Federal Reserve Bulletin, 1997-09

VOLUME 83 • NUMBER 9 • SEPTEMBER 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 • J. Virgil Mattingly, Jr. • Michael J. Prell • Richard Spillenkothen • Edwin M. Truman The Federal Reserve Bulletin is issued monthly under the direction of the staff publications committee. This committee is responsible for opinions expressed except in official statements and signed articles. It is assisted by the Economic Editing Section headed by S. Ellen Dykes, the Graphics Center under the direction of Peter G. Thomas, and Publications Services supervised by Linda C. Kyles. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Table of Contents 707 CHANGES IN THE DISTRIBUTION OF Board has been working with the Department of BANKING OFFICES Housing and Urban Development on developing legislative recommendations and that there is The past twenty years have been marked by growing interest in making significant changes major structural and regulatory changes in the in the way in which consumers shop for and banking industry. This article explores the relaobtain mortgage loans to improve the usefulness tionships between these changes and the distriof the information that consumers receive and at bution of "brick and mortar" banking offices the same time reduce regulatory burden for the between 1975 and 1995. The analysis explores home mortgage industry, before the Subcommithow population shifts, deregulation, and mergtee on Financial Institutions and Regulatory ers, acquisitions, and failures may have influ- Relief of the Senate Committee on Banking, enced changes in the number and location of Housing, and Urban Affairs, July 15, 1997. banking offices. Special attention is given to changes in banking office distributions across 738 Alan Greenspan, Chairman, Board of Governeighborhoods grouped by the median income nors, presents the views of the Board on the of their residents and their central city, subur- Financial Services Competition Act of 1997 and ban, or rural location. says that although the Board supports the overall thrust of the Banking Committee bill, it is none- 726 TREASURY AND FEDERAL RESERVE theless concerned that the bill goes unnecessar- FOREIGN EXCHANGE OPERATIONS ily far at this time in mixing commerce and banking and that permitting banks to conduct During the second quarter of 1997, the dollar new activities in their own subsidiaries is unwise depreciated 7.3 percent against the Japanese yen because of the extension of the safety net subbut gained 4.2 percent against the German mark. sidy directly to those subsidiaries; also, the On a trade-weighted basis against other Group Board should continue to have consolidated of Ten currencies, the dollar appreciated 1.0 peroversight responsibility for most holding comcent. The U.S. monetary authorities did not panies, before the Subcommittee on Finance and undertake any intervention operations in the Hazardous Materials of the House Committee foreign exchange market during the quarter. on Commerce, July 17, 1997. 732 INDUSTRIAL PRODUCTION AND CAPACITY 742 Chairman Greenspan presents the Federal UTILIZATION FOR JULY 1997 Reserve's semiannual report to the Congress on Industrial production increased 0.2 percent in the economic situation and monetary policy and July, to 119.8 percent of its 1992 average, after says that the recent performance of the econan increase of 0.3 percent in June. The rate omy, characterized by strong growth and low of industrial capacity utilization slipped to inflation, has been exceptional and that the key 83.1 percent; during the past twelve months, the question facing financial markets and policyrate has ranged between 83.0 percent and makers is what is behind the good performance 83.6 percent. of the economy and will it persist, before the Subcommittee on Domestic and International Monetary Policy of the House Committee on 735 STATEMENTS TO THE CONGRESS Banking and Financial Services, July 22, 1997. Laurence H. Meyer, Member, Board of Gover- [Chairman Greenspan presented identical testinors, discusses the efforts of the Board to mony before the Senate Committee on Banking, streamline the disclosure requirements for home Housing, and Urban Affairs on July 23, 1997.] mortgage loans under the Truth in Lending Act and unify them with those of the Real Estate 749 Alice M. Rivlin, Vice Chair, Board of Gover- Settlement Procedures Act and says that the nors, shares the views of the Board on why the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

economy is doing so well and how best to interface with customers ready by mid-1998 keep it going and says that a combination of to permit approximately eighteen months for policies—wise monetary policy; investment in customer testing, before the Subcommittee on skills by individuals, firms, and the public and Financial Services and Technology of the Senate nonprofit sectors; and increased saving invested Committee on Banking, Housing, and Urban in research, technology, and infrastructure—can Affairs, July 30, 1997. keep the economy on the highest sustainable growth path, before the House Committee on 770 ANNOUNCEMENTS Banking and Financial Services, July 23, 1997. Public forum on the streamlining and reform of 753 Governor Meyer discusses his views on the the Truth in Lending Act and the Real Estate conduct of monetary policy, specifically his Settlement Procedures Act held by the Federal views about the relevance of the NAIRU Reserve Board and the U.S. Department of (nonaccelerating-inflation rate of unemploy- Housing and Urban Development. ment) and says that he believes that NAIRU is Issuance of guidelines on sound riskan important and useful concept and that it is management practices for private banking lower than it was in the 1980s, although there activities. is uncertainty about the precise estimate of NAIRU, before the House Committee on Bank- Proposal to apply sections 23A and 23B of the ing and Financial Services, July 23, 1997. Federal Reserve Act to transactions between a member bank and any subsidiary that engages in 758 William J. McDonough, President, Federal activities that are impermissible for the bank Reserve Bank of New York, provides his views itself and that Congress has not previously on the conduct of monetary policy in conjuncexempted from coverage; proposed amendments tion with the semiannual report to the Congress to model forms in Regulation B. under the Humphrey-Hawkins Act and says that the longer-run purpose of today's policy actions Publication of a group of new statistical tables in should be to lay the foundation for price stability the Federal Reserve Bulletin with annual data and sound economic growth over the coming provided by private mortgage insurance compadecade, before the House Committee on Bank- nies regarding the disposition of applications for ing and Financial Services, July 23, 1997. private mortgage insurance. 760 Vice Chair Rivlin discusses the Federal Discontinuation of a statistical table in the Reserve's planning process and the efforts being Bulletin. taken to improve performance in the spirit of the Availability of revised lists of over-the-counter Government Performance and Results Act and stocks and of foreign stocks that are subject to says that the Federal Reserve has undertaken to margin regulations. plan further ahead, to use resources more effectively, and to coordinate activities across the Changes in Board staff. whole System more explicitly, before the House Committee on Banking and Financial Services, 773 MINUTES OF THE FEDERAL OPEN MARKET July 29, 1997. COMMITTEE MEETING HELD ON MAY 20, 763 Edward W. Kelley, Jr., Member, Board of Gov- 1997 ernors, discusses the Federal Reserve's efforts to At its meeting on May 20, 1997, the Committee address the Year 2000 computer systems probadopted a directive that called for maintaining lem and says that the Federal Reserve System the existing degree of pressure on reserve posihas developed and is executing a comprehensive tions and that included a bias toward the posplan to ensure its own Year 2000 readiness, that sible firming of reserve conditions during the the bank supervision function is well along in a intermeeting period. cooperative, interagency effort to promote early remediation and testing by the industry, and that 781 LEGAL DEVELOPMENTS all Federal Reserve computer program changes, as well as system and user-acceptance testing, Various bank holding company, bank service are scheduled to be completed by year-end 1998, corporation, and bank merger orders; and pendwith some critical financial services systems that ing cases. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A1 FINANCIAL AND BUSINESS STATISTICS A82 BOARD OF GOVERNORS AND STAFF These tables reflect data available as of A84 FEDERAL OPEN MARKET COMMITTEE AND July 29, 1997. STAFF; ADVISORY COUNCILS A3 GUIDE TO TABULAR PRESENTATION A86 FEDERAL RESERVE BOARD PUBLICATIONS A4 Domestic Financial Statistics A42 Domestic Nonfinancial Statistics A88 MAPS OF THE FEDERAL RESERVE SYSTEM A50 International Statistics A90 FEDERAL RESERVE BANKS, BRANCHES, A63 GUIDE TO STATISTICAL RELEASES AND AND OFFICES SPECIAL TABLES A80 INDEX TO STATISTICAL TABLES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Changes in the Distribution of Banking Offices Robert B. Avery, Raphael W. Bostic, Paul S. Calem, offices, which traditionally have been the most imporand Glenn B. Canner, of the Board's Division of tant delivery system that banking institutions use to Research and Statistics, prepared this article. John E. provide products and services to households and busi- Matson provided research assistance. ness customers.2 In these offices, customers can conduct a host of deposit, borrowing, and other financial Over the past twenty years, major structural changes, transactions through tellers, loan officers, and other including rapid consolidation among institutions, customer service representatives. have altered the shape of the banking industry. Struc- Although much discussion about the possible tural change has been driven by advances in tech- effects of structural changes in banking on branching nology, efforts to increase efficiency and reduce costs, activity has taken place, only limited information has the general performance of the economy, and the been available for a systematic analysis of this issue. globalization of financial services markets. Deregula- This analysis relies on a new, specially constructed tion of various aspects of banking, including a relax- database that combines information on banking office ation of regulatory restrictions on the ability of bank- locations, mergers and consolidations, failures of ing organizations to purchase other institutions and to commercial banks and savings associations, and establish branch offices, has also contributed signifi- neighborhood economic and demographic charactercantly to the changes in banking structure. istics. The Federal Reserve's National Information Consolidation in the industry has resulted from Center database, supplemented with data supplied by mergers of previously independent institutions, the the Office of Thrift Supervision, was used to track failure of a large number of commercial banks and mergers, acquisitions, and failures over time. Inforsavings associations (savings banks and savings and mation from the Census of Population and Housing loan associations), and consolidation within bank for 1970, 1980, and 1990 and Bureau of the Census holding companies. Industry analysts have advanced estimates for the intervening years were used to certain explanations for the drive to consolidate. In assign economic and demographic characteristics to one view, consolidation is primarily a response to an the geographic area containing each banking office. oversupply of banking institutions and offices, or Appendix A provides details on the construction of "overcapacity." Overcapacity has resulted from the database used in this article. advances in technology, the easing of some regula- These structural and distributional changes have tory restrictions, and inroads by nonbank financial raised some public concerns. One concern is that institutions into traditional banking service markets. consolidation will tend to reduce the number of bank- Another view is that some consolidation is motivated ing offices and possibly the availability of services. by strategic considerations and may, in some cases, Another is that banks and savings associations may have anticompetitive effects. be closing offices and reorienting their office net- These structural changes may have influenced the works to the benefit of more affluent customers at the distribution of banking offices, that is, their number expense of lower-income communities. Legislators and location.1 This article explores the relationship and regulators have addressed these varied concerns between these changes and the distribution of offices through laws and regulations intended to help ensure between 1975 and 1995, particularly across neighbor- that all segments of the public have access to banking hoods grouped by the median income of residents services. The analysis in this article focuses on the and location (central city, suburban, or rural). The structural and distributional changes in the banking examination is restricted to "brick and mortar" industry in light of these concerns. 1. In this article the terms "bank," "banking institution," and 2. Other delivery systems include telephone banking networks, "banking office" pertain to commercial banks and savings automated teller machines (ATMs), and software products for homeassociations. based personal computers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

708 Federal Reserve Bulletin • September 1997 GENERAL TRENDS IN DISTRIBUTION all institutions to roughly 2 percent, while the proportion of offices they operated increased from 17 per- According to the data, the number of banking institu- cent to 41 percent. As expected, a close association tions declined between 1975 and 1995. The number exists between the asset size of an institution and of banking institutions fell from about 18,600 to the number of offices it operates. From 1975 to 1995, 12,200, a decline of 35 percent (table 1). The percent- large banking institutions (those with assets of more age decline was much larger for savings associations than $1 billion in constant 1995 dollars) increased as than for commercial banks—52 percent for savings a percentage of all banking institutions from less than associations compared with 30 percent for commer- 3 percent to about 5 percent, and the proportion cial banks—largely because of a relatively high rate of all banking offices operated by these institutions of failure among savings associations in the late increased from 31 percent to 51 percent (table 2). 1980s and early 1990s. Because commercial banks On net, the average number of offices per instifar outnumber savings associations, however, abso- tution increased over this period from three to six lute declines were greater for commercial banks. (table 1, memo item). This finding understates some- In contrast, during the same period the number of what the degree to which branching expanded among banking offices increased markedly. The total number institutions with multiple offices (that is, excluding of banking offices rose 29 percent—much of which single-office institutions), for which the average numwas due to a 38 percent increase in the number of ber of offices per institution increased from six to ten. commercial bank offices. The number of savings Even though in 1995 commercial banks outnumbered association offices in 1995 was only 5 percent higher savings associations nearly five to one (table 1), than the number in 1975. savings associations had a disproportionate number Not only the number of banking institutions and of offices, in part because single-office institutions offices but also the size distribution of institutions have been more common among commercial banks. and office networks has changed substantially. From Forty-two percent of commercial banks and 28 per- 1975 to 1995, the proportion of institutions operating cent of savings associations operated only one office a single office declined from 58 percent of all institu- in 1995 (data not shown in table). tions to 40 percent, and the proportion of all offices The overall institutional and branching developthey accounted for declined from 18 percent to ments over 1975-95 are the net result of two diver- 6 percent. Over the same period, the proportion of all gent trends. First, from 1975 to 1985 the total number banking institutions operating large office networks of institutions fell slightly, and the number of bank- (more than fifty offices) increased from 0.5 percent of ing offices increased dramatically. The number of 1. Distribution of commercial banks, savings associations, and banking offices, by number of banking offices, 1975-95 Percent except as noted All institutions All banking offices IItteemm 1975 1980 1985 1990 1995 1975 1980 1985 1990 1995 Distribution of institutions and offices by number of offices operated 1 57.5 48.2 46.8 47.3 39.8 18.2 12.1 10.3 9.2 6.4 2-3 25.5 29.3 30.0 26.6 30.7 18.7 17.3 15.4 12.2 11.7 4-10 12.8 16.6 16.5 18.6 21.4 22.9 23.8 20.8 20.6 19.5 11-50 3.6 5.2 5.7 6.1 6.5 22.8 25.7 26.5 24.9 21.5 51 or more .5 .7 1.1 1.4 1.7 17.4 21.1 26.9 33.0 40.9 Total 100 100 100 100 100 100 100 100 100 100 Number of institutions and offices by type of institution Commercial banks 14.318 14,379 14,377 12,370 10,089 43,482 51,509 56,020 56,129 59,895 Savings associations 4,300 4,352 3,492 3,167 2,080 15,429 22,962 25,141 23,897 16,161 Total 18,618 18,731 17,869 15,537 12,169 58,911 74,471 81,161 80,026 76,056 MEMO: Average number of offices All institutions 3.2 4.0 4.5 5.2 6.2 Excluding single-office institutions 6.0 6.7 7.7 8.9 9.7 SOURCE. Federal Reserve Board, National Information Center database; Federal Deposit Insurance Corporation, Summary of Deposits; and Office of Thrift Supervision, Branch Office Survey System. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Changes in the Distribution of Banking Offices 709 offices increased 63 percent for savings associations Most banking offices—about 73 percent in 1995— and 29 percent for commercial banks. Second, in were located in metropolitan areas, either in central contrast, from 1985 to 1995, a marked contraction cities or suburbs (table 3). While the overall percentoccurred in the industry: The number of institutions age of offices in metropolitan areas remained fairly declined nearly 32 percent, and the number of offices constant over 1975-95, suburban areas gained share declined about 6 percent. Although commercial banks and central cities lost share. and savings associations both recorded substantial declines in their numbers, their trends regarding the FACTORS INFLUENCING THE DISTRIBUTION number of offices diverged. The number of savings OF BANKING OFFICES association offices dropped precipitously—nearly to 1975 levels; in contrast, the number of commercial The factors that influence banks' decisions to expand bank offices continued to increase, although at a or contract the number of offices they operate and much slower rate than that of the previous ten years. where to locate these offices include office profitabil- 3. Distribution of banking offices and population by 2. Distribution of banking institutions and banking offices, population growth rate and degree of urbanization, by type of institution and asset size, 1975-95 1975-95 Percent Percent Type of institution Population growth rate ( a a n s d se t s s i z i e n 1975 1980 1985 1990 1995 of a u n r d b a d n e i g z r a e t e io n 1975 1980 1985 1990 1995 millions of dollars)1 of ZIP code area Institution distribution Population growth rate—all areas1 Commercial banks Office distribution Less than 100 60.4 60.3 59.9 57.3 57.0 Low 45.9 44.4 42.1 41.5 41.9 100 to 999 14.9 14.9 18.5 19.7 22.6 Moderate 32.8 32.2 31.8 32.3 32.7 1,000 to 9,999 1.5 1.4 1.8 2.2 2.7 High 21.3 23.4 26.1 26.2 25.4 10,000 or more .1 .2 .2 .6 Total 100 100 100 100 100 Savings associations Less than 100 11.9 11.1 8.0 8.6 7.8 Urbanization 100 to 999 9.9 10.7 9.6 9.8 8.0 Population distribution 1,000 to 9,999 1.2 1.4 1.9 1.9 1.2 Central city 42.9 42.0 41.8 41.5 40.9 10,000 or more .0 .0 .1 .1 .1 Suburban 36.6 37.3 38.0 39.1 39.7 Rural 20.5 20.7 20.2 19.4 19.4 Total 100 100 100 100 100 Total 100 100 100 100 100 All institutions Less than 100 72.3 71.4 67.9 65.9 64.8 Office distribution 100 to 999 24.9 25.6 28.1 29.5 30.7 Central city 35.6 36.0 35.6 34.8 33.6 1,000 to 9,999 2.7 2.8 3.7 4.1 3.9 Suburban 35.8 36.5 37.2 39.1 39.0 10,000 or more .2 .2 .3 .5 .7 Rural 28.6 27.4 27.2 26.1 27.4 Total 100 100 100 100 100 Total 100 100 100 100 100 Office distribution Urbanization and population growth rate Office distribution Commercial banks Less than 100 27.3 24.4 21.0 17.5 16.0 Central city 100 to 999 22.2 21.8 21.2 19.8 22.0 Low 13.4 12.9 11.6 11.2 10.8 1,000 to 9,999 17.0 15.6 18.4 19.8 21.2 Moderate 11.0 10.9 10.4 10.4 10.3 10,000 or more . . 7.3 7.4 8.3 13.0 19.5 High 11.2 12.3 13.6 13.2 12.5 Suburban Low 17.5 17.4 16.6 17.3 17.4 Savings associations Less than 100 5.6 4.8 3.0 2.9 2.2 Moderate 10.5 10.4 10.6 11.2 . 11.2 100 to 999 13.8 16.2 13.2 12.0 8.3 High 7.9 8.8 10.0 10.6 10.4 Rural 1,000 to 9,999 6.3 9.2 12.0 11.5 7.5 10,000 or more .5 .7 2.9 3.5 3.2 Low 14.9 14.2 13.9 13.0 13.7 Moderate 11.4 10.9 10.8 10.7 11.2 Total 100 100 100 100 100 High 2.3 2.3 2.5 2.3 2.5 Total 100 100 100 100 100 All institutions Less than 100 32.9 29.1 24.0 20.4 18.3 100 to 999 36.0 38.0 34.4 31.8 30.3 MEMO: 1,000 to 9,999 23.3 24.8 30.4 31.3 28.7 Number of offices 58,911 74,471 81,161 80,026 76,056 10,000 or more 7.8 8.1 11.2 16.5 22.7 1. Growth rates for ZIP code areas are defined as follows: "Low" popula- Total 100 100 100 100 100 tion growth is less than or equal to 11 percent in 1975-95 (lowest one-third); "moderate" growth is 12 to 32 percent (middle one-third); "high" growth is 1. Measured in constant 1995 dollars. 33 percent or more (top one-third). SOURCE. Federal Reserve Board, National Information Center database; Fed- SOURCE. Federal Deposit Insurance Corporation, Summary of Deposits; eral Deposit Insurance Corporation, Summary of Deposits; and Office of Thrift Office of Thrift Supervision, Branch Office Survey System; and Census of Supervision, Branch Office Survey System. Population and Housing, 1970, 1980, and 1990. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

710 Federal Reserve Bulletin • September 1997 ity; risk diversification and strategic considerations; ating at its most efficient level. In other words, a general economic and demographic trends, including minimum amount of business must be conducted population shifts and changing business patterns; at an office if it is to operate most efficiently. At technological developments; the regulatory environ- an office where transactions are conducted relatively ment; and mergers, acquisitions, and failures. infrequently, the average cost of the services provided will be relatively high. Therefore, unless some individual customers who use the office also generate Office Profitability substantial revenues or low-cost checking and savings account deposits for the bank or there are long- The profitability of an office is a function of both the run strategic considerations of the kind discussed revenues the office generates and its operating costs. below, the office will not be cost-effective to operate. Revenues depend, in part, on the number and charac- Studies also find that banks that have been conteristics of customers that the office attracts or helps strained by legal restrictions on branching can someretain and the amount and type of deposits and loans times lower their overall average costs by opening that it generates. For many institutions, a basic func- new offices when the restrictions are eased. Thus, in tion of offices is to attract relatively low-cost check- certain circumstances branching may permit a bank ing and savings account deposits that may be used to to provide services in more optimally sized offices.4 fund lending activity. The types and financial profiles Even if an office operates at its most efficient level, of residents and businesses in the local commu- an alternative means for delivering banking services, nity, along with the office's product mix and associ- such as an automated teller machine (ATM), may be ated prices, will help determine its effectiveness in more cost-effective. In such cases, that office will be attracting and retaining depositors and other loan viewed as less profitable. Over time, such offices will customers. be either replaced by the more profitable alternative An important factor influencing decisions about or closed, with their customers' accounts transferred office locations is demand from current or potential to other nearby offices. customers for convenient access to banking services. Thus, office profitability depends in part on such factors as traffic flow patterns and transportation routes in an area, the extent of nearby commercial Risk Diversification and Strategic and retail development, resident and employee pop- Considerations ulation densities, and household preferences for offices as opposed to alternative delivery channels. The potential benefits of risk diversification may Evidence from recent surveys sponsored by the Fed- provide an incentive for banks to open new offices eral Reserve confirms that the locational convenience or acquire existing offices from other institutions. By of banking offices is important both to households operating a geographically dispersed network of and to small business customers, for most customers offices, an institution may achieve greater diversificaprefer to conduct their banking activities close to tion of its deposit base and loan portfolio and thereby their homes, places of work, or businesses.3 This reduce the risk of substantial deposit outflows and evidence suggests that an analysis of changes in the loan losses.5 number and location of banking offices is most appro- Further, a bank may evaluate whether to open a priately conducted at the neighborhood level, as this new office (or close an existing one) within a strateanalysis is. gic context; that is, competitive considerations may In deciding where to locate its offices, a banking carry some weight in an assessment of the costs and institution seeks to meet the needs of existing and benefits associated with a particular office. For exampotential customers in a cost-efficient manner. Bank- ple, in a fast-growing market, a bank might open ing cost studies have found economies of scale at the more offices than it expects to be profitable in the office level; that is, average total costs decline until short run to gain a competitive advantage in the long office size (typically measured by total deposits) run. reaches some threshold at which the office is oper- 4. David B. Humphrey, "Why Do Estimates of Bank Scale Economies Differ?" Federal Reserve Bank of Richmond, Economic Review (September/October 1991), pp. 38-50. 3. Myron L. Kwast, Martha Starr-McCluer, and John D. Wolken, 5. See, for example, J. Nellie Liang and Stephen A. Rhoades, "Market Definition and the Analysis of Antitrust in Banking," Anti- "Geographic Diversification and Risk in Banking," Journal of Ecotrust Bulletin (forthcoming). nomics and Business, vol. 40 (1988), pp. 271-84. 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Changes in the Distribution of Banking Offices 711 Population Changes Deregulation Changes in population, income, and business activity Over the past two decades, the regulatory environcan influence branching patterns. The establishment ment in banking has changed dramatically in the of new households and the movement of many exist- direction of deregulation. Three major aspects of ing households, for example, have resulted in the deregulation between 1975 and 1995 are particularly growth of numerous suburban and rural areas as well pertinent for the analysis of bank branching behavior. as population declines in some urban communities. First, the removal of federal limits on the interest Banking institutions may respond to these population rates that banks could pay depositors changed the changes by establishing new banking offices in areas focus of competition among banking organizations experiencing growth or by closing and consolidating from the quality and extent of services to their price. offices in areas of declining population.6 Second, most states repealed or liberalized their laws restricting intrastate branching by commercial banks and savings associations. Third, banking organiza- Technological Developments tions were largely freed from restrictions on interstate expansion by holding company acquisition or merger. Technological developments in the delivery of bank- The changes in the laws governing geographic expaning services may affect the number and location sion by banking organizations provided institutions of bank offices in two ways. First, many consumers with new opportunities to restructure and expand may find alternative delivery mechanisms more con- their banking office networks. venient and less costly for many transactions, thus reducing demand for certain office services. Second, technological developments, particularly the intro- Deregulation of Interest Rates duction and spread of ATMs, can affect the cost of operating an office, both absolutely and relative to Before the mid-1980s, commercial banks and savings alternative delivery mechanisms.7 For example, the associations were subject to federal regulatory restricaverage transaction conducted with a bank teller is tions on the payment of interest on checking and estimated to cost more than three times that of a savings accounts. The inability of commercial banks transaction at an ATM.8 Because they deliver more and savings associations to pay market interest rates convenient and less costly services, ATMs prolifer- had several consequences for their branching activity. ated from only a few thousand in 1975 to 123,000 in One was that competition for depositors' funds took 1995.9 Most ATMs are in bank offices, where they the form of "quality" or "nonprice" rivalry—for substitute for more costly tellers and reduce the cost example, offering additional offices. Another conseof operation. However, large numbers of ATMs quence was a periodic outflow of funds from banking (38,000, or 31 percent, in 1995) are off site, where institutions because depositors transferred funds to they serve as substitutes for bank offices. Technologi- savings instruments that paid market rates. This outcal innovations continue to improve the delivery of flow was particularly large in the late 1970s and early banking services, with potential implications for 1980s, when the gap between market interest rates future branching patterns. and regulated deposit rates was widest. This large gap and the accompanying outflow increased the incentives for institutions to use banking offices to acquire checking and savings account deposits, which, when compared with alternative sources of funds, were relatively inexpensive. 6. An alternative potential response to increased demand for ser- The Congress acted in the early 1980s to remove vices is the establishment of a new, or de novo, bank. For an assessment of factors influencing de novo bank entry, see Dean F. interest rate ceilings on deposit accounts, and by Amel, "An Empirical Investigation of Potential Competition: Evi- 1986, banking institutions were almost entirely free dence from the Banking Industry," in Benton E. Gup, ed., Bank of such restrictions.10 With deregulation of deposit Mergers: Current Issues and Perspectives (Kluwer Academic Publishers, 1989), pp. 29-68. 7. See David B. Humphrey, "Delivering Deposit Services: Banks Versus Branches," Federal Reserve Bank of Richmond, Economic 10. The Depository Institutions Deregulation and Monetary Con- Quarterly, vol. 80 (Spring 1994), pp. 59-81. trol Act of 1980 authorized banks nationwide to offer NOW accounts 8. See Drew Clark, "Branches' Persistence Rests with the Public," and established the Depository Institutions Deregulation Committee American Banker (December 4, 1996), p. 10a. to preside over the phaseout and ultimate elimination, by 1986, of 9. See "EFT Network Data Book," Bank Network News, vol. 15 regulatory interest rate ceilings on time and savings deposits. The (November 11, 1996), pp. 1-3. Garn-St Germain Act of 1982 permitted depository institutions to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

712 Federal Reserve Bulletin • September 1997 interest rates, the influence of nonprice competition ings institutions was not restricted to the extent it was on branching patterns has diminished. for commercial banks. Since then, mainly during the 1980s, restrictions on intrastate branching have been removed or relaxed Deregulation of Intrastate Bank Branching substantially in all states. In some states the elimination of branching restrictions occurred in stages Before 1975, intrastate restrictions on branching by whereas in others restrictions were removed at one commercial banks were commonplace. Commercial time. In states that relaxed intrastate branching rebanks were allowed to branch statewide with few or strictions, many banks opened new offices in local no restrictions in only seventeen states (see box "Cate- markets from which they had previously been gorization of States by Changes in Intrastate Branch- excluded.12 Thus, one would expect the lifting of ing Laws").11 However, intrastate branching by sav- intrastate branching restrictions to have resulted in an increase in the number of banking offices.13 Howoffer an account that is "equivalent to and competitive with money market mutual funds" and made introducing money market deposit accounts possible for banks. A few legal restrictions on bank deposit accounts remain. For 12. See Dean F. Amel and J. Nellie Liang, "The Relationship instance, banks are still unable to pay interest on demand deposits between Entry into Banking Markets and Changes in Legal Restric- (regular checking accounts), and only noncommercial customers are tions on Entry," Antitrust Bulletin, vol. 37 (Fall 1992), pp. 631-49. eligible for NOW accounts. 13. Comparisons across states find less extensive branch coverage 11. Individual state banking laws established branching rules for (for example, in the total number of banking offices per capita) in state-chartered banks. The McFadden Act of 1927 subjected nation- states that restrict bank branching. See Douglas D. Evanoff, "Branch ally chartered banks to the branching laws of the state in which they Banking and Service Accessibility," Journal of Money, Credit, and were located. Banking, vol. 20 (May 1988), pp. 191-202. Categorization of States by Changes in Intrastate Branching Laws To facilitate analysis of the effects of changes in intrastate States that had few or no restrictions on intrastate branchbranching laws on bank office patterns over 1975-95, states ing throughout 1975-92 are placed in the full statewide and the District of Columbia are classified into five groups. branching category.1 States where, as of 1975, banks were These classifications are based on the degree to which subject to a limit of five or fewer offices (in some cases, intrastate branching by commercial banks was restricted only one) are categorized as having had severe restricunder state laws as of January 1, 1975, and on the extent to tions. These states are further subdivided into those where which these laws were subsequently relaxed. branching restrictions were completely eliminated by yearend 1992; those where the restrictions were substantially Categorization of States by Changes in Intrastate relaxed by year-end 1992; and those where no significant Branching Laws change occurred.2 The final grouping consists of states where branching Categorization by changes in States state branching restrictions laws were moderately restrictive as of 1975. Most of these Full statewide branching, Alaska, Arizona, California, states limited branching to a single county, to contiguous 1975-92 Delaware, District of Columbia, counties, or to locations within a specified distance from Hawaii, Idaho, Maine, Maryland, Nevada, North Carolina, the home office. Several imposed a form of "home office Rhode Island, South Carolina, protection law," prohibiting banks from branching into a South Dakota, Vermont, Virginia, and Washington municipality with a population below a specified threshold Severe restrictions 1975-92 Iowa and where the principal office of another institution was located. In all these states, branching restrictions were Severe restrictions in 1975; Florida, Indiana, Kansas, elimination by 1992 Louisiana, New Hampshire, Texas, either completely eliminated or significantly eased by year- West Virginia, and Wisconsin end 1992. Severe restrictions in 1975; Colorado, Illinois, Kentucky, significant relaxation by 1992 Minnesota, Montana, Nebraska, North Dakota, Oklahoma, and Wyoming 1. Three of these states placed mild restrictions on bank branching as Moderate restrictions in 1975; Alabama, Arkansas, Connecticut, of 1975. Hawaii imposed some restrictions on the number of offices in elimination or significant Georgia, Massachusetts, Michigan, Honolulu; Virginia and Washington allowed statewide branching by merger relaxation by 1992 Mississippi, Missouri, New Jersey, or acquisition but restricted de novo branching to the county in which the New Mexico, New York, Ohio, Oregon, Pennsylvania, Tennessee, bank's principal office was located. All three states eliminated these branchand Utah ing restrictions by 1987. 2. Among those states in which severe branching restrictions were SOURCE. Dean F. Amel, "State Laws Affecting the Geographic Expan- significantly relaxed (but not eliminated) by year-end 1992, only Illinois had sion of Commercial Banks," Board of Governors of the Federal Reserve lifted its remaining restrictions by year-end 1995. Iowa alone retained severe System, Division of Research and Statistics, staff memorandum, September restrictions on bank branching through 1992, although it allowed small 1993. increases in the numerical limits on bank branching during the period. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Changes in the Distribution of Banking Offices 713 ever, isolating the effects of intrastate branching Historically, savings associations and their parent deregulation from other significant developments organizations had been subject to similar restrictions affecting bank branching behavior is difficult. on interstate expansion. In 1986, however, the Federal Home Loan Bank Board relaxed many of the restrictions on interstate acquisition of savings asso- Deregulation of Interstate Banking ciations, particularly when failing institutions were involved. In 1992, the Office of Thrift Supervision, Until the late 1970s, no state permitted out-of-state successor agency to the Federal Home Loan Bank commercial banking organizations to operate in-state Board, granted savings associations full interstate banking subsidiaries. State barriers to interstate bank- branching privileges. ing began to fall in 1978, when Maine relaxed restric- The effects of relaxing restrictions on interstate tions on entry by out-of-state holding companies. banking on the distribution of banking offices are During the 1980s and early 1990s, every state except uncertain. To date, most expansion by banking orga- Hawaii followed suit by allowing some degree of nizations across state boundaries has involved acquiinterstate banking. Until recently, commercial bank- sitions or mergers rather than de novo entry, and the ing organizations could expand office networks effects of such transactions can vary depending on across state lines only through holding company the circumstances. For example, acquisition of an acquisitions (see box "The Riegle-Neal Act of inefficiently run bank by an out-of-state banking 1994"). organization, when the inefficiencies are related to the size or scope of the acquired bank's office network, could result in either the closing of inefficient offices or, with an undersized network, the opening of new offices. In contrast, one would not expect the The Riegle-Neal Act of 1994 acquisition of an efficiently run institution to lead to changes in the number and location of the acquired The Douglas Amendment to the federal Bank Holding bank's offices. Company Act of 1956 restricted the ownership of banking subsidiaries by bank holding companies to only the state in which the holding companies were headquartered The Community Reinvestment Act unless other states expressly permitted their entry or they were grandfathered. Passage of the Riegle-Neal Inter- The Community Reinvestment Act of 1977 (CRA) state Banking and Branching Efficiency Act in 1994 encourages commercial banks and savings associaeffectively repealed the Douglas Amendment by allowtions to help meet the credit needs of the communiing a bank holding company to acquire a bank in any state provided that certain conditions were met, includ- ties in which they are chartered, consistent with safe ing compliance with the Community Reinvestment Act and sound banking practices. In evaluating compli- (CRA). However, states may still prohibit out-of-state ance with the CRA, regulators have always considbanks from establishing new (de novo) banks within their ered an institution's record of opening and closing borders, and most states maintain such restrictions. offices.14 To achieve a good CRA compliance record, Besides the historical restriction on interstate expan- an institution may open or retain offices in lowersion by bank holding companies, federal and state laws income communities. Moreover, a strong office presgenerally prevented individual commercial banks from ence in lower-income communities may not only branching across state lines. The Riegle-Neal Act effechelp an institution avoid costly CRA-related protively eliminated these restrictions for commercial banks. tests of applications for mergers and acquisitions As of June 1, 1997, the act allows bank holding compabut also create opportunities for new and profitable nies to consolidate their interstate banks into an office business relationships. To further enhance their recnetwork and "independent" banks (those not owned by a ords of serving their local communities, many banks bank holding company) to branch interstate by merging with another bank across state lines.1 However, the estab- and savings associations have entered into agreelishment of de novo offices within a state by an out-of- ments with community organizations. These agreestate bank is allowed only where specifically authorized ments sometimes involve pledges to retain existing by state law, and most states do not permit it. 1. Only banks satisfying certain conditions, such as not exceeding limits on statewide deposit shares, may acquire branches across state lines under the Riegle-Neal Act. The law allowed states to "opt out" of the Riegle-Neal liberalization and to continue prohibitions against interstate 14. For additional details, see Griffith L. Garwood and Dolores S. branching. Only two states, Montana and Texas, chose to do so. Smith, "The Community Reinvestment Act: Evolution and Current Issues," Federal Reserve Bulletin, vol. 79 (April 1993), pp. 251-67. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

714 Federal Reserve Bulletin • September 1997 offices or to establish new offices in lower-income neighborhoods.15 The Service Test Current CRA regulations, introduced in 1995, establish three performance-based measures of com- When evaluating performance of a banking institution pliance, including a service test that focuses on the under the service test, regulators consider the following factors: availability and effectiveness of an institution's system for delivering retail banking services.16 The ser- 1. The current distribution of the institution's branch vice test is the performance measure that is most offices among low-, moderate-, middle-, and upperrelevant to the effect of the CRA on bank branching income areas of its community activity. This test considers the geographic distribu- 2. The record of opening and closing branches, partion and the range of services provided by an institu- ticularly those located in low- or moderate-income areas tion's offices, along with its record of opening and or serving low- or moderate-income individuals closing offices (see box "The Service Test"). The 3. The availability and effectiveness of alternative sysregulatory focus on office locations reflects the view tems for delivering retail banking services (for example, that convenient access to full-service offices within a ATMs) community is an important factor determining the 4. The range of services provided across the instituavailability of credit and other banking services.17 tion's community and the degree that these services are tailored to the specific needs of the different segments of the community. Industry Consolidation and Competition The CRA regulations emphasize that alternative systems for delivering retail banking services, such as Generally, mergers, acquisitions, and failures are ATMs, will be considered only to the extent that they are believed to reduce the number of banking offices, effective alternatives for providing services to low- and although there are differing views as to the under- moderate-income areas and individuals. The regulations lying causes. One view is that consolidation in the do not require an institution to expand its branch network or to operate unprofitable branches nor do they require banking industry has been necessary to increase effithat an institution's branches and other service delivery ciency. In this view, changes in demographics, techsystems be accessible to every part of its local communology, regulation, and other factors had resulted nity. At the same time, however, they indicate that the in overcapacity, necessitating structural and distribuinstitution's delivery system should not exhibit conspicutional changes within the industry. At the same time, ous gaps in accessibility unless such gaps can be reasonconcerns have been expressed that consolidation may ably justified. have reduced competition and led to an excessive decline in the provision of banking services, including unwarranted reductions in the number of banking geographic distribution of the combined institution's offices. offices. When institutions serving the same geo- Mergers and acquisitions have been transforming graphic market merge, a reorganization of the comthe structure of the banking industry.18 In many cases, bined office networks typically occurs, with formerly these mergers have involved direct competitors in competing offices being combined and customer the same local banking markets. Mergers and acqui- accounts transferred to the surviving offices. In addisitions often result in changes in the number and tion, mergers may provide a convenient opportunity for management to reassess the effectiveness of the entire office network, and such an evaluation 15. Alex Schwartz, Banks and Community Development: The may lead to changes in the network's geographic Implementation of Community Reinvestment Act Agreements configuration. (New York: Community Development Research Center, New School of Social Research, June 1997). The large number of failures of commercial banks 16. See Federal Reserve press release, "Community Reinvestment and savings associations also contributed to industry Act Regulations," April 24, 1995. consolidation over the past two decades. Between 17. Additional consumer protection regulation pertaining to branch closings comes from section 228 of the Federal Deposit Insurance 1984 and 1994, nearly 1,300 commercial banks and Corporation Improvement Act of 1991. This law requires banking more than 1,100 savings associations failed—levels institutions to notify bank customers and the appropriate regulatory of failure not seen since the Great Depression. Many agency in advance of branch closings and to adopt a policy statement regarding branch closings. As part of each CRA examination, regula- of these failed banks and savings institutions were tors consider the institution's compliance with this law. acquired by healthy organizations or were reopened 18. For details, see Stephen A. Rhoades. "Bank Mergers and by investors entering the banking business. In some Industrywide Structure, 1980-94," Staff Study 169 (Board of Governors of the Federal Reserve System, 1996). cases, offices of failed banks and savings institutions Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Changes in the Distribution of Banking Offices 715 were closed and the deposits transferred to a healthy share of total banking offices has declined for some organization. Overall, we expect failures to lead to a categories between 1975 and 1995, the absolute numreduction in the number of banking offices. ber of banking offices has generally increased in all Even though many commercial banks and savings categories. associations failed during this period, a large number of new institutions were established. Between 1984 and 1994, nearly 2,100 new commercial banks were Population Changes and Bank Office Patterns chartered, resulting in at least that number of new banking offices.19 The growth of and movements in population may Commercial banks and savings associations have help explain some of the broad patterns that we have also faced increased competitive pressures from both identified, because population growth and growth in nonbanking financial institutions and from banking the number of banking offices are positively related. institutions that previously faced legal barriers to Overall, those areas with low population growth rates entering local banking markets. The implications of between 1975 and 1995 saw their share of all banking increased competition for branching are uncertain. offices decline about 4 percentage points (table 3). In On the one hand, increased competitive pressures comparison, areas with high population growth saw may force banking organizations to cut costs by their share of all banking offices increase about 4 perstreamlining their branch structures. On the other centage points. hand, the convenience and services offered by an Grouping offices by location—central city or subextensive office network may help solidify customer urban parts of metropolitan areas or rural parts of relationships and differentiate a bank from its com- states—also reveals a strong relation between populapetitors, particularly from nonbanking institutions; tion growth and the number of offices. Between 1975 thus banking organizations may have an incentive to and 1995, both population share and the share of all maintain or even expand office networks. banking offices increased in suburban areas about 3 percentage points. In contrast, central city and rural areas experienced a decline both in their share of CHANGES IN THE DISTRIBUTION population and in their share of all banking offices. OF BANKING OFFICES Thus, the data suggest that population shifts into suburban areas were a strong catalyst for office Using the new database, we examine the relationship expansion. between the broad trends in bank office patterns Looking within central city, suburban, and rural between 1975 and 1995 and changes in the economic areas, there is a consistent relationship between rates and regulatory environments. In evaluating these rela- of population growth and changes in office shares. tionships, we recognize that changes in the economic Areas with high population growth experienced the and regulatory environment evolved simultaneously largest growth in offices. Population growth, howand that their direct effects on branching decisions ever, does not appear to fully explain patterns of may have been complementary or conflicting. In this office growth. For example, high-growth suburban analysis, with the exception of population growth, we areas experienced a substantially larger increase in do not explicitly control for the interactions among office share than either central city or rural highthese factors. When appropriate, we separate out the growth areas. effects of population growth by focusing on trends in In terms of the divergent trends discussed earlier, the number of banking offices per capita.20 the general pattern of high growth in the number of Finally, for some of the discussion that follows, offices from 1975 to 1985 followed by a contraction banking offices are grouped according to features of from 1985 to 1995 appears in every geographic catethe economic or regulatory environment, and then gory (not shown in table). Even in suburban areas, changes in the shares of banking offices across these whose overall share of banking offices increased, the groupings are reported. Despite observations that the number of offices declined between 1985 and 1995. 19. See Federal Deposit Insurance Corporation, Statistics on Bank- Effects of Easing Intrastate Branching ing: A Statistical History of the United States Banking Industry, Historical 1934-1994 (Washington: FDIC, 1995). Restrictions 20. The population-adjusted results presented here show the number of banking offices per 10,000 persons. In the exposition, some To examine the effect of changes in intrastate branchpopulation-adjusted results are alternately characterized as "offices per capita." ing restrictions on changes in the number of banking Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

716 Federal Reserve Bulletin • September 1997 offices, states were grouped by the degree to which However, deregulation of intrastate bank branching branching was initially restricted and subsequently does not appear to provide an explanation for the liberalized between 1975 and 1992. Year-end 1992 differences in trends during the two ten-year periods. was selected as the end date for categorizing changes The general trend of a rapid expansion followed by a in the laws that might have influenced changes in contraction holds for all states, regardless of how office patterns through 1995 because banks' response branching restrictions changed. The contraction was to changes in branching restrictions takes some time. most severe in states that had statewide branching (See the box "Categorization of States by Changes in throughout and least severe in states that began with Intrastate Branching Laws.") severe restrictions and later relaxed them. As expected, the lifting of intrastate branching restrictions appears to be related to an increase in the number of banking offices. States beginning the Banking Industry Consolidation period with severe restrictions that were subsequently and Bank Office Patterns eased or eliminated increased their share of all U.S. banking offices between 1975 and 1995 (table 4). In this section we examine the relationship between Most notably, states that went from having severe changes in industry consolidation since 1975 and restrictions to full statewide branching by 1992 changes in the number and location of banking increased their share of all banking offices from offices. The analysis begins with the calculation—for 16.1 percent in 1975 to 19.8 percent in 1995—a the five-year periods starting with the years 1975, 59 percent increase in the number of offices. 1980, 1985, and 1990—of the percentage of offices in Separating the effect of population growth on the three categories: those acquired by another institunumber of banking offices in a state from the effect tion; those acquired by another institution with an of changes in bank branching laws involves focusing office in the same ZIP code; and those belonging to on the population-adjusted number of offices. Over- an institution that failed or that merged into a firm all, between 1975 and 1995, the number of banking that then failed. In computing the first two measures offices per 10,000 U.S. residents increased about we excluded all offices belonging to an institution 10 percent, from 3.06 to 3.38. The largest increases that failed (or merged into a firm that failed) duroccurred in states that either eliminated or substan- ing the five-year period. Thus these measures pertially relaxed severe branching restrictions, while the tain only to mergers among nonfailing firms. Also number decreased between 1975 and 1995 in states excluded are consolidations of institutions that were that already had full statewide branching as of 1975. already part of the same holding company.21 Thus, on the surface, deregulation appears to be associated with an increase in the number of branches 21. This definition of merger also excludes consolidations among per capita. bank holding companies in which the banks were not merged. 4. Distribution of banking offices by stringency of intrastate branching laws and changes in the laws, 1975-951 Banking offices Banking offices per 10,000 residents (Percent except as noted) (Number) BBrraanncchhiinngg llaawwss aanndd cchhaannggeess,, 11997755--9922 1975 1980 1985 1990 1995 1975 1980 1985 1990 1995 No change Full statewide branching throughout 26.4 25.9 26.3 26.3 25.0 3.03 3.47 3.52 3.15 2.66 Severe restrictions throughout 2.1 2.0 1.8 1.6 1.7 4.76 5.71 5.78 5.12 4.97 Change Severe restrictions to full statewide branching 16.1 17.3 19.5 19.4 19.8 2.41 3.01 3.41 3.17 2.86 Severe to relaxed restrictions 11.1 12.0 11.6 10.8 12.0 2.51 3.26 3.35 3.05 3.08 Moderate restrictions to full statewide branching or relaxed restrictions 44.3 42.8 40.8 41.9 41.4 2.84 3.41 3.49 3.45 3.13 Total TOO TOO 100 100 100 || MEMO: Number of offices 58,911 74,471 81,161 80,026 76,056 National average 3.06 3.51 3.71 3.58 3.38 1. States are grouped by stringency of the intrastate geographic restrictions SOURCE. Federal Deposit Insurance Corporation, Summary of Deposits; they placed on branching over the 1975-92 period. See box "Categorization of Office of Thrift Supervision, Branch Office Survey System; and Census of States by Changes in Intrastate Branching Laws." Population and Housing, 1970, 1980, and 1990. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Changes in the Distribution of Banking Offices 717 Consolidation Patterns 5. Banking offices that were merged into another institution or were involved in a failure, in five-year periods, 1975-94 Over 1975-95, commercial banks and savings asso- Percent ciations had very different experiences with mergers, acquisitions, and failures. The percentage of commer- Initial year TTyyppee ooff iinnssttiittuuttiioonn aanndd ddiissppoossiittiioonn of five-year period cial bank offices that were acquired by another instiooff ooffffiiccee oovveerr nneexxtt ffiivvee yyeeaarrss tution increased from 2 percent in 1975-80 to 6 per- 1975 1980 1985 1990 cent in 1980-85 and then remained fairly stable over Commercial banks MB the subsequent periods (table 5). Most of these offices Acquired by another institution1 2.3 6.2 5.2 5.8 Acquired by firm with office were not acquired by an institution already operating in same ZIP code1 .2 1.2 1.5 2.0 Failed or merged into a firm that failed .2 .8 2.9 2.9 an office in the same ZIP code area, but the proportion of offices involved in such transfers has increased Savings associations Acquired by another institution1 7.1 22.5 7.8 14.6 over time. The proportion of commercial bank offices Acquired by firm with office in same ZIP code1 .4 2.7 .8 3.8 involved in failures was initially less than 1 percent, Failed or merged into a firm that failed .0 1.8 21.5 26.0 but it increased some over 1975-85 and then All institutions remained constant.22 Acquired by another institution1 3.6 11.2 6.0 8.4 Acquired by firm with office Much larger percentages of savings association in same ZIP code1 .2 1.6 1.3 2.5 Failed or merged into a firm that failed .2 1.1 8.6 9.8 offices than of commercial bank offices were acquired by another institution, and after 1985, 1. Excludes offices belonging to an institution that failed during the succeeding five-year period and offices acquired by an institution that is part of the same extraordinarily large percentages failed. For instance, holding company. during the five-year period beginning in 1990, SOURCE. Federal Reserve Board, National Information Center database; Federal Deposit Insurance Corporation, Summary of Deposits; and Office of Thrift nearly 15 percent of savings association offices were Supervision, Goings and Gainings and Branch Office Survey System. acquired by another institution (compared with 6 percent for commercial bank offices), and 26 percent The rate of merger activity is represented by the were involved in a failure (compared with 3 percent percentage of banking offices in a ZIP code area that for commercial bank offices). The proportion of sav- were involved in mergers and acquisitions. Those ings association offices involved in failures was quite ZIP code areas in which more (or fewer) than 10 perlow during the late 1970s and early 1980s, as was the cent of all banking offices were acquired by another case for commercial banks. institution during 1975-85 or 1985-95 were classified as having a "high" ("low") rate of merger activity for the period. Analogous classifications were Effects of Consolidation on Bank Office Patterns based on the proportion of offices acquired by another institution with an office in the same ZIP code area. To determine whether consolidation has been asso- For failures, any area that included at least one office ciated with a reduction in offices, we identify those of a bank that failed in a period was classified as ZIP code areas likely to have experienced "high" for that period; areas with no failures were consolidation—areas with high rates of merger activ- classified as "low" for that period. ity. We also examine trends in the number of offices For virtually all merger and failure classifications, in areas where there were mergers between institu- the number of banking offices per 10,000 residents tions operating offices in the same ZIP code. We increased between 1975 and 1985 and then declined, expect that these areas are most likely to show the a finding consistent with the broad trends observed effects of consolidation. previously (table 6). However, a closer look reveals The rate of merger and acquisition activity and the important differences between commercial banks and numbers of failures within ZIP code areas were cal- savings associations. culated for the two major periods: 1975-85 and For commercial banks, merger, acquisition, and 1985-95. We restricted our analysis to mergers that failure activity appears to be generally unrelated to did not involve failed institutions because mergers branching patterns. Numbers of offices per capita are involving failed institutions were often motivated by nearly the same across merger and failure categories special circumstances. The effects of failures were in any given year. Further, in nearly every merger and examined separately. failure category, the number of offices increases continually over time, and the number of offices per capita increases from 1975 to 1985 and then declines. 22. The high failure rate for the 1990-95 period is the consequence The only exception to this is that the number of of very high numbers of failures in the early portion of this period. offices per capita in any year is higher in ZIP code Few institutions failed between 1993 and 1995. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

718 Federal Reserve Bulletin • September 1997 areas with high proportions of offices acquired by the per capita number of offices appear to differ another institution operating an office in the same ZIP across ZIP code areas with different rates of mergers code area in both periods. and failures. For example, areas with low merger For savings associations, unlike commercial banks, activity show no change in the number of offices per the number of offices per capita appears to be related capita from 1985 to 1995; in contrast, those with to the level of merger and failure activity within ZIP persistently high merger activity or with persistently code areas. For example, in 1975 the number of high levels of failure show sharp declines from 1985 offices per capita in ZIP code areas with high levels to 1995. of merger activity in both 1975-85 and 1985-95 was When commercial banks and savings associations more than four times that in areas with low merger are combined, some relationship is apparent between activity during both decades. Moreover, particularly merger and failure activity and both the per capita after 1985, changes in both the number of offices and number of banking offices and changes in the per 6. Distribution of banking offices in ZIP code areas by rates of merger and acquisition or failure, 1975-95 Number Banking offices Banking offices per 10,000 residents Rates of merger and acquisition or failure, by type of institution, 1975-95" 1975 1980 1985 1990 1995 1975 1980 1985 1990 1995 Commercial banks Merger and acquisition rate2 Low 1975-85, Low 1985-95 .... 11,245 13,120 13,963 14,120 14,951 2.00 2.21 2.25 2.16 2.15 High 1975-85, Low 1985-95 .... 3,397 3,893 3,994 3,884 4,013 2.23 2.49 2.52 2.38 2.37 Low 1975-85, High 1985-95 .... 4,002 4,808 5,214 5,209 5,769 2.07 2.34 2.42 2.28 2.37 High 1975-85, High 1985-95 ... 2,971 3,452 3,652 3,787 4,168 2.14 2.39 2.45 2.42 2.54 With institutions in same ZIP code2 Low 1975-85, Low 1985-95 .... 18,658 21,787 23,137 23,342 25,056 2.03 2.26 i 2.30 2.20 2.23 High 1975-85, Low 1985-95 .... 702 766 754 744 773 2.40 2.64 2.63 2.61 2.69 Low 1975-85, High 1985-95 .... 1,929 2,341 2,514 2,493 2,657 2.17 2.51 2.60 2.43 2.46 High 1975-85, High 1985-95 ... 326 379 418 421 415 3.01 3.41 3.73 3.62 3.47 Failure rate High 1975-85, Low 1985-95 . 568 652 645 605 658 2.36 2.59 2.52 2.32 2.44 Low 1975-85, High 1985-95 . 19,307 23,377 26,226 26,354 28,251 1.99 2.29 2.43 2.32 2.37 High 1975-85, High 1985-95 1,992 2,207 2,326 2,170 2,085 2.80 3.05 3.12 2.84 2.67 Savings associations Merger and acquisition rate2 Low 1975-85, Low 1985-95 .... 1,245 2,120 2,186 2,625 2,423 .22 .36 .35 .40 .35 High 1975-85, Low 1985-95 .... 1,111 1,376 1,299 1,367 1,219 .73 .88 .82 .84 .72 Low 1975-85, High 1985-95 .... 1,074 1.697 1,893 1,907 1,438 .55 .83 .88 .83 .59 High 1975-85, High 1985-95 ... 1,380 1,790 1,821 1,782 1,239 .99 1.24 1.22 1.14 .75 With institutions in same ZIP code2 Low 1975-85, Low 1985-95 .... 3,672 5,446 5,603 6,116 5,179 .40 .56 .56 .58 .46 High 1975-85, Low 1985-95 .... 225 280 265 274 216 .77 .96 .93 .96 .75 Low 1975-85, High 1985-95 .... 758 1,070 1,148 1,111 801 .85 1.15 1.19 1.08 .74 High 1975-85, High 1985-95 ... 155 187 183 180 123 1.43 1.68 1.63 1.55 1.03 Failure rate High 1975-85, Low 1985-95 149 221 214 213 151 .62 .88 .84 .82 .56 Low 1975-85, High 1985-95 9,426 14,307 16,339 14,763 8,869 .97 1.40 1.51 1.30 .74 High 1975-85, High 1985-95 1,044 1,451 1,389 1,240 822 1.47 2.01 1.86 1.62 1.05 All Merger and acquisition rate2 Low 1975-85, Low 1985-95 .... 12,490 15,240 16,149 16,745 17,374 2.22 2.57 2.60 2.56 2.50 High 1975-85, Low 1985-95 .... 4,508 5,269 5,293 5,251 5,232 2.96 3.38 3.34 3.22 3.09 Low 1975-85, High 1985-95 .... 5,076 6,505 7,107 7,116 7,207 2.62 3.17 3.30 3.12 2.96 High 1975-85, High 1985-95 4,351 5,242 5,473 5,569 5,407 3.14 3.63 3.67 3.56 3.29 With institutions in same ZIP code2 Low 1975-85, Low 1985-95 .... 22,330 27,233 28,740 29,458 30,235 2.43 2.82 2.85 2.78 2.69 High 1975-85, Low 1985-95 .... 927 1,046 1,019 1,018 989 3.16 3.60 3.56 3.58 3.44 Low 1975-85, High 1985-95 .... 2,687 3,411 3,662 3,604 3,458 3.02 3.66 3.78 3.51 3.20 High 1975-85, High 1985-95 ... 481 566 601 601 538 4.44 5.09 5.36 5.17 4.50 Failure rate High 1975-85, Low 1985-95 717 873 859 818 809 2.98 3.47 3.36 3.14 3.00 Low 1975-85, High 1985-95 28,733 37,684 42,565 41,117 37,120 2.96 3.69 3.94 3.63 3.11 High 1975-85, High 1985-95 3,036 3,658 3,715 3,410 2,907 4.26 5.06 4.98 4.46 3.72 1. ZIP codes where more (or fewer) than 10 percent of all banking offices 2. Excludes ZIP codes where offices of institutions that failed during the were acquired by another institution during the 1975-85 or 1985-95 periods 1975-95 period were located. were classified as having a "high" ("low") merger rate for the subperiod. A SOURCE. Federal Reserve Board, National Information Center database; similar classification was made based on the proportion of offices acquired by Federal Deposit Insurance Corporation, Summary of Deposits; Office of Thrift another institution with an office in the same ZIP code. ZIP codes containing Supervision, Goings and Gainings and Branch Office Survey System; and one or more offices of an institution that failed during the 1975-85 or 1985-95 Census of Population and Housing, 1970, 1980, and 1990. periods were classified as "high" for the subperiod. ZIP codes containing no offices of a failed institution were classified as "low." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Changes in the Distribution of Banking Offices 719 capita number over time. In particular, a higher level boundaries) with differing characteristics, neighborof merger activity in either the 1975-85 period or hoods are first classified by their relative median the 1985-95 period or in both or an incidence of household income (see box, "Categorization of failure tends to be associated with a larger decline in Neighborhoods by Relative Household Median the number of offices per capita between 1985 and Income"). The analysis excludes areas that are 1995. This evidence, coupled with the disproportion- heavily commercial or that have too few residents ate occurrence of mergers, acquisitions, and failures to permit classification by income; these areas are in ZIP code areas that had higher numbers of banking referred to here as business districts (see appenoffices per capita, provides support for the hypothesis dix A for details). that the reduction in banking offices was a response The analysis is subject to several limitations. First, to excess capacity in banking. Thus, the contraction although we use the number of offices in a ZIP code over 1985-95 in the number of offices per capita may area as a proxy for the availability of banking serhave been a response to inefficiencies that arose vices in a neighborhood, people often have conduring the earlier period, which was one of signifi- venient access to banking offices outside their immecant expansion. However, this evidence is also con- diate neighborhoods, such as those near places of sistent with the notion that the level of service has employment. Second, although we attempted to sepabeen reduced as a result of reduced competition. rate out business districts, some of the remaining ZIP A definitive conclusion regarding the competitive code areas may still be heavily commercial, and, as a effects of mergers, acquisitions, and failures cannot result, may have a relatively large number of banking be reached, though, without a detailed, market-level offices. Finally, this study cannot quantify the level of analysis. services offered at a branch or how it may have Because little relationship was observed between changed over time. merger, acquisition, and failure activity and patterns of commercial bank branching, the net effect of these factors on savings association patterns drives the Changes by Neighborhood Income pattern for all institutions. This finding does not necessarily mean, however, that commercial bank In 1995, the majority of banking offices were located branching has been unaffected by mergers, acquisi- in middle-income neighborhoods, with relatively few tions, or failures. For instance, even though many in low-income neighborhoods. Low-income neighcommercial banks failed during this period, many borhoods were the only areas in which the number of others purchased savings association offices, and banking offices declined (by 21 percent) between these purchases may have offset what would otherwise have been an overall decline in the number of commercial bank offices due to failures. Categorization of Neighborhoods by Relative Household Median Income To assess the potential relationship between CRA and CHANGES IN THE DISTRIBUTION bank office patterns, it is useful to group ZIP code areas OF BANKING OFFICES according to their relative income levels. Doing so con- BY NEIGHBORHOOD CHARACTERISTICS forms to the classification standards in the current CRA regulation.1 ZIP codes are grouped according to the me- Banking regulation, particularly the CRA, encour- dian household income in the ZIP code as a percentage of ages commercial banks and savings associations to the median household income in its metropolitan statistimake their products and services available through- cal area (MSA) or in the nonmetropolitan portion of the out all segments of their community. Concerns have state if the ZIP code is not located in an MSA. Categories are shown in the table below. been raised that, despite the CRA, a disproportionate number of banking offices have been closed in lowerincome neighborhoods in recent years. To date, how- 1. Note, however, that the CRA regulation defines a neighborhood as a census tract or block numbering area. ever, no systematic analysis has examined the distribution of banking offices across neighborhoods Percentage of area Number of ZIP codes Income category stratified by their urbanization and income character- median in category in 1995 istics and the way this distribution has changed over Less than 50 523 time. 50-80 3,940 Middle 80-120 12,386 To analyze changes in the distribution of banking High More than 120 4,080 offices across neighborhoods (defined by ZIP code Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

720 Federal Reserve Bulletin • September 1997 7. Distribution of commercial bank and savings association offices grouped by relative income of ZIP code area, 1975-95 Number Banking offices Banking offices per 10,000 residents CChhaarraacctteerriissttiicc ooff ZZIIPP ccooddee aarreeaa11 1975 1980 1985 1990 1995 1975 1980 1985 1990 1995 Commercial banks Income (percent) More than 120 6,389 8,163 9,485 10,609 11,975 2.19 2.37 2.51 2.57 2.60 80 to 120 23,444 27,957 30,349 30,362 32,802 2.62 2.79 2.95 2.88 2.95 50 to 80 8,258 9,451 9,917 9,333 9,504 2.53 2.77 2.93 2.87 2.89 50 or less 1,587 1,699 1,687 1,473 1,404 2.82 3.07 3.18 2.92 2.90 Savings associations Income (percent) More than 120 2,862 4,690 5,319 5,322 3,671 .60 .90 .94 .87 .58 80 to 120 8,334 12,633 13,934 13,397 9,195 .51 .77 .82 .75 .51 50 to 80 2,980 4,044 4,329 3,837 2,509 .50 .74 .80 .69 .46 50 or less 577 689 643 536 315 .80 .97 .96 .83 .49 All Income (percent) More than 120 9,251 12,853 14,804 15,931 15,646 2.79 3.27 3.45 3.44 3.18 80 to 120 31,778 40,590 44,283 43,759 41,997 3.13 3.56 3.76 3.63 3.46 50 to 80 11,238 13,495 14,246 13,170 12,013 3.03 3.51 3.73 3.56 3.36 50 or less 2,164 2,388 2,330 2,009 1,719 3.62 4.04 4.14 3.75 3.39 NOTE. In this and the tables that follow, ZIP code characteristics are based on Excludes business district ZIP codes, those with only a small number of the 1995 estimates. residents, and those for which income data are not available. 1. Income is the median 1995 household income of ZIP code residents as a SOURCE. Federal Reserve Board, National Information Center database; percentage of median 1995 household income of metropolitan statistical area Federal Deposit Insurance Corporation, Summary of Deposits; Office of Thrift (MSA) for ZIP codes in metropolitan areas or as a percentage of median 1995 Supervision, Branch Office Survey System; and Census of Population and household income of nonmetropolitan areas for ZIP codes outside MSAs. Housing, 1970, 1980, and 1990. 1975 and 1995. Despite a net increase in the overall However, to better understand the relationship number of offices over the entire twenty-year period, between changes in the number of banking offices the number declined between 1985 and 1995 in all and neighborhood income, population changes must neighborhoods except those in the high-income be considered. For example, in addition to losing category. In low- and moderate-income areas taken offices, low-income areas also experienced signifitogether the reduction in the number of banking cant reductions in population; as a consequence, the offices was relatively large—nearly two-thirds of the number of offices per capita declined only 6.4 pertotal decline in offices (excluding offices in business cent. Indeed, from 1975 to 1995, the number of districts) occurred in these areas, which had only banking offices per capita converged across all about one-fifth of all banking offices in 1985. income categories of neighborhoods. In 1975, low- 8. Distribution of banking offices grouped by relative income of ZIP code area and degree of urbanization, 1975-95 Number Banking offices Banking offices per 10,000 residents CChhaarraacctteerriissttiicc ooff ZZIIPP ccooddee aarreeaa11 1975 1980 1985 1990 1995 1975 1980 1985 1990 1995 Area income (percent) More than 120 Central city 2,169 3,284 3,961 4,229 4,198 1.43 2.07 2.35 2.35 2.22 Suburban 5,323 7,350 8,362 9,253 8,967 3.02 3.55 3.70 3.80 3.42 Rural 1,759 2,219 2,481 2,449 2,481 3.43 3.70 3.87 3.71 3.52 80 to 120 Central city 9,112 12,324 13,429 13,330 12,482 1.79 2.33 2.44 2.33 2.12 Suburban 12,052 15,285 16,867 17,287 16,387 3.04 3.45 3.62 3.46 3.19 Rural 10,614 12,981 13,987 13,142 13,128 3.73 4.13 4.40 4.26 4.18 50 to 80 Central city 5,748 6,805 7,023 6,337 5,587 2.18 2.58 2.66 2.39 2.08 Suburban 3,042 3,714 4,028 3,873 3,479 2.97 3.44 3.63 3.41 3.07 Rural 2,448 2,976 3,195 2,960 2,947 3.64 4.19 4.52 4.44 4.39 50 or less Central city 2,002 2,200 2,137 1,830 1,537 3.96 4.46 4.55 4.00 3.46 Suburban 79 91 92 88 86 2.61 2.81 2.82 2.67 2.63 Rural 83 97 101 91 96 2.89 3.13 3.30 3.30 3.42 1. See note 1 to table 7. SOURCE. Federal Deposit Insurance Corporation, Summary of Deposits; Office of Thrift Supervision, Branch Office Survey System; and Census of Population and Housing, 1970, 1980, and 1990. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Changes in the Distribution of Banking Offices 721 income neighborhoods had the largest number of mergers, acquisitions, and failures. A second possioffices per capita; by 1995, there was relatively little bility is that these areas include relatively high condifference across income categories (table 7). A simi- centrations of businesses and that the high levels lar pattern of convergence holds for both commercial of branching and the subsequent sharp decline were banks and savings associations. concentrated in these business areas. Changes by Neighborhood Income Branching Patterns in Low- and Moderate-Income and Degree of Urbanization Areas Bank office patterns in relation to neighborhood Another potential explanation for the decline in the income are different across central city, suburban, number of banking offices in low- and moderateand rural areas. For example, among central city ZIP income areas is that these areas became poorer over code areas, those with the lowest incomes have the time and that as a result banks found offices in these most banking offices per capita; among suburban ZIP areas less profitable. To examine this proposition, code areas, those with the highest incomes have the low- and moderate-income ZIP code areas in 1995 most banking offices per capita (table 8). Further, were sorted according to their relative income in from 1975 to 1995 the number of banking offices 1975, allowing us to identify those areas for which increased in all neighborhood income categories relative income increased, decreased, or remained within suburban and rural areas. In contrast, among constant. central city areas, only high- and middle-income The data do not show a consistent relationship neighborhoods experienced an increase in the num- between changes in neighborhood income and ber of banking offices. changes in the number of banking offices. Contrary The convergence across neighborhood income to expectations, areas with low relative incomes in categories in the number of offices per capita over 1975 that had become moderate-income areas by 1975-95 reflects increases in most neighborhood 1995 experienced a reduction both in the number of income categories, a relatively large decline in low- offices, from 414 to 349, and in offices per capita, income central city areas, which in 1975 had had the from 4.34 to 4.06 (table 9). Further, although the highest number of offices per capita, and a more number of offices fell in areas that went from high-, modest decline in moderate-income central city middle-, or moderate-income categories to the lowneighborhoods. Several explanations for the declines income category in 1995, the number of offices per are possible. For example, low- and moderate-income capita increased. The strongest effect was observed areas may have been disproportionately affected by among ZIP code areas that had low incomes in both 9. Distribution of banking offices in low-income ZIP code areas, by change in relative income and owner-occupancy rate, 1975-95 Number Banking offices Banking offices per 10,000 residents CChhaarraacctteerriissttiicc ooff ZZIIPP ccooddee aarreeaa11 1975 1980 1985 1990 1995 1975 1980 1985 1990 1995 Area income in 1995 (percent) 50 to 80 percent Change More than 80 in 1975 5,981 7,344 7,822 7,174 6,654 3.09 3.61 3.86 3.68 3.51 50 to 80 in 1975 4,843 5,727 5,984 5,591 5,010 2.86 3.30 3.48 3.30 3.09 50 or less in 1975 414 424 440 405 349 4.34 4.72 4.91 4.81 4.06 50 percent or less Change More than 50 in 1975 ... 990 1,129 1,094 955 869 2.65 3.00 3.08 2.94 2.84 50 or less in 1975 1,174 1,259 1,236 1,054 850 5.28 5.80 5.95 5.14 4.34 Owner occupancy (percent) More than 33 all areas .. 553 622 584 503 489 2.07 2.31 2.38 2.29 2.35 33 or less all areas 1,611 1,766 1,746 1,506 1,230 5.27 5.88 6.02 5.30 4.50 More than 33 central city 406 453 409 342 323 1.17 1.40 1.36 1.20 1.21 33 or less central city ... 1,5% 1,747 1,728 1,488 1,214 5.38 6.02 6.17 5.43 4.60 1. See note 1 to table 7. SOURCE. Federal Deposit Insurance Corporation, Summary of Deposits; Office of Thrift Supervision, Branch Office Survey System; and Census of Population and Housing, 1970, 1980, and 1990. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

