1.4 1.7 1.8 3.3 2.9 2.6 40 Taiwan 5.2 7.3 8.5 9.0 9.0 9.4 9.7 9.8 10.3 41 India 3.2 3.2 4.2 3.8 4.0 4.4 4.4 4.7 4.2 3.8 42 Israel .4 .5 .4 .6 .7 .5 .5 .5 6 .5 43 Korea (South) 6.6 6.7 16.2 16.9 18.7 18.0 19.1 19.3 21.7 21 9 44 Malaysia 3.1 4.4 3.1 3.9 4.1 4.3 4.4 5.2 5.3 5.5 45 Philippines 3.6 3.1 3.3 3.0 3.6 3 3 4.1 3.9 4.7 5.4 46 Thailand 3.1 3.3 3.8 3.9 4.9 5.2 5.4 4.8 47 Other Asia 3.1 4.9 3.5 3.7 4.5 4.3 4.8 4.1 Afrka 48 Egypt .2 .4 .3 4 .4 49 Morocco .6 .7 .6 .9 .7 .8 .7 50 Zaire .0 .0 .0 .0 .0 .0 .0 51 Other Africa3 1.0 .8 .8 .6 .9 .8 10 52 Eastern Europe 3.2 2.7 1.8 3.4 4.2 6.2 5.0 5.2 53 Russia4 1.9 1.6 .8 .7 .4 .6 1.0 1.4 1.0 1.8 54 Yugoslavia5 .6 .6 .5 .4 .3 .4 .3 .3 .3 .3 55 Other .6 .9 1.4 1.2 1.0 2.3 4.5 3.7 3.1 56 Offshore banking centers 58.1 73.5 72.9 85.7 83.8 87.5 99.2 101.3 106.2 105.3 57 Bahamas 6.9 10.9 10.2 12.5 8.4 12.6 11.0 13.9 17.3 14.2 58 Bermuda 6.2 8.9 8.4 8.7 8.4 6.1 6.3 5.3 4.1 4.0 59 Cayman Islands and other British West Indies 21.5 18.4 21.4 20.7 25 3 25.1 32.4 28.8 26.1 32.0 60 Netherlands Antilles 1.1 2.6 1.3 .9 2.4 5.3 9.9 10.7 13.0 11.5 61 Panama'1 1.9 24 1.3 1.1 1.2 1.3 1.4 1.6 1.7 1.7 62 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 63 Hong Kong 13.9 18.8 20.0 22.5 23.1 23.7 25.0 25.3 27.8 26.2 64 Singapore 6.5 11.2 10.1 19.2 14.8 13.3 13.1 15.4 15.9 15.4 65 Other .0 .1 .1 .0 .0 .1 .1 .1 .1 .1 66 Miscellaneous and unallocated* 39.7 43.6 66.7 82.3 72.3 63.9 57.3 62.2 72.3 49.6 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 L.S. banks. The data also include other types of U.S. depository 3. Excludes Liberia Beginning March 1994 includes Namibia. institutions as well as some types of brokers and dealers. To eliminate duplication, the data 4. As of December 1992, excludes other republics of the former Soviet Union. are adjusted to exclude the claims on foreign branches held by a U.S. office or another foreign 5. As of December 1992, excludes Croatia, Bosnia and Hercegovinia, and Slovenia. branch of the same banking institution. 6. Includes Canal Zone. These data are on a gross claims basis and do not necessarily reflect the ultimate country 7. Foreign branch claims only. risk or exposure of U.S. banks. More complete data on the country risk exposure of U.S. banks 8. Includes New Zealand, Liberia, and international and regional organizations. are available in the quarterly Country Exposure Lending Survey published by the Federal Financial Institutions Examination Council. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A58 International Statistics • July 1997 3.22 LIABILITIES TO UNAFFIL1ATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States Millions of dollars, end of period 1995 1996 Type of liability, and area or country 1993 1994 1995 Sept. Dec. Mar. June Sept. Dec.p 1Total 50,597 54,309 46.448 47,673 46.448 49,907 48,990 51,105 53.658 Payable in dollars 38,728 38,298 33.903 13,908 33,903 36.273 35.385 36,402 38.372 1 Payable in foreign currencies 11,869 16,011 12.545 13,765 12,545 13.634 13.605 14,703 15,286 flv npe 4 Financial liabilities 29,226 32,9^4 24.241 26.237 24,241 26,570 24,844 25.107 25,568 s Payable in dollars 18,545 I8.KIS 12.903 12.903 13.831 12.212 11.256 11,162 6 Payable in foreign currencies 10.681 14.136 11.338 12J65 11.338 12.719 12.632 13.851 14,406 7Commercial liabilities 21.371 21.3^5 22.207 21,436 22.207 23.337 24.146 25,998 28,090 8 Trade payables 8.802 10.005 11.013 10,061 11.013 10.815 11.081 11,605 12.519 9 Advance receipts and oihei liabilities 12.569 11.350 11.194 11,375 11,194 12,522 13.065 14,393 15,571 10 Payable in dollars 20,183 19,480 21.000 20,036 21.000 22,442 23.173 25 146 27,210 Payable in foreign currencies 1,188 1,875 1.207 1,400 1.207 895 971 852 880 flv area or couiurx Financial liabilities 12 Europe 18,810 21.703 15.622 16 401 15.622 16.950 16.434 16,054 16.200 13 Belgium and Luxembourg 175 495 369 347 369 483 498 547 632 14 France 2.539 1.727 999 1.365 999 1.679 1.011 1,220 1,091 15 Germany 975 1,96! 1,974 1,670 1,974 2,161 1.850 2,276 1,834 16 Netherlands 534 552 466 474 466 479 444 519 556 17 Switzerland 614 688 895 948 895 1,260 1,156 8,10 699 18 United Kingdom 13.312 15.543 10,138 10,518 10.138 10,246 10,790 9,821 10,202 19 Canada . .... 859 629 612 797 632 1.166 95 1 881 1,353 20 Lalin America and Caribbean 3,359 2.034 1.7X1 1.904 1.783 1,876 969 1.018 1,299 21 Bahamas 1.148 101 59 79 59 78 31 50 46 Bermuda 0 80 147 144 147 126 28 25 50 23 Brazil 18 207 57 57 57 K 9 14 24 British West Indies 1,533 866 930 866 946 826 764 1,030 25 Mexico 17 0 12 3 12 16 11 4 26 Venezuela ... 5 2 1 0 0 27 Asia 5,956 8.403 5.988 6.947 5,988 6,390 6.351 6.927 6.354 28 Japan 4,887 7.314 5.436 6.308 5 436 5.980 6.051 6,602 5.846 29 Middle Eastern oil-exporting countries' 23 35 27 25 27 26 26 25 25 10 Africa ^ 133 135 150 149 150 131 72 132 22 31 Oil-exporting eountrics: 123 123 122 122 122 122 61 121 0 32 All other 109 50 66 .19 66 57 67 95 340 Commercial liabilities 33 Europe 6,827 6.773 7 700 7.263 7,700 8.425 7.916 8,654 9,584 34 Belgium and Luxembourg 239 241 311 349 331 .170 126 427 479 France 655 728 481 528 481 648 678 657 679 36 Germany 684 604 767 660 767 867 819 959 972 Netherlands 688 722 500 506 500 659 617 6ftK 736 .18 Switzerland 375 327 411 255 413 428 516 409 571 United Kingdom . . 2,039 2,444 3.568 .1.351 3.568 3.525 3.266 3,664 4.293 40 Canada . . . . .. 879 1.017 1.041) 1.219 1,040 9S9 998 1,094 1.001 41 Latin America and Caribbean 1,658 1,857 1.740 1.607 1,740 2 110 2.301 2,306 2.440 42 Bahamas 21 19 1 1 1 ' 28 35 31 46 43 Bermuda 350 345 205 219 205 570 509 355 296 44 Brazil 214 161 98 143 98 128 119 159 162 45 British West Indies 27 23 56 5 56 10 10 15 14 46 Mexico 481 574 416 357 416 468 475 441 639 47 Venezuela 123 276 221 175 221 243 283 332 318 48 Asia 10.980 10.741 10,421 10,275 10.421 10,474 11,389 12.229 13.199 49 Japan 4.314 4.555 3,315 3,475 3.315 3,725 3,943 4,150 4,551 50 Middle Eastern oil-exporting countries' 1.534 1,576 1,912 1,647 1.912 1,747 1,784 1.951 2.165 51 Africa , 453 428 619 589 619 708 924 1.013 1,027 52 Oil-exporting countries" 167 256 254 241 254 254 462 490 532 53 Other' 574 519 687 483 687 661 618 702 839 1. Comprises Bahrain, Iran. Iraq, Kuwait, Oman. Qatar. Saudi Arabia, and United Arab 2. Comprises Algeria, Gabon, Libya, and Nigeria, Emirates (Trucial States) 3 Include1- nonmoneury international and regional organizatio 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 1995 1996 Type of claim, and area or cnuntry 199.3 1994 1995 Sept. Dec. Mar. June Sept. Dec.n 1Total . 49.159 57,888 52,509 53,424 52.509 55,406 58,845 57,230 61,432 T Payable in dollar- 45.161 5.3.805 48.711 49,696 48.71 1 51.007 54.000 52,555 56.908 3 Payable in foreign currencies 3.998 4.083 3.798 3.728 3.79K 4.399 4.845 4.675 4.524 B\ type 4 Financial claims 27.771 .33.897 27.398 29.891 27,198 30.772 33.994 32,857 33.647 5 Deposits 15,717 18,507 15.133 17,974 15.113 17.595 18,364 18,941 20.223 6 Payable in dollars 15.182 18.026 14.654 17.393 14.654 17.044 17,926 18.317 19.533 7 Payable in foreign currencies 535 481 479 581 479 551 438 624 690 8 Other financial claims 12.054 15,390 12.265 11.917 12.265 13.177 15,630 13.916 1.3,424 9 Payable in dollars 10.862 14.306 Ht.976 10.689 10.976 11.290 13,233 11.827 11.629 10 Payable in foreign currencies ... 