722 Federal Reserve Bulletin • September 1997 1975 and 1995; the number of offices in these persis- However, in central city low-income areas with a low tently low-income areas declined about 28 percent proportion of owner-occupied housing, the number of and by nearly one office per 10,000 residents. banking offices per capita is relatively large, and it Areas that were classified as low-income in both has declined in recent years. 1975 and 1995, however, still had the largest number of banking offices per capita among all low-income neighborhoods, which is consistent with the premise The Effects of Mergers, Acquisitions, and Failures that at least some of these neighborhoods contain a on Banking Office Patterns in Low-Income Areas relatively large number of businesses. To better identify ZIP code areas with relatively high concentra- A final conjecture we examine is whether the effects tions of businesses, low-income areas were sorted of mergers, acquisitions, and failures differed in lowaccording to the proportion of households in owner- and moderate-income areas from those in middleoccupied units in 1995. This procedure was based on and upper-income areas. To investigate this proposian assumption that residential areas in close proxim- tion, ZIP code areas were sorted according to whether ity to business districts are likely to have a relatively they were low- or moderate-income and then further low proportion of owner-occupied housing. ZIP code segmented by merger, acquisition, and failure activity areas were identified as having either more or less during 1985-95, using the definitions discussed prethan the median percentage of owner-occupied viously. The evidence from this analysis indicates housing units for all low-income ZIP code areas, that mergers generally did not have a differential which is 33 percent. effect on lower income areas (table 10). Among ZIP When these areas are differentiated, two distinct code areas with high levels of merger activity, the patterns emerge. As expected, low-income areas with number of offices per capita and trends in the number a low proportion of owner-occupied units had a much of offices per capita are similar across neighborhood larger number of banking offices per capita, and income classifications. However, if the mergers were low-income areas with a high proportion of owner- only among institutions in the same ZIP code area, occupied units had a low number. This finding is some differences are apparent. In this case, the numconsistent with the conjecture that some low-income ber of offices per capita in low- and moderate-income ZIP code areas include business districts, which have neighborhoods (those with income of less than more banking offices than more residential areas and 80 percent of the area median) was higher than in more banking offices per capita than middle- and other areas in 1975, but over the twenty-year period, upper-income areas. the numbers converged primarily because of a decline Moreover, while the number of offices per capita in low- and moderate-income areas. Grouping ZIP has declined in low-income areas with low rates of code areas by incidence of failure yields a similar owner occupancy, it has increased slightly in low- pattern. income areas with higher rates of owner occupancy. Thus, nearly all of the general decline in the number of banking offices in low-income areas reflects CONCLUSIONS declines in areas with low rates of owner occupancy. The patterns related to owner occupancy are even Historically, most banking services have been delivmore pronounced when the analysis is restricted to ered through banking offices. Recent changes in the low-income areas in central cities. Within central structure of the banking industry are believed to have cities, low-income areas with a high proportion of had an important influence on the number and locaowner-occupied housing have a very low number of tion of banking offices, with potential implications banking offices per capita (about one office per for the availability and accessibility of banking prod- 10,000 residents), and that number has remained ucts and services. relatively constant over the twenty-year period.23 Between 1975 and 1995, the number of banking institutions declined sharply, and the number of banking offices increased nearly 29 percent. However, this 23. Surveys find that residents of low-income areas use nonbank providers of banking services relatively often. However, users of these twenty-year period embodies two different trends. In services rarely cite a lack of convenient bank offices as a reason for the first decade, the overall number of banking offices using these nonbank institutions. See Arthur B. Kennickell, Martha expanded significantly, even as the number of insti- Starr-McCluer, and Annika E. Sunden, "Family Finances in the U.S.: Recent Evidence from the Survey of Consumer Finances," Federal tutions declined slightly. In the second decade, the Reserve Bulletin, vol. 83 (January 1997), pp. 1-24; and John P. number of institutions fell sharply while the number Caskey, Lower Income Americans, Higher Cost Financial Services of banking offices contracted modestly. In both (Madison, Wisconsin: Filene Research Institute, 1997). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Changes in the Distribution of Banking Offices 723 10. Distribution of banking offices, by merger or failure rate and relative income of ZIP code area, 1975-95 Number Banking offices Banking offices per 10,000 residents MMeerrggeerr aanndd ffaaiilluurree rraattee aanndd iinnccoommee,, bbyy ZZIIPP ccooddee aarreeaa11 1975 1980 1985 1990 1995 1975 1980 1985 1990 1995 High merger rate areas 2 More than 80 percent 7,096 9,073 9,794 10,096 10,207 3.70 4.29 4.50 4.30 4.10 80 percent or less 1,891 2,187 2,240 2,078 1,945 3.67 4.21 4.46 4.25 3.97 High merger rate in ZIP2 More than 80 percent 2,280 2,994 3,235 3,280 3,172 3.71 4.50 4.68 4.38 3.96 80 percent or less 775 857 888 798 719 4.68 4.98 5.42 4.81 3.96 High failure rate areas 2 More than 80 percent 22,081 29,772 33,875 33,417 30,615 3.59 4.42 4.82 4.48 3.95 80 percent or less 7,830 9,408 10,075 9,065 7,749 3.96 4.71 5.08 4.53 3.89 All areas More than 80 percent 41,029 53,443 59,087 59,690 57,643 3.05 3.49 3.69 3.58 3.39 80 percent or less 13,402 15,883 16,576 15,179 13,732 3.10 3.57 3.78 3.58 3.36 1. See note 1 to table 7. of an institution that failed during the 1985-95 period were classified as "high;" 2. ZIP codes where more (or fewer) than 10 percent of all banking offices ZIP codes containing no offices of a failed institution were classified as "low." were acquired by another institution during the 1985-95 period were classi- SOURCE. Federal Reserve Board, National Information Center database; fied as having a "high" ("low") merger rate. A similar classification was made Federal Deposit Insurance Corporation, Summary of Deposits; Office of Thrift based on the proportion of offices acquired by another institution with an office Supervision, Goings and Gainings and Branch Office Survey System; and in the same ZIP code. For failure rates, ZIP codes containing one or more offices Census of Population and Housing, 1970, 1980, and 1990. decades the experiences of commercial banks and While this evidence provides plausible explanasavings associations differed markedly, particularly tions for the contractions observed in banking from 1985 to 1995, when the number of savings between 1985 and 1995, none of it appears to explain association offices plummeted while the number of the steep increase in banking offices during 1975-85. commercial bank offices increased somewhat. Perhaps the most significant factor during the These broad trends in the number and location of 1975-85 period was the effect of nonprice competibanking offices have been associated with changes in tion among banking institutions. Legal restrictions on various factors, including population shifts, branch- the interest rates that institutions could pay on deposit ing deregulation, and mergers, acquisitions, and accounts, along with the high interest rates in the late failures. Population growth and relaxation of legal 1970s and early 1980s, provided strong incentives restrictions on branching are positively associated for institutions to compete on the basis of convewith increased branching activity over the twenty nience and service rather than price, which may have years. Areas that experienced the highest rates of induced the establishment of many new offices. population growth increased their share of banking We also examined the relationship between neighoffices, whereas those with the lowest growth experi- borhood income and the number and changes over enced a decline of similar magnitude. Also, the larg- time in the number of banking offices. There has been est increases in the number of offices per capita a steady convergence over the 1975-95 period in occurred in states that either eliminated or substan- the number of banking offices per capita across neightially eased legal restrictions on branching during the borhood income categories, so that as of 1995, the period. numbers for all income categories were roughly Mergers, acquisitions, and failures were associated equal. The convergence reflects initially large numwith the decline in the absolute number and per bers of offices per capita in low-income areas relative capita number of banking offices between 1985 and to other areas, declines in the number of offices per 1995. Overall patterns appear to be primarily a result capita in these same areas, and increases in the numof the net effect of mergers, acquisitions, and failures ber per capita in other areas. of savings associations. Moreover, mergers, acquisi- The data indicate that there are two types of lowtions, and failures have taken place disproportion- income areas, particularly in central cities. One type ately in ZIP code areas that had higher numbers includes a small proportion of owner-occupied units of banking offices per capita. On the whole, this and a relatively large number of banking offices per evidence is consistent with the view that consoli- capita, which suggests that these areas may have dation has been a response to excess capacity. Com- relatively high concentrations of businesses. The secpetition may also play a role, but a more detailed ond type of low-income area has a high proportion of market-by-market analysis is required to draw firm owner-occupied housing and few banking offices per conclusions. capita, although this number has remained fairly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

724 Federal Reserve Bulletin • September 1997 steady over the twenty-year period. Nearly all the from the annual Summary of Deposits filings overall decline in the number of banking offices in required of all U.S. commercial banks and Branch low-income areas occurred in the first category. Office Survey System filings required of all savings On balance, there is little evidence to suggest that associations for the years 1975, 1980, 1985, 1990, mergers in general have more strongly affected the and 1995. These addresses were reported as of number of banking offices in low- and moderate- June 30 for each year except for savings and loan income areas than in other areas. However, mergers associations that reported as of September 30 in 1975 involving institutions operating offices in the same and 1980. The office list includes all locations quali- ZIP code area have been associated with a relatively fying as separate institution offices under federal larger decline in the number of offices per 10,000 guidelines but excludes some "drive-ins" and most residents in low- and moderate-income areas, though standalone ATMs.24 Reporting institutions include all these areas also had higher levels of banking offices federally insured commercial banks, savings and loan than other areas at the beginning of the twenty-year associations, cooperative banks, and mutual savings sample period. banks, as defined by the Federal Reserve Board's Finally, the broad distributional patterns of bank National Information Center database. The office offices found in this analysis do not necessarily totals reported in this article will differ slightly from describe the circumstances in any given neigh- those reported elsewhere because of different agency borhood or local market. Moreover, the effects of definitions of federally insured institutions and changes in office locations must be interpreted in because of some limited data cleaning required for light of local conditions. Indeed, the regulatory agen- the analysis. Some offices were removed that were cies that enforce the nation's antitrust laws and the double-reported to different agencies, and some CRA consider much more information at a far greater offices were added for a few institutions that did not level of detail than is presented in this article. submit a Summary of Deposits or Branch Office Survey System filing. APPENDIX: CONSTRUCTION OF THE DATABASE 24. Supermarket offices are included under this definition if they The basic data on office location were compiled as are staffed by bank personnel. While proliferating recently, these types follows. Addresses of bank offices were extracted of offices were relatively rare before 1995. A.l. Number and characteristics of ZIP code areas by relative income of ZIP code and degree of urbanization, 1995 Distribution of offices in ZIP code areas NNuummbbeerr ooff AAvveerraaggee AAvveerraaggee nnuummbbeerr CChhaarraacctteerriissttiicc ooff ZZIIPP ccooddee aarreeaa'' ZZIIPP ccooddee aarreeaass ppooppuullaattiioonn ooff ooffffiicceess One to three More than No offices offices three offices Area income (percent)2 More than 120 Central city 928 17,256 4.52 34.9 22.6 42.5 Suburban 1,818 15,993 4.93 7.1 43.7 49.2 Rural 1,334 5,581 1.86 29.1 57.0 13.9 80 to 120 Central city 2,292 22,539 5.45 28.7 18.7 52.6 Suburban 4,296 13,633 3.81 11.1 52.0 36.9 Rural 5,798 5,955 2.26 21.9 59.0 19.1 50 to 80 Central city 1,157 25,750 4.83 19.4 31.1 49.5 Suburban 1,068 13,058 3.26 15.7 52.0 32.3 Rural 1,715 4,317 1.72 24.0 63.9 12.1 50 or less Central city 365 21,191 4.21 18.9 41.6 39.5 Suburban 37 11,054 2.32 18.9 64.9 16.2 Rural 121 3,384 .79 44.6 52.9 2.5 Business district Central city 296 5.88 24.3 33.8 41.9 Suburban 682 1.10 17.9 79.0 3.1 Rural 2,310 .95 13.6 86.1 .3 Total 24,217 12,278 3.14 19.4 52.5 28.1 1. ZIP code characteristics are based on the 1995 estimates. ness district ZIP codes include those with a small number of residents, those in 2. Income is median 1995 household income of ZIP code residents as a central business districts, or those for which income data are not available. percentage of median 1995 household income of metropolitan statistical area SOURCE. Federal Deposit Insurance Corporation, Summary of Deposits; (MSA) for ZIP codes in metropolitan areas or as a percentage of median 1995 Office of Thrift Supervision, Branch Office Survey System; and Census of household income of nonmetropolitan areas for ZIP codes outside MSAs. Busi- Population and Housing, 1970, 1980, and 1990. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Changes in the Distribution of Banking Offices 725 Banking offices were geographically classified code boundaries do not necessarily correspond to using the 1993 U.S. Postal Service five-digit ZIP code natural socioeconomic divisions and in many cases corresponding to their address. In some cases where cut across city or county lines. ZIP code boundaries changed, the 1993 ZIP code Economic and demographic variables for ZIP differed from the original one reported by the institu- codes used in the analysis are based on projections tion. In other instances institutions reported discontin- from the Decennial Census for 1980 and 1990. CACI ued, mailbox, or erroneous ZIP codes, which were Inc. provided data for both censuses using 1993 ZIP corrected. The decision to use 1993 ZIP codes was code definitions, which are consistent with the bank made in order to define a geographic taxonomy that office data. Additional information was obtained from was fixed over the entire sample period. the Bureau of the Census for 1970. This information, Data were aggregated to the ZIP code level for combined with annual Bureau of the Census countyseveral reasons. First, it is comparatively easy to level income and population estimates, was used to classify addresses by ZIP code with a high degree of estimate economic and demographic information for accuracy. Second, ZIP code areas are large enough the ZIP codes for the non-census years (1975, 1985, (an average of 20,000 residents apiece in urban areas) and 1995) used in the study. to encompass both residential areas and the business Economic and demographic data were either not areas that serve them, which is not the case for available or deemed inappropriate for some nonresicensus tracts, for example. Although census tracts are dential ZIP codes. These included central business designed to be economically and demographically districts in urban areas and some very small rural homogenous, they are relatively small (between areas. These ZIP codes were included in some of the 4,000 and 5,000 people) in large metropolitan areas. analysis, but were excluded from the analysis related Many census tracts contain no bank offices yet are to economic and demographic characteristics. See near business districts that provide ready and easy table A.l for a brief description of the data sample, access to banking services. One disadvantage of including the breakdown of ZIP codes by location using ZIP codes is that they were set up for the and median household income. Average population convenience of the Postal Service and their ground and the distribution of banking offices is reported for transportation system, not for statistical analysis. ZIP each category. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

726 Treasury and Federal Reserve Foreign Exchange Operations This quarterly report describes U.S. Treasury and authorities pointed to improvement in Japan's near- System foreign exchange operations for the period term economic prospects and suggested that excesfrom April through June 1997. It was presented by sive yen depreciation might be addressed with Peter R. Fisher, Executive Vice President, Federal intervention. The U.S. monetary authorities did not Reserve Bank of New York, and Manager for Foreign undertake any intervention operations in the foreign Operations, System Open Market Account. Grace exchange market during the quarter. Sone was primarily responsible for preparation of the report. A SLIGHT RISE IN THE INTRADAY VOLATILITY During the second quarter of 1997, the dollar depreci- OF THE DOLLAR ated 7.3 percent against the Japanese yen but gained 4.2 percent against the German mark. On a trade- Foreign exchange market volatility was slightly weighted basis against other Group of Ten (G-10) higher during the quarter, with the average daily currencies, the dollar appreciated 1.0 percent.1 The trading range for the dollar widening to 1.0 percent contrast between the dollar's performance against the against both the mark and the yen, compared with yen and its performance against the mark primarily average daily ranges of 0.9 percent experienced in reflected broad-based yen strength and generalized the first quarter of 1997 and 0.7 percent in the second mark weakness. Early in the period, the dollar had quarter of 1996. initially continued the upward trend against the yen In the middle of the period, implied volatility on that it had established in the previous quarter. How- dollar-mark and dollar-yen options moved higher as ever, in the weeks after the April 27, Group of Seven the dollar-yen exchange rate fell 8.5 percent during (G-7) meeting, the yen appreciated as the Japanese May but tapered off as the dollar-yen exchange rate stabilized in June. Dollar-yen implied volatility ended the second quarter only slightly higher than 1. The dollar's movements on a trade-weighted basis against ten its first-quarter close, while dollar-mark implied major currencies are measured using an index developed by members of the staff of the Board of Governors of the Federal Reserve System. volatility ended slightly lower. The dispersion of the 1. Spot exchange rate of the dollar against the Japanese yen 2. Spot exchange rate of the dollar against the German mark and volatility implied by option prices, 1997:H1 and volatility implied by option prices, 1997:H1 NOTE. Data are daily. NOTE. Data are daily. SOURCE. Federal Reserve Bank of New York; Reuters. SOURCE. Federal Reserve Bank of New York; Reuters. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

727 probability distribution of the future dollar-mark 5. U.S. interest rates, 1997:Q2 exchange rate one-month hence implied by currency options prices was little changed over the quarter but became skewed toward a weaker dollar against the yen, reflecting a higher cost of protection against a sharp downward move in the dollar-yen exchange rate. 3. Option-based probability distribution of exchange rates, one month hence Dollar-Mark June 26, 1997 NOTE. A 3x6 forward rate agreement (FRA) refers to the yield on a threemonth deposit with a value date three months hence and a maturity date six months hence. Data are daily. SOURCE. Reuters. STRENGTHENING OF THE YEN AGAINST OTHER MAJOR CURRENCIES The dollar began the quarter by continuing its upward movement against the yen, supported by expectations for further monetary tightening in the United States Dollar-Yen and steady monetary policy in Japan. On April 8, the June 26, 1997 spread between ten-year U.S. and Japanese govern- April 3, 1997 ment bond yields widened to an eight-year high of 463 basis points. Market participants focused on a reference to "persisting strength in demand" in the press release after the March Federal Open Market Committee (FOMC) meeting, which was viewed as suggesting that the FOMC might apply more monetary restraint than had been anticipated. Meanwhile, SOURCE. Federal Reserve Bank of New York. 6. Japanese interest rates, 1997:Q2 4. Differentials in ten-year bond yields, 1997:Q2 Percent Basis points Basis points Japanese 3x6 forward rate agreement y-v U.S.-German ten-year differential Three-month Euroyen Ay^n — .8 460 deposit yield * K V*' \ no n A A— .7 — 440 100 ~KI rv \ f f, — 420 90 — \A / — 400 i 80 — \f— U.S.-Japan ten-year differential 380 1 1 i Apr. May June 1 I 1 1 1997 Apr. May June 1997 NOTE. A 3x6 forward rate agreement (FRA) refers to the yield on a threemonth deposit with a value date three months hence and a maturity date six NOTE. Data are daily. months hence. Data are daily. SOURCE. Bloomberg L.P. SOURCE. Reuters. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

728 Federal Reserve Bulletin • September 1997 7. Japanese current account balance, 1992-May 1997 Cumulative total in billions of Japanese yen Monthly surplus in billions of Japanese yen 15,000 Cumulative twelve-month total Monthly surplus 10,000 5,000 500 1992 1993 1994 1995 1996 1997 NOTE. Data are monthly. SOURCE. Bloomberg L.P. market analysts became concerned that Japan's eco- official noted that the yen might strengthen to ¥103 nomic recovery was neither broad-based nor self- by year-end, a comment that was interpreted by marsustaining and that there was a potential for negative ket analysts as a warning against further yen depreeffects from the April 1 consumption tax hike; there ciation. Also, U.S. officials indicated their agreement were also concerns about strains in the Japanese with Japan's concern about yen depreciation. In addifinancial sector. tion, Japanese officials commented that the Japanese In this perceived dollar-supportive environment economic recovery was stronger than perceived by there was no immediate reaction to the April 27, G-7 market participants and that an interest rate hike statement, which emphasized the importance of could occur sooner than expected. Against this backavoiding exchange rate levels that could lead to the drop, the Nikkei began to rise, closing above the reemergence of large external imbalances. On May 1, 20,000 level on May 6 for the first time in 1997; the dollar rose to a fifty-six-month high of ¥127.50, yields on the benchmark ten-year Japanese governas the yen depreciated against most major currencies. ment bond increased; and the yen started to appreci- However, initial releases of economic data for April ate against a broad range of currencies. Contributing appeared to suggest that the Japanese economy was to the yen's broad-based strength was the apparent not as adversely affected by the consumption tax hike unwinding of yen-financed positions in emerging as had been anticipated. Concurrently, Japanese officials began hinting at the possibility of intervention to support the yen. In particular, a Ministry of Finance 9. Value of the yen against selected currencies, 1997:Q2 Percent 8. Trade-weighted yen, 1997:Q2 Australian dollar 1990= 100 Apr. May June 1997 NOTE. Foreign currency per Japanese yen, indexed to March 31 = 100. Data NOTE. Data are daily. are daily. SOURCE. Bloomberg L.P. (Bank of England calculation). SOURCE. Reuters. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 729 market currencies, a move that was exacerbated by broad participation in the European monetary union reports of worsening current account deficits and (EMU). In addition, expectations of steady monetary downwardly revised economic growth forecasts in policy in Germany, supported by reports that German countries such as Thailand and the Czech Republic. unemployment remained at high levels, contributed Later in the period, market attention again shifted to the weakness of the mark. Although the yield toward signs of a softer Japanese economy after differential between U.S. and German ten-year releases of data implied a two-tiered economic recov- bonds narrowed 20 basis points, to end the quarter at ery led by the export sector. However, the yen 90 basis points, the dollar continued to move higher remained firm amid heightened concerns over pos- against the German mark as market participants sible intervention to stem any renewed yen weakness. focused on developments in Europe. These concerns were prompted by indications of a In May, the German mark firmed somewhat as widening Japanese trade surplus and comments from doubts about the likelihood of a timely start to the U.S. officials suggesting that Japan should avoid an EMU reemerged. This uncertainty reflected both the export-led recovery. Meanwhile, market participants prospects for a Socialist victory in the French elecstarted to scale back their expectations for U.S. mone- tions and the criticism raised regarding the German tary tightening after the release of data on retail sales government's proposal to revalue the Bundesbank's and housing, both of which were viewed as indicat- gold reserves. At this time, the dollar-mark exchange ing moderating consumer demand. rate moved from around DM 1.73 to near DM 1.68. The U.S.-Japan ten-year bond-yield spread nar- However, by mid-June, the dollar-mark exchange rowed from its eight-year high of 463 basis points on rate moved back above DM 1.73, toward levels seen April 8, to end the period at 391 basis points. On a in April, as earlier market doubts about a timely trade-weighted basis, the yen appreciated 9.2 percent launch to EMU dissipated. Reports that France and during the second quarter. Against the Australian Germany would have difficulty strictly meeting the dollar, Swiss franc, and British pound the yen appre- Maastricht reference value of 3 percent deficitciated 12.5 percent, 9.0 percent, and 6.3 percent to-gross domestic product, combined with assertions respectively. from French and German officials of their commitment to start the EMU on time, made it appear increasingly likely that the EMU would start with a broader set of countries. During the second quarter, SUPPORT OF THE DOLLAR-MARK EXCHANGE the mark depreciated more than 4.0 percent against RATE BY BROAD GERMAN MARK WEAKNESS the U.S. dollar and Japanese yen, and more than 12.0 percent against the British pound. On a trade- Over the reporting period, the German mark was weighted basis, the German mark depreciated 2.4 perpressured lower by growing market expectations of cent during the period. 10. German interest rates, 1997:Q2 11. Trade-weighted mark, 1997:Q2 1990= 100 German 3x6 forward rate — 105 Three-month Euromark deposit yield NOTE. A 3x6 forward rate agreement (FRA) refers to the yield on a threemonth deposit with a value date three months hence and a maturity date six months hence. Data are daily. NOTE. Data are daily. SOURCE. Reuters. SOURCE. Bloomberg L.P. (Bank of England calculation). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

730 Federal Reserve Bulletin • September 1997 TREASURY AND FEDERAL RESERVE FOREIGN German and Japanese government securities held EXCHANGE RESERVES either directly or under repurchase agreement. As of June 30, outright holdings of government securities The U.S. monetary authorities did not undertake any by U.S. monetary authorities totaled $7.4 billion. intervention operations this quarter. At the end of the Japanese and German government securities held quarter, the current values of the German and Japa- under repurchase agreement are arranged either nese yen reserve holdings totaled $18.0 billion for the through transactions executed directly in the market Federal Reserve System and $15.1 billion for the or through agreements with official institutions. Gov- Exchange Stabilization Fund. ernment securities held under repurchase agreements The U.S. monetary authorities invest all of their by the U.S. monetary authorities totaled $11.8 billion foreign currency balances in a variety of instruments at the end of the quarter. Foreign currency reserves that yield market-related rates of return and have a are also invested in deposits at the Bank for Internahigh degree of liquidity and credit quality. A sig- tional Settlements and in facilities at other official nificant portion of these balances is invested in institutions. 1. Foreign exchange holdings of U.S. monetary authorities based on current exchange rates, 1997:Q2 Millions of dollars Quarterly changes in balances by source BBaallaannccee,, BBaallaannccee,, IItteemm MMaarr.. 3311,, 11999977 Net purchases Impact of Investment Currency JJuunnee 3300,, 11999977 and sales1 sales2 income ad v j a u l s u t a m ti e o n n t s3 FEDERAL RESERVE Deutsche marks 12,113.8 .0 .0 87.3 -529.5 11,671.7 Japanese yen 5,761.5 .0 .0 4.5 456.1 6,222.1 Interest receivables" 76.4 73.2 Other cash flow from investments5 -1.6 2.9 MHI BMHNR Total 17,950.1 17,969.8 U.S. TREASURY EXCHANGE STABILIZATION FUND Deutsche marks 6,131.3 .0 .0 45.1 -268.0 5,908.4 Japanese yen 8,445.4 .0 .0 6.8 667.2 9,119.4 Interest receivables4 40.0 40.4 Other cash flow from investments5 -3.8 10.4 Total 14,612.9 15,078.6 NOTE. Figures may not sum to totals because of rounding. 3. Foreign currency balances are marked to market monthly at month-end 1. Purchases and sales include foreign currency sales and purchases related to exchange rates. official activity, swap drawings and repayments, and warehousing. 4. Interest receivables for the ESF are revalued at month-end exchange rates. 2. Calculated using marked-to-market exchange rates; represents the differ- Interest receivables for the Federal Reserve System are carried at average cost ence between the sale exchange rate and the most recent revaluation exchange of acquisition and are not marked to market until interest is paid. rate. Realized profits and losses on sales of foreign currencies computed as the 5. Cash flow differences from payment and collection of funds between difference between the historic cost-of-acquisition exchange rate and the sale quarters. exchange rate are shown in table 2. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 731 2. Net profits or losses (-) on U.S. Treasury 3. Currency arrangements, June 30, 1997 and Federal Reserve foreign exchange operations Millions of dollars based on historical cost-of-acquisition exchange rates, 1997:Q2 Amount of Outstanding, facility June 30, 1997 Millions of dollars Federal Reserve U.S. Treasury Reciprocal Currency Federal Arrangements Stabilization Fund Austrian National Bank 250 0 National Bank of Belgium 1,000 Valuation profits and losses on Bank of Canada 2,000 outstanding assets and liabilities, National Bank of Denmark 250 Mar. 31, 1997 Bank of England 3,000 SSHIB; Deutsche marks 956.3 75.2 Bank of France 2,000 589.6 871.7 Deutsche Bundesbank 6,000 ^I Total 1,545.9 946.9 Bank of Italy 3,000 SINNING! M Bank of Japan 5,000 Realized profits and losses Bank of Mexico 3,000 from foreign currency sales, Netherlands Bank 500 Mar. 31-June 30, 1997 Bank of Norway 250 Deutsche marks Bank of Sweden 300 Japanese yen Swiss National Bank 4,000 Total Bank for International Settlements Dollars against Swiss francs 600 Valuation profits and losses on Dollars against other authorized outstanding assets and liabilities, European currencies 1,250 June 30, 1997 Deutsche marks 426.9 -192.8 Total 32,400 0 yen 1,047.2 1,542.7 U.S. Treasury Total 1,474.1 1,349.9 Exchange Stabilization Fund Currency Arrangements NOTE. Figures may not sum to totals because of rounding. 1,000 0 3,000 0 0 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

732 Industrial Production and Capacity Utilization for July 1997 Released for publication August 14 In addition, output at utilities surged 1.5 percent, as production moved further toward seasonal Industrial production increased 0.2 percent in July norms after unseasonably cool weather in May. At after an increase of 0.3 percent in June. Growth was 119.8 percent of its 1992 average, industrial producslowed by a fall in the production of motor vehicles tion in July was 3.7 percent higher than it was in and parts and by smaller declines in a number of July 1996. The rate of industrial capacity utilization nondurable goods manufacturing industries. Large slipped to 83.1 percent; during the past twelve increases occurred again in the production of com- months, the rate has ranged between 83.0 percent and mercial aircraft, computers, and semiconductors. 83.6 percent. Industrial production indexes Twelve-month percent change Twelve-month percent change Materials Durable 10 manufacturing 10 Products Nondurable manufacturing 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 Capacity 140 — Capacity ——• — 140 120 - 120 100 = ^ 100 Production 80 Production _ 80 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Percent of capacity Percent of capacity Total industry Manufacturing Utilization 90 Utilization — 90 80 80 70 70 J I I I L J I L 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, July. Capacity is an index of potential industrial production. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

733 Industrial production and capacity utilization, July 1997 Industrial production, index, 1992=100 Percentage change Category 1997 19971 July 1996 to Apr.r Mayr Juner July? Apr.1 Mayr June1 July f July 1997 Total 1193 119.3 119.6 119.8 .4 .0 .3 .2 3.7 Previous estimate 119.3 119.5 119.9 .4 .2 .3 Major market groups Products, total2 115.4 115.6 116.0 115.9 .2 .1 .4 -.1 3.2 Consumer goods 112.1 112.1 112.5 112.3 .0 .0 .4 -.2 1.4 Business equipment 135.5 135.9 136.8 137.6 .9 .3 .7 .5 7.4 Construction supplies 120.1 120.9 120.1 119.7 -1.4 .6 -.7 -.3 1.8 Materials 125.5 125.2 125.3 126.0 .8 -.3 .1 .6 4.6 Major industry groups Manufacturing 120.9 121.0 121.3 121.4 .3 .1 .3 .1 3.8 Durable 132.3 132.7 133.4 133.8 .5 .3 .5 .3 5.4 Nondurable 108.7 108.5 108.5 108.3 .0 -.2 .0 -.2 1.8 Mining 106.0 107.9 107.6 107.2 -1.3 1.8 -.3 -.3 4.0 Utilities 113.6 110.8 111.3 113.0 3.3 -2.4 .5 1.5 3.3 Capacity utilization, percent MMMEEEMMMOOO CCCaaapppaaaccciiitttyyy,,, pppeeerrr--ccceeennntttaaagggeee 1996 1997 ccchhhaaannngggeee,,, AAvveerraaggee,, LLooww,, HHiigghh,, JJJuuulllyyy 111999999666 11996677--9966 11998822 11998888--8899 July Apr.r Mayr Juner JulyP tttooo JJJuuulllyyy 111999999777 Total 82.1 71.1 85.3 83.2 83.6 83.3 83.3 83.1 3.8 Previous estimate 83.6 83.5 83.5 Manufacturing 81.2 69.0 85.7 82.4 82.6 82.4 82.3 82.1 4.2 Advanced processing 80.6 70.4 84.2 80.6 80.6 80.3 80.3 80.1 5.1 Primary processing . 82.3 66.2 88.9 86.7 87.1 87.2 86.8 86.5 2.3 Mining 87.5 80.3 86.8 90.7 92.9 94.4 94.0 93.6 .8 Utilities 87.2 75.9 92.6 87.6 89.6 87.3 87.6 88.8 1.8 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. MARKET GROUPS the previous July. The growth in business equipment was led by solid gains in the output of business After an increase of 0.4 percent in June, the overall vehicles other than light trucks, by further strong output of consumer goods slipped 0.2 percent in July; increases in information processing equipment and in the production of durable goods was unchanged, and commercial aircraft, and by sharp gains in farm and that of nondurable goods fell 0.3 percent. The lack of service industry machinery. However, the output of growth in durable consumer goods resulted from a industrial equipment weakened again and has now drop of nearly 15 percent in the production of con- fallen almost 1.4 percent from its recent peak in sumer light trucks, a category that includes vans and April. The output of defense and space equipment sport utility vehicles. In contrast, production gains fell 0.5 percent. were widespread among other consumer durables, After a drop of 0.7 percent in June, the output of including sizable increases in the production of appli- construction supplies fell another 0.3 percent in July; ances, home computers, and audio and video equip- as a result, the July index for this market group is ment. The fall in the production of nondurable con- more than 1.7 percent below its peak in March. The sumer goods resulted primarily from significant production of materials, however, rose 0.6 percent, declines in the output of clothing, chemical products, led by a large increase in the output of energy materipaper products, and fuels. Residential electricity sales als; coal mining and electricity generation provided rebounded further from their big drop in May. much of the boost. The output of durable goods Continuing its strong expansion, the output of busi- advanced 0.4 percent; gains in the production of ness equipment increased 0.5 percent, bringing the equipment parts, particularly semiconductors, more index in July to a level 7.4 percent higher than that of than offset decreases in the production of parts for Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

734 Federal Reserve Bulletin • September 1997 consumer durables, mainly for motor vehicles. two nondurables industries, tobacco and paper, saw Pushed by increases in chemical and paper materials, output gains, while apparel, printing and publishthe output of nondurable goods materials increased ing, petroleum products, and leather had sizable 0.4 percent. declines. Mining output decreased 0.3 percent, as a large gain in coal mining was more than offset by substan- INDUSTRY GROUPS tial drops in other mining industries, especially the drilling of oil and gas wells. Manufacturing output increased 0.1 percent in July The factory operating rate fell 0.2 percentage after a 0.3 percent increase in June; excluding motor point, to 82.1 percent—its lowest level since vehicles and parts, however, production rose 0.2 per- October 1996. The utilization rate for advancedcent for the third consecutive month. Continuing processing industries decreased 0.2 percentage point, the pattern of the past several months, the gains in to 80.1 percent—a level just slightly higher than manufacturing output were concentrated in durable the rate attained last October. The rate for primarygoods. Gains were widespread, with only the lum- processing industries decreased 0.3 percentage point, ber, primary metals, and motor vehicles and parts to 86.5 percent—its lowest level since January 1997. industries declining appreciably; increases were espe- The operating rate at mines decreased 0.4 percentcially strong in computers and electrical machinery. age point, to 93.6 percent, while the rate at utilities The output of nondurable goods declined. Only increased 1.2 percentage point, to 88.8 percent. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

735 Statements to the Congress Statement by Laurence H. Meyer, Member, Board of Board, to reach consensus on reform, we have before Governors of the Federal Reserve System, before the us a unique opportunity to make significant changes Subcommittee on Financial Institutions and Regula- to the way in which consumers shop for and obtain tory Relief of the Committee on Banking, Housing, mortgage loans. These changes could improve the and Urban Affairs, US. Senate, July 15, 1997 usefulness of the information that consumers receive and at the same time reduce regulatory burden for the The Board of Governors appreciates the opportunity home mortgage industry. To the extent that beneficial to discuss our efforts to streamline the disclosure change is possible, we hope to facilitate it in any way requirements for home mortgage loans under the that we can. Truth in Lending Act (TILA) and unify them with those of the Real Estate Settlement Procedures Act (RESPA). Simplifying and streamlining the regulatory re- THE TRUTH IN LENDING ACT quirements under these two statutes is something that the Board and the Department of Housing and Urban The purpose of TILA is to promote the informed use Development (HUD) have been working on jointly of consumer credit, primarily through disclosure, for several years. The results of our efforts, which are with some substantive provisions. RESPA is both described in more detail later, generally have been a disclosure law and one that indirectly regulates well received. These regulatory changes have been prices. It requires disclosure about settlement costs relatively minor, however, because TILA and RESPA but also prohibits kickbacks and referral fees to proserve quite different purposes and contain distinct tect consumers from unnecessarily high settlement statutory disclosure requirements. Unquestionably, costs, as the HUD testimony will explain. each statute directly affects consumer mortgage loan TILA requires standardized disclosures about transactions, and the disclosure requirements are, in credit terms and costs. Creditors must disclose the fact, related. But given the statutory requirements, cost of credit as a dollar amount (the finance charge) there is little room for our agencies to simplify and and as an annual percentage rate (the APR). Uniforcombine disclosures in any significant way by regula- mity in creditors' disclosures is intended to assist tion. The Board supports the congressional directive consumers in comparison shopping. TILA requires to explore ways to change the two statutes to better additional disclosures for a loan secured by a conserve the homebuying public. sumer's home and permits consumers to rescind cer- Our testimony discusses how TILA and Regula- tain transactions that involve their principal dwelling. tion Z (Truth in Lending) regulate home mortgage The Board's Regulation Z implements the act, and an lending. It describes the agencies' efforts to simplify official staff commentary interprets the regulation. and streamline TILA and RESPA, including our joint The disclosure rules that creditors must follow efforts over the years to harmonize the regulations vary depending on the type of credit that is being whenever possible. Finally, the testimony outlines offered. For example, there are separate rules for our plan to develop legislative recommendations. closed-end credit, such as automobile or home mort- The task facing the agencies has evolved over the gage loans, and for open-end credit, such as credit past year. In the legislation enacted last September, cards or home equity lines of credit. There are addithe directive was to simplify and unify the disclo- tional rules governing reverse mortgages and mortsures given to consumers under the two existing gages that have rates and fees above a certain amount. statutes. That, in and of itself, can be viewed as a These regulatory requirements generally are denarrow mandate. rived from detailed disclosure provisions in TILA, As you heard from industry and consumer repre- except for certain rules governing adjustable rate sentatives last week, however, there is a significant mortgage loans. The statutory provisions dictate what and growing interest in more sweeping reform. If it is information must be disclosed, the format in which it possible for those parties, along with HUD and the is disclosed, and when it is disclosed. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

736 Federal Reserve Bulletin • September 1997 REGULATORY STREAMLINING EFFORTS During this process there were informal meetings TO DATE with industry and consumer group representatives, and we also sought the views of the Board's Con- The Board has always made a conscious effort to sumer Advisory Council. While representatives from ensure that TILA rules are compatible with RESPA. all of these groups, including the council, expressed For example, Regulation Z has long permitted credi- some dissatisfaction with the current statutes and tors to substitute both the RESPA good faith estimate regulations, there were few concrete suggestions and settlement statement (commonly referred to as about how to improve the situation without major the HUD-1) for the itemization of the "amount statutory changes. When the Congress subsefinanced" disclosure required under TILA. When quently directed the Board and HUD to streamline RESPA was amended in 1992 to cover subordinate the disclosures—first by making regulatory changes lien loans, the Board worked closely with HUD on if possible and second by making legislative the regulations that implemented the changes. Thus, recommendations—we took the opportunity to forin amending Regulation X (Borrowers of Securities mally ask interested parties what they would like to Credit) to cover those loans, HUD incorporated a see by way of reform. number of the definitions and concepts found in the In December 1996, the Board and HUD published Board's Regulation Z. The amendments to Regula- a joint Advance Notice of Proposed Rulemaking in tion X also permit Regulation Z's disclosures for the Federal Register (Attachment A).1 In that notice, home equity lines of credit to substitute for RESPA the agencies requested specific recommendations on disclosures. how TILA and RESPA disclosures could be made Over the past five years, the agencies have contin- more consistent (including ways that the disclosures ued to work together to streamline the rules to the could be combined, simplified, or improved), and extent possible. One recent example was an amend- how the timing and format of the disclosures could ment to the Regulation Z commentary designed to be made more compatible. The Board and HUD avoid conflict between RESPA's escrow accounting received about eighty comment letters, primarily rules and TILA's rules for calculating prepaid finance from creditors and their representatives, as is typicharges, such as private mortgage insurance. We are cally the case for agency proposals. confident that the cooperative relationships that have The comments covered a wide range of issues. developed between the agencies will stand us in good Many commenters requested changes that required stead as we tackle the job of preparing legislative legislative action, for example, changing the timing recommendations. of disclosures. A significant number of commenters Congressional efforts to simplify the disclosure requested more sweeping reform, such as eliminating schemes have been discussed and debated for several the APR. In some instances, commenters recomyears now. In early 1995, there were legislative mended consolidating the disclosures in ways that, proposals that would have transferred authority while not common in the industry, are permitted for RESPA to the Board, a transfer that the Board under the existing rules. For example, a significant opposed as it would not have satisfied concerns number of commenters recommended the consolidaabout the statute. These proposals also would have tion of the "early" TILA and RESPA disclosures for directed the Board to simplify the disclosures home purchase loans on a single form. The Board has under TILA and RESPA. In light of this potential subsequently clarified, through its commentary to responsibility, the Board undertook a review of Regulation Z, that there is no prohibition against the regulatory and statutory requirements of both putting multiple disclosures on the same page or TILA and RESPA to identify areas where it form, provided the TILA disclosures are segregated might be possible to streamline the two regula- from other information. tions. Because the proposed transfer of authority for RESPA would not have been accompanied by THE NEED FOR LEGISLATIVE CHANGES any statutory changes, however, the list of potential regulatory changes was short. The list included The timing rules and the different disclosure requirethings like changing the definition of a "business ments in TILA and RESPA are major obstacles to purpose loan" in Regulation X to match that in harmonizing the rules by regulation, beyond the Regulation Z, developing a commentary to Regulation X similar to Regulation Z's, and adopting the same record retention requirements in Regulation X 1. The attachments to this statement are available from Publications Services, Mail Stop 127, Board of Governors of the Federal as are in Regulation Z. Reserve System, Washington, DC 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 737 actions that the agencies have taken. After a review comparison shop before they apply for a loan and pay of the public comments and upon further analysis, the a fee. Second, consumers want the cost disclosures to Board and HUD thus concluded earlier this year that be as accurate as possible so that they are not conlegislative changes are needed to accomplish con- fronted with unexpected charges at the loan closing. gressional purposes. The Board published a Federal And third, commenters generally believed that the Register notice on April 2, stating our belief that disclosures could be less complex and therefore more making minor regulatory amendments would not be useful. significant enough either to materially improve the Creditors that commented continue to support more disclosures for consumers or to justify the cost of the fundamental reform, and a number of them reported changes for the industry. that they are working on legislative proposals. As You asked the Board to comment on whether the mentioned earlier, it now appears that this process for purposes of TILA and RESPA might be better change has moved beyond streamlining and unifying achieved by consolidation of the two statutes. At this disclosures to consideration of significant statutory stage it is not entirely clear whether targeted amend- reform. Despite the closing of the comment period, ments to the existing statutes, or the creation of a new the Board would welcome these proposals whenever statute, would best accomplish the needed changes. their sponsors are ready to share them. These are among the issues that the Board and HUD During the past two months, the Board and HUD are currently considering and that we will address in have held meetings with a number of consumer advoour recommendations to the Congress. cacy and industry groups involved in the legislative reform process. These meetings have been designed to give interested parties an opportunity to share their TIMETABLE FOR LEGISLATIVE concerns about TILA and RESPA, and ideas about reform, without having to be concerned that they are RECOMMENDATIONS being locked into any particular position. The Board and HUD have a number of efforts under In addition, the Board and HUD will hold a joint way to help us in developing our legislative recom- public forum in which the groups involved in the mendations. The Board's Federal Register notice of RESPA-TILA reform initiative, as well as members April 2 reopened the comment period for an addi- of the public, can discuss the benefits of and probtional 90 days so that interested parties could submit lems associated with the current statutory schemes legislative proposals. That comment period ended on and the principles that should guide any reform June 30, and we have received more than 100 com- effort. This one-day forum will be held at the Federal ment letters. Perhaps because of coverage of the Reserve Board on July 30. reform issue in a nationally syndicated column, most After the forum, the Board and HUD will identify of the letters from this second round of comments are potential areas for legislative recommendations. from consumers. Although the Board is still in the These meetings will address issues raised in the comprocess of reviewing and analyzing the letters, we ment letters received, the information gathered from can provide some general impressions about them. the public forum and informal meetings, and other Consumers' primary concern is that they do not background information. If needed, we may hold receive disclosures about mortgage costs earlier in additional meetings in September with the groups the process. Under the existing rules, lenders are not involved in the reform process to discuss more sperequired to provide the TILA disclosure, or a good cific proposals. faith estimate of the transaction costs, until at least At the end of this process, likely some time in three days after the consumer applies for the loan; October, we will work with HUD to begin drafting and to apply, the consumer may have to pay a non- the legislative recommendations. Our goal is to prorefundable fee. Most consumers who commented vide recommendations to the Congress by the end of would prefer to receive disclosures that help them the year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

738 Federal Reserve Bulletin • September 1997 Statement by Alan Greenspan, Chairman, Board of guish where one type of activity ends and another Governors of the Federal Reserve System, before the begins. Nonetheless, the Federal Reserve Board also Subcommittee on Finance and Hazardous Materials has concluded that it would be wise to move with of the Committee on Commerce, U.S. House of Repre- caution in addressing the removal of the current legal sentatives, July 17, 1997 barriers between commerce and banking because the unrestricted association of banking and commerce I appreciate the opportunity to present the views of would be a profound and surely irreversible structural the Board of Governors on the Financial Services change in the U.S. economy. Competition Act of 1997. The Banking Committee is Were we fully confident of how emerging techto be commended for addressing the complex issues nologies would affect the evolution of our economic associated with financial modernization. The commit- and financial structure, we could presumably develop tee has taken a major step forward in permitting today the regulations that would foster that evolution. affiliations of banking, securities, and insurance orga- But we are not, and history suggests we cannot. We nizations within an appropriate framework for con- thus run the risk of locking in a set of inappropriate solidated oversight. We believe such affiliations rules that could adversely alter the development of would improve the efficiency and competitiveness of market structures. Our ability to foresee accurately the financial services industry and result in more the future implications of technologies and market choices and better services for consumers. However, developments in banking, as in other industries, in addressing financial modernization the bill encom- has not been particularly impressive. As Professor passes a large number of far-ranging provisions. The Rosenberg of Stanford University has pointed out, Board has difficulty with the way some of the issues "... mistaken forecasts of future structure litter our are resolved in the bill before you. Thus, while reem- financial landscape." Consider the view of the 1960s phasizing our support for much of the general thrust that the "cashless society" was imminent. Nonetheof the bill, I would like today to highlight our major less, the public preference for paper has declined only gradually. Similarly, just a few years ago conconcerns. ventional wisdom argued that banks were dinosaurs that were becoming extinct. The reality today is far from it. Even more recently, it was argued that banks and nonfinancial firms had to merge to save the BANKING AND COMMERCE capital-starved banking system. Today, as you know, virtually all of our banks are very well capitalized. The need to respond to the effects of technology is one of the major reasons we are here today. Technol- All these examples, and more, suggest that if we ogy has already eroded many of the previous distinc- dramatically change the rules now about banking and tions between banking and nonbank finance, thereby commerce under circumstances of great uncertainty supporting the desirability, if not the necessity, of about future synergies between finance and nonpermitting the merging of all financial activities. finance we may well end up doing more harm than It seems clear that the same forces are in the good. And, as with all rule changes by government, process of blurring the boundaries between financial we are likely to find it impossible to correct our and nonfinancial businesses. Most of us are aware of errors promptly, if at all. Modifications of such a software companies interested in the financial ser- fundamental structural rule as the separation of bankvices business, but some financial firms, leveraging ing and commerce accordingly should proceed at a off their own internal skills, are also seeking to pro- deliberate pace to test the response of markets and duce software for third parties. Tracking software of technological innovations to the altered rules in the shipping companies lends itself to payment services. years ahead. Manufacturers have financed their customers' pur- Excessive delay would doubtless produce inequichases for a long time but now are increasingly using ties. Expanded financial activities for banking organithe resultant financial skills to finance noncustomers. zations require, and the Banking Committee's Finan- Moreover, many nonbank financial institutions are cial Services Competition Act provides, that those now profitably engaged in nonfinancial activities. firms operating in markets that banks can enter, in Current facts and future trends, in short, are creat- turn, be authorized to engage in banking. However, ing market pressures to permit the common owner- some securities and insurance firms, as well as some ship of financial and nonfinancial firms. The Board, thrift institutions, already own—or are owned by— in fact, has concluded that it is quite likely that in nonfinancial entities. Continuing the commerce and future years it will be close to impossible to distin- banking prohibitions would thus require the divesti- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 739 ture or grandfathering of all nonfinancial activities by such a change in the legal framework without major those organizations that wanted to acquire or estab- damage to established business relationships. Thus, lish banks. any errors from larger-than-needed initial authoriza- But the fact is that we do not—and the Board's tions could result in significant problems. Moreover, view is that we need not—have to make today as the authorization of commercial activities through sweeping a banking and commerce decision as the banks and their subsidiaries directly extends the sub- Competition Act proposes. That bill would permit sidy of the safety net over a much wider range of both banks and nonfinancial corporations each to activities, not to mention potentially undermining the originate up to 15 percent of their revenue from the safety and soundness of insured banks. other's activities. While there is some limit on the original size of each nonfinancial firm acquired by a bank holding company and on the original size of the one bank that a nonfinancial company could pur- OPERATING SUBSIDIARIES chase, the subsequent growth is only constrained by the 15 percent revenue limit. This constraint may be A number of observers have argued that there is no more apparent than real, given the ongoing growth subsidy associated with the federal safety net for and consolidation of the financial services industry. depository institutions—deposit insurance, and direct In our judgment, these baskets are far larger than access to the Federal Reserve's discount window and what is needed either as a controlled experiment or to payment system guarantees. The Board strongly permit unfettered consolidation with banks of those rejects this view. In saying this, the Board fully financial firms that have commercial affiliates. More- agrees that mandated government supervision and over, the Banking Committee bill would permit addi- regulation impose significant costs on banks, costs tional bank and commercial affiliations beyond these that, in many cases, can and should be reduced. But holding company affiliate baskets and permit some given that these costs cannot be avoided by a bank, affiliation within the bank or a bank subsidiary. Any no rational bank manager would ignore the opportucommercial (or financial) activity that had been nity to take advantage of the lower cost of funds, or authorized by the Office of Thrift Supervision for equivalently, the lower capital ratio, that access to the thrift institutions or by the Federal Reserve Board's safety net demonstrably provides. While it is true that regulation for overseas operations of U.S. banks the safety net does increase the possibility of loss to would be permitted to banks in the United States by taxpayers, a far larger public policy concern is that it the Banking Committee bill. Thus, over and above provides banks with a government-sanctioned comthe basket, U.S. banks could create subsidiaries that petitive advantage over nonbank firms. In the Board's invest up to 3 percent of the bank's assets in the view, unless the Congress explicitly desires to expand equity of OTS-approved commercial enterprises. In access to the safety net and tilt the competitive playaddition, applying the Board's foreign market rule to ing field further, a core component of any prudent domestic operations would mean that banks them- financial modernization strategy should be to miniselves could invest in the equity of individual non- mize the chances that safety net subsidies will be financial firms. The Board's foreign market rule, expanded into new activities and beyond the confines authorized by statute, was promulgated to assist U.S. of insured depository institutions. banks to achieve a level playing field with their Because the subsidy created by the federal safety foreign competitors in foreign markets. We see no net grants access to the "sovereign credit" of the compelling need to apply that rule to U.S. banks' United States, bank creditors are willing to accept a domestic operations. We are also concerned that the lower risk premium on bank liabilities and capital grandfather date for savings and loan holding compathan otherwise would be the case. For fully insured nies continues to shift with the date of enactment of deposits this risk premium is reduced essentially to the bill, thereby encouraging an increase in the numzero. But other debt instruments also benefit, and the ber of commercial firms that seek to affiliate with capital ratio demanded by the market is lower. The insured savings associations before new rules come end result is that banks enjoy a lower total and into effect. marginal cost of funding, including lower capital The Competition Act, in the Board's view, goes ratios, than would otherwise be required by the well beyond what both commercial banks and non- market. financial firms need to meet the requirements of While some benefits of the safety net are always today as well as in the foreseeable future. The Board available to banks, it is critical to understand that the believes it would be virtually impossible to reverse value of the subsidy is smallest for very healthy Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

740 Federal Reserve Bulletin • September 1997 banks during good economic times and greatest at national, Continental Illinois, Barings PLC, thrift weak banks during a financial crisis. What was it institutions, and Texas banks all exhibited problems worth in the late 1980s and early 1990s for a bank that spread quickly among their affiliates or required with a troubled loan portfolio to have deposit liabili- a consolidated approach to resolve the problems at ties guaranteed by the Federal Deposit Insurance least cost and disruption to the overall financial Corporation to be assured that it could turn illiquid system. assets to liquid assets at once through the Federal Moreover, continued gains in technology and in Reserve discount window and to tell its customers innovative risk-management techniques permit orgathat payment transfers would be settled on a riskless nizations of all kinds to manage and control their Federal Reserve Bank? For many, it was worth not activities on an increasingly centralized basis, with basis points but percentage points. For some, it meant less attention paid to the individual legal entities that the difference between survival and failure. In con- make up the organization. In that environment, it trast today, when the economy is performing well and seems to the Board that oversight on a consolidated the banking industry has just experienced its fifth basis of an organization's broad-based activities has straight year of record profits, it is perhaps too easy to become more crucial in recent years, not less. Bank ignore the value of the safety net and see only its supervisors throughout the world recognize this point costs. The Board believes that prudent public policy and have adopted consolidated oversight as a fundashould take a longer view. mental principle. The Congress also recognized the In the Board's judgment, the bank holding com- necessity of consolidated oversight for the U.S. bankpany organizational form has, by the record, proved ing system, by requiring, as a condition for a foreign to be an effective means for limiting the safety net bank's entry into this country, that the bank be subsubsidy primarily to banks. There is clear evidence ject to consolidated home country supervision. What that market participants understand that regulatory is necessary for foreign banks entering the United policy is focused on the bank, and thus markets States is surely just as necessary for U.S. banks and distinguish between the bank and its holding com- the U.S. banking system. pany parent and affiliates. Given this success, the holding company structure should, in the Board's view, not be abandoned. Indeed, our strong preference is for the holding company format to be retained Crisis Management and Systemic Risk for new activities that will under expanded authorities benefit from direct access to the federal safety We believe that the Federal Reserve needs to connet. Thus, we would recommend that the Financial tinue to have consolidated oversight authority, espe- Services Competition Act's provisions that allow cially for organizations in which the bank is large expanded activities to be conducted either in a hold- enough that its failure could cause disruptions in ing company subsidiary or in a direct operating sub- financial markets sufficient to affect economic activsidiary of a bank be amended to require that new ity. Critically, the central bank has the responsibility activities be conducted only in a holding company to forestall financial crises (including systemic distursubsidiary. bances in the banking system) and to manage such crises once they occur. Supervisory and regulatory responsibilities afford the Federal Reserve both the insight and the authority CONSOLIDATED OVERSIGHT to use crisis management techniques that are less blunt than open market operations and more precisely The Board supports the provisions of the Banking calibrated to the problem at hand. Such tools not only Committee's Competition Act that continue consoli- improve our ability to manage crises but, more dated oversight of the bank holding company. In our important, help us to avoid them. Indeed, we meajudgment, it is essential that these provisions be sure our degree of success in this area not by the retained and not weakened. The historical experience number of crises we assist in containing but rather in supervising bank holding companies has shown in the number of crises that could have erupted but that knowledge of the financial strength and risks did not. The use of crisis management techniques inherent in a consolidated holding company can be requires both the authority that comes with supercritical to protecting an insured subsidiary bank and vision and regulation and the understanding of resolving problems once they arise. Examples are the linkages among supervision and regulation, easy to recall: Bank of Credit and Commerce Inter- prudential standards, risk-taking, relationships among Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 741 banks and other financial market participants, and ment and settlement systems, exposing financial marmacroeconomic stability. The objectives of the cen- kets to dangerous stress. Indeed, it is in the cauldron tral bank in crisis management are to contain finan- of the payment and settlement systems, where decicial losses and prevent a contagious loss of confi- sions involving large sums must be made quickly, dence so that difficulties at one institution do not that all of the risks and uncertainties associated with spread more widely to others. The focus of its con- problems at a single participant become focused as cern is not to avoid the failure of entities that have participants seek to protect themselves from uncermade poor decisions or have had bad luck but rather tainty. Better solvent than sorry, they might well to see that such failures—or threats of failures— decide, and refuse to honor a payment request. do not have broad and serious impacts on financial Observing that, others might follow suit. And that is markets and the national, and indeed the global, how crises often begin. economy. Limiting, if not avoiding, such disruptions and The Federal Reserve's ability to respond expedi- ensuring the continued operation of the payment systiously to any particular incident does not necessitate tem requires broad and in-depth knowledge of bankcomprehensive information on each banking institu- ing and markets as well as detailed knowledge and tion. But it does require that the Federal Reserve have authority with respect to the payment and settlement in-depth knowledge of how institutions of various arrangements and their linkages to banking operasizes and other characteristics are likely to behave tions. This type of insight and authority—as well as and what resources are available to them in the event knowledge about the behavior of key participants— of severe financial stress. We currently gain the nec- cannot be created on an ad hoc basis. It requires essary insight by having a broad sample of banks broad and sustained involvement in both the payment subject to our supervision and through our authority infrastructure and the operation of the banking sysover bank holding companies. tem. Supervisory authority over the major bank participants is a necessary element. Payment and Settlement Systems Changing Role of Consolidated Oversight A key element of avoiding systemic concerns is management of the payment system. Virtually all of The modernizing of our financial system—especially the U.S. dollar transactions made worldwide—for the combining of banks, securities firms, and insursecurities transfers, foreign exchange and other inter- ance companies, as well as possibly banking and national capital flows, and for payment for goods and commerce—requires that the role of consolidated services—are settled in the U.S. banking system. A oversight also be reviewed. small number of transactions that comprise the vast The necessity to understand and review centralized proportion of the total value of transactions are trans- risk management and control mechanisms, and simiferred over large-dollar payment systems. larly to review intra-organizational fund transfers A critical component of these systems is the Fed- involving the insured depositories, does not require eral Reserve's wire transfer network, Fedwire. Fed- bank-like supervision of nonbank affiliates. The Comwire and a very small number of private clearing- petition Act appropriately recognizes this. It would houses are arguably the linchpin of the international require that the banking agencies rely to the fullest system of payments that relies on the dollar as the extent possible on examination reports and other major international currency for trade and finance. information collected by supervisors of other regu- Disruptions and disturbances in the U.S. payment lated entities. In addition, the bill would require that system thus can easily have global implications. the banking agencies defer to the Securities and In all of these payment and settlement systems, Exchange Commission in interpretations and enforcecommercial banks play a central role, both as partici- ment of the federal securities laws and to the state pants and as providers of credit to nonbank partici- insurance commissioners and to state insurance laws. pants. Day in and day out, the settlement of payment The bill continues to allow the Federal Reserve Board obligations and securities trades requires significant to establish capital adequacy guidelines at the holdamounts of bank credit. In periods of stress, such ing company level. However, the bill sets important credit demands surge just at the time when some limits on these holding company guidelines. For banks are least willing or able to meet them. These example, the consolidated supervisor may not impose demands, if unmet, could produce gridlock in pay- capital requirements on any nonbank subsidiary that Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

742 Federal Reserve Bulletin • September 1997 is in compliance with applicable capital requirements CONCLUSION of another federal or state agency. In addition, holding company capital guidelines must take full account To summarize: of the capital position of these regulated nonbank subsidiaries when establishing consolidated capital • The Board supports the overall thrust of the guidelines and full account of capital levels in Banking Committee bill that is now being reviewed unregulated subsidiaries when those levels are consis- by this committee. We strongly support the bill's tent with industry norms. The bill requires the Fed- approach to affiliations of banking, securities, and eral Reserve Board to address the use of double insurance organizations. leverage (that is, the use of debt at the holding • We are, nonetheless, concerned that the bill goes company to fund equity and subordinated debt at a unnecessarily far at this time in mixing commerce regulated institution) but prohibits the establishment and banking. There is no reason not to proceed in of a capital ratio that is not risk weighted. In addition, incremental steps; first to integrate banking and the bill requires that the consolidated supervisor con- finance with the minor and quite limited combinasult with other supervisors, including, in particular, tions of banking and commerce that this requires and supervisors of nonbanking entities, before establish- only later, as these developments mature, assess the ing capital guidelines for holding companies. desirability of fully dismantling the barriers between All of these—the capital and examination rules— banking and commerce. are extremely important provisions both for existing • In addition, we think it unwise to permit banks bank holding companies and for securities firms and to conduct new activities in their own subsidiaries insurance companies that wish to affiliate with banks. because of the extension of the safety net subsidy Such provisions would greatly enhance the "two-way directly to those subsidiaries. We have concluded that street" by eliminating unnecessary burden and red the holding company framework provides the best tape. insulation against the transference of that subsidy The Board believes that bank holding companies beyond the bank and creates the most level playing need to continue to have consolidated oversight both field for affiliations of banks and other financial firms. to protect the safety net and to limit the transference • Consolidated oversight of bank holding compaof the safety net subsidy. We believe that the Federal nies is critical both to protect the safety net and to Reserve must not have its ability impaired to monitor minimize its transference. We believe that the central banking organizations in order to respond effectively bank's role in the prevention and containment of to systemic crises, to manage the risk in the payment financial crises and as guarantor of the payment syssystem, and to ensure the safety and stability of our tem requires that we continue to have consolidated financial system. oversight responsibility for most holding companies. Statement by Alan Greenspan, Chairman, Board of ing the first quarter of 1997, real gross domestic Governors of the Federal Reserve System, before the product expanded at nearly a 6 percent annual rate, Subcommittee on Domestic and International Mone- after having posted a 3 percent increase over 1996. tary Policy of the Committee on Banking and Finan- Activity apparently continued to expand in the cial Services, US. House of Representatives, July 22, second quarter, albeit at a more moderate pace. The 1997 economy is now in the seventh consecutive year of expansion, making it the third longest post-World I am pleased to appear before this subcommittee to War II cyclical upswing to date. present the Federal Reserve's report on the economic Moreover, our Federal Reserve Banks indicate that situation and monetary policy.1 economic activity is on the rise, and at a relatively The recent performance of the economy, character- high level, in virtually every geographic region and ized by strong growth and low inflation, has been community of the nation. The expansion has been exceptional—and better than most anticipated. Dur- balanced, in that inventories, as well as stocks of business capital and other durable assets, have been kept closely in line with spending, so overhangs have 1. See "Monetary Policy Report to the Congress," Federal Reserve been small and readily corrected. Bulletin, vol. 83 (August 1997), pp. 641-58. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 743 This strong expansion has produced a remarkable Nonetheless, we also recognize that the capacity of increase in work opportunities for Americans. A net our economy to produce goods and services is not of more than 13 million jobs has been created since without limit. If demand were to outrun supply, inflathe current period of growth began in the spring tionary imbalances would eventually develop that of 1991. As a consequence, the unemployment rate would tend to undermine the current expansion and has fallen to 5 percent—its lowest level in almost inhibit the long-run growth potential of the economy. a quarter century. The expansion has enabled many Because monetary policy works with a significant in the working-age population, a large number of lag, policy actions are directed at a future that may whom would have otherwise remained out of the not be clearly evident in current experience. This labor force or among the longer-term unemployed, to leads to policy judgments that are by their nature acquire work experience and improved skills. Our calibrated to the relative probabilities of differing whole economy will benefit from their greater pro- outcomes. We moved the federal funds rate higher ductivity. To be sure, not all segments of our popula- in March because we perceived the probability of tion are fully sharing in the economic improvement. demand outstripping supply to have increased to a Some Americans still have trouble finding jobs, and point where inaction would have put at risk the solid for part of our workforce real wage stagnation elements of support that have sustained this expanpersists. sion and made it so beneficial. In contrast to the typical postwar business cycle, In making such judgments in March and in measured price inflation is lower now than when the the future, we need to analyze carefully the various expansion began and has shown little tendency to forces that may be affecting the balance of supply and rebound of late, despite high rates of resource utiliza- demand in the economy, including those that may be tion. In the business sector, producer prices have responsible for its exceptional recent behavior. The fallen in each of the past six months. Consumers also remainder of my testimony will address the various are enjoying low inflation. The consumer price index possibilities. (CPI) rose at less than a 2 percent annual rate over the first half of the year, down from a little more than 3 percent in 1996. INFLATION, OUTPUT, AND TECHNOLOGICAL With the economy performing so well for so long, CHANGE IN THE 1990S financial markets have been buoyant, as memories of past business and financial cycles fade with time. Many observers, including us, have been puzzled Soaring prices in the stock market have been fueled about how an economy, operating at high levels and by moderate long-term interest rates and expectations drawing into employment increasingly less experiof investors that profit margins and earnings growth enced workers, can still produce subdued and, by will hold steady, or even increase further, in a some measures even falling, inflation rates. It will, relatively stable, low-inflation environment. Credit doubtless, be several years before we know with any spreads at depository institutions and in the open conviction the full story of the surprisingly benign market have remained extremely narrow by historical combination of output and prices that has marked the standards, suggesting a high degree of confidence business expansion of the past six years. among lenders regarding the prospects for credit Certainly, public policy has played an important repayment. role. Administration and congressional actions to cur- The key question facing financial markets and poli- tail budget deficits have enabled long-term interest cymakers is what is behind the good performance of rates to move lower, encouraging private efficiencythe economy and will it persist. Without question, the enhancing capital investment. Deregulation in a numexceptional economic situation reflects some tempo- ber of industries has fostered competition and held rary factors that have been restraining inflation rates. down prices. Finally, the preemptive actions of In addition, however, important pieces of informa- the Federal Reserve in 1994 contained a potentially tion, while just suggestive at this point, could be read destabilizing surge in demand, short-circuiting a as indicating basic improvements in the longer-term boom-bust business cycle in the making and keeping efficiency of our economy. The Federal Reserve has inflation low to encourage business innovation. But been aware of this possibility in our monetary policy the fuller explanation of the recent extraordinary deliberations and, as always, has operated with a performance may well lie deeper. view to supplying adequate liquidity to allow the In February 1996,1 raised before this committee a economy to reach its highest potential on a sustain- hypothesis tying together technological change and able basis. cost pressures that could explain what was even then Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

744 Federal Reserve Bulletin • September 1997 a puzzling quiescence of inflation. The new informa- kets would have suggested, and a lingering sense of tion received in the past eighteen months remains fear or uncertainty seems still to pervade the job consistent with those earlier notions; indeed, some market, though to a somewhat lesser extent. additional pieces of the puzzle appear to be falling Consumer surveys do indicate greater optimism into place. about the economy. However, it is one thing to A surge in capital investment in high-tech equip- believe that the economy, indeed the job market, will ment that began in early 1993 has since strengthened. do well overall, but quite another to feel secure about Purchases of computer and telecommunications one's individual situation, given the accelerated pace equipment have risen at an annual rate of more than of corporate restructuring and the heightened fear of 14 percent since early 1993 in nominal terms, and at skill obsolescence that has apparently characterized an astonishing rate of nearly 25 percent in real terms, this expansion. Persisting insecurity would help reflecting the fall in the prices of this equipment. explain why measured personal saving rates have not Presumably, companies have come to perceive a declined as would have been expected from the huge significant increase in profit opportunities from increase in stock market wealth. We will, however, exploiting the improved productivity of these new have a better fix on saving rates after the coming technologies. benchmark revisions to the national income and prod- It is premature to judge definitively whether these uct accounts. business perceptions are the harbinger of a more The combination in recent years of subdued comgeneral and persistent improvement in productivity. pensation per hour and solid productivity advances Supporting this possibility, productivity growth, has meant that unit labor costs of nonfinancial corpowhich often suffers as business expansions mature, rations have barely moved. Moreover, when you has not followed that pattern. In addition, profit mar- combine unit labor costs with nonlabor costs—which gins remain high in the face of pickups in compensa- account for one-quarter of total costs on a consolition growth, suggesting that businesses continue to dated basis—total unit costs for the year ended in the find new ways to enhance their efficiency. Nonethe- first quarter of 1997 rose only about xh percent. less, although the anecdotal evidence is ample and Hence, a significant part of the measured price manufacturing productivity has picked up, a change increase over that period was attributable to a rise in in the underlying trend is not yet reflected in our profit margins, unusual well into a business expanconventional data for the whole economy. sion. Rising margins are further evidence suggesting But even if the perceived quicker pace of applica- that productivity gains have been unexpectedly tion of our newer technologies turns out to be mere strong; in these situations, real labor compensation wheel-spinning rather than true productivity advance, usually catches up only with a lag. it has brought with it a heightened sense of job While accelerated technological change may well insecurity and, as a consequence, subdued wage be an important element in unraveling the current gains. As I pointed out here last February, polls economic puzzle, other influences have been at play indicated that despite the significant fall in the unem- as well in restraining price increases at high levels of ployment rate, the proportion of workers in larger resource utilization. The strong dollar of the past two establishments fearful of being laid off rose from years has pared import prices and constrained the 25 percent in 1991 to 46 percent by 1996. It should pricing behavior of domestic firms facing import not have been surprising then that strike activity in competition. Increasing globalization has enabled the 1990s has been lower than it has been in decades greater specialization over a wider array of goods and and that new labor union contracts have been longer services, in effect allowing comparative advantage to and have given greater emphasis to job security. Nor hold down costs and enhance efficiencies. Increased should it have been unexpected that the number of deregulation of telecommunications, motor and rail workers voluntarily leaving their jobs to seek other transport, utilities, and finance doubtless has been a employment has not risen in this period of tight labor factor restraining prices, as perhaps has the reduced markets. market power of labor unions. Certainly, changes in To be sure, since last year, surveys have indicated the health care industry and the pricing of health that the proportion of workers fearful of layoff has services have greatly contributed to holding down stabilized and the number of voluntary job leavers growth in the cost of benefits, and hence overall labor has edged up. And, indeed, perhaps as a conse- compensation. quence, wage gains have accelerated some. But Many of these forces are limited or temporary, increases in the employment cost index still trail and their effects can be expected to diminish, at behind what previous relationships to tight labor mar- which time cost and price pressures would tend to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 745 re-emerge. The effects of an increased rate of techno- We do not now know, nor do I suspect can anyone logical change might be more persistent, but they know, whether current developments are part of a too could not permanently hold down inflation if once-or-twice-in-a-century phenomenon that will the Federal Reserve allows excess liquidity to flood carry productivity trends nationally and globally to a financial markets. I have noted to you before the new higher track, or whether we are merely observlikelihood that at some point workers might no longer ing some unusual variations within the context of be willing to restrain wage gains for added security, an otherwise generally conventional business cycle at which time accelerating unit labor costs could expansion. The recent improvement in productivity begin to press on profit margins and prices, should could be just transitory, an artifact of a temporary monetary policy be too accommodative. surge in demand and output growth. In view of the When I discuss greater technological change, I am slowing in growth in the second quarter and the more not referring primarily to a particular new invention. moderate expansion widely expected going forward, Instead, I have in mind the increasingly successful data for profit margins on domestic operations and and pervasive application of recent technological productivity from the second quarter on will be espeadvances, especially in telecommunications and cially relevant in assessing whether recent improvecomputers, to enhance efficiencies in production ments are structural or cyclical. processes throughout the economy. Many of these Whatever the trend in productivity and, by extentechnologies have been around for some time. Why sion, overall sustainable economic growth, from the might they be having a more pronounced effect Federal Reserve's point of view, the faster the better. now? We see our job as fostering the degree of liquidity In an intriguing paper prepared for a conference that will best support the most effective platform for last year sponsored by the Federal Reserve Bank of growth to flourish. We believe a noninflationary envi- Boston, Professor Nathan Rosenberg of Stanford ronment is such a platform because it promotes longdocumented how, in the past, it often took a consid- term planning and capital investment and keeps the erable period of time for the necessary synergies pressure on businesses to contain costs and enhance to develop between different forms of capital and efficiency. technologies. One example is the invention of the The Federal Reserve's policy problem is not with dynamo in the mid-1800s. Rosenberg's colleague growth, but with maintaining an effective platform. Professor Paul David had noted a number of years To do so, we endeavor to prevent strains from develago that it was not until the 1920s that critical oping in our economic system, which long expecomplementary technologies of the dynamo—for rience tells us produce bottlenecks, shortages, and example, the electric motor as the primary source of inefficiencies. These eventually create more inflation, mechanical drive in factories, and central generating which undermines economic expansion and limits the stations—were developed and in place and that longer-term potential of the economy. production processes had fully adapted to these In gauging the potential for oncoming strains, it is inventions. the effective capacity of the economy to produce that What we may be observing in the current environ- is important to us. An economy operating at a high ment is a number of key technologies, some even level of utilization and growing 5 percent a year is in mature, finally interacting to create significant new little difficulty if capacity is growing at least that fast. opportunities for value creation. For example, the But a fully utilized economy growing at 1 percent applications for the laser were modest until the later will eventually get into trouble if capacity is growing development of fiber optics engendered a revolution less than that. in telecommunications. Broad advances in software Capacity itself, however, is a complex concept, have enabled us to capitalize on the prodigious gains which requires a separate evaluation of its two comin hardware capacity. The interaction of both of these ponents, capital and labor. It appears that capital, that has created the Internet. is, plant and equipment, can adapt and expand more The accelerated synergies of the various technolo- expeditiously than in the past to meet demands. gies may be what have been creating the apparent Hence, capital capacity is now a considerably less significant new profit opportunities that presumably rigid constraint than it once was. lie at the root of the recent boom in high-tech invest- In recent years, technology has engendered a sigment. An expected result of the widespread and effec- nificant compression of lead times between order and tive application of information and other technolo- delivery for production facilities. This has enabled gies would be a significant increase in productivity output to respond increasingly faster to an upsurge in and reduction in business costs. demand, thereby decreasing the incidence of strains Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