1.192 1,084 1.289 1.228 1.289 1.887 2,397 2.089 1.795 11Commercial claims "M 388 23 991 25 1 1 1 23 533 25 1 II 24 634 24 851 24 173 27.785 12 Trade receivables 18,425 21.158 22.998 21,409 22.998 22,12.1 22.276 22,010 25.225 13 Advance payments and other claims 2.%3 2.833 2.113 2.124 2,1 11 2,511 2.575 2,363 2.560 14 Payable in dollars 19.1 (7 21,473 23.081 21.614 21 081 22,673 22.841 22.411 25.746 15 Payable in foreign currencies 2'271 2^518 2.030 L919 2/130 L961 2,010 L962 2,039 Bv area or muntrx Financial claims 16 Europe 7 29*) 7.936 7.609 7.840 7.609 8.929 9 241 8.500 7 746 17 Belgium and Luxembourg 134 86 193 160 193 159 15! 126 185 18 France 826 800 801 753 803 1.015 679 733 694 19 Germain 52<i 540 436 .301 436 320 296 276 20 Netherlands 5(12 429 517 522 517 486 488 520 493 21 Sw itzerland 530 52.3 498 530 498 470 461 431 473 -}t United Kingdom 3.5X5 4.649 4.303 4,924 4.303 5.568 6.169 5.333 4.600 23 Canada 2.032 3,581 2.851 3.526 2.851 5,269 4.773 4.502 3.445 24 Latin America and Caribbean 16.224 19.536 14.500 15,345 14,500 13,827 17,644 17,184 19.501 25 Bahamas 1.336 2.424 1.965 1,552 1,965 1.538 2.168 1,746 1.452 26 Bermuda 125 27 81 15 8! 77 84 113 140 27 Bra/jl 654 520 830 851 830 1.019 1.242 1.417 1 453 2S British West Indies 12 699 15.228 10.393 11.816 HI.393 10.100 13.024 12.809 15.182 29 Mexico 872 723 554 487 554 461 .192 411 455 30 Venezuela 161 35 32 50 32 40 23 17 2.1 31 Asia 1,657 1.871 1.579 2.160 1.579 1.890 1,571 1,826 2.213 12 Japan 892 953 871 1.404 871 1,171 852 1,001 1,035 33 Middle Eastern oil-exporting countries1 3 141 3 4 3 13 9 13 IP 14 Africa ^ 99 .373 276 188 276 277 197 176 173 15 Oil-cxpomng countries2 1 0 ? 6 5 <i 13 14 36 All other' 460 6fX) 5X3 832 583 580 568 669 569 Commercial claims n Europe 9.105 9.540 9.824 8.862 9.824 9.776 9.812 9,162 10.208 38 Belgium and Luxembourg 184 213 211 224 211 247 239 213 221 39 France 1 947 1.881 1.830 1.706 1.830 1,803 1,658 1,525 1.641 40 Germany 1.018 1.027 1.07(1 997 1,070 1,410 1,335 1.239 1.301 41 Netherlands 423 311 452 338 452 442 481 420 539 42 Switzerland 432 557 520 438 520 579 602 588 620 4? United Kingdom 2.377 2.556 2.656 2.479 2,656 2,607 2.651 2.514 2.907 44 Canada 1.781 1,988 1.951 1.971 1.951 2,045 2.074 2,032 2.147 45 Latin America and Caribbean 3.274 4,117 4.364 4,359 4.364 4.151 4,340 4,156 4.985 46 Bahamas 11 9 .3(1 26 1(1 30 2S 14 15 47 Bermuda 182 234 272 245 272 273 264 290 264 48 Brazil 460 612 898 745 898 809 837 857 1.160 49 British West Indies 71 83 79 66 79 106 103 119 190 50 Mexico 990 1,243 993 1.026 993 870 1,021 901 1,094 51 Venezuela 293 348 285 325 285 308 313 302 341 52 Asia 6.014 6,982 7.312 6,826 7.312 7.100 6.881 7.216 8.364 53 Japan 2.275 2.655 1.870 1.998 1.870 2.010 1.877 1.918 2.065 54 Middle Eastern oil-exporting countries' 71)4 708 974 775 974 1.024 879 930 955 5 5 5 6 Afr O ic i a l- exporting countries2} 49 7 3 2 45 6 4 7 65 8 4 7 5 7 4 4 4 65 8 4 7 6 1 6 0 7 7 68 8 8 3 7 1 1 4 6 2 7 1 1 6 9 5 57 Other' 721 910 1,006 971 1.006 895 1.054 1,091 1,362 1. Comprises Bahrain, Iran. Iraq. Kuwail. Oman, Qatar, Saudi Arabia, and United Arab 2. Comprises Algeria, Gabon. Libya, and Nigeria. Emirates (Trucial States). ^ Includes nonmoneiary international and regional organization^. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A60 International Statistics • July 1997 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1996 Transaction, and area or country J M an a . r - . Sept. Oct. Mar.p U.S. corporate securities STOCKS 1 Foreign purchases 462,950 623,760 214,514 42,599 57,758 65,571 57,051 73,003 73,052 68,459 451.710 610,332 207,489 42,550 56,751 63,436 56.629 70,132 69,198 68,159 2 Foreign sales 11,240 13,428 7,025 1,007 2,135 2,871 3,854 3 Net purchases, or sales (—) .... 4 Foreign countries 11.445 13,502 7,018 75 1,013 2,138 451 2,872 3,854 292 1 1 1 1 1 1 1 1 5 6 7 9 8 0 1 2 3 4 5 6 7 E O L O M A C u a a f t t G i F S N h J h U r r t n d i i o a r e w e n c e a d e n a p p r r d a r t l i i n a e m h e t A t a c A e c n z e o d a m e e E r s u n r l i a a e l a n K y a s n r t t n i i r d 1 c n i d s e a g s d a o n m d Caribbean . , , - - - - - 1 2 2 1 1 4 3 8 5 - 2 , . , . . . 3 0 , , . . 7 2 5 8 9 5 0 5 8 3 9 2 8 1 3 1 0 6 0 1 7 9 7 5 3 7 2 7 3 6 4 - - 2 1 6 4 5 - 2 2 1 1 , , , , , . , , , - 3 - 3 9 5 1 5 5 2 7 3 1 8 5 7 5 0 9 1 2 4 6 8 1 0 1 5 2 4 6 8 9 1 3 6 9 0 4 - - 1 2 5 2 3 0 1 1 , , . , , , , 6 3 3 6 3 1 1 2 7 8 3 1 1 5 6 1 8 3 3 4 8 4 3 6 0 1 0 6 1 3 6 8 6 3 2 4 6 4 - - - - - 1 - 1 5 1 4 2 2 1 1 1 8 0 1 2 - 7 5 7 0 5 9 6 0 5 9 3 3 6 5 3 5 0 2 1 6 4 - - - 2 6 1 - 4 9 7 5 3 1 1 1 5 3 5 4 1 0 1 4 1 4 1 9 3 2 4 7 1 9 3 5 2 6 4 5 - - - 2 - 5 6 6 2 7 9 2 1 2 4 5 7 8 7 5 6 0 6 6 3 8 3 9 6 9 0 8 7 4 4 3 -1 - - - - 1 - , - - , 3 1 2 2 4 9 0 4 - 1 - 7 2 4 6 3 7 9 6 1 8 7 8 9 6 9 3 0 2 0 4 4 0 7 - - 2 1 3 - 1 , , , , 1 5 9 4 1 5 3 2 2 3 - - 6 3 5 3 7 2 8 5 2 3 6 I 8 7 2 9 2 5 2 9 9 2 8 4 -2 5 - 2 1 - , , , , 3 5 4 7 4 5 3 4 1 9 0 3 2 0 7 0 2 5 4 0 7 2 8 5 4 7 0 9 6 5 8 8 8 8 7 6 0 -1 2 - - - , , 3 2 8 6 3 2 5 3 4 1 0 5 9 9 7 9 9 0 7 1 3 9 2 3 9 8 8 6 9 0 4 2 6 18 Nonmonelary international and -205 -6 -1 regional organizations BONDS2 293,533 421,474 140,573 37,424 40,668 46,440 43.054 48.955 47,980 43.638 19 Foreign purchases 206,951 294.536 111,117 23,858 30.277 34,235 32,825 36.603 36,424 38,090 20 Foreign sales 86,582 126,938 29,456 13,566 10,391 12,205 10,229 12,352 11,556 5,548 21 Net purchases, or sales (-) 87.036 126,767 29,433 13,568 10,406 12,215 10,229 12,356 11,543 5,534 22 Foreign countries , 70.318 74.997 20,524 8,367 6,279 5,578 4,770 6,620 9,183 4,721 23 Europe 5 1 , , 9 1 3 4 8 3 5 5 . . 1 1 7 6 4 4 5 4 1 0 6 1 5 3 6 8 5 1 -2 7 6 1 0 3 2 7 3 2 7 - 2 2 5 7 2 -27 7 4 3 1 1 0 8 3 4 3 49 4 1 0 24 France 1.463 2,440 567 244 93 533 148 337 125 105 25 Germany 494 882 -149 403 59 -132 -30 -58 -189 98 26 Netherlands 57.591 54,644 18,331 6.248 5.316 4.232 4,498 6,443 8,988 2,900 27 Switzerland 2.569 4,197 1.824 122 181 402 391 379 1,055 390 28 United Kingdom 6.141 22,901 134 1.144 2,954 2.201 2,940 3,189 -623 -2.432 29 Canada 1.869 1,637 1,651 65 211 513 412 480 691 480 3 3 0 1 L M a i t d in d le A m Ea e s r t i 1 ca and Caribbean . . 5 2 . , 6 2 5 5 9 0 2 1 2 3 , , 7 6 6 9 5 4 4 2 . , 6 9 9 78 0 3 1 . . 6 9 8 6 1 3 1, 7 0 8 3 7 7 3 2 . , 3 2 8 4 4 5 1 1 , . 6 3 4 9 4 5 1 1 . . 6 5 6 9 1 7 8 1 1 2 8 2 2 1 . , 2 2 1 5 1 9 32 Other Asia 234 600 379 109 45 132 79 89 243 47 33 Japan 246 -330 231 80 -51 5 -7 -62 176 117 34 Africa 35 Other countries 36 Nonmonetary international and -15 regional organizations .. Foreign securities 37 Stocks, net purchases, or sales (-) -50.291 -58,606 -11,822 -1.825 -2,473 -2,161 -5,902 -3,643 -4,353 -3,826 38 Foreign purchases 345,540 456,826 145,006 31,227 40,185 46,838 41,850 47,084' 50,139 47,783 39 Foreign sales 395.831 515,432 156,828 33,052 42,658 48,999 47.752 50,727' 54,492 51,609 40 Bonds, net purchases, or sales (—) -48,405 -48,793 -4.331 -5.419 -5,948 -2.973 -10.947 -710' -1,481 -2,140 41 Foreign purchases 889,541 1,118.678 351,520 113,089 117.032 104,662 99,095 109.567' 110,510 131,443 42 Foreign sales 937,946 355.851 118,508 122,980 107,635 110,042 110,277' 111,991 133,583 1,167,471 43 Net purchases, or sales (-), of stocks and bonds -98,696 -16,153 -7,244 -8,421 -5,134 -16,849 -4,353' -5,834 -5,966 -107,399 44 Foreign countries -97,891 -16,349 -6,718 -8,443 -5,166 -16,838 -4,401' -5,916 -6,032 -106.528 45 Europe -48.125 -57,432 -3.544 -5.518 -6.318 -3.174 - 10.740 741' -2,030 -2,255 46 Canada -7,812 -6,279 2,296 210 -642 -667 -2,269 526' 1,880 -110 47 Latin America and Caribbean -7,634 -9,503 -7.045 -2,264 886 3,571 -2,020 -2,264' -3,297 -1,484 48 Asia -34,056 -27,745 -6,630 902 -796 -4,135 -773 -2,829 -2,284 -1,517 49 Japan -25,072 -5,888 -3.275 2,457 696 -633 2,218 -332 -2,269 -674 50 Africa -327 -1,529 -47 -49 -468 -115 36 34 -7 -74 51 Other countries 63 -4,040 -1,379 -1,105 -646 -1.072 -609' -178 -592 52 Nonmonetary international and regional organizations -526 22 32 -11 48 82 66 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 1997 1996 1997 Area or country 1995 1996 J M an a . r - . Sept. Oct. Nov. Dec. Jan. Feb. Mar.1' 1 Iota) estimated 1.M.I 15 244.725 68,418 14,738 24,321 21,283 47,662 22,225 25,556 20,637 2 Foreign countries 1.13.676 246,567 68,286 14.K9.5 23,784 22,475 46.519 22.691 24,648 20.947 ^ Europe 49,976 118,345 27.455 13,104 12,992 9.312 14,778 4,410 11.364 11,681 4 Belgium and Luxembourg 591 1,486 764 489 -120 335 370 38 659 67 5 Germany . . 6 136 17,647 -3.994 -264 2.813 3,024 1.499 556 -1.227 -3.323 f> Neiherlands. 1.891 -582 218 116 -423 676 855 -671 546 343 7 Sweden 358 2,343 -1.182 431 169 -52 26 -255 -346 -58! X Swiizertand -•472 327 -205 718 -599 -207 -517 241 992 -1.438 l) Uniled Kingdom 34.754 65,3X1 23,245 7.977 10,121 801 7.265 2,914 7.828 12.503 10 Other Europe and former U.S.S.R 6.718 31.743 8.609 3.637 1.231 4.735 5,280 1.587 2,912 4.110 1 1 Canada 252 2.389 342 -215 -1.744 -23 -780 667 -96 -229 12 Latin America and Caribbean 48,609 25.379 6.443 -19,359 1,479 12,745 15.228 10.243 -515 - 3.285 13 Venezuela -2 -69 66 -45 -29 -68 212 -3 59 10 14 Other Latin America and Caribbean 25.152 13,026 12,109 -1.547 926 2.715 5.292 6,461 1.834 3.814 1 5 Netherlands Antilles 21,459 12,422 -5,7.32 -17,767 582 10.098 9,724 3.785 -2.40S -7,1119 I n Asia 32.467 98.001 35.349 20,713 9,889 1,337 16 744 8.540 14.358 12,451 17 Japan 16,979 41,390 12,855 4.875 6,629 1,219 7,59.1 4.264 6.5;ti 2,063 IS Africa 1.464 1.085 64 30 -13 —12 -2 29 57 -22 1M Other 908 1,368 -1,367 622 1,181 -884 5sT -1.198 52d 351 20 Nonmonetary international and regional organizations 439 -1,842 132 -157 537 -1.192 1,143 -466 90K' - 310 2 ] International 9 -1.390 -338 -52 338 -1.146 773 -484 530 -3M 22 Latin American regional 261 -779 441 -90 -4 _2 :52 - 1 362 80 MHMO 23 Foreicn countries 1.13.676 246,567 68,286 14.895 23,784 22.475 46.519 22.69! 24.648 20,947 24 Official institutions 39,631 86.875 24 878 17,188 4,838 3 840 13,662 8,022 10.043 6.8 1 1 2.5 Other foreign 94.045 159,692 43,408 -2.293 18.946 18.635 32.857 14.669 14.605 14.134 Oil-cxpoi'lm? anttunc* 26 Middle East: 3,075 10,227 6,297 4.969 -1.876 332 2.279 1,242 2.5 19 2.5.16 27 Africa' 2 1 -1 1 n 0 0 0 -1 0 1. Official and private transactions in marketable U.S. Treasury securities having an 2, Comprises Bahrain, Iran, Iraq. Kuwait, Oman. Qatar, Saudi Arabia, and United Arab original maturity of more than one year. Data are based on monthly transaciions reports. Emirates (Trucial States). Excludes nonmarketable U.S. Treasury bonds and notes held by official insiiiuhons 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 May 31, 1997 Rate on May .11, 1997 Country Country Percent ef M fe o c n ti t v h e Percent e M ffe o c n ti t v h e Austria : s: Apr 1996 Germany 2.5 Apr. 1996 Belgium :,5 Apr. 1995 Italy 6.75 Jan. 1997 Canada 3.25 Nov. 1996 Japan .5 Sept. 1995 Denmark 3 25 Nov. 1996 Netherlands 2.5 Apr. 1996 France^ 3.10 Jan. 1997 Switzerland 1.0 Sept. 1996 1. Rate.s .shown are mainl) those al which the central hank either discounts or makes 2. Since February ]*?81, ihe rat advances against eligible commercial paper or government securities for commercial banks or Treasury bills for seven to ten days hmkers. 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. 3,21 FOREIGN SHORT-TERM INTEREST RATES' Percent per year, averages of daily figures 1996 1997 Type or country 1994 1995 1996 Nov. Dec. Jan. Feb. Mar. A pi. May 1 Eurodollars 4.63 5.93 5.38 5.38 5.43 5.44 5.36 5.50 5.70 5.69 5 45 6 63 5 99 6 27 63] 6.28 6.16 6.17 6.35 6.41 3 Canada 5.57 7.14 4.49 3 0.5 3,16 3.18 3.16 1.25 3.49 3.36 4 Germany 5.25 4.43 3.21 3 09 3.13 3.03 3.08 1.16 1.14 1.09 5 Swuz.ciLtnd 4.03 2.94 1.92 1 .SO 1.99 1.72 161 1.77 1.76 1.52 6 Netherlands 5.09 4.30 2.91 2.92 2.99 2.94 2.95 3.12 3.15' 1.15 5 72 6 43 381 3 35 1.31 3.21 1.22 1.26 3.28 3.37 8 Italy 8.45 10.43 8.79 7 40 7.22 7.21 7.33 7.40 7.09 6.82 9 Belgium 5.65 4.73 3.19 3,03 3.01 3.00 3.10 3.40 3.22 •)">2 10 Japan 2.24 1.20 .58 51 .51 .53 .54 .55 .55 .58 I. Kales are for (hree-month interbank loans, with the following exec pi ions: 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 D July 1997 3.28 FOREIGN EXCHANGE RATES1 Currency units per dollar except as noted 1996 1997 Country/currency uml 1994 1995 1996 Dec Jan Feb. Mar. Apr. May 1 Australia/dollar 71.161 74.073 78.283 79.661 77.756 76.768 78.747 77.868 77.510 2 Austria/schilling 11.409 10.076 10.589 10.923 11.289 11.785 11.932 12.050 11 998 3 Beliiium/fraiic 13.426 29.472 30.970 31.992 33.087 34.556 34.961 35.328 35 188 4 Canada/dollar 1.3664 1.3725 1.3638 1.3622 1.3494 1.3556 1.3725 1.3942 1.1804 5 China. P.R./yuan 8.6197 8.3700 8.3389 8.3290 8.3260 8.3227 8.3258 8.3257 8.3229 6 Denmark/krone 6.3561 5.5999 5.8003 5.9428 6.1199 6.3867 6.4628 6.5226 6.4926 7 Finland/markka 5.2140 4.3763 4.5948 4.6388 4.7766 4.9792 5.0632 5.1375 5.1444 8 France/lranc 5.5459 4.9864 5.1158 5.2427 5.4145 5.6536 5.7154 5.7672 5.7482 9 Germaiiy/deursche mark 1.6216 1.4321 1 5049 1.5525 1.6047 1.6747 1.6946 1.7119 1.7048 10 Greece/drachma 242.50 231.68 240.82 245.70 251.54 262.42 266.86 270.58 271.95 i 1 Hono Kong/dollar 7.7290 7.7357 7.7345 7.7355 7.7397 7.7474 7.7460 7.7483 7.7431 1 i3 2 I I r n e d la ia n / d ru /p p o e u e n . d . 2s 1 3 4 1 9 . .6 3 9 94 1 3 6 2 0 . .3 4 5 18 1 3 5 5 9 . .9 5 5 06 1 3 6 5 5 . . 8 9 8 ! 2 1 3 6 5 3 . . 9 1 0 1 4 1 3 5 5 8 . . 8 6 9 0 1 1 3 5 5 6 . . 8 57 85 1 3 5 5 5. . 