746 Federal Reserve Bulletin • September 1997 on capital capacity and shortages so evident in earlier to respond to changes in demand. To be sure, indibusiness expansions. vidual firms have acquired additional flexibility by Reflecting progressively shorter lead times for increased use of outsourcing and temporary workers. capital equipment, unfilled orders to shipment ratios In addition, smaller work teams can adapt more for nondefense capital goods have declined 30 per- readily to variations in order flows. While these techcent in the past six years. Not only do producers have niques put the right workers at the right spots to quicker access to equipment that embodies the most reduce bottlenecks, they do not increase the aggrerecent advances, but they have been able to adjust gate supply of labor. That supply is sensitive to their overall capital stock more rapidly to increases in changes in demand, but to a far more limited extent demand. than for facilities. New plants can almost always be The current lack of material shortages and bottle- built. But labor capacity for an individual country necks, despite the high level and recent robust expan- is constrained by the size of the working-age popusion of demand, is striking. The effective capacity lation, which, except for immigration, is basically of production facilities has increased substantially determined several decades in the past. in recent years in response to strong final demands Of course, capital facilities and labor are not fully and the influence of cost reductions possible with the separate markets. Within limits, labor and capital are newer technologies. Increased flexibility is particu- substitutes, and slack in one market can offset tightlarly evident in the computer, telecommunications, ness in another. For example, additional work shifts and related industries, a segment of our economy that can expand output without significant addition to seems far less subject to physical capacity constraints facilities, and similarly more labor-displacing equipthan many older-line establishments, and one that is ment can permit production to be increased with the assuming greater importance in our overall output. same level of employment. But the shortening of lags has been pervasive even Yet despite significant increases in capital equipin more mature industries, in part because of the ment in recent years, new additions to labor supply application of advanced technologies to production have been inadequate to meet the demand for labor. methods. As a consequence, the recent period has been one of At the extreme, if all capital goods could be pro- significant reduction in labor market slack. duced at constant cost and on demand, the size of our Of the more than 2 million net new hires at an nation's capital stock would never pose a restraint on annual rate since early 1994, only about half have production. We are obviously very far from that come from an expansion in the population aged 16 to nirvana, but it is important to note that we are also far 64 who wanted a job, and more than a third of those from the situation a half-century ago when our pro- were net new immigrants. The remaining 1 million duction processes were dominated by equipment such plus per year increase in employment has been pulled as open hearth steel furnaces, which had very exact- from those who had been reported as unemployed ing limits on how much they could produce in a fixed (600,000 annually) and those who wanted, but had time frame and which required huge lead times to not actively sought, a job (more than 400,000 annuexpand their capacity. ally). The latter, of course, are not in the official Even so, today's economy as a whole still can unemployment count. face capacity constraints from its facilities. Indeed, The key point is that continuously digging ever just three years ago, bottlenecks in industrial deeper into the available working-age population production—though less extensive than in years past is not a sustainable trajectory for job creation. The at high levels of measured capacity utilization—were unemployment rate has a downside limit if for no nonetheless putting significant upward pressures on other reason than unemployment, in part, reflects prices at earlier stages of production. More recently voluntary periods of job search and other frictional vendor performance has deteriorated somewhat, indi- unemployment. There is also a limit on how many of cating that flexibility to meet demands still has limits. the additional 5 million who wanted a job last quarter Although further strides toward greater facilities flex- but were not actively seeking one could be readily ibility have occurred since 1994, this is clearly an absorbed into jobs—in particular, the large number evolutionary, not a revolutionary, process. enrolled in school and those who may lack the necessary skills or face other barriers to taking jobs. The rise in the average workweek since early 1996 sug- LABOR MARKETS gests employers are having increasingly greater difficulty fitting the millions who want a job into avail- Moreover, technology and management changes have able job slots. If the pace of job creation continues, had only a limited effect on the ability of labor supply Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 747 the pressures on wages and other costs of hiring ditions are supportive of growth. Particularly notable increasing numbers of such individuals could esca- is the run-up in stock market wealth, the full effects late more rapidly. of which apparently have not been reflected in overall To be sure, there remain an additional 34 million in demand but might yet be. the working-age population (age 16-64) who say Monetary policymakers, balancing these various they do not want a job. Presumably, some of these forces, forecast a continuation of less rapid growth early retirees, students, or homemakers might be in coming quarters. For 1997 as a whole, the central attracted to the job market if it became sufficiently tendency of their forecasts has real GDP growing rewarding. However, making it attractive enough 3 percent to ?>lA percent. This would be much more could also involve upward pressures in real wages brisk than was anticipated in February, and the that would trigger renewed price pressures, under- upward revision to this estimate largely reflects the mining the expansion. unexpectedly strong first quarter. The central ten- Thus, there would seem to be emerging constraints dency of monetary policymakers' projections is that on potential labor input. Even before we reach the real GDP will expand 2 percent to 2xh percent in ultimate limit of sustainable labor supply growth, the 1998. This pace of expansion is expected to keep the economy's ability to expand employment at the unemployment rate close to its current low level. recent rate should rapidly diminish. The availability We are reasonably confident that inflation will be of unemployed labor could no longer add to growth, quite modest for 1997 as a whole. The central tenirrespective of the degree of slack in physical facili- dency of the forecasts is that consumer prices will ties at that time. Simply adding new facilities will rise only 2XA percent to 2yh percent this year. This not increase production unless output per worker would be a significantly better outcome than the improves. Such improvements are possible if worker 23A percent to 3 percent CPI inflation foreseen in skills increase, but such gains come slowly through February. improved education and on-the-job training. They are Federal Open Market Committee (FOMC) memalso possible as capital substitutes for labor but are bers do see higher rates of inflation next year. The limited by the state of technology. More significant central tendency of the projections is that CPI inflaadvances require technological breakthroughs. At tion will be 2Vi percent to 3 percent in 1998—a little the cutting edge of technology, where America finds above the expectation for this year. However, much itself, major improvements cannot be produced on of this increase is presumed to result from the demand. New ideas that matter are hard won. absence of temporary factors that are holding down inflation this year. In particular, the favorable movements in food and energy prices of 1997 are unlikely THE ECONOMIC OUTLOOK to be repeated, and non-oil import prices may not continue to decline. While it is possible that better As I noted, the recent performance of the labor mar- productivity trends and subdued wage growth will kets suggests that the economy was on an unsustain- continue to help damp the increases in business costs able track. Unless aggregate demand increases more associated with tight labor markets, this is a situation slowly than it has in recent years—more in line with that the Federal Reserve plans to monitor closely. trends in the supply of labor and productivity— I have no doubt that the current stance of policy— imbalances will emerge. We do not know, however, characterized by a nominal federal funds rate around at what point pressures would develop—or indeed 5V2 percent—will need to be changed at some point whether the economy is already close to that point. to foster sustainable growth and low inflation. Adjust- Fortunately, the very rapid growth of demand over ments in the policy instrument in response to new the winter has eased recently. To an extent this easing information are a necessary and, I should like to seems to reflect some falloff in growth of demand for emphasize, routine aspect of responsible policymakconsumer durables and for inventories to a pace more ing. For the present, as I indicated, demand growth in line with moderate expansion in income. But some does appear to have moderated, but whether that of the recent slower growth could simply be a prod- moderation will be sufficient to avoid putting addiuct of abnormal weather patterns, which contributed tional pressures on resources is an open question. to a first-quarter surge in output and weakened the With considerable momentum behind the expansion second quarter, in which case the underlying trend and labor market utilization rates unusually high, the could be somewhat higher than suggested by the Federal Reserve must be alert to the possibility that second-quarter data alone. Certainly, business and additional action might be called for to forestall consumer confidence remains high and financial con- excessive credit creation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

748 Federal Reserve Bulletin • September 1997 The Federal Reserve is intent on gearing its policy too high. Similarly, in conducting monetary policy to facilitate the maximum sustainable growth of the the Federal Reserve needs constantly to look down economy, but it is not, as some commentators have the road to gauge the future risks to the economy and suggested, involved in an experiment that deliber- act accordingly. ately prods the economy to see how far and fast it can grow. The costs of a failed experiment would be much too burdensome for too many of our citizens. GROWTH OF MONEY AND CREDIT Clearly, in considering issues of monetary policy we need to distinguish carefully between sustainable The view that the Federal Reserve's best contribution economic growth and unsustainable accelerations of to growth is to foster price stability has informed activity. Sustainable growth reflects the increased both our tactical decisions on the stance of monetary capacity of the economic system to produce goods policy and our longer-run judgments on appropriate and services over the longer run. It is largely the sum rates of liquidity provision. To be sure, growth rates of increases in productivity and in the labor force. of monetary and credit aggregates have become less That growth contrasts with a second type, a more reliable as guides for monetary policy as a result transitory growth. An economy producing near of rapid change in our financial system. As I have capacity can expand faster for a short time, often reported to you previously, the current uncertainties through unsustainably low short-term interest rates regarding the behavior of the monetary aggregates and excess credit creation. But this is not growth that have implied that we have been unable to employ promotes lasting increases in standards of living and them as guides to short-run policy decisions. Accordin jobs for our nation. Rather, it is a growth that ingly, in recent years we have reported annual ranges creates instability and thereby inhibits the achieve- for money growth that serve as benchmarks under ment of our nation's economic goals. conditions of price stability and a return to histori- The key question is how monetary policy can best cally stable patterns of velocity. foster the highest rate of sustainable growth and Over the past several years, the monetary avoid amplifying swings in output, employment, and aggregates—M2 in particular—have shown some prices. The historical evidence is unambiguous that signs of reestablishing such stable patterns. The excessive creation of credit and liquidity contributes velocity of M2 has fluctuated in a relatively narrow nothing to the long-run growth of our productive range, and some of its variation within that range potential and much to costly shorter-term fluctua- has been explained by interest rate movements, in a tions. Moreover, it promotes inflation, impairing the relationship similar to that established over earlier economy's longer-term potential output. decades. We find this an encouraging development, Our objective has never been to contain inflation and it is possible that at some point the FOMC might as an end in itself, but rather as a precondition for elect to put more weight on such monetary quantities the highest possible long-run growth of output and in the conduct of policy. But in our view, sufficient income—the ultimate goal of macroeconomic policy. evidence has not yet accumulated to support such a In considering possible adjustments of policy to judgment. achieve that goal, the issue of lags in the effects of Consequently, we have decided to keep the existmonetary policy is crucial. The evidence clearly dem- ing ranges of growth for money and credit for 1997 onstrates that monetary policy affects the financial and carry them over to next year, retaining the intermarkets immediately but works with significant lags pretation of the money ranges as benchmarks for the on output, employment, and prices. Thus, as I pointed achievement of price stability. With nominal income out earlier, policy needs to be made today on the growth strong relative to the rate that would likely basis of likely economic conditions in the future. As prevail under conditions of price stability, the growth a consequence, and in the absence of once-reliable of M2 is likely to run in the upper part of its range monetary guides to policy, there is no alternative to both this year and next, while M3 could run a little formulating policy using risk-reward tradeoffs based above its cone. Domestic nonfinancial sector debt is on what are, unavoidably, uncertain forecasts. likely to remain well within its range, with private Operating on uncertain forecasts, of course, is not debt growth brisk and federal debt growth subdued. unusual. People do it every day, consciously or sub- Although any tendency for the aggregates to exceed consciously. A driver might tap the brakes to make their ranges would not, in the event, necessarily call sure not to be hit by a truck coming down the street, for an examination of whether a policy adjustment even if he thinks the chances of such an event are was needed, the Federal Reserve will be closely relatively low; the costs of being wrong are simply examining financial market prices and flows in the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 749 context of a broad range of economic and price larly, other government policies also have a major indicators for evidence that the sustainability of the role to play in contributing to economic growth. A economic expansion may be in jeopardy. continued emphasis on market mechanisms through deregulation will help sharpen incentives to work, save, invest, and innovate. Similarly, a fiscal policy CONCLUDING COMMENT oriented toward limited growth in government expen- The Federal Reserve recognizes, of course, that ditures, producing smaller budget deficits and even monetary policy does not determine the economy's budget surpluses, would tend to lower real interest potential. All that it can do is help establish sound rates even further, also promoting capital investment. money and a stable financial environment in which The recent experience provides striking evidence of the inherent vitality of a market economy can flourish the potential for the continuation and extension of and promote the capital investment that in the long monetary, fiscal, and structural policies to enhance run is the basis for vigorous economic growth. Simi- our economy's performance in the period ahead. Chairman Greenspan presented identical testimony before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, July 23, 1997. Statement by Alice M. Rivlin, Vice Chair, Board of 1. Why is the economy performing so well—and, Governors of the Federal Reserve System, before the in particular, why do we have so little inflation with Committee on Banking and Financial Services, U.S. such low unemployment? House of Representatives, July 23, 1997 2. Why is it so important, especially right now, to keep the economy growing at its highest sustainable I would like to begin by expressing my appreciation rate and to avoid recession? to the committee for holding this hearing to solicit a 3. What policies—monetary and other economic wide range of views on appropriate monetary policy policies—are most likely to keep economic perforat this extremely favorable moment in our economic mance high and sustained? history. All too often congressional hearings are called when something bad is happening. In a deteriorating situation, the Congress finds it necessary to WHY IS THE ECONOMY DOING SO WELL? survey the damage, assess responsibility, and call for better policies in the future. Most economists are frankly surprised that the econ- At the moment, however, the economy as a whole omy has been able to grow fast enough to push is functioning amazingly well. Employment is unemployment rates below 5 percent without generathigh and rising, unemployment is low, incomes are ing accelerating inflation. Until recently, most stuincreasing, profits are high, the federal budget deficit dents of the economy thought that unemployment is plummeting, state and local finances are increas- rates below 5.5 percent to 6.0 percent (estimates ingly strong, and inflation is benign. The overrid- differed) for an appreciable period would lead to ing economic objective—shared by all participants rising labor costs that would be passed on in higher in the economy—is to keep the good news flowing. prices and start a self-perpetuating wage-price spiral We all want the economy to grow at its highest that would be hard to reverse. True, unemployment sustainable rate, to keep unemployment and inflation had been lower in the 1960s while inflation remained low, and, above all, to avoid recession as long as low, but the structure of the economy and the charpossible. acteristics of the labor force subsequently changed Thoughtful people, at the Federal Reserve and in ways that seemed to make the economy more elsewhere, have somewhat different views about why inflation-prone for given levels of unemployment. the economy is doing so well and how best to keep it The experience of the period since about 1970 going. Your invitation to share those views is timely, appeared to confirm that inflationary pressure constructive, and welcome. emerged at unemployment rates appreciably higher I would like briefly to discuss three questions: than those of the 1960s. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

750 Federal Reserve Bulletin • September 1997 Five years ago, most economists would have to their customers in higher prices because they thought the Federal Reserve irresponsible and dere- would lose those customers to competitors overseas lict in its duty if it had not used monetary policy or down the street. Low import prices resulting from to slow an economy operating at such a high level growing international competition and the strong dolthat unemployment remained less than 5.5 percent lar reinforce this perception. Domestic markets have for more than a short time. The inflation might not also become more fiercely competitive as the result appear immediately, but it was thought to be inevi- of deregulation, lower transportation and communicatable, and allowing it to get up a head of steam tion costs, and more competitive business attitudes. before acting was taking a high risk of having to react These competitive forces, well known to workers, more strongly, perhaps strongly enough to bring on a may give employers a plausible reason—or at least recession. an excuse—for strong resistance to wage and benefit Nevertheless, the unemployment rate has been demands. below 5.5 percent for more than a year and below The subdued inflation rate itself, moreover, has 5.0 percent in 1997, while inflation has shown no dampened inflationary expectations. These lower signs of picking up—indeed, producer prices have expectations contribute both to diminished compenactually been falling. The Federal Reserve, except for sation demands of workers and stiffer employer resisa quarter point tightening of the federal funds rate in tance to those demands. An important contribution to March (after months of inaction), has left the mone- lower total compensation costs has also come from tary levers alone. Is the Federal Reserve ignoring the slowdown in the rise of health benefit costs risks of future inflation? associated with the shift to managed care and the The answer depends on whether the coexistence of general reduction in the rate of health care inflation. higher growth and lower unemployment with benign It is not yet clear how much of this slowdown is inflation is explained by a fundamental improvement temporary. in the structure of the economy making it less The other surprise is that prices have shown no inflation-prone, by temporary factors that might reaction to the moderate compensation increases that return to "normal" and kick off an inflationary wage- have occurred. Increased foreign and domestic comprice spiral, or by some combination of the two. The petitiveness is certainly part of the answer, but the honest answer is: We do not know yet. remarkable fact is that this competition has not gen- One surprise has been that such tight labor markets erally eroded profit margins. Persistent high profits have not resulted in more rapid increases in wages suggest that, on the average, employers have been and other labor compensation. Part of the explana- able to increase productivity enough to absorb larger tion, as Chairman Greenspan noted in his testimony compensation increases without comparable price on July 22, may lie in less aggressive behavior on the increases. Whether they will be able to continue to do part of workers. Workers may be more reluctant than so is the crucial unanswered question facing monepreviously to bargain for higher compensation or to tary policy makers at the moment. Measured productake drastic action, such as striking or quitting to look tivity has grown slowly for more than two decades for a better job. They may be reluctant because they and did not accelerate in this expansion as econoare insecure in the face of rapidly changing technol- mists hoped it would. Nevertheless, output per hour ogy, for which they fear they may not have the right seems to have picked up a little recently, which is skills, because they have recent memories of com- surprising late in an expansion when productivity pany "downsizing," or because they are less likely increase normally slows. If productivity growth were than in previous tight labor markets to be members of on the verge of sustained acceleration, a possibility a union. These explanations of less aggressive worker discussed in Chairman Greenspan's testimony, it behavior are plausible but likely to be temporary. would greatly increase the chances of higher sus- Workers are not likely to get more insecure as low tained growth without accelerating inflation. There unemployment continues, and union strength is are reasons to be optimistic, but only time will tell if unlikely to ebb further. the optimists are right. Part of the explanation of moderate compensation increases may also lie in more aggressive employer resistance to labor cost increases than in previous WHY is SUSTAINED GROWTH So IMPORTANT cycles. Business owners and managers appear to NOW? believe strongly that they are operating in such a competitive environment—whether domestic or It is always desirable to live in an economy that is international—that they cannot pass cost increases on growing at a healthy rate. The general standard of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 751 living rises and average people are normally better couple of decades is the prospective rise in the ratio off. Not only do private resources grow, giving con- of elderly to working-age people. Barring a huge sumers more and better choices, but public resources increase in working-age immigrants or dramatic also grow, making it easier to solve public problems increases in the length of working life, the number of and improve national and community infrastructure. retirees will rise much faster than the working popu- Healthy growth has to be sustainable, not bought at lation beginning early in the next century. No matter the price of environmental degradation or inflationary what combination of public and private pensions are overheating that turns a boom into a bust. used to sort out the claims of retirees to a share of the Nevertheless, there are at least three reasons why it nation's output, the only way to guarantee a rising seems especially important for the United States in standard of living for both retirees and workers is to the next few years to do everything possible to keep greatly increase the future productivity of that workthe economy growing at a healthy sustainable rate force. A high growth economy over the next decade and avoid recession. could generate enough saving and investment to make that increased future workforce productivity feasible. Slower growth and repeated recessions Welfare Reform could make the burden of an aging population far heavier and policy choices more contentious. Recent legislation requires extremely ambitious state and federal efforts to reduce dependency and channel large portions of the present and future welfare popu- WHAT POLICIES ARE NEEDED? lation into self-supporting jobs. For these efforts to be even moderately successful will require effective skill These three challenges to the U.S. economy simply training and job placement, adequate child care, and, reinforce the need to keep the economy on the highabove all, low unemployment rates and plentiful est sustainable growth track attainable and to keep entry level jobs. If economic expansion continues recessions as shallow and infrequent as possible. The and labor markets remain tight, there is a good biggest problem for monetary policy at the moment is chance that many families who would otherwise have that no one knows what growth rate is sustainable. It depended on welfare can acquire the job skills and may be true that the structure of the economy has experience that can enable them to live more indepenchanged in ways that make a higher growth rate dent and satisfying lives. If the economy slides into sustainable without inflation than we thought posrecession before welfare recipients have time to sible a few years ago—or it may not be true. The establish new skills, work patterns, and eligibility for question turns on whether productivity growth has unemployment benefits, welfare reform is almost shifted up out of the doldrums of the past couple of certain to be a failure, if not an outright disaster. decades. It is possible that it has but by no means certain. This leaves monetary policymakers with the diffi- Community Development cult job of watching all the signs, weighing the risks, and making a new judgment call every few weeks. Partnerships for community development are begin- At the moment, there seems to be little risk of the ning to create new hope for some devastated areas of economy slowing down too much in the near term big cities, smaller towns, and rural areas. Partners and sliding into recession. Growth has already slowed include business and community groups, financial from its clearly unsustainable pace in the first quarter, institutions, and governments. With continued ecobut all the current signs point to continued economic nomic growth and low unemployment, these efforts expansion for the rest of this year and into the next. could transform many blighted areas into viable com- The risks seem higher on the other side—that many munities with decent housing and an economic base. of the factors holding down inflationary pressures Recession, especially a deep one, would dry up will prove temporary and that the rebound of producpublic and private resources and greatly reduce the tivity necessary for higher sustainable growth will chances of successful community development. not occur or not prove robust and durable. The Federal Open Market Committee has to weigh the risk Preparing for More Older People of slowing the economy unnecessarily against the risk of waiting too long and having to put the brakes Perhaps the biggest challenge to the U.S. economy on harder later. Waiting longer may increase the possibility of overheating followed by recession. It is (indeed to all industrial economies) over the next Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

752 Federal Reserve Bulletin • September 1997 a tough call. I cannot promise we will make the right chance in tight labor markets of moving workers into decisions, but I can promise we will try. jobs in which they can gain increasing skills, experi- It is important not to overestimate the role of ence, and higher wages. Continued low unemploymonetary policy and the Federal Reserve. Monetary ment rates, plus public and private investment in skill policy can help keep the economy from falling off the training are essential, not only for successful welfare sustainable growth track in either direction—either reform but also for modernizing the skills of the by overheating and generating enough inflation to portion of the workforce whose real incomes and unbalance the economy and threaten growth or by opportunities have declined both relatively and absochugging along too slowly with excessive unemploy- lutely in the past couple of decades. ment. But monetary policy cannot do much to deter- The other key to productivity increase, of course, mine how high the sustainable growth rate is. How is continued investment, both public and private, in fast the economy can grow is determined by how research and development and the technology and rapidly the employed labor force is increasing and infrastructure needed for continuous modernization how fast the productivity of that workforce is grow- of the economy. Stable low inflation tends to foster ing. There are only two ways to get more output: long-term planning and investment by businesses and Either more people work or working people produce households. A high growth economy should generate more (or both). more of the saving needed to finance the investment. In the 1960s and 1970s, the U.S. workforce was Reducing the public dissaving inherent in running a growing rapidly as the large baby boom generation deficit in the federal budget also adds to national reached working age and women, especially mothers, saving. Near-term reform of social security and Medimoved into the workforce in much larger proportions care in ways that add to national saving, public and than previously. But those two trends have run their private, could make a significant contribution to course. The labor force is likely to grow slowly over future productivity increase and hence to raising the the next few years, about 1 percent per year. The future rate of sustainable economic growth. main hope for increasing labor force growth, besides In summary, the objective of economic policy— encouraging more immigration, is that continued tight monetary policy included—is to keep the economy labor markets plus increased flexibility in employ- on the highest sustainable growth path. No one knows ment hours will gradually begin to reverse the trend exactly what that rate is right now, or what it can be to early retirement that has reduced labor force in the future, but a combination of policies, intelliparticipation among older people. Continued employ- gently pursued, can raise it as far as possible. These ment opportunities combined with well-designed policies include the following: training programs, especially in computer-related skills, could also attract into the labor force people • Wise monetary policy that helps the economy who are not actively looking for work because they expand and keeps labor markets tight without incurdo not think they have the skills to get a "good" ring excessive risk of accelerating inflation job—principally older workers and young people • Investment in skills by individuals, firms, and who have dropped out of school. the public and nonprofit sectors Indeed, the shortage of workers with modern tech- • Increased saving (public and private) invested in nical skills may be the biggest problem facing the research, technology, and infrastructure. U.S. economy at the moment, as well as its biggest opportunity. As long as labor markets stay tight, investment in skill training is likely to pay off hand- The Federal Reserve will do its part, in the face of somely both for individuals and for companies that huge uncertainties, to steer an appropriate monetary can retain the trained workers long enough to benefit policy. Fiscal and other policies, both public and from their increased productivity. Public investment private, are needed to take full advantage of the in training for workers with low skills—often unsuc- opportunity we have today to keep the U.S. economy cessful when jobs are scarce—also stands a far better operating at a high level in the future. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 753 Statement by Laurence H. Meyer, Member, Board of ciency and quality. Regulatory policy subjects more Governors of the Federal Reserve System, before the and more markets to the discipline of competition. Committee on Banking and Financial Services, U.S. The star of this show is the private sector. Our job is House of Representatives, July 23, 1997 not to mess it up. We can mess it up either by inappropriate action or by the failure to take appropri- I am pleased to have this opportunity to meet with ate action. you this morning to discuss my views on the conduct of monetary policy. I am well aware that, despite the recent good performance of the economy, some mem- CHALLENGES IN THE GOOD NEWS ECONOMY bers of this committee have reservations about the conduct of monetary policy, specifically the decision Recent economic performance has been extraordinarto raise the federal funds rate lA percentage point on ily favorable. Growth over the past year has been March 25.1 am also aware that there has been interest among the strongest in the past decade. The unemby some members, particularly Congressman Frank, ployment rate has declined to the lowest level in a in my views, specifically my views about the rele- quarter century. Inflation is the lowest in more than vance of the NAIRU (nonaccelerating-inflation rate thirty years. Equity prices have soared. Consumer of unemployment) concept to understanding recent confidence is at record levels. The performance of economic performance and risks to the outlook. I this "good news" economy is enough to make you welcome the chance to discuss these issues with you want to cheer. this morning. I have noted on several occasions that U.S. policy- Achieving price stability in the long run and pre- makers, including the Federal Reserve, would probventing an increase in inflation in the short run are ably be inclined to accept more credit for this perfornot ends in themselves. They are a means to the end, mance if they had forecast it or even could explain important because they are the best way that the how it was possible. Herein lie the challenges: First, Federal Reserve can contribute to achieving the high- how do we explain such favorable performance, and est sustainable level of production and the maximum specifically what accounts for the favorable combinasustainable rate of growth for the American people. tion of low inflation and low unemployment? Second, This is a key point. While there may be, from time to what can monetary policy do to help extend the time, differences about how to reach these common good performance; specifically, how should monetary goals—indeed, it would be amazing if there were policy be positioned in light of the uncertainties in not—there is no disagreement about the goals. the current environment so as to balance what I call The history of business cycles has repeatedly regularities and possibilities—regularities that sugtaught us that the greatest risk to an expansion comes gest there are limits to the economy's productive from failing to prevent an overheated economy. The capacity, at any point in time, and to the growth of best way to ensure the durability of this expansion capacity over time and possibilities that suggest these is, therefore, to be vigilant that we do not allow the limits may have become more flexible in recent years. economy to overheat and produce the inevitable rise in inflation. Failure to heed this lesson of history would result not only in higher inflation but also in THE ART AND SCIENCE OF FORECASTING cyclical instability and higher unemployment rates. AND POLICYMAKING One way of explaining the recent good performance in the economy is that policymakers have When I won awards for economic forecasting while created a favorable environment for the private sector in the private sector, I was always asked about my and then gotten out of the way, allowing the natural recipe for forecasting. My response was: Take one dynamism of our economy to operate to its potential. part science and mix it with one part art and one part Monetary policy has laid the groundwork of stable, luck. The science refers to the model that guided low inflation—an environment conducive to long- the forecast, to the historical regularities that the term planning by households and businesses. Fiscal model uses to help predict future performance. The policy has helped lower the deficit and thus has art refers to the forecaster's judgment. I never made a increased national saving and reduced its competition forecast by standing back and letting the model do all for funds with the private sector. Trade policy has the work. Judgment was equally important to the end opened markets and increased competition, allowing product. We constantly had to consider what parts consumers access to the wider variety of goods and of the model could be trusted better than others and increasing the pressure on producers to raise effi- what to do when some parts of the model got off Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

754 Federal Reserve Bulletin • September 1997 track. That is where a forecaster earns his living and ANSWERS TO YOUR QUESTIONS makes his reputation. Finally, I never ignored the contribution of good fortune to my forecasting Let me briefly now turn to some specific questions success. that you raised in your letter of invitation or that were It is not very different for policymakers. Models the subject of Congressman Frank's comments on my and historical regularities are important underpin- April 24 speech. nings of any preemptive policy. Such a policy depends on forecasts because you are attempting to avoid problems that would occur if you failed to act. But judgment is essential, too, and more so when WHAT DO I THINK OF THE NAIRU CONCEPT historical regularities are called into question, as is AND ITS USEFULNESS TODAY? the case today. A policymaker, like a forecaster, has to adjust on the fly, before there is time to even NAIRU stands for nonaccelerating-inflation rate of determine, with certainty, why the models are off unemployment. The relationship between inflation track and certainly before they can be corrected. and unemployment, based on NAIRU, is called the Historians may put this all in perspective in due time. Phillips Curve. Perhaps. But policy is made in real time. According to this concept, there is some threshold In recent years monetary policy has not simply level of the unemployment rate (NAIRU) at which been guided by historical regularities about the rela- supply and demand are balanced in the labor market tionship between inflation and unemployment inher- (and perhaps in the product market as well). This ited from the 1980s and early 1990s. Rather, mone- balance yields a constant inflation rate. You asked tary policy has been adaptive, pragmatic, and flexible what the relationship was between full employment in response to evolving economic circumstances. and inflation. In this model, there is no relation- Such an adaptive approach does not throw out the ship between full employment and inflation. At framework that has successfully guided forecasting full employment, defined as the rate of unemployand policymaking in the past but attempts, in real ment equal to NAIRU, inflation is constant, but time, to adjust that approach based on the current any constant level of inflation is possible at full data. employment. The rate of inflation in the long run is therefore not determined by the unemployment rate at all. It is determined by the rate of growth of KEY ISSUES IN THE ECONOMIC OUTLOOK the money supply. This, of course, gives monetary policy unique responsibility for inflation in the long The economy appears to have slowed to near a trend run. rate in the second quarter after surprisingly robust If the unemployment rate falls below this threshgrowth in the previous quarter. The underlying funda- old, inflation rises over time, indefinitely, progresmentals of the expansion continue to look quite posi- sively, and without limit. It is a process that feeds tive. There is solid momentum in employment and upon itself, because once inflation begins to rise, income, financial conditions are highly supporting, further price increases feed into wage increases. The and consumer confidence has soared to record levels. basic framework is based on supply and demand. At I do not see any obstacles to the continuation of the NAIRU, supply and demand are balanced, so inflaexpansion, with growth near trend, through 1998. tion is stable, matched by expected inflation. The There are in my judgment two key issues in the trigger for increases in inflation is excess demand for outlook related to monetary policy, and these focus labor and goods. The unemployment rate is a proxy on the interaction among growth, utilization rates, for the balance between supply and demand in the and inflation. First, will growth rebound to an above- labor market, for the degree of excess demand. Histrend rate, raising utilization rates still further? Sec- torically the balance between supply and demand in ond, are prevailing utilization rates already so high the product market—that is, for final goods and that inflation will begin to rise, even if growth services—has closely paralleled the balance in the remains at trend? These are the same questions I labor market, so that the unemployment rate has raised in my first speech after coming to the Board, in effectively summarized the relationship between sup- September 1996. They are the key questions that ply and demand in both the product market and the affected my judgment about the appropriate posture labor market. of monetary policy over the past year, and they It has always been the case that the application remain relevant today. of the NAIRU concept has been more difficult in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 755 practice than in theory. Sometimes the Phillips Curve Outside Estimates of the Current NAIRU has made large errors; occasionally the equation and Trend GDP Growth has overpredicted or underpredicted for a consider- Percent able period of time. The value of NAIRU has also Organization NAIRU Trend GDP growth varied over time, for example, in response to changes Macro advisers 5555....9999 2222....2222 in the composition of the labor force. Of course, if DRI 5555....77775555 2222....3333 NAIRU moves frequently without explanation, the CEA 5555....5555 2222....1111 CBO 5555....8888 2222....1111 concept would not be very useful, either for fore- 5555....4444----5555....5555 2222....2222 casting or for policymaking. But the fact is that, 1. NAIRU using CPI. Current NAIRUs for PCE (personal consumption relative to other equations used to forecast macro- expenditure) deflator and GDP deflator are 5.3 percent and 5.55 percent respectively. economic performance, the Phillips Curve was one of the most reliable, if not the most reliable, equation during the fifteen years before 1994. During In the conduct of monetary policy, the process of this period NAIRU either appeared to be relatively analysis is more decentralized. There is no single constant or moved predictably with changing labor model or forecast, no single measure of NAIRU (not force composition. More recently, there has been everyone on the Federal Open Market Committee a run of overpredictions, beginning in late 1994 even believes that the concept is useful), no single for wages and the past year or so for prices. These measure of trend growth. But each of us is dedicated errors are the very heart of the challenge of explain- to making disciplined judgments about the economy. ing the recent surprisingly favorable performance I have said on several occasions that (1) I continue and of the challenge of setting monetary policy today. to believe that NAIRU is an important and useful I will turn to the possible sources of these errors concept; and (2) I believe that NAIRU is lower below. recently than it had been in the 1980s. I believe that NAIRU has declined from about 6 percent at the end The accompanying table provides some outside of the 1980s to about 5Vi percent currently. However, estimates of NAIRU. The sources include the Conas has always been the case and is certainly true gressional Budget Office (CBO), the President's today, there is uncertainty about the precise estimate Council of Economic Advisers (CEA), which develof NAIRU. Clearly, many believe it is higher, as ops, along with the Office of Management and reflected in this table. Some also believe it is lower. Budget and the Treasury Department, the economic I constantly re-evaluate my own estimate of NAIRU assumptions underlying the Administration's budget in light of the recent data. projections; two leading model-based forecasting firms—DRI and Macroeconomic Advisers; and estimates from Professor Robert Gordon of Northwestern University, whom I consider the leading aca- How FAST CAN THE ECONOMY GROW? demic authority on NAIRU. All those represented in the table view NAIRU as a central and important The next question you asked is how fast the economy concept for forecasting inflation and identifying long- can grow. Over the short run, that depends on the run values to which the actual unemployment rate amount of slack in the economy. Once the economy will gravitate. The range of estimates is from 5.4 per- has moved to capacity, the maximum sustainable cent to 5.9 percent. Professor Gordon's work sug- growth rate is limited by the rate at which productive gests that, after having fallen for a couple of years, capacity expands over time. This limit is generally NAIRU has stabilized, remaining unchanged over the referred to as trend growth. Productive capacity past year. expands both because of increases in physical inputs Obviously, I am not alone in using this concept in (labor and capital) and because of improvements in important policy work. For example, in its budget technology—more people working with more and projections, the CBO is very disciplined in assuming better equipment. Once full employment is reached, that the unemployment rate gradually gravitates to the labor force expands with increases in the working NAIRU. If we begin with an unemployment rate age population, augmented by any trend in the labor below their estimate of NAIRU, the CBO assumes a force participation rate. The contribution of growth in period of below-trend growth to allow the unemploy- capital stock and of technological improvements is ment rate to return to their estimate of NAIRU and to summarized in the growth in labor productivity. prevent on ongoing increase in the rate of inflation. The accompanying table also provides outside esti- This is the model and forecast upon which your mates of trend growth. Note that they all fall within budget deal is based. a very narrow range, just above 2 percent per year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

756 Federal Reserve Bulletin • September 1997 There has been very little change in these estimates in ated. First, non-oil import prices have declined, in recent years. About half of the increase in trend gross large measure because of the appreciation of the domestic product is attributable to the long-term trend dollar from mid-1995 through early 1997. This has in labor force growth and about half to the long-term both lowered the price of imported goods and contrend in productivity growth. The narrowness of the strained the pricing power of domestic firms that range of estimates in this table should not suggest the compete with imports. Second, the cost of employee absence of an important degree of uncertainty about benefits has risen more slowly, especially the cost of trend growth, and I will consider in the next section employer-provided health care, tempering the rise in some reasons why trend growth could turn out to be compensation per hour. Third, most recently, energy higher. prices have declined sharply this year, and food prices If output grows at the trend rate, resource utiliza- are increasing less rapidly. Fourth, the price of comtion rates will generally be constant. If output grows puters is falling even faster, reflecting, in part, the faster than the trend rate, demand increases relative rapid pace of technical change. to supply and resource utilization rates will rise. At Some believe the collection of these temporary some point, above-trend growth will raise utilization factors fully accounts for the recent favorable perforrates to a point where excess demand puts upward mance of inflation, and such a view is not entirely pressure on inflation. implausible. But I do not hold this view. I believe Note that trend growth does not cause inflation. that other longer-lasting factors may also be contrib- The higher the trend rate of growth, the better, as uting. One possibility is an intriguing anomaly of the Chairman Greenspan noted yesterday in his testi- current expansion. I noted above that the change mony. And while above-trend growth itself does not in utilization rates in the labor and goods markets raise inflation, it does raise utilization rates which, (the unemployment rate and the capacity utilization after some point, will result in higher inflation. I will rate) usually mirror one another over the cycle. In the come back to this thought when I answer your ques- current episode, these two measures have diverged to tion about the rationale for the March 25 policy a greater degree than has been typical in the past. action. This divergence is likely related to another defining feature of this expansion, the investment boom which has raised the level of net investment to the point HOW DO YOU EXPLAIN THE RECENT where the capital stock is expanding rapidly, raising FAVORABLE PERFORMANCE OF INFLATION capacity and preventing the increase in demand from AND UNEMPLOYMENT? overtaking supply. The unemployment rate is signaling that the labor market is tight; but the capacity The answer here, unfortunately, is not as well as I utilization rate indicates that supply and demand are would like. It is important, as a forecaster and policy- well balanced, at least in the industrial sector of the maker, to understand how much you know and how economy. As a result, there has been some upward little you know. In this spirit, I believe that the recent pressure on wages, but no pass-through to higher performance of the economy is to some degree a price inflation. Firms report an absence of pricing puzzle. I cannot solve that puzzle completely, but I leverage because nothing gives a firm pricing power am quite sure of some of the factors that have been like excess demand and there is no apparent excess important, and I can speculate about some other demand for U.S. firms, especially in the global marfactors that might be important. In the final analysis, ket place where there is plenty of slack abroad. we have to make monetary policy before we have all The most intriguing explanations of the recent the answers, though we can, and do constantly, favorable performance are structural changes which review our models in light of new data to refine our may have expanded the limits to productive capacity thinking. and trend growth. These possibilities come in two The clearest and perhaps the most important factor forms: structural change in the labor market which is the temporary confluence of favorable supply lowers NAIRU and structural change in the product shocks over the past couple of years; by favorable market, specifically higher productivity growth, supply shocks, I refer to developments that have which, at least temporarily, also lowers the NAIRU recently lowered the prices or slowed the rate of and which pushes out the limit of trend growth. increase in the prices of specific goods, unrelated to One explanation for why we can sustain stable the overall balance between supply and demand in inflation with lower unemployment is the worker U.S. labor and product markets. The list of favorable insecurity hypothesis. According to this theory, corshocks is well known and generally widely appreci- porate restructuring, globalization, and technological Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 757 change have increased workers' insecurity about through February 1997, utilization rates had remained their jobs. As a result, workers have been willing to in a very narrow range, in the case of the unemployaccept some restraint on their real wages in order to ment rate only a shade below my estimate of NAIRU. increase their prospects of remaining employed, lead- Recall that the unemployment rate averaged 5.4 pering to a more moderate rate of increase in wages than cent in 1996. There was some risk that utilization would otherwise have occurred at any given rate rates were already so high that inflation might of unemployment. While this is consistent with a increase over time, but this risk was not clear enough, decline in the NAIRU, we cannot very precisely test in my judgment, to justify action. I viewed growth as the worker insecurity hypothesis itself. But it does fit either close to trend already or about to slow to trend, some of the facts of the current labor market experi- implying that there was negligible risk that utilization ence. My conclusion is that NAIRU has declined, rates would rise further. So, before March 25, the even taking into account the role of temporary fac- Federal Reserve's posture was one of "watchful waittors, though I cannot pin down definitely the source ing," but with an asymmetric directive, based on the of the decline. I am simply adjusting my estimate to judgment that the risks were weighted toward higher the data. The worker insecurity hypothesis is a pos- inflation. sible explanation. In March, my view was that there was sufficient An example of a product market structural change momentum in growth to justify a forecast that utilizawould be an increase in trend productivity growth. tion rates would rise materially further, in the absence This is clearly the most intriguing of all the potential of a change in policy. The policy action was clearly a explanations because it ties together so many puzzles. preemptive one, based not on inflation pressures evi- It can explain why we are in a midst of an investment dent at the time but on inflation pressures likely to boom, why the profit share of income has been rising, emerge in the absence of policy action. As the Chairwhy inflation is so well contained, and why stock man has repeatedly emphasized, lags in the response prices have soared. The only problem is the data. It is to monetary policy make it imperative that monetary true that productivity has increased more rapidly policy be forward looking and anticipatory, not backrecently. This is not clear-cut evidence of a shift in ward looking and reactive. the productivity trend, however, because productivity One of the principles of prudent monetary policy normally accelerates when output growth rises, as management, in my judgment, is to lean gently it has over the past year. There is, however, some against the cyclical winds. This means that when support for the view that we are experiencing a growth is above trend and utilization rates are speed-up in the trend rate of productivity growth. For increasing, it is often prudent to allow short-term example, if we measure productivity from the income rates to rise. Monetary policy should not sit on interside rather than the product side of the national est rates and wait until the economy blows by capacaccounts, we do observe a sharper acceleration in ity and inflation takes off. To do so would risk a productivity. This income-side measure of productiv- serious boom-bust cycle and would require abrupt ity provides at least a tantalizing hint of an increase and decisive increases in interest rates later to regain in trend productivity growth. This would also be control of inflation. A small, cautious step early is the consistent with a considerable number of reports by recipe for avoiding the necessity of a sharper destabibusinesses that they are realizing new efficiencies in lizing move later on. production, both through corporate reorganization What does the record show? Growth was much and through the application of new technology. stronger in the first quarter than I had anticipated and appears to have slowed to trend in the second quarter. The legacy of the robust first-quarter growth was a decline in the unemployment rate to below 5 percent WHAT WAS THE RATIONALE FOR THE in the second quarter. I call the March 25 move, as MARCH 25 TIGHTENING? a result, "just-in-time" monetary policy. I believe it was prudent. I voted in favor of it because I thought it The discussion of the rationale for the March 25 would help to prolong the expansion and contribute policy move to follow is my personal view. During to the goal of maximum sustainable employment and the period from June 1996, when I joined the Board, maximum sustainable growth. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

758 Federal Reserve Bulletin • September 1997 Statement by William J. McDonough, President, Fed- central bank would no longer be concerned about eral Reserve Bank of New York, before the Committee output or job growth. I would like to make explicit on Banking and Financial Services, U.S. House of for the record that I believe this view to be simply Representatives, July 23, 1997 wrong. Price stability is the absolutely essential means to produce sustained economic growth. More- I welcome the opportunity to appear before the Com- over, there need be no inconsistency between seeking mittee on Banking and Financial Services this morn- long-run price stability and leaning against short-run ing to provide my views on the conduct of monetary business cycles. Indeed, a stable price and finanpolicy in conjunction with the semiannual report to cial environment that the public expects to persist Congress under the Humphrey-Hawkins Act. There almost certainly will enhance the capacity of monecan be no doubt that the ultimate goal of monetary tary policy to fight occasions of cyclical weakness policy in the United States today must be to achieve in the economy. This is a key point—and is often the highest level of sustainable economic growth, overlooked. which, in turn, will promote the highest possible In my view, a goal of price stability requires that standard of living for all our citizens and the greatest monetary policy be oriented beyond the horizon of its number of jobs. But in saying this, I want to be clear immediate impact on inflation and the economy. This as to what we can expect monetary policy to do and horizon is about two to three years, and it is imporwhat we know it cannot do. tant, in part, because it sets the stage for what comes What monetary policy can do is to anchor inflation later. But the longer-run purpose of today's policy at low levels over the long term and thereby lock in actions should be to lay the foundation for price inflation expectations. In addition, monetary policy stability and sound economic growth over the coming can help offset the effects of financial crises as well decade. as prevent severe downturns of the economy. This orientation properly puts the focus of a Over the past twenty years, a widespread consen- forward-looking policy on the time horizon most sus has emerged among policymakers and econo- important to household and business planning. This mists that a monetary policy to stimulate output and is the horizon that is relevant for the definition of reduce unemployment beyond its sustainable level price stability articulated by Chairman Greenspan: leads to higher inflation but not to lower unemploy- that price stability exists when inflation is not a ment or higher output. Moreover, although some consideration in household and business decisions. countries have managed to experience rapid growth A central bank's commitment to price stability in the presence of high inflation rates, often with over the longer term, however, does not mean that the help of extensive indexation, none has been able the monetary authorities can ignore the short-term to do so without encountering severe difficulties at impact of economic events. It is important to recoga later stage. It is thus widely recognized today that nize that, even if we set ourselves successfully on the there is no long-run tradeoff between inflation and path to price stability and even if, as a result, price unemployment. As a result, we have witnessed a expectations are contained, we still will not have growing commitment among central banks through- eliminated all sources of potential inflation. The realout the world to price stability as the primary goal of ity is that monetary policy is only one of many monetary policy. influences on the economy. One point is worth emphasizing: Allowing even For example, supply shocks that drive prices up a moderate level of inflation to persist without a sharply and suddenly—such as the two oil shocks of commitment to bring that level downward toward the 1970s—are always possible. In such an eventualprice stability permits—and may even encourage— ity, the appropriate monetary policy consistent with a expectations for still sharper price rises in the future. goal of price stability would not be to tighten precipi- What monetary policy cannot do, in and of itself, is tously but rather to bring inflation down gradually produce economic growth. Economic growth stems over time as the economy adjusts to the shift in from increases in the supply of capital and labor and relative prices. In the event of a shock to the finanfrom the productivity with which labor and capital cial system, the appropriate monetary policy might are used, neither of which is directly influenced by require a temporary reflation. monetary policy. However, without doubt, monetary As you can see, I believe that monetary policy policy can help foster economic growth by ensuring a must be exercised cautiously. Why do I say this? stable price environment. Because the economy is not perfectly flexible and Some would argue that establishing price stability pushing hard in the face of rigidities can cause unnecas the primary goal of monetary policy means that a essary problems. For example, contracts, especially Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 759 wage contracts, can outlast a good part of, or even resources out of that sector, causing unemployment exceed the duration of, short-term shocks. In the and business failures to follow: What was boom, short term, therefore, monetary policy must accept as goes bust. Countries that have seen overexpansion of given the rigidities in wages and prices that these the financial sector have experienced the sharp concontracts create. Abrupt shifts in policy, given these traction of that sector when inflation finally was rigidities, especially a monetary tightening in the face brought down. This implies an additional argument of wages that are unlikely to be cut, can cause unac- for price stability. Namely, in a low-inflation environceptable rises in unemployment and drops in output. ment, these boom-bust cycles created by distortion- In my view, therefore, a key principle for monetary ary incentives are less likely to emerge and can be policy is that price stability is a long-term goal and a more easily contained when they arise. means to an end—to promote sustainable economic The avoidance of such unnecessary boom-bust growth. But even if we agree that price stability must cycles also limits the serious social costs that inflabe the primary long-term goal of monetary policy, tion can impose. These social costs are all too often what exactly does price stability mean in practice? underestimated in economists' typical calculations of We know that, as currently measured, a zero inflation inflation's costs. For one, inflation may strain a counrate is not the same thing as price stability. This is try's social fabric, pitting different groups in a society because of well-known errors in measuring inflation against each other as each group seeks to make that stem from many factors, including how qual- certain its wages keep up with the rising level of ity improvements and new products are valued in prices. Moreover, as we all know, inflation tends to the consumer price index. Although there is much fall particularly hard on the less fortunate in society, research on this topic, economists and policymakers often the last to get employment and the first to lose cannot agree upon a single number for the magnitude it. These people do not possess the economic clout to of this measurement error. In most studies, the error keep their income streams steady, or even buy neceshas been estimated to range from 0.5 percent to sities, when a bout of inflation leads to an increase in 2.0 percent. Therefore, as a practical matter, price prices they must pay. When the bust comes, they also stability may best be thought of as an inflation rate, suffer disproportionately by being among the first to measured by the consumer price index (CPI), falling lose their jobs. They also are not users of sophistisomewhere within this range. cated financial instruments to protect their modest But, we may well ask, why is price stability so savings from confiscation by inflation. important and so desirable? Price stability is both There can be no doubt that a stop-go, boom-bust important and desirable because a rising price level— economy significantly reduces the overall economic inflation—even at moderate rates, imposes substan- welfare of its citizens. Such an economy produces tial costs on society. These costs are both economic serious and dangerous tensions within a society and social. The economic costs entail, for example, because the benefits and pain of an inflationary envithe following: (1) increased uncertainty about the ronment are unequally distributed. Because of these outcome of business decisions; (2) negative effects realities, I am convinced that price stability is imporon the cost of capital resulting from the interaction of tant and desirable not simply for purely economic inflation with the tax system; (3) reduced effective- reasons but for broader public policy reasons as ness of the price and market systems; and (4) in well. particular, distortions that create perverse incentives In a word, I believe that the less fortunate in our to engage in nonproductive activities. society particularly benefit from an environment of The costs of inflation-induced nonproductive price stability and the economic growth that it fosactivities—such as tax code dodges or overinvest- ters, as we currently are seeing in our economy. ment in the financial sector—decrease the resource Sustained economic growth brings a lower level of base available to an economy for growth. A move to unemployment, higher labor force participation, and price stability gives an economy the necessary incen- greater availability of jobs to those who are not easily tives to shift resources back to productive uses. hired because they need more training and help from Rapid moves toward price stability from high infla- their employers. Over the long term, I am convinced tion, however, do have their costs under certain cir- strong economic growth can be sustained only if the cumstances. I have already described the rigidities benefits of the economic pie—more and better jobs, caused by contracts. The overdevelopment of a sector higher incomes, improved housing, and a higher for no reason other than the inflation rate is another standard of living—are shared by all parts of our of those circumstances. The removal of the distortion- society—rich and poor, skilled and less skilled. ary incentive—inflation—leads to a rapid transfer of Unless all parts of society share in—and therefore Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

760 Federal Reserve Bulletin • September 1997 have a stake in—economic growth, we cannot have Failure to contain inflationary pressures at an early the social and political cohesion that is essential to stage makes it much costlier to deal with inflation sustain growth. later. From a personal perspective, I am convinced that Because of its long and variable lags, monetary much of the success the Federal Reserve has had in policy also requires of Federal Reserve officials the containing inflation in recent years reflects monetary experience and courage to deal with what will always policy actions that preempted inflationary pressures be a level of uncertainty. The Federal Open Market before they actually showed up in general prices. Committee has been willing to deal with the uncer- When the Federal Reserve began firming monetary tainty caused by the overestimation of inflation and conditions in February 1994, it did so because of the the underestimation of growth of most economic potential it saw for inflation re-emerging. The main models in the past year or more. In my view, the reason we need a preemptive approach, in my view, Committee's policy has been an important ingredient is because monetary policy works with uncertain and in the excellent economic performance we have been long time lags. Although most of its effects on output enjoying. take place within one to two years, its effects on I believe that there is broad support within the inflation take even longer—over a three-year time United States today for a rigorous and consistent frame, which is the appropriate horizon for monetary anti-inflation policy. Moreover, I am pleased by the policymakers. credibility the Federal Reserve appears to have When one stands back and considers monetary earned in controlling inflation over the past several policy over the past several decades, the case is years, while encouraging both growth of the real strengthened for a preemptive approach to squeeze economy and financial system stability. off incipient inflation before it shows through in Finally, I am convinced that no central bank can broader price increases. Economic analysis has maintain price stability over the longer term without shown not only that an overheating economy has a public support for the necessary policies. Only with strong effect in raising inflation but also that reducing the confidence of the public in their policies and their inflation is a very painful process. We learned these own vigilance in implementing these policies can lessons during the long and costly disinflation of the central banks in democracies ultimately succeed in early 1980s, after the explosion of inflation in the achieving price stability to maximize economic 1970s. Thus, both analysis and experience reinforce growth. This is the goal we at the Federal Reserve the need for preemptive monetary policy actions. work toward each day. Statement by Alice M. Rivlin, Vice Chair, Board of System more explicitly. The testimony is a brief Governors of the Federal Reserve System, before the progress report on those efforts. Committee on Banking and Financial Services, U.S. House of Representatives, July 29, 1997 I am pleased to be here today to discuss the Federal PLANNING AT THE FED Reserve's planning process and the efforts we are making to measure and improve our performance in In its briefest form, the Federal Reserve's mission is the spirit of the Government Performance and Results to "foster the stability, integrity and efficiency of the Act (GPRA). I am personally a long-term proponent nation's financial and payment systems so as to proof GPRA and worked hard on its implementation mote optimal macroeconomic performance." This when I was at the Office of Management and Budget. mission derives directly from the Federal Reserve While the Federal Reserve does not receive appropri- Act of 1913, which established the Federal Reserve ated funds and is not, strictly speaking, covered by as the nation's central bank, and has three main the act, we are eager to participate in the processes elements: and activities set forth in the act. GPRA fits well with the new efforts the Federal Reserve has undertaken to • To formulate and conduct monetary policy plan further ahead, to use our resources more effec- toward the achievement of maximum sustainable tively, and to coordinate activities across the whole long-term growth; price stability fosters that goal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 761 • To promote a safe, sound, competitive, and to unfolding events. When serious problems develaccessible banking system and stable financial mar- oped in the banking industry in the 1980s and kets through supervision and regulation of the in response to increased supervisory responsibility nation's banking and financial systems; through its for foreign banking entities, more Federal Reserve function as the lender of last resort; and through resources were channeled into supervision and regueffective implementation of statutes designed to lation. Rapidly changing technology, especially teleinform and protect the consumer. communications and automation, has revolutionized • To foster the integrity, efficiency, and accessibil- Federal Reserve operations and required considerable ity of U.S. dollar payments and settlement systems; investment in hardware, software, and expertise. issue a uniform currency ; and act as the fiscal agent Consolidation of the banking industry, evolution of and depository of the U.S. government. payment systems patterns and technology, growth in derivatives, globalization of financial services, con- The activities involved in carrying out this broad cerns about equal credit opportunity and fair housing mission are extremely diverse, ranging from setting issues, efforts to reduce systemic risk in the payments short-term interest rates to processing checks and area, and changes in monetary aggregates have all cash to examining depository institutions. Allocation caused planning and resource adjustments. of the resources the Federal Reserve uses to do its job Rapid technological change has also created depends heavily on the state of the economy (both opportunities for Systemwide efficiencies resulting national and international), how well or badly the from consolidation of activities in one or more financial services system is functioning, and what Reserve Banks. A number of the twelve regional additional tasks (such as implementation of the Com- banks have developed specialized activities serving munity Reinvestment Act and expansion of our over- other regions. For example, FRAS (Federal Reserve sight of foreign banks operating in the United States Automation Services) is headquartered in Richmond pursuant to the Foreign Bank Supervision Enhance- but provides mainframe data processing and data ment Act of 1991) the Congress assigns to us. communications services to all parts of the System. To carry out this multifaceted mission, the Con- This consolidation and specialization has enabled gress established a highly decentralized Federal the Reserve Banks to centralize operations of many Reserve System with a complex governance struc- of their mission critical applications such as Fedwire, ture. Leadership and direction are vested in the Board automated clearinghouse (ACH), and accounting. of Governors, but only about 1,700 staff members Continued technological advance, as well as further (out of about 24,900) work for the Board in Washing- consolidation in the financial services industry, is ton. The regional Reserve Banks carry out the bulk likely to lead to further specialization among regional of operations and have substantial autonomy. As a Federal Reserve Banks. result, planning and resource allocation at the Federal Reserve have historically been quite decentralized, and major changes have required painstaking consen- NEW STRATEGIC PLANNING ACTIVITIES sus building across the Board-Bank structure. The regional structure of the Federal Reserve is In the face of accelerating change, the Federal one of its great strengths. The twelve regional Fed- Reserve recently recognized the need for a more eral Reserve Banks work closely with the banks in comprehensive planning framework. In 1995, a their region and are closely tied into their regional System Strategic Planning Coordinating Group was economies. The development of Federal Reserve pol- appointed, consisting of Board members, Reserve icy is greatly enriched by the in-depth knowledge that Bank presidents, and senior managers, representing the regional banks have of the industrial, agricultural, the full range of the Federal Reserve's activities. This and financial forces shaping different parts of the group produced an "umbrella" framework, designed economy. The challenge confronting strategic plan- to enable the Board, the Reserve Banks, and prodning at the Federal Reserve is to find a balance uct and support offices to produce their own more between decentralized regional planning, which pre- detailed plans and decision documents under the serves the strengths of the regional structure, and the "umbrella." need for a more comprehensive national plan aimed This framework, which is the basis for the docuat increasing efficiency by rationalizing the allocation ment submitted to the House and Senate Banking of resources across regions and functions. Committees, sets forth the mission of the Federal In recent years, major changes have occurred in the Reserve referred to above. It also discusses the allocation of Federal Reserve resources in response "values" of the Federal Reserve, its goals and objec- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

762 Federal Reserve Bulletin • September 1997 tives, and key assumptions as well as the external and paper checks—Americans wrote 64 billion checks in internal factors that could affect the achievement of 1996—while most of the industrial world is shifting those goals and objectives. With the overall frame- rapidly to more efficient electronic-based payments. work as a reference point, strategic planning activi- The study, directed by a committee of two Goverties are proceeding with new energy at the Reserve nors and two Federal Reserve Bank presidents, has Banks, at the Board, and with respect to crosscutting drawn on analytic resources across the Federal major functions such as the payments system and Reserve System and outside. We began by examining bank supervision and regulation. the consequences of substantially altering the role of Individual Reserve Banks have reviewed their the Federal Reserve in the retail payments system operations from the ground up and reassessed their (checks and wire transfer system known as ACH). structure and effectiveness in carrying out their mis- We analyzed the impact of scenarios ranging from sions. Some of the Banks have launched fundamental withdrawal of the Federal Reserve from the check re-engineering efforts that are resulting in substantial and ACH markets to more aggressive leadership by changes in management structure and operations. The the Federal Reserve in making the payment system Federal Reserve Bank of Chicago calls its effort more efficient and less dependent on paper. "Fresh Look;" the Federal Reserve Bank of Cleve- To get maximum input from the participants in the land is engaged in "Transformation: 2000." payment system—banks, clearinghouses, vendors, consumers, and others—in helping us assess alternatives for the future, we held a series of "forums" Board Planning and Budgeting around the country in May and June. We had enthusiastic and extremely helpful participation from a wide At the Board, we have restructured the annual plan- range of institutions. We learned a lot from the proning and budget process to put more emphasis on cess and are now reassessing the alternatives, conplanning (and less on detailed line-item budgeting), ducting additional analyses, and preparing to present to lengthen the planning and budgeting horizon, and preliminary options to the Board. I look forward to to involve the Board itself more heavily in setting sharing the study with this committee. priorities. To this end, we have established a Budget The payments area is a good example of the Committee of the Board (consisting of myself and dilemma posed for planners by rapid technological Governors Phillips and Kelley) assisted by a staff change. While rapidly evolving technology makes planning group drawn from across the major func- focusing on future options imperative, it also makes tions of the Board. We are working with a four-year it extremely important to remain flexible. Laying out planning horizon and intend to produce the Board's a blueprint for the payments system of the next ten first biennial budget (1998-99) to go into effect on or even five years, and rigidly following it, would January 1, 1998. Our hope is that the new process almost certainly be a mistake. The technology is and structure will give the Board a better understand- moving so rapidly that investments made now may ing of the options it faces with respect to alternative well be obsolete in a short time. ways of carrying out the Federal Reserve's mission and a clearer basis for deciding on priorities. PERFORMANCE MEASURES Payments System Study A major theme of the GPRA is the identification of specific measures of performance of projects and A major study of the Federal Reserve's role in the programs that can be used to evaluate their effectivepayments system, currently under way, is another ness. As in most organizations, performance measexample of strategic planning with respect to a urement at the Federal Reserve is more advanced— major portion of the Federal Reserve's activities, and more feasible—in some types of activities than in under the general umbrella of the strategic planning others. framework. In the payment services areas, the Reserve Banks Because payments technology and the structure of have measured their performance through various the financial services industry are changing rapidly, it financial measures for many years. For example, the seemed important to focus both on how the payment Monetary Control Act of 1980 imposes market discisystem was evolving (and should evolve) and what pline on the Federal Reserve by requiring it fully to role the Federal Reserve should play in that evolu- cover its costs of providing services to depository tion. The United States is amazingly dependent on institutions, and compliance with this requirement is Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 763 monitored closely. Frequently, private competitors already collect and are effective and cost-saving provide or could provide these services, and our because they provide a systematic way to plan and ability to recover our costs, adjusted to include a prioritize our time and resources. factor for imputed profits, taxes, and cost of capital, In other areas, such as the research and statistical help determine whether it is beneficial for the econ- analysis on which monetary policy is based, perforomy that we stay in the business. In addition, the mance measurement is—and will remain—far more Federal Reserve has traditionally measured unit costs problematic. The performance of the economy itself for its financial services and has developed various is not so hard to measure and right now is highly indexes that allow a Reserve Bank to measure its cost positive. But it is not clear how much of the ecoperformance over time and in comparison with other nomic progress can be attributed to monetary policy Reserve Banks. Private sector benchmarks are also and even less clear how particular monetary policy being developed. The Federal Reserve also tracks actions are related to the quality and quantity of quality measures for many Reserve Bank services. research and analysis produced by the Fed's research Finally, the Federal Reserve monitors the progress staff. of the Reserve Banks against various strategic objectives. Similarly, in bank supervision, the Federal Reserve CONCLUSION has long used a variety of measures of the effectiveness of its examination process, but the measurement GPRA provides the opportunity for a major improvechallenge has taken on new importance as super- ment in the management and effectiveness of federal vision becomes more automated and more focused agencies. It provides the impetus for agencies to on analyzing risk. To meet this challenge, the Federal clarify their missions and objectives, measure their Reserve is working closely with other regulators to performance better, and improve their efficiency and standardize and improve examination techniques and effectiveness. It must, however, avoid the risk of has established a steering committee to oversee becoming, like some previous efforts to improve govimplementation of a risk-focused examination pro- ernment management, largely a paper exercise that gram and to design a management information sys- produces many numbers and reports but few real tem that will permit the Board to evaluate better the results. efficient use of examination resources among the The Federal Reserve welcomes the opportunity to Reserve Banks. For instance, supervisory data are participate in the GPRA process. We will work hard used to determine in advance of on-site examinations to fulfill the vision of the framers of the act and avoid what factors (CAMELS rating, asset size, location, the pitfalls. We will have to respond in ways that are and loan types) are most predictive as to the resources appropriate to the Federal Reserve's diverse missions needed for examinations, and which institutions, and decentralized structure. I believe we have made particular lending areas, or other service lines may significant progress toward the GPRA-type strategic require more intensive review. Such programs are planning and are on the track to making more in the low-cost because they use information that we immediate future. Statement by Edward W. Kelley, Jr., Member, Board YEAR 2000 READINESS of Governors of the Federal Reserve System, before the Subcommittee on Financial Services and Tech- It is crucial that the Federal Reserve maintain reliable nology of the Committee on Banking, Housing, and services to the nation's banking system and financial Urban Affairs, U.S. Senate, July 30, 1997 markets. I want to assure you that the Federal Reserve is giving the Year 2000 its highest priority, commen- I am pleased to appear before the subcommittee surate with our goal of maintaining the stability of today to discuss the Federal Reserve's efforts to the nation's financial markets and payments systems, address the Year 2000 computer systems problem. I preserving public confidence, and supporting reliable will discuss what action is being taken by the Federal government operations. Reserve System to address internal systems, our The Federal Reserve System has developed and supervisory efforts, coordination with the industry, is executing a comprehensive plan to ensure its own and contingency planning. Year 2000 readiness, and the bank supervision func- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

764 Federal Reserve Bulletin • September 1997 tion is well along in a cooperative, interagency effort, plans. We are also faced with labor market pressures to promote early remediation and testing by the that call for creative measures to retain staff memindustry. The supervision function is completing an bers who are critical to the success of our Year 2000 assessment of the industry's readiness, will examine activities. every bank subject to our jurisdiction by mid-1998, According to industry experts, one-quarter of an and will review their progress as part of all examina- organization's Year 2000 compliance efforts are tions conducted throughout the remaining months devoted to project management. Managing prepabefore the millennium. rations for the century date change is particularly We are taking a comprehensive approach to pre- resource-intensive given the number of automated paredness that includes assessments of readiness, systems to be addressed, systems interrelationships remediation, testing, and updating proved plans and and interdependencies, interfaces with external data techniques used during other times of operational sources and customers, and testing requirements. In stress in order to be prepared to address potential addition, Year 2000 preparations must address comcentury data change difficulties. All Federal Reserve puterized environmental systems such as power, heatcomputer program changes, as well as system and ing and cooling, voice communications, elevators, user-acceptance testing, are scheduled to be com- and vaults. In the case of the Federal Reserve, manpleted by year-end 1998. Further, critical financial agement of this project is particularly challenging services systems that interface with customers will be because it requires coordination among Reserve Year 2000 ready by mid-1998, permitting approxi- Banks, the Board of Governors, government agenmately eighteen months for customer testing. cies, numerous vendors and service providers, and Many top personnel in the Federal Reserve System approximately 13,000 customers. are working hard to manage this initiative. Our staff In late 1995, a Federal Reserve Systemwide project is putting in many extra hours to prepare for testing was initiated, referred to as the Century Date Change with customers, planning for business continuity in (CDC) project, to coordinate the efforts of the the event of any unanticipated internal systems prob- Reserve Banks, Federal Reserve Automation Serlem, and enhancing our ability to respond to possible vices (FRAS)—the Reserve Banks' centralized mainoperating failures of depository institutions. While frame data processing and data communications there are challenges before us, I can report that we services organization—and the Board of Governors. expect to be fully prepared for the century date Our project team is taking a three-part approach to change. achieve its objectives, focusing on planning, readiness, and communication. Our planning began with a careful inventory of all applications and establishment of schedules and support mechanisms to ensure FEDERAL RESERVE READINESS that readiness objectives are met. The readiness process involves performing risk assessments, modi- The Federal Reserve recognized the potential prob- fying automated systems, and testing internally and lem with two-digit date fields more than five with depository institutions, service providers, and years ago when we began consolidating our main- government agencies. Finally, we are stressing effecframe data processing operations. Our new central- tive, consistent, and timely communication, both ized mission-critical applications, such as Fedwire internal and external, to promote awareness and comfunds transfer, book-entry securities, and automated mitment at all levels of our own organization and the clearinghouse, were designed from inception with financial services industry, more generally. Some of Year 2000 compliance in mind. The mainframe con- our most senior executives are leading the project, solidation effort also necessitated extensive applica- and the Board is now receiving formal status reports tion standardization, which required us to complete a at least every sixty days. Any significant compliance issues will be reported to the Board immediately. comprehensive inventory of our mainframe applications, a necessary first step to effective remediation. A significant challenge in meeting our Year 2000 Like our counterparts in the private sector, the Fed- readiness objectives is our reliance on commercial eral Reserve System still faces substantial challenges hardware and software products and services. Much in achieving Year 2000 readiness. These challenges of our information processing and communications include managing a highly complex project involving infrastructure is composed of hardware and software multiple interfaces with others, ensuring the readi- products from third-party vendors. Additionally, the ness of vendor components, ensuring the readiness of Federal Reserve utilizes commercial application softapplications, testing, and establishing contingency ware products and services for certain administrative Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 765 functions and other operations. As a result, we must demand for technical talent. As the millennium draws coordinate with numerous vendors and manufactur- closer, the global market requirements for qualified ers to ensure that all of our hardware, software, and personnel will intensify even further. We are respondservices are Year 2000 ready. In many cases, compli- ing as necessary to these market-induced pressures ance will require upgrading, or even replacing, equip- by offering incentives to retain staff members in ment and software. We have completed an initial critical, high-demand positions. inventory of vendor components used in our main- Our focus at the Board goes beyond the immediate frame and distributed computing environments, and need to prepare our systems and ensure reliable vendor coordination and system change are progress- operation of the payments infrastructure. We are also ing well. working hard to address the supervisory issues raised As we continue to assess our systems for Year by Year 2000 and are developing contingency plans 2000 readiness, we are preparing a central environ- that I will discuss later. ment for testing our payment system applications. We are establishing isolated mainframe data processing environments to be used for internal testing of all SUPERVISION PROGRAM system components as well as for testing with depository institutions and other government agencies. Banks rely heavily on their automated information These environments will enable testing for high-risk processing and telecommunications systems to pardates such as year-end 1999, beginning of year 2000, ticipate in the global payments system, to exchange and February 29, 2000 (leap year). Testing will be information with counterparties and regulatory agenconducted through a combination of future-dating cies, and to manage their internal control systems and our computer systems to verify the readiness of our sophisticated computer equipment. As a bank superinfrastructure and testing critical future dates within visor, the Federal Reserve has worked actively with interfaces to other institutions. Our test environ- the other banking agencies to advise the industry of ments will be available to our customers for testing our concerns and to develop a thorough understandon a twenty-four hour basis, six days a week. Net- ing of the industry's readiness. In this regard, the work communications components will also be tested Federal Reserve is closely monitoring Year 2000 and certified in a special test lab environment at preparations and compliance of the institutions we FRAS. supervise so that we can act aggressively to identify The testing effort for Year 2000 readiness within and resolve problems that arise. the Federal Reserve will be extensive and complex. Early this year, the Federal Reserve and the other Industry experts estimate that testing for readiness regulatory agencies developed a uniform Year 2000 will consume about half of total Year 2000 project assessment questionnaire to collect and aggregate resources. To leverage existing resources and proc- information on a national basis. We have received esses, we are modeling our Year 2000 testing, both more than 1,000 responses from financial organizainternally and with depository institutions, on proved tions and service providers supervised by the Federal testing methods and processes. Our customers are Reserve. Based on these responses and other informaalready familiar with these processes and testing tion, we believe the banking industry's awareness environment. We will finalize and distribute our level has improved substantially during 1997 and is testing strategy to depository institutions by the end reflected in the intensified project management, planof September this year and begin coordinating test ning, budgeting, and renovation efforts that have schedules January 1998. As I noted earlier, the been initiated. Reserve Banks are targeting June 1998 to commence Generally speaking, the nation's largest banking testing with their customers, which allows an organizations have done much to address the issues eighteen-month time period for depository institu- and have devoted significant financial and human tions to test their systems with the Federal Reserve. resources to preparing for the century date change. The next challenge I would like to discuss regards Many larger banks are already renovating their retaining staff members critical to the success of the operating systems and have commenced testing of project. As I mentioned earlier, we have placed a high their critical applications. Large organizations appear priority on our CDC project and as such have allo- capable of renovating their critical operating systems cated many of the best managers and technical staff by year-end 1998 and will have their testing well in the Federal Reserve System to work on the project. under way by then. Some of these organizations have The information technology industry is already recently come to realize that their initial resource and experiencing market pressures due to the increased cost estimates to address this project need to be Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