0 8 5 28 1 3 5 5 1 . .1 8 1 25 14 Italy/lira 1,611.49 1.629.45 1,542.76 1,528.44 1,567.91 1,655.00 1.691.21 1,694.52 1,684.33 15 Japan/yen 102. IK 93.96 108.78 113.98 117.91 122.96 122.77 125.64 119.19 16 MalayMa/ringgil 2.6237 2.5073 2.5154 2.5251 2.4900 2.4866 2.4771 2.5028 2.5070 17 Netherlands/euiltler 1.8190 1.6044 1.6863 1.7420 1 8023 1.8812 1.9071 1.9256 1 9173 18 New Zealand/dollar' 59.358 65.625 68.765 7U.5OI 70.088 69.084 69.789 69.220 69.097 19 Norway/krone 7.0551 6.3355 6.4594 6 4716 6.4589 6.632.1 6.7915 6.9932 7 0797 20 Portujial/escudo 165.93 149.88 154.28 156 54 160.53 168.24 170.35 171.77 171.72 21 Singapore/dollar 1.5275 1.4171 1.4100 1.3999 1.4061 1.4193 1.4378 1.4417 1 4368 22 South Atrica/rand 3.5526 3.6284 4.3011 4.6873 4.6402 4.4557 4.4319 4.4417 4.4668 23 South Korea/won 806.93 772.69 805.00 841.92 854.07 868.39 882.62 895.57 894.67 24 Spain/uoela I33.K8 124.64 126.68 130.69 134.79 141.85 143.72 144.48 143.93 25 Si i 1 .inka/nipce 49.170 51.047 55.289 56.730 57.278 57.772 57.873 58.826 58.862 26 Sweden/krona 7.7161 7.1406 6.7082 6.R283 7.0692 7.4069 7.6502 7.6942 7.6856 27 Swiuerland/t'ranc i.3667 1.1812 1.2361 1.3290 1.3913 1.4541 1.4634 1.4618 1.4331 28 Taiwan/dollar 26.465 26.495 27.468 27.516 27.477 27.554 27.551 27.629 27 791 29 ThailandAiaht ^ 25.161 24.921 25.359 25.600 25.726 25.957 25.959 26.064 25.751 30 United Kingdom/pound' 153.1" 157.85 15607 166.39 165.85 162.56 160.96 162.93 163 22 MtlMO 31 Uniled Stales/dollar" 91.32 84.25 87 34 88.71 91.01 94.52 95.60 96.39 95.29 1. Averages of certified noon buying rates in New York for cable transfers. Dala in Ihis table also appear in the Board's (j.5 (405) monthly statistical release. F-or ordering address, sec inside front cover. 2. Value in U.S. cents. 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 1997 A72 SPECIAL TABLES—Data Published Irregularly, with Latest Bulletin Reference Title and Dale Issue Page Assets and liabilities of commercial banks March 31, 1996 November 1996 A96 June 30, 1996 November 1996 A100 September 30, 1996 February 1997 A64 December 31, 1996 May 1997 A64 Terms of lending at commercial banks May 1996 August 1996 A64 August 1996 November 1996 A104 November 1996 February 1997 A68 February 1997 May 1997 A68 Assets and liabilities of U.S. branches and agencies of foreign banks March 31, 1996 September 1996 A64 June 30, 1996 November 1996 A108 September 30, 1996 February 1997 A72 December31, 1996 May 1997 A72 Pro forma balance sheet and income statements for priced service operations March 31, 1996 July 1996 A64 June 30, 1996 October 1996 A64 September 30, 1996 January 1997 A64 March 31, 1997 July 1997 A64 Assets and liabilities of life insurance companies June 30, 1991 December 1991 A79 September 30, 1991 May 1992 A81 December31, 1991 August 1992 A83 September 30, 1992 March 1993 A71 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

A64 Special Tables • July 1997 4.31 PRO FORMA FINANCIAL STATEMENTS FOR FEDERAL RESERVE PRICED SERVICES A. Pro forma balance sheet Millions of dollars Item Mar. 31, 1997 Mar. 31, 1996 Short-term assets (Note 1) Imputed reserve requirement on clearing balances 672.9 557.2 6,056.1 5,014.8 Receivables 65.5 63.1 3.0 10.6 Prepaid expenses 45.4 39.8 2,777.9 1,827.4 Total short-term assets 9,620.8 7.512.9 Lung-term assets (Note 2) Premises 383.9 365.3 137.3 146.6 Leases and leasehold improvements 35.2 21.5 Prepaid pension costs 303.0 254.3 859.4 787.7 Total assets 10,480.2 8,300.6 Shorl-lerm liabilities Clearing balances and balances arising from early credit 7,036.9 s.630.3 Deferred-availability items 2,470.0 1,769.1 113.9 113.5 Total short-term liabilities 9,620.8 7,512.9 Long-term liabilities .7 2.3 Long-term debt 188.2 176.3 Postretirement/postemployment benefits obligation 181.7 179.7 Total long-term liabilities 370.6 358.3 Total liabilities 9,991.4 7.871.2 488.8 429.4 Total liabilities and equity (Note 3) 10.480.2 8,300.6 NOTE. Components may not sum to totals because of rounding. The priced servk financial statements consist of these tables and the accompanying notes. B. Pro forma income statement Millions of dollars hem Quarter ending Mar. 31, 1996 Revenue from services provided to depository institutions (Note 4) , 194.1 Operating expenses (Note 5) 161.1 Income from operations Imputed costs (Note 6) Interest on float 10.7 Interest on debt 4.3 Sales taxes 2.7 FDIC insurance .0 17.8 Income from operations after imputed costs 15.2 Other income and expenses (Note 7) Investment income on clearing balances 71.5 Earnings credits 65.4 6.1 Income before income taxes 21.3 Imputed income taxes (Note 8) 6.4 Income before cumulative effect of a change in accounting principle . . 14.9 Cumulative effect on previous years from retroactive application of a method of accounting for postemployment benefits (net of $6.5 million tax) Net income 14.9 MEMO Targeted relurn on equity (Note 9) 10.3 NOTE. Components may not sum to totals because of rounding. The priced services financial statements consist of these tables and the accompanying notes. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Bank-Reported Data A65 NOTES TO FINANCIAL STATEMENTS FOR FEDERAL RESERVE PRICED SERVICES (1) SHORT-TERM ASSETS Governors working directly on the development of priced services. The expenses for Board staff members were $0.7 million in the first quarter of 1997 and $0.7 million in Ihe first The imputed reserve requirement on clearing balance held al Reserve Banks by depository quarter of 1996. The credit to expenses under SFAS 87 (see note 2) is reflected in operating institutions reflects a treatment comparable to lhat of compensating balances held at corre- expenses. spondent banks by rcspondenl institutions. The reserve requirement imposed on respondent balances must be held as vault cash or as nonearning balances maintained at a Reserve Bank; (6) IMPUTED COSTS thus, a portion of priced services clearing balance^ held with the Federal Reserve is shown as required reserve on the asset side ol the balance sheet. The remainder of clearing balances is Imputed costs consist of interest on float, interest on debt, sales taxes, and the FDIC assumed to be invented in three-month Treasury bills, shown as investment in marketable assessment. Interest on float is derived from the value of float to be recovered, either securities. explicitly or through pcr-item fees, during the period. Float costs include costs for checks, Receivables are (1) amounts due the Reserve Banks for priced services and (2) the share of book-entry securities, noncash collection, ACH, and funds transfers. suspense-account and difference-account balances related lo priced services. Interest is imputed on the debt assumed necessary to finance priced-service assets The Materials and supplies are the inventory value ol short-term assets. sales taxes and FDIC assessment that the Federal Reserve would have paid had it been a Prepaid expenses include salary advances and travel advances for priced-service personnel private-sector firm are among the components of ihe PSAF (see noie .1). Items in process or collection is gross Federal Reserve cash items in process of collection The following list shows the daily average recovery of float by the Reserve Banks for the (C1PC) slated on a basis comparable to that of a commercial bank. It reflects adjustments for first quarter of 1997 and 1996 in millions of dollars: intra-System items that would otherwise be double-counted on a consolidated Federal Reserve balance sheet: adjustments for items associated with non-priced items, such as those 1997 collected lor government agencies: and adjustments for items associated with providing fixed availability or credit before items are received and processed. Among the costs to be Total float recovered under the Monelarv Control Act is the cost of float, or net CIPC during the period Unrecovered float (ihc difference between gross CIPC and deferred-availability items which is the portion of Float subject lo recover) 673.7 gross CIPC lhal involves a financing cost), valued at the federal funds rate. Sources of float recovery Income on clearing balances 67.7 As-of adjustment*. 