766 Federal Reserve Bulletin • September 1997 raised, given the magnitude of the tasks to be per- vided as Attachments 1 and 2 respectively.1 We have formed and the growing scarcity of available pro- also established an Internet Web site to provide gramming staff with the skills necessary to renovate depository institutions with information regarding older systems. the Federal Reserve System's CDC project. This site Smaller banks, including the U.S. offices of foreign can be accessed at the following Internet address: banks and those dependent on a third party to provide http://www.frbsf.org/fiservices/cdc. their computer services, are generally aware of the To heighten the industry's awareness level, the issues and are working on the problem; however, Federal Financial Institutions Examination Council their progress is less visible and will be carefully (FFIEC), issued a policy statement on May 5 entitled monitored as part of our supervision program. Many "Year 2000 Project Management Awareness," which of these organizations appear to have underestimated updates the supervisory guidance first issued in 1996. the efforts necessary to ensure that their systems will The statement emphasizes the regulators' concerns be compliant. Accordingly, we will direct significant that inability to provide a compliant hardware and attention to ensure that these banks intensify their software environment to support the upcoming cenefforts to prepare for the Year 2000. We intend to tury date change would expose a bank to inordinate update our assessment periodically to maintain a operational, financial, and legal risks. A set of unicurrent awareness of the industry's readiness. form examination procedures accompanying the Our focus on the industry's readiness began last statement provides guidance for examiners as well as year, when the Federal Reserve commenced examin- bank management, stressing the need for sponsorship ing banks' plans and initiatives for the century date at the highest levels of the organization to effectively change. Through mid-year 1998 we will continue this manage the remediation process and address any program and conduct a thorough Year 2000 prepared- deficiencies that may surface. ness examination of every bank, U.S. branch and Bank management must not only be aware of the agency of a foreign bank, data processing center, and many Year 2000 problems but must also be sensitive service provider that we supervise. Our examination to the magnitude of the efforts needed to achieve program includes an extensive review of each institu- compliance and the consequent budgetary implication's Year 2000 project management plans to evalu- tions. Industry experts maintain that costs to perate their sufficiency, to ensure the direct involvement form Year 2000 renovation tasks will increase as the of senior management and the board of directors, and demand for skilled information technology profesto monitor their progress against the plan. Our exam- sionals grows. Accordingly, the interagency policy iners are actively engaged in ensuring that the board statement emphasizes the need for bank management of directors and senior management are addressing to be aggressive in securing sufficient human and the issues and assembling the necessary resources. computer resources. The statement also encourages Based on the examination results and the findings banks to be largely completed with their renovation collected during the current assessment program, we and well into testing of their major applications by are identifying those institutions that require intensi- year-end 1998 so that any substantive problems can fied supervisory attention and establish our priorities be addressed in 1999. for subsequent examinations. The statement also calls upon banks to consider the Year 2000 risks posed by their borrowers and customers, as banks could be adversely affected by borrowers who are not prepared for Year 2000 process- PUBLIC AWARENESS ing. Corporate customers who have not considered Year 2000 issues may experience a disruption in We are mindful that extensive communication with business, resulting in financial difficulties that could the industry and the public is crucial to the success of negatively influence their creditworthiness. Examinour efforts. Our public awareness program includes ers now verify that a bank incorporates a borrower's communications related to our testing efforts and Year 2000 preparedness into its underwriting stanour overall concerns about the industry's readiness. dards and that loan officers assess the extent of We continue to advise our customers of the Federal Year 2000 computer problems that may influence a Reserve's plans and time frames for making our borrower's ability to repay its loans on a timely basis. software Year 2000 ready. We have inaugurated a Year 2000 newsletter and have just published our first 1. The attachments to this statement are available from Publicabulletin addressing specific technical issues. Copies tions Services, Stop 127, Board of Governors of the Federal Reserve of our recent newsletter and the bulletin are pro- System, Washington, DC 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 767 On behalf of the FFIEC, the Federal Reserve Year 2000 issues, and have been active in various has developed a Year 2000 information distribution private sector forums. The participants will discuss system, including an Internet web site and a toll free their involvement with raising bank industry aware- Fax Back service (888-882-0982). The web site ness, remediation of payment systems, and the readiprovides easy access to policy statements, guidance ness of the central banks' internal systems. Informato examiners, and paths to other Year 2000 web sites tion garnered from this meeting will assist the BIS available from numerous other sources. The site has Committee on Payment and Settlement Systems, as been used heavily since its introduction in early well as the Federal Reserve, in understanding the May of this year. The FFIEC Year 2000 web site current state of preparedness of payment systems on can be accessed at the following Internet address: a global level. http://www.ffiec.gov/y2k. The Federal Reserve has also produced a tenminute video entitled "Year 2000 Executive Awareness" intended for viewing by a bank's board of CONTINGENCY PLANNING directors and senior management. The video presents a summary of the Year 2000 five-phase project man- Because smooth and uninterrupted financial flows are agement plan outlined in the interagency policy state- obviously of utmost importance, our main focus is ment. In my introductory remarks on the video, I note our preparedness and the avoidance of problems. But that senior bank officials should be directly involved we know from experience that upon occasion, things in managing the Year 2000 project to ensure that it is can go wrong. Given our unique role as the nation's given the appropriate level of attention and sufficient central bank, the Federal Reserve has always stressed resources to address the issue on a timely basis. The contingency planning—for both systemic risks as video has already been distributed to banks and their well as operational failures. service providers and can be ordered through the In this regard, we regularly conduct exhaustive Board's Web site. business resumption tests of our major payment sys- We are also taking steps to provide this informa- tems that include depository institutions. Moreover, tion to foreign bank supervisors. With regard to the as a result of our experience in responding to probinternational aspects of the Year 2000 issue, U.S. lems arising from such diverse events as earthquakes, offices of foreign banks pose a unique set of chal- fires, storms, and power outages, as well as liquidity lenges. Based on our assessments, we are concerned problems in institutions, we expect to be well posithat some offices may not have an adequate apprecia- tioned to deal with problems in the financial sector tion of the magnitude and ramifications of the prob- that might arise as a result of CDC. We are, of lem and may not have committed the resources nec- course, developing specific CDC contingency plans essary to address the issues effectively. This is a to address various operational scenarios. Our existing particular concern for foreign bank offices that are business resumption plans will be updated to address dependent on their foreign parent bank for informa- date-related difficulties that may face the financial tion processing systems. industry. Therefore, we are working through the Bank for We already have arrangements in place to assist International Settlements' (BIS) committee of bank financial institutions in the event they are unable to supervisors composed of many of the international access their own systems. For example, we are able agencies responsible for the foreign banks that oper- to provide financial institutions with access to Fedate in the United States. Through several presenta- eral Reserve computer terminals on a limited bases tions and the distribution of the interagency statement for the processing of critical funds transfers. This and the Year 2000 video to the BIS Supervisors contingency arrangement has proved highly effective Committee, we have sought to elevate foreign bank when used from time to time by depository institusupervisors' awareness of the risks posed by the tions experiencing major hardware-software outages century date change and to solicit their assistance in or that have had their operations disrupted due to monitoring the state of overall preparedness of for- natural disasters such as the Los Angeles earthquake, eign bank parents to ensure that they consider the Hurricane Hugo in the Carolinas, and Hurricane needs of their U.S. offices. Andrew in South Florida. In these cases we worked We are also participating in the BIS Group of closely with financial institutions to ensure that Computer Experts' meeting of G-10 and non-G-10 adequate supplies of cash were available to the comcentral banks in September, which provides a forum munity and also arranged for our operations to functo share views on and approaches to dealing with tion virtually without interruptions for twenty-four Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

768 Federal Reserve Bulletin • September 1997 hours a day during the crisis period. We feel the We recognize, nonetheless, that despite their best experience gained from such crises will prove very efforts, some depository institutions may experience helpful in the event of similar problems triggered by operating difficulties, either as a result of their own the century date change. We are also beginning to computer problems or those of their customers, counformulate responses for augmenting certain func- terparties, or others. These problems could be manitions, such as computer help desk services and off- fested in a number of ways and would not necessarily line funds transfers, to respond to short-term needs involve funding shortfalls. Nevertheless, the Federal for these services. Reserve is always prepared to provide information Although operational contingency is something to depository institutions on the balances in their that the Federal Reserve is confronted with on a daily accounts with us throughout the day so that they can basis, preparation for contingencies in the century identify shortfalls and seek funding in the market. date change environment does offer some new and The Federal Reserve will be prepared to lend in significant challenges. For example, in the software appropriate circumstances and with adequate collatapplication arena, the normal contingency of falling eral to depository institutions when market sources of back to a prior release of the software is not a viable funding are not reasonably available. The terms and option. This underscores the importance of the rigor- conditions of such lending may depend upon the ous assessment and testing to which all applications circumstances giving rise to the liquidity shortfall. must be subjected. Discussions are also under way with the other Beyond reliance on a sound plan and effective federal banking agencies to ensure that we are jointly execution of the plan, the Federal Reserve is not prepared to address the challenge resulting from totally dependent upon any single system for execut- serious operating problems. If such operating probing payment orders. While we have very sophisti- lems were not correctable within a reasonable time cated automated systems in place, such as Fedwire frame, it could necessitate a federal resolution comand our automated clearinghouse systems, we also parable to that used for a bank that has become operate paper-based payment systems that offer a set capital insolvent. of alternatives in the event of a disruption in a seg- Our preparations for possible liquidity difficulties ment of the electronic payment system. also extend to the foreign bank branches and agencies Clearly, the Federal Reserve and other bank super- in the United States that may be adversely affected visors expect depository institutions to work dili- directly by their own computer systems or through gently and effectively to ensure that automation difficulties caused by the linkage and dependence on issues associated with the Year 2000 are resolved their parent bank. Such circumstances would necessifully and in a timely fashion. However, we anticipate tate coordination with the home country supervisor. that at least a few financial institutions will experi- Moreover, consistent with current policy, foreign cenence difficulty in completing their Year 2000 prepara- tral banks will be expected to provide liquidity suptions in a timely manner, and we are developing plans port to any foreign banking organizations that experito address such cases. The Federal Reserve will ence a funding shortfall. identify and monitor these organizations closely and work to ensure that senior management and boards of directors are aware of their Year 2000 issues, cost implications, and possible consequences. A bank's CLOSING REMARKS need for adequate preparation for the Year 2000 is regarded as a safety and soundness issue. When As I indicated at the outset, the Federal Reserve progress is deemed to be substantively less than sat- views its Year 2000 preparations with great seriousisfactory, resulting in excessive risk and a possibly ness. As such, we have placed a high priority on the unsafe or unsound condition, we will address the remediation of date problems in our systems and issue in a manner consistent with our long-standing the development of action plans that will ensure supervisory approach to dealing with other safety and business continuity for the critical financial systems soundness issues. The full range of our supervisory we operate. While we have made significant progress tools and remedies are available, including intensified in validating our internal systems and planning for monitoring, progressively more detailed reporting testing with depository institutions and others using requirements, presentations to the board of directors, Federal Reserve services, we must work to ensure insistence on bank commitments to initiate corrective that our efforts remain on schedule and that problems action, and, ultimately, possible use of enforcement are addressed in a timely fashion. In particular, we actions as appropriate. will be paying special attention to the testing needs Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 769 of depository institutions and the financial industry monitor progress, and target for special supervisory and are prepared to adjust our support for them as attention those organizations that are most in need of required by experience. We believe that we are well assistance. Lastly, we will continue to participate in positioned to meet our objectives and will remain international forums with the expectation that these vigilant throughout the process. efforts will help foster an international awareness As a bank supervisor, the Federal Reserve will of Year 2000 issues and provide for the sharing of continue to address the industry's preparedness, experiences, ideas, and best practices. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

770 Announcements PUBLIC FORUM ON STREAMLINING AND legal risks that may be associated with inadequate REFORM OF THE TRUTH IN LENDING ACT knowledge and understanding of its clients' personal AND THE REAL ESTATE SETTLEMENT and business backgrounds. PROCEDURES ACT The review has resulted in these policy guidelines on sound practices to provide banking organizations The Federal Reserve Board and the Department with guidance on basic controls necessary to miniof Housing and Urban Development held a public mize reputational and legal risk and to deter illicit forum on July 30 to give interested parties an oppor- activities such as money laundering. tunity to present their views concerning the stream- The essential elements associated with these sound lining and reform of the Truth in Lending Act (TILA) private banking activities include the following: and the Real Estate Settlement Procedures Act (RESPA). • Management oversight The Economic Growth and Regulatory Paperwork • "Know your customer" policies and procedures Reduction Act of 1996 directs the agencies to submit • Risk-management practices and monitoring legislative recommendations to the Congress on how systems to simplify and improve consumer disclosures under • Segregation of duties, compliance, and audit TILA and RESPA if the disclosures cannot be sim- • Other related projects and products. plified through regulatory change. The two agencies concluded that meaningful simplification of the The Federal Reserve will also distribute an updated disclosures can come about only through statutory Bank Secrecy Act examination manual in the next revisions. few weeks. The updated manual will include exami- Interested parties unable to attend the forum or nation procedures relating to recent additions and wishing to provide written views on the issues could changes to the Bank Secrecy Act, as well as updated submit comments by August 15 to either agency. sections relating to anti-money-laundering initiatives. GUIDELINES FOR SOUND RISK-MANAGEMENT PROPOSED ACTIONS PRACTICES FOR PRIVATE BANKING ACTIVITIES The Federal Reserve Board on July 7, 1997, The Federal Reserve Board announced on July 2, requested comment on a proposal to apply sec- 1997, guidelines on sound risk-management practices tions 23A and 23B of the Federal Reserve Act to for private banking activities such as personalized transactions between a member bank and any subsidinvestment services for selected customers. iary that engages in activities that are impermissible Private banking activities also involve money man- for the bank itself and that Congress has not preagement and financial advice for high net worth viously exempted from coverage by section 23A. clients and have become an increasingly important Sections 23A and 23B restrict the ability of a member aspect of some large, internationally active banking bank to fund an affiliate through direct investment, organizations. loans, or other transactions that might expose the The Federal Reserve Bank of New York recently member bank to risk. Comments are requested by conducted a comprehensive review of private bank- September 3, 1997. ing activities at about forty domestic and foreign The Federal Reserve Board issued for public combanking organizations in its District to improve the ment on July 9,1997, proposed amendments to model Federal Reserve's understanding of private banking forms in Regulation B (Equal Credit Opportunity), operations. to reflect statutory changes to disclosures required Examiners assessed each institution's ability to by the Fair Credit Reporting Act (FCRA). Creditors recognize and manage the potential reputational and have the option of providing the FCRA disclosures Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

771 separately or with the notice of action taken required that meet the margin criteria in Regulation T (Credit under Regulation B. Comments are requested by by Brokers and Dealers). August 15. The lists were effective August 11, 1997, and supersede the previous lists that were effective May 12, 1997. The next revision of these lists is scheduled to be effective November 1997. These lists AVAILABILITY IN THE FEDERAL RESERVE are published for the information of lenders and the BULLETIN OF NEW STATISTICAL TABLES ON general public. APPLICATIONS FOR PRIVATE MORTGAGE The changes that have been made to the revised INSURANCE OTC List, which now contains 4,880 OTC stocks, are as follows: Under the auspices of the Mortgage Insurance Companies of America, the nation's eight private mortage • One hundred eighty-four stocks have been insurance (PMI) companies make available to the included for the first time, 140 under National Market Federal Financial Institutions Examination Council System (NMS) designation (FFIEC) information about applications received for • Forty-nine stocks previously on the list have private mortgage insurance. The information includes been removed for substantially failing to meet the the disposition of the applications, and the race or requirements for continued listing national origin, sex, and annual income of applicants. • One hundred four stocks have been removed for A summary of the 1996 PMI data is provided in a reasons such as listing on a national securities series of tables in the Financial and Business Staexchange or involvement in an acquisition. tistics section of this issue of the Federal Reserve Bulletin (see pages A76-A79). Statistical tables simi- The OTC list is composed of OTC stocks that have lar to these have appeared in Bulletin articles describbeen determined by the Board to be subject to margin ing PMI activity since 1994. Summary tables simirequirements in Regulations G (Securities Credit by lar to those in this issue will appear each year in Persons other than Banks, Brokers, or Dealers), T, the Financial and Business Statistics Section of the and U (Credit by Banks for Purchasing or Carrying Bulletin. Margin Stocks). It includes OTC stocks qualifying under Board criteria and also includes all OTC stocks designated as NMS securities. Additional NMS secu- DISCONTINUATION OF STATISTICAL TABLE rities may be added in the interim between quarterly IN THE FEDERAL RESERVE BULLETIN Board publications; these securities are immediately marginable upon designation as NMS securities. Table 1.13, "Selected Borrowings in Immediately The foreign list is composed of foreign equity Available Funds of Large Banks" will be discontinsecurities that are eligible for margin treatment at ued after this issue of the Federal Reserve Bulletin. broker-dealers. Effective July 1, 1996, foreign stocks This table is produced from data in the H.5 statistical that have a "ready market" for purposes of the release, and these data will no longer be available. Securities and Exchange Commission's (SEC) net The H.5 release was discontinued in July. Data on the capital rule may be included on the foreign list. The repurchase agreement component of the monetary SEC effectively treats all stocks included on the aggregate M3 will continue to be provided in Financial Times/Standard & Poor's Actuaries World table 1.21 of the Federal Reserve Bulletin statistical Indices (FT/S&P-AW Indices) as having a "ready appendix and in the H.6 statistical release, "Money market" for capital purposes. The Board is adding Stock, Liquid Assets, and Debt Measures." sixty-four foreign stocks and deleting sixty-three, based on changes to the FT/S&P-AW Indices. The revised foreign list now contains 1,976 securities AVAILABILITY OF REVISED LISTS OF displayed in order of country. OVER-THE-COUNTER STOCKS AND OF FOREIGN STOCKS SUBJECT TO MARGIN REGULATIONS CHANGES IN BOARD STAFF The Federal Reserve Board published on July 25, 1997, a revised list of over-the-counter (OTC) stocks The Board of Governors announced the appointment that are subject to its margin regulations. Also pub- of Paul W. Bettge as Assistant Director in the Divilished was a revised list of foreign equity securities sion of Reserve Bank Operations and Payment Sys- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

772 Federal Reserve Bulletin • September 1997 terns, effective August 1, 1997. Mr. Bettge is a certi- thirty-three years of service with the Federal Reserve fied public accountant and received his M.B.A. from System and the Office of the Comptroller of the the College of William and Mary. He joined the Currency. Board's staff in 1982. The Board announced that Ralph W. Smith, Jr., The Board announced that Rhoger Pugh, Assistant Assistant Director in the Division of International Director in the Division of Banking Supervision and Finance, retired, effective September 3, 1997. • Regulation, retired, effective August 31, 1997, after Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

773 Minutes of the Federal Open Market Committee Meeting Held on May 20,1997 A meeting of the Federal Open Market Committee Mr. Conrad, First Vice President, Federal Reserve was held in the offices of the Board of Governors of Bank of Chicago the Federal Reserve System in Washington, D.C., on Messrs. Dewald, Hakkio, Ms. Krieger, Messrs. Lang, Rosenblum, and Sniderman, Senior Vice Tuesday, May 20, 1997, at 9:00 a.m. Presidents, Federal Reserve Banks of St. Louis, Kansas City, New York, Philadelphia, Dallas, Present: and Cleveland respectively Mr. Greenspan, Chairman Messrs. Cox, Rosengren, and Weber, Vice Presidents, Mr. McDonough, Vice Chairman Federal Reserve Banks of Dallas, Boston, and Mr. Broaddus Minneapolis respectively Mr. Guynn Mr. Kelley Mr. Moskow By unanimous vote, the Federal Open Market Mr. Meyer Committee approved the minutes of its meeting on Mr. Parry March 25, 1997. Ms. Phillips The Manager of the System Open Market Account Ms. Rivlin reported on recent developments in foreign exchange markets. The Desk did not conduct any transactions Messrs. Hoenig, Jordan, Melzer, and Ms. Minehan, in foreign currencies for System Account during the Alternate Members of the Federal Open Market Committee period since the latest meeting on March 25, 1997, and thus no vote was required of the Committee. Messrs. Boehne, McTeer, and Stern, Presidents of the The Manager also reported on developments in Federal Reserve Banks of Philadelphia, Dallas, domestic financial markets and on System open marand Minneapolis respectively ket transactions in government securities and federal agency obligations during the period March 25, 1997, Mr. Kohn, Secretary and Economist through May 19, 1997. By unanimous vote, the Com- Mr. Bernard, Deputy Secretary mittee ratified these transactions. Mr. Coyne, Assistant Secretary The Committee then turned to a discussion of the Mr. Gillum, Assistant Secretary Mr. Mattingly, General Counsel economic outlook and the implementation of mone- Mr. Baxter, Deputy General Counsel tary policy over the intermeeting period ahead. A Mr. Prell, Economist summary of the economic and financial information Mr. Truman, Economist available at the time of the meeting and of the Committee's discussion is provided below, followed by Messrs. Beebe, Eisenbeis, Goodfriend, Hunter, the domestic policy directive that was approved by Lindsey, Mishkin, Promisel, Siegman, Slifman, the Committee and issued to the Federal Reserve and Stockton, Associate Economists Bank of New York. The information reviewed at this meeting sug- Mr. Fisher, Manager, System Open Market Account gested that the expansion of economic activity had slowed after having surged in late 1996 and earlier Mr. Ettin, Deputy Director, Division of Research and Statistics, Board of Governors this year. Consumer spending appeared to be increas- Messrs. Madigan and Simpson, Associate Directors, ing at a considerably slower pace after the spurt in Divisions of Monetary Affairs and Research and the first quarter, while business fixed investment Statistics respectively, Board of Governors remained on a strong uptrend, and the demand for Ms. Low, Open Market Secretariat Assistant, housing seemed to be well maintained. Growth of Division of Monetary Affairs, Board of labor demand had moderated somewhat from the Governors Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

774 Federal Reserve Bulletin • September 1997 rapid pace at the beginning of the year, but labor were a little above the elevated level in the fourth markets remained tight and worker compensation quarter. appeared to be accelerating gradually. Despite the Business fixed investment expanded briskly in the upward drift in labor costs, underlying price inflation first quarter. Outlays for producers' durable equipwas still subdued. ment rebounded after fourth-quarter weakness, and Private nonfarm payroll employment rose at a con- spending for nonresidential structures posted another siderably reduced pace over March and April, and the substantial advance. Available indicators pointed to average workweek dropped from an unusually high further sizable gains in spending on both equipment rate in February and March to a more normal level in and structures. Business inventory investment was up April. The services industries recorded further large considerably in the first quarter after having increased gains in employment in March and April, but the a relatively small amount in the fourth quarter; hownumber of jobs in manufacturing contracted in April ever, inventory-sales ratios for most industry and and construction employment declined in both March trade groupings remained at very low levels. and April. The civilian unemployment rate fell appre- The nominal deficit on U.S. trade in goods and ciably in April to 4.9 percent, and the labor force services widened substantially on balance over Januparticipation rate edged down from the record high ary and February from the temporarily depressed rate reached in March. in the fourth quarter of last year and was about the Industrial production was unchanged in April after same as the rate in the third quarter. A surge in having recorded sizable increases in March and other imports reflected a rebound in the importation of recent months; declines in mining and manufacturing automotive products from the strike-reduced level of were offset by a large rise in utility output. The drop the fourth quarter, further expansion in purchases in manufacturing production reflected a sharp decline of imported computers, and an upturn in imports of in the output of motor vehicles and parts that was semiconductors after four quarters of declines. By largely related to the lagged effects of strike activity contrast, exports of goods and services rose only in recent months. The output of manufactured goods slightly in the January-February period; exports of other than motor vehicles and parts rose moderately automotive products were up sharply, but sizable in April: the production of business equipment posted increases in exports of chemicals, computers, and another solid gain while the output of consumer semiconductors were largely offset by declines in goods and construction supplies was unchanged. The other nonautomotive trade categories. Recent ecorate of utilization of manufacturing capacity fell in nomic information on the foreign G-7 countries, April, reflecting the decline in motor vehicle output, including some preliminary indicators for the second but it remained relatively high. quarter, suggested that the growth of output had Nominal retail sales were unchanged in March and strengthened somewhat on average in these countries. declined in April after having increased rapidly in Activity in continental Europe, though still weak, earlier months. Weaker sales of motor vehicles con- was improving, while the economies of Canada, tributed to the overall sluggishness of retail activity Japan, and the United Kingdom remained strong. in March and April, but spending on many other Economic activity continued to expand rapidly on categories of goods, both durable and nondurable, average in the major developing countries in the first also was down over the two-month period after hav- quarter. ing previously grown strongly. Expenditures on ser- Recent data indicated that price inflation remained vices advanced further through March (latest avail- moderate despite a gradual acceleration of labor able data) even though unseasonably mild weather costs. Increases in consumer prices were held down held down outlays for heating. While retail sales had in March and April by sizable declines in energy slowed recently, the latest surveys indicated that con- prices and a small net reduction in food prices. Consumer sentiment had risen further from an already sumer prices for items other than food and energy markedly high level. advanced at a moderate rate over the two months, and Housing activity in March and April was in line over the twelve months ended in April they increased with that in other recent months. Single-family hous- the same amount as in the previous twelve months. ing starts were unchanged in April after having Producer prices fell in both March and April, reflectdeclined in March. Starts for the two-month period ing large declines in energy prices. Excluding food were only a little below the average for 1996, and and energy, producer prices edged lower in April sales of new homes remained at a very high level in after having risen a sizable amount in March. Core March (latest data). Multifamily starts rose consider- producer prices increased considerably less over the ably in April and on average over March and April twelve months ended in April than over the previous Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 775 twelve months. At earlier stages of production, pro- stantially over the period but they rose considerably ducer prices registered declines both in recent months on balance. and for the twelve months ended in April. An upward In foreign exchange markets, the trade-weighted creep in the growth of labor costs was apparent in value of the dollar in terms of the other G-10 currendata on the hourly compensation of private industry cies declined on balance over the intermeeting period. workers; although the rise in the first three months The movements of the dollar during the period of 1997 was smaller than the increase in the fourth roughly corresponded to the fluctuations in quarter, the advance over the twelve months ended in intermediate- and long-term U.S. interest rates; the March was larger than that over the previous twelve dollar advanced strongly in April on growing expecmonths. A similar but more pronounced pattern was tations of a further finning of U.S. monetary policy evident in data on average hourly earnings for pro- but more than retraced that gain in May as the likeliduction or nonsupervisory workers. hood of further tightening waned. The dollar's weak- At its meeting on March 25, 1997, the Committee ness in May also seemed to reflect growing attention issued a directive that called for a slight increase in to the prospects for official intervention to restrain the the degree of pressure on reserve positions; the firm- dollar's rise, notably against the Japanese yen and the ing of policy was taken in light of continued rapid German mark. growth of aggregate demand in the first quarter and The growth of M2 and M3 remained brisk over the attendant greater risk of heightened pressures on March and April. Much of M2's strength during this resources and an upturn in inflation. Although further period resulted from a temporary buildup by housepolicy tightening might be needed at some point, the holds of balances in savings accounts and money Committee did not believe that developments during market mutual funds to cover unusually large tax the intermeeting period were likely to require an payments. The rapid growth of M3 was associated adjustment, and thus the directive did not include a not only with the bulge in M2 but also with presumption about adjustments to policy during the stepped-up issuance of large time deposits to fund the intermeeting period. The reserve conditions associ- expansion of bank credit. For the year through April, ated with this directive were expected to be consis- both aggregates expanded at rates appreciably above tent with some moderation in the expansion of M2 the upper bounds of their respective ranges for the and M3 over coming months. year. The growth of total domestic nonfinancial debt Open market operations immediately after the had moderated over recent months as a result of meeting on March 25 were directed toward imple- reductions in federal government borrowing. menting the slightly firmer reserve conditions desired The staff forecast prepared for this meeting sugby the Committee and then maintaining those condi- gested that the economy would expand in the second tions over the remainder of the intermeeting period. half of the year at a rate a little above that of its The federal funds rate averaged close to the higher estimated potential and then would increase at a intended level of 5Vi percent. Open market opera- slower and more sustainable rate in 1998. Growth of tions were complicated during the period by extraor- consumer spending, supported by high levels of dinarily large federal tax payments in April, which household wealth and further projected gains in emsubstantially increased the volume of open market ployment and income, was expected to remain fairly purchases needed to offset the reserve drains associ- brisk over the forecast horizon. Business spending on ated with those tax payments. equipment and structures was anticipated to continue Market interest rates generally posted small mixed to outpace the overall expansion of the economy, changes over the intermeeting period. Most private though the differential would tend to narrow over short-term rates increased only a little in response to time in conjunction with the gradual diminution of the March policy action, which had been largely increases in sales and profits that was expected anticipated by market participants. Intermediate- and to be associated with moderating economic growth. long-term yields rose over the early part of the inter- Housing construction was projected to drift lower meeting period, responding mostly to incoming data over coming quarters, partly in conjunction with suggesting that growth in aggregate demand and the rise in mortgage interest rates that already had output remained strong; these increases were sub- occurred but also in response to the smaller increases sequently more than reversed, however, as later infor- expected in household income. The staff continued to mation indicated that economic growth was moder- anticipate that fiscal policy and the external sector ating and price inflation remained subdued and on would exert mild restraint on the expansion of news of an agreement to balance the federal budget. economic activity. With resource utilization high and Major indexes of stock market prices fluctuated sub- labor compensation gradually accelerating, core con- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

776 Federal Reserve Bulletin • September 1997 sumer price inflation was forecast to drift slightly Spending for business fixed investment seemed to higher. have retained a good deal of momentum even after In the Committee's discussion, the members the large increases in such expenditures in recent agreed that the information for recent months pointed years. Clearly, businesses regarded such investments on balance to a marked slowing in the expansion of as highly profitable, and they appeared to be leading economic activity from a very rapid pace in late 1996 to gains in productivity that in turn were helping to and earlier this year. The extent of the reduced growth offset rising compensation and to maintain profit in the current quarter and the prospects for subse- margins in highly competitive markets. In the circumquent quarters were subject to substantial uncertainty, stances, it appeared unlikely that growth in capital but the members generally felt that the economy outlays would moderate appreciably for some time. retained considerable underlying strength. In the cir- A number of members also referred to the increasing cumstances and assuming no changes from current strength in nonresidential construction, notably that financial conditions, the individual members saw of commercial structures, in several parts of the likely prospects for expansion over the forecast hori- nation. Some referred in particular to planned or zon at a pace close to, or a little above, the estimated actual construction of new office buildings in various growth of the economy's long-run potential. Many locales; such activity was being stimulated by declinnoted, however, that high levels of consumer and ing vacancy rates, rising rents, and a ready availabilbusiness confidence and supportive financial condi- ity of financing. Likewise, a surge in tourism in a tions among other factors suggested the possibility number of areas had resulted in a scarcity of hotel that growth could turn out to be even faster. With rooms and was spurring hotel construction in some the utilization of productive resources, notably labor, major cities. Anecdotal reports of nonresidential already at particularly high levels in relation to the building activity undertaken on a speculative basis economy's potential, an outcome no stronger than had increased, but a building boom reminiscent of the current forecasts could well have adverse implica- 1980s did not appear to be under way. tions for inflation. Nonetheless, the members also Concerning the outlook for housing, members renoted that the rise in compensation increases had ferred to forecasts of a mild downtrend in residential been damped and that there continued to be few construction associated with the increases that had indications of accelerating price inflation in the occurred in mortgage interest rates. To date, however, statistical and anecdotal information available at there were few indications of any weakening. Indeed, this time; such developments underlined persisting housing construction had been relatively robust in the uncertainties about behavior in labor markets and early months of the year, though the strength probthe level and growth of the economy's sustainable ably was largely accounted for by unusually favorpotential. able weather conditions and may have borrowed from In their review of developments in key sectors of building activity later in the year. On balance, as the economy, members referred to favorable under- evidenced by anecdotal reports from some areas, lying factors in the outlook for consumer spending. various factors including ongoing growth in employ- These included solid growth in consumer incomes, ment and incomes, the availability of financing on large increases in financial wealth, and currently high still generally favorable terms, and the associated levels of consumer confidence. While more moderate affordability of housing for many homeowners growth in consumer spending for durable goods seemed likely to provide continued support for this seemed likely after an extended period of robust sector of the economy for some period of time. expansion, these favorable factors suggested that the A surge in nonfarm business inventory investment risks of a different outcome were tilted in the direc- accounted for a substantial portion of the acceleration tion of faster-than-projected expansion. On the nega- in output in the first quarter, and an anticipated modtive side, large consumer debts were still viewed as eration in the accumulation of inventories was an likely to constitute an inhibiting influence on con- important element in forecasts of greatly reduced sumer expenditures, and many banking institutions economic growth in the current quarter. In keeping had tightened lending terms and conditions at least with business practices aimed at achieving or mainfor their more marginal consumer borrowers. On taining lean inventory-sales ratios, inventory investbalance, growth in consumer expenditures at a some- ment was projected to continue at a relatively subwhat reduced pace approximating that of the expected dued pace in coming quarters. A number of members expansion of disposable incomes appeared to be a expressed the view, however, that stockbuilding reasonable prospect, though one that was subject to represented an upside risk in the economic outconsiderable uncertainty. look, at least in the nearer term. While there were Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 75 some indications of efforts to pare inventories in While these were welcome developments, memrecent months, generally optimistic business senti- bers continued to express concern that, perhaps ment and currently trim inventories in most industries sooner rather than later, growing pressures on producmight well foster efforts to accumulate stocks at a tive resources would be reflected in some upturn in relatively rapid pace, especially if more-buoyant- overall inflation. Although most measures of labor than-anticipated sales were to stimulate a precau- compensation had been relatively favorable recently, tionary demand for inventories as had occurred in such measures had been displaying a clear uptrend 1994. over a somewhat longer period, and it seemed likely With regard to the outlook for inflation, members that, if this trend continued, labor cost developments observed that increases in prices had remained sub- would at some point be reflected more fully in core dued despite the rapid expansion in economic activity measures of prices. Members commented that the in recent quarters and the associated increase in pres- timing and extent of any upturn in price inflation sures on already highly utilized resources. The appre- would depend on growth of overall demand in the ciation of the dollar undoubtedly had helped to damp economy, but they also believed that expansion of domestic inflation this year, and reported increases in demand in line with their current expectations could consumer prices also had been held down to a mar- induce a somewhat less favorable inflation experiginal extent by an ongoing series of technical adjust- ence during coming quarters. However, recent develments to the consumer price index. These were only opments had underscored the fact that historical expepartial explanations, however, and the members rience was not a fully reliable guide to the prospective found it very difficult to account for the surprisingly behavior of prices; accordingly, the inflation outlook benign behavior of inflation in an economy that remained subject to considerable uncertainty. had been operating at a level approximating full In the Committee's discussion of policy for the employment—indeed, possibly somewhat above sus- intermeeting period ahead, all but one of the memtainable full employment in labor markets in the view bers indicated that they could support a proposal to of a number of members, especially taking into con- maintain an unchanged policy stance, although some sideration the recent further decline in the unemploy- also expressed a preference for some tightening at ment rate. On the basis of historical patterns, any this meeting. Those who endorsed a steady policy at overshooting of full employment would be expected this time agreed that some tightening might well be to generate rising inflation over time. Although needed later to contain potentially rising inflation. increases in labor compensation had been trending For now, however, economic growth seemed to be higher, these pressures were muted and had not slowing to a more sustainable pace, and the uncershown through to prices. tainties surrounding the extent of the slowing and the Members focused on the possible role of faster- outlook for inflation pointed to the desirability of a than-reported increases in productivity as a key cautious approach to any policy tightening, especially explanation for the benign behavior of inflation in given the persisting absence of a rising inflation trend current circumstances. Business firms had continued in current measures of prices. A number of members to report robust profit margins in a period when also observed that real interest rates were not unusucompetitive pressures generally prevented them from ally low. Thus, the present stance of monetary policy raising their prices, or raising them sufficiently, to probably was not very far out of alignment with what pass on the increases that they were experiencing in likely would prove to be a desirable degree of worker compensation. Standard statistical measures restraint, thereby lessening any risk of large and that pointed to relatively limited increases in produc- persisting imbalances that a delay in implementing tivity seemed inconsistent with strong profits as well further restraint might incur. as with anecdotal reports of sizable gains associated Members who preferred some tightening, at least with widespread business restructuring activities and in the near term if not necessarily at this meeting, large additions of high-technology equipment to an noted that the Committee needed to weigh the risks increasingly efficient capital stock. The ongoing of having to implement a small degree of restraint development and spreading adoption of automated now versus considerably more later if inflation were equipment along with the increasing skills and other allowed to build momentum. Monetary policy exerts infrastructure needed to use it effectively appeared to its effects with a considerable lag, and a small but be creating growing efficiencies or synergies that relatively prompt tightening action would provide were markedly enhancing productivity and enabling some further insurance against an intensification of firms to hold the line on prices and maintain high inflation. Such an outcome could be seen as more profit margins. likely now, given the increased tightness in labor Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

778 Federal Reserve Bulletin • September 1997 markets and the possibility that relatively strong Account in accordance with the following domestic growth would put added pressures on resources. policy directive: Some of these members commented that the risk of a retarding effect on the economy from a small move at The information reviewed at this meeting suggests that growth in economic activity has slowed after surging in this time was quite limited in light of the apparently late 1996 and earlier this year. Private nonfarm payroll solid momentum of the economic expansion. Indeed, employment increased at a considerably reduced pace over the strength of investment demand, the ready avail- March and April, but the civilian unemployment rate fell ability of financing, and possible favorable productiv- appreciably to 4.9 percent in April. Industrial production ity gains argued that real rates of interest would need was flat in April following sizable gains over previous months. Nominal retail sales were unchanged in March and to be higher than historical norms to balance aggredeclined in April after a considerable advance in earlier gate demand and supply. The risk of slightly lower months. Housing activity in March and April was little economic growth needed to be compared with what changed from other recent months. Available indicators they viewed as the greater risk of losing ground to point to further sizable gains in business fixed investment. inflation and thereby inhibiting the Committee's abil- The nominal deficit on U.S. trade in goods and services widened substantially in January-February from its tempoity to reach its ultimate goal of price stability, a goal rarily depressed rate in the fourth quarter. Underlying price that all the members viewed as necessary to achieve inflation has remained subdued. maximum sustainable economic growth over time. Market interest rates generally have posted small mixed Given the quiescence of inflation and the uncertain- changes since the Committee meeting on March 25, 1997; ties surrounding its outlook, however, all but one of share prices in equity markets have risen considerably. In foreign exchange markets, the trade-weighted value of the these members could accept a wait-and-see policy dollar in terms of the other G-10 currencies declined on stance for now. balance over the intermeeting period. With regard to possible adjustments to policy dur- Growth of M2 and M3 was brisk over March and April, ing the intermeeting period, all the members sup- boosted by a buildup in household balances to cover unusuported a shift from the symmetric directive that had ally large tax payments. For the year through April, both aggregates expanded at rates appreciably above the upper been adopted in conjunction with the policy tightenbounds of their respective ranges for the year. Growth ing action at the March meeting to an asymmetric in total domestic nonfinancial debt has moderated over directive tilted toward tightening. While such a bias recent months, reflecting reductions in federal government did not necessarily imply an intention to tighten borrowing. policy during the weeks immediately ahead, it was The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and consistent with the members' view that the risks were promote sustainable growth in output. In furtherance of in the direction of a potential need for some tightenthese objectives, the Committee at its meeting in February ing in monetary policy to counter rising inflationary established ranges for growth of M2 and M3 of 1 to pressures, and that they might be required to make 5 percent and 2 to 6 percent respectively, measured from such a decision in the not-too-distant future. 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 but one member indicated that they supported behavior of the monetary aggregates will continue to be a directive that called for maintaining the existing evaluated in the light of progress toward price level stabildegree of pressure on reserve positions and that ity, movements in their velocities, and developments in the included a bias toward the possible firming of reserve economy and financial markets. In the implementation of policy for the immediate future, conditions during the intermeeting period. Accordthe Committee seeks to maintain the existing degree of ingly, in the context of the Committee's long-run pressure on reserve positions. In the context of the Comobjectives for price stability and sustainable eco- mittee's long-run objectives for price stability and sustainnomic growth, and giving careful consideration to able economic growth, and giving careful consideration to economic, financial, and monetary developments, the economic, financial, and monetary developments, somewhat greater reserve restraint would or slightly lesser Committee decided that somewhat greater reserve reserve restraint might be acceptable in the intermeeting restraint would be acceptable and slightly lesser period. The contemplated reserve conditions are expected reserve restraint might be acceptable during the inter- to be consistent with some moderation in the expansion of meeting period. The reserve conditions contemplated M2 and M3 over coming months. at this meeting were expected to be consistent with moderate growth of M2 and M3 over coming Votes for this action: Messrs. Greenspan, McDonough, Guynn, Kelley, Meyer, Moskow, Parry, Mses. Phillips months. and Rivlin. Vote against this action: Mr. Broaddus. The Federal Reserve Bank of New York was authorized and directed, until instructed otherwise by the Mr. Broaddus dissented because he believed that Committee, to execute transactions in the System the strength of investment demand, due possibly to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 779 an increase in the trend growth rate of productivity, of a moderate further tightening was small given the required somewhat higher real interest rates to pre- apparent momentum of aggregate economic activity. vent inflationary pressures from developing. He was It was agreed that the next meeting of the Commitconcerned that, with the economy already operating tee would be held on Tuesday-Wednesday, July 1-2, at a high level and labor markets apparently very 1997. tight, any increase in such pressures might be costly The meeting adjourned at 12:45 p.m. to reverse and might reduce the credibility of the Committee's longer-run strategy of promoting maximum sustainable growth by fostering price level sta- Donald L. Kohn bility. He also believed that the risk to the economy Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

780 Legal Developments ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT to be conditions imposed in writing by the Board in connection with its findings and decision, and, as such, may be Orders Issued Under Section 3 of the Bank Holding enforced in proceedings under applicable law. Company Act This transaction shall not be consummated before the fifteenth calendar day following the effective date of this Neighborhood Bancorp order, or later than three months following the effective San Diego, California date of this order, and Bank shall be open for business within six months following the effective date of this order, Order Approving the Formation of a Bank Holding unless such periods are extended for good cause by the Company Board or by the Federal Reserve Bank of San Francisco, acting pursuant to delegated authority. Neighborhood Bancorp, San Diego, California ("Neigh- By order of the Board of Governors, effective July 21, borhood"), has requested the Board's approval under 1997. section 3 of the Bank Holding Company Act (12 U.S.C. § 1842) ("BHC Act") to become a bank holding company This action was taken pursuant to the Board's Rules Regarding by acquiring approximately 95 percent of the voting shares Delegation of Authority (12C.F.R. 265.4(b)(1)) by a committee of Board members. Voting for this action: Chairman Greenspan, of Neighborhood National Bank ("Bank"), also in San Vice Chair Rivlin, and Governor Meyer. Diego, a de novo chartered national bank with a community development focus.1 JENNIFER J. JOHNSON Notice of the application, affording interested persons an Deputy Secretary of the Board opportunity to submit comments, has been published (62 Federal Register 29,347 (1997)). The time for filing Orders Issued Under Section 4 of the Bank Holding comments has expired, and the Board has considered the Company Act application and all comments received in light of the factors set forth in section 3(c) of the BHC Act. Bankers Trust New York Corporation Neighborhood is a nonoperating corporation formed for New York, New York the purpose of acquiring Bank. Accordingly, the Board concludes that consummation of this proposal would not Order Approving Notice to Engage in Nonbanking have a significantly adverse effect on competition or the Activities concentration of banking resources in any relevant banking market. The Board also concludes that the financial and Bankers Trust New York Corporation, New York, New managerial resources and future prospects of Neighbor- York ("BTNY"), a bank holding company within the hood and Bank are consistent with approval, as are the meaning of the Bank Holding Company Act ("BHC Act"), convenience and needs and other supervisory factors the has requested the Board's approval under section 4(c)(8) of Board is required to consider under section 3 of the BHC the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.24 Act. of the Board's Regulation Y (12 C.F.R. 225.24) to acquire Based on the foregoing and all the facts of record, the all the voting securities of Alex. Brown Incorporated, Board has determined that this application should be, and Baltimore, Maryland ("Alex. Brown"), and thereby enhereby is, approved. The Board's approval is expressly gage in the following nonbanking activities:1 conditioned on compliance with all the commitments made (1) Providing various types of investment and financial by Neighborhood, including those made by the principals advice, pursuant to section 225.28(b)(6) of Regulation Y of Neighborhood, in connection with this application. For (12 C.F.R. 225.28(b)(6)); purposes of this action, the commitments and conditions (2) Providing securities brokerage, private placement, relied on by the Board in reaching this decision are deemed and riskless principal services pursuant to section 225.28(b)(7)(i), (ii), and (iii) of Regulation Y (12 C.F.R. 225.28(b)(7)(i), (ii), and (iii)); 1. The remaining voting shares of Bank would be acquired by the Federal National Mortgage Association. Bank would engage primarily in lending activities that support the development and maintenance of affordable housing stock in San Diego County, and has received 1. The acquisition will be structured as a merger of Alex. Brown preliminary charter approval from the Office of the Comptroller of the into a newly created, wholly owned subsidiary of BTNY, Voyager Currency. Merger Corporation, New York, New York ("BT Sub"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 781 (3) Underwriting and dealing in obligations of the United broker-dealer registered with the Securities and Exchange States, general obligations of states and their political Commission ("SEC") under the Securities Exchange Act subdivisions, and other obligations that state member of 1934 (15 U.S.C. § 78a et seq.) and a member of the banks of the Federal Reserve System may be authorized National Association of Securities Dealers ("NASD"). Acto underwrite and deal in under 12 U.S.C. §§ 24 and 335, cordingly, Company would be subject to the recordkeeping pursuant to section 225.28(b)(8) of Regulation Y and reporting obligations, fiduciary standards, and other (12 C.F.R. 225.28(b)(8)); requirements of the Securities Exchange Act of 1934, the (4) Underwriting and dealing in, to a limited extent, all SEC, and the NASD. types of debt and equity securities other than interests in open-end investment companies ("mutual funds"); Activities Previously Approved by the Board (5) Providing administrative and other services to investment companies, including mutual funds; Except as discussed below, the Board previously has deter- (6) Making, acquiring, brokering and servicing loans or mined by regulation or order that all the activities proposed other extensions of credit for its own account and the to be conducted by BTNY after its acquisition of Alex. account of others, pursuant to section 225.28(b)(1) of Brown are closely related to banking within the meaning of Regulation Y (12 C.F.R. 225.28(b)(1)); and section 4(c)(8) of the BHC Act.5 BTNY proposes to con- (7) Performing functions or activities that may be duct these activities in accordance with Regulation Y and performed by a trust company (including activities relevant Board interpretations and orders. of a fiduciary, agency or custodial nature), pursuant to section 225.28(b)(5) of Regulation Y (12 C.F.R. Bank-Ineligible Securities Underwriting and Dealing 225.28(b)(5)). Activities Notice of the proposal, affording interested persons an Company currently is engaged in limited underwriting and opportunity to submit comments, has been published (62 dealing activities that the Board previously has determined Federal Register 33,411 (1997)). The time for filing com- are permissible under section 20 of the Glass-Steagall Act ments has expired, and the Board has considered the notice (12 U.S.C. § 377).6 Alex. Brown's principal subsidiary, and all comments received in light of the factors set forth ABSI, also is engaged in underwriting and dealing in in section 4(c)(8) of the BHC Act. securities. The Board has determined that the conduct of BTNY, with total consolidated assets of $120.2 billion, these securities underwriting and dealing activities is conis the seventh largest commercial banking organization in sistent with section 20,7 provided that the company enthe United States.2 BTNY controls two subsidiary banks gaged in the underwriting and dealing activities derives no and engages, directly and through its subsidiaries, in a more than 25 percent of its total gross revenue over any broad range of permissible nonbanking activities in the United States and throughout the world. Alex. Brown, with consolidated assets of $2.5 billion, engages worldwide in a with and into Company, BTNY would contribute the stock of Combroad range of investment advisory, securities brokerage, pany to BT Sub, which would thus become the intermediate holding securities underwriting, lending, custodial, and other activ- company of Company. Under this proposal, BTNY also would retain ities.3 Alex. Brown Capital Advisory and Trust Company, a nonbanking subsidiary of Alex. Brown that engages in trust company and asset BTNY proposes to merge the principal subsidiary of management activities, as a stand alone nonbanking subsidiary of Alex. Brown, Alex. Brown & Sons Incorporated, Balti- BTNY. more, Maryland ("ABSI"), with and into BT Securities 5. See 12 C.F.R. 225.25(b)(1), (5), (6), (7), and (8). Corporation, New York, New York ("Company"), a sub- 6. See Bankers Trust. 7. See J.P. Morgan & Co. Incorporated, et al., 75 Federal Reserve sidiary of BTNY that engages in a wide range of securities- Bulletin 192 (1989), aff'd sub nom. Securities Industry Ass'n v. Board and derivatives-related activities, including underwriting of Governors of the Federal Reserve System, 900 F.2d 360 (D.C. Cir. and dealing in all types of debt and equity securities (other 1990); Citicorp, et al., 13 Federal Reserve Bulletin 473 (1987), aff'd than securities issued by open-end investment companies) sub nom. Securities Industry Ass'n v. Board of Governors of the on a limited basis.4 Company is, and will continue to be, a 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 Subsid- 2. Asset and ranking data are as of December 31, 1996. iary and an Affiliated Bank or Thrift, 61 Federal Register 57,679 3. Alex. Brown also currently engages in certain insurance activities (1996) (collectively, "Section 20 Orders"). See also Revenue Limit on and controls several limited partnerships that invest in debt and equity Bank-Ineligible Activities of Subsidiaries of Bank Holding Companies securities beyond the levels permissible for bank holding companies. Engaged in Underwriting and Dealing in Securities, 61 Federal BTNY has committed to conform, within two years of acquiring Alex. Register 68,750 (1996). Compliance with the 25-percent revenue Brown, all activities and investments of Alex. Brown and its subsidiar- limitation shall be calculated in accordance with the method stated in ies to those permissible for bank holding companies under section 4 of the Section 20 Orders, as modified by the Order Approving Modificathe BHC Act and Regulation Y. BTNY also has committed to cease, tions to the Section 20 Orders, 75 Federal Reserve Bulletin 751 within six months of consummation of the proposal, the sale of new (1989); and 10 Percent Revenue Limit on Bank-Ineligible Activities of impermissible insurance policies and annuities. Subsidiaries of Bank Holding Companies Engaged in Underwriting 4. See Bankers Trust New York Corporation, 75 Federal Reserve and Dealing Securities, 61 Federal Register 51,619 (1996) (collective- Bulletin 829 (1989) ("Bankers Trust"). Prior to the merger of ABSI ly, "Modification Orders"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

782 Federal Reserve Bulletin • September 1997 two-year period from underwriting and dealing in securi- BTNY also proposes to have officers of BTNY or its ties that a state member bank may not underwrite or deal in nonbank affiliates serve as up to two of the nine or ten directly ("bank-ineligible securities").8 BTNY has com- directors of the Funds, one of whom would serve as mitted to conduct the underwriting and dealing activities of chairman of the board of directors of the Funds. BTNY the entity resulting from the merger of ABSI with and into also plans to have a limited number of its employees serve Company in compliance with the 25-percent revenue limit as junior-level officers of the Funds.14 The Board previand other prudential limitations previously established by ously has authorized a bank holding company to have the Board.9 director and officer interlocks with mutual funds that the bank holding company advises and administers.15 The Mutual Fund Activities Board does not believe that the proposed interlocks between Company and the Funds in this case would compro- Under the Glass-Steagall Act, a company that owns a mise the independence of the boards of directors of the member bank may not control "through stock ownership Funds, or the independent distribution of the Funds, or or in any other manner" a company that engages princi- result in control of the Funds by BTNY.16 pally in distributing, underwriting or issuing securities.10 Based on the foregoing, the Board concludes that control The Board has found that this provision prohibits affiliates of the Funds would rest with the independent members of of banks from sponsoring, organizing, or controlling a the boards of directors of the Funds, and that the proposed mutual fund. The Board previously has determined, how- interlocks between Company and the Funds would not ever, that the Glass-Steagall Act does not prohibit a bank compromise the independence of the boards of the Funds holding company from providing advisory and administra- or permit BTNY to control the Funds. Thus, the Board tive services to a mutual fund.11 concludes that this proposal is consistent with the Glass- Alex. Brown currently provides administrative, advi- Steagall Act. sory, promotional, and other services to mutual funds. Through its lead bank, Bankers Trust Company, New York, Other Considerations New York, and other nonbanking subsidiaries, BTNY plans to continue providing these services, including promo- In order to approve this notice, the Board must determine tional, marketing, and advertising services, to mutual that the proposed activities are a proper incident to bankfunds.12 The promotional activities that BTNY plans to ing, that is, that the performance of the activities "can continue involve contact only with financial intermediaries reasonably be expected to produce benefits to the public and are similar to activities previously approved by the . . . that outweigh possible adverse effects, such as undue Board.13 8. The Board also notes that Company may engage in activities that are necessary incidents to the proposed underwriting and dealing activities, provided that they are treated as part of the bank-ineligible advertising and marketing materials. The independent distributor securities activities, unless Company has received specific approval would be responsible for placing all advertisements, and would have under section 4(c)(8) of the BHC Act to conduct the activities indepen- legal responsibility under the rules of the NASD for the form and use dently. Until such approval is obtained, any revenues from the inciden- of all advertising and sales literature prepared by Company, and also tal activities must be counted as ineligible revenues subject to the would be responsible for filing these materials with the NASD or the 25-percent revenue limitation. SEC. Neither the Company nor any employee of Company would 9. BTNY proposes that the chairman of an overseas subsidiary of receive transaction-based income or commissions from the Funds in BTNY's lead bank, Bankers Trust Company, New York, New York connection with Company's promotional or marketing activities. See ("Bankers Trust Company"), serve as co-chief executive officer of Commerzbank. Company. This person would not be a director, officer, or employee of 14. These employees would serve as secretary, treasurer, assistant Bankers Trust Company, and thus his service would not be prohibited secretary, or assistant treasurer of the Funds, and would be supervised by the interlocks limitation applicable to section 20 subsidiaries. by the board of directors or senior-level officers, including the presi- 10. 12 U.S.C. §§ 221a and 377. dent, executive vice president, and vice president of the Funds. The 11. See 12 C.F.R. 225.28(b)(6); 12C.F.R. 225.125; and Mellon employees would have no policy-making authority at the Funds and Bank Corporation, 79 Federal Reserve Bulletin 626 (1993) ("Mel- would not be responsible for, or involved in, making recommendalon"). tions regarding policy decisions. No employee or officer of Company 12. See Commerzbank AG, 83 Federal Reserve Bulletin 678 (1997) would serve as a senior-level officer of any BTNY advised funds. ("Commerzbank"). Company also plans to provide transfer agency BTNY also may acquire up to 5 percent of the shares of mutual services and act as agent, upon the order and for the account of funds for which it provides administrative or advisory services, but customers, to purchase or sell shares of mutual funds that it provides any such ownership may not be used in any way in marketing or administrative and/or advisory services (the "Funds"). selling the shares of the investment company. See Mellon at n. 21. 13. An independent distributor would enter into an agreement with 15. See Commerzbank. the Funds under which the distributor would serve as "principal 16. Any director of the Funds who also serves as an officer or underwriter" of the Funds. 15 U.S.C. § 80a-2(a)(29). The distributor employee of Company would be an "interested person" under the or intermediaries other than Company would enter into the sales Investment Company Act of 1940 and, therefore, would be required to agreements with financial intermediaries to sell shares of the Funds on abstain from voting on the Funds' investment advisory and other behalf of the Funds. Personnel of Company may review the agree- major contracts. In addition, BTNY has committed that its representaments and be involved in discussions with financial intermediaries tives would not vote on any advisor's agreement, administrative regarding provisions that relate to Company's advisory or administra- services agreement, sub-administration agreement, or any amendment tive role. BTNY would have primary responsibility for preparing the thereto. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 783 concentration of resources, decreased or unfair competi- ciencies that would allow it to become a more effective tion, conflicts of interest, or unsound banking practices."17 competitor and thereby provide improved services at a As part of its review of these factors, the Board consid- lower cost to its customers. ered the financial and managerial resources of BTNY and The Board also has carefully considered the competitive its subsidiaries and the effect the transaction would have on effects of this proposal. BTNY operates nonbanking subsuch resources.18 The Board also has reviewed the capitali- sidiaries that compete with certain nonbanking subsidiaries zation of BTNY and Company in accordance with the of Alex. Brown. In each case, the markets for the nonbankstandards set forth in the Section 20 Orders and finds the ing services are unconcentrated, and there are numerous capitalization of each to be consistent with approval.19 The providers of the services. As a result, consummation of this determination about the capitalization of Company is based proposal would have a de minimis effect on competition for on all the facts of record, including BTNY's projections of the services, and the Board has concluded that the proposal the volume of Company's underwriting and dealing activi- would not result in a significantly adverse effect on competies in bank-ineligible securities. tition in any relevant market. On the basis of its supervisory experience with BTNY Under the framework established in this and prior deciand Company, the commitments provided in this case, and sions, including the prudential limitations established by the proposed management of Company, the Board also has the Board in the Section 20 Orders, the Board has deterdetermined that BTNY and Company have established mined that consummation of the proposal is not likely to policies and procedures to ensure compliance with this result in any significantly adverse effects, such as undue order and the Section 20 Orders, including computer, audit, concentration of resources, decreased or unfair competiand accounting systems, internal risk management con- tion, conflicts of interests, or unsound banking practices trols, and the necessary operational and managerial infra- that would outweigh the public benefits of the proposal. structure. The Board also has reviewed other aspects of the Accordingly, based on all the facts of record, the Board managerial resources of the entities involved in this pro- has determined that the balance of public benefits that it posal, including the expected effect of this proposal on must consider under the proper incident to banking stansuch resources. dard of section 4(c)(8) of the BHC Act is favorable and On the basis of the foregoing and all the facts of record, consistent with approval of the proposal. the Board has concluded that financial and managerial considerations are consistent with approval of this pro- Conclusion posal. The Board expects that the proposed acquisition would On the basis of all the facts of record, including all the provide added convenience to customers of BTNY and commitments and representations made by BTNY, the Alex. Brown, including Alex. Brown's current mutual fund Board has determined to, and hereby does, approve this clients. The Board previously has determined that the notice subject to all the terms and conditions discussed in provision of advisory and administrative services to mutual this order and in the Section 20 Orders, as modified by the funds within certain parameters is not likely to result in the Modification Orders. The Board's approval of this protypes of subtle hazards at which the Glass-Steagall Act is posal extends only to activities conducted within the limitaaimed or in any other adverse effects. As required by the tions of those orders and this order, including the Board's Board's regulations, for example, Company would provide reservation of authority to establish additional limitations disclosures to its customers designed to alert them to the to ensure that Company's activities are consistent with relationships between Company and the Funds. These dis- safety and soundness, avoiding conflicts of interests, and closures include those required by the Board's interpretive other relevant considerations under the BHC Act. Underrule on investment advisory activities to address conflicts writing and dealing in any manner other than as approved of interests that may be raised by the relationship between in this order and the Section 20 Orders, as modified by the Company and the Funds.20 BTNY also has indicated that Modification Orders, is not authorized for Company. the proposed transaction would result in operational effi- The Board's determination also is subject to all the terms and conditions set forth in Regulation Y, including those in sections 225.7 and 225.25(c) (12 C.F.R. 225.7 and 17. 12 U.S.C. § 1843(c)(8). 225.25(c)), and to the Board's authority to require modifi- 18. See 12 C.F.R. 225.26. 19. The Board notes that, as a registered broker-dealer, Company cation or termination of the activities of a bank holding must comply with the SEC's net capital rule. See 15 C.F.R. company or any of its subsidiaries as the Board finds 240.15c3-l. necessary to assure compliance with and to prevent eva- 20. See 12 C.F.R. 225.125. The interpretive rule requires a bank sion of the provisions of the BHC Act and the Board's holding company that recommends to customers shares of a mutual regulations and orders issued thereunder. The Board's decifund that the bank holding company advises to caution customers to read the fund prospectus before investing and to advise customers in sion is specifically conditioned on BTNY's compliance writing that the fund's shares are not insured by the Federal Deposit with all the commitments made in connection with this Insurance Corporation, and are not deposits, obligations of, or en- notice, including the commitments discussed in this order dorsed or guaranteed in any way, by any bank, unless that happens to and the conditions set forth in the Board regulations and be the case. The holding company also must disclose in writing to the orders noted above. The commitments and conditions shall customer the role of the company or its affiliate as investment advisor to the fund. be deemed to be conditions imposed in writing by the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

784 Federal Reserve Bulletin • September 1997 Board in connection with its findings and decisions, and 15. Providing marketing support with respect to sales of may be enforced in proceedings under applicable law. the Funds through financial intermediaries, including par- This transaction shall not be consummated later than ticipating in seminars, meetings and conferences designed three months after the effective date of this order unless to present information concerning the operations of the such period is extended for good cause by the Board or the Funds. Federal Reserve Bank of New York, acting pursuant to 16. Providing reports to the directors of the Funds with delegated authority. regard to the activities of the Funds. By order of the Board of Governors, effective July 21, 17. Providing telephone shareholder services through a 1997. toll-free 800 number. This action was taken pursuant to the Board's Rules Regarding First Chicago NBD Corporation Delegation of Authority (12 C.F.R. 265.4(b)(1)) by a committee Chicago, Illinois of Board members. Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governor Meyer. First Chicago Capital Markets, Inc. Chicago, Illinois JENNIFER J. JOHNSON Deputy Secretary of the Board Order Approving Notice to Engage De Novo in Underwriting and Dealing in All Types of Equity Appendix Securities on a Limited Basis First Chicago NBD Corporation, Chicago, Illinois ("First List of Administrative Services Chicago"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), and its 1. Maintaining and preserving the records of the Funds, wholly owned subsidiary, First Chicago Capital Markets, including financial and corporate records. Inc., Chicago, Illinois ("Company"), have requested the 2. Computing net asset value, dividends, performance data Board's approval under section 4(c)(8) of the BHC Act and financial information regarding the Funds. (12 U.S.C. § 1843(c)(8)) and section 225.24 of the Board's 3. Furnishing statistical and research data. Regulation Y (12 C.F.R. 225.24) to engage to a limited 4. Preparing and filing with the SEC and state securities extent in underwriting and dealing in all types of equity regulators registration statements, notices, reports, and securities except ownership interests in open-end investother materials required to be filed under applicable laws. ment companies. 5. Preparing reports and other informational materials re- Notice of the proposal, affording interested persons an garding the Funds, including proxies and other shareholder opportunity to submit comments, has been published communications. (62 Federal Register 32,611 (1997)). The time for filing 6. Providing legal and other regulatory advice to the Funds comments has expired, and the Board has considered the in connection with their other administrative functions. notice and all comments received in light of the factors set 7. Providing office facilities and clerical support for the forth in section 4(c)(8) of the BHC Act. Funds. First Chicago, with total consolidated assets of 8. Developing and implementing procedures for monitor- $109.1 billion, is the eighth largest commercial banking ing compliance with regulatory requirements and compli- organization in the United States.1 First Chicago operates ance with the Funds' investment objectives, policies and bank subsidiaries in Illinois, Michigan, Florida, Indiana, restrictions as established by the board of directors/trustees and Delaware, and engages through its subsidiaries in a of the Funds. broad range of permissible nonbanking activities in the 9. Providing routine fund accounting services and liaison United States. Company currently engages in limited unwith outside auditors. derwriting and dealing in bank-ineligible securities,2 as 10. Preparing and filing tax returns, and monitoring tax permitted under section 20 of the Glass-Steagall Act compliance. (12 U.S.C. § 377).3 Company is, and will continue to be, a 11. Reviewing and arranging for payment of expenses of broker-dealer registered with the Securities and Exchange the Funds. Commission ("SEC") and a member of the National Asso- 12. Providing communication and coordination services ciation of Securities Dealers, Inc. ("NASD"). Accordwith regard to the Funds' investment advisor, transfer agent, custodian, distributor and other service organizations that render recordkeeping or shareholder communica- 1. Asset and ranking data are as of March 31, 1997. tion services. 2. As used in this order, the term "bank-ineligible securities" refers 13. Reviewing and providing advice to the distributor, the to securities that a bank may not underwrite or deal in directly under section 16 of the Glass-Steagall Act (12 U.S.C. § 24(Seventh)). fund and the investment advisor regarding sales literature 3. Company has authority to underwrite and deal in, to a limited and marketing plans for the Funds. extent, all types of debt securities. See First Chicago Corporation, 14. Providing information to the distributor's personnel 80 Federal Reserve Bulletin 449 (1994). Company also is authorized concerning performance and administration of the Funds. to engage in a variety of other nonbanking activities. See id. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 785 ingly, Company is subject to the recordkeeping and report- such as undue concentration of resources, decreased or ing obligations, fiduciary standards, and other requirements unfair competition, conflicts of interests, or unsound bankof the Securities Exchange Act of 1934 (15 U.S.C. § 78a ing practices."7 As part of its evaluation of these factors, et seq.\ the SEC, and the NASD. the Board considers the financial condition and managerial The Board previously has determined that, subject to the resources of the notificant and its subsidiaries and the effect prudential framework of limitations established in previous the transaction would have on such resources.8 The Board decisions to address the potential for conflicts of interests, has reviewed the capitalization of First Chicago and Comunsound banking practices, or other adverse effects ("sec- pany in accordance with the standards set forth in the tion 20 firewalls"), the proposed underwriting and dealing Section 20 Orders and finds the capitalization of each to be activities involving bank-ineligible securities are so closely consistent with approval of the proposal. With respect to related to banking as to be proper incidents thereto within Company, this determination is based on all the facts of the meaning of section 4(c)(8) of the BHC Act.4 First record, including First Chicago's projections of the volume Chicago has committed that Company will conduct the of Company's underwriting and dealing activities. On the proposed underwriting and dealing activities using the basis of all the facts of record, and subject to the complesame methods and procedures, and subject to the same tion of a satisfactory infrastructure review, the Board conprudential limitations, as were established by the Board in cludes that financial and managerial considerations are the Section 20 Orders and other previous cases. consistent with approval of the notice. The Board also has previously determined that conduct As noted above, First Chicago has committed that Comof the proposed activities is consistent with section 20 of pany will conduct its bank-ineligible securities underwritthe Glass-Steagall Act (12 U.S.C. § 377), provided that ing and dealing activities in accordance with the prudential the company engaged in underwriting and dealing activi- framework established by the Board's Section 20 Orders. ties derives no more than 25 percent of its gross revenues Under the framework and conditions established in this from underwriting and dealing in bank-ineligible securities order and the Section 20 Orders, the Board concludes that over a two-year period.5 First Chicago has committed that Company's proposed activities are not likely to result in Company will conduct its underwriting and dealing activi- significantly adverse effects, such as undue concentration ties in bank-ineligible securities subject to the Board's of resources, decreased or unfair competition, conflicts of revenue limit.6 interest, or unsound banking practices. The Board expects, In order to approve this notice, the Board also must additionally, that the de novo entry of Company into the consider whether performance of the proposed activities is market for the proposed services would provide added a proper incident to banking, that is, whether the activities convenience to First Chicago's customers, lead to improposed "can reasonably be expected to produce benefits proved methods of meeting customer financing needs, and to the public . . . that outweigh possible adverse effects, increase the level of competition among existing providers of these services. Accordingly, the Board has determined that performance of the proposed activities by First Chi- 4. See Canadian Imperial Bank of Commerce, et al., 76 Federal cago can reasonably be expected to produce public benefits Reserve Bulletin 158 (1990); J.P. Morgan & Co. Incorporated, et al., 75 Federal Reserve Bulletin 192 (1989), aff'd sub nom. Securities that outweigh possible adverse effects under the proper Industries Ass 'n v. Board of Governors of the Federal Reserve System, incident to banking standard of section 4(c)(8) of the BHC 900 F.2d 360 (D.C. Cir. 1990); Citicorp, et al., 73 Federal Reserve Act. Bulletin 473 (1987), aff'd sub nom. Securities Industry Ass'n v. Board For the reasons set forth in this order and the Section 20 of Governors of the Federal Reserve System, 839 F.2d 47 (2d Cir. 1988), cert, den., 486 U.S. 1059 (1988); as modified by Review of Orders, the Board has concluded that First Chicago's pro- Restrictions on Director, Officer and Employee Interlocks, Cross- posal to engage through Company in the proposed activi- Marketing Activities, and the Purchase and Sale of Financial Assets ties is consistent with the Glass-Steagall Act, and that the Between a Section 20 Subsidiary and an Affiliated Bank or Thrift, proposed activities are so closely related to banking as to 61 Federal Register 57,679 (1996) (collectively, "Section 20 Orders"). 5. See Section 20 Orders. Effective March 6, 1997, the Board be proper incidents thereto within the meaning of section increased from 10 to 25 percent the amount of total revenue that a 4(c)(8) of the BHC Act provided that First Chicago limits section 20 subsidiary may derive from underwriting and dealing in Company's activities as specified in this order and the bank-ineligible securities. Revenue Limit on Bank-Ineligible Activities Section 20 Orders, as modified by the Modification Orders. of Subsidiaries of Bank Holding Companies Engaged in Underwriting On the basis of all the facts of record, the Board has and Dealing in Securities, 61 Federal Register 68,750 (1996). Compliance with the revenue limitation shall be calculated in accordance determined that the notice should be, and hereby is, apwith the method stated in the Section 20 Orders, as modified by the proved, subject to all the terms and conditions in this order Order Approving Modifications to the Section 20 Orders, 75 Federal and the Section 20 Orders, as modified by the Modification Reserve Bulletin 751 (1989), and 10 Percent Revenue Limit on Bank- Orders. The Board's approval of this proposal extends only Ineligible Activities of Subsidiaries of Bank Holding Companies Ento activities conducted within the limitations of those orgage in Underwriting and Dealing in Securities, 61 Federal Register 48,953 (1996) (collectively, "Modification Orders"). ders and this order, including the Board's reservation of 6. Company may provide services that are necessary incidents to the authority to establish additional limitations to ensure that proposed underwriting and dealing activities. Unless Company receives specific approval under section 4(c)(8) of the BHC Act to conduct the activities independently, any revenues from the incidental activities must be treated as ineligible revenues subject to the Board's 7. 12 U.S.C. § 1843(c)(8). revenue limitation. 8. See 12 C.F.R. 225.24. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