346.1 (2) LONG-TERM -XS.SETS Direct charges 146.4 Per-item fees 113.4 Consists of long-term assets used solely in priced services, the priced-services portion of long-ierm assets shared with nonpneed services, and an estimate of the assets of the Board of Unrecovered float includes float generated by services lo government agencies and by olher Governors used in the development of priced services. Effective Jan. 1. 1987. the Reserve centra) bank services. Float recovered through income on clearing balances is the result of the Banks implemented the Financial Accounting Standards Board's Statement of Financial increase in invesiable clearing balances; the increase is produced by a deduction for float for Accounting Standard*, No. 87. Employers' Accounting for Pensions (SFAS X7). Accordingly, cash items in process of collection, which reduces imputed reserve requirements. The income ihc Federal Reserve Banks recognized credits to expenses of $15.6 million in the first quarter on clearing balances reduces the float to be recovered through other means As-of adjustments of 1997 and $12.2 million in the first quarter of 1996, and corresponding increases in this and direct charges are mid-week closing float and interterritory check float, which may be asset aeeouni. recovered from depositing instilutious through adjustments to the institution's reserve or clearing balance or by valuing the float at the federal funds rate and hilling the institution directly. Float recovered through per-ilem fees is valued at the federal funds rate and has been (3) LIABILITIES AND Eyum added to the cost base subject tu recovery in the first quarter of 1997. Under the matched-book capital structure for assets that are not "self-financing," short-term (7) OTHER INCOME AND EXPENSES assets arc financed with short-term debt. Long-term assets are financed with long-term debt Consists of investment income on clearing balances and the cost of earnings credits. and equity in a proportion equal to the ratio of long-term debt to equity for the fifty largest Investment income on clearing balances represents the average coupon-equivalent yield on bank holding companies, which are used in the model for the private-sector adjustment factor (PSAF). The PSAF consists of the taxes that would have been paid and Ihe return on capital three-month Treasury bills applied to the total clearing balance maintained, adjusted for the that would have been provided had priced services been furnished by a private-sector firm. effect of reserve requirements on clearing balances. Expenses for earnings credits granted to Other short-term liabilities include clearing balances mainiained at Reserve Banks and depository institutions on their clearing balances are derived by applying ihe average federal deposit balances arising from float. Other long-term liabililies consist of obligations on capital funds rate to the required portion of the clearing balances, adjusted for ihe net effect of leases. reserve requirements on clearing balances (8) INCOME TAXES (4) REVENUE Imputed income taxes are calculated at the effective tax rate derived from the PSAF model Revenue represents charges to depository institutions for priced services and is reaped from (see note 3). each institution through one of two methods direel charges lo an institution's account or (9) RETURN ON EQUITY charges against its accumulated earnings credits Represents the after-tax rate of return on equity that the Federal Reserve would have earned had it been a private business firm, as derived from the PSAF model (see note 3). This amount (5) OPERATING EXPENSES is adjusted to reflect the recovery of automation consolidation costs of $2.3 million for first Opcranng expenses consist of ihe direct, indirect, and other general administrative expenses quarter of 1997 and $1.2 million for the first quarter of 1996. The Reserve Banks plan to of the Reserve Banks for priced services plus ihe expenses for staff members of the Board of recover these amounts, along with a finance charge, bj the end of" the year 2001. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 Index to Statistical Tables References are to pages A3-A65 although the prefix "A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) FARM mortgage loans, 35 Assets and liabilities (See also Foreigners) Federal agency obligations, 5, 9, 10. 11, 28, 29 Commercial banks, 16-21 Federal credit agencies, 30 Domestic finance companies, 33 Federal finance Federal Reserve Banks, 10 Debt subject to statutory limitation, and types and ownership Foreign-related institutions, 20 of gross debt, 27 Automobiles Receipts and outlays, 25, 26 Consumer credit, 36 Treasury financing of surplus, or deficit, 25 Production, 44, 45 Treasury operating balance. 25 Federal Financing Bank, 30 BANKERS acceptances, 5, 10. 22, 23 Federal funds, 6, 23, 25 Bankers balances, 16-21. (See also Foreigners) Federal Home Loan Banks, 30 Bonds (See also U.S. government securities) Federal Home Loan Mortgage Corporation, 30, 34, 35 Federal Housing Administration, 30, 34, 35 New issues, 31 Federal Land Banks, 35 Rates, 23 Business activity, nonfinancial, 42 Federal National Mortgage Association, 30, 34, 35 Business loans (See Commercial and industrial loans) Federal Reserve Banks Condition statement, 10 Discount rates (See Interest rates) CAPACITY utilization, 43 U.S. government securities held, 5, 10, 11. 27 Capital accounts Federal Reserve credit, 5, 6, 10, 11 Commercial banks, 16-21 Federal Reserve notes, 10 Federal Reserve Banks, 10 Federal Reserve System Central banks, discount rates, 61 Balance sheet for priced services, 64, 65 Certificates of deposit, 23 Condition statement for priced services, 64, 65 Commercial and industrial loans Federally sponsored credit agencies, 30 Commercial banks, 16-21 Finance companies Weekly reporting banks, 18 Assets and liabilities, 33 Commercial banks Business credit. 33 Assets and liabilities, 16-21 Loans, 36 Commercial and industrial loans, 16-21 Paper, 22, 23 Consumer loans held, by type and terms. 36 Float, 5 Deposit interest rates of insured. 15 Flow of funds, 37—41 Real estate mortgages held, by holder and property, 35 Foreign currency operations, 10 Time and savings deposits. 4 Foreign deposits in U.S. banks. 5 Commercial paper, 22, 23, 33 Foreign exchange rates, 62 Condition statements (See Assets and liabilities) Foreign-related institutions. 20 Construction, 42, 46 Foreign trade, 51 Consumer credit, 36 Foreigners Consumer prices, 42 Claims on, 52, 55, 56, 57. 59 Consumption expenditures, 48, 49 Liabilities to, 51, 52, 53, 58, 60, 61 Corporations Profits and their distribution. 