786 Federal Reserve Bulletin • September 1997 Company's activities are consistent with safety and sound- Bank Holding Company Act ("BHC Act"),1 has requested ness, avoidance of conflicts of interests, and other relevant the Board's approval under section 4(c)(8) of the BHC Act considerations under the BHC Act. Underwriting and deal- (12 U.S.C. § 1843(c)(8)) and section 225.24(a) of the ing in any manner other than as approved in this order and Board's Regulation Y (12 C.F.R. 225.24(a)) to acquire the Section 20 Orders (as modified by the Modification Dillon, Read Holding, Inc., New York, New York ("Dil- Orders) is not within the scope of the Board's approval and lon"). Dillon engages in the following nonbanking activiis not authorized for Company. ties: The Board's approval of the proposed underwriting and (1) Providing various types of investment and financial dealing activities is conditioned on a future determination advice, as described in section 225.28(b)(6) of Regulaby the Board that First Chicago and Company have estab- tion Y (12 C.F.R. 225.28(b)(6)); lished policies and procedures to ensure compliance with (2) Conducting securities brokerage activities, and activthe section 20 firewalls and the other requirements of this ities incidental thereto, as described in section order and the Section 20 Orders, including computer, audit 225.28(b)(7) of Regulation Y (12 C.F.R. 225.28(b)(7)); and accounting systems, internal risk management controls (3) Acting as agent in the private placement of all types and the necessary operational and managerial infrastruc- of securities, and providing related advisory services, as ture. After notification by the Board that this condition has described in section 225.28(b)(7) of Regulation Y been satisfied, Company may commence the proposed (12 C.F.R. 225.28(b)(7)); underwriting and dealing activities, subject to the other (4) Dealing in obligations of the United States, general conditions of this order and the Section 20 Orders. obligations of states and their political subdivisions, and The Board's determination also is subject to all the terms other obligations that state member banks of the Federal and conditions set forth in Regulation Y, including those in Reserve System may be authorized to underwrite and sections 225.7 and 225.25(c) of Regulation Y (12 C.F.R. deal in under 12 U.S.C. §§ 24 and 335 ("bank-eligible 225.7 and 225.25(c)), and to the Board's authority to securities"), as described in section 225.28(b)(8) of require such modification or termination of the activities of Regulation Y (12 C.F.R. 225.28(b)(8)); a bank holding company or any of its subsidiaries as the (5) Engaging to a limited extent in underwriting and Board finds necessary to ensure compliance with, and to dealing in all types of debt and equity securities; prevent evasion of, the provisions of the BHC Act and the (6) Acting as a futures commission merchant in the Board's regulations and orders issued thereunder. The execution, clearance, and execution and clearance of Board's decision is specifically conditioned on compliance futures contracts and options on futures contracts, pursuwith all the commitments made in connection with this ant to section 225.28(b)(7) of Regulation Y (12 C.F.R. notice, including the commitments discussed in this order, 225.28(b)(7)); and and the conditions set forth in this order and the above- (7) Making loans or other extensions of credit for the noted Board regulations and orders. These commitments account of others, as described in section 225.25(b)(1) and conditions are deemed to be conditions imposed in of Regulation Y (12 C.F.R. 225.28(b)(1)). writing by the Board in connection with its findings and decision, and, as such, may be enforced in proceedings After Swiss Bank's acquisition of Dillon, Dillon, Read under applicable law. & Co., New York, New York ("Dillon & Co."), an indirect The proposal shall not be commenced later than three subsidiary of Dillon, would merge with or purchase the months after the effective date of this order, unless such assets of SBC Warburg Inc., New York, New York ("SBC period is extended for good cause by the Board or by the Warburg"), a subsidiary of Swiss Bank that engages in a Federal Reserve Bank of Chicago, acting pursuant to dele- wide range of securities-related activities, including engaggated authority. ing to a limited extent in underwriting and dealing in all By order of the Board of Governors, effective July 28, types of debt and equity securities (other than the securities 1997. of open-end investment companies).2 Dillon & Co., as the survivor, would change its name to SBC Warburg Dillon Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Read Inc. ("SBCWDR"). SBCWDR would continue to Governors Kelley, Phillips, and Meyer. engage in all the current activities of SBC Warburg and the permissible activities of Dillon & Co. JENNIFER J. JOHNSON Notice of the proposal, affording interested persons an Deputy Secretary of the Board opportunity to submit comments, has been published (62 Federal Register 32,117 (1997)). The time for filing Swiss Bank Corporation Basel, Switzerland 1. As a foreign bank operating branches and an agency in the United Order Approving Notice to Engage in Nonbanking States, Swiss Bank is subject to certain provisions of the BHC Act by Activities operation of section 8(a) of the International Banking Act of 1978 (12 U.S.C. §3106(a)) ("IBA"). 2. See Swiss Bank Corporation, 81 Federal Reserve Bulletin 185 Swiss Bank Corporation, Basel, Switzerland ("Swiss (1995) ("Swiss Bank 1994")\ Swiss Bank Corporation, 82 Federal Bank"), a foreign bank subject to the provisions of the Reserve Bulletin 685 ("Swiss Bank 1996,,). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 787 comments has expired, and the Board has considered the SBC Warburg is currently engaged in limited underwritnotice and all comments received in light of the factors set ing and dealing activities that the Board previously has forth in section 4(c)(8) of the BHC Act. determined are permissible under section 20 of the Glass- Swiss Bank, with total consolidated assets of approxi- Steagall Act (12 U.S.C. § 377).8 In particular, the Board mately $250 billion, is the second largest banking organiza- has determined that the conduct of these securities undertion in Switzerland and the 30th largest banking organiza- writing and dealing activities is consistent with section 20, tion in the world.3 In the United States, Swiss Bank provided that the company engaged in the underwriting operates branches in New York, New York; Chicago, Illi- and dealing activities derives no more than 25 percent of nois; and San Francisco, California; and an agency in its total gross revenues over any two-year period from Miami, Florida.4 Swiss Bank also engages through subsid- underwriting and dealing in securities that a state member iaries in a broad range of nonbanking activities in the bank may not underwrite or deal in directly ("bank- United States. SBC Warburg is, and, after consummation ineligible securities").9 Swiss Bank has committed that of the proposal, SBCWDR will continue to be, registered SBCWDR will conduct its underwriting and dealing activwith the Securities and Exchange Commission ("SEC") as ities with respect to bank-ineligible securities subject to a broker-dealer under the Securities Exchange Act of 1934 this 25 percent revenue test. (15 U.S.C. § 78a et seq.) ("1934 Act") and as an invest- In order to approve the proposal, the Board also must ment adviser under the Investment Advisers Act of 1940 determine that the proposed activities are a proper incident (15 U.S.C. § 80b-l et seq.) ("Advisers Act"), and a mem- to banking, that is, that the proposed transaction "can ber of the National Association of Securities Dealers, Inc. reasonably be expected to produce benefits to the pub- ("NASD"). Accordingly, Swiss Bank is subject to the lic ... that outweigh possible adverse effects, such as unrecordkeeping and reporting obligations, fiduciary stan- due concentration of resources, decreased or unfair compedards, and other requirements of the 1934 Act, the Advis- tition, conflicts of interests, or unsound banking ers Act, the SEC, and the NASD. practices."10 As part of its evaluation of these factors, the Swiss Bank seeks approval for Dillon, through its direct Board considers the financial and managerial resources of and indirect subsidiaries, to continue to conduct the activi- the notificant, its subsidiaries, and any company to be ties listed above throughout the United States.5 The Board acquired, and the effect the transaction would have on such previously has determined by regulation or order that all resources.11 Swiss Bank's capital ratios satisfy applicable these activities are closely related to banking and permissi- risk-based standards under the Basle Accord and are conble for bank holding companies under section 4(c)(8) of sidered equivalent to the capital levels that would be rethe BHC Act, and the Board previously has authorized quired of a United States banking organization. The Board Swiss Bank to engage in each of these activities.6 Swiss also has reviewed the capitalization of Swiss Bank and Bank would continue to conduct its activities in accor- SBCWDR in accordance with the standards set forth in the dance with the conditions and limitations imposed by the Section 20 Orders and finds the capitalization of each to be Board in the Swiss Bank Orders, including the limitations consistent with approval. This determination regarding the established in Regulation Y and all the commitments furnished by Swiss Bank and relied on by the Board in the Swiss Bank Orders.1 this activity will be brought into conformity with the BHC Act or will be divested within two years after consummation of the proposal and that all future participation by Swiss Bank in such limited partnerships will be in conformity with the BHC Act. 3. Asset and foreign ranking data are as of December 31, 1995, and 8. See Canadian Imperial Bank of Commerce, et al., 76 Federal are based on foreign exchange conversion rates as of that date. Reserve Bulletin 158 (1990); J.P. Morgan & Co., Incorporated, et al., 4. Swiss Bank has received approval from the Board to establish a 75 Federal Reserve Bulletin 192 (1989), aff'd sub nom. Securities branch in Stamford, Connecticut. See Swiss Bank Corporation, Industries Ass'n. v. Board of Governors of the Federal Reserve 83 Federal Reserve Bulletin 214 (1997). As part of the Board's System, 900 F.2d 360 (D.C. Cir. 1990); Citicorp, et al., 73 Federal approval of this branch, Swiss Bank has changed its home state for Reserve Bulletin 473 (1987), aff'd sub nom. Securities Industry Ass'n. purposes of the IBA from California to Connecticut and limited the v. Board of Governors of the Federal Reserve System, 839 F.2d 47 deposits accepted by its San Francisco branch only to deposits that a (2d Cir. 1988), cert, denied, 486 U.S. 1059 (1988) (collectively, the corporation organized under section 25A of the Federal Reserve Act "Section 20 Orders"). (an Edge Act corporation) may accept. 9. See Revenue Limit on Bank-Ineligible Activities of Subsidiaries of 5. SBCWDR would engage in all the activities described above Bank Holding Companies Engaged in Underwriting and Dealing in except the futures commission merchant activities and lending for the Securities, 61 Federal Register 68,750 (1996). See also the Section 20 account of others. Futures commission merchant activities would be Orders. Compliance with the 25 percent revenue limitation will be engaged in by Dillon, Read Futures Inc., and lending activities would calculated in accordance with the method stated in the Section 20 be engaged in by Dillon, Read Interfunding Inc., both of New York, Orders, as modified by the Order Approving Modifications to the New York, indirect subsidiaries of Dillon. Section 20 Orders, 15 Federal Reserve Bulletin 751 (1989); and 6. See generally Swiss Bank 1996; Swiss Bank 1994; Swiss Bank 10-Percent Revenue Limit on Bank-Ineligible Activities of Subsidiar- Corporation, 11 Federal Reserve Bulletin 759 (1991), and Swiss Bank ies of Bank Holding Companies Engaged in Underwriting and Deal- Corporation, 11 Federal Reserve Bulletin 126 (1991) (together, the ing in Securities, 61 Federal Register 48,953 (1996) (collectively, the "Swiss Bank Orders"). "Modification Orders"). 1. Dillon, through its subsidiaries, also is general partner of certain 10. See 12 U.S.C. § 1843(c)(8). limited partnerships that hold investments in certain nonbanking com- 11. See 12 C.F.R. 225.26; see also The Fuji Bank, Limited, 75 panies in excess of the limitations set forth in section 4(c)(7) of the Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 BHC Act (12 U.S.C. § 1843(c)(7)). Swiss Bank has committed that Federal Reserve Bulletin 155 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

788 Federal Reserve Bulletin • September 1997 capitalization of SBCWDR is based on all the facts of its customer base and equity research capabilities. As a record, including projections of the volume of SBCWDR's result, Swiss Bank should be able to offer a broader range underwriting and dealing activities in bank-ineligible secu- of products and services to its customers. rities. The Board also has reviewed other aspects of the Accordingly, based on all the facts of record, the Board financial condition and resources of Swiss Bank, Dillon, has determined that the balance of public benefits that it and their respective subsidiaries, including the effect of the must consider under the proper incident to banking stanproposal on the financial condition and resources of these dard of section 4(c)(8) of the BHC Act is favorable and entities. consistent with approval of the proposal. On the basis of its supervisory experience with Swiss Based on the foregoing and all other facts of record, the Bank and SBCWDR, the commitments provided in this Board has determined that the notice should be, and hereby case, and the management of SBCWDR, the Board also is, approved. This determination is subject to all the terms has determined that Swiss Bank and SBCWDR have estab- and conditions discussed in this order and in the Swiss lished policies and procedures to ensure compliance with Bank Orders, and extends only to activities conducted this order and the Section 20 Orders, including computer, within the limitations of those orders and this order, includaudit, and accounting systems, internal risk management ing the Board's reservation of authority to establish addicontrols, and the necessary operational and managerial tional limitations to ensure that SBCWDR's activities are infrastructure. The Board also has reviewed other aspects consistent with safety and soundness, conflicts of interests, of the managerial resources of the entities involved in the and other relevant considerations under the BHC Act. The proposal, including the expected effect of the proposal on Board's determination also is subject to all the terms and such resources. conditions set forth in Regulation Y, including those in On the basis of the foregoing and all the facts of record, sections 225.7 and 225.25(c) of Regulation Y (12 C.F.R. the Board has concluded that financial and managerial 225.7 and 225.25(c)), and to the Board's authority to considerations are consistent with approval of the propos- require such modification or termination of the activities of al.12 a bank holding company or any of its subsidiaries as the The Board also has carefully considered the competitive Board finds necessary to ensure compliance with, and to effects of the proposal. Dillon operates nonbanking subsid- prevent evasion of, the provisions of the BHC Act and the iaries that compete with certain nonbanking subsidiaries of Board's regulations and orders issued thereunder. The Swiss Bank. In each case, however, the market for these Board's decision is specifically conditioned on compliance nonbanking services is unconcentrated, and there are nu- with all the commitments made in connection with the merous providers of these services. As a result, consumma- notice, the conditions established in this order, and the tion of the proposal would have a de minimis effect on commitments and conditions set forth or referred to in the competition for these services, and the Board has con- Swiss Bank Orders and the Board regulations and other cluded that the proposal would not result in a significantly orders noted above. The commitments and conditions readverse effect on competition in any relevant market. lied on by the Board in reaching this decision are deemed Under the framework established in this and prior deci- to be conditions imposed in writing by the Board in consions, including the prudential limitations established by nection with its findings and decision, and, as such, may be the Board in the Section 20 Orders, consummation of the enforced in proceedings under applicable law. proposal is not likely to result in any significantly adverse The proposal shall not be consummated later than three effects, such as undue concentration of resources, de- months after the effective date of this order, unless such creased or unfair competition, conflicts of interests, or period is extended for good cause by the Board or by the unsound banking practices that outweigh the public bene- Federal Reserve Bank of New York, acting pursuant to fits of the proposal. The Board expects that the proposal delegated authority. would enable Swiss Bank to compete more effectively, By order of the Board of Governors, effective July 28, particularly in underwriting activities and in providing 1997. merger and acquisition advice and financing, by increasing Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Phillips, and Meyer. 12. The Board received a comment from a customer of Swiss Bank in Switzerland alleging that a Swiss Bank branch in Switzerland has JENNIFER J. JOHNSON denied a member of his family access to the funds in her account and Deputy Secretary of the Board discriminated against her on the basis of her gender and several factors in her family background. Swiss Bank responded to these allegations and stated that the funds in the account were properly withdrawn several years ago and that Swiss Bank has explained the facts concerning the withdrawal to the commenter several times ORDERS ISSUED UNDER INTERNATIONAL BANKING ACT during the subsequent years. This dispute arises under the laws of a foreign country and is subject to the jurisdiction of foreign courts. The ABSA Bank Limited Board has determined that its limited jurisdiction to review notices Johannesburg, Republic of South Africa under the specific factors in the BHC Act does not authorize it to adjudicate disputes between a bank customer and a notificant, particularly disputes arising under the laws of a foreign jurisdiction, that do Order Approving Establishment of a Representative not arise under the enumerated factors in the BHC Act. Office Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 789 ABSA Bank Limited ("Bank"), Johannesburg, Republic office under the IBA and Regulation K, the Board will take of South Africa, a foreign bank within the meaning of the into account the standards that apply to the establishment International Banking Act ("IBA"), has applied under sec- of branches and agencies, subject generally to the followtion 10(a) of the IBA (12 U.S.C. § 3107(a)) to establish a ing considerations. With respect to supervision by home representative office in New York, New York. The Foreign country authorities, a foreign bank that proposes to estab- Bank Supervision Enhancement Act of 1991, which lish a representative office should be subject to a significant amended the IBA, provides that a foreign bank must obtain degree of supervision by its home country supervisor.3 A the approval of the Board to establish a representative foreign bank's financial and managerial resources will be office in the United States. reviewed to determine whether its financial condition and Notice of the application, affording interested persons an performance demonstrate that it is capable of complying opportunity to comment, has been published in a newspa- with applicable laws and has an operating record that per of general circulation in New York (The New York would be consistent with the establishment of a representa- Times, April 19, 1995). The time for filing comments has tive office in the United States. Finally, all foreign banks, expired, and the Board has considered the application and whether operating through branches, agencies or represenall comments received. tative offices, will be required to provide adequate assur- Bank, with assets of $28 billion as of March 31, 1997, is ances of access to information on the operations of the a wholly owned subsidiary of Amalgamated Banks of bank and its affiliates necessary to determine compliance South Africa Limited ("Amalgamated"), the controlling with U.S. laws. company of the largest banking and financial services The Board has considered the following information group in South Africa.1 Bank provides banking services with respect to home country supervision of Bank. The throughout South Africa and has investments in a number South African Reserve Bank (the "Reserve Bank") is the of banks and nonbank companies. Outside South Africa, primary bank supervisory authority in South Africa and, as Bank operates branches in the United Kingdom and Singa- such, is the home country supervisor of Bank. The Reserve pore, and representative offices in the People's Republic of Bank has authorized Bank to establish the proposed repre- China and the Federal Republic of Germany, and owns sentative office. subsidiaries in Hong Kong and Germany. The Board previously has determined, in connection The activities of Bank's proposed representative office with an application involving another bank from South would include acting as liaison between Bank's home Africa, Standard Bank of South Africa, ("Standard office and customers in the United States, soliciting finan- Bank"), that Standard Bank was subject to a significant cial services business on behalf of Bank, and providing degree of supervision by the Reserve Bank.4 The Board has information and advice on economic conditions and invest- determined that Bank is supervised by the Reserve Bank ment opportunities in South Africa. The representative on substantially the same terms and conditions as Standard office would not execute contracts on behalf of Bank, Bank. Based on all the facts of record, the Board concludes approve loans, disburse funds, or accept deposits or loan that factors relating to the supervision of Bank by its home repayments. country supervisor are consistent with approval of the In acting on an application to establish a representative proposed representative office. office, the IBA and Regulation K provide that the Board The Board also has determined that, for purposes of the shall take into account whether the foreign bank engages IBA and Regulation K, Bank engages directly in the busidirectly in the business of banking outside of the United ness of banking outside of the United States through its States and has furnished to the Board the information it operations in South Africa. Bank has provided the Board needs to assess the application adequately. The Board also with the information necessary to assess the application shall take into account whether the foreign bank and any through submissions that address relevant issues. foreign bank parent is subject to comprehensive supervi- The Board also has taken into account the additional sion or regulation on a consolidated basis by its home standards set forth in section 7 of the IBA and Regucountry supervisor (12 U.S.C. § 3107(a)(2); 12 C.F.R. lation K (see 12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. 211.24(d)). The Board may also take into account 211.24(c)(2)). As noted above, the Reserve Bank has auadditional standards as set forth in the IBA (12 U.S.C. thorized Bank to establish the proposed representative of- § 3105(d)(3)-(4)) and Regulation K (12 C.F.R. 211.24(c)). fice. The Board previously has stated that the standards that Taking into consideration Bank's record of operations in apply to the establishment of a branch or agency need not its home country, its overall financial resources, and its in every case apply to the establishment of a representative standing with its home country supervisors, the Board also office, because representative offices do not engage in a has determined that financial and managerial factors are banking business and cannot take deposits or make loans.2 consistent with approval of the proposed representative In evaluating an application to establish a representative 3. See Citizens National Bank, 79 Federal Reserve Bulletin 805 1. Amalgamated is controlled directly and indirectly by a number of (1993). South African companies engaged in insurance and other businesses. 4. See Standard Bank of South Africa, 81 Federal Reserve Bulletin 2. See 58 Federal Register 6348, 6351 (1993). 517(1995). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

790 Federal Reserve Bulletin • September 1997 office. Bank appears to have the experience and capacity to Bank or any of its affiliates subsequently interfere with the support the proposed representative office and also has Board's ability to determine the compliance by Bank or its established controls and procedures for the proposed repre- affiliates with applicable federal statutes, the Board may sentative office to ensure compliance with U.S. law. require termination of any of Bank's direct or indirect With respect to access to information about Bank's activities in the United States. Approval of the application operations, the Board has reviewed the restrictions on is also specifically conditioned on compliance by Bank disclosure in South Africa and has communicated with the with the commitments made in connection with the applirelevant authorities about access to information. Bank and cation and with the conditions in this order.5 The commitits parents have committed to make available to the Board ments and conditions referred to above are conditions such information on the operations of Bank and any of its imposed in writing by the Board in connection with its affiliates that the Board deems necessary to determine and decision, and may be enforced in proceedings under enforce compliance with the IBA, the Bank Holding Com- 12 U.S.C. § 1818 against Bank and its affiliates. pany Act of 1956, as amended, and other applicable federal By order of the Board of Governors, effective July 30, law. To the extent that the provision of such information to 1997. the Board may be prohibited or impeded by law, Bank and its parents have committed to cooperate with the Board to Voting for this action: Chairman Greenspan, Vice Chair Rivlin and obtain any necessary consents or waivers that might be Governors Meyer and Phillips. Absent and not voting: Governor Kelley. required from third parties in connection with disclosure of such information. In light of these commitments and other JENNIFER J. JOHNSON facts of record, and subject to the condition described Deputy Secretary of the Board below, the Board concludes that Bank has provided adequate assurances of access to any necessary information the Board may request. 5. The Board's authority to approve the establishment of the pro- On the basis of all the facts of record, and subject to the posed representative office parallels the continuing authority of the commitments made by Bank, as well as the terms and State of New York to license offices of a foreign bank. The Board's conditions set forth in this order, the Board has determined approval of this application does not supplant the authority of the State of New York and its agent, the New York State Banking that Bank's application to establish a representative office Department (the "Department"), to license the proposed representashould be, and hereby is, approved. Should any restrictions tive office of Bank in accordance with any terms or conditions that the on access to information on the operations or activities of Department may impose. APPLICATIONS APPROVED UNDER BANK HOLDING COMPANY ACT By the Secretary of the Board Recent applications have been approved by the Secretary of the Board as listed below. Copies are available upon request to the Freedom of Information Office, Office of the Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Section 3 Applicant(s) Bank(s) Effective Date Eggemeyer Advisory Corp., SC Bancorp, July 29, 1997 San Diego, California Anaheim, California Castle Creek Capital, L.L.C., Southern California Bank, San Diego, California Anaheim, California Castle Creek Capital Partners Fund-I, L.P., San Diego, California Western Bancorp, Laguna Niguel, California Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 791 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—Continued Applicant(s) Bank(s) Reserve Bank Effective Date ABC Bancorp, Irwin Bankcorp, Inc., Atlanta July 23, 1997 Moultrie, Georgia Ocilla, Georgia The Bank of Ocilla, Ocilla, Georgia Bank of Mulberry Employee Stock Acme Holding Company, Inc., St. Louis June 26, 1997 Ownership Trust, Mulberry, Arkansas Mulberry, Arkansas Central Bancompany, Inc., Farmers and Traders Bancshares, Inc., St. Louis July 10, 1997 Jefferson City, Missouri California, Missouri Farmers and Traders Bank, California, Missouri Central Illinois Bancorp Inc., First Ozaukee Capital Corporation, Chicago July 2, 1997 Champaign, Illinois Cedarburg, Wisconsin First Ozaukee Savings Bank, Cedarburg, Wisconsin Century Acquisition Corp., Century Capital Financial, Inc., Kansas City July 24, 1997 Hurst, Texas Kilgore, Texas Century South Banks, Inc., Bank Corporation of Georgia, Atlanta July 11, 1997 Gainesville, Georgia Macon, Georgia First South Bank, N.A., Macon, Georgia Ameribank, N.A., Savannah, Georgia City Bancorp, THE BANK, St. Louis July 9, 1997 Springfield, Missouri Springfield, Missouri Commercial Bancshares of Ozark, The Commercial Bank of Ozark, Atlanta July 9, 1997 Inc., Ozark, Alabama Ozark, Alabama CoVest Bancshares, Inc., CoVest Banc, N.A., Chicago July 10, 1997 Des Plaines, Illinois Des Plaines, Illinois Davis BanCorporation, Inc., Century Acquisition Corp., Kansas City July 24, 1997 Davis, Oklahoma Hurst, Texas ECSB Holding Company, Inc., American National Financial Atlanta June 25, 1997 Fort Walton Beach, Florida Corporation, Panama City, Florida First National Bank Northwest Florida, Panama City, Florida Edgar County Banc Shares, Inc., Edgar County Bank and Trust Co., Chicago July 9, 1997 Paris, Illinois Paris, Illinois Kansas Banc Corporation, Kansas, Illinois Kansas State Bank, Kansas, Illinois Enterbank Holdings, Inc. City Bancorp, St. Louis July 17, 1997 Clayton, Missouri Springfield, Missouri THE BANK, Springfield, Missouri Ewen Bancshares, Inc. State Bank of Ewen, Minneapolis July 1, 1997 Ewen, Michigan Ewen, Michigan Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

792 Federal Reserve Bulletin • September 1997 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date FBA Bancorp, Inc., First Bank of the Americas, S.S.B., Chicago July 15, 1997 Chicago, Illinois Chicago, Illinois F & M Bancorporation, Inc., Clear Lake Bancorp, Inc., Chicago July 10, 1997 Kaukauna, Wisconsin Clear Lake, Wisconsin F & M Merger Corporation, Landmark Bank, Kaukauna, Wisconsin Clear Lake, Wisconsin Minneapolis, Minnesota First Bank National Association ND, Minneapolis July 14, 1997 Fargo, North Dakota First Centralia Bancshares, Inc. Century Acquisition Corp., Kansas City July 24, 1997 Centralia, Kansas Hurst, Texas First Eldorado Bancshares, Inc. Dana Bancorp, Inc., St. Louis July 15, 1997 Eldorado, Illinois Dana, Indiana First National Bank of Dana, Dana, Indiana First Marshall Bancshares, Inc. First Marshall Delaware Bancshares, Dallas July 16, 1997 Marshall, Texas Dover, Delaware First Marshall Corporation, Marshall, Texas East Texas National Bank of Marshall, Marshall, Texas First Marshall Delaware Bancshares, First Marshall Corporation, Dallas July 16, 1997 Inc., Marshall, Texas Dover, Delaware East Texas National Bank of Marshall, Marshall, Texas First National Bancorp of River First National Bank of River Falls, Minneapolis July 3, 1997 Falls, Inc., River Falls, Wisconsin River Falls, Wisconsin First National Bancshares of The First National Bank of Gallatin, Kansas City July 2, 1997 Gallatin, Gallatin, Missouri Gallatin, Missouri First State Bancshares of Blakely, First State Bank of Donalsonville, Atlanta July 2, 1997 Inc., Donalsonville, Georgia Blakely, Georgia First Federal Savings Bank of Southwest Georgia, Donalsonville, Georgia First United Bancshares, Inc., Fredonia Bancshares, Inc., St. Louis July 3, 1997 El Dorado, Arkansas Nacogdoches, Texas Fredonia State Bank, Nacogdoches, Texas Fulton Financial Corp, The Peoples Bank of Elkton, Philadelphia June 30, 1997 Lancaster, Pennsylvania Elkton, Maryland Gideon Bancshares Company, First Midwest Bank of Chaffee, St. Louis June 25, 1997 Dexter, Missouri Chaffee, Missouri Hibernia Corporation, Executive Bancshares, Inc., Atlanta July 17, 1997 New Orleans, Louisiana Paris, Texas First National Bank of Paris, Paris, Texas Collin County National Bank, McKinney, Texas Intra Financial Corp, Peoples Bancorp of Belleville, Inc., Kansas City July 2, 1997 Clyde, Kansas Belleville, Kansas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 793 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date J&L Holdings Limited Partnership, American National Creighton Company, Kansas City July 23, 1997 Pilger, Nebraska Creighton, Nebraska Plainview Holding Company, Pilger, Nebraska Midwest Bancorporation, Inc., Midwest Bancshares, Inc., St. Louis July 9, 1997 Poplar Bluff, Missouri Poplar Bluff, Missouri Midwest Bancshares, Inc., Midwest Bancorporation, Inc., St. Louis July 9, 1997 Poplar Bluff, Missouri Poplar Bluff, Missouri Affiliates Employee Stock Ownership Plan, Poplar Bluff, Missouri Morrill Bancshares, Inc., Century Acquisition Corp., Kansas City July 24, 1997 Sabetha, Kansas Hurst, Texas MSB Mutual Holding Company, Manasquan Savings Bank, New York July 18, 1997 Wall Township, New Jersey Wall Township, New Jersey MSB Financial, Inc., Wall Township, New Jersey NationsBank Corporation, Citizens Bancshares of Eldon, Richmond July 2, 1997 Charlotte, North Carolina Missouri, Inc., NB Holdings Corporation, Eldon, Missouri Charlotte, North Carolina Boatmen's Bank of Southern Missouri, Springfield, Missouri New Woodson Bancshares, Inc., Woodson Bancshares, Inc., Dallas July 9, 1997 Graham, Texas Graham, Texas First State Bancorp, Inc., Carson City, Nevada First State Bank, Graham, Texas Northway Financial, Inc., The Berlin City Bank, Boston July 22, 1997 Berlin, New Hampshire Berlin, New Hamsphire Pemi Bancorp, Inc., Plymouth, New Hampshire Norwest Corporation, Myers Bancshares, Inc., Minneapolis July 10, 1997 Minneapolis, Minnesota Dallas, Texas Norwest Corporation, Woodhaven National Bank, Minneapolis July 9, 1997 Minneapolis, Minnesota Fort Worth, Texas Onaga Bancshares, Inc., Century Acquisition Corp., Kansas City July 24, 1997 Onaga, Kansas Hurst, Texas Pioneer Bancshares, Inc., Employee Pioneer Bancshares, Inc., Kansas City July 23, 1997 Stock Ownership Plan, Ponca City, Oklahoma Ponca City, Oklahoma Security Bancshares, Inc., Intra Financial Corp., Kansas City July 2, 1997 Scott City, Kansas Clyde, Kansas South Platte Bancorp, South Platte Bancorp, Kansas City July 24, 1997 Julesburg, Colorado Julesburg, Colorado First National Bank of Julesburg ESOP, Julesburg, Colorado State Bank of Hawley Employee Bankshares of Hawley, Inc., Minneapolis July 2, 1997 Stock Ownership Plan and Trust, Hawley, Minnesota Hawley, Minnesota Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

794 Federal Reserve Bulletin • September 1997 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date The Union Illinois 1995 Investment Union Illinois Company, St. Louis July 14, 1997 Limited Partnership, Swansea, Illinois Swansea, Illinois United Roosevelt, MHC, United Roosevelt Savings Bank, New York July 18, 1997 Carteret, New Jersey Carteret, New Jersey United Roosevelt Bancorp, Inc., United Roosevelt Savings Bank, Carteret, New Jersey Carteret, New Jersey Section 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Anteilsverwaltung-Zentralsparkasse, Creditanstalt-Bankverein, New York July 17, 1997 Vienna, Austria Vienna, Austria Bank Austria Aktiengesellschaft, Vienna, Austria Commercial BancShares, Inc., Mid-Ohio Valley Loan Company, Richmond July 3, 1997 Parkersburg, West Virginia St. Mary's, West Virginia Independent Community Tredegar Trust Company, Richmond July 1, 1997 Bankshares, Inc., Richmond, Virginia Middleburg, Virginia Norwest Corporation, Tennessee Credit Corporation, Minneapolis July 17, 1997 Minneapolis, Minnesota Murfreesboro, Tennessee Norwest Financial Services, Inc., First City Life Insurance Company, Des Moines, Iowa Murfreesboro, Tennessee Norwest Financial, Inc., Des Moines, Iowa Norwest Corporation, Paragon Capital LLC, Minneapolis July 23, 1997 Minneapolis, Minnesota Newton, Massachusetts Patapsco Valley Bancshares, Inc., Central Maryland Services Corporation, Richmond June 27, 1997 Ellicott City, Maryland Ellicott City, Maryland Pinnacle Financial Services, Inc., Indiana Federal Corporation, Chicago June 30, 1997 St. Joseph, Michigan Valparaiso, Indiana Indiana Federal Bank for Savings, Valparaiso, Indiana IndFed Mortgage Company, Valparaiso, Indiana IFB Investment Services, Inc., Valparaiso, Indiana Forrest Holdings, Inc., Lisle, Illinois Forrest Financial Corporation, Lisle, Illinois Provident Bankshares Corporation, First Citizens Financial Corporation, Richmond July 7, 1997 Baltimore, Maryland Gaithersburg, Maryland Citizens Savings Bank, F.S.B., Gaithersburg, Maryland Waseca Bancshares, Inc., American Savings, Inc., Minneapolis July 2, 1997 Waseca, Minnesota Farmington, Minnesota Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 795 APPLICATIONS APPROVED UNDER BANK MERGER ACT By Federal Reserve Banks Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to the Reserve Banks. Applicant(s) Bank(s) Reserve Bank Effective Date First Community Bank of Southwest First Virginia Bank - Mountain Empire, Richmond July 9, 1997 Virginia, Inc., Damascus, Virginia Tazewell, Virginia Premier Bank-Central, N.A., Honaker, Virginia Premier Bank-South, N.A., Wytheville, Virginia Triangle Bank, United Carolina Bank, Richmond July 1, 1997 Raleigh, North Carolina Whiteville, North Carolina Branch Banking and Trust Company, Winston-Salem, North Carolina Vectra Bank, Professional Bank, Kansas City July 16, 1997 Denver, Colorado Denver, Colorado PENDING CASES INVOLVING THE BOARD OF GOVERNORS This list of pending cases does not include suits against the dated January 31, 1997, imposing civil money penalties and Federal Reserve Banks in which the Board of Governors is not an order of prohibition for violations of the Bank Holding named a party. Company Act. Research Triangle Institute v. Board of Governors, No. 97- Eliopulos v. Board of Governors, No. 97-1442 (D.C. Cir., 1282 (4th Cir., filed February 24, 1997). Appeal of district filed July 17, 1997). Petition for review of a Board order court's dismissal of contract claim. dated June 23, 1997, approving the application of First Jones v. Board of Governors, No. CV97-0198 (W.D. Louisi- Bank System, Inc., Minneapolis, Minnesota, to acquire U.S. ana, filed January 30, 1997). Complaint alleging violations Bancorp, Portland, Oregon, and thereby acquire U.S. Ban- of the Fair Housing Act. The case was dismissed on corp's banking and nonbanking subsidiaries. May 29, 1997. Greeff v. Board of Governors, No. 97-1976 (4th Cir., filed The New Mexico Alliance v. Board of Governors, No. 96- June 17, 1997). Petition for review of a Board order dated 9552 (10th Cir., filed December 24, 1996). Petition for May 19, 1997, approving the application of by Allied Irish review of a Board order dated December 16, 1996, approv- Banks, pic, Dublin, Ireland, and First Maryland Bancorp, ing the acquisition by NationsBank Corporation and NB Baltimore, Maryland, to acquire Dauphin Deposit Corpora- Holdings Corporation, both of Charlotte, North Carolina, of tion, Harrisburg, Pennsylvania, and thereby acquire Dau- Boatmen's Bancshares, Inc., St. Louis, Missouri. Also on phin's banking and nonbanking subsidiaries. December 24, 1996, petitioners moved for an emergency Inner City Press/Community on the Move v. Board of Gover- stay of the Board's order. The motion for a stay was denied nors, No. 97- 1394 (D.C. Cir., filed June 12, 1997). Petition by the 10th Circuit on January 3, 1997; on January 6, 1997, to review a Board order dated May 14, 1997, approving the petitioners' application for emergency stay was denied by application of Banc One Corporation, Inc., Columbus, Ohio, the Supreme Court. to merge with First USA, Inc., Dallas, Texas. On June 16, Artis v. Greenspan, No. 1:96CV02619 (D.D.C., filed Novem- 1997, petitioners moved for a stay pending appeal. The ber 19, 1996). Employment discrimination action. On motion was denied on June 27, 1997. May 30, 1997, the court granted the Board's motion to Vickery v. Board of Governors, No. 97-1344 (D.C. Cir., filed dismiss the action. May 9, 1997). Petition for review of a Board order dated Snyder v. Board of Governors, No. 96-1403 (D.C. Cir., filed April 14, 1997, prohibiting Charles R. Vickery, Jr., from October 23, 1996). Petition for review of Board order dated further participation in the banking industry. September 11, 1996, prohibiting John K. Snyder and Wilkins v. Board of Governors, No. 3:97CV331 (E.D. Va., Donald E. Hedrick from further participation in the banking filed May 2, 1997). Customer dispute with bank. On industry. On May 8, 1997, the court of appeals granted the June 11, 1997, the Board filed a motion to dismiss. Board's motion to dismiss the petition. Petitioners' request Pharaon v. Board of Governors, No. 97-1114 (D.C. Cir., filed for rehearing or rehearing en banc was denied on July 31, February 28, 1997). Petition for review of a Board order 1997. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

796 Federal Reserve Bulletin • September 1997 American Bankers Insurance Group, Inc. v. Board of Gover- ary 13, 1997. On July 2, 1997, the court of appeals disnors, No. 96-CV-2383-EGS (D.D.C., filed October 16, missed the petition for review. 1996). Action seeking declaratory and injunctive relief in- Lee v. Board of Governors, No. 95-4134 (2nd Cir., filed validating a new regulation issued by the Board under the August 22, 1995). Petition for review of Board orders dated Truth in Lending Act relating to treatment of fees for debt July 24, 1995, approving certain steps of a corporate reorgacancellation agreements. On October 18, 1996, the district nization of U.S. Trust Corporation, New York, New York, court denied plaintiffs' motion for a temporary restraining and the acquisition of U.S. Trust by Chase Manhattan order. On January 17, 1997, the parties filed cross-motions Corporation, New York, New York. On September 12, for summary judgment. 1995, the court denied petitioners' motion for an emergency Artis v. Greenspan, No. 96-CV-02105 (D. D.C., filed Septem- stay of the Board's orders. The Board's brief was filed on ber 11, 1996). Class complaint alleging race discrimination April 16, 1996. Oral argument, consolidated with Inner City in employment. On December 20, 1996, the Board moved Press/Community on the Move v. Board of Governors, took to dismiss the action. On June 30, 1997, the court granted place on January 13, 1997. On July 2, 1997, the court of the motion and dismissed the case. appeals dismissed the petition for review. Leuthe v. Board of Governors, No. 96-5725 (E.D. Pa., filed In re Subpoena Duces Tecum, Misc. No. 95-06 (D.D.C., filed August 16, 1996). Action against the Board and other January 6, 1995). Action to enforce subpoena seeking pre- Federal banking agencies challenging the constitutionality decisional supervisory documents sought in connection with of the Office of Financial Institution Adjudication. On Janu- an action by Bank of New England Corporation's trustee in ary 24, 1997, the agencies filed a motion to dismiss the bankruptcy against the Federal Deposit Insurance Corporaaction. tion. The Board filed its opposition on January 20, 1995. Long v. Board of Governors, No. 96-9526 (10th Cir., filed Oral argument on the motion was held July 14, 1995. July 31, 1996). Petition for review of Board order dated Board of Governors v. Pharaon, No. 91-CIV-6250 (S.D. New July 2, 1996, assessing a civil money penalty and cease and York, filed September 17, 1991). Action to freeze assets of desist order for violations of the Bank Holding Company individual pending administrative adjudication of civil Act. Oral argument was heard on May 12, 1997, and on money penalty assessment by the Board. On September 17, June 30, 1997, the court affirmed the Board's decision. 1991, the court issued an order temporarily restraining the Inner City Press/Community on the Move v. Board of Gover- transfer or disposition of the individual's assets. nors, No. 96-4008 (2nd Cir., filed January 19, 1996). Petition for review of a Board order dated January 5, 1996, approving the applications and notices by Chemical Bank- FINAL ENFORCEMENT ORDERS ISSUED BY THE BOARD ing Corporation to merge with The Chase Manhattan Cor- OF GOVERNORS poration, both of New York, New York, and by Chemical Bank to merge with The Chase Manhattan Bank, N.A., both Postipankki Ltd. of New York, New York. Petitioners' motion for an emer- Helsinki, Finland gency stay of the transaction was denied following oral argument on March 26, 1996. The Board's brief on the The Federal Reserve Board announced on July 11, 1997, merits was filed July 8, 1996. The case was consolidated for the issuance of an Order of Assessment of a Civil Money oral argument and decision with Lee v. Board of Governors, Penalty against Postipankki Ltd., Helsinki, Finland, a for- No. 95-4134 (2d Cir.); oral argument was held on Janu- eign bank, and its New York branch. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1 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 All Maturity distribution of loan and security Real Estate holdings A34 Mortgage markets Monetary and Credit Aggregates A3 5 Mortgage debt outstanding All Aggregate reserves of depository institutions Consumer Credit and monetary base A12 Money stock, liquid assets, and debt measures A3 6 Total outstanding A14 Deposit interest rates and amounts outstanding— A3 6 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 A15 All commercial banks A41 Summary of financial assets and liabilities A16 Domestically chartered commercial banks A17 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

2 Federal Reserve Bulletin • September 1997 DOMESTIC NONFINANCIAL STATISTICS- Reported by Nonbanking Business CONTINUED Enterprises in the United States A58 Liabilities to unaffiliated foreigners Selected Measures—Continued A59 Claims on unaffiliated foreigners A48 Gross domestic product and income A49 Personal income and saving Securities Holdings and Transactions A60 Foreign transactions in securities INTERNATIONAL STATISTICS A61 Marketable U.S. Treasury bonds and notes—Foreign transactions Summary Statistics Interest and Exchange Rates A50 U.S. international transactions—Summary A61 Discount rates of foreign central banks A51 U.S. foreign trade A61 Foreign short-term interest rates A51 U.S. reserve assets A62 Foreign exchange rates A51 Foreign official assets held at Federal Reserve Banks A63 GUIDE TO STATISTICAL RELEASES AND A52 Selected U.S. liabilities to foreign official institutions SPECIAL TABLES Reported by Banks in the United States SPECIAL TABLES A52 Liabilities to and claims on foreigners A64 Assets and liabilities of commercial banks, A53 Liabilities to foreigners March 31, 1997 A55 Banks' own claims on foreigners A68 Residential lending under the Home Mortgage A56 Banks' own and domestic customers' claims on Disclosure Act, 1996 foreigners A76 Disposition of applications for private mortgage A56 Banks' own claims on unaffiliated foreigners insurance, 1996 A57 Claims on foreign countries— Combined domestic offices and foreign branches A80 INDEX TO STATISTICAL TABLES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