32 GOLD Security issues, 31, 61 Certificate account, 10 Cost of living (See Consumer prices) Stock, 5, 51 Credit unions, 36 Government National Mortgage Association, 30, 34, 35 Currency in circulation, 5. 13 Gross domestic product, 48, 49 Customer credit, stock market, 24 HOUSING, new and existing units, 46 DEBT (See specific types of debt or securities) Demand deposits, 16-21 INCOME and expenses, Federal Reserve System, 64, 65 Depository institutions Income, personal and national, 42, 48, 49 Reserve requirements, 8 Industrial production, 42, 44 Reserves and related items, 4, 5, 6. 12 Insurance companies, 27, 35 Deposits (See also specific types) Interest rates Commercial banks, 4, 16^-21 Bonds, 23 Federal Reserve Banks, 5, 10 Consumer credit, 36 Interest rates, 15 Deposits, 15 Discount rates at Reserve Banks and at foreign central banks and Federal Reserve Banks, 7 foreign countries (See Interest rates) Foreign central banks and foreign countries, 61 Discounts and advances by Reserve Banks (See Loans) Money and capital markets, 23 Dividends, corporate, 32 Mortgages, 34 Prime rate, 22 EMPLOYMENT, 42 International capital transactions of United States, 50-61 Eurodollars, 23, 61 International organizations, 52, 53, 55, 58, 59 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A67 Inventories, 48 Residential mortgage loans, 34, 35 Investment companies, issues and assets, 32 Retail credit and retail sales, 36, 42 Investments (See also specific types) Commercial banks, 4. 16-21 SAVING Federal Reserve Banks, 10, 11 Flowof funds, 37-41 Financial institutions, 35 National income accounts, 48 Savings institutions, 35, 36, 37-41 LABOR force. 42 Savings deposits (See Time and savings deposits) Life insurance companies (See Insurance companies) Securities (See also specific types) Loans (See also specific types) Federal and federally sponsored credit agencies, 30 Commercial banks. 16-21 Foreign transactions, 60 Federal Reserve Banks, 5, 6, 7, 10, 11 New issues, 31 Federal Reserve System, 64, 65 Prices, 24 Financial institutions, 35 Special drawing rights, 5, 10, 50, 51 Insured or guaranteed by United States, 34, 35 State and local governments Holdings of U.S. government securities, 27 MANUFACTURING New security issues, 31 Capacity utilization, 43 Rates on securities, 23 Production, 43, 45 Stock market, selected statistics, 24 Margin requirements, 24 Stocks (See also Securities) Member banks (See also Depository institutions) New issues, 31 Federal funds and repurchase agreements, 6 Prices, 24 Reserve requirements, 8 Student Loan Marketing Association, 30 Mining production, 45 Mobile homes shipped, 46 TAX receipts, federal, 26 Monetary and credit aggregates, 4, 12 Thrift institutions, 4. (See also Credit unions and Savings Money and capital market rates, 23 Money stock measures and components, 4, 13 institutions) Mortgages (See Real estate loans) Time and savings deposits, 4, 13. 15, 16-21 Mutual funds, 13,32 Trade, foreign, 51 Mutual savings banks {See Thrift institutions) Treasury cash, Treasury currency, 5 Treasury deposits, 5, 10, 25 Treasury operating balance, 25 NATIONAL defense outlays, 26 National income, 48 UNEMPLOYMENT, 42 OPEN market transactions, 9 U.S. government balances Commercial bank holdings, 16-21 PERSONAL income, 49 Treasury deposits at Reserve Banks, 5, 10, 25 Prices U.S. government securities Consumer and producer, 42. 47 Bank holdings, 16-21,27 Stock market. 24 Dealer transactions, positions, and financing, 29 Prime rate, 22 Federal Reserve Bank holdings, 5, 10, 11, 27 Producer prices, 42, 47 Foreign and international holdings and Production, 42, 44 transactions, 10, 27, 6! Profits, corporate. 32 Open market transactions, 9 Outstanding, by type and holder, 27, 28 REAL estate loans Rates, 23 Banks, 16-21,35 U.S. international transactions. 50-62 Terms, yields, and activity, 34 Utilities, production, 45 Type of holder and property mortgaged, 35 Repurchase agreements, 6 VETERANS Administration, 34, 35 Reserve requirements, 8 Reserves WEEKLY reporting banks, 18 Commercial banks, 16-21 Wholesale (producer) prices, 42, 47 Depository institutions, 4, 5, 6, 12 Federal Reserve Banks, 10 U.S. reserve assets, 51 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 Federal Reserve Board of Governors and Official Staff ALAN GREENSPAN, Chairman EDWARD W. KELLEY, JR. ALICE M. RIVLIN, Vice Chair SUSAN M. PHILLIPS 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 DAVID S. JONES, Assistant Director BARBARA R. LOWREY, Associate Secretary and Ombudsman STEPHEN A. RHOADES, Assistant Director CHARLES S. STRUCKMEYER, Assistanr Director DIVISION OF BANKING ALICE PATRICIA WHITE, Assistant Director JOYCE K. ZICKLER, Assistant Director SUPERVISION AND REGULATION GLENN B. CANNER, Senior Adviser RICHARD SPILLENKOTHEN, Director JOHN J. MINGO, Senior Adviser STEPHEN C. SCHEMERING, Deputy Director WILLIAM A. RYBACK, Associate Director DIVISION OF MONETARY AFFAIRS HERBERT A. BIERN. Deputy Associate Director ROGER T. COLE, Deputy Associate Director DONALD L. KOHN, Director HOWARD A. AMER, Assistant Director DAVID E. LINDSEY, Deputy Director GERALD A. EDWARDS, JR., Assistant Director BRIAN F. MADIGAN, Associate Director STEPHEN M. HOFFMAN, JR., Assistant Director RICHARD D. PORTER, Deputy Associate Director JAMES V. HOUPT, Assistant Director VINCENT R. REINHART, Assistant Director JACK P. JENNINGS, Assistant Director NORMAND R.V. BERNARD, Special Assistant to the Board MICHAEL G. MARTINSON. Assistant Director RHOGER H PUGH. Assistant Director DIVISION OF CONSUMER SIDNEY M. SUSSAN, Assistant Director AND COMMUNITY AFFAIRS MOLLY S. WASSOM, Assistant Director GRIFFITH L. GARWOOD, Director WILLIAM SCHNEIDER, Project Director, GLENN E. LONEY, Associate Director National Information Center DOLORES S. SMITH, Associate Director MAUREEN P. ENGLISH. Assistant Director IRENE SHAWN MCNULTY, Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A69 LAURENCE H. MEYER 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 JACK DENNIS, JR., Assistant Director MANAGEMENT EARL G. HAMILTON, Assistant Director JEFFREY C. MARQUARDT, Assistant Director DAVID L. SHANNON, Director FLORENCE M. YOUNG, Assistant Director JOHN R. WEIS, Associate Director JOSEPH H. HAYES, JR., Assistant Director OFFICE OF THE INSPECTOR GENERAL FRED HOROWITZ, Assistant Director BRENT L. BOWEN, Inspector General OFFICE OF THE CONTROLLER DONALD L. ROBINSON, Assistant Inspector General BARRY R. SNYDER, Assistant Inspector General GEORGE E. LIVINGSTON, Controller STEPHEN J. CLARK, Assistant Controller (Programs and Budgets) DARRELL R. PAULEY, Assistant Controller (Finance) DIVISION OF SUPPORT SERVICES ROBERT E. FRAZIER, Director GEORGE M. LOPEZ, Assistant Director DAVID L. WILLIAMS, Assistant Director DIVISION OF INFORMATION RESOURCES MANAGEMENT STEPHEN R. MALPHRUS, Director MARIANNE M. EMERSON, Assistant Director Po KYUNG KIM, Assistant Director RAYMOND H. MASSEY, Assistant Director EDWARD T. MULRENIN, Assistant Director DAY W. RADEBAUGH, 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