3 Guide to Tabular Presentation SYMBOLS AND ABBREVIATIONS c Corrected G-10 Group of Ten e Estimated GNMA Government National Mortgage Association n.a. Not available GDP Gross domestic product n.e.c. Not elsewhere classified HUD Department of Housing and Urban P Preliminary Development r Revised (Notation appears on column heading IMF International Monetary Fund when about half of the figures in that column 10 Interest only are changed.) IPCs Individuals, partnerships, and corporations * Amounts insignificant in terms of the last decimal IRA Individual retirement account place shown in the table (for example, less than MMDA Money market deposit account 500,000 when the smallest unit given is millions) MSA Metropolitan statistical area 0 Calculated to be zero NOW Negotiable order of withdrawal Cell not applicable OCD Other checkable deposit ATS Automatic transfer service OPEC Organization of Petroleum Exporting Countries BIF Bank insurance fund OTS Office of Thrift Supervision CD Certificate of deposit PO Principal only CMO Collateralized mortgage obligation REIT Real estate investment trust FEB 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 NonfinancialS tatistics • September 1997 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted1 1996 1997 1997 MMoonneettaarryy oorr ccrreeddiitt aaggggrreeggaattee Q3 Q4 Qi Q2 Feb. Mar. Apr. Mayr June Reserves of depository institutions2 1 Total -16.4 -17.2 -8.3 -14.3 -12.3 -17.0 -21.9 -9.7 1.9 2 Required -16.5 -18.5 -8.4 -14.9 -7.9 -20.7 -18.6 -15.8 1.4 3 Nonborrowed -17.6 -16.2 -7.2 -16.0 -12.3 -19.9 -24.5 -9.3 -1.2 4 Monetary base3 5.3 5.1 5.6 3.3 5.7 3.5 1.6 3.6 4.7 Concepts of money, liquid assets, and debt4 5 Ml -6.5 -7.3 -.7 -5.5 .9 -6.0 -11.3 -2.7 .6 6 M2 3.4 5.r 6.r 4.3 5.3r 5.2r 6.r -.1 4.6 7 M3 5.5r 8.2r 8.2r 6.8 9.5r 7.9r 9.0r 1.6 5.7 8 L 6.5r 7.2r 6.7r n.a. 9.1r 1.9' 8.8r 1.1 n.a. 9 Debt 5.3r 5.0 4.5r n.a. 5.0r 53' 5.9r 4.0 n.a. Nontransaction components 10 In M25 7.7 10.3r 8.7r 8.1 6.9r 9.6' 12.7r .8 6.2 11 In M3 only6 13.2r 19.4r 15.7r 15.6 24.5r 17.T 19.0r 7.2 9.2 Time and savings deposits Commercial banks 12 Savings, including MMDAs 12.0 17.0 14.0 10.7 9.3 17.1 17.6 -3.2 5.7 13 Small time7 3.7 4.7 2.9' 5.9 2.2r 5.r 5.6r 6.2 11.6 14 Large time8'9 19.lr 22.9r 12.8r 23.7 17.5r 25.5r 35.4r 4.6 25.6 Thrift institutions 15 Savings, including MMDAs .2 .8 2.7 5.8 2.9 2.3 9.7 7.7 .0 16 Small time7 -.3 3.0r .r -3.1 2.4r — 10.5r -4.1r 3.4 -4.1 17 Large time8 9.0 9.1 12.8 5.1 11.8 1.5 7.3 -1.5 11.7 Money market mutual funds 18 Retail 16.3 17.2 16.3 14.7 13.9 19.9 24.5 -4.2 12.1 19 Institution-only 20.7 19.8 15.5 12.5 36.9 25.1 -.8 .0 28.1 Repurchase agreements and Eurodollars 20 Repurchase agreements10 -4.4 1.8 7.8 1.7 24.5 -10.8 11.5 -3.0 -15.0 21 Eurodollars10 8.5 47.3r 42.2r 25.4 21X? 23.5r 31.7r 57.0 -55.3 Debt components4 22 Federal 3.8 3.2 1.8 n.a. 1.8 4.7 2.4 -3.9 n.a. 23 Nonfederal 5.8r 5.6 5.5r n.a. 6.r 5.5r 7.1r 6.7 n.a. 1. Unless otherwise noted, rates of change are calculated from average amounts outstand- amounts held by depository institutions, the U.S. government, money market funds, and ing during preceding month or quarter. foreign banks and official institutions. Seasonally adjusted M3 is calculated by summing large 2. Figures incorporate adjustments for discontinuities, or "breaks," associated with time deposits, institutional money fund balances, RP liabilities, and Eurodollars, each regulatory changes in reserve requirements. (See also table 1.20.) seasonally adjusted separately, and adding this result to seasonally adjusted M2. 3. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term Treasury adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted currency securities, commercial paper, and bankers acceptances, net of money market fund holdings of component of the money stock, plus (3) (for all quarterly reporters on the "Report of these assets. Seasonally adjusted L is computed by summing U.S. savings bonds, short-term Transaction Accounts, Other Deposits and Vault Cash" and for all weekly reporters whose Treasury securities, commercial paper, and bankers acceptances, each seasonally adjusted vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted difference separately, and then adding this result to M3. between current vault cash and the amount applied to satisfy current reserve requirements. Debt: The debt aggregate is the outstanding credit market debt of the domestic nonfinancial 4. Composition of the money stock measures and debt is as follows: sectors—the federal sector (U.S. government, not including government-sponsored enter- Ml: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of prises or federally related mortgage pools) and the nonfederal sectors (state and local depository institutions, (2) travelers checks of nonbank issuers, (3) demand deposits at all governments, households and nonprofit organizations, nonfinancial corporate and nonfarm commercial banks other than those owed to depository institutions, the U.S. government, and noncorporate businesses, and farms). Nonfederal debt consists of mortgages, tax-exempt and foreign banks and official institutions, less cash items in the process of collection and Federal corporate bonds, consumer credit, bank loans, commercial paper, and other loans. The data, Reserve float, and (4) other checkable deposits (OCDs), consisting of negotiable order of which are derived from the Federal Reserve Board's flow of funds accounts, are breakwithdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, adjusted (that is, discontinuities in the data have been smoothed into the series) and credit union share draft accounts, and demand deposits at thrift institutions. Seasonally month-averaged (that is, the data have been derived by averaging adjacent month-end levels). adjusted Ml is computed by summing currency, travelers checks, demand deposits, and 5. Sum of (1) savings deposits (including MMDAs), (2) small time deposits, and (3) retail OCDs, each seasonally adjusted separately. money fund balances, each seasonally adjusted separately. M2: Ml plus (1) savings (including MMDAs), (2) small-denomination time deposits (time 6. Sum of (1) large time deposits, (2) institutional money fund balances, (3) RP liabilities deposits—including retail RPs—in amounts of less than $100,000), and (3) balances in retail (overnight and term) issued by depository institutions, and (4) Eurodollars (overnight and money market mutual funds (money funds with minimum initial investments of less than term) of U.S. addressees, each seasonally adjusted separately. $50,000). Excludes individual retirement accounts (IRAs) and Keogh balances at depository 7. Small time deposits—including retail RPs—are those issued in amounts of less than institutions and money market funds. Seasonally adjusted M2 is calculated by summing $100,000. All IRA and Keogh account balances at commercial banks and thrift institutions savings deposits, small-denomination time deposits, and retail money fund balances, each are subtracted from small time deposits. seasonally adjusted separately, and adding this result to seasonally adjusted Ml. 8. Large time deposits are those issued in amounts of $100,000 or more, excluding those M3: M2 plus (1) large-denomination time deposits (in amounts of $100,000 or more), (2) booked at international banking facilities. balances in institutional money funds (money funds with minimum initial investments of 9. Large time deposits at commercial banks less those held by money market funds, $50,000 or more), (3) RP liabilities (overnight and term) issued by all depository institutions, depository institutions, the U.S. government, and foreign banks and official institutions. and (4) Eurodollars (overnight and term) held by U.S. residents at foreign branches of U.S. 10. Includes both overnight and term. banks worldwide and at all banking offices in the United Kingdom and Canada. Excludes Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Money Stock and Bank Credit A5 1.11 RESERVES OF DEPOSITORY INSTITUTIONS AND RESERVE BANK CREDIT 1 Millions of dollars Average of Average of daily figures for week ending on date indicated daily figures Apr. May May 14 May 21 May 28 June 4 June 11 June SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 448,875 449,172 450,194 442,274 442,707r 443,365 447,486 U.S. government securities2 Bought outright—System account-. 400,786 405,099 407,635 404,852 405,907 406,056 405,776 405,677 407,195 Held under repurchase agreements 13,357 10,616 7,801 11,330 4,843 4,889 8,093 4,512 6,331 Federal agency obligations Bought outright 1,985 1,970 1,563 1,970 1,970 1,970 1,839 1,644 1,496 Ac H ce e p ld t a u n n ce d s e r repurchase agreements 8170 680 0 8620 4500 3990 6310 1,4990 1,2850 6590 Loans to depository institutions Adjustment credit 94 16 25 18 234 25 2291 S E e x a te so n n d a e l d c c r r e e d d it i t 0 176 0 2430 1540 1830 2090 2101 1890 0 Float 643 150r 477 62 395 46r 327 329 1,278 Other Federal Reserve assets 31,107 30,028r 30,497 31,359 28,552 28,887r 29,884 29,704 30,297 12 Gold stock 11,052 11,051 11,050 11,052 11,051 11,051 11,051 11,050 11,050 13 Special drawing rights certificate account 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 14 Treasury currency outstanding 25,207 25,270 25,330 25,259 25,273 25,287 25,301 25,315 25,329 ABSORBING RESERVE FUNDS 15 Currency in circulation 446,043 448,775 451,842 448,079 448,326 450,865 451,706 451,620 451,833 16 Treasury cash holdings 301 320 343 316 323 327 332 344 344 Deposits, other than reserve balances, with Federal Reserve Banks 1 17 8 T Fo re r a e s ig u n r y 12,9 1 9 7 6 4 11,5 1 1 7 3 5 182 14,6 1 6 7 1 1 5,1 1 7 6 6 6 5,01583 6 4,9 1 9 7 3 6 5,2 1 5 7 4 1 6,8 1 3 7 1 2 19 Service-related balances and adjustments 7,038 7,117 7,185 7,141 7,113 7,059 7,124 7,054 7,146 20 Other 376 356 366 348 360 368 404 368 374 21 Other Federal Reserve liabilities and capital . . 15,040 15,132 15,497 15,163 15,046 15,008 15,917 15,747 15,198 22 Reserve balances with Federal Reserve Banks4 12,366 10,918r 10,490 9,827 11,289 9,379r 12,762 8,374 11,168 End-of-month figures Wednesday figures Apr. May May 14 May 21 May 28 June 4 June 11 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 447,054r 446,925 444,693 U.S. government securities2 2 Bought outright—System account" 402,513 405,124 410,914 406,500 406,087 406,293 405,074 407,451 3 Held under repurchase agreements 50,378 7,453 15,456 11,596 5,213 5,759 9.211 Federal agency obligations 4 Bought outright 1,970 1,970 1,496 1,970 1,970 1,970 1,663 1,596 1,496 5 Held under repurchase agreements 9890 1,8470 1,1170 4140 1,5530 827 0 1,2080 1,6350 9660 6 Acceptances Loans to depository institutions 7 Adjustment credit 28 353 1,587 19 12 12 11 109 9 8 9 E S x ea te s n on d a e l d c c r r e e d d i i t t 1280 2190 3070 1720 2000 2130 1900 1809 2680 0 Float 241 103r 469 1,059 190 508r 614 436 811 1 Other Federal Reserve assets 33,115 29,986r 32,338 31,545 28,845 29,105r 29,924 29,895 30,562 12 Gold stock 11,051 11,051 11,050 11,051 11,051 11,051 11,050 11,050 11.050 13 Special drawing rights certificate account . 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 14 Treasury currency outstanding 25,231 25,301 25,357 25,259 25,273 25,287 25,301 25,315 25,329 ABSORBING RESERVE FUNDS 15 Currency in circulation 446,632 451,158 453,646 449,053 449,653 452.381 452,304 452,486 452,488 16 Treasury cash holdings 309 330 343 322 327 330 344 344 344 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 52,215 5,174 16,368 16,838 5,307 4,824 4,298 4,776 9,050 18 Foreign 169 177 178 158 163 223 173 188 167 19 Service-related balances and adjustments . . 7,089 7,124 7,559 7,141 7,113 7,059 7,124 7,054 7,146 20 Other 348 325 321 355 370 370 377 361 371 2 2 2 1 R O e th se er r v F e e b d a e l r a al n c R es e s w er i v th e F li e a d b e il r i a t l i e R s e s a e n r d v e c a B pi a t n al k s4 . 1 1 3 4 , , 1 9 0 7 6 7 1162,,203871 r 1 15 5 , , 3 5 5 1 9 7 1 9 5 , , 9 0 1 0 7 1 1 1 4 4 , , 6 8 9 2 0 7 1 9 4 , , 6 8 9 00 4 r 1 1 4 5 , , 6 73 5 1 3 1 1 0 5 , , 0 0 3 1 5 5 1 1 1 4 , , 8 9 4 4 6 0 1. Amounts of cash held as reserves 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. government securities pledged inflation-indexed securities. with Federal Reserve Banks—and excludes securities sold and scheduled to 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 NonfinancialS tatistics • September 1997 1.12 RESERVES AND BORROWINGS Depository Institutions' Millions of dollars Prorated monthly averages of biweekly averages RReesseerrvvee ccllaassssiiffiiccaattiioonn 1994 1995 1996 1996 1997 Dec. Dec. Dec. Dec. Jan. Feb. Mar. Apr. Mayr June 1 Reserve balances with Reserve Banks2 24,658 20,440 13,395 13,395 11,710 11,455 11,515 12,308 10,916 10,297 2 Total vault cash3 40,378 42,094 44,426 44,426 47,172 43,375 42,116 41,381 41,111 42,398 3 Applied vault cash4 36,682 37,460 37,848 37,848 38,932 36,588 36,029 35,571 35,081 36,328 4 Surplus vault cash5 3,696 4,634 6.578 6,578 8,240 6,788 6,087 5,810 6,030 6,070 5 Total reserves6 61,340 57,900 51,243 51,243 50,642 48,043 47,543 47,879 45,997 46,625 6 Required reserves 60,172 56,622 49,819 49,819 49,419 47,012 46,383 46,869 44,757 45,361 7 Excess reserve balances at Reserve Banks7 1,168 1,278 1,424 1,424 1,223 1,031 1,160 1,010 1,240 1,264 8 Total borrowings at Reserve Banks8 209 257 155 155 45 42 156 261 243 367 9 Seasonal borrowings 100 40 68 68 19 21 37 88 173 243 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 Feb. 26 Mar. 12 Mar. 26 Apr. 9 Apr. 23 May 7 May 21 June 4r June 18 July 2 1 Reserve balances with Reserve Banks2 11,817 11,341 11,269 12,620 12,516 11,493 10,547 11,030 9,782 10,655 2 Total vault cash3 41,948 42,841 41,665 41,640 40,986 41,838 40,879 40,929 43,447 41,664 3 Applied vault cash4 35,672 36,490 35,674 35,916 35,359 35,551 34,780 35,176 36,911 36,031 4 Surplus vault cash5 6,276 6,351 5,991 5,724 5,627 6,288 6,099 5,753 6,536 5,633 5 Total reserves6 47,489 47,831 46,943 48,536 47,874 47,043 45,326 46,205 46,693 46,686 6 Required reserves 46,493 46,593 45,872 47,313 47,209 45,619 44,280 44,821 45,417 45,477 7 Excess reserve balances at Reserve Banks7 996 1,238 1,071 1,223 665 1,424 1,046 1,384 1,276 1,209 8 Total borrowings at Reserve Banks8 50 35 194 344 228 219 189 336 222 547 9 Seasonal borrowings 23 27 38 61 86 127 169 210 205 300 10 Extended credit9 0 0 0 0 0 0 0 0 0 0 1. Data in this table also appear in the Board's H.3 (502) weekly statistical release. For 5. Total vault cash (line 2) less applied vault cash (line 3). ordering address, see inside front cover. Data are not break-adjusted or seasonally adjusted. 6. Reserve balances with Federal Reserve Banks (line 1) plus applied vault cash 2. Excludes required clearing balances and adjustments to compensate for float and (line 3). includes other off-balance-sheet "as-of' adjustments. 7. Total reserves (line 5) less required reserves (line 6). 3. Total "lagged" vault cash held by depository institutions subject to reserve 8. Also includes adjustment credit. requirements. Dates refer to the maintenance periods during which the vault cash may be used 9. Consists of borrowing at the discount window under the terms and conditions estabto satisfy reserve requirements. The maintenance period for weekly reporters ends sixteen lished for the extended credit program to help depository institutions deal with sustained days after the lagged computation period during which the vault cash is held. Before Nov. 25, liquidity pressures. Because there is not the same need to repay such borrowing promptly as 1992, the maintenance period ended thirty days after the lagged computation period. with traditional short-term adjustment credit, the money market effect of extended credit is 4. All vault cash held during the lagged computation period by "bound" institutions (that similar to that of nonborrowed reserves. is, those whose required reserves exceed their vault cash) plus the amount of vault cash applied during the maintenance period by "nonbound" institutions (that is, those whose vault cash exceeds their required reserves) to satisfy current reserve requirements. 1.13 SELECTED BORROWINGS IN IMMEDIATELY AVAILABLE FUNDS Large Banks' Millions of dollars, averages of daily figures 1997 SSoouurrccee aanndd mmaattuurriittyy May 5 May 12 May 19 May 26 June 2 June 9 June 16 June 23 June 30 Federal funds purchased, repurchase agreements, and other selected borrowings From commercial banks in the United States 1 For one day or under continuing contract 84,930 85,007 81,694 79,967 84,235 72,778 67,068 58,864 2 For all other maturities 16,003 15,875 15,754r 15,975r 15,636 14,714 15,073 14,987 From other depository institutions, foreign banks and official institutions, and U.S. government agencies 3 For one day or under continuing contract 21,002 18,957 19,356 19,358 19,506 19,484 17,714 18,091 4 For all other maturities 22,328 21,528 22,580r 24,415r 21,786 21,656 24,022 24,042 Repurchase agreements on U.S. government and federal agency securities Brokers and nonbank dealers in securities 5 For one day or under continuing contract 15,162 14,325 15,144 15,403 17,804 14,868 14,474 13,010 n.a. 6 For all other maturities 3399,,669922 39,859 38,779 37,420 36,168 37,094 3388,,117700 3399,,665544 All other customers 7 For one day or under continuing contract 46,802 46,728 47,000 45,930 47,092 44,787 46,083 47,105 8 For all other maturities 13,704 14.077 13,379 13,881 13,804 14,086 13,770 14,166 MEMO Federal funds loans and resale agreements in immediately available funds in maturities of one day or under continuing contract 9 To commercial banks in the United States 85,527 80,548 77,241 78,087 80,706 65,280 60,090 57,707 10 To all other specified customers2 24,414 22,114 23,351 22,179 27,342 23,251 24,636 26,973 NOTE. This table will be discontinued after the September issue of the Federal Reserve 1. Banks with assets of $4 billion or more as of Dec. 31, 1988. Bulletin as the detailed data necessary to produce both this table and the H.5 (507) statistical Data in this table also appear in the Board's H.5 (507) weekly statistical release. For release will no longer be available after July 2, 1997. Data on the repurchase agreement ordering address, see inside front cover. component of the monetary aggregate M3 will continue to be provided in table 1.21 and on 2. Brokers and nonbank dealers in securities, other depository institutions, foreign banks the H.6 (508) statistical release, "Money Stock, Liquid Assets, and Debt Measures." and official institutions, and U.S. government agencies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A7 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per year Current and previous levels Adjustment credit Seasonal credit Extended credit3 Federal Reserve Bank On On Previous rate On 7/4/97 7/4/97 7/4/97 Boston 2/1/96 New York.. . . 1/31/96 Philadelphia. . 1/31/96 Cleveland 1/31/96 Richmond. . . . 2/1/96 Atlanta 1/31/96 Chicago 2/1/96 St. Louis 2/5/96 Minneapolis. . 1/31/96 Kansas City . . 2/1/96 Dallas 1/31/96 San Francisco. 1/31/96 Range of rates for adjustment credit in recent years Range (or F.R. Bank Range (or F.R. Bank Range (or F.R. Bank level)—All of evel)—All of Effective date level)—All of F.R. Banks N.Y. F.R. Banks N.Y. F.R. Banks N.Y. In effect Dec. 31, 1977 1981—Nov. 2 13-14 13 1988—Aug. 9 6-6.5 6.5 6 13 13 11 6.5 6.5 1978—Jan. 9 6-6.5 6.5 Dec. 4 12 12 20 6.5 6.5 1989—Feb. 24 6.5-7 7 May 11 6.5-7 7 1982—July 20 11.5-12 11.5 27 7 7 12 7 7 23 11.5 11.5 July 3 7-7.25 7.25 Aug. 2 11-11.5 11 1990—Dec. 19 6.5 6.5 10 7.25 7.25 3 11 11 Aug. 21 7.75 7.75 16 10.5 10.5 1991—Feb. 1 6-6.5 6 Sept. 22 8 8 27 10-10.5 10 4 6 6 Oct. 16 8-8.5 8.5 30 10 10 Apr. 30 5.5-6 5.5 20 8.5 8.5 Oct. 12 9.5-10 9.5 May 2 5.5 5.5 Nov. I 8.5-9.5 9.5 13 9.5 9.5 Sept. 13 5-5.5 5 3 9.5 9.5 Nov. 22 9-9.5 9 17 5 5 26 9 9 Nov. 6 4.5-5 4.5 1979—July 20 10 10 Dec. 14 8.5-9 9 7 4.5 4.5 Aug. 17 10-10.5 10.5 15 8.5-9 8.5 Dec. 20 3.5^.5 3.5 20 10.5 10.5 17 8.5 8.5 24 3.5 3.5 Sept. 19 10.5-11 11 21 11 11 1984—Apr. 9 8.5-9 9 1992—July 2 3-3.5 3 Oct. 8 11-12 12 13 9 9 7 3 3 10 12 12 Nov. 21 8.5-9 8.5 26 8.5 8.5 1994—May 17 3-3.5 3.5 1980—Feb. 15 12-13 13 Dec. 24 8 8 18 3.5 3.5 19 13 13 Aug. 16 3.5-4 4 May 29 12-13 13 1985—May 20 7.5-8 7.5 18 4 4 30 12 12 24 7.5 7.5 Nov. 15 4^1.75 4.75 June 13 11-12 11 17 4.75 4.75 16 11 11 1986—Mar. 7 7-7.5 7 July 28 10-11 10 10 7 7 1995—Feb. 1 4.75-5.25 5.25 Sept. 2 2 6 9 1101 1 10 1 Apr. 2 21 3 . 6 6 .5 .5 - 7 6 6 . . 5 5 9 5.25 5.25 Nov. 17 12 12 July 11 6 6 1996—Jan. 31 5.00-5.25 5.00 Dec. 5 12-13 13 Aug. 21 5.5-6 5.5 Feb. 5 5.00 5.00 8 13 13 22 5.5 5.5 1981—May 5 13-14 14 IInn eeffffeecctt JJuullyy 44,, 11999977 5.00 5.00 8 14 14 1987—Sept. 4 5.5-6 6 11 6 6 1. Available on a short-term basis to help depository institutions meet temporary needs for of the Federal Reserve Bank, this time period may be shortened. Beyond this initial period, a funds that cannot be met through reasonable alternative sources. The highest rate established flexible rate somewhat above rates charged on market sources of funds is charged. The rate for loans to depository institutions may be charged on adjustment credit loans of unusual size ordinarily is reestablished on the first business day of each two-week reserve maintenance that result from a major operating problem at the borrower's facility. period, but it is never less than the discount rate applicable to adjustment credit plus 50 basis 2. Available to help relatively small depository institutions meet regular seasonal needs for points. funds that arise from a clear pattern of intrayearly movements in their deposits and loans and 4. For earlier data, see the following publications of the Board of Governors: Banking and that cannot be met through special industry lenders. The discount rate on seasonal credit takes Monetary Statistics, 1914-1941, and 1941-1970; and the Annual Statistical Digest, 1970into account rates charged by market sources of funds and ordinarily is reestablished on the 1979. first business day of each two-week reserve maintenance period; however, it is never less than In 1980 and 1981, the Federal Reserve applied a surcharge to short-term adjustment-credit the discount rate applicable to adjustment credit. borrowings by institutions with deposits of $500 million or more that had borrowed in 3. May be made available to depository institutions when similar assistance is not successive weeks or in more than four weeks in a calendar quarter. A 3 percent surcharge was reasonably available from other sources, including special industry lenders. Such credit may in effect from Mar. 17, 1980, through May 7, 1980. A surcharge of 2 percent was reimposed be provided when exceptional circumstances (including sustained deposit drains, impaired on Nov. 17, 1980; the surcharge was subsequently raised to 3 percent on Dec. 5, 1980, and to access to money market funds, or sudden deterioration in loan repayment performance) or 4 percent on May 5, 1981. The surcharge was reduced to 3 percent effective Sept. 22, 1981, practices involve only a particular institution, or to meet the needs of institutions experiencing and to 2 percent effective Oct. 12, 1981. As of Oct. 1, 1981, the formula for applying the difficulties adjusting to changing market conditions over a longer period (particularly at times surcharge was changed from a calendar quarter to a moving thirteen-week period. The of deposit disintermediation). The discount rate applicable to adjustment credit ordinarily is surcharge was eliminated on Nov. 17, 1981. charged on extended-credit loans outstanding less than thirty days; however, at the discretion Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic NonfinancialS tatistics • September 1997 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1 Type of deposit Net transaction accounts 1 $0 million-$49.3 million3 . . 1/2/97 2 More than $49.3 million4 . . 1/2/97 3 Nonpersonal time deposits5. 12/27/90 4 Eurocurrency liabilities6. . .. 12/27/90 1. Required reserves must be held in the form of deposits with Federal Reserve Banks succeeding calendar year by 80 percent of the percentage increase in the total reservable or vault cash. Nonmember institutions may maintain reserve balances with a Federal liabilities of all depository institutions, measured on an annual basis as of June 30. No Reserve Bank indirectly, on a pass-through basis, with certain approved institutions. For corresponding adjustment is made in the event of a decrease. The exemption applies only to previous reserve requirements, see earlier editions of the Annua! Report or the Federal accounts that would be subject to a 3 percent reserve requirement. Effective 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 with- 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 that permit no more than six 5. For institutions that report weekly, the reserve requirement on nonpersonal time deposits preauthorized, automatic, or other transfers per month (of which no more than three may be with an original maturity of less than 1 Vi years was reduced from 3 percent to 1 '/2 percent for by 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 Vi 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 time deposits with an original maturity of 1 {/i 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 $52.0 million to in the same manner and on the same dates as the reserve requirement on nonpersonal time $49.3 million. deposits with an original maturity of less than 1 Vi 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 TRANS ACTIONS1 Millions of dollars 1996 1997 TTyyppee ooff ttrraannssaaccttiioonn 11999944 11999955 11999966 aanndd mmaattuurriittyy Nov. Dec. Jan. Feb. Mar. Apr. May U.S. TREASURY SECURITIES2 Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 17,484 10,932 9,901 6,502 0 0 0 0 4,006 0 2 Gross sales 0 0 0 0 0 0 0 0 0 0 3 Exchanges 380,327 405,296 426,928 34,037 34,211 40,346 33,997 31,720 33,160 47,456 4 For new bills 380,327 405,296 426,928 34,037 34,211 40,346 33,647 31,720 33,160 47,456 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 0 818 0 0 383r 7 Gross sales 0 0 0 0 0 0 0 0 0 0 8 Maturity shifts 0 43,574 30,512 3,818 2,259 2,481 5,086 3,143 2,006 5,666 9 Exchanges -31,949 -35,407 -41,394 -5,655 -1,950 -550 -2,864 -1,534 -2,100 -4,229 10 Redemptions 0 0 2,015 0 0 607 0 0 0 0 One to five years 11 Gross purchases 9,168 5,366r 3,898 0 0 0 1,125 2,861 1,924 l,102r 12 Gross sales 0 0 0 0 0 0 0 0 0 0 13 Maturity shifts -6,004 -34,646 -25,022 -2,102 -2,259 -2,481 -4,926 -3,143 -2,006 -4,685 14 Exchanges 26,458 26,387 31,459 2,716 1,950 550 1,874 1,534 1,700 2,479 Five to ten years 15 Gross purchases 3,818 1,432r 1,116 0 0 0 0 0 0 734r 16 Gross sales 0 0 0 0 0 0 0 0 0 0 17 Maturity shifts -3,145 -3,093 -5,469 -1,716 0 0 1,236 0 0 -981 18 Exchanges 4,717 7,220 6,666 1,470 0 0 890 0 400 1,750 More than ten years 19 Gross purchases 3,606 2,529r 1.655 0 0 0 0 1,117 0 988r 20 Gross sales 0 0 0 0 0 0 0 0 0 0 21 Maturity shifts -918 -2,253 -20 0 0 0 -1,396 0 0 0 22 Exchanges 775 1,800 3,270 1,470 0 0 450 0 0 0 All maturities 23 Gross purchases 35,314 20,649 17,094 6,502 0 0 1,943 3,978 5,930 3.206 24 Gross sales 0 0 0 0 0 0 0 0 0 0 25 Redemptions 2,337 2,676 2,015 0 0 607 0 0 376 0 Matched transactions 26 Gross purchases 1,700,836 2,197,736 3,092,399 227,577 272,117 285,667 250,867 288,373 303,056 287,229 27 Gross sales 1,701,309 2,202,030 3,094,769 226,505 273,872 283,240 254,741 288,073 301,177 287,826 Repurchase agreements 28 Gross purchases 309,276 331,694 457,568 36,383 85,924 74,422 48,805 60,425 102,578 46,552 29 Gross sales 311,898 328,497 450,359 36,665 73,501 86,673 45,747 60,718 62,685 89,477 30 Net change in U.S. Treasury securities 29,882 16,875 19,919 7,293 10,669 -10,430 1,127 3,984 47,326 -40,316 FEDERAL AGENCY OBLIGATIONS Outright transactions 31 Gross purchases 0 0 0 0 0 0 0 0 0 0 32 Gross sales 0 0 0 0 0 0 0 0 0 0 33 Redemptions 942 1,103 409 10 12 187 27 17 24 0 Repurchase agreements 34 Gross purchases 52,696 36,851 75,354 9,264 7,796 17,668 9,795 14,300 10,178 7,954 35 Gross sales 52,696 36,776 74,842 9,471 8,947 17,995 9,454 14,830 10,285 7,096 36 Net change in federal agency obligations -942 -1,028 103 -217 -1,163 -514 314 -547 -131 858 37 Total net change in System Open Market Account... 28,940 15,848 20,021 7,076 9,506 -10,944 1,441 3,437 47,195 -39,458 1. Sales, redemptions, and negative figures reduce holdings of the System Open Market 2. Transactions exclude changes in compensation for the etfects of inflation on the principal Account; all other figures increase such holdings. of inflation-indexed securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic Nonfinancial Statistics • September 1997 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements' Millions of dollars Wednesday End of month Account 1997 1997 May 28 June 4 June 11 June 18 June 25 Apr. 30 May 31 June 30 Consolidated condition statement ASSETS 1 Gold certificate account 11.051 11,050 11,050 11,050 11,050 11,051 11,051 11,050 2 Special drawing rights certificate account 9.200 9,200 9.200 9,200 9,200 9,200 9,200 9,200 3 Coin 526 506 512 511 496 619 531 492 Loans 4 To depository institutions 226 200 298 276 702 156 571 1,894 5 Other 0 0 0 0 0 0 0 0 6 Acceptances held under repurchase agreements 0 0 0 0 0 0 0 0 Federal agency obligations 7 Bought outright 1,970 1.663 1.596 1.496 1,496 1,970 1,970 1.496 8 Held under repurchase agreements 827 1.208 1,635 966 1,400 989 1,847 1.117 9 Total U.S. Treasury securities 411,506 415,843 410,833 416,662 422,859 452,891 412,577 426,370 10 Bought outright" 406.293 406,884 405,074 407,451 409,719 402,513 405,124 410,914 11 Bills 195,607 196.197 194,387 195.115 195,741 195,034 194,437 195,531 12 Notes 157,770 157.771 157,771 159,420 161,062 156,079 157.770 161.122 13 Bonds 52,916 52.916 52,916 52,916 52.916 51.399 52,916 54,261 14 Held under repurchase agreements 5.213 8,959 5.759 9,211 13,140 50.378 7,453 15,456 15 Total loans and securities 414,530 418,915 414,362 419,401 426,457 456,006 416,965 430,878 16 Items in process of collection 8.780 7.681 6,129 7.182 5,961 6.294 4,188 2,400 17 Bank premises 1.244 1.243 1.247 1,249 1,251 1,238 1,243 1,251 Other assets 18 Denominated in foreign currencies 17.402 18.085 18.092 18,099 18.107 17,420 18,080 17.970 19 All other4 10.524 10.659 10,785 11,425 12,150 14,606 10,727 13.295 20 Total assets 473,257 477,340 471,377 478,117 484,672 516,434 471,985 486,536 LIABILITIES 21 Federal Reserve notes 427.950 427.853 428,026 428,014 428,350 422,329 426,718 429,124 22 Total deposits 22,563 27,278 22,631 28,898 35,840 73,266 25,268 40,087 23 Depository institutions 17,144 22.432 17,305 19,310 15,750 20,534 19,592 23,219 24 U.S. Treasury—General account 4.824 4,298 4,776 9.050 19,285 52,215 5,174 16,368 25 Foreign—Official accounts 223 173 188 167 468 169 177 178 26 Other 370 377 361 371 337 348 325 321 27 Deferred credit items 7,944 6,477 5,705 6,265 5.315 5,862 3,962 1,808 28 Other liabilities and accrued dividends5 4.799 5,079 4,939 4,858 4,860 5.551 5,187 5,029 29 Total liabilities 463,256 466,688 461,302 468,035 474,366 507,008 461,135 476,048 CAPITAL ACCOUNTS 30 Capital paid in 4.826 4.840 4.873 4,891 5,049 4.796 4.828 5.050 31 Surplus 4.496 4.496 4.496 4,496 4,496 4,475 4,496 4,496 32 Other capital accounts 679 1.316 707 695 761 155 1,527 943 33 Total liabilities and capital accounts 473,257 477,340 471,377 478,117 484,672 516,434 471,985 486,536 MEMO 34 Marketable U.S. Treasury securities held in custody for foreign and international accounts 643.430 645.765 647,036 641,936 634,677 648,245 643.549 632,925 Federal Reserve note statement 35 Federal Reserve notes outstanding (issued to Banks) 535,437 537.262 538.873 540,776 541.469 529.350 536,348 542,199 36 LESS: Held by Federal Reserve Banks 107.486 109.409 110.847 112,762 113.118 107,022 109,630 113,075 37 Federal Reserve notes, net 427,950 427.853 428.026 428,014 428,350 422,329 426,718 429.124 Collateral held against notes, net 38 Gold certificate account 11,051 11.050 11.050 11.050 11.050 11,051 11,051 11.050 39 Special drawing rights certificate account 9,200 9.200 9.200 9,200 9,200 9,200 9,200 9,200 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. Treasury and agency securities 407.699 407.602 407,776 407.764 408,101 402,077 406,468 408,874 42 Total collateral 427,950 427,853 428,026 428,014 428,350 422,329 426,718 429,124 1. Some of the data in this table also appear in the Board's H.4.1 (503) weekly statistical 3. Valued monthly at market exchange rates. release. For ordering address, see inside front cover. 4. Includes special investment account at the Federal Reserve Bank of Chicago in Treasury 2. Includes securities loaned—fully guaranteed by U.S. Treasury securities pledged with bills maturing within ninety days. Federal Reserve Banks—and includes compensation that adjusts for the effects of inflation on 5. Includes exchange-translation account reflecting the monthly revaluation at market the principal of inflation-indexed securities. Excludes securities sold and scheduled to be 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/Monetary and Credit Aggregates A11 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holding Millions of dollars Wednesday End of month TTTyyypppeee ooofff hhhooollldddiiinnnggg aaannnddd mmmaaatttuuurrriiitttyyy 1997 1997 May 28 June 4 June 11 June 18 June 25 Apr. 30 May 30 June 30 1 Total loans 226 201 298 276 702 156 571 1,894 2 Within fifteen days' 201 47 141 243 652 106 466 1,726 3. Sixteen days to ninety days 25 154 157 34 50 50 105 169 4 Total U.S. Treasury securities' 411,506 415,843 410,833 416,662 422,859 452,891 412,577 426,370 5 Within fifteen days' 20.304 17,520 16,720 22.065 26,734 68.449 8,778 23,839 6 Sixteen days to ninety days 93,491 95,429 91,515 89,905 95,856 90,660 100,730 94.494 7 Ninety-one days to one year 121,699 127,228 126,932 127,871 121,806 120,653 127,057 129,694 8 One year to five years 94,392 94,044 94,044 95,198 96,840 94,000 94.392 95.315 9 Five years to ten years 38.516 38,517 38,517 38,517 38,517 37,012 38.516 39,016 10 More than ten years 43,105 43,105 43,105 43,105 43,105 42,117 43,105 44,011 11 Total federal agency obligations 2,797 2,871 3,231 2,462 2,896 2,959 3,797 2,613 12 Within fifteen days' 1,301 1,375 1,735 1,226 1,670 1,141 2.301 1,392 13 Sixteen days to ninety days 434 504 504 296 286 604 434 281 14 Ninety-one days to one year 315 245 245 210 210 327 315 210 15 One year to five years 416 416 416 416 416 416 416 416 16 Five years to ten years 307 307 307 290 290 447 307 290 17 More than ten years 25 25 25 25 25 25 25 25 1. Holdings under repurchase agreements are classified as maturing within fifteen days in 2. Includes compensation that adjusts for the effects of inflation on the principal of accordance with maximum maturity of the agreements. inflation-indexed securities. 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 1996 1997 IItteemm D 19 e 9 c 3 . D 19 e 9 c 4 . D 19 e 9 c 5 . D 19 e 9 c 6 . Nov. Dec. Jan. Feb. Mar. Apr. May' June Seasonally adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS- 1 Total reserves3 60.55 59.40 56.39 50.06 49.81 50.06 49.52 49.01 48.31 47.43 47.05 47.12 2 Nonborrowed reserves 60.46 59.20 56.13 49.91 49.60 49.91 49.47 48.97 48.16 47.17 46.81 46.76 3 Nonborrowed reserves plus extended credit" 60.46 59.20 56.13 49.91 49.60 49.91 49.47 48.97 48.16 47.17 46.81 46.76 4 Required reserves 59.48 58.24 55.11 48.64 48.78 48.64 48.29 47.98 47.15 46.42 45.81 45.86 5 Monetary base6 386.88 418.48 434.52 452.67 449.37 452.67 454.14 456.28 457.62 458.24 459.61 461.43 Not seasonally adjusted 6 Total reserves7 62.37 61.13 58.02 51.52 50.01 51.52 50.67 48.12 47.69 48.09 46.26 46.95 7 Nonborrowed reserves 62.29 60.92 57.76 51.37 49.79 51.37 50.62 48.08 47.53 47.83 46.02 46.58 8 Nonborrowed reserves plus extended credit" 62.29 60.92 57.76 51.37 49.79 51.37 50.62 48.08 47.53 47.83 46.02 46.58 9 Required reserves8 61.31 59.96 56.74 50.10 48.97 50.10 49.44 47.09 46.53 47.08 45.02 45.68 10 Monetary base9 390.59 422.51 439.03 456.72 449.20 456.72 455.55 452.56 455.26 458.17 458.30 461.83 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS'" 11 Total reserves" 62.86 61.34 57.90 51.24 49.76 51.24 50.64 48.04 47.54 47.88 46.00 46.63 12 Nonborrowed reserves 62.78 61.13 57.64 51.09 49.54 51.09 50.60 48.00 47.39 47.62 45.75 46.26 13 Nonborrowed reserves plus extended credit" 62.78 61.13 57.64 51.09 49.54 51.09 50.60 48.00 47.39 47.62 45.75 46.26 14 Required reserves 61.80 60.17 56.62 49.82 48.72 49.82 49.42 47.01 46.38 46.87 44.76 45.36 15 Monetary base'2 397.62 427.25 444.45 463.49 455.90 463.49 462.71 459.64 462.22 465.06 465.23 468.80 16 Excess reserves'3 1.06 1.17 1.28 1.42 1.04 1.42 1.22 1.03 1.16 1.01 1.24 1.26 17 Borrowings from the Federal Reserve .08 .21 .26 .16 .21 .16 .05 .04 .16 .26 .24 .37 1. Latest monthly and biweekly figures are available from the Board's H.3 (502) weekly 8. To adjust required reserves for discontinuities that are due to regulatory changes in statistical release. Historical data starting in 1959 and estimates of the effect on required reserve requirements, a multiplicative procedure is used to estimate what required reserves reserves of changes in reserve requirements are available from the Money and Reserves would have been in past periods had current reserve requirements been in effect. Break- Projections Section, Division of Monetary Affairs, Board of Governors of the Federal Reserve adjusted required reserves include required reserves against transactions deposits and nonper- System, Washington, DC 20551. sonal time and savings deposits (but not reservable nondeposit liabilities). 2. Figures reflect adjustments for discontinuities, or "breaks," associated with regulatory 9. The break-adjusted monetary base equals (I) break-adjusted total reserves (line 6), changes in reserve requirements. (See also table 1.10.) plus (2) the (unadjusted) currency component of the money stock, plus (3) (for all quarterly 3. Seasonally adjusted, break-adjusted total reserves equal seasonally adjusted, break- reporters on the "Report of Transaction Accounts, Other Deposits and Vault Cash" and for all adjusted required reserves (line 4) plus excess reserves (line 16). those weekly reporters whose vault cash exceeds their required reserves) the break-adjusted 4. Seasonally adjusted, break-adjusted nonborrowed reserves equal seasonally adjusted, difference between current vault cash and the amount applied to satisfy current reserve break-adjusted total reserves (line 1) less total borrowings of depository institutions from the requirements. Federal Reserve (line 17). 10. Reflects actual reserve requirements, including those on nondeposit liabilities, with no 5. Extended credit consists of borrowing at the discount window under the terms and adjustments to eliminate the effects of discontinuities associated with regulatory changes in conditions established for the extended credit program to help depository institutions deal reserve requirements. with sustained liquidity pressures. Because there is not the same need to repay such 11. Reserve balances with Federal Reserve Banks plus vault cash used to satisfy reserve borrowing promptly as with traditional short-term adjustment credit, the money market effect requirements. of extended credit is similar to that of nonborrowed reserves. 12. The monetary base, not break-adjusted and not seasonally adjusted, consists of (1) total 6. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally reserves (line 11), plus (2) required clearing balances and adjustments to compensate for float adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted currency at Federal Reserve Banks, plus (3) the currency component of the money stock, plus (4) (for component of the money stock, plus (3) (for all quarterly reporters on the "Report of all quarterly reporters on the "Report of Transaction Accounts, Other Deposits and Vault Transaction Accounts, Other Deposits and Vault Cash" and for all those weekly reporters Cash" and for all those weekly reporters whose vault cash exceeds their required reserves) the whose vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted difference between current vault cash and the amount applied to satisfy current reserve difference between current vault cash and the amount applied to satisfy current reserve requirements. Since the introduction of contemporaneous reserve requirements in February requirements. 1984. currency and vault cash figures have been measured over the computation periods 7. Break-adjusted total reserves equal break-adjusted required reserves (line 9) plus excess ending on Mondays. reserves (line 16). 13. Unadjusted total reserves (line 11) less unadjusted required reserves (line 14). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A12 Domestic Financial Statistics • September 1997 1.21 MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES' Billions of dollars, averages of daily figures 1997r IItteemm 1993 1994 1995 1996 Dec. Dec. Dec. Dec. Mar. Apr. May June Seasonally adjusted Measures2 1 Ml 1,129.8 1,150.7 1,129.0 1,081.0 1,075.2 1,065.1 1,062.7 1.063.2 2 M2 3,486.6 3,502.1 3,655.0 3,834.3r 3,885.4 3,905.0 3,904.7 3,919.8 3 M3 4,254.4 4,328.7 4,594.8 4,934.4r 5,029.8 5,067.5 5,074.2 5,098.3 4 L 5,167.8 5,309.8 5,700.0r 6,099.9r 6,202.0 6,247.5 6,253.0 n.a. 5 Debt 12,508.7 13,150.9 13,869.7 14,621.7r 14,791.9 14,865.0 14,914.2 n.a. Ml components 6 Currency3 322.2 354.4 372.6 395.2 402.4 403.7 406.1 407.7 V Travelers checks4 7.9 8.5 8.9 8.6 8.5 8.3 8.2 8.0 8 Demand deposits5 385.2 384.1 391.1 402.4 402.8 395.4 395.6 397.3 y Other checkable deposits6 414.5 403.8 356.5 274.8 261.6 257.7 252.8 250.2 Nontransaction components 10 In M27 2,356.8 2,351.4 2,526.0 2,753.3r 2,810.2 2,839.9 2,841.9 2,856.6 n In M3 only8 767.8 826.6 939.8 i,ioo.r 1,144.4 1,162.5 1,169.5 1.178.5 Commercial banks 12 Savings deposits, including MMDAs 785.2 752.4 776.0 903.9 934.2 947.9 945.4 949.9 13 Small time deposits9 468.3 503.2 576.0 592.0 596.1 598.9 602.0 607.8 14 Large time depositslc' 11 271.9 298.4 344.7 412.3r 427.1 439.7 441.4 450.8 Thrift institutions 15 Savings deposits, including MMDAs 434.0 397.2 361.1 367.1 370.1 373.1 375.5 375.5 16 Small time deposits9 314.3 314.3 357.7 353.7r 352.0 350.8 351.8 350.6 1/ Large time deposits10 61.5 64.7 75.1 79.2 82.0 82.5 82.4 83.2 Money market mutual funds 18 Retail 354.9 384.3 455.2 536.6 557.8 569.2 567.2 572.9 19 Institution-only 209.5 198.5 246.9 299.3 311.8 311.6 311.6 318.9 Repurchase agreements and Eurodollars 20 Repurchase agreements12 158.6 182.9 182.1 193.0 198.3 200.2 199.7 197.2 21 Eurodollars'" 66.4 82.1 91.0 116.3r 125.1 128.4 134.5 128.3 Debt components 22 Federal debt 3,323.3 3,492.2 3,638.8 3,780.4 3,799.1 3,806.8 3,794.3 n.a. 23 Nonfederal debt 9,185.4 9,658.7 10,231.0 10,841.3r 10,992.8 11,058.2 11,119.9 n.a. Not seasonally adjusted Measures2 24 Ml 1.153.7 1.174.4 1,152.8 1,103.0 1.067.2 1,071.6 1,051.8 1,062.5 25 M2 3.506.6 3.522.5 3,675.3 3,852.8r 3.890.3 3,922.1 3,887.2 3,917.2 26 M3 4.274.8 4,348.8 4,614.3 4,951.5r 5.036.8 5,075.1 5,056.0 5,094.4 27 L 5.197.7 5,340.2 5,731.8r 6,129.3r 6.218.9 6,259.3 6,229.8 n.a. 28 Debt 12,510.7 13,152.4 13,870.2 14,621 0r 14,761.8 14,826.2 14,863.3 n.a. MI components 29 Currency3 324.8 357.5 376.2 397.9 401.0 403.4 406.1 408.4 30 Travelers checks4 7.6 8.1 8.5 8.3 8.2 8.2 8.2 8.2 31 Demand deposits5 401.8 400.3 407.3 418.8 396.0 396.4 387.3 396.3 32 Other checkable deposits6 419.4 408.6 360.8 278.0 261.9 263.7 250.2 249.6 Nontransaction components 33 In M27 2,352.9 2,348.1 2,522.6 2,749.8r 2,823.1 2,850.4 2,835.4 2,854.7 34 In M3 only8 768.2 826.3 939.0 l,098.7r 1,146.5 1,153.0 1,168.8 1,177.2 Commercial banks 35 Savings deposits, including MMDAs. . . 784.3 751.7 775.3 902.9 935.1 949.4 943.7 952.6 36 Small time deposits9 466.8 501.5 573.8 589.8 597.6 600.6 603.2 608.2 37 Large time deposits'0, " 272.0 298.9 345.7 413.7r 426.3 435.7 443.6 451.1 Thrift institutions 38 Savings deposits, including MMDAs. . . 433.4 396.8 360.8 366.7 370.5 373.7 374.8 376.6 39 Small time deposits9 313.3 313.2 356.3 352.4r 352.9 351.8 352.5 350.8 40 Large time deposits10 61.5 64.8 75.4 79.5 81.9 81.8 82.8 83.3 Money market mutual funds 41 Retail 355.0 385.0 456.3 538.1 567.1 574.8 561.1 566.5 42 Institution-only 210.6 199.8 248.2 300.5 316.4 309.2 307.0 313.1 Repurchase agreements and Eurodollars 43 Repurchase agreements12 156.6 179.6 178.0 187.8 195.6 199.0 202.2 202.4 44 Eurodollars12 67.6 83.2 91.8 117.2r 126.3 127.4 133.2 127.4 Debt components 45 Federal debt 3,329.5 3,499.0 3,645.9 3,787.9 3,815.4 3,810.3 3,781.3 n.a. 46 Nonfederal debt 9,181.2 9,653.5 10,224.2 10,833.0" 10,946.4 11,015.9 11,082.1 n.a. Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary and Credit Aggregates A13 NOTES TO TABLE 1.21 1. Latest monthly and weekly figures are available from the Board's H.6 (508) weekly these assets. Seasonally adjusted L is computed by summing U.S. savings bonds, short-term statistical release. Historical data starting in 1959 are available from the Money and Reserves Treasury securities, commercial paper, and bankers acceptances, each seasonally adjusted Projections Section, Division of Monetary Affairs, Board of Governors of the Federal Reserve separately, and then adding this result to M3. System, Washington, DC 20551. Debt: The debt aggregate is the outstanding credit market debt of the domestic nonfinancial 2. Composition of the money stock measures and debt is as follows: sectors—the federal sector (U.S. government, not including government-sponsored enter- Ml: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of prises or federally related mortgage pools) and the nonfederal sectors (state and local depository institutions, (2) travelers checks of nonbank issuers, (3) demand deposits at all governments, households and nonprofit organizations, nonfinancial corporate and nonfarm commercial banks other than those owed to depository institutions, the U.S. government, and noncorporate businesses, and farms). Nonfederal debt consists of mortgages, tax-exempt and foreign banks and official institutions, less cash items in the process of collection and Federal corporate bonds, consumer credit, bank loans, commercial paper, and other loans. The data, Reserve float, and (4) other checkable deposits (OCDs), consisting of negotiable order of which are derived from the Federal Reserve Board's flow of funds accounts, are breakwithdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, adjusted (that is, discontinuities in the data have been smoothed into the series) and credit union share draft accounts, and demand deposits at thrift institutions. Seasonally month-averaged (that is, the data have been derived by averaging adjacent month-end levels). adjusted Ml is computed by summing currency, travelers checks, demand deposits, and 3. Currency outside the U.S. Treasury, Federal Reserve Banks, and vaults of depository OCDs, each seasonally adjusted separately. institutions. M2: Ml plus (1) savings deposits (including MMDAs), (2) small-denomination time 4. Outstanding amount of U.S. dollar-denominated travelers checks of nonbank issuers. deposits (time deposits—including retail RPs—in amounts of less than $100,000), and (3) Travelers checks issued by depository institutions are included in demand deposits. balances in retail money market mutual funds (money funds with minimum initial invest- 5. Demand deposits at commercial banks and foreign-related institutions other than those ments of less than $50,000). Excludes individual retirement accounts (IRAs) and Keogh owed to depository institutions, the US. government, and foreign banks and official institubalances at depository institutions and money market funds. Seasonally adjusted M2 is tions, less cash items in the process of collection and Federal Reserve float. calculated by summing savings deposits, small-denomination time deposits, and retail money 6. Consists of NOW and ATS account balances at all depository institutions, credit union fund balances, each seasonally adjusted separately, and adding this result to seasonally share draft account balances, and demand deposits at thrift institutions. adjusted M1. 7. Sum of (1) savings deposits (including MMDAs), (2) small time deposits, and (3) retail M3: M2 plus (1) large-denomination time deposits (in amounts of $100,000 or more) money fund balances. issued by all depository institutions, (2) balances in institutional money funds (money funds 8. Sum of (1) large time deposits, (2) institutional money fund balances, (3) RP liabilities with minimum initial investments of $50,000 or more), (3) RP liabilities (overnight and term) (overnight and term) issued by depository institutions, and (4) Eurodollars (overnight and issued by all depository institutions, and (4) Eurodollars (overnight and term) held by U.S. term) of U.S. addressees. residents at foreign branches of U.S. banks worldwide and at all banking offices in the United 9. Small time deposits—including retail RPs—are those issued in amounts of less than Kingdom and Canada. Excludes amounts held by depository institutions, the U.S. govern- $100,000. All IRAs and Keogh accounts at commercial banks and thrift institutions are ment, money market funds, and foreign banks and official institutions. Seasonally adjusted subtracted from small time deposits. M3 is calculated by summing large time deposits, institutional money fund balances, RP 10. Large time deposits are those issued in amounts of $100,000 or more, excluding those liabilities, and Eurodollars, each seasonally adjusted separately, and adding this result to booked at international banking facilities. seasonally adjusted M2. 11. Large time deposits at commercial banks less those held by money market funds, L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term Treasury depository institutions, the U.S. government, and foreign banks and official institutions. securities, commercial paper, and bankers acceptances, net of money market fund holdings of 12. Includes both overnight and term. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Nonfinancial Statistics • September 1997 1.22 DEPOSIT INTEREST RATES AND AMOUNTS OUTSTANDING Commercial and BIF-insured saving banks1 1996 1997 1995 1996 Dec. Dec. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June Interest rates (annual effective yields) INSURED COMMERCIAL BANKS 1 Negotiable order of withdrawal accounts2 1.91 n.a. 1.91 1.98 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 2 Savings deposits2-3 3 10 n.a. 2.85 2.85 n.a. n.a. 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 4.11 4.08 4.03 4.03 4.05 4.02 4.01 4.07 4.09 4 92 to 182 days 4.68 4.63 4.60 4.60 4.63 4.63 4.62 4.67 4.72 4.77 4.76 5 183 days to 1 year 5.02 5.00 5.02 4.99 5.00 5.01 5.02 5.08 5.13 5.15 5.16 6 More than 1 year to 2'/? years 5.17 5.22 5.27 5.23 5.22 5.25 5.27 5.36 5.46 5.45 5.44 7 More than 2Vl years 5.40 5.46 5.52 5.48 5.46 5.49 5.51 5.60 5.69 5.68 5.69 BIF-INSURED SAVINGS BANKS4 8 Negotiable order of withdrawal accounts2 1.91 n.a. 1.90 1.92 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 9 Savings deposits2,3 2.98 n.a. 2.80 2.82 n.a. n.a. 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 4.67 4.66 4.75 4.73 4.80 4.83 4.8 lr 4.82 11 92 to 182 days 4.95 5.02 5.08 5.03 5.02 5.05 5.04 5.06 5.13 5.15R 5.11 12 183 days to 1 year 5.18 5.28 5.32 5.29 5.28 5.31 5.31 5.37 5.43 5.45 5.47 13 More than 1 year to 2'/2 years 5.33 5.53 5.60 5.56 5.53 5.58 5.59 5.69 5.75 5.77 5.72 14 More than 2 Vi years 5.46 5.72 5.79 5.76 5.72 5.77 5.78 5.84 5.91 5.91 5.89 Amounts outstanding (millions of dollars) INSURED COMMERCIAL BANKS 15 Negotiable order of withdrawal accounts2 248,417 n.a. 188,803 167,503 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 16 Savings deposits2,3 776,466 n.a. 859,524 896,820 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 17 Personal 615,113 n.a. 680,596 713,672 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 18 Nonpersonal 161,353 n.a. 178,928 183,148 n.a. n.a. n.a. n.a. n.a. n.a. n.a. Interest-bearing time deposits with balances of less than $100,000, by maturity 19 1 to 91 days 32,170 32,931 32,428 32,044 32,931 32,799 32,796 34,853 34,485 32,56 lr 31,500 20 92 to 182 days 93,941 92,301 91,195 92,503 92,301 94,955 95,235 93,804 92,432 91,234r 91,316 21 183 days to 1 year 183,834 201,449 199,397 201,281 201,449 201,491 202,329 203,336 207,006 209,296r 211,653 22 More than 1 year to 2 years 208,601 213,198 213,012 214,405 213,198 213,875 212,970 214,066 226,159 220,795r 228,180 23 More than 2 'A years 199,002 199,906 199,126 198,539 199,906 198,077 197,958 200,282 199,147 198,694r 198,477 24 IRA and Keogh plan deposits 150.067 151,275 151,276 151,389 151,275 150,442 150,356 151,931 151,105 151,192r 151,776 BIF-INSURED SAVINGS BANKS4 25 Negotiable order of withdrawal accounts2 11.918 n.a. 9,938 9,710 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 26 Savings deposits2,3 68,643 n.a. 67,975 68,102 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 27 Personal 65,366 n.a. 64,326 64,369 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 28 Nonpersonal 3,277 n.a. 3,649 3,733 n.a. n.a. n.a. n.a. n.a. n.a. n.a. Interest-bearing time deposits with balances of less than $100,000, by maturity 29 7 to 91 days 2,001 2,428 2,503 2,405 2,428 2,542 2,535 2,656 2,698 2,738r 2,684 30 92 to 182 days 12,140 13,013 13,300 13,074 13,013 13,112 13,099 13,377 13,463 13,73 lr 13,745 31 183 days to 1 year 25.686 28,792 29,659 29,329 28,792 29,503 29,510 30,002 30,076 29,661' 29,806 32 More than 1 year to 2 '/i years 27,482 29,095 28,063 28,573 29,095 29,163 29,699 31,028 31,616 31,664r 32,117 33 More than 2Vi years 22,866 22,254 22,156 21.823 22,254 21,828 21,877 21,731 21,640 21,391r 21,471 34 IRA and Keogh plan accounts 21,408 21,365 20,983 20,627 21,365 20,405 20,423 20,860 20,860 20,683 20,559 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 front 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