A70 Federal Reserve Bulletin • July 1997 Federal Open Market Committee and Advisory Councils FEDERAL OPEN MARKET COMMITTEE MEMBERS ALAN GREENSPAN, Chairman WILLIAM J. MCDONOUGH, Vice Chairman J. ALFRED BROADDUS, JR. LAURENCE H. MEYER SUSAN M. PHILLIPS JACK GUYNN MICHAEL H. MOSKOW ALICE M. RIVLIN EDWARD W. KELLEY, JR. ROBERT T. PARRY ALTERNATE MEMBERS THOMAS M. HOENIG THOMAS C. MELZER ERNEST T. PATRIKIS JERRY L. JORDAN CATHY E. MINEHAN STAFF DONALD L. KOHN, Secretary and Economist ROBERT A. EISENBEIS, Associate Economist NORMAND R.V. BERNARD, Deputy Secretary MARVIN S. GOODFRIEND, Associate Economist JOSEPH R. COYNE, Assistant Secretary WILLIAM C. HUNTER, Associate Economist GARY P. GILLUM, Assistant Secretary DAVID E. LINDSEY, Associate Economist J. VIRGIL MATTINGLY, JR., General Counsel FREDERIC S. MISHKIN, Associate Economist THOMAS C. BAXTER, JR., Deputy General Counsel LARRY J. PROMISEL, Associate Economist MICHAEL J. PRELL, Economist CHARLES J. SIEGMAN, Associate Economist EDWIN M. TRUMAN, Economist LAWRENCE SLIFMAN, Associate Economist JACK BEEBE, Associate Economist DAVID J. STOCKTON, Associate Economist PETER R. FISHER, Manager, System Open Market Account FEDERAL ADVISORY COUNCIL WALTER V. SHIPLEY, President CHARLES E. NELSON, 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 ROBERT W. GILLESPIE, Fourth District CHARLES E. NELSON, Tenth District KENNETH D. LEWIS, Fifth District CHARLES T. DOYLE, Eleventh District STEPHEN A. HANSEL, Sixth District WILLIAM F. ZUENDT, Twelfth District HERBERT V. PROCHNOW, Secretary Emeritus JAMES ANNABLE, Co-Secretary WILLIAM J. KORSVIK, Co-Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A71 CONSUMER ADVISORY COUNCIL JULIA W. SEWARD, Richmond, Virginia, Chairman WILLIAM N. LUND, Augusta, Maine, Vice Chairman RICHARD S. AMADOR, LOS Angeles, California ERROL T. LOUIS, Brooklyn, New York WAYNE-KENT A. BRADSHAW, LOS Angeles, California PAUL E. MULLINGS, McLean, Virginia THOMAS R. BUTLER, Riverwoods, Illinois CAROL PARRY, New York, New York ROBERT A. COOK, Crofton, Maryland PHILIP PRICE, JR., Philadelphia, Pennsylvania HERIBERTO FLORES, Springfield. Massachusetts RONALD A. PRILL, Minneapolis, Minnesota EMANUEL FREEMAN, Philadelphia, Pennsylvania LISA RICE, Toledo, Ohio DAVID C. FYNN, Cleveland, Ohio JOHN R. RINES, Detroit, Michigan ROBERT G. GREER, Houston, Texas SISTER MARILYN ROSS, Omaha, Nebraska KENNETH R. HARNEY, Chevy Chase, Maryland MARGOT SAUNDERS, Washington, D.C. GAIL K. HILLEBRAND, San Francisco, California GAIL SMALL, Lame Deer, Montana TERRY JORDE, Cando, North Dakota YVONNE S. SPARKS, St. Louis, Missouri FRANCINE C. JUSTA, New York, New York GREGORY D. SQUIRES, Milwaukee, Wisconsin JANET C. KOEHLER, Jacksonville, Florida GEORGE P. SURGEON, Chicago, Illinois EUGENE I. LEHRMANN. Madison, Wisconsin THEODORE J. WYSOCKI, JR., Chicago, Illinois THRIFT INSTITUTIONS ADVISORY COUNCIL DAVID F. HOLLAND, Burlington, Massachusetts, President CHARLES R. RINEHART, Irwindale. California, Vice President BARRY C. BURKHOLDER, Houston, Texas STEPHEN D. HAILER, Akron, Ohio DAVID E. A. CARSON, Bridgeport, Connecticut EDWARD J. MOLNAR, Harleysville, Pennsylvania MICHAEL T. CROWLEY, JR., Milwaukee. Wisconsin GUY C. PINKERTON, Seattle, Washington DOUGLAS A. FERRARO, Englewood, Colorado TERRY R. WEST, Jacksonville, Florida WILLIAM A. FITZGERALD, Omaha, Nebraska FREDERICK WILLETTS, III, Wilmington, North Carolina Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A72 Federal Reserve Board Publications For ordering assistance, write PUBLICATIONS SERVICES, The Payment System Handbook. $75.00 per year. MS-127, Board of Governors of the Federal Reserve System, Federal Reserve Regulatory Service. Four vols. (Contains all Washington, DC 20551 or telephone (202) 452-3244 or FAX four Handbooks plus substantial additional material.) $200.00 (202) 728-5886. You may also use the publications order per year. form available on the Board's World Wide Web site Rates for subscribers outside the United States are as follows (http://www.bog.frb.fed.us). When a charge is indicated, payment and include additional air mail costs: should accompany request and be made payable to the Board of Federal Reserve Regulatory Service, $250.00 per year. Governors of the Federal Reserve System or may be ordered via Each Handbook, $90.00 per year. Mastercard or Visa. Payment from foreign residents should be FEDERAL RESERVE REGULATORY SERVICE FOR PERSONAL drawn on a U.S. bank. COMPUTERS. Diskettes; updated monthly. Standalone PC. S300 per year. Network, maximum 1 concurrent user. $300 per year. Network, maximum 10 concurrent users. $750 per year. BOOKS AND MISCELLANEOUS PUBLICATIONS Network, maximum 50 concurrent users. $2,000 per year. THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNCTIONS. Network, maximum 100 concurrent users. $3,000 per year. 1994. 157 pp. Subscribers outside the United States should add $50 to cover ANNUAL REPORT. additional airmail costs. ANNUAL REPORT: BUDGET REVIEW, 1995-96. THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A MULTI- FEDERAL RESERVE BULLETIN. Monthly. $25.00 per year or $2.50 COUNTRY MODEL, May 1984. 590 pp. $14.50 each. each in the United States, its possessions, Canada, and INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. Mexico. Elsewhere, $35.00 per year or $3.00 each. 440 pp. $9.00 each. ANNUAL STATISTICAL DIGEST: period covered, release date, num- FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. ber of pages, and price. December 1986. 264 pp. $10.00 each. 1981 October 1982 239 pp. $ 6.50 FINANCIAL SECTORS IN OPEN ECONOMIES: EMPIRICAL ANALY- 1982 December 1983 266 pp. $ 7.50 SIS AND POLICY ISSUES. August 1990. 608 pp. $25.00 each. 1983 October 1984 264 pp. $11.50 RISK MEASUREMENT AND SYSTEMIC RISK: PROCEEDINGS OF A 1984 October 1985 254 pp. $12.50 JOINT CENTRAL BANK RESEARCH CONFERENCE. 1996. 1985 October 1986 231 pp. $15.00 578 pp. $25.00 each. 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 1990-95 November 1996 404 pp. $25.00 A Guide to Business Credit for Women, Minorities, and Small Businesses Series on the Structure of the Federal Reserve System SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SERIES 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 REGULATIONS OF THE BOARD OF GOVERNORS OF THE FEDERAL Organization and Advisory Committees RESERVE SYSTEM. A Consumer's Guide to Mortgage Lock-Ins ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— A Consumer's Guide to Mortgage Settlement Costs Regulation Z) Vol. I (Regular Transactions). 1969. 100 pp. A Consumer's Guide to Mortgage Refinancings Vol. //(Irregular Transactions). 1969. 116 pp. Each volume Home Mortgages: Understanding the Process and Your Right $5.00. to Fair Lending GUIDE TO THE FLOW OF FUNDS ACCOUNTS. 