Commercial Banking Institutions—Assets and Liabilities A15 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1 A. All commercial banks Billions of dollars Monthly averages Wednesday figures Account 1996 1996 1997 1997 June Dec. Jan. Feb. Mar. Apr." May" June June 4 June 11 June 18 June 25 Seasonally adjusted Assets 1 Bank credit 3,672.0 3,770.2r 3,804.5" 3,840.9" 3,860.4" 3,893.5 3,900.8 3,922.6 3,905.9 3,916.9 3,919.0 33,,992288..22 2 Securities in bank credit 983.2 989.9 1,005.2" 1,020.8" 1,014.6" 1,032.3 1,013.7 1,010.4 1,007.9 1,012.4 1,005.4 1,007.6 3 U.S. government securities 707.4 706.7r 707.0" 704.1" 708.5" 721.4 721.0 724.1 724.5 724.4 718.9 721.3 4 Other securities 275.8 283.2 298.2 316.7 306.1" 310.8 292.7 286.3 283.4 288.0 286.5 286.3 5 Loans and leases in bank credit2 . . . 2,688.8 2,780.3r 2,799.3" 2,820.1" 2,845.7" 2,861.2 2,887.1 2,912.2 2,898.0 2,904.4 2,913.5 2,920.6 6 Commercial and industrial 740.2 783.2r 785.3" 793.6" 798.0" 805.0 810.8 816.9 812.4 815.1 816.7 818.0 7 Real estate 1,104.1 1,127.9" 1,134.7" 1,140.3" 1,153.9" 1,162.3 1,172.6 1,181.6 1,180.4 1,181.9 1,182.1 1,181.3 8 Revolving home equity 79.4 85.2 85.7 86.5 87.9 89.0 90.2 91.3 91.3 91.5 91.5 91.7 9 Other 1,024.7 1,042.6r 1,049.0" 1,053.8" 1,066.0" 1,073.2 1,082.4 1,090.3 1,089.0 1,090.4 1,090.5 1,089.6 508.7 520.9" 521.6" 520.6" 518.1" 515.6 518.5 520.6 521.8 521.6 520.9 520.7 11 Security3 78.8 78.7 82.4 83.9 88.2 89.7 89.1 94.0 86.7 91.5 94.5 98.1 12 Other loans and leases 257.1 269.7 275.4 281.9 287.6 288.6 296.2 299.1 296.8 294.4 299.4 302.4 205.0 204.9 198.9 204.7 220.0 215.9 218.6 191.7 198.7 193.1 190.8 189.9 219.3 231.0 232.2 233.4 239.9 246.1 243.7 248.0 235.1 250.5 243.5 260.5 15 Other assets5 245.2 265.4 257.0 265.7 273.5 277.6 277.9 283.3 285.6 289.9 278.5 283.5 16 Total assets6 4,284.7 4,415.0" 4,436.5" 4,488.6r 4,537.6" 4,576.6 4,584.5 4,588.7 4,568.4 4,593.6 4,575.1 4,6053 Liabilities 17 Deposits 2,731.8 2,859.9 2,871.9 2,892.6 2,916.0 2,943.9 2,930.9 2,964.7 2,939.6 2,951.4 2,952.4 2,989.7 18 Transaction 750.7 719.5 715.1 705.1 699.8 700.6 688.6 692.7 676.4 690.2 686.9 717.5 1,981.1 2,140.4 2,156.8 2,187.6 2,216.3" 2,243.3 2,242.3 2,272.0 2,263.1 2,261.2 2,265.5 2,272.2 20 Large time 439.4 519.6 526.5 542.1 548.3 567.3 562.6 579.2 566.8 568.5 578.1 587.1 21 Other 1,541.7 1,620.8 1,630.3 1,645.5 1,667.9 1,676.0 1,679.6 1,692.7 1,696.3 1,692.6 1,687.4 1,685.2 22 Borrowings 703.4 705.5 724.2 735.3 747.9 762.3 765.4 735.3 736.5 746.3 728.0 726.8 290.7 304.7 300.9 305.4 313.5" 313.1 302.9 271.7 283.8 285.6 262.5 259.6 24 From others 412.8 400.7 423.3 429.9 434.3 449.2 462.5 463.6 452.7 460.8 465.5 467.2 25 Net due to related foreign offices 258.5 231.3 222.3 217.7 209.1 211.7 233.7 229.5 246.1 239.8 236.6 213.0 26 Other liabilities 220.1 259.8 269.4 287.0 278.5 271.3 263.4 264.6 264.2 269.8 263.5 261.5 27 Total liabilities 3,913.8 4,056.5 4,087.8 4,132.6 4,1515 4,189.2 4,193.5 4,194.2 4,186.4 4,2073 4,1805 4,191.0 28 Residual (assets less liabilities)7 370.9 358.6r 348.6" 356.0" 386.1" 387.4 391.0 394.5 382.0 386.2 394.6 414.4 Not seasonally adjusted Assets 29 Bank credit 3,676.3 3,769.5" 3,803.1" 3,833.8" 3.850.8" 3,892.9 3,905.4 3,926.3 3,919.8 3,920.9 3,925.3 33,,991199..99 30 Securities in bank credit 989.9 976.2" 996.6" 1,017.4" 1,017.3" 1,034.7 1,022.7 1,016.9 1,021.9 1,022.6 1,012.3 1,009.2 31 U.S. government securities 708.5 702.6" 701.0" 702.8" 713.1" 724.1 723.5 723.8 728.6 726.4 719.7 719.5 281.4 273.6 295.6 314.6 304.1" 310.6 299.3 293.0 293.2 296.2 292.6 289.7 33 Loans and leases in bank credit2 . . . 2,686.4 2,793.3" 2,806.5" 2,816.4" 2,833.5" 2,858.2 2,882.7 2,909.4 2,897.9 2,898.3 2,912.9 2,910.7 34 Commercial and industrial 743.4 780.2" 783.0" 793.2" 800.6" 812.3 817.6 820.4 817.9 816.0 820.8 820.3 1,102.7 1,132.8" 1,136.7" 1,137.2" 1,147.9" 1,157.8 1,168.2 1,179.9 1,176.6 1,180.3 1,180.3 1,179.4 36 Revolving home equity 79.4 85.4 85.7 86.1 87.1 88.3 90.0 91.3 91.1 91.4 91.5 91.8 37 Other 1,023.3 1,047.4" 1,051.0" 1,051.1" 1,060.8" 1,069.5 1,078.2 1,088.6 1,085.6 1,088.9 1,088.8 1,087.6 505.7 525.6" 527.2" 521.2" 513.6" 513.2 516.3 517.7 519.2 518.4 517.7 518.4 39 Security3 78.5 79.9 81.6 85.0 87.8 90.2 89.5 93.6 87.0 92.3 96.4 94.8 40 Other loans and leases 256.1 274.8 278.0 279.8 283.7 284.7 291.1 297.8 297.1 291.4 297.8 297.7 202.9 214.2 208.7 209.1 216.4 214.3 214.1 189.2 202.3 193.3 189.4 177.0 42 Cash assets4 216.5 247.0 242.5 234.5 230.8 241.4 241.5 244.6 248.4 235.6 247.5 239.3 43 Other assets5 245.3 265.4 257.6 265.6 268.9 275.3 280.2 283.4 290.5 288.2 277.6 278.3 44 Total assets6 4,284.1 4,439.5" 4,456.1r 4,487.0" 4,510.8r 4,567.5 4,584.7 4,586.6 4,604.0 4,581.0 4,582.9 4,557.7 Liabilities 2,726.7 2,892.1 2,875.8 2,877.6 2,904.8 2,941.4 2,922.2 2,960.0 2,967.9 2,951.6 2,954.7 22,,993366..88 744.9 752.6 726.5 698.1 687.6 703.8 678.7 687.1 692.6 678.8 687.9 675.8 1,981.8 2,139.5 2,149.2 2,179.5 2,217.2 2,237.5 2,243.5 2,272.9 2,275.3 2,272.9 2,266.8 2,261.1 439.3 518.3 525.2 541.6 548.4 562.9 567.4 579.0 572.6 574.0 578.9 584.1 49 Other 1,542.5 1,621.2 1,624.0 1,637.9 1,668.8 1,674.6 1,676.0 1,693.8 1,702.6 1,698.9 1,687.9 1,677.0 719.2 697.8 718.7 719.8 728.4 763.3 775.1 754.3 747.5 739.3 759.2 759.2 300.1 299.5 295.1 293.6 301.8 311.9 310.9 284.4 294.0 284.3 283.7 276.6 419.2 398.3 423.5 426.3 426.6" 451.4 464.2 469.9 453.5 455.0 475.6 482.6 53 Net due to related foreign offices 249.8 230.0 232.7 228.6 218.3 210.3 236.7 220.1 232.9 228.4 219.8 213.6 54 Other liabilities 221.6 255.7 266.6 289.0 276.7 271.6 267.1 266.9 268.1 274.1 264.1 262.8 55 Total liabilities 3,917.3 4,075.6 4,093.8 4,115.0 4,128.2 4,1865 4,201-2 4,2013 4,216.4 4,193.5 4,197.9 4,172.4 56 Residual (assets less liabilities)7 366.8 364.0" 362.3" 372.0" 382.6" 380.9 383.5 385.3 387.6 387.6 385.0 385.2 MEMO 57 Revaluation gains on off-balance-sheet items6 n.a. 69.5" 88.8" 101.9" 90.5" 90.2 81.5 76.3 78.1 78.7 76.3 7733..66 58 Revaluation losses on off-balancesheet items8 n.a. 64.5" 85.1" 98.6" 8877..00"" 88.1 85.8 81.0 82.9 82.7 80.8 78.3 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Financial Statistics • September 1997 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'—Continued B. Domestically chartered commercial banks Billions of dollars Monthly averages Wednesday figures Account 1996 1996 1997 1997 June Dec. Jan. Feb. Mar. Apr.r Mayr June June 4 June 11 June 18 June 25 Seasonally adjusted Assets 1 Bank credit 3,213.1 3,265.2r 3,288.6r 3,310.2r 3,334.9r 3,359.8 3,360.8 3,379.8 3,366.4 3,371.8 3,378.9 3,386.5 2 Securities in bank credit 836.4 825.5r 835.0r 843.7r 841.6r 854.2 838.1 832.7 828.9 831.9 832.2 832.6 3 U.S. government securities 630.2 619.2r 625.2r 618.7r 624.9 633.6 631.1 631.7 630.2 631.1 631.3 630.3 4 Other securities 206.2 206.3 209.8 225.0 216.7r 220.6 207.0 201.0 198.7 200.8 200.9 202.3 5 Loans and leases in bank credit2 2,376.7 2,439.8r 2,453.6r 2,466.5r 2,493.3r 2,505.6 2,522.8 2,547.1 2,537.5 2,539.9 2,546.8 2,553.9 6 Commercial and industrial 549.0 570.2r 570.9r 516.5' 581.9r 588.4 591.0 596.4 593.2 594.5 595.3 597.8 7 Real estate 1,070.8 l,095.9r l,102.8r l,108.2r l,122.3r 1.130.9 1,142.0 1,152.0 1,150.3 1,151.9 1,152.3 1,151.9 8 Revolving home equity 79.4 85.2 85.7 86.5 87.9 89.0 90.2 91.3 91.3 91.5 91.5 91.7 9 Other 991.5 l,010.6r 1,017.2r l,021.8r l,034.4r 1,041.9 1,051.8 1,060.7 1,059.0 1,060.4 1,060.8 1,060.3 10 Consumer 508.7 520.9r 521.6r 520.6r SIS R 515.6 518.5 520.6 521.8 521.6 520.9 520.7 11 Security3 47.1 42.5 44.3 44.1 48.4 46.5 45.6 48.0 45.5 45.5 47.9 50.6 12 Other loans and leases 201.1 210.3 214.1 217.1 222.5 224.1 225.6 230.1 226.8 226.4 230.3 232.7 13 Interbank loans 183.1 183.2 176.2 183.8 197.3 197.0 198.0 171.8 179.6 173.0 170.9 170.7 14 Cash assets4 191.2 199.8 201.1 200.5 207.6 213.4 209.7 212.3 201.0 216.2 207.4 223.7 15 Other assets5 203.3 228.3 218.2 223.9 231.7 237.7 238.3 241.1 242.3 246.6 238.1 242.1 16 Total assets6 3,734.0 3,820.3R 3,828.3R 3,862.6R 3,915.6R 3,951.7 3,950.6 3,948.4 3,932.8 3,951.1 3,938.9 3,966.5 Liabilities 17 Deposits 2,556.4 2,640.4 2,646.2 2,654.7 2,673.4 2,686.2 2,678.9 2,706.5 2,691.0 2,699.6 2,693.9 2,726.8 18 Transaction 739.9 709.3 704.8 695.4 689.3 689.8 677.4 681.6 665.6 679.4 675.2 706.6 19 Nontransaction 1,816.5 1,931.1 1,941.4 1,959.3 1,984.0 1,996.4 2,001.5 2,024.9 2,025.4 2,020.2 2,018.7 2,020.3 20 Large time 277.1 313.1 313.3 317.8 319.7 322.8 324.3 334.6 331.5 329.9 333.7 337.5 21 Other 1,539.4 1,618.1 1,628.1 1,641.5 1,664.4 1,673.6 1,677.3 1,690.3 1,694.0 1,690.3 1,685.0 1,682.8 22 Borrowings 575.5 583.9 593.9 592.0 607.8 622.4 621.7 594.0 600.8 607.8 588.3 581.6 23 From banks in the U.S 258.3 271.8 272.6 271.0 278.2 279.7 269.0 239.5 254.2 257.2 230.1 224.8 24 From others 317.1 312.1 321.3 321.0 329.6r 342.7 352.7 354.5 346.6 350.7 358.2 356.8 25 Net due to related foreign offices 81.1 69.1 72.0 78.2 68.0 77.1 85.0 80.7 79.5 79.5 86.9 79.2 26 Other liabilities 152.0 176.5 178.6 186.4 183.7 178.4 173.3 173.0 171.3 175.5 172.9 173.4 27 Total liabilities 3,365.0 3,469.9 3,490.7 3,511.3 3,532.9 3,564.1 3,558.8 3,554.2 3,542.7 3,562.3 3,542.0 3,561.0 28 Residual (assets less liabilities)7 369.1 350.4r 337.6r 351.3' 382.7r 387.5 391.8 394.1 390.1 388.8 396.8 405.4 Not seasonally adjusted Assets 29 Bank credit 3,216.9 3,268.3r 3,290.0r 3,302.5r 3,325.6r 3,359.2 3,362.9 3,383.1 3,375.0 3,375.9 3,385.3 3,379.7 30 Securities in bank credit 842.5 817.9r 830.3r 839.4r 843.6' 856.2 842.2 838.5 837.3 840.3 838.6 835.2 31 U.S. government securities 631.6 617.4r 618.3r 615.7r 626.6 636.8 633.0 632.8 633.6 633.8 632.4 630.7 32 Other securities 210.9 200.5 212.0 223.7 217.T 219.4 209.2 205.7 203.7 206.5 206.2 204.5 33 Loans and leases in bank credit2 2,374.4 2,450.3r 2,459.8r 2,463. lr 2,481.9r 2,503.0 2,520.7 2,544.6 2,537.7 2,535.6 2,546.7 2,544.5 34 Commercial and industrial 551.5 566.7r 568.7r 576.2r 584.8r 595.0 597.6 599.1 598.1 596.0 598.8 599.2 35 Real estate 1,069.6 l,100.6r l,104.8r l,105.2r 1,116.4r 1,126.9 1,137.9 1,150.4 1,146.8 1,150.5 1,150.5 1,150.2 36 Revolving home equity 79.4 85.4 85.7 86.1 87.1 88.3 90.0 91.3 91.1 91.4 91.5 91.8 37 Other 990.2 l,015.2r l,019.2r l,019.1r l,029.3r 1,038.6 1,047.9 1,059.1 1,055.7 1,059.1 1,059.0 1,058.4 38 Consumer 505.7 525.6r 527.2r 521.2r 513.6r 513.2 516.3 517.7 519.2 518.4 517.7 518.4 39 Security3 46.8 43.8 43.5 45.2 48.1 47.0 46.0 47.6 45.9 46.3 49.8 47.3 40 Other loans and leases 200.8 213.6 215.5 215.4 219.1 220.9 222.8 229.7 227.8 224.5 230.0 229.5 41 Interbank loans 181.0 192.5 186.1 188.2 193.7 195.4 193.5 169.3 183.3 173.3 169.5 157.7 42 Cash assets4 187.9 214.8 211.1 202.4 199.0 209.5 207.5 208.2 213.5 200.6 210.7 202.1 43 Other assets5 203.5 227.6 219.6 223.0 227.8r 236.8 239.6 241.3 246.0 243.7 237.4 238.2 44 Total assets6 3,732.4 3,846.8R 3,851.0R 3,860.3R 3,890. LR 3,944.8 3,947.1 3,945.2 3,961.1 3,936.7 3,946.2 3,921.1 Liabilities 45 Deposits 2,551.0 2,669.9 2,649.9 2.642.8 2,662.3 2,690.0 2,669.7 2,701.3 2,716.4 2,697.3 2,695.6 2,673.5 46 Transaction 734.2 741.7 716.2 688.2 677.3 693.5 668.0 676.0 682.0 668.5 676.6 664.7 47 Nontransaction 1,816.8 1,928.2 1,933.8 1.954.7 1,985.0 1,996.5 2,001.7 2,025.3 2,034.4 2,028.8 2,019.0 2,008.8 48 Large time 276.5 309.7 311.9 320.7 319.7 324.3 328.1 333.9 334.1 332.4 333.5 334.2 49 Other 1,540.2 1,618.5 1,621.8 1,634.0 1,665.2 1,672.2 1,673.6 1,691.4 1,700.2 1,696.5 1,685.5 1,674.6 50 Borrowings 586.9 577.4 591.5 583.1 594.2 620.8 631.6 608.1 609.1 597.7 613.0 610.7 51 From banks in the U.S 266.3 265.8 265.8 261.5 268.1 278.2 277.5 250.6 262.7 254.6 249.1 242.6 52 From others 320.6 311.5 325.6 321.6 326. r 342.6 354.1 357.5 346.4 343.1 364.0 368.1 53 Net due to related foreign offices 79.5 66.2 73.6 79.9 72.5 78.8 92.2 79.5 79.7 80.6 81.9 80.6 54 Other liabilities 152.7 173.8 176.7 185.8 182.1 178.9 174.2 174.4 172.4 176.7 173.8 174.5 55 Total liabilities 3,370.1 3,487.2 3,491.8 3,491.7 3,511.0 3,568.6 3,567.8 3,563.3 3,577.6 3,552.3 3,564.4 3,539.2 56 Residual (assets less liabilities)7 362.3 359.6r 359.3r 368.6r 379. r 376.2 379.4 381.9 383.5 384.5 381.8 381.8 MEMO 57 Revaluation gains on off-balance-sheet items8 n.a. 36.0 47.5 55.9 49.0 49.5 42.0 38.5 38.5 40.0 39.0 37.1 58 Revaluation losses on off-balancesheet items8 n.a. 31.8 44.0 50.9 43.2 44.6 43.4 40.2 40.2 41.2 40.5 38.8 59 Mortgage-backed securities9 n.a. 241.6r 244.3r 243.6 245.8r 249.0 249.2 248.4 251.1 249.0 248.5 249.0 Footnotes appear on p. 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 C. Large domestically chartered commercial banks Billions of dollars Monthly averages Wednesday figures AAAccccccooouuunnnttt 1996 1996 1997 1997 June Dec. Jan. Feb. Mar. Apr.r Mayr June June 4 June 11 June 18 June 25 Seasonally adjusted Assets 1 Bank credit 1,881.6 1,892.8 1,907.6 1,926.3 1,938.0 1,955.2 1,947.2 1,958.6 1,947.7 1,952.6 1,956.8 1,963.4 2 Securities in bank credit 434.4 424.6 430.5 440.7 434.9 444.9 428.3 424.5 420.0 423.3 423.2 424.9 U.S. government securities 308.2 297.9 301.0 295.5 299.4 307.5 304.4 305.7 303.3 304.9 304.7 305.0 4 Trading account 20.9 19.5 17.3 16.2 18.3 20.3 19.4 23.1 20.4 22.9 21.1 22.6 5 Investment account 287.3 278.3 283.8 279.3 281.2 287.2 284.9 282.6 282.9 281.9 283.6 282.4 6 Other securities 126.1 126.7 129.4 145.2 135.4 137.4 123.9 118.7 116.7 118.4 118.4 119.9 1 Trading account 55.8 60.7 64.6 79.9 69.3 71.9 58.3 51.7 50.2 52.1 51.3 52.2 8 Investment account 70.4 66.0 64.9 65.3 66.1 65.5 65.6 67.0 66.4 66.4 67.1 67.6 9 State and local government. . 20.7 20.4 20.5 21.1 20.8 20.8 21.1 21.7 21.5 21.5 21.8 21.8 in Other 49.7 45.7 44.3 44.1 45.3 44.7 44.5 45.3 44.9 44.8 45.3 45.9 n Loans and leases in bank credit2 . . . 1,447.2 1,468.2 1,477.1 1,485.6 1,503.2 1,510.3 1,518.9 1,534.1 1,527.7 1,529.3 1,533.6 1,538.5 12 Commercial and industrial 381.6 396.2 396.4 400.3 404.3 409.9 410.9 415.0 413.1 414.6 414.2 415.4 1.3 Bankers acceptances 1.5 2.0 1.9 1.6 1.7 1.6 1.6 1.6 1.5 1.5 1.6 1.6 14 Other 380.1 394.2 394.5 398.7 402.6 408.3 409.4 413.4 411.5 413.1 412.6 413.7 Real estate 590.4 591.7 592.6 593.3 599.2 602.4 608.9 613.7 614.3 615.0 613.8 612.5 16 Revolving home equity 56.4 58.6 58.8 59.2 60.0 60.6 61.5 62.4 62.6 62.7 62.5 62.6 17 Other 534.0 533.1 533.8 534.1 539.3 541.9 547.4 551.3 551.8 552.3 551.3 549.9 18 Consumer 292.7 295.0 298.0 299.7 298.3 296.9 298.2 298.5 299.4 299.2 298.5 298.6 19 Security3 42.3 37.7 39.6 39.2 43.3 41.7 40.7 43.1 40.5 40.6 43.1 45.8 20 Federal funds sold to and repurchase agreements with broker-dealers 26.5 21.9 23.7 23.8 26.9 23.6 23.2 26.3 24.8 23.0 26.6 28.5 21 Other 15.8 15.9 15.9 15.3 16.4 18.1 17.6 16.8 15.8 17.6 16.5 17.2 22 State and local government 11.6 11.8 11.6 11.5 11.4 11.1 11.0 11.1 11.1 11.1 11.1 11.1 23 Agricultural 9.0 8.6 8.6 8.5 8.6 8.6 8.8 8.6 8.8 8.8 8.5 8.6 24 Federal funds sold to and repurchase agreements with others 5.6 5.2 5.7 4.9 5.8 6.8 5.3 5.8 4.5 4.4 5.1 8.2 25 All other loans 62.8 61.1 61.1 62.5 64.7 63.9 64.5 66.1 64.7 64.0 67.5 66.3 26 Lease-financing receivables 51.2 60.7 63.6 65.7 67.3 69.0 70.4 72.1 71.3 71.6 71.8 72.2 27 Interbank loans 137.3 131.9 125.3 129.8 139.1 144.4 145.3 118.3 125.4 120.3 118.7 117.1 28 Federal funds sold to and repurchase agreements with commercial banks 90.2 82.2 77.4 79.9 87.9 92.3 89.0 66.5 73.2 66.3 67.7 65.1 79 Other 47.1 49.8 47.9 49.9 51.2 52.1 56.3 51.7 52.2 54.0 51.0 52.0 30 Cash assets4 130.1 135.8 135.5 132.2 137.3 141.9 139.7 139.6 131.7 142.7 136.1 148.2 31 Other assets5 157.2 176.2 167.3 170.8 171.9 176.9 178.7 176.9 181.8 180.6 175.1 175.5 32 Total assets6 2,268.6 2,300.0 2,2993 2,323.0 2,350.0 2381.9 2,374.5 2,356.9 2,350.1 2359.8 23503 2367.9 Liabilities 33 Deposits 1,395.4 1,439.7 1.431.6 1,429.4 1,437.3 1,449.4 1,439.1 1,453.3 1,447.5 1,450.0 1,444.4 1,468.5 34 Transaction 429.8 402.9 399.3 389.3 382.4 382.3 371.9 374.7 364.5 373.4 370.2 392.8 35 Nontransaction 965.6 1,036.8 1,032.4 1,040.2 1,054.8 1,067.2 1,067.3 1,078.7 1,083.0 1,076.6 1,074.2 1,075.7 36 Large time 138.5 160.0 158.3 161.3 162.1 166.2 166.3 174.1 171.9 170.0 173.5 176.5 37 Other 827.1 876.7 874.0 878.9 892.8 900.9 901.0 904.6 911.1 906.6 900.7 899.2 38 Borrowings 437.8 426.4 436.3 435.7 449.4 462.2 462.6 434.3 440.8 444.3 430.4 423.0 39 From banks in the U.S 180.4 188.8 188.1 187.4 194.0 195.4 184.2 160.5 172.3 172.4 153.9 146.9 40 From others 257.4 237.6 248.2 248.4 255.4 266.9 278.4 273.7 268.5 271.9 276.5 276.1 41 Net due to related foreign offices 75.9 66.3 68.0 74.2 64.1 72.7 80.9 76.9 75.9 75.4 83.5 75.3 42 Other liabilities 126.4 151.3 154.1 161.2 157.1 152.1 146.2 145.6 143.6 148.0 145.1 146.1 43 Total liabilities 2,035.4 2,083.7 2,090.1 2,100.6 2,107.9 2,136.4 2,128.9 2,110.1 2,107.8 2,117.6 2,103.5 2,112.9 44 Residual (assets less liabilities)7 233.2 216.3 209.3 222.4 242.2 245.5 245.6 246.8 242.3 242.2 246.8 254.9 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Nonfinancial Statistics • September 1997 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued C. Large domestically chartered commercial banks—Continued Monthly averages Wednesday figures AAAccccccooouuunnnttt 1996 1996 1997r 1997 June' Dec/ Jan. Feb. Mar. Apr. May June June 4 June 11 June 18 June 25 Not seasonally adjusted Assets 45 Bank credit 1,8* 4.6 1,893.1 1,910.8 1,924.1 1,933.2 1,954.2 1,949.3 1,961.0 1.956.8 1,955.2 1,963.3 1,955.0 46 Securities in bank credit 438.6 417.5 427.2 438.0 435.5 443.4 430.6 428.5 427.5 429.4 427.7 424.7 47 U.S. government securities 307.6 296.6 295.3 293.9 300.0 307.6 304.7 305.0 305.8 305.3 303.9 302.5 48 Trading account 19.7 18.2 16.4 16.4 19.4 20.5 19.6 21.7 21.1 22.5 20.5 19.6 49 Investment account 2S 8.0 278.4 278.9 277.4 280.6 287.0 285.1 283.3 284.7 282.8 283.4 282.9 50 Mortgage-backed securities. 176.4 179.4 180.1 181.8 183.2 183.1 183.5 184.1 184.4 183.6 183.6 51 Other 101.8 99.4 97.1 98.7 103.6 101.8 99.6 100.6 98.4 99.8 99.3 52 One year or less n.a. 26.9 27.3 26.0 26.3 28.7 27.2 27.1 26.5 26.5 27.4 28.3 53 Between one and five years 60.9 58.0 55.8 55.9 56.9 56.2 54.0 55.8 54.4 53.9 53.3 54 More than five years .... 13.9 14.2 15.3 16.5 18.0 18.4 18.6 18.2 17.5 18.5 17.6 55 Other securities 131.0 120.9 131.9 144.1 135.6 135.9 125.9 123.5 121.7 124.1 123.8 122.2 56 Trading account 61.1 54.2 66.5 78.8 69.8 70.7 60.5 56.9 55.3 57.9 56.9 55.3 57 Investment account >9.9 66.7 65.4 65.4 65.8 65.1 65.3 66.6 66.3 66.2 66.9 66.9 58 State and local government . . 20.7 20.5 20.6 21.1 20.8 20.9 21.2 21.8 21.6 21.6 21.9 21.9 59 Other 49.2 46.2 44.8 44.2 44.9 44.2 44.2 44.8 44.7 44.5 44.9 45.0 60 Loans and leases in bank credit2 . . 1,446.0 1,475.6 1,483.7 1.486.1 1,497.6 1,510.8 1,518.7 1,532.5 1,529.3 1,525.8 1,535.6 1.530.3 61 Commercial and industrial 382.9 393.3 394.2 400.3 406.8 415.2 416.1 416.6 416.5 414.7 416.4 415.6 62 Bankers acceptances 1.4 2.1 1.9 1.6 1.6 1.5 1.5 1.5 1.5 1.5 1.6 1.6 63 Other 381.4 391.2 392.4 398.7 405.2 413.7 414.6 415.0 415.0 413.2 414.8 414.1 64 Real estate 589.3 594.5 595.0 592.8 596.3 601.1 606.3 612.3 611.9 614.0 612.5 610.4 65 Revolving home equity 56.4 58.7 58.8 59.0 59.4 60.1 61.4 62.4 62.4 62.6 62.6 62.8 66 Other n.a. 330.9 328.8 326.0 327.8 335.2 337.3 340.5 339.9 341.8 338.8 336.1 67 Commercial n.a. 203.2 205.6 206.0 207.2 203.7 205.5 207.1 209.7 209.6 211.1 211.6 68 Consumer 291.7 298.9 302.6 299.5 295.6 294.8 296.6 297.5 298.2 297.9 297.7 297.8 69 Security3 42.1 38.8 38.7 40.1 43.0 42.2 41.3 42.8 40.8 41.3 4455..22 4422..99 70 Federal funds sold to and repurchase agreements with broker-dealers 26.2 22.0 22.7 24.1 26.6 24.6 23.9 25.8 25.2 24.3 27.9 25.1 7711 Other 16.0 16.8 16.0 16.1 16.4 17.6 17.4 17.0 15.6 16.9 17.3 17.7 72 State and local government 11.6 11.8 11.4 11.4 11.4 11.1 11.0 11.1 11.2 11.1 11.1 11.2 73 Agricultural 9.1 8.5 8.5 8.3 8.4 8.5 8.7 8.7 8.8 8.9 8.6 8.7 74 Federal funds sold to and repurchase agreements with others 5.8 4.6 5.8 5.7 5.7 6.5 5.4 6.0 5.0 4.4 5.4 8.2 75 All other loans 62.3 64.3 62.8 61.5 62.9 62.6 63.0 65.6 65.7 62.2 67.0 63.6 76 Lease-financing receivables .... 51.1 60.9 64.6 66.3 67.6 68.8 70.3 71.9 71.2 71.5 71.7 72.0 77 Interbank loans 138.1 138.2 133.9 132.1 135.6 142.4 144.2 118.6 128.1 118.1 121.1 112.8 78 Federal funds sold to and repurchase agreements with commercial banks 92.1 85.7 82.4 82.0 85.9 92.4 89.9 67.9 76.3 65.9 70.9 62.4 7799 Other 46.1 52.5 51.5 50.2 49.7 50.0 54.3 50.6 51.8 52.2 50.3 50.3 80 Cash assets4 128.1 147.1 143.3 134.9 130.9 139.3 137.7 136.9 140.4 131.1 140.3 132.9 81 Other assets5 159.0 174.8 167.7 168.5 168.8 177.0 180.5 179.1 183.8 182.0 177.0 176.0 82 Total assets6 2,272.2 2316.4 2,319.6 2,323.5 2332.2 2376.7 2375.4 2359.1 2372.6 2349.9 23653 23403 Liabilities 83 Deposits 1,392.1 1,455.7 1,437.8 1.427.4 1,431.2 1,451.0 1,432.5 1,450.0 1,461.8 1,446.2 1,449.1 1,431.7 84 Transaction 425.9 424.1 406.9 385.9 374.7 385.7 365.8 370.7 373.6 363.0 373.4 363.3 8855 Nontransaction 966.2 1,031.6 1,030.9 1,041.5 1.056.4 1,065.4 1,066.7 1,079.3 1,088.2 1,083.2 1.075.6 1.068.4 8866 Large time 138.4 157.6 158.3 163.5 161.2 166.7 169.3 173.9 174.3 172.2 173.7 174.3 87 Other 827.8 874.0 872.7 878.0 895.2 898.7 897.4 905.4 914.0 911.0 901.9 894.1 88 Borrowings 446.9 420.3 432.2 428.1 441.2 463.2 468.6 444.6 447.9 436.5 449.9 443.6 89 From banks in the U.S 186.9 183.4 181.6 179.7 187.6 194.8 190.2 168.6 179.5 171.5 167.5 158.6 90 From nonbanks in the U.S 260.1 236.9 250.7 248.4 253.6 268.4 278.4 276.0 268.4 265.0 282.4 285.0 91 Net due to related foreign offices .... 74.3 63.4 69.7 76.0 68.6 74.4 88.1 75.8 76.1 76.5 78.6 76.8 92 Other liabilities 127.7 149.1 152.0 160.2 155.1 152.3 147.4 147.4 145.4 149.5 146.8 147.4 93 Total liabilities 2,041.0 2,088.5 2,091.7 2,091.7 2,096.0 2,140.9 2,136.7 2,117.8 2,131.2 2,108.7 2,1243 2,099.5 94 Residual (assets less liabilities)7 231.2 227.9 227.9 231.7 236.2 235.8 238.7 241.3 241.4 241.1 240.9 240.8 MEMO 95 Revaluation gains on off-balancesheet items8 36.0 47.5 55.9 49.0 49.5 42.0 38.5 38.5 40.0 39.0 37.1 96 Revaluation losses on off-balancesheet items8 31.8 44.0 50.9 43.2 44.6 43.4 40.2 40.2 41.2 40.5 38.8 97 Mortgage-backed securities9 n.a. 198.0 200.0 199.7 200.7 203.4 203.1 201.3 204.2 202.2 201.4 201.7 98 Pass-through securities 134.3 136.5 136.8 138.0 140.5 141.0 139.9 141.8 113399..66 113399..55 114400..11 99 CMOs, REMICs, and other mortgage-backed securities . . . 63.7 63.5 62.9 62.7 62.9 62.0 61.4 62.5 6622..66 6611..99 6611..77 100 Net unrealized gains (losses) on available-for-sale securities . . . 2.8 2.7 2.7 2.7 1.8 2.1 2.6 2.4 2.5 2.6 2.6 101 Offshore credit to U.S. residents" . . . 28.7 31.7 30.9 32.1 32.9 33.3 33.6 33.4 34.2 34.1 32.9 32.8 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ 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 AAAccccccooouuunnnttt 1996 1996 1997r 1997 Juner Dec.r Jan. Feb. Mar. Apr. May June June 4 June 11 June 18 June 25 Seasonally adjusted Assets 1 Bank credit 1,331.5 1,372.5 1,381.1 1,383.9 1,396.9 1,404.6 1,413.7 1,421.2 1,418.7 1,419.2 1,422.2 1,423.1 7 Securities in bank credit 402.0 400.9 404.5 403.0 406.8 409.3 409.8 408.2 408.9 408.6 409.0 407.7 3 U.S. government securities 322.0 321.3 324.2 323.2 325.5 326.1 326.7 326.0 326.9 326.2 326.5 325.3 4 Other securities 80.0 79.6 80.4 79.9 81.3 83.2 83.1 82.2 82.1 82.4 82.5 82.4 Loans and leases in bank credit2 929.5 971.6 976.5 980.9 990.1 995.3 1,003.9 1,012.9 1,009.8 1,010.6 1,013.2 1,015.3 Commercial and industrial 167.4 173.9 174.5 176.1 177.5 178.5 180.1 181.4 180.1 179.9 181.2 182.4 7 Real estate 480.5 504.1 510.2 515.0 523.1 528.5 533.1 538.3 536.0 536.9 538.5 539.4 8 Revolving home equity 23.0 26.6 26.9 27.3 27.9 28.5 28.7 28.9 28.7 28.8 29.0 29.0 9 Other 457.5 477.5 483.3 487.6 495.2 500.0 504.4 509.4 507.2 508.1 509.5 510.4 in Consumer 216.0 225.8 223.6 220.9 219.8 218.7 220.2 222.1 222.4 222.4 222.4 222.2 11 Security3 4.8 4.8 4.7 4.9 5.1 4.8 4.9 4.9 5.0 4.9 4.8 4.9 17 Other loans and leases 60.9 62.9 63.5 64.0 64.6 64.6 65.6 66.3 66.4 66.4 66.2 66.4 13 Interbank loans 45.9 51.3 50.9 54.0 58.1 52.6 52.7 53.5 54.2 52.7 52.1 53.6 14 Cash assets4 61.1 64.0 65.6 68.3 70.3 71.6 70.1 72.7 69.3 73.5 71.3 75.5 15 Other assets5 46.1 52.1 51.0 53.1 59.9 60.8 59.6 64.2 60.5 65.9 63.0 66.6 16 Total assets6 1,465.4 1520.4 1,528.9 1,539.7 1,565.6 1569.8 1,576.1 15915 1,582.7 1,591.3 1,588.6 1,598.6 Liabilities 17 Deposits 1,161.1 1,200.8 1,214.6 1,225.3 1,236.1 1,236.8 1,239.8 1,253.2 1,243.5 1,249.6 1,249.5 1,258.3 18 Transaction 310.2 306.4 305.6 306.1 306.9 307.6 305.5 306.9 301.1 306.0 305.0 313.7 19 Nontransaction 850.9 894.4 909.1 919.1 929.2 929.2 934.2 946.2 942.4 943.6 944.5 944.5 7.0 Large time 138.6 153.0 155.0 156.5 157.6 156.6 158.0 160.5 159.6 159.9 160.2 161.0 71 Other 712.3 741.3 754.0 762.6 771.6 772.6 776.3 785.8 782.8 783.6 784.3 783.6 77 Borrowings 137.6 157.5 157.5 156.3 158.4 160.1 159.0 159.7 160.1 163.5 157.9 158.6 73 From banks in the U.S 77.9 83.0 84.5 83.6 84.2 84.3 84.8 79.0 81.9 84.7 76.2 77.9 74 From others 59.7 74.6 73.0 72.7 74.2 75.9 74.3 80.8 78.1 78.8 81.7 80.7 25 Net due to related foreign offices 5.3 2.7 4.0 4.0 3.9 4.4 4.1 3.8 3.6 4.0 3.4 3.8 26 Other liabilities 25.6 25.2 24.5 25.2 26.6 26.4 27.1 27.5 27.7 27.5 27.8 27.4 27 Total liabilities 1,3295 1386.3 1,400.6 1,410.7 1,425.0 1,427.8 1,430.0 1,444.2 1,434.9 1,444.7 1,438.5 1,448.1 28 Residual (assets less liabilities)7 135.9 134.1 128.3 129.0 140.6 142.0 146.1 147.3 147.8 146.6 150.0 150.5 Not seasonally adjusted Assets 79 Bank credit 1,332.4 1,375.2 1,379.2 1,378.4 1,392.4 1,405.0 1,413.5 1,422.0 1,418.2 1,420.7 1,422.0 1,424.7 30 Securities in bank credit 403.9 400.4 403.1 401.4 408.1 412.8 411.6 410.0 409.8 410.9 410.9 410.5 31 U.S. government securities 324.0 320.8 322.9 321.8 326.6 329.2 328.2 327.8 327.7 328.5 328.5 328.2 37 Other securities 79.9 79.6 80.2 79.6 81.5 83.5 83.3 82.2 82.1 82.4 82.4 82.3 33 Loans and leases in bank credit2 928.4 974.8 976.1 977.0 984.3 992.2 1,002.0 1,012.0 1,008.4 1,009.8 1,011.1 1,014.2 34 Commercial and industrial 168.7 173.5 174.5 175.8 178.0 179.7 181.5 182.6 181.6 181.3 182.4 183.5 35 Real estate 480.3 506.1 509.8 512.4 520.1 525.8 531.6 538.1 534.8 536.5 538.0 539.8 36 Revolving home equity 23.0 26.7 26.8 27.1 27.7 28.2 28.6 28.9 28.7 28.8 28.9 29.0 37 Other 457.3 479.4 483.0 485.3 492.4 497.6 503.0 509.2 506.1 507.7 509.1 510.8 38 Consumer 214.0 226.7 224.6 221.7 218.0 218.4 219.8 220.3 221.0 220.5 220.0 220.6 39 Security1 4.6 5.0 4.8 5.0 5.1 4.9 4.7 4.8 5.0 5.0 4.6 4.4 40 Other loans and leases 60.8 63.5 62.3 62.1 63.0 63.4 64.4 66.3 66.0 66.5 66.1 65.9 41 Interbank loans 42.9 54.3 52.2 56.1 58.1 53.0 49.3 50.7 55.2 55.1 48.3 45.0 47 Cash assets4 59.8 67.6 67.8 67.5 68.1 70.2 69.8 71.3 73.1 69.5 70.4 69.1 43 Other assets5 44.5 52.7 51.9 54.4 58.9 59.8 59.1 62.2 62.2 61.7 60.4 62.2 44 Total assets6 1,4603 1530.4 1,5315 1,536.9 1,557.9 1,568.1 1,571.7 1586.1 1588.4 1,586.9 1580.9 1580.8 Liabilities 45 Deposits 1,158.9 1,214.2 1,212.1 1,215.4 1,231.1 1,239.0 1,237.2 1,251.3 1,254.5 1,251.1 1,246.6 1,241.8 46 Transaction 308.3 317.6 309.3 302.3 302.6 307.8 302.2 305.3 308.4 305.5 303.2 301.4 47 Nontransaction 850.6 896.6 902.8 913.2 928.5 931.2 935.0 946.0 946.2 945.6 943.4 940.4 48 Large time 138.2 152.1 153.7 157.2 158.5 157.6 158.8 160.0 159.9 160.2 159.8 159.9 49 Other 712.4 744.5 749.1 755.9 770.1 773.5 776.2 786.0 786.3 785.5 783.6 780.5 50 Borrowings 139.9 157.1 159.3 155.0 153.0 157.6 163.0 163.4 161.2 161.2 163.2 167.1 51 From banks in the U.S 79.4 82.4 84.3 81.8 80.5 83.4 87.2 82.0 83.3 83.1 81.6 84.0 57 From others 60.5 74.6 75.0 73.2 72.5 74.2 75.7 81.4 78.0 78.1 81.6 83.1 53 Net due to related foreign offices 5.3 2.7 4.0 4.0 3.9 4.4 4.1 3.8 3.6 4.0 3.4 3.8 54 Other liabilities 25.0 24.8 24.7 25.6 26.9 26.7 26.8 27.0 27.0 27.2 27.0 27.0 55 Total liabilities 1329.2 1398.7 1,400.1 1,400.0 1,415.0 1,427.7 1,431.1 1,4455 1,446.4 1,4435 1,440.1 1,439.7 56 Residual (assets less liabilities)7 131.1 131.7 131.4 136.9 142.9 140.4 140.6 140.7 142.0 143.4 140.8 141.1 MEMO 57 Mortgage-backed securities9 n.a. 43.6 44.3 43.9 45.1 45.6 46.1 47.1 46.8 46.8 47.2 47.2 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Financial Statistics • September 1997 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued E. Foreign-related institutions Billions of dollars Monthly averages Wednesday figures Account 1996 1996 1997 1997 June Dec. Jan. Feb. Mar. Apr. May June June 4 June 11 June 18 June 25 Seasonally adjusted Assets 1 Bank credit 458.9 505.0 515.9 530.7 525.4 533.7 539.9 542.8 539.5 545.1 540.0 541.7 2 Securities in bank credit 146.8 164.5 170.2 177.0 173.0 178.1 175.6 177.7 179.0 180.5 173.3 175.0 3 U.S. government securities 77.2 87.6 81.8 85.4 83.6 87.8 89.9 92.3 94.3 93.3 87.7 91.0 4 Other securities 69.6 76.9 88.4 91.6 89.4 90.2 85.7 85.4 84.7 87.2 85.6 84.0 5 Loans and leases in bank credit2 . . . 312.1 340.6 345.7 353.6 352.4 355.6 364.3 365.1 360.5 364.6 366.8 366.7 6 Commercial and industrial 191.2 213.0 214.4 217.1 216.1 216.6 219.7 220.5 219.2 220.6 221.4 220.2 7 Real estate 33.2 32.0 31.8 32.0 31.5 31.4 30.6 29.6 30.1 30.0 29.7 29.3 8 Security-' 31.8 36.2 38.1 39.8 39.7 43.2 43.5 46.0 41.2 46.0 46.6 47.5 9 Other loans and leases 55.9 59.3 61.3 64.7 65.1 64.5 70.5 69.0 70.1 68.0 69.1 69.7 10 Interbank loans 21.9 21.7 22.7 20.9 22.7 18.9 20,6 19.9 19.0 20.0 19.9 19.3 11 Cash assets4 28.0 31.1 31.1 32.9 32.4 32.7 34.0 35.7 34.1 34.3 36.1 36.8 12 Other assets5 41.9 37.0 38.8 41.8 41.8 39.9 39.6 42.2 43.3 43.3 40.4 41.4 13 Total assets6 550.7 594.7 608.2 626.0 622.0 625.0 633.9 6403 635.7 642.5 6363 638.9 Liabilities 14 Deposits 175.4 219.5 225.7 238.0 242.7 257.7 252.0 258.2 248.5 251.8 258.4 262.9 15 Transaction 10.8 10.2 10.3 9.7 10.4 10.8 11.2 11.1 10.8 10.8 11.7 10.9 16 Nontransaction 164.6 209.3 215.4 228.2 232.2 246.9 240.8 247.1 237.7 241.0 246.8 252.0 17 Large time 162.3 206.5 213.2 224.3 228.7 244.5 238.4 244.7 235.3 238.6 244.4 249.6 18 Other 2.3 2.8 2.2 4.0 3.6 2.5 2.4 2.4 2.4 2.4 2.4 2.4 19 Borrowings 128.0 121.6 130.3 143.3 140.1 139.9 143.7 141.3 135.7 138.5 139.7 145.2 20 From banks in the U.S 32.3 33.0 28.3 34.4 35.3 33.5 33.9 32.1 29.6 28.4 32.4 34.7 21 From others 95.6 88.6 102.1 108.9 104.8 106.5 109.8 109.2 106.1 110.1 107.3 110.4 22 Net due to related foreign offices 177.4 162.2 150.3 139.4 141.1 134.6 148.7 148.8 166.6 160.3 149.7 133.8 23 Other liabilities 68.1 83.3 90.8 100.6 94.8 92.9 90.2 91.6 92.9 94.4 90.6 88.1 24 Total liabilities 548.9 586.5 597.1 6213 618.6 625.1 634.6 639.9 643.7 645.0 638.4 630.0 25 Residual (assets less liabilities)7 1.8 8.1 11.1 4.7 3.4 -0.1 -0.8 0.4 -8.0 -2.5 -2.2 8.9 Not seasonally adjusted Assets 26 Bank credit 459.4 501.2 513.1 531.3 525.2 533.7 542.6 543.2 544.8 545.1 540.0 540.1 27 Securities in bank credit 147.4 158.2 166.3 178.0 173.7 178.5 180.5 178.4 184.6 182.3 173.8 174.0 28 U.S. government securities 76.9 85.1 82.8 87.2 86.6 87.3 90.5 91.0 95.1 92.7 87.3 88.8 29 Trading account n.a. 19.9 17.0 21.4 20.0" 18.6 18.8 18.8 23.6 20.5 15.7 16.6 30 Investment account n.a. 65.3 65.8r 65.8r 66.6r 68.7r 71.6r 72.2 71.4 72.1 71.6 72.2 31 Other securities 70.5 73.1 83.6 90.8 87.1 91.2 90.1 87.4 89.5 89.7 86.4 85.2 32 Trading account n.a. 51.3r 58.6r 65.2r 60.4r 61.4r 60.0" 58.6 60.6 60.1 57.7 56.8 33 Investment account n.a. 21.8r 24.9" 25.7r 26.7r 29.8r 30.1" 28.8 28.9 29.5 28.7 28.4 34 Loans and leases in bank credit2 . . . 312.0 343.0 346.8 353.3 351.6 355.2 362.0 364.9 360.2 362.7 366.2 366.1 35 Commercial and industrial 191.8 213.4 214.3 217.1 215.7 217.3 220.0 221.3 219.8 220.0 222.0 221.1 36 Real estate 33.1 32.2 31.8 32.1 31.5 30.9 30.3 29.5 29.9 29.8 29.8 29.2 37 Security3 31.8 36.2 38.1 39.8 39.7 43.2 43.5 46.0 41.2 46.0 46.6 47.5 38 Other loans and leases 55.3 61.2 62.6 64.4 64.6 63.8 68.3 68.2 69.3 66.9 67.8 68.3 39 Interbank loans 21.9 21.7 22.7 20.9 22.7 18.9 20.6 19.9 19.0 20.0 19.9 19.3 40 Cash assets4 28.6 32.2 31.5 32.1 31.8 31.8 34.0 36.4 34.8 35.0 36.8 37.3 41 Other assets5 41.8 37.8 38.0 42.7 41.2 38.4 40.6 42.1 44.5 44.5 40.2 40.2 42 Total assets6 551.6 592.7 605.0 626.7 620.6 622.7 637.6 641.4 642.9 6443 636.7 636.6 Liabilities 43 Deposits 175.7 222.2 225.8 234.8 242.5 251.3 252.5 258.6 251.5 254.4 259.1 263.4 44 Transaction 10.7 10.9 10.4 9.9 10.2 10.4 10.7 11.1 10.6 10.3 11.3 11.1 45 Nontransaction 165.0 211.3 215.5 224.9 232.3 241.0 241.8 247.6 240.9 244.0 247.8 252.3 46 Large time 162.8 208.5 213.2 221.0 228.7 238.6 239.4 245.2 238.5 241.6 245.4 249.9 47 Other 2.3 2.8 2.2 3.9 3.5 2.4 2.4 2.4 2.4 2.4 2.4 2.4 48 Borrowings 132.3 120.4 127.2 136.7 134.2 142.4 143.5 146.3 138.4 141.6 146.2 148.5 49 From banks in the U.S 33.8 33.6 29.3 32.1 33.7 33.7 33.5 33.8 31.3 29.7 34.6 34.0 50 From others 98.6 86.8 97.9 104.6 100.5 108.8 110.1 112.5 107.1 111.9 111.6 114.4 51 Net due to related foreign offices 170.2 163.8 159.1 148.6 145.8 131.5 144.5" 140.6 153.2 147.8 137.9 133.0 52 Other liabilities 68.8 81.9 89.9 103.1 94.7 92.7 92.9 92.6 95.7 97.4 90.3 88.4 53 Total liabilities 547.1 588.3 602.0 6233 617.2 617.9 633.4 638.0 638.8 641.2 633.5 633.2 54 Residual (assets less liabilities)7 4.5 4.4 3.0 3.4 3.5 4.7 4.2 3.4 4.2 3.1 3.2 3.4 MEMO 55 Revaluation gains on off-balance-sheet items8 n.a. 33.6r 41.3r 46.1r 41.5r 40.7r 39.5" 37.9 39.6 38.7 37.3 36.6 56 Revaluation losses on off-balancesheet items8 n.a. 32.7r 4i.r 47.7" 43.8r 43.5r 42.4" 40.8 42.7 41.6 40.2 39.5 Footnotes appear on p. 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 group that contained the acquired bank and put into past data for the group containing the statistical release, "Assets and Liabilities of Commercial Banks in the United States." Table acquiring bank. Balance sheet data for acquired banks are obtained from Call Reports, and a 1.27, "Assets and Liabilities of Large Weekly Reporting Commercial Banks," and table 1.28, ratio procedure is used to adjust past levels. "Large Weekly Reporting U.S. Branches and Agencies of Foreign Banks," are no longer 2. Excludes federal funds sold to, reverse RPs with, and loans made to commercial banks being published in the Bulletin. Instead, abbreviated balance sheets for both large and small in the United States, all of which are included in "Interbank loans." domestically chartered banks have been included in table 1.26, parts C and D. Data are both 3. Consists of reverse RPs with brokers and dealers and loans to purchase and carry merger-adjusted and break-adjusted. In addition, data from large weekly reporting U.S. securities. branches and agencies of foreign banks have been replaced by balance sheet estimates of all 4. Includes vault cash, cash items in process of collection, balances due from depository foreign-related institutions and are included in table 1.26, part E. These data are break- institutions, and balances due from Federal Reserve Banks. adjusted. 5. Excludes the due-from position with related foreign offices, which is included in "Net The not-seasonally-adjusted data for all tables now contain additional balance sheet items, due to related foreign offices." which were available as of October 2, 1996. 6. Excludes unearned income, reserves for losses on loans and leases, and reserves for 1. Covers the following types of institutions in the fifty states and the District of transfer risk. Loans are reported gross of these items. Columbia: domestically chartered commercial banks that submit a weekly report of condition 7. This balancing item is not intended as a measure of equity capital for use in capital (large domestic); other domestically chartered commercial banks (small domestic); branches adequacy analysis. On a seasonally adjusted basis this item reflects any differences in the and agencies of foreign banks, and Edge Act and agreement corporations (foreign-related seasonal patterns estimated for total assets and total liabilities. institutions). Excludes International Banking Facilities. Data are Wednesday values or pro 8. Fair value of derivative contracts (interest rate, foreign exchange rate, other commodity and rata averages of Wednesday values. Large domestic banks constitute a universe; data for equity contracts) in a gain/loss position, as determined under FASB Interpretation No. 39. small domestic banks and foreign-related institutions are estimates based on weekly samples 9. Includes mortgage-backed securities issued by U.S. government agencies, U.S. and on quarter-end condition reports. Data are adjusted for breaks caused by reclassifications government-sponsored enterprises, and private entities. of assets and liabilities. 10. Difference between fair value and historical cost for securities classified as available- The data for large and small domestic banks presented on pp. A17-19 are adjusted to for-sale under FASB Statement No. 115. Data are reported net of tax effects. Data shown are remove the estimated eifects of mergers between these two groups. The adjustment for restated to include an estimate of these tax effects. mergers changes past levels to make them comparable with current levels. Estimated 11. Mainly commercial and industrial loans but also includes an unknown amount of credit quantities of balance sheet items acquired in mergers are removed from past data for the bank extended to other than nonfinancial businesses. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic Nonfinancial Statistics • September 1997 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING Millions of dollars, end of period Year ending December 1996 1997 Item D 19 e 9 c 2 . D 19 e 9 c 3 . D 19 e 9 c 4 . D 19 e 9 c 5 . D 19 e 9 c 6 . Dec. Jan. Feb. Mar. Apr. May Commercial paper (seasonally adjusted unless noted otherwise) 1 All issuers 545,619 555,075 595,382 674,904 775,371 775,371 804,644 813,168 836,979 838,366 855,178 Financial companies' 2 Dealer-placed paper2, total . 226,456 218,947 223,038 275,815 361,147 361,147 376,908 387,164 402,291 404,727 413,776 3 Directly placed paper3, total 171,605 180,389 207,701 210,829 229,662 229,662 238,133 239,509 246,215 248,920 252,856 4 Nonfinancial companies4 147,558 155,739 164,643 188,260 184,563 184,563 189,602 186,495 188,473 184,719 188,546 Bankers dollar acceptances (not seasonally adjusted)5 5 Total 38,194 32,348 29,835 29,242 25,754 25,754 By 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 1,321 Federal Reserve Banks6 9 Foreign correspondents 1,276 725 410 n.a. n.a. n.a. 10 Others 26,364 19,202 17,642 By basis 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 every 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, construction, 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 rate rate 6.25 1994 1995—Jan. . 8.50 1996—Jan. . 6.75 1995 Feb. 9.00 Feb. 7.25 1996 8.27 Mar. 9.00 Mar. 7.75 Apr. 9.00 Apr. 8.50 1994—Jan. 6.00 May 9.00 May Feb. 6.00 June 9.00 June 9.00 Mar. 6.06 July . 8.80 July . 8.75 Apr. 6.45 Aug. 8.75 Aug. 8.50 May 6.99 Sept. 8.75 Sept. June 7.25 Ocl 8.75 Oct. . 8.25 July 7.25 Nov. 8.75 Nov. 8.50 Aug. 7.51 Dec. 8.65 Dec. Sept. 7.75 Oct. 7.75 1997—Jan. . Nov. 8.15 Feb. Dec. 8.50 Mar. Apr. May June July . 1. The prime rate is one of several base rates that banks use to price short-term business Report. Data in this table also appear in the Board's H.15 (519) weekly and G.13 (415) loans. The table shows the date on which a new rate came to be the predominant one quoted monthly statistical releases. For ordering address, see inside front cover. by a majority of the twenty-five largest banks by asset size, based on the most recent Call Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A23 1.35 INTEREST RATES Money and Capital Markets Percent per year; figures are averages of business day data unless otherwise noted 1997 1997, week ending IItteemm 11999944 11999955 11999966 Mar. Apr. May June May 30 June 6 June 13 June 20 June 27 MONEY MARKET INSTRUMENTS 1 Federal funds1,2,3 4.21 5.83 5.30 5.39 5.51 5.50 5.56 5.43 5.54 5.48 5.62 5.42 2 Discount window borrowing2,4 3.60 5.21 5.02 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 Commercial paperi^'(' 3 1-month 4.43 5.93 5.43 5.51 5.61 5.61 5.60 5.60 5.61 5.59 5.60 5.61 4 3-month 4.66 5.93 5.41 5.56 5.71 5.69 5.65 5.67 5.68 5.66 5.64 5.63 5 6-month 4.93 5.93 5.42 5.61 5.79 5.78 5.69 5.75 5.74 5.71 5.67 5.65 Finance paper, directly placed3,5,7 6 1-month 4.33 5.81 5.31 5.39 5.51 5.53 5.53 5.50 5.52 5.52 5.53 5.54 7 3-month 4.53 5.78 5.29 5.42 5.61 5.61 5.57 5.59 5.60 5.56 5.56 5.55 8 6-month 4.56 5.68 5.21 5.41 5.60 5.66 5.57 5.63 5.61 5.59 5.54 5.53 Bankers acceptances3,5,8 9 3-month 4.56 5.81 5.31 5.44 5.62 5.62 5.59 5.59 5.61 55..6600 5.58 55..5588 10 6-month 4.83 5.80 5.31 5.50 5.71 5.71 5.63 5.68 5.67 5.66 5.60 5.61 Certificates of deposit, secondary market3,9 11 1-month 4.38 5.87 5.35 5.44 5.57 5.58 5.57 5.57 5.56 5.56 5.57 5.58 12 3-month 4.63 5.92 5.39 5.53 5.71 5.70 5.66 5.69 5.68 5.68 5.65 5.66 13 6-month 4.96 5.98 5.47 5.69 5.90 5.87 5.78 5.85 5.82 5.80 5.75 5.76 14 Eurodollar deposits, 3-month3,10 4.63 5.93 5.38 5.50 5.70 5.69 5.66 5.69 5.69 5.68 5.65 5.63 U.S. Treasury bills Secondary market3,5 15 3-month 4.25 5.49 5.01 5.14 5.16 5.05 4.93 4.94 4.91 4.88 4.91 4.99 16 6-month 4.64 5.56 5.08 5.26 5.37 5.30 5.13 5.25 5.20 5.17 5.10 5.08 17 1-year 5.02 5.60 5.22 5.47 5.64 5.54 5.38 5.53 5.44 5.40 5.34 5.35 Auction average3,5,11 18 3-month 4.29 5.51 5.02 5.14 5.17 5.13 4.92 5.03 4.93 4.94 4.88 44..9944 19 6-month 4.66 5.59 5.09 5.24 5.35 5.35 5.14 5.26 5.22 5.20 5.10 5.05 20 1-year 5.02 5.69 5.23 5.36 5.66 5.64 5.35 5.55 n.a. n.a. n.a. 5.35 U.S. TREASURY NOTES AND BONDS Constant maturities'2 21 1-year 5.32 5.94 5.52 5.80 5.99 5.87 5.69 5.86 5.76 5.72 5.65 5.65 7.2 2-year 5.94 6.15 5.84 6.22 6.45 6.28 6.09 6.29 6.19 6.12 6.03 6.04 23 3-year 6.27 6.25 5.99 6.38 6.61 6.42 6.24 6.44 6.32 6.27 6.16 6.20 24 5-year 6.69 6.38 6.18 6.54 6.76 6.57 6.38 6.60 6.48 6.40 6.29 6.33 25 7-year 6.91 6.50 6.34 6.65 6.86 6.66 6.46 6.69 6.55 6.48 6.38 6.42 26 10-year 7.09 6.57 6.44 6.69 6.89 6.71 6.49 6.75 6.61 6.52 6.40 6.45 27 20-year 7.49 6.95 6.83 7.05 7.20 7.02 6.84 7.07 6.93 6.87 6.76 6.80 28 30-year 7.37 6.88 6.71 6.93 7.09 6.94 6.77 6.99 6.86 6.80 6.69 6.73 Composite 29 More than 10 years (long-term) 7.41 6.93 6.80 7.03 7.18 7.00 6.82 7.05 6.92 66..8855 6.74 66..7788 STATE AND LOCAL NOTES AND BONDS Moody's series13 30 Aaa 5.77 5.80 5.52 5.55 5.66 5.48 5.33 5.43 5.45 5.33 5.28 5.24 31 Baa 6.17 6.10 5.79 5.75 5.85 5.67 5.53 5.62 5.64 5.54 5.49 5.43 32 Bond Buyer series14 6.18 5.95 5.76 5.76 5.88 5.70 5.53 5.67 5.60 5.52 5.48 5.53 CORPORATE BONDS 33 Seasoned issues, all industries15 8.26 7.83 7.66 7.83 7.99 7.86 7.68 7.92 7.79 7.72 7.60 7.63 Rating group 34 Aaa 7.97 7.59 7.37 7.55 7.73 7.58 7.41 7.64 7.51 7.44 7.33 7.36 35 Aa 8.15 7.72 7.55 7.77 7.93 7.80 7.62 7.85 7.73 7.66 7.53 7.56 36 A 8.28 7.83 7.69 7.82 7.98 7.86 7.68 7.91 7.79 7.71 7.60 7.62 37 BBaaaa 8.63 8.20 8.05 8.18 8.34 8.20 8.02 8.25 8.13 8.06 7.94 7.96 38 AA--rraatteedd,, rreecceennttllyy ooffffeerreedd uuttiilliittyy bboonnddss1166 8.29 7.86 7.77 8.08 8.23 8.01 7.85 8.02 7.90 7.84 7.77 7.84 MEMO Dividend-price ratio17 39 Common stocks 2.82 2.56 2.19 1.91 1.98 1.85 1.77 1.83 1.84 1.77 1.73 1.76 1. The daily effective federal funds rate is a weighted average of rates on trades through 12. Yields on actively traded issues adjusted to constant maturities. Source: U.S. Depart- New York brokers. ment of the Treasury. 2. Weekly figures are averages of seven calendar days ending on Wednesday of the 13. General obligation bonds based on Thursday figures; Moody's Investors Service. current week; monthly figures include each calendar day in the month. 14. State and local government general obligation bonds maturing in twenty years are used 3. Annualized using a 360-day year for bank interest. in compiling this index. The twenty-bond index has a rating roughly equivalent to Moodys' 4. Rate for the Federal Reserve Bank of New York. A1 rating. Based on Thursday figures. 5. Quoted on a discount basis. 15. Daily figures from Moody's Investors Service. Based on yields to maturity on selected 6. An average of offering rates on commercial paper placed by several leading dealers for long-term bonds. firms whose bond rating is AA or the equivalent. 16. Compilation of the Federal Reserve. This series is an estimate of the yield on recently 7. An average of offering rates on paper directly placed by finance companies. offered, A-rated utility bonds with a thirty-year maturity and five years of call protection. 8. Representative closing yields for acceptances of the highest-rated money center banks. Weekly data are based on Friday quotations. 9. An average of dealer offering rates on nationally traded certificates of deposit. 17. Standard & Poor's corporate series. Common stock ratio is based on the 500 stocks in 10. Bid rates for Eurodollar deposits at approximately 11:00 a.m. London time. Data are the price index. for indication purposes only. NOTE. Some of the data in this table also appear in the Board's H.15 (519) weekly and 11. Auction date for daily data; weekly and monthly averages computed on an issue-date G. 13 (415) monthly statistical releases. For ordering address, see inside front cover. basis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 Domestic NonfinancialS tatistics • September 1997 1.36 STOCK MARKET Selected Statistics 1996 1997 IInnddiiccaattoorr 11999944 11999955 11999966 Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June Prices and trading volume (averages of daily figures)' Common stock prices (indexes) 1 New York Stock Exchange (Dec. 31, 1965 = 50) 254.16 291.18 357.98 373.54 388.75 391.61 403.58 418.57 416.72 401.00 433.36 457.07 2 Industrial 315.32 367.40 453.57 473.98 490.60 494.38 509.18 524.30 523.08 506.69 549.65 578.57 3 Transportation 247.17 270.14 327.30 332.80 348.32 352.28 359.40 364.15 372.37 366.67 395.50 410.93 4 Utility 104.96 110.64 126.36 130.04 135.88 128.55 131.95 142.88 132.38 126.66 140.52 140.24 5 Finance 209.75 238.48 303.94 324.42 345.30 350.01 361.45 388.75 387.19 364.25 392.32 419.12 6 Standard & Poor's Corporation (1941-43 = 10)2 460.42 541.72 670.49 701.46 735.67 743.25 766.22 798.39 792.16 763.93 833.09 876.29 7 American Stock Exchange (Aug. 31, 1973 = 50)3 449.49 498.13 570.86 574.46 583.21 582.96 585.09 593.29 593.64 554.13 584.06 619.94 Volume of trading (thousands of shares) 8 New York Stock Exchange 290,652 345,729 409,740 420,835 443,521 431,538 526,631 508,199 496,241 473,094 479,907 516,241 9 American Stock Exchange 17,951 20,387 22,567 18,780 22,151 23,648 24,019 21,250 19,232 19,122 19,634 23,277 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers4 61,160 76,680 97,400 88,740 91,680 97,400 99,460 100,000 100,160 98,870 106,010 113,440 Free credit balances at brokers5 11 Margin accounts6 14,095 16,250 22,540 19,890 20,020 22,540 22,870 22,200 22,930 22,700 22,050 23,860 12 Cash accounts 28,870 34,340 40,430 36,610 36,650 40,430 41,280 40,090 41,050 37,560 39,400 41,750 Margin requirements (percent of market value and effective date)7 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 the 3. On July 5, 1983, the American Stock Exchange rebased its index, effectively cutting Board. Regulation T was adopted effective Oct. 15, 1934; Regulation U, effective May 1, 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, 1985, 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 option maintenance margin required April 1984. by the appropriate exchange or self-regulatory organization; 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 Commission. brokers 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 TTTyyypppeee ooofff aaaccccccooouuunnnttt ooorrr ooopppeeerrraaatttiiiooonnn 1997 11999944 11999955 11999966 Jan. Feb. Mar. Apr. May June U.S. budget1 1 Receipts, total 1,258,627 1,351,830 1,453,062 150,718 90,293 108,099 228,588 94,493 173,361 2 On-budget 923,601 1,000,751 1,085,570 113,841 59,673 73,869 187,997 63,146 135,922 3 Off-budget 335,026 351,079 367,492 36,877 30,620 34,230 40,591 31,347 37,439 4 Outlays, total 1,461,731 1,515,729 1,560,330 137,354 134,303 129,422 134,650 142,988 118,837 5 On-budget 1,181,469 1,227,065 1,259,872 110,552 104,964 100,427 107,842 112,625 105,379 6 Off-budget 279,372 288,664 300,458 26,802 29,339 28,996 26,807 30,362 13,459 7 Surplus or deficit (-), total -203,104 -163,899 -107,268 13,364 -44,010 -21,323 93,939 -48,494 54,523 8 On-budget -258,758 -226,314 -174,302 3,289 -45,291 -26,558 80,155 -49,479 30,543 9 Off-budget 55,654 62,415 67,034 10,075 1,281 5,234 13,784 985 23,980 Source of financing (total) 10 Borrowing from the public 185,344 171,288 129,712 -16,776 35,968 28,833 -39,001 -19,054 -11,147 11 Operating cash (decrease, or increase (—)) 16,564 -2,007 -6,276 -3,785 21,357 -18,274 -55,908 72,532 -34,387 12 Other 2 1,196 -5,382 -16,168 7,197 -13,315 10,764 970 -4,984 -8,989 MEMO 13 Treasury operating balance (level, end of period) 35,942 37,949 44,225 36,579 15,222 33,496 89,404 16,872 51,259 14 Federal Reserve Banks 6,848 8,620 7,700 6,770 5,258 5,945 52,215 5,174 16,368 15 Tax and loan accounts 29,094 29,329 36,525 29,809 9,965 27,551 37,189 11,698 34,891 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 US. Government; fiscal year totals: U.S. Office of Management accrued interest payable to the public; allocations of SDRs; deposit funds; miscellaneous and Budget, Budget of the U.S. Government. liability (including checks outstanding) and asset accounts; seigniorage; increment on gold; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic NonfinancialS tatistics • September 1997 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS' Millions of dollars Fisca year Calendar year SSSooouuurrrccceee ooorrr tttyyypppeee 1995 1996 1997 1997 11999955 11999966 H2 HI H2 . HI Apr. May June RECEIPTS 1 All sources 1,351,830 1,453,062 656,865 767,099 707,551 845,552 228,588 94,493 173,361 2 Individual income taxes, net 590.244 656,417 292,393 347,285 323.884 400,435 134,291 30,690 74,381 3 Withheld 499.927 533,080 256.916 264.177 279.988 292,252 45,582 48,097 44.802 4 Nonwithheld 175.855 212.168 45.521 162.782 53.491 191,050 110,878 5,873 31.395 5 Refunds 85,538 88,8y7 10,058 79.735 9,604 82,926 22,177 23,300 1,825 Corporation income taxes 6 Gross receipts 174,422 189,055 88,302 96,480 95.364 106,451 29,547 5.005 40,541 7 Refunds 17,418 17.231 7.518 9.704 10,053 9.635 2,125 752 1,169 8 Social insurance taxes and contributions, net . . . 484,473 509,414 224,269 277.767 240,326 288,251 54,644 50,220 48,612 y Employment taxes and contributions" 451,045 476,361 211,323 257.446 227,777 268,357 50,771 39,835 47,933 10 Unemployment insurance 28,878 28,584 10,702 18.068 10.302 17,709 3,532 9,963 343 n Other net receipts3 4.550 4,469 2,247 2.254 2,245 2,184 341 422 336 12 Excise taxes 57,484 54.014 30.014 25.682 27,016 28,084 4,768 4,808 5,185 13 Customs deposits 19,301 18,670 9.849 8.731 9,294 8,619 1,492 1.443 1,522 14 Estate and gift taxes 14,763 17.189 7,718 8.775 8,835 10,477 3,308 1,412 1.494 15 Miscellaneous receipts4 28.561 25.534 11.839 12.087 12,888 12,866 2,662 1,667 2,793 OUTLAYS 16 All tvpes 1,515,729 1,560,330 752,856 785,368 799,851 797,554 134,650 142,988 118,837 17 National defense 272,066 265.748 132.887 132.599 138,350 131,525 21,872 26,152 20.613 18 International affairs 16.434 13,496 6,908 8,076' 8,895 5,779 1,654 256 472 19 General science, space, and technology 16,724 16,709 7.970 8.897 9,498 8,939 1,395 1,655 1,565 20 Energy 4.936 2,836 1,992 1.356 806 801 28 129 -5 21 Natural resources and environment 22.078 21,614 11,392 10,254 11,642 9,688 1,545 1.719 1.622 22 Agriculture 9,778 9,159 3,065 73 10,699 1,433 -206 -205 -255 23 Commerce and housing credit -17,808 -10.646 -3.947 -6,885' -6,198 -7,463 -2.314 -62 891 24 Transportation 39,350 39,565 20.725 18,290 21,205 18,046 2,955 3,320 3.224 25 Community and regional development 10,641 10,685 5.569 5.245 6,192 5,699 1.067 883 1.207 26 Education, training, employment, and social services 54,263 52,001 26.212 25.979 26,032 25,227 4,123 3,799 3,702 27 Health 115.418 119.378 57.128 59,989 61,466 61,808 10,439 10,374 10,595 28 Social security and Medicare 495,701 523,901 251.388 264.647 269,409 278,817 46,823 48,887 47,558 29 Income security 220,493 225,989 104,847 121,186 107,181 123,874 20,624 22,357 11,298 30 Veterans benefits and services 37,890 36.985 18.678 18.140 21,107 17,697 3,342 4.333 1,583 31 Administration of justice 16,216 17,548 8.091 9,015 9,595 10,643 1,454 1,875 1,883 32 General government 13.835 11,892 7,601 4,641 6,544 6,574 1,519 484 1,897 33 Net interest5 232,169 241.090 119.348 120.576 122,568 122,701 21,132 21,162 19,543 34 Undistributed offsetting receipts6 : -44,455 -37.620 -26.995 -16.716 -25,140 -24,234 -2,803 -4,128 -8,556 1. Functional details do not sum to total outlays for calendar year data because revisions to 4. Deposits of earnings by Federal Reserve Banks and other miscellaneous receipts. monthly totals have not been distributed among functions. Fiscal year total for receipts and 5. Includes interest received by trust funds. outlays do not correspond to calendar year data because revisions from the Budget have not 6. Rents and royalties for the outer continental shelf, U.S. government contributions for been fully distributed across months. employee retirement, and certain asset sales. 2. Old-age. disability, and hospital insurance, and railroad retirement accounts. SOURCE. Fiscal year totals: U.S. Office of Management and Budget, Budget of the U.S. 3. Federal employee retirement contributions and civil service retirement and Government. Fist til Year 199H\ monthly and half-year totals: U.S. Department of the Treadisability fund. sury. Monthly Treasury Statement of Receipts and Outlays of the US. Government. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A27 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars, end of month 1995 1996 1997 IItteemm June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 1 Federal debt outstanding 4,978 5,001 5,017 5,153 5,197 5,260 5,357 5,415 n.a. 2 Public debt securities 4,951 4,974 4,989 5,118 5,161 5,225 5,323 5,381 5,3176 3 Held by public 3,635 3,653 3,684 3,764 3,739 3,778 3,826 3,874 + 4 Held by agencies 1,317 1,321 1,305 1,354 1,422 1,447 1,497 1,507 5 Agency securities 27 27 28 36 36 35 34 34 n.a. 6 / H H e e l l d d b b y y a p g u e b n li c c i es 27 0 27 0 28 0 28 8 28 8 27 8 27 8 26 8 iI 8 Debt subject to statutory limit 4,861 4,885 4,900 5,030 5,073 5,137 5,237 5,294 5,290 9 Public debt securities 4,861 4,885 4,900 5,030 5,073 5,137 5,237 5,294 5,290 10 Other debt1 0 0 0 0 0 0 0 0 0 MEMO 11 Statutory debt limit 4,900 4,900 4,900 5,500 5,500 5,500 5,500 5,500 5,500 1. Consists of guaranteed debt of U.S. Treasury and other federal agencies, specified SOURCE. U.S. Department of the Treasury, Monthly Statement of the Public Debt of the participation certificates, notes to international lending organizations, and District of Colum- United States and Treasury Bulletin. bia stadium bonds. 1.41 GROSS PUBLIC DEBT OF U.S. TREASURY Types and Ownership Billions of dollars, end of period 1996 1997 TTyyppee aanndd hhoollddeerr 11999933 11999944 11999955 11999966 Q3 Q4 Q1 Q2 1 Total gross public debt 4,535.7 4,800.2 4,988.7 5,323.2 5,224.8 5,323.2 5,380.9 5,376.2 BY type 2 Interest-bearing 4,532.3 4,769.2 4,964.4 5,317.2 5,220.8 5,317.2 5,375.1 5,370.5 3 Marketable 2,989.5 3,126.0 3,307.2 3,459.7 3,418.4 3,459.7 3,504.4 3,433.1 4 Bills 714.6 733.8 760.7 777.4 761.2 777.4 785.6 704.1 5 Notes 1,764.0 1,867.0 2,010.3 2,112.3 2,098.7 2,112.3 2,131.0 2,132.6 6 Bonds 495.9 510.3 521.2 555.0 543.5 555.0 565.4 565.4 7 Inflation-indexed notes' n.a. n.a. n.a. n.a. n.a. n.a. 7.4 15.9 8 Nonmarketable" 1,542.9 1,643.1 1,657.2 1,857.5 1,802.4 1,857.5 1,870.8 1,937.4 9 State and local government series 149.5 132.6 104.5 101.3 95.7 101.3 104.8 107.9 10 Foreign issues3 43.5 42.5 40.8 37.4 37.5 37.4 36.8 35.4 1 1 Government 43.5 42.5 40.8 47.4 37.5 47.4 36.8 35.4 12 Public .0 .0 .0 .0 .0 .0 .0 .0 13 Savings bonds and notes 169.4 177.8 181.9 182.4 184.2 182.4 182.6 182.7 14 Government account series4 1,150.0 1.259.8 1,299.6 1,505.9 1,454.7 1,505.9 1,516.6 1,581.5 15 Non-interest-bearing 3.4 31.0 24.3 6.0 4.0 6.0 5.8 5.7 By holder 5 16 U.S. Treasury and other federal agencies and trust funds 1,153.5 1,257.1 1,304.5 1,497.2 1,447.0 1,497.2 1,506.8 > 17 Federal Reserve Banks 334.2 374.1 391.0 410.9 390.9 410.9 405.6 18 Private investors 3,047.4 3,168.0 3,294.9 3,411.2 3,386.2 3,411.2 3,451.7 19 Commercial banks 322.2 290.4 278.7 261.7r 274.8 261.7r 275.0 20 Money market funds 80.8 67.6 71.5r 91 6r 85.2 91,6r 83.9 21 Insurance companies 234.5 240.1 241.5 235.9r 235.6r 235.9r 236.5 22 Other companies 213.0 224.5r 228.8 258.5 249.1 258.5 262.5 n a. 23 State and local treasuries6'7 609.2r 540.2r 421.5r 358.0r 382.3r 358.0r 353.0 Individuals 24 Savings bonds 171.9 180.5 185.0 187.0 186.8 187.0 186.5 25 Other securities 137.9 150.7 162.7 169.6 167.0 169.6 168.9 26 Foreign and international8 623.0 688.6 862.2 l,131.8r 1,030.9 1,131 -8r 1,199.1 27 Other miscellaneous investors7'1 655.0r 785.5r 843.0r 717.lr 774.5r 717.1' 686.4 1. The U.S. Treasury first issued inflation-indexed notes during the first quarter of 1997. 8. Consists of investments of foreign balances and international accounts in the United 2. Includes (not shown separately) securities issued to the Rural Electrification Administra- States. tion, depository bonds, retirement plan bonds, and individual retirement bonds. 9. Includes savings and loan associations, nonprofit 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 States; 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 to "State and local treasuries." The data shown here have been revised accordingly. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic Nonfinancial Statistics • September 1997 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions' Millions of dollars, daily averages 1997 1997, week ending IItteemm Mar. Apr. May Apr. 30 May 7 May 14 May 21 May 28 June 4 June 11 June 18 June 25 OUTRIGHT TRANSACTIONS2 By type of security 1 U.S. Treasury bills 51,479 49,329 42,017 47,754 37,016 35,920 43,207 50,796 49,231 39,951 40,063 39,012 Coupon securities, by maturity 2 Five years or less 114,432 104,196 107,517 118,815 111,939 104,920 99,280 112,463 113,651 113,897 112,350 111,740 3 More than five years 55,743 49,121 57,216 51,203 58.914 61,357 52,694 53,208 61,943 61,296 56,678 49,296 4 Federal agency 36,352 38,194 41,103 49,033 38,854 37,197 42,299 45,390 44,927 33,286 39,975 35,339 5 Mortgage-backed 41,420 41,984 39,712 33.270 46,230 47,955 29,544 33,017 41,622 65,901 45,400 42,808 By type of counterparty With interdealer broker 6 U.S. Treasury 127,693 117,018 120,714 125,120 121.200 120,911 116,087 124,211 123,578 122,735 120,481 115,078 7 Federal agency 1,117 1,028 1,003 866 1,021 1,070 838 993 1,223 1,334 1,821 1,066 8 Mortgage-backed 15,314 13,923 12,677 12,747 13,628 15,450 10,145 11,008 13,036 20,694 15,073 13,753 With other 9 U.S. Treasury 93,961 85,628 86,036 92,652 86,669 81,286 79,093 92,256 101,248 92,408 88,610 84,970 10 Federal agency 35,235 37,166 40.100 48,168 37,833 36,126 41,461 44,397 43,704 31,952 38,154 34,273 11 Mortgage-backed 26,105 28,061 27,035 20,523 32,602 32,506 19,398 22,009 28,585 45,207 30,327 29,055 FUTURES TRANSACTIONS3 By type of deliverable security 12 U.S. Treasury bills 482 191 217 n.a. 218 263 247 107 244 473 494 155 Coupon securities, by maturity 13 Five years or less 2,150 1,720 2,014 1.806 1.992 1,718 1,439 2,416 3,447 2,357 2,558 1,755 14 More than five years 14,670 12,314 14,506 13,467 13,417 15,029 14,953 12,591 18,631 15,645 15,967 13,281 15 Federal agency 0 0 0 0 0 0 0 0 0 0 0 0 16 Mortgage-backed 0 0 0 0 0 0 0 0 0 0 0 0 OPTIONS TRANSACTIONS4 By type of underlying security 17 U.S. Treasury bills 0 0 0 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 18 Five years or less 3,469 3,195 3,570 3,049 4,435 3,659 4,701 1,577 2,342 3,993 4,122 1,655 19 More than five years 4,649 4,277 5.024 5,360 6,855 4,412 5,919 2,729 4,325 4,265 3,691 3,760 20 Federal agency 0 0 0 0 0 0 0 0 0 0 0 0 21 Mortgage-backed 578 584 560 392 589 845 393 433 445 530 572 163 1. Transactions are market purchases and sales of securities as reported to the Federal Forward transactions are agreements made in the over-the-counter market that specify Reserve Bank of New York by the U.S. government securities dealers on its published list of delayed delivery. Forward contracts for U.S. Treasury securities and federal agency debt primary dealers. Monthly averages are based on the number of trading days in the month. securities are included when the time to delivery is more than five business days. Forward Transactions are assumed evenly distributed among the trading days of the report week. contracts for mortgage-backed agency securities are included when the time to delivery is Immediate, forward, and futures transactions are reported at principal value, which does not more than thirty business days. include accrued interest; options transactions are reported at the face value of the underlying 3. Futures transactions are standardized agreements arranged on an exchange. All futures securities. transactions are included regardless of time to delivery. Dealers report cumulative transactions for each week ending Wednesday. 4. Options transactions are purchases or sales of put and call options, whether arranged on 2. Outright transactions include immediate and forward transactions. Immediate delivery an organized exchange or in the over-the-counter market, and include options on futures refers to purchases or sales of securities (other than mortgage-backed federal agency securi- contracts on U.S. Treasury and federal agency securities. ties) for which delivery is scheduled in five business days or less and "when-issued" NOTE, "n.a." indicates that data are not published because of insufficient activity. securities that settle on the issue date of offering. Transactions for immediate delivery of mortgage- Major changes in the report form filed by primary dealers induced a break in the dealer data backed agency securities include purchases and sales for which delivery is scheduled in thirty business series as of the week ending July 6, 1994. days or less. Stripped securities are reported at market value by maturity of coupon or corpus. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A29 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Millions of dollars 1997 1997, week ending Mar. Apr. May Apr. 30 May 7 May 14 May 21 May 28 June 4 June 11 June 18 Positions2 NET OUTRIGHT POSITIONS3 By type of security 1 U.S. Treasury bills 14,352 4,082 -5,335 -2,288 -2,870 -6,817 -11,566 -6,935 10,641 3,197 -5,577 Coupon securities, by maturity 2 Five years or less -20,140 -24,443 -22,394 -25,842 -17,715 -21,724 -24,070 -27,109 -19,961 -16,154 -22,525 3 More than five years -28,545 -28,153 -18,077 -25,855 -17,057 -17,115 -18,634 -17,823 -21,997 -17,990 -19,549 4 Federal agency 24,380 29,723 29,451 31,230 30,592 30,382 25,764 30,457 30,873 33,666 33,311 5 Mortgage-backed 40,292 34,916 35,472 33,990 33,163 39,457 38,260 33,633 29,343 37,166 39,500 NET FUTURES POSITIONS4 By type of deliverable security 6 U.S. Treasury bills -2,494 -2,308 -974 -1,823 -1,464 -1,009 -1,032 -705 -237 -432 812 Coupon securities, by maturity 7 Five years or less 3,130 4,018 3,100 2,375 2,095 2,798 2,806 4,325 3,973 3,485 2,209 8 More than five years -5,256 -5,916 -11,685 -9,728 -11,944 -14,945 -10,008 -10,577 -9,970 -14,621 -12,934 9 Federal agency 0 0 0 0 0 0 0 0 0 0 0 10 Mortgage-backed 0 0 0 0 0 0 0 0 0 0 0 NET OPTIONS POSITIONS By type of deliverable security 11 U.S. Treasury bills 0 0 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 12 Five years or less -2,653' -2,458 848 -725 -693 16 1,690 1,509 2,882 3,083 2,692 13 More than five years -433 -1,448 -671 -2,019 -601 -776 -486 -999 -252 2,147 2,495 14 Federal agency 0 0 0 0 0 0 0 0 0 0 0 15 Mortgage-backed 1,405 2,437 2,210 2,785 2,492 2,259 2,368 1,664 2,343 -464 -182 Financing5 Reverse repurchase agreements 16 Overnight and continuing 284,574 279,264 293,697 295,122 291,888 289,947 322,269 271,638 291,476 283,840 305,383 17 Term 503,687 537,456 552,156 526,746 563,468 597,502 511,002 535,289 555,332 600,039 607,423 Securities borrowed 18 Overnight and continuing 213,214 213,138 216,864 215,280 214,098 214,759 227,741 211,460 215,458 211,755 214,207 19 Term 77,877 81,206 78,569 81,124 84,883 81,694 73,246 75,345 76,489 83,949 93,569 Securities received as pledge 20 Overnight and continuing 5,937 6,499 4,104 4,012 4,094 4,011 4,163 4,001 4,452 4,603 11,328 21 Term n.a. n.a. 188 n.a. n.a. 184 203 180 178 153 165 Repurchase agreements 22 Overnight and continuing 599,641 595,167 602,889 572,343 585,445 607,208 633,677 575,751 624,993 637,862 643,690 23 Term 456,464 484,562 500,610 495,378 518,171 548,468 461,055 478,163 492,636 529,437 558,977 Securities loaned 24 Overnight and continuing 5,321 5,795 6,399 6,387 6,631 7,156 6,339 5,820 5,584 5,947 7,346 25 Term 6,057 4,430 4,352 4,979 4,441 5,165 3,713 4,059 4,427 4,879 4,522 Securities pledged 26 Overnight and continuing 62,775 59,877 62,667 65,196 66,523 63,219 64,797 57,179 60,212 61,080 61,646 27 Term 2,026 2,363 2,956 2,401 3,347 3,945 2,757 2,445 1,388 1,386 1,840 Collateralized loans 28 Overnight and continuing 0 0 0 0 0 0 0 0 0 0 0 29 Term 0 0 0 0 0 0 0 0 0 0 0 30 Total 10,604 11,503 12,391 7,927 14,381 11,813 12,120 9,606 16,226 12,383 13,191 MEMO: Matched book6 Securities in 31 Overnight and continuing 281,495 281,975 298,289 293,913 304,888 292,435 322,439 276,919 290,066 290,077 303,114 32 Term 487,773 521,831 531,303 509,093 540,911 575,827 490,500 517,037 533,488 579,944 594,712 Securities out 33 Overnight and continuing 358,230 362,687 363,061 364,418 364,387 363,224 379,851 340,727 372,527 378,812 405,995 34 Term 393,532 418,703 432,788 426,861 451,559 480,873 394,500 409,910 419,514 453,902 480,866 1. Data for positions and financing are obtained from reports submitted to the Federal 4. Futures positions reflect standardized agreements arranged on an exchange. All futures Reserve Bank of New York by the U.S. government securities dealers on its published list of positions are included regardless of time to delivery. primary dealers. Weekly figures are close-of-business Wednesday data. Positions for calendar 5. Overnight financing refers to agreements made on one business day that mature on the days of the report week are assumed to be constant. Monthly averages are based on the next business day; continuing contracts are agreements that remain in effect for more than one number of calendar days in the month. business day but have no specific maturity and can be terminated without advance notice by 2. Securities positions are reported at market value. either party; term agreements have a fixed maturity of more than one business day. Financing 3. Net outright positions include immediate and forward positions. Net immediate posi- data are reported in terms of actual funds paid or received, including accrued interest. tions include securities purchased or sold (other than mortgage-backed agency securities) that 6. Matched-book data reflect financial intermediation activity in which the borrowing and have been delivered or are scheduled to be delivered in five business days or less and lending transactions are matched. Matched-book data are included in the financing break- "when-issued" securities that settle on the issue date of offering. Net immediate positions for downs given above. The reverse repurchase and repurchase numbers are not always equal mortgage-backed agency securities include securities purchased or sold that have been because of the "matching" of securities of different values or different types of collateralizadelivered or are scheduled to be delivered in thirty business days or less. tion. Forward positions reflect agreements made in the over-the-counter market that specify NOTE, "n.a." indicates that data are not published because of insufficient activity. delayed delivery. Forward contracts for US. Treasury securities and federal agency debt Major changes in the report form filed by primary dealers induced a break in the dealer data securities are included when the time to delivery is more than five business days. Forward series as of the week ending July 6, 1994. contracts for mortgage-backed agency securities are included when the time to delivery is more than thirty business days. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic Nonfinancial Statistics • September 1997 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1996 1997 AAggeennccyy 11999933 11999944 11999955 11999966 Dec. Jan. Feb. Mar. Apr. 1 Federal and federally sponsored agencies 570,711 738,928 844,611 925,823 925,823 939,416 927,400 929,809 n.a. 2 Federal agencies 45,193 39,186 37,347 29,380 29,380 29,481 29,303 28,989 27,762 3 Defense Department1 6 6 6 6 6 6 6 6 6 4 Export-Import Bank2'3 5,315 3,455 2,050 1,447 1,447 1,437 1,437 1,363 1,357 5 Federal Housing Administration4 255 116 97 84 84 144 146 26 31 6 Government National Mortgage Association certificates of participation5 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. / Postal Service6 9,732 8,073 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 27,853 27,831 27,714 27,594 27,756 9 United States Railway Association6 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 10 Federally sponsored agencies7 523,452 699,742 807,264 896,443 896,443 909,998 898,097 900,820 932,729 11 Federal Home Loan Banks 139,512 205,817 243,194 263,404 263,404 257,055 255,407 266,456 277,880 12 Federal Home Loan Mortgage Corporation 49,993 93,279 119,961 156,980 156,980 163,171 161,532 153,621 162,872 13 Federal National Mortgage Association 201,112 257,230 299,174 331,270 331,270 333,302 332,046 336,174 341,789 14 Farm Credit Banks8 53,123 53,175 57,379 60,053 60,053 67,610 60,075 60,884 60,945 15 Student Loan Marketing Association9 39,784 50,335 47,529 44,763 44,763 48,788 48,707 43,105 48,515 16 Financing Corporation10 8,170 8,170 8,170 8,170 8,170 8,170 8,170 8,170 8,170 17 Farm Credit Financial Assistance Corporation" 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 18 Resolution Funding Corporation12 29,996 29,996 29,996 29,996 29,996 29,996 29,996 29,996 29,996 MEMO 19 Federal Financing Bank debt13 128,187 103,817 78,681 58,172 58,172 57,635 57,625 53,688 n.a. Lending to federal and federally sponsored agencies 20 Export-Import Bank3 5,309 3,449 2,044 1,431 1,431 1,431 1,431 1,357 1,357 21 Postal Service6 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. n.a. n.a. n.a. 23 Tennessee Valley Authority 6,325 3,200 3,200 n.a. n.a. n.a. n.a. n.a. n.a. 24 United States Railway Association6 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Other lending14 25 Farmers Home Administration 38,619 33,719 21,015 18,325 18,325 17,875 17,875 16,675 16,675 26 Rural Electrification Administration 17,578 17,392 17,144 16,702 16,702 16,702 16,710 15,696 15,674 27 Other 45,864 37,984 29,513 21,714 21,714 21,627 21,609 21,317 23,919 1. Consists of mortgages assumed by the Defense Department between 1957 and 1963 10. The Financing Corporation, established in August 1987 to recapitalize the Federal under family housing and homeowners assistance programs. Savings and Loan Insurance Corporation, undertook its first borrowing in October 1987. 2. Includes participation certificates reclassified as debt beginning Oct. 1, 1976. 11. The Farm Credit Financial Assistance Corporation, established in January 1988 to 3. On-budget since Sept. 30, 1976. provide assistance to the Farm Credit System, undertook its first borrowing in July 1988. 4. Consists of debentures issued in payment of Federal Housing Administration insurance 12. The Resolution Funding Corporation, established by the Financial Institutions Reform, claims. Once issued, these securities may be sold privately on the securities market. Recovery, and Enforcement Act of 1989, undertook its first borrowing in October 1989. 5. Certificates of participation issued before fiscal year 1969 by the Government National 13. The FFB, which began operations in 1974, is authorized to purchase or sell obligations Mortgage Association acting as trustee for the Farmers Home Administration, the Department issued, sold, or guaranteed by other federal agencies. Because FFB incurs debt solely for the of Health, Education, and Welfare, the Department of Housing and Urban Development, the purpose of lending to other agencies, its debt is not included in the main portion of the table to Small Business Administration, and the Veterans Administration. avoid double counting. 6. Off-budget. 14. Includes FFB purchases of agency assets and guaranteed loans; the latter are loans 7. Includes outstanding noncontingent liabilities: notes, bonds, and debentures. Includes guaranteed by numerous agencies, with the amounts guaranteed by any one agency generally Federal Agricultural Mortgage Corporation; therefore details do not sum to total. Some data being small. The Farmers Home Administration entry consists exclusively of agency assets, are estimated. whereas the Rural Electrification Administration entry consists of both agency assets and 8. Excludes borrowing by the Farm Credit Financial Assistance Corporation, which is guaranteed loans. shown on line 17. 9. Before late 1982, the association obtained financing through the Federal Financing Bank (FFB). Borrowing excludes that obtained from the FFB, which is shown on line 22. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Markets and Corporate Finance A31 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1996 1997 TTyyppee ooff iissssuuee oorr iissssuueerr,, 11999944 11999955 11999966 oorr uussee Nov. Dec. Jan. Feb. Mar. Apr. May June 1 All issues, new and refunding1 153,950 145,657 171,222 14,520 17,431 10,340 12,052 13,701 15,741r 15,407r 18,677 By type of issue 2 General obligation 54,404 56,980 60,409 5,134 4,755 4,160 4,287 5,491 6,224 5,725 6,164 3 Revenue 99,546 88,677 110,813 9,386 12,676 6,180 7,765 8,210 9,517r 9,682r 12,513 By type of issuer 4 State 19,186 14,665 13,651 1,351 663 728 713 4,037 1,126 1,216 1,197 5 Special district or statutory authority2 95,896 93,500 113,228 9,091 12,315 6,306 8,341 7,206 11,124r 9,596r 13,075 6 Municipality, county, or township 38,868 37,492 44,343 4,078 4,453 3,306 2,998 2,458 3,491 4,595 4,405 7 Issues for new capital 105,972 102,390 112,298 8,656 12,311 6,106 8,409 8,736 11,476 9,632 14,790 By use of proceeds 8 Education 21,267 23,964 26,851 1,530 2,306 1,974 1,924 2,330 3,264 2,844 3,498 9 Transportation 10,836 11,890 12,324 1,164 736 808 639 393 1,873 1,225 638 10 Utilities and conservation 10,192 9,618 9,791 1,102 1,006 749 901 954 425 1,608 1,615 11 Social welfare 20,289 19,566 24,583 1,974 3,294 1,265 1,281 2,644 1,929 1,291 4,438 12 Industrial aid 8,161 6,581 6,287 460 1,081 231 481 317 765 462 637 13 Other purposes 35,227 30,771 32,462 2,426 3,888 1,079 3,183 2,098 3,220 2,202 3,964 1. Par 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 TTyyppee ooff iissssuuee,, ooffffeerriinngg,, 11999944 11999955 11999966 oorr iissssuueerr Oct. Nov. Dec. Jan. Feb. Mar. Apr. May 1 All issues' 583,240 n.a. n a. 60,387 57,937 48,747 57,186 53,027 62,232 44,014r 54,421 2 Bonds2 498,039 573,206 n a. 47,498 44,569 39,585 44,027 44,980 54,632 37,914r 46,521 By type of offering 3 Public, domestic 365,222 408,804 386,280 39,855 38,948 37,108 35,449 35,245 45,886 29,800r 38,047 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 7,643 5,621 2,477 8,577 9,735 8,746 8,114r 8,474 By industry group 6 Manufacturing 43,423 61,070 41,959 5,969 2,720 5,096 4,088 4,791 3,060 2,291 2,355 7 Commercial and miscellaneous 40,735 50,689 34,076 5,010 4,282 1,727 4,926 2,004 1,641 6,20 r 4,532 8 Transportation 6,867 8,430 5,111 436 270 341 366 100 324 257 4,445 9 Public utility 13,322 13,751 8,161 1,067 773 680 858 1,476 1,185 47 653 10 Communication 13,340 22,999 13,320 802 475 628 1,210 405 2,802 500 300 11 Real estate and financial 380,352 416,269 358,446 34,215 36,049 31,113 32,578 36,204 45,619 28,617r 34,236 12 Stocks2 85,155 100,573 n.a. 12,889 13,368 9,162 13,159 8,047 7,779r 6,100r 7,900 By type of offering 13 Public preferred 12,570 10,917 33,208 3,855 5,656 5,452 8,048 1,510 2,740r l,952r 2,050 14 Common 47,828 57,556 83,052 9,034 7,712 3,710 5,111 6,537 5,039r 4,148r 5,850 15 Private placement3 24,800 32,100 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. By industry group 16 Manufacturing 17,798 21,545 1,588 1,530 899 943 2,049 1,136r 842 1,647 17 Commercial and miscellaneous 15,713 27,844 n.a. 5,752 3,974 2,922 1,827 3,041 1,923r 1,081 1,890 18 Transportation 2,203 804 42 367 54 250 258 0r 0 35 19 Public utility 2,214 1,936 100 210 103 1,847 96 84 r 570 200 20 Communication 494 1,077 480 42 23 0 28 0 25 0 21 Real estate and financial 46,733 47,367 4,928 7,219 5,161 8,292 2,575 3,879r 3,582r 4,129 1. Figures represent gross proceeds of issues maturing in more than one year; they are the 2. Monthly data cover only public offerings. principal amount or number of units calculated by multiplying by the offering price. Figures 3. Monthly data are not available. exclude secondary offerings, employee stock plans, investment companies other than closed- SOURCE. Beginning July 1993, Securities Data Company and the Board of Governors of end, intracorporate transactions, equities sold abroad, and Yankee bonds. Stock data include the Federal Reserve System. ownership securities issued by limited partnerships. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A32 Domestic Financial Statistics • September 1997 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Assets1 Millions of dollars 1996 1997 IItteemm 11999955 11999966 Nov. Dec. Jan. Feb. Mar. Apr. Mayr June 1 Sales of own shares2 871,415 1,149,918 87,958 122,792 134,460 102,169 101,390 110,721 103,470 112,807 2 Redemptions of own shares 699,497 853,460 65,949 87,949 96,243 73,871 79,976 100,188 76,337 87,056 3 Net sales3 171,918 296,458 22,009 34,843 38,218 28,298 21,413 10,532 27,133 25,752 4 Assets4 2,067,337 2,637,398 2,652,884 2,637,398 2,752,273 2,772,715 2,700,474 2,782,077 2,952,609 3,067,392 5 Cash5 142,572 139,396 146,044 137,973 152,297 153,525 160,570 177,979 182,004 180,464 6 Other 1,924,765 2,498,002 2,506,840 2,499,425 2,599,976 2,619,189 2,539,906 2,604,098 2,770,606 2,886,928 1. Data on sales and redemptions exclude money market mutual funds but include 4. Market value at end of period, less current liabilities. limited-maturity municipal bond funds. Data on asset positions exclude both money market 5. Includes all U.S. Treasury securities and other short-term debt securities. mutual funds and limited-maturity municipal bond funds. SOURCE. Investment Company Institute. Data based on reports of membership, which 2. Includes reinvestment of net income dividends. Excludes reinvestment of capital gains comprises substantially all open-end investment companies registered with the Securities and distributions and share issue of conversions from one fund to another in the same group. Exchange Commission. Data reflect underwritings of newly formed companies after their 3. Excludes sales and redemptions resulting from transfers of shares into or out of money initial offering of securities. market mutual funds within the same fund family. 1.48 CORPORATE PROFITS AND THEIR DISTRIBUTION Billions of dollars; quarterly data at seasonally adjusted annual rates 1995 1996 1997 AAccccoouunntt 11999944 11999955 11999966 Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql 1 Profits with inventory valuation and capital consumption adjustment 554.1 604.8 670.2 580.8 630.0 628.3 661.2 672.1 677.3 670.1 712.5 2 Profits before taxes 531.2 598.9 639.9 589.6 607.2 604.2 642.2 644.6 635.6 637.1 668.5 3 Profits-tax liability ' 195.3 218.7 233.0 214.2 224.5 218.7 233.4 236.4 233.4 228.9 246.2 4 Profits after taxes 335.9 380.2 406.8 375.3 382.8 385.5 408.8 408.1 402.2 408.2 422.3 5 Dividends 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 124.8 152.8 162.6 150.8 154.3 150.8 168.9 165.1 156.9 159.5 168.1 7 Inventory valuation -13.3 -28.1 -8.9 -42.3 -9.3 -8.8 -17.4 -11.0 2.0 -9.2 -.4 8 Capital consumption adjustment 36.2 34.0 39.2 33.5 32.1 32.9 36.4 38.6 39.7 42.2 44.4 SOURCE. U.S. Department of Commerce, Survey of Current Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Markets and Corporate Finance A33 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities' Billions of dollars, end of period; not seasonally adjusted 1995 1996 1997 AAccccoouunntt 11999944 11999955 11999966 Q3 Q4 Ql Q2 Q3 Q4 Ql ASSETS 1 Accounts receivable, gross2 551.0 614.6 658.3 594.7 614.6 621.8 631.4 642.0 658.3 672.7 2 Consumer 134.8 152.0 154.5 146.2 152.0 151.9 154.6 154.8 154.5 150.4 3 Business 337.6 375.9 398.1 362.4 375.9 380.9 383.7 387.0 398.1 409.6 4 Real estate 78.5 86.6 105.7 86.1 86.6 89.1 93.1 100.2 105.7 112.6 5 LESS: Reserves for unearned income 55.0 63.2 59.1 61.2 63.2 61.5 59.6 58.9 59.1 58.3 6 Reserves for losses 12.4 14.1 14.8 13.8 14.1 14.2 14.1 14.7 14.8 14.5 7 Accounts receivable, net 483.5 537.3 584.4 519.7 537.3 546.1 557.7 568.4 584.4 599.9 8 All other 183.4 210.7 242.5 198.1 210.7 212.8 216.1 226.8 242.5 239.7 9 Total assets 666.9 748.0 826.9 717.8 748.0 7S8.9 773.8 795.2 826.9 839.6 LIABILITIES AND CAPITAL 10 Bank loans 21.2 23.1 27.8 21.8 23.1 23.5 26.2 27.5 27.8 26.2 11 Commercial paper 184.6 184.5 192.9 178.0 184.5 184.8 186.9 189.4 192.9 195.4 Debt 12 Owed to parent 51.0 62.3 79.2 59.0 62.3 62.3 68.4 71.9 79.2 81.2 13 Not elsewhere classified 235.0 284.7 320.0 272.1 284.7 291.4 301.3 311.5 320.0 325.3 14 All other liabilities 99.5 106.2 109.1 102.4 106.2 105.7 100.1 102.8 109.1 112.8 15 Capital, surplus, and undivided profits 75.7 87.2 97.9 84.4 87.2 91.1 90.9 92.1 97.9 98.7 16 Total liabilities and capital 666.9 748.0 826.9 717.8 748.0 758.9 773.8 795.2 826.9 839.6 1. Includes finance company subsidiaries of bank holding companies but not of retailers 2. Before deduction for unearned income and losses, and banks. Data are amounts carried on the balance sheets of finance companies; securitized pools are not shown, as they are not on the books. 1.52 DOMESTIC FINANCE COMPANIES Consumer, Real Estate, and Business Credit' Millions of dollars, amounts outstanding, end of period 1996 1997 TTyyppee ooff ccrreeddiitt Dec. Jan. Feb. Mar. Apr.' May Seasonally adjusted 1 Total 615,618 691,616 755,827 755,827 762,305 763,525 767,187 772,083 777,961 2 Consumer 176,085 198,861 213,513 213,513 213,504 213,429 209,744 213,707 214,016 3 Real estate" 78,910 87,077 106,300 106,300 108,476 110,841 113,710 115,523 118,067 4 Business 360,624 405,678 436.014 436,014 440,325 439,255 443,734 442,853 445,878 Not seasonally adjusted 5 Total 620,975 697,340 761,756 761,756 763,714 764,717 769,258 774,738 780,271 6 Consumer 178,999 202.101 216,886 216,886 215,122 213,058 208,604 211,976 212,625 7 Motor vehicles 61,609 70.061 73,484 73,484 73,933 74,337 73,139 70,768 72,068 8 Other consumer1 73,221 81,988 80,984 80,984 80,927 79,798 77,274 79,158 80,226 9 Securitized motor vehicles4 31,897 33,633 35,644 35,644 33,976 33,069 32,101 36,106 34,489 10 Securitized other consumer4 12,272 16,419 26,774 26,774 26,286 25,854 26,090 25,944 25,842 11 Real estate" 78,479 86,606 105,728 105,728 108,980 111,265 113,157 115,569 118,067 12 Business 363,497 408,633 439,142 439,142 439,612 440,394 447,497 447,193 449,579 13 Motor vehicles 118,197 133,277 142,009 142,009 145,329 148,334 152,037 150,712 150,098 14 Retail loans5 21,514 25,304 27,868 27,868 28,549 28,629 28,617 27,935 27,982 15 Wholesale loans6 35,037 36,427 32,337 32,337 33,811 36,259 38,846 37,165 36,013 16 Leases 61,646 71,546 81,804 81,804 82,969 83,446 84,574 85,612 86,103 17 Equipment 157,953 177,297 184,942 184,942 182,484 181,949 183,155 184,525 185,209 18 Loans7 49,358 59,109 60,991 60,991 57,977 56,785 57,366 57,430 56,503 19 Leases 108,595 118,188 123,951 123,951 124,507 125,164 125,789 127,095 128,706 20 Other business8 61,495 65,363 71,110 71,110 71,784 72,718 74,434 74,800 75,736 21 Securitized business assets4 25,852 32.696 41,081 41,081 40,015 37,393 37,871 37,156 38,536 22 Retail loans 4,494 4,723 5,250 5,250 5,086 4,778 4,470 4,184 5,005 23 Wholesale loans 14,826 21,327 24,732 24,732 24,143 21,699 22,247 21,885 22,754 24 Leases 6,532 6,646 11,099 11,099 10,786 10,916 11,154 11,087 10,777 1. Includes finance company subsidiaries of bank holding companies but not of retailers 5. Passenger car fleets and commercial land vehicles for which licenses are required. and banks. Data are before deductions for unearned income and losses. Data in this table also 6. Credit arising from transactions between manufacturers and dealers, that is, floor plan appear in the Board's G.20 (422) monthly statistical release. For ordering address, see inside financing. front cover. 7. Beginning with the June 1996 data, retail and wholesale business equipment loans have 2. Includes all loans secured by liens on any type of real estate, for example, first and junior been combined and are no longer separately available. mortgages and home equity loans. 8. Includes loans on commercial accounts receivable, factored commercial accounts, and 3. Includes personal cash loans, mobile home loans, and loans to purchase other types of receivable dealer capital; small loans used primarily for business or farm purposes; and consumer goods such as appliances, apparel, general merchandise, and recreation vehicles. wholesale and lease paper for mobile homes, campers, and travel trailers. 4. Outstanding balances of pools upon which securities have been issued; these balances are 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 NonfinancialS tatistics • September 1997 1.53 MORTGAGE MARKETS Mortgages on New Homes Millions of dollars except as noted 1996 1997 IItteemm 11999944 11999955 11999966 Dec. Jan. Feb. Mar. Apr. May June Terms and yields in primary and secondary markets PRIMARY MARKETS Terms' 170.4 175.8 182.4 170.8 172.4 166.6 169.2 172.5 177.6 181.4 130.8 134.5 139.2 129.9 133.6 130.9 132.1 134.8 137.7 140.6 78.8 78.6 78.2 79.3 79.7 80.9 80.8 81.1 80.0 79.9 27.5 27.7 27.2 27.5 27.9 28.2 28.0 27.8 28.2 28.0 1.29 1.21 1.21 1.01 1.02 1.03 0.99 1.04 1.00 1.04 Yield (percent per year) 7.26 7.65 7.56 7.63 7.65 7.61 7.72 7.86 7.85 7.79 7.47 7.85 7.77 7.79 7.81 7.78 7.88 8.03 8.01 7.95 8 Contract rate (HUD series)4 8.58 8.05 8.03 7.91 7.94 7.94 8.25 8.19 8.08 77..8822 SECONDARY MARKETS Yield (percent per year) 8.68 8.18 8.19 8.06 8.06 8.08 8.55 8.56 8.05 8.02 10 GNMA securities6 7.96 7.57 7.48 7.33 7.51 7.37 7.69 7.80 7.59 77..3377 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 1 1 Total 222,057 253.511 287,052 287,052 288,504 288,951 292,115 295,804 297,023 297,471 12 FHA/VA insured 27,558 28.762 30,592 30,592 30,352 30,119 30,100 30,839 31,437 31,198 13 Conventional 194,499 224,749 256,460 256,460 258,152 258,832 262,015 264,965 265,586 266,273 14 Mortgage transactions purchased (during period) 62,389 56.598 68,618 6,178 4,128 3,029 5,839 6,683 4,148 3,594 Mortgage commitments (during period) 15 Issued7 54,038 56,092 65,859 3,991 4,384 4,407 8,299 3,898 1,704 6,196 16 To sell8 1.820 360 130 28 71 0 1 0 23 115 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of periodf 17 Total 72,693 107.424 137,755 137,755 138,935 139,925 144,558 147,190 148,698 149,250 18 FHA/VA insured 276 267 220 220 216 213 208 205 210 210 19 Conventional 72,416 107,157 137,535 137,535 138,719 139,712 144,350 146,985 148,488 149,040 Mortgage transactions (during period) 70 Purchases 124,697 98.470 128,566 9,943 9,507 8,204 7,403 8,981 8,195 8,884 21 Sales 117,110 85.877 119,702 9,220 9,204 10,271 6,796 8,269 7,596r 8,321 22 Mortgage commitments contracted (during period)9 136,067 118.659 128,995 9,905 9,021 7,537 7,595 9,746 7,408 9,099 1. Weighted averages based on sample surveys of mortgages originated by major institu- 6. Average net yields to investors on fully modified pass-through securities backed by tional lender groups for purchase of newly built homes; compiled by the Federal Housing mortgages and guaranteed by the Government National Mortgage Association (GNMA), Finance Board in cooperation with the Federal Deposit Insurance Corporation. assuming prepayment in twelve years on pools of thirty-year mortgages insured by the 2. Includes all fees, commissions, discounts, and "points" paid (by the borrower or the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. seller) to obtain a loan. 7. Does not include standby commitments issued, but includes standby commitments 3. Average effective interest rate on loans closed for purchase of newly built homes, converted. assuming prepayment at the end of ten years. 8. Includes participation loans as well as whole loans. 4. Average contract rate on new commitments for conventional first mortgages; from U.S. 9. Includes conventional and government-underwritten loans. The Federal Home Loan Department of Housing and Urban Development (HUD). Based on transactions on the first Mortgage Corporation's mortgage commitments and mortgage transactions include activity day of the subsequent month. under mortgage securities swap programs, whereas the corresponding data for FNMA 5. Average gross yield on thirty-year, minimum-downpayment first mortgages insured exclude swap activity. by the Federal Housing Administration (FHA) for immediate delivery in the private secondary market. Based on transactions on first day of subsequent month. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Real Estate A35 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period 1996 1997 TTyyppee ooff hhoollddeerr aanndd pprrooppeerrttyy 11999933 11999944 11999955 Qi Q2 Q3 Q4 Qlp 1 All holders 4,269,331 4,475,550 4,709,386 4,788,889 4,882,718 4,964,129 5,052,167 5,113,053 By type of properly 2 One- to four-family residences 3,232,753 3,436,677 3,633,779 3,700,246 3,775.559 3,848,864 3,915,412 3,966,770 3 Multifamily residences 270,380 275,301 287,761 292,084 297,543 301,943 310,395 313,285 4 Nonfarm, nonresidential 685,015 680,615 703,226 711,355 723,090 725,919 738,301 744,567 5 Farm 81,183 82,957 84,620 85,204 86,526 87,405 88,060 88,432 By type of holder 6 Major financial institutions 1,763,404 1,811,417 1,884,623 1,897,191 1.919,622 1,945,088 1,967,948 1,979,222 7 Commercial banks2 940,595 1,004,322 1,080,366 1,087,207 1,099,643 1,112,914 1.1-36,128 1,149,716 8 One- to four-family 556,660 611,391 663,614 665,935 670,756 679,217 696,333 705,210 9 Multifamily 38,657 39,360 43,842 44,700 45,368 46,529 47,037 47,904 10 Nonfarm, nonresidential 324,413 331,004 349,081 352,641 358,956 362,353 367,875 371,372 11 Farm 20,866 22,567 23,829 23,931 24,563 24,815 24,883 25,231 12 Savings institutions' 598,437 596,191 596,789 602,631 611,735 628,037 628,337 627,212 13 One- to four-family 470,000 477,626 482,351 489,634 498,219 513,291 513,376 513,903 14 Multifamily 67,367 64,343 61,988 60,540 60,680 61,434 61,624 60,718 1.5 Nonfarm, nonresidential 60,765 53,933 52,162 52,155 52,522 52,991 53,007 52,255 16 Farm 305 289 288 302 315 320 331 336 17 Life insurance companies 224,372 210,904 207,468 207,353 208,244 204,138 203,483 202,293 18 One- to four-family 8,593 7,018 7,316 7.273 7,270 6,190 5,817 5,412 19 Multifamily 25,376 23,902 23,435 23,427 23,534 23,155 23,082 22,968 20 Nonfarm, nonresidential 180,934 170,421 167,095 167.039 167,800 165,096 164,573 163,765 21 Farm 9,469 9,563 9,622 9,614 9,640 9,697 10,011 10,148 22 Federal and related agencies 327,014 319,327 313,760 312,950 314,694 311,697 309,757 303,591 23 Government National Mortgage Association 22 6 2 2 2 2 2 6 24 One- to four-family 15 6 2 2 2 2 2 6 25 Multifamily 7 0 0 0 0 0 0 0 26 Farmers Home Administration 41,386 41,781 41,791 41.594 41,547 41,575 41,596 41,485 27 One- to four-family 15,303 13,826 12,643 12,327 11,982 11,630 11,319 11,311 28 Multifamily 10,940 11,319 11,617 11,636 11,645 11,652 11,685 11.692 29 Nonfarm, nonresidential 5,406 5,670 6,248 6,365 6,552 6,681 6,841 6,969 30 Farm 9,739 10,966 11,282 11,266 11,369 11,613 11,752 11,513 31 Federal Housing and Veterans' Administrations 12,215 10,964 9,809 8,439 8,052 6,627 6,244 4,330 32 One- to four-family 5,364 4,753 5,180 4,228 3,861 3,190 3.524 2,335 33 Multifamily 6,851 6,211 4,629 4,211 4,191 3,438 2,719 1,995 34 Resolution Trust Corporation 17,284 10,428 1,864 0 0 0 0 0 35 One- to four-family 7,203 5,200 691 0 0 0 0 0 36 Multifamily 5,327 2,859 647 0 0 0 0 0 37 Nonfarm, nonresidential 4,754 2,369 525 0 0 0 0 0 38 Farm 0 0 0 0 0 0 0 0 39 Federal Deposit Insurance Corporation 14,112 7,821 4,303 5,553 5,016 4.025 2,431 2,217 40 One- to four-family 2,367 1,049 492 839 840 675 365 333 41 Multifamily 1,426 1,595 428 1,099 955 766 413 377 42 Nonfarm, nonresidential 10,319 5,177 3,383 3,616 3,221 2,584 1,653 1,508 43 Farm 0 0 0 0 0 0 0 0 44 Federal National Mortgage Association 166,642 178,059 183,782 183,531 186,041 185,221 184,445 182,556 45 One- to four-family 151,310 162,160 168,122 167,895 170,572 170,083 169,765 168,436 46 Multifamily 15,332 15,899 15,660 15,636 15,469 15,138 14,680 14,120 47 Federal Land Banks 28,460 28,555 28,428 28,891 29,362 29,579 29,602 29,668 48 One- to four-family 1,675 1,671 1,673 1,700 1,728 1,740 1,742 1,746 49 Farm 26,785 26,885 26,755 27,191 27,634 27,839 27,860 27,922 50 Federal Home Loan Mortgage Corporation 46,892 41,712 43,781 44,939 44,674 44,668 45,437 43,329 51 One- to four-family 44,345 38,882 39,929 40,877 40,477 40,304 40,691 38,301 52 Multifamily 2,547 2,830 3,852 4.062 4,197 4,364 4,746 5,028 53 Mortgage pools or trusts5 1,570,666 1,726,833 1,861,864 1,905,515 1,963,909 2,008,229 2,057,873 2,100,674 54 Government National Mortgage Association 414,066 450,934 472,292 475,829 485,441 497,248 505,977 513,531 55 One- to four-family 404,864 441,198 461,447 464,650 473,950 485,303 493,795 500,651 56 Multifamily 9,202 9,736 10,845 11,179 11,491 11,945 12,182 12,880 57 Federal Home Loan Mortgage Corporation 447,147 490,851 515,051 524,327 536,671 545,608 554,260 562,894 58 One- to four-family 442,612 487,725 512,238 521,722 534,238 543,341 551,513 560,369 59 Multifamily 4,535 3,126 2,813 2,605 2,433 2,267 2,747 2,525 60 Federal National Mortgage Association 495,525 530,343 582,959 599,546 621,285 636,362 650,780 663,668 61 One- to four-family 486,804 520,763 569,724 585,527 606,271 619,869 633,210 645,324 62 Multifamily 8,721 9,580 13,235 14,019 15,014 16,493 17,570 18,344 63 Farmers Home Administration4 28 19 11 10 9 7 3 3 64 One- to four-family 5 3 2 I 1 0 0 0 65 Multifamily 0 0 0 0 0 0 0 0 66 Nonfarm, nonresidential 13 9 5 5 4 4 0 0 67 Farm 10 7 4 4 4 3 3 3 68 Private mortgage conduits 213,901 254,686 291,551 305,803 320,502 329,003 346,853 360,579 69 One- to four-family6 179,730 202,987 222,892 230,221 239,153 244,527 249,700 258,000 70 Multifamily 8,701 14,925 21,279 24,477 26,809 28,141 33,689 35,498 71 Nonfarm, nonresidential 25,469 36,774 47,380 51,104 54,541 56,336 63,464 67,081 72 Farm 0 0 0 0 0 0 0 0 73 Individuals and others7 608,247 617,972 649,140 673,233 684,494 699,115 716,590 729,565 74 One- to four-family 455,903 460,419 485,464 507,414 516,239 529,501 544,259 555,434 75 Multifamily 65,393 69,615 73,492 74,492 75,758 76,622 78,221 79.236 76 Nonfarm, nonresidential 72,943 75,257 77,346 78,431 79,495 79,874 80,888 81,616 77 Farm 14,009 12,681 12,838 12,896 13,002 13,118 13,221 13,280 1. Multifamily debt refers to loans on structures of five or more units. 6. Includes securitized home equity loans. 2. Includes loans held by nondeposit trust companies but not loans held by bank trust 7. Other holders include mortgage companies, real estate investment trusts, state 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 nonfarm 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 Securities and other sources. the agency indicated. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A36 Domestic NonfinancialS tatistics • September 1997 1.55 CONSUMER CREDIT1 Millions of dollars, amounts outstanding, end of period 1996 1997r 11999955 11999966 Dec. Jan. Feb. Mar. Apr. May Seasonally adjusted I Total 966,457 1,103,296 l,192,548r l,192,548r 1,202,445 1,208,693 1,211,364 1,221,137 1,224,088 2 Automobile 317,182 350,848 375,182 375.182 375,985 376,041 375,020 379,539 377,820 3 Revolving 339,337 413,894 467,854 467.854 475,482 479,701 480,436 485,788 486,510 4 Other2 309,939 338,554 349,513r 349.513r 350,977 352,951 355,908 355,810 359,758 Not seasonally adjusted 5 Total 990,247 1,131,881 l,224,437r l,224,437r 1,213,628 1,205,398 1,200,117 1,209,463 1,213,611 By major holder 6 Commercial banks 462,923 507,753 529,417r 529,417r 525,749 518,914 512,016 517,187 518,547 7 Finance companies 134,830 152,624 154,468 154,468 154,860 154,135 150,413 149,926 152,294 8 Credit unions 119,594 131,939 144,148 144,148 144,432 143,788 144,415 146,265 147,368 9 Savings institutions 38,468 40,106 44,711 44.711 45.095 45,478 45,860 46,243 46,626 10 Nonfinancial business5 86,621 85,061 79.745 79,745 75,611 72,599 74,500 74,075 74,061 11 Pools of securitized assets4 147,811 214,398 271,948 271,948 267,881 270,484 272,913 275,767 274,715 By major type of credit5 12 Automobile 319,715 354,055 378,791 378,791 375.577 373,687 371,030 374,871 375,024 13 Commercial banks 141,895 149,094 153,983 153,983 153,013 151,826 150,458 151,260 150,794 14 Finance companies 61,609 70,626 73,484 73,484 73,933 74,337 73,139 70,768 72,068 IS Pools of securitized assets4 36,376 44,411 51.171 51.171 48,473 47,070 46,266 50,670 48,536 16 Revolving 357,307 435,674 492,367 492,367 483,175 478,353 474,445 478,355 480,088 17 Commercial banks 182,021 210,298 228,615 228,615 223,184 215,772 207,251 212,492 212,748 18 Nonfinancial business3 56,790 53,525 46,901 46,901 43,900 41,813 43,979 43,594 43,394 19 Pools of securitized assets4 96,130 147.934 188,712 188,712 187,865 192,332 194,823 193,480 194,736 20 Other 313,225 342.152 353,279r 353,279r 354,876 353,358 354,642 356.237 358,499 21 Commercial banks 139,007 148,361 146,819r 146.819r 149,552 151,316 154,307 153,435 155,005 22 Finance companies 73,221 81,998 80,984 80,984 80,927 79,798 77,274 79,158 80,226 23 Nonfinancial business3 29,831 31,536 32,844 32,844 31,711 30,786 30,521 30,481 30,667 24 Pools of securitized assets4 15,305 22,053 32,065 32,065 31,543 31,082 31,824 31,617 31,443 1. The Board's series on amounts of credit covers most short- and intermediate-term credit 3. Includes retailers and gasoline companies. extended to individuals. 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 other 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 education, boats, 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 IItteemm 11999944 11999955 11999966 Nov. Dec. Jan. Feb. Mar. Apr. May INTEREST RATES Commercial banks~ 1 48-month new car 8.12 9.57 9.05 9.03 n.a. n.a. 8.92 9.20 2 24-month personal 13.19 13.94 13.54 13.62 n.a. n.a. 13.46 n.a. n.a. 13.81 Credit card plan 3 All accounts 15.69 16.02 15.63 15.62 n.a. n.a. 15.88 n.a. n.a. 15.75 4 Accounts assessed interest 15.77 15.79 15.50 15.52 n.a. n.a. 15.13 n.a. n.a. 15.72 Auto finance companies 5 New car 9.79 11.19 9.84 10.31 8.60 7.17 7.44 8.08 8.56 7.80 6 Used car 13.49 14.48 13.53 13.56 13.42 12.93 13.08 13.18 13.29 13.48 OTHER TERMS3 Maturity (months) 7 New car 54.0 54.1 51.6 52.3 52.3 55.1 54.6 53.5 52.8 53.2 8 Used car 50.2 52.2 51.4 50.3 49.9 51.5 51.1 51.1 51.2 51.3 Loan-to-value ratio 9 New car 92 92 91 90 90 92 92 90 91 93 10 Used car 99 99 100 102 99 99 99 99 99 99 Amount financed (dollars) 11 New car 15,375 16,210 16,987 17,719 17,670 17,090 16,837 17,198 17,620 18,060 12 Used car 10,709 11,590 12,182 12,393 12,492 12,362 12,202 12,194 12,195 12,261 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 1995 1996 1997 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr Q3 Q4 Ql Q2 Q3 Q4 Ql Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors.... 545.6 628.8 621.6 719.7 751.8 571.1 590.2 886.1 715.0 712.7 693.2 762.9 By sector and instrument ? Federal government 304.0 256.1 155.9 144.4 145.0 86.0 59.3 239.9 62.4 161.3 116.5 93.7 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 95.2 4 Budget agency securities and mortgages .2 7.8 .2 1.5 -1.6 .4 5.1 -2.3 2.2 -3.1 -3.3 -1.4 5 Nonfederal 241.6 372.7 465.8 575.3 606.7 485.1 530.9 646.3 652.6 551.4 576.7 669.1 By instrument 6 Commercial paper 8.6 10.0 21.4 18.1 -.9 18.1 14.1 30.3 11.0 -16.1 -29.0 13.1 7 Municipal securities and loans 30.5 74.8 -29.3 -44.2 1.5 -107.2 -12.6 -18.9 37.7 -76.2 63.5 26.8 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 79.4 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 31.0 138.4 in 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 34.9 ii 133.5 157.0 196.4 228.0 331.4 247.7 191.0 377.9 339.4 268.0 340.2 296.4 i? Home 190.3 186.4 203.9 197.1 281.6 219.2 161.4 333.5 276.1 248.4 268.5 274.3 13 Multifamily residential -10.7 -5.9 1.7 10.5 18.9 11.6 13.3 14.7 18.3 13.4 29.1 6.3 14 Commercial -47.5 -23.9 -11.0 18.7 27.4 14.8 15.2 27.4 39.7 2.7 39.9 14.3 15 Farm 1.4 .5 1.8 1.7 3.4 2.2 1.1 2.3 5.3 3.5 2.6 1.5 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 80.2 By borrowing sector 17 Household 201.0 256.5 372.4 381.9 403.4 413.8 334.6 473.5 420.3 372.1 347.7 391.4 18 Nonfinancial business 19.5 53.9 133.2 232.4 190.5 172.5 207.0 176.4 187.8 240.9 156.8 237.5 19 Coiporate 34.1 47.7 118.5 197.0 146.4 133.8 174.9 130.9 148.3 211.8 94.6 189.2 20 Nonfarm noncorporate -16.0 4.2 11.9 33.7 40.8 35.2 33.1 45.5 32.4 30.2 55.0 48.8 71 Farm 1.3 2.0 2.8 1.6 3.3 3.5 -1.0 .1 7.1 -1.2 7.2 -.4 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 40.3 23 Foreign net borrowing in United States 23.7 70.4 -15.3 69.5 67.4 88.3 76.9 49.1 36.6 106.0 77.8 29.0 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 13.3 ?5 Bonds 16.8 82.9 12.2 48.3 46.8 55.2 72.7 47.9 11.1 59.7 68.4 17.3 26 Bank loans n.e.c 2.3 .7 1.4 8.5 9.1 8.2 11.9 8.7 15.1 4.7 7.8 -.6 27 Other loans and advances -.6 -4.2 -1.6 -.8 .7 1.3 -3.9 1.1 .7 3.1 -2.2 -.9 28 Total domestic plus foreign 569.3 699.3 606.4 789.1 819.1 659.4 667.1 935.3 751.5 818.7 771.0 791.9 Financial sectors 29 Total net borrowing by financial sectors 240.0 291.3 467.7 447.2 531.2 506.3 574.3 330.9 689.3 497.2 607.2 332.8 By instrument 30 Federal government-related 155.8 165.3 287.5 204.1 231.1 227.7 305.5 137.8 296.0 240.4 250.0 112.4 31 Government-sponsored enterprise securities 40.3 80.6 176.9 105.9 90.4 101.5 132.1 31.4 126.9 80.0 123.3 10.7 32 Mortgage pool securities 115.6 84.7 115.4 98.2 140.7 126.2 173.4 106.5 169.1 160.4 126.8 101.8 33 Loans from U.S. government .0 .0 -4.8 .0 .0 .0 .0 .0 .0 .0 .0 .0 34 84.2 126.0 180.2 243.1 300.1 278.6 268.8 193.1 393.3 256.8 357.2 220.3 35 Open market paper -.7 -6.2 41.6 42.6 92.7 43.7 55.1 17.8 105.7 85.2 162.0 177.1 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 45.7 37 Bank loans n.e.c 2.2 -13.0 -12.3 5.6 14.5 8.2 -1.2 25.4 23.5 4.1 5.0 -2.4 38 Other loans and advances -.6 22.4 22.6 3.4 27.2 4.9 32.0 -5.5 48.6 33.9 31.8 -16.1 39 Mortgages .6 3.6 9.8 5.9 11.4 4.5 7.7 7.7 10.8 12.9 14.3 16.0 By borrowing sector 40 Commercial banking 10.0 13.4 20.1 22.5 11.6 38.9 -9.7 -32.5 40.1 1155..77 23.2 19.3 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 -14.6 42 Credit unions .0 .2 .2 -.1 .1 .1 .0 -.1 -.2 .3 .3 -.2 43 Life insurance companies .0 .2 .3 -.1 1.1 -.1 -.4 2.5 .3 -.4 2.0 .8 44 Government-sponsored enterprises 40.2 80.6 172.1 105.9 90.4 101.5 132.1 31.4 126.9 80.0 123.3 10.7 45 Federally related mortgage pools 115.6 84.7 115.4 98.2 140.7 126.2 173.4 106.5 169.1 160.4 126.8 101.8 46 Issuers of asset-backed securities (ABSs) 58.5 82.4 69.5 133.2 130.2 164.8 187.5 137.1 131.1 101.8 150.6 52.6 47 Finance companies —1.6 .2 50.2 51.6 48.4 19.8 54.3 47.1 68.4 56.9 21.1 43.0 48 Mortgage companies 8.0 .0 -11.5 .4 9.9 4.0 -10.0 20.0 16.0 1.6 11..88 -2.6 49 Real estate investment trusts (REITs) .3 3.4 13.7 6.0 12.8 4.5 8.3 8.2 11.5 13.7 1177..77 18.9 50 Brokers and dealers 2.7 12.0 .5 -5.0 -2.0 2.1 7.7 -31.8 13.2 5.7 4.9 -2.9 51 Funding corporations 13.2 2.9 24.2 32.0 62.1 39.4 -.4 31.6 70.9 35.0 110.9 106.1 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Nonfinancial Statistics • September 1997 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS'—Continued 1995 1996 1997 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999922 11999933 11999944 11999955 11999966 Q3 Q4 Ql Q2 Q3 Q4 Ql All sectors 55552222 TTTToooottttaaaallll nnnneeeetttt bbbboooorrrrrrrroooowwwwiiiinnnngggg,,,, aaaallllllll sssseeeeccccttttoooorrrrssss 809.3 990.6 1,074.1 1,236.3 1,350.3 1,165.7 1,241.4 1,266.2 1,440.8 1,315.9 1,378.2 1,124.7 55553333 OOOOppppeeeennnn mmmmaaaarrrrkkkkeeeetttt ppppaaaappppeeeerrrr 13.1 -5.1 35.7 74.3 102.6 85.5 65.3 39.6 126.3 107.6 136.8 203.4 55554444 UUUU....SSSS.... ggggoooovvvveeeerrrrnnnnmmmmeeeennnntttt sssseeeeccccuuuurrrriiiittttiiiieeeessss 459.8 421.4 448.1 348.5 376.1 313.7 364.8 377.7 358.4 401.7 366.5 206.2 55555555 MMMMuuuunnnniiiicccciiiippppaaaallll sssseeeeccccuuuurrrriiiittttiiiieeeessss 30.5 74.8 -29.3 -44.2 1.5 -107.2 -12.6 -18.9 37.7 -76.2 63.5 26.8 55556666 CCCCoooorrrrppppoooorrrraaaatttteeee aaaannnndddd ffffoooorrrreeeeiiiiggggnnnn bbbboooonnnnddddssss 167.1 277.3 153.9 307.2 273.6 332.2 329.9 256.4 287.4 248.2 302.4 142.4 55557777 BBBBaaaannnnkkkk llllooooaaaannnnssss nnnn....eeee....cccc -9.3 -8.6 62.3 113.5 93.8 91.4 88.6 74.7 113.6 143.1 43.8 135.4 55558888 OOOOtttthhhheeeerrrr llllooooaaaannnnssss aaaannnndddd aaaaddddvvvvaaaannnncccceeeessss 8.9 8.7 70.7 61.6 66.7 41.3 89.1 28.6 76.1 116.5 45.8 17.9 55559999 MMMMoooorrrrttttggggaaaaggggeeeessss 134.1 160.6 206.2 233.8 342.8 252.2 198.7 385.6 350.1 280.9 354.5 312.4 66660000 CCCCoooonnnnssssuuuummmmeeeerrrr ccccrrrreeeeddddiiiitttt 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 equities 66661111 TTTToooottttaaaallll nnnneeeetttt iiiissssssssuuuueeeessss 312.5 453.9 153.0 156.3 240.1 197.1 228.6 306.3 396.7 91.9 165.4 184.3 66662222 CCCCoooorrrrppppoooorrrraaaatttteeee eeeeqqqquuuuiiiittttiiiieeeessss 103.4 130.1 24.1 -17.7 -18.5 -4.9 -15.9 2.5 53.0 -106.3 -23.2 -54.5 66663333 NNNNoooonnnnffffiiiinnnnaaaannnncccciiiiaaaallll ccccoooorrrrppppoooorrrraaaattttiiiioooonnnnssss 27.0 21.3 -44.9 -73.8 -81.2 -92.8 -71.2 -92.4 -27.2 -138.8 -66.4 -84.8 66664444 FFFFoooorrrreeeeiiiiggggnnnn sssshhhhaaaarrrreeeessss ppppuuuurrrrcccchhhhaaaasssseeeedddd bbbbyyyy UUUU....SSSS.... rrrreeeessssiiiiddddeeeennnnttttssss 32.4 63.4 48.1 50.7 57.8 88.2 57.4 89.8 69.7 32.1 39.5 47.3 66665555 FFFFiiiinnnnaaaannnncccciiiiaaaallll ccccoooorrrrppppoooorrrraaaattttiiiioooonnnnssss 44.0 45.4 20.9 5.5 4.9 -.3 -2.2 5.1 10.5 .5 3.7 -17.0 66666666 MMMMuuuuttttuuuuaaaallll ffffuuuunnnndddd sssshhhhaaaarrrreeeessss 209.1 323.7 128.9 173.9 258.6 202.0 244.5 303.8 343.7 198.2 188.6 238.8 1. Data in this table also appear in the Board's Z. 1 (780) quarterly statistical release, tables F.2 through F.4. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A39 1.58 SUMMARY OF FINANCIAL TRANSACTIONS1 Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1995 1996 1997 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999922 11999933 11999944 11999955 11999966 Q3 04 Ql Q2 Q3 Q4 Ql NET LENDING IN CREDIT MARKETS2 1 Total net lending in credit markets 809.3 990.6 1,074.1 1,236.3 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 nonfederal nonfinancial sectors 115.4 76.0 252.8 -98.5 .6 -82.4 -189.9 -78.0 330.1 -179.9 -69.9 -113.8 3 Household 86.0 35.3 289.9 -19.1 18.1 84.6 -93.6 -121.1 310.5 -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 5 Nonfarm noncorporate business -.1 -1.1 .2 .3 .4 .3 .3 .4 .4 .4 .4 .5 6 State and local governments 1.7 32.6 -55.0 -77.4 -36.2 -128.5 -83.7 2.4 -20.8 -120.4 -6.2 -7.6 7 Federal government -11.9 -18.4 -24.2 -21.5 -21.9 -24.3 -24.4 -20.7 -15.2 -26.4 -25.1 -18.7 8 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 12.3 -4.1 19.7 16.9 9.4 19.3 3.6 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.-chaitered 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 5.4 4.8 10.6 2.2 15 Banks in U.S.-affiliated areas 3.7 2.4 3.3 4.2 1.0 1.8 7.4 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 18 Bank personal trusts and estates 8.0 9.5 7.1 -18.8 3.9 -23.7 -20.2 -3.5 4.2 7.8 7.2 8.2 19 Life insurance companies 79.5 100.9 66.7 99.2 59.7 73.1 53.1 48.7 2.5 120.1 67.6 56.1 20 Other 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 funds 37.5 49.5 47.7 63.1 46.6 59.9 81.3 69.5 45.4 41.9 29.5 57.6 22 State and local government retirement funds 5.9 21.1 30.7 22.7 34.5 2.6 20.2 62.1 50.6 8.0 17.3 -2.8 23 Money market mutual funds 4.7 20.4 30.0 86.5 88.8 30.0 125.1 175.0 18.4 88.5 73.4 77.1 24 Mutual funds 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 funds 18.2 14.4 -3.3 13.3 9.3 16.7 13.2 10.9 9.8 9.0 7.5 6.7 26 Government-sponsored enterprises 68.8 88.6 120.6 87.9 93.8 50.0 186.5 33.4 122.2 82.1 137.5 63.2 27 Federally related mortgage pools 115.6 84.7 115.4 98.2 140.7 126.2 173.4 106.5 169.1 160.4 126.8 101.8 28 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 29 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 -36.4 51.8 -26.8 3.4 4.1 -5.0 31 Real estate investment trusts (REITs) 1.1 .6 4.7 2.2 3.0 1.8 3.4 3.4 3.4 3.4 2.0 2.0 32 Brokers and dealers -1.3 14.8 -44.2 90.1 -17.1 -5.2 189.3 -109.0 -72.0 35.5 77.0 -11.8 33 Funding corporations 13.3 -35.6 -16.7 4.3 27.5 3.7 12.8 116.7 15.9 -11.9 -10.9 26.6 RELATION OF LIABILITIES TO FINANCIAL ASSETS 34 Net flows through credit markets 809.3 990.6 1,074.1 1,236.3 1,350.3 1,165.7 1,241.4 1,266.2 1,440.8 1,315.9 1378.2 1,124.7 Other financial sources 35 Official foreign exchange -1.6 .8 -5.8 8.8 -6.3 9.0 -1.9 -.9 1.6 -26.6 .7 -22.2 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 18.2 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 deposits and currency 113.5 117.3 -9.7 -12.8 16.0 -113.1 -69.3 43.3 4.5 107.1 -91.0 123.4 41 Small time and savings deposits -57.2 -70.3 -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 62.2 -19.3 117.9 -29.4 85.3 30.7 45 Corporate equities 103.4 130.1 24.1 -17.7 -18.5 -4.9 -15.9 2.5 53.0 -106.3 -23.2 -54.5 46 Mutual fund shares 209.) 323.7 128.9 173.9 258.6 202.0 244.5 303.8 343.7 198.2 188.6 238.8 47 Trade payables 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 -.1 26.7 52.4 32.1 50.1 120.6 -37.7 -4.3 131.1 103.4 49 Life insurance reserves 28.0 36.0 34.5 44.9 40.0 33.1 38.3 19.0 32.5 56.6 51.8 58.5 50 Pension fund reserves 233.8 259.1 257.7 247.6 274.7 250.8 196.2 260.9 238.3 291.1 308.5 290.9 51 Taxes payable 9.7 5.2 3.2 1.3 2.6 3.4 -10.2 5.6 6.6 -1.2 -.6 -8.2 52 Investment 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 36.4 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 55 Total financial sources 1,808.3 2,407.0 2,179.5 2,820.6 2,972.9 2,613.9 3,087.9 3,192.3 2,724.3 2,696.0 3,279.2 3,028.5 Liabilities not identified as assets (-) 56 Treasury currency -.2 — .2 -.2 -.5 -1.0 -.3 -1.0 -1.1 -1.0 1.3 -3.1 -.3 57 Foreign deposits -2.8 -7.0 44.0 26.7 29.7 -56.0 19.3 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 -23.6 10.9 -26.9 -9.2 11.6 26.9 59 Security 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 60 Taxes payable 11.9 11.1 8.6 8.7 3.7 10.3 2.2 -23.2 24.9 9.9 3.2 -34.2 61 Miscellaneous -37.9 -147.1 -139.2 -4.3 -71.0 -45.1 246.3 -147.1 -217.5 -62.4 143.0 -28.5 Floats not 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 -3.2 -4.7 -3.8 -4.2 -4.0 -4.0 -4.1 64 Trade credit 11.3 -4.0 8.3 -27.3 -32.0 -43.3 -149.3 45.1 26.6 -98.6 -101.0 -.8 65 Total identified to sectors as assets 1,824.0 2,506.8 2,211.1 2,775.0 3,021.6 2,659.7 2,981.6 3,212.9 2,786.6 2,854.5 3,232.3 3,101.9 1. Data in this table also appear in the Board's Z. 1 (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. F.1 and F.5. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Nonfinancial Statistics • September 1997 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1 Billions of dollars, end of period 1995 1996 1997 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr Q3 Q4 Q1 Q2 Q3 Q4 Q1 Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors 12,538.8 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 By sector and instrument 2 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 3,755.1 3,576.5 3,608.5 3,689.6 3,665.5 3,705.7 3,755.1 3,803.5 4 Budget agency securities and mortgages 26.6 26.7 28.2 26.6 26.9 28.2 27.6 28.2 27.4 26.6 26.3 5 Nonfederal 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 instrument 6 Commercial paper 117.8 139.2 157.4 156.4 163.3 157.4 174.2 181.7 173.0 156.4 168.7 / 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 1,326.3 1,341.5 1,359.4 1,376.4 1,398.8 1,418.7 y Bank loans n.e.c 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 n Mortgages 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 3,232.8 3,436.7 3,633.8 3,915.4 3,594.0 3,633.8 3,700.2 3,775.6 3,848.9 3,915.4 3,966.8 13 Multifamily 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 borrowing sector 17 Household 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 Nonfinancial business 3,757.1 3,896.9 4,129.3 4,319.7 4,084.3 4,129.3 4,184.2 4,239.6 4,287.3 4,319.7 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 20 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 21 Farm 138.3 141.1 142.7 146.0 144.8 142.7 140.3 145.3 146.2 146.0 143.5 22 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 53.4 64.8 65.8 67.9 25 Bonds 230.1 242.3 290.6 337.3 272.4 290.6 302.5 305.3 320.2 337.3 341.7 2b Bank loans n.e.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 28 Total credit market debt owed by nonfinancial sectors, domestic and foreign 12,924.3 13,537.0 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 2,545.3 2,607.9 2,639.7 31 Government-sponsored enterprise 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 securities 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 1,911.4 2,008.3 2,074.4 2,167.7 2,218.2 35 Open market paper 393.5 442.8 488.0 580.7 473.6 488.0 491.9 518.5 539.6 580.7 624.5 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 n.e.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 108.9 131.6 135.0 162.2 127.0 135.0 133.6 145.8 154.2 162.2 158.2 39 Mortgages 8.9 18.7 24.6 36.0 22.7 24.6 26.5 29.2 32.4 36.0 40.0 By borrowing sector 40 Commercial banks 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 123.4 133.6 148.0 150.0 150.3 148.0 141.4 148.4 149.1 150.0 152.0 42 Savings institutions 99.6 112.4 115.0 141.1 107.2 115.0 117.8 128.3 134.9 141.1 137.4 43 Credit unions .2 .5 .4 .4 .4 .4 .4 .3 .4 .4 .4 44 Life insurance companies .2 .6 .5 1.6 .6 .5 1.1 1.2 1.1 1.6 1.8 45 Government-sponsored enterprises 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 4/ Issuers of asset-backed securities (ABSs) 486.7 556.2 689.4 819.6 639.8 689.4 720.3 751.7 779.3 819.6 829.1 48 Brokers 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 390.5 440.7 492.3 540.7 471.9 492.3 499.8 514.4 528.4 540.7 546.9 50 Mortgage companies 30.2 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 61 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 table also appear in the Board's Z. 1 (780) quarterly statistical release, tables L.2 through L.4. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A41 1.60 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES' Billions of dollars except as noted, end of period 1995 1996 1997 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999933 11999944 11999955 11999966 Q3 Q4 Ql Q2 Q3 Q4 Ql CREDIT MARKET DEBT OUTSTANDING2 1 Total credit market assets 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 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 Household 1,693.0 2,013.3 1,959.1 2,003.8 2,005.5 1,959.1 1,928.1 1,999.9 2,002.4 2,003.8 1,958.8 4 Nonfinancial corporate business 271.5 289.2 286.8 305.1 273.8 286.8 273.6 285.7 291.6 305.1 301.3 5 Nonfarm 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 14,826.2 13,543.9 13,886.9 14,135.5 14,326.9 14,571.0 14.826.2 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 3,254.3 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 3,175.9 3,023.7 3,056.1 3,068.8 3,101.3 3,135.3 3,175.9 3,220.9 13 Foreign banking offices in United States 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 914.1 920.8 913.3 933.2 930.4 913.3 921.8 932.0 945.4 933.2 930.7 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 422.7 446.4 468.7 492.8 463.0 468.7 474.5 480.2 486.4 492.8 499.3 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 funds 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 725.9 718.8 771.3 820.2 739.2 771.3 795.9 809.0 818.3 820.2 834.2 25 Closed-end funds 82.0 78.7 92.0 101.3 88.7 92.0 94.8 97.2 99.5 101.3 103.0 26 Government-sponsored enterprises 546.4 667.0 755.0 822.5 708.4 755.0 762.7 767.6 788.2 822.5 837.6 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 Mortgase companies 60.4 36.5 33.0 41.2 42.2 33.0 46.0 39.3 40.2 41.2 39.9 31 Real estate investment trusts (REITs) 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 16,246.0 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 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 189.3 280.1 290.7 239.6 267.2 290.7 266.0 249.1 223.6 239.6 204.0 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 deposits 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 559.6 602.9 745.3 891.1 702.7 745.3 816.9 809.5 838.1 891.1 950.8 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 4b 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 4,642.9 4,848.4 5,570.8 6,285.9 5,442.0 5,570.8 5,748.3 5,883.4 6,013.2 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 89.3 94.3 90.3 92.1 91.9 93.6 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 35,451.8 37,503.8 41,012.7 44,584.6 40,075.1 41,012.7 41,914.0 42,632.0 43,412.6 44,584.6 45,267.5 Financial assets 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 2,499.5 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 -5.6 -5.8 -6.1 -6.3 -6.0 -6.8 -6.9 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 -1.6 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 -869.9 -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 45,075.0 47,181.7 52,903.7 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 table also appear in the Board's Z. 1 (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. L. 1 and L.5. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • September 1997 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures Monthly data seasonally adjusted, and indexes 1992=100, except as noted 1996 1997 MMeeaassuurree 11999944 11999955 11999966 Oct. Nov. Dec. Jan. Feb. Mar. Apr/ Mayr June 1 Industrial production' 108.6 112.1 115.2 116.2 117.2 117.7 117.8 118.4 118.8 119.3 119.5 119.9 Market groupings 2 Products, total 106.8 109.3 112.0 112.8 114.1 114.3 114.2 114.8 115.3 115.4 115.7 116.2 3 Final, total 107.1 109.9 112.8 113.6 114.8 115.3 115.1 115.6 116.3r 116.6 116.8 117.5 4 Consumer goods 107.4 108.9 110.5 110.8 112.3 112.7 111.7 111.6 112.1r 112.1 112.2 112.6 5 Equipment 106.6 111.6 116.8 118.4 119.0 119.6 120.8 122.6 123.5r 124.2 124.8 126.0 6 Intermediate 106.1 107.5 109.4 110.2 111.9 111.3 111.6 112.0 112.1r 112.0 112.3 112.2 1 Materials 111.3 116.6 120.3 121.7 122.2 123.1 123.4 124.1 124.5 125.4 125.6 125.7 Industry groupings 8 Manufacturing 109.4 113.2 116.3 117.6 118.5 119.2 119.3 120.1 120.6r 120.9 121.3 121.7 9 Capacity utilization, manufacturing (percent)2. . 83.1 83.1 82.1 82.0 82.4 82.5 82.4 82.6 82.7 82.6 82.6 82.5 10 Construction contracts3 117.3 121.8 130.3 126.0 132.0 128.0 130.0r 130.0r 133.01" 136.0 132.0 130.0 11 Nonagricultural employment, total4 112.0 115.0 117.3 117.9 118.1 118.3 118.6 118.8 119.0 119.3 119.5 119.7 12 Goods-producing, total 96.9 98.1 98.3 99.2 99.3 99.5 99.6 99.9 100.0 100.0 100.1 100.2 13 Manufacturing, total 96.4 97.2 96.2 97.1 97.1 97.1 97.2 97.2 97.3 97.4 97.4 97.5 14 Manufacturing, production workers 97.5 98.7 97.5 98.3 98.3 98.4 98.5 98.5 98.6 98.6 98.8 98.8 15 Service-producing 116.8 120.3 123.3 123.9 124.1 124.4 124.6 124.9 125.1 125.5 125.7 126.0 16 Personal income, total 148.2 157.2 165.9 168.2 169.3 170.5 171.1 172.3r 173.3r 173.7 174.2 n.a. 17 Wages and salary disbursements 142.6 150.9 159.7 162.0 163.4 165.1 165. r 167.r 168.3r 168.4 168.9 n.a. 18 Manufacturing 124.9 130.4 135.3 136.7 137.4 139.2 138.8r 139.3r 140.4r 140.7 140.8 n.a. 19 Disposable personal income5 149.1 157.6 165.5 167.8 168.8 169.9 170.3 171.3r 172.2r 172.5 172.9 n.a. 20 Retail sales5 144.6 151.2 158.6 160.9 160.5 161.3 163.9 166.1 165.6 163.7 163.2 164.0 Prices6 21 Consumer (1982-84=100) 148.2 152.4 156.9 158.3 158.6 158.6 159.1 159.6 160.0 160.2 160.1 160.3 22 Producer finished goods (1982=100) 125.5 127.9 131.3 132.7 132.6 132.7 132.6 132.2 132.2 131.6 131.5 131.6 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 Production 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. 67-92. The article contains a indexes can be obtained from the U.S. Department of Labor, Bureau of Labor Statistics, 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 NOTE. Basic data (not indexes) for series mentioned in notes 4 and 5, and indexes for series Developments and Historical Revision," Federal Reserve Bulletin, vol. 76 (April 1990), pp. mentioned in notes 3 and 6, can also be found in the Survey of Current Business. 187-204. Figures for industrial production for the latest month are preliminary, and many figures for 2. Ratio of index of production to index of capacity. Based on data from the Federal the three months preceding the latest month have been revised. See "Recent Developments in Reserve, DRI McGraw-Hill, U.S. Department of Commerce, and other sources. Industrial Capacity and Utilization," Federal Reserve Bulletin, vol. 76 (June 1990), pp. 3. Index of dollar value of total construction contracts, including residential, nonresiden- 411-35. See also "Industrial Production Capacity and Capacity Utilization since 1987," tial, and heavy engineering, from McGraw-Hill Information Systems Company, F.W. Dodge Federal Reserve Bulletin, vol. 79 (June 1993), pp. 590-605. Division. 2.11 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT Thousands of persons; monthly data seasonally adjusted 1996 1997 CCaatteeggoorryy 11999944 11999955 11999966 Nov. Dec. Jan. Feb. Mar. Apr. May1" June HOUSEHOLD SURVEY DATA1 1 Civilian labor force2 131,056 132,304 133,943 134,831 135,022 135,848 135,634 136,319 136,098 136,173 136,200 Employment 2 Nonagricultural industries3 119,651 121,460 123,264 124,290 124,429 125,112 125,138 125,789 125,887 126,209 125,973 3 Agriculture 3,409 3,440 3,443 3,354 3.426 3,468 3,292 3,386 3,497 3,430 3,391 Unemployment 4 Number 7,996 7,404 7,236 7,187 7,167 7,268 7,205 7,144 6,714 6,534 6,836 5 Rate (percent of civilian labor force) 6.1 5.6 5.4 5.3 5.3 5.4 5.3 5.2 4.9 4.8 5.0 ESTABLISHMENT SURVEY DATA 6 Nonagricultural payroll employment4 114,172 117,203 119,549 120,450 120,659 120,909 121,162 121,344 121,671r 121,837 122,054 7 Manufacturing 18,321 18,468 18,282 18,442 18,448 18,465 18,475 18,489 18,495r 18,500 18,514 8 Mining 601 580 570 571 571 574 574 572 573 576 576 9 Contract construction 4,986 5,158 5,405 5,495 5,521 5,542 5,604 5,609 5,599 5,625 5,623 10 Transportation and public utilities 5,993 6,165 6,318 6,303 6,288 6,351 6,376 6,405 6,42 r 6,426 6,431 11 Trade 26,670 27,585 28,178 28,396 28,471 28,487 28,515 28,556 28,65 lr 28,650 28,709 12 Finance 6,896 6,830 6,977 6,949 6,962 6,971 6,980 6,992 7,019 7,031 7,043 13 Service 31,579 33,107 34,360 34,800 34,884 34,990 35.091 35,176 35,334r 35,464 35,527 14 Government 19,128 19,310 19,459 19,494 19,514 19,529 19,547 19,545 19,579r 19,565 19,631 1. Beginning January 1994, reflects redesign of current population survey and population 4. Includes all full- and part-time employees who worked during, or received pay for, the controls from the 1990 census. pay period that includes the twelfth day of the month; excludes proprietors, self-employed 2. Persons sixteen years of age and older, including Resident Armed Forces. Monthly persons, household and unpaid family workers, and members of the armed forces. Data are figures are based on sample data collected during the calendar week that contains the twelfth adjusted to the March 1992 benchmark, and only seasonally adjusted data are available at this day; annual data are averages of monthly figures. By definition, seasonality does not exist in time. population figures. SOURCE. Based on data from U.S. Department of Labor, Employment and Earnings. 3. Includes self-employed, unpaid family, and domestic service workers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A43 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION' Seasonally adjusted 1996 1997 1996 1997 1996 1997 SSeerriieess Q3 Q4 Qlr Q2 Q3 Q4 Qlr Q2 Q3 Q4 Qlr Q2 Output (1992=100) Capacity (percent of 1992 output) Capacity utilization rate (percent)2 1 Total industry 115.8 117.0 118.3 119.6 139.2 140.5 141.8 143.2 83.2 83.3 83.5 83.5 2 Manufacturing 117.2 118.4 120.0 121.3 142.5 143.9 145.3 146.9 82.3 82.3 82.5 82.6 3 Primary processing1 113.2 113.9 114.7 115.9 130.7 131.5 132.2 132.9 86.6 86.6 86.8 87.2 4 Advanced processing4 119.1 120.7 122.6 123.9 148.2 150.0 151.9 153.8 80.4 80.4 80.7 80.5 5 Durable goods 127.2 128.1 130.7 132.9 154.5 156.9 159.3 161.8 82.3 81.7 82.0 82.1 6 Lumber and products 110.5 110.1 111.3 113.7 129.1 130.0 131.0 132.0 85.6 84.7 84.9 86.1 7 Primary metals 118.6 119.8 119.7 122.1 129.8 131.0 132.1 133.3 91.4 91.5 90.6 91.6 8 Iron and steel 117.9 118.6 118.3 121.7 131.9 133.5 134.9 136.0 89.4 88.9 87.7 89.5 9 Nonferrous 119.4 121.1 121.3 122.4 127.1 127.8 128.6 129.8 93.9 94.8 94.3 94.3 10 Industrial machinery and equipment 158.9 161.5 166.2 171.2 176.3 181.3 186.5 192.3 90.1 89.1 89.1 89.1 11 Electrical machinery 164.5 167.2 172.1 179.2 200.6 208.5 216.3 224.2 82.0 80.2 79.6 79.9 12 Motor vehicles and parts 131.3 126.0 130.2 125.0 176.1 177.3 178.2 178.7 74.5 71.0 73.0 70.0 13 Aerospace and miscellaneous transportation equipment 86.7 90.4 93.5 96.3 120.2 119.8 119.7 120.5 72.2 75.5 78.1 79.9 14 Nondurable goods 106.5 108.1 108.6 108.9 129.6 130.1 130.6 131.1 82.2 83.0 83.1 83.1 15 Textile mill products 107.9 107.4 107.1 108.7 130.1 130.8 131.3 131.4 82.9 82.1 81.6 82.7 16 Paper and products 109.0 109.8 111.2 112.5 122.9 123.3 123.6 123.9 88.7 89.0 89.9 90.8 17 Chemicals and products 109.2 112.4 112.8 113.1 139.2 140.3 141.5 142.6 78.4 80.1 79.8 79.3 18 Plastics materials 125.3 125.3 127.0 131.8 134.0 136.2 95.1 93.5 93.3 19 Petroleum products 106.7 107.7 108.1 112.5 113.7 113.8 113.9 114.2 93.9 94.6 94.9 98.5 20 Mining 103.7 103.8 105.8 107.5 113.7 113.7 113.8 114.3 91.2 91.3 93.0 94.0 21 Utilities 110.5 113.0 110.9 111.4 125.2 125.9 126.5 127.0 88.2 89.8 87.7 87.8 22 Electric 110.8 112.4 111.5 111.5 123.6 124.4 125.1 125.6 89.6 90.4 89.1 88.8 1973 1975 Previous cycle5 Latest cycle6 1996 1997 High Low High Low High Low June Jan. Feb. Mar.r Apr.r May Junep Capacity utilization rate (percent)2 1 Total industry 89.2 72.6 87.3 71.1 85.3 78.1 83.5 83.3 83.5 83.6 83.6 83.5 83.5 2 Manufacturing 88.5 70.5 86.9 69.0 85.7 76.6 82.3 82.4 82.6 82.7 82.6 82.6 82.5 3 Primary processing3 91.2 68.2 88.1 66.2 88.9 77.8 86.5 86.2 86.9 87.3 87.1 87.4 87.0 4 Advanced processing4 87.2 71.8 86.7 70.4 84.2 76.1 80.5 80.7 80.7 80.7 80.6 80.5 80.5 5 Durable goods 89.2 68.9 87.7 63.9 84.5 73.2 82.5 81.7 82.1 82.3 82.1 82.1 82.1 6 Lumber and products 88.7 61.2 87.9 60.8 93.6 75.5 87.4 83.1 85.5 86.3 86.3 86.1 86.0 7 Primary metals 100.2 65.9 94.2 45.1 92.7 73.7 90.7 89.4 90.8 91.5 90.4 92.8 91.5 8 Iron and steel 105.8 66.6 95.8 37.0 95.2 71.8 89.5 87.7 87.6 87.7 87.9 91.0 89.4 9 Nonferrous 90.8 59.8 91.1 60.1 89.3 74.2 92.2 91.7 95.0 96.3 93.7 95.1 94.3 10 Industrial machinery and equipment 96.0 74.3 93.2 64.0 85.4 72.4 90.1 89.2 89.3 88.8 90.0 88.8 88.4 II Electrical machinery 89.2 64.7 89.4 71.6 84.0 75.1 83.8 78.9 79.7 80.1 79.6 80.1 80.1 12 Motor vehicles and parts 93.4 51.3 95.0 45.5 89.1 55.9 74.4 74.1 72.7 72.3 70.2 69.2 70.5 13 Aerospace and miscellaneous transportation equipment 78.4 67.6 81.9 66.6 87.3 79.2 70.0 77.1 78.2 79.1 79.5 79.9 80.4 14 Nondurable goods 87.8 71.7 87.5 76.4 87.3 80.7 82.0 83.1 83.2 83.1 83.1 83.1 83.0 15 Textile mill products 91.4 60.0 91.2 72.3 90.4 77.7 83.3 81.0 81.4 82.4 82.9 82.7 82.6 16 Paper and products 97.1 69.2 96.1 80.6 93.5 85.0 88.5 89.3 89.9 90.6 90.8 91.1 90.6 17 Chemicals and products 87.6 69.7 84.6 69.9 86.2 79.3 78.0 80.6 79.7 79.0 79.8 79.3 79.0 18 Plastics materials 102.0 50.6 90.9 63.4 97.0 74.8 95.0 93.5 93.3 93.0 93.3 19 Petroleum products 96.7 81.1 90.0 66.8 88.5 85.1 93.6 94.3 95.4 94.9 97.0 99.3 99.2 20 Mining 94.3 88.2 96.0 80.3 86.8 86.1 91.8 91.1 93.4 94.3 93.0 94.6 94.5 71 Utilities 96.2 82.9 89.1 75.9 92.6 83.4 91.4 89.3 87.1 86.8 89.3 86.9 87.1 22 Electric 99.0 82.7 88.2 78.9 95.0 87.1 92.7 90.7 88.7 88.1 90.6 87.7 88.1 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. For 3. Primary processing includes textiles; lumber; paper; industrial chemicals; synthetic the ordering address, see the inside front cover. The latest historical revision of the industrial materials; fertilizer materials; petroleum products; rubber and plastics; stone, clay, and glass; production index and the capacity utilization rates was released in January 1997. See primary metals; and fabricated metals. "Industrial Production and Capacity Utilization: Historical 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 of 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 Historical Revision," Federal Reserve Bulletin, vol. 76 (April 1990), pp. 5. Monthly highs, 1978-80; monthly lows, 1982. 187-204. 6. Monthly highs, 1988-89; monthly lows, 1990-91. 2. Capacity utilization is calculated as the ratio of the Federal Reserve's seasonally adjusted index of industrial production to the corresponding index of capacity. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A44 Domestic Nonfinancial Statistics • September 1997 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data seasonally adjusted 1992 1996 1997 Group pro- 1996 por- avg. tion June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar.r Apr.r May Junep Index (1992 = 100) MAJOR MARKETS 1 Total index 100.0 115.2 115.5 115.5 115.8 116.0 116.2 117.2 117.7 117.8 118.4 118.8 119.3 119.5 119.9 2 Products 60.5 112.0 112.3 112.3 112.2 112.7 112.8 114.1 114.3 114.2 114.8 115.3 115.4 115.7 116.2 3 Final products 46.3 112.8 113.1 113.4 113.0 113.3 113.6 114.8 115.3 115.1 115.6 116.3 116.6 116.8 117.5 4 Consumer goods, total 29.1 110.5 110.8 110.7 110.1 110.5 110.8 112.3 112.7 111.7 111.6 112.1 112.1 112.2 112.6 Durable consumer goods 6.1 126.2 129.9 129.7 128.0 127.1 124.5 127.1 128.4 127.3 129.2 131.0 126.7 128.5 130.3 6 Automotive products 2.6 125.8 130.0 132.1 128.7 127.7 122.0 127.4 127.2 129.6 131.0 131.7 124.4 126.3 129.3 / Autos and trucks 1.7 132.6 137.7 145.7 138.7 134.6 125.7 133.8 135.5 138.7 138.9 138.9 127.1 129.5 134.7 8 Autos, consumer .9 120.2 133.3 137.8 132.5 129.9 112.3 123.5 115.9 120.1 122.3 123.3 116.0 117.7 118.5 y Trucks, consumer .7 147.2 148.7 161.3 152.3 146.6 147.4 152.4 164.9 167.0 165.0 163.8 146.1 149.6 160.0 10 Auto parts and allied goods .9 114.5 117.4 112.4 113.5 116.2 114.4 116.4 114.0 115.5 118.1 119.7 118.0 119.2 119.5 11 Other 3.5 126.3 129.7 128.0 127.5 126.6 126.2 126.8 129.1 125.5 127.8 130.4 128.3 129.9 130.9 12 Appliances, televisions, and air conditioners 1.0 173.0 180.1 181.1 175.9 174.2 176.5 176.9 181.1 171.2 179.5 183.6 178.1 181.6 185.7 13 Carpeting and furniture .8 109.9 114.6 107.0 111.1 110.5 108.6 110.7 109.3 106.0 106.9 111.6 108.5 112.1 111.8 14 Miscellaneous home goods 1.6 107.9 108.7 108.5 108.0 107.6 106.5 106.4 109.6 109.2 109.2 109.9 109.8 109.5 109.6 15 Nondurable consumer goods 23.0 106.5 106.0 106.0 105.6 106.3 107.3 108.5 108.7 107.8 107.2 107.4 108.4 108.2 108.2 1 1 6 1 F C o lo o t d h s i n a g n d tobacco 1 2 0 . . 4 3 1 9 0 5 6. . 1 5 1 9 0 5 5. . 8 6 1 9 0 5 5 . . 4 9 1 9 0 5 5 . . 4 4 1 9 0 5 6. . 1 1 1 9 0 5 6 . . 5 6 1 9 0 5 7 . . 0 2 1 9 0 4 8. . 2 9 1 9 0 4 7 . . 0 7 1 9 0 3 8 . . 8 0 1 9 0 4 8 . . 2 7 1 9 0 5 7 . . 3 9 1 9 0 5 7 . . 0 6 1 9 0 5 7 . . 1 3 18 Chemical products 4.5 112.7 110.6 112.6 111.3 113.5 115.5 117.3 118.8 117.9 116.2 114.9 117.0 117.0 116.7 19 Paper products 2.9 101.1 100.2 101.4 101.8 101.9 102.9 102.9 103.0 101.1 101.5 102.3 102.6 103.1 104.6 20 Energy 2.9 112.0 113.2 109.1 109.4 109.4 110.7 115.3 111.8 110.4 107.6 107.5 112.7 111.9 112.1 21 Fuels .8 106.6 106.7 106.7 107.7 105.4 108.1 107.8 106.0 105.1 106.2 108.5 110.1 114.1 114.0 22 Residential utilities 2.1 114.3 116.0 109.9 110.0 110.9 111.7 118.5 114.2 112.6 108.0 106.8 113.7 110.6 110.9 23 Equipment 17.2 116.8 117.1 118.1 117.9 118.1 118.4 119.0 119.6 120.8 122.6 123.5 124.2 124.8 126.0 24 Business equipment 13.2 126.6 126.6 128.1 127.7 128.3 128.8 129.8 130.7 132.1 133.8 134.3 135.4 135.9 137.0 25 Information processing and related 5.4 143.2 143.9 144.1 144.6 146.3 147.4 147.1 148.5 149.6 152.4 153.6 154.8 156.1 157.9 26 Computer and office equipment 1.1 292.0 289.4 301.7 306.2 314.3 318.8 323.5 327.1 335.7 343.0 349.9 357.3 365.1 372.4 2/ Industrial 4.0 126.9 126.3 127.2 126.7 126.3 127.0 127.1 127.3 127.9 128.2 127.5 130.2 129.4 129.3 28 Transit 2.5 100.0 100.6 104.1 103.0 103.8 101.9 106.6 107.2 109.8 111.8 113.1 110.1 112.3 114.5 29 Autos and trucks 1.2 115.3 120.8 126.5 120.9 117.7 109.4 115.9 113.7 117.2 118.7 118.3 109.9 112.2 114.0 30 Other 1.3 116.4 114.3 118.0 116.1 115.5 118.7 119.9 121.4 123.4 124.4 125.1 128.9 127.9 127.7 31 Defense and space equipment 3.3 77.0 77.0 77.7 77.9 77.7 77.0 76.1 76.2 74.7 75.4 75.6 75.2 75.4 76.0 32 Oil and gas well drilling .6 120.5 127.8 122.1 122.6 117.5 120.2 120.7 123.6 130.8 140.7 153.4 153.4 156.0 164.3 33 Manufactured homes .2 162.0 167.9 163.0 167.4 165.6 165.3 159.8 156.3 163.5 160.9 168.0 166.4 34 Intermediate products, total 14.2 109.4 109.7 108.9 110.0 110.6 110.2 111.9 111.3 111.6 112.0 112.1 112.0 112.3 112.2 35 Construction supplies 5.3 116.8 118.3 117.5 119.2 119.8 117.7 120.7 117.8 117.0 120.0 121.8 120.0 120.9 120.3 36 Business supplies 8.9 105.1 104.6 103.9 104.6 105.3 105.8 106.8 107.4 108.4 107.3 106.5 107.3 107.3 107.4 37 Materials 39.5 120.3 120.5 120.5 121.5 121.2 121.7 122.2 123.1 123.4 124.1 124.5 125.4 125.6 125.7 38 Durable goods materials 20.8 134.0 134.0 134.5 136.2 135.5 135.8 136.5 137.8 138.4 139.2 140.2 141.5 142.2 142.7 39 Durable consumer parts 4.0 128.8 130.4 131.1 133.9 128.3 126.6 129.7 130.3 132.1 129.7 129.8 130.6 127.0 127.4 40 Equipment parts 7.6 159.2 158.9 159.6 161.7 162.6 163.4 165.3 167.9 169.4 172.6 175.6 178.0 181.6 183.6 41 Other 9.2 118.2 117.9 118.2 119.2 119.2 120.0 119.1 119.9 119.3 119.8 120.0 120.8 121.3 120.8 42 Basic metal materials 3.1 113.1 112.6 112.9 113.6 114.7 117.2 114.4 115.7 114.9 116.4 116.4 116.6 118.5 117.4 43 Nondurable goods materials 8.9 106.4 106.2 107.4 106.5 106.9 108.0 108.4 109.5 109.6 110.5 110.6 111.4 110.7 110.5 44 Textile materials 1.1 106.3 106.3 109.9 107.4 107.1 108.4 108.5 105.9 106.8 107.7 104.9 108.1 107.4 106.8 45 Paper materials 1.8 107.4 105.2 109.1 108.2 107.0 108.0 110.9 112.5 111.5 113.2 113.8 114.8 114.9 114.7 46 Chemical materials 3.9 105.9 105.3 106.1 106.2 106.8 109.3 107.7 110.2 111.1 111.2 111.2 112.2 110.8 110.7 47 Other 2.1 106.1 108.0 107.1 104.7 106.2 103.9 106.8 106.3 105.3 107.5 108.4 107.7 107.9 107.7 48 Energy materials 9.7 103.9 104.8 102.4 104.0 103.9 103.9 104.0 103.9 103.8 104.0 103.5 103.7 103.5 103.1 4y Primary energy 6.3 102.6 103.5 101.7 103.2 102.2 102.0 101.6 102.6 101.6 102.8 102.3 101.7 102.3 101.5 50 Converted fuel materials 3.3 106.2 107.2 103.9 105.4 107.0 107.5 108.5 106.3 108.0 106.2 105.9 107.6 105.6 106.2 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.1 114.9 115.0 114.9 115.4 115.7 116.1 116.9 117.4 117.4 118.0 118.5 119.2 119.4 119.7 52 Total excluding motor vehicles and parts 95.1 114.6 114.7 114.6 115.0 115.4 115.9 116.6 117.2 117.1 117.8 118.3 119.0 119.3 119.5 53 Total excluding computer and office equipment 98.2 112.9 113.2 113.1 113.4 113.5 113.7 114.6 115.1 115.1 115.6 116.0 116.4 116.6 116.9 54 Consumer goods excluding autos and trucks . 27.4 109.2 109.3 108.9 108.6 109.2 109.9 111.0 111.4 110.3 110.1 110.7 111.1 111.2 111.4 55 Consumer goods excluding energy 26.2 110.2 110.4 110.9 110.2 110.6 110.8 111.8 112.8 111.9 112.1 112.7 112.0 112.3 112.7 56 Business equipment excluding autos and trucks 12.0 127.7 127.2 128.2 128.3 129.3 130.7 131.2 132.4 133.6 135.3 135.9 137.9 138.3 139.3 57 Business equipment excluding computer and office equipment 12.1 115.8 115.8 116.8 116.1 116.3 116.6 117.5 118.2 119.2 120.5 120.7 121.4 121.6 122.4 58 Materials excluding energy 29.8 125.4 125.4 126.1 127.0 126.6 127.1 127.8 129.0 129.4 130.3 131.0 132.1 132.4 132.6 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 SIC2 pro- 1996 Group code por- avg. tion June July Aug. Sept. Apr.' May Junep Index (1992 = 100) MAJOR INDUSTRIES 59 Total index 100.0 115.2 115.5 115.5 115.8 116.0 116.2 117.2 117.7 117.8 118.4 118.8 119 J 119.5 119.9 60 Manufacturing 85.4 116.3 116.4 117.0 117.2 117.4 117.6 118.5 119.2 119.3 120.1 120.6 120.9 121.3 121.7 61 Primary processing 26.5 112.2 112.6 113.0 113.1 113.5 113.8 113.8 114.0 113.8 114.8 115.6 115.6 116.2 115.9 62 Advanced processing 58.9 118.4 118.3 118.9 119.2 119.3 119.5 120.8 121.7 122.0 122.6 123.0 123.4 123.8 124.5 63 Durable goods 45.0 125.7 126.3 126.9 127.5 127.2 127.1 128.4 128.8 129.5 130.8 131.7 132.2 132.9 133.7 64 Lumber and products 24 2.0 109.7 112.4 109.3 111.4 110.7 109.2 113.1 108.0 108.6 112.0 113.3 113.6 113.7 113.9 65 Furniture and fixtures 25 1.4 108.9 109.5 108.1 108.8 108.8 110.4 110.5 110.5 109.7 110.3 111.0 112.7 113.8 112.7 66 Stone, clay, and glass products 32 2.1 111.0 111.3 114.1 111.8 113.1 111.7 111.8 111.3 112.7 112.5 113.5 113.6 113.2 113.0 67 Primary metals 33 3.1 117.2 117.0 118.0 118.3 119.5 122.1 118.5 118.8 117.8 120.0 121.3 120.2 123.6 122.4 68 Iron and steel 331,2 1.7 116.4 117.1 118.0 118.2 117.4 123.2 115.9 116.7 118.0 118.2 118.7 119.3 123.8 122.0 69 Raw steel 331PT .1 112.2 114.9 113.3 113.6 112.6 111.5 108.7 112.5 111.7 112.3 114.2 115.5 115.8 115.1 70 Nonferrous 333-6,9 1.4 118.0 116.8 117.9 118.5 121.8 120.7 121.4 121.2 117.6 122.1 124.2 121.2 123.4 122.7 71 Fabricated metal products.. . 34 5.0 118.6 118.9 119.1 119.4 119.3 119.3 119.1 119.5 119.2 119.5 120.4 120.6 120.9 120.8 72 Industrial machinery and equipment 35 8.0 156.4 156.1 157.7 159.6 159.4 159.9 161.7 162.9 164.7 166.6 167.4 171.2 170.8 171.7 73 Computer and office equipment 357 1.8 296.9 294.3 306.5 310.8 319.0 323.6 328.3 332.5 340.3 347.8 354.7 362.2 337700..11 377.5 74 Electrical machinery 36 7.3 163.3 164.0 163.8 164.6 165.2 165.6 167.2 168.8 168.6 172.5 175.2 176.3 179.5 181.8 75 Transportation equipment.. . 37 9.5 106.1 107.1 109.5 109.3 107.3 105.3 109.5 109.6 111.9 111.5 111.9 110.6 110.2 111.8 76 Motor vehicles and parts . 371 4.9 126.9 130.4 134.1 132.8 127.0 121.2 128.9 127.9 132.0 129.6 128.9 125.3 123.7 126.1 77 Autos and light trucks . 371PT 2.6 124.6 130.4 137.3 131.0 127.4 117.3 125.7 125.6 128.8 129.4 129.5 119.1 121.3 125.4 78 Aerospace and miscellaneous transportation equipment 372-6,9 4.6 85.6 84.3 85.7 86.5 87.9 89.4 90.3 91.5 92.2 93.5 94.8 9955..55 9966..33 97.1 79 Instruments 38 5.4 102.8 103.3 102.3 103.0 103.0 103.4 103.0 104.1 103.3 104.6 104.7 104.4 104.9 105.6 80 Miscellaneous 39 1.3 112.9 113.1 U3.0 112.9 113.0 113.0 114.1 116.6 116.3 117.1 116.3 116.7 116.4 116.9 81 Nondurable goods 40.4 106.3 105.9 106.4 106.2 106.9 107.4 107.9 108.8 108.5 108.6 108.7 108.8 109.0 108.9 82 Foods "20 9.4 106.3 106.1 106.5 105.5 106.2 107.1 107.6 108.2 108.2 108.4 