672 pp. $8.50 each. How to File a Consumer Complaint FEDERAL RESERVE REGULATORY SERVICE. Loose-leaf; updated Making Deposits: When Will Your Money Be Available? monthly. (Requests must be prepaid.) Making Sense of Savings Consumer and Community Affairs Handbook. $75.00 per year. SHOP: The Card You Pick Can Save You Money Monetary Policy and Reserve Requirements Handbook. $75.00 Welcome to the Federal Reserve per year. When Your Home is on the Line: What You Should Know Securities Credit Transactions Handbook. $75.00 per year. About Home Equity Lines of Credit Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A73 STAFF STUDIES: Only Summaries Printed in the 165. THE DEMAND FOR TRADE CREDIT: AN INVESTIGATION OF BULLETIN MOTIVES FOR TRADE CREDIT USE BY SMALL BUSINESSES, by Gregory E. Elliehausen and John D. Wolken. September Studies and papers on economic and financial subjects that are of 1993. 18 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 166. THE ECONOMICS OF THE PRIVATE PLACEMENT MARKET, by Mark Carey, Stephen Prowse, John Rea, and Gregory Udell. Publications Services. January 1994. Ill pp. 167. A SUMMARY OF MERGER PERFORMANCE STUDIES IN BANK- Staff Studies 1-157 are out of print. ING, 1980-93, AND AN ASSESSMENT OF THE "OPERATING PERFORMANCE" AND "EVENT STUDY" METHODOLOGIES, 158. THE ADEQUACY AND CONSISTENCY OF MARGIN REQUIRE- by Stephen A. Rhoades. July 1994. 37 pp. MENTS IN THE MARKETS FOR STOCKS AND DERIVATIVE 168. THE ECONOMICS OF THE PRIVATE EQUITY MARKET, by PRODUCTS, by Mark J. Warshawsky with the assistance of George W. Fenn, Nellie Liang, and Stephen Prowse. Novem- Dietrich Earnhart. September 1989. 23 pp. ber 1995. 69 pp. 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUBSIDI- 169. BANK MERGERS AND INDUSTRYWIDE STRUCTURE, 1980-94, ARIES OF BANK HOLDING COMPANIES, by Nellie Liang and by Stephen A. Rhoades. February 1996. 32 pp. Donald Savage. February 1990. 12 pp. 160. BANKING MARKETS AND THE USE OF FINANCIAL SER- VICES BY SMALL AND MEDIUM-SIZED BUSINESSES, by Gregory E. Elliehausen and John D. Wolken. September REPRINTS OF SELECTED Bulletin ARTICLES 1990. 35 pp. Some Bulletin articles are reprinted. The articles listed below are 161. A REVIEW OF CORPORATE RESTRUCTURING ACTIVITY, those for which reprints are available. Beginning with the Janu- 1980-90, by Margaret Hastings Pickering. May 1991. ary 1997 issue, articles are available on the Board's World Wide 21pp. Web site (http://www.bog.frb.fed.us) under Publications, Federal 162. EVIDENCE ON THE SIZE OF BANKING MARKETS FROM MORT- Reserve Bulletin articles. GAGE LOAN RATES IN TWENTY CITIES, by Stephen A. Rhoades. February 1992. 11 pp. Limit of ten copies 163. CLEARANCE AND SETTLEMENT IN U.S. SECURITIES MAR- KETS, by Patrick Parkinson, Adam Gilbert, Emily Gollob, FAMILY FINANCES IN THE U.S.: RECENT EVIDENCE FROM THE Lauren Hargraves, Richard Mead, Jeff Stehm, and Mary SURVEY OF CONSUMER FINANCES. January 1997. Ann Taylor. March 1992. 37 pp. 164. THE 1989-92 CREDIT CRUNCH FOR REAL ESTATE, by James T. Fergus and John L. Goodman, Jr. July 1993. 20 pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 Maps of the Federal Reserve System 1 9 • 2 BOSTON MINNEAPOLIS • 7 mm ~™~ 12 • _ - J 5 • • NEW YORK CHICAGO! CLEVELAND PHILADELPHIA 10 4 5 • SAN RRANCISCO KANSAS CITY I1 « • > B ST. LOUIS RlC5HMONt 8 6 m 11 • ATLANTA DALLAS ALASKA HAWAII LEGEND Both pages Facing page • Federal Reserve Bank city • Federal Reserve Branch city H Board of Governors of the Federal — Branch boundary Reserve System, Washington, D.C. NOTE The Federal Reserve officially identifies Districts by num- of Puerto Rico and the U.S. Virgin Islands; the San Franber and Reserve Bank city (shown on both pages) and by cisco Bank serves American Samoa, Guam, and the Comletter (shown on the facing page). monwealth of the Northern Mariana Islands. The Board of In the 12th District, the Seattle Branch serves Alaska, Governors revised the branch boundaries of the System and the San Francisco Bank serves Hawaii. most recently in February 1996. The System serves commonwealths and territories as follows: the New York Bank serves the Commonwealth Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A75 1-A 2-B 3-C 4-D 5-E Pittsburgh Baltim 4 ore M D \ Buffalo •* •Cincinnati •Charlotte MA ^ / I / NY sc BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 6-F 7-G 8-H •N^hville KY Birmingham^ Detroit* Louisville TN Jacksonville K. ©Memphis ^ New Orleans 2 Little1) Miami ATLANTA CHICAGO ST. LOUIS 9-1 MINNEAPOLIS 10-J 12-L Omaha* Denver Oklahoma City OK KANSAS CITY 11-K Salt Lake City • : 7 " r«" El Paso I __r\Z X X r-J YHouston t Angeles San Antonio ^ HAWAII DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 Federal Reserve Banks, Branches, and Offices FEDERAL RESERVE BANK Chairman President Vice President branch, or facility Zip Deputy Chairman First Vice President in charge of branch BOSTON* 02106 William C. Brainard Cathy E. Minehan Frederick J. Mancheski Paul M. Connolly NEW YORK* 10045 John C. Whitehead William J. McDonough Thomas W. Jones Ernest T. Patrikis Buffalo 14240 Bal Dixit Carl W. Turnipseed' PHILADELPHIA 19105 Donald J. Kennedy Edward G. Boehne Joan Carter William H. Stone, Jr. CLEVELAND* 44101 G. Watts Humphrey, Jr. Jerry L. Jordan David H. Hoag Sandra Pianalto Cincinnati 45201 George C. Juilfs Charles A. Cerino' Pittsburgh 15230 John T. Ryan, III Harold J. Swan1 RICHMOND* 23219 Claudine B. Malone J. Alfred Broaddus, Jr. Robert L. Strickland Walter A. Varvel Baltimore 21203 Rebecca Hahn Windsor William J. Tignanelli1 Charlotte 28230 Dennis D. Lowery Dan M. Bechter1 ATLANTA 30303 Hugh M. Brown Jack Guynn David R. Jones Patrick K. Barron James M. Mckee Birmingham 35283 D. Bruce Can- FredR. Herr1 Jacksonville 32231 Patrick C. Kelly James D. Hawkins1 Miami 33152 Kaaren Johnson-Street James T. Curry III Nashville 37203 James E. Dalton, Jr. Melvyn K. Purcell New Orleans 70161 Jo Ann Slaydon Robert J. Musso CHICAGO* 60690 Lester H. McKeever, Jr. Michael H. Moskow Arthur C. Martinez William C. Conrad Detroit 48231 Florine Mark David R. Allardice' ST. LOUIS 63166 John F. McDonnell Thomas C. Melzer Susan S. Elliott W. LeGrande Rives Little Rock 72203 Robert D. Nabholz, Jr. Robert A. Hopkins Louisville 40232 John A. Williams Thomas A. Boone Memphis 38101 John V. Myers Martha L. Perine MINNEAPOLIS 55480 Jean D. Kinsey Gary H. Stern David A. Koch Colleen K. Strand Helena 59601 Matthew J. Quinn John D.Johnson KANSAS CITY 64198 A. Drue Jennings Thomas M. Hoenig Jo Marie Dancik Richard K. Rasdall Denver 80217 Peter I. Wold Carl M. Gambs' Oklahoma City 73125 Barry L. Eller Kelly J. Dubbert Omaha 68102 Arthur L. Shoener Bradley C. Cloverdyke DALLAS 75201 Roger R. Hemminghaus Robert D. McTeer, Jr. Cece Smith Helen E. Holcomb El Paso 79999 Alvin T. Johnson Sammie C. Clay Houston 77252 I. H. Kempner, III Robert Smith, III' San Antonio 78295 H. B. Zachry, Jr. James L. Stull' SAN FRANCISCO 94120 Judith M. Runstad Robert T. Parry Gary G. Michael John F. Moore Los Angeles 90051 Anne L. Evans MarkL. Mullinix1 Portland 97208 Carol A. Whipple Raymond H. Laurence1 Salt Lake City 84125 Gerald R. Sherratt Andrea P. Wolcott Seattle 98124 Richard R. Sonstelie Gordon R. G. Werkema2 'Additional offices of these Banks are located at Lewiston, Maine 04240: Windsor Locks, Connecticut 06096; East Rutherford, New Jersey 07016; 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. Digitized fo2.r FERxeAcuStiEveR V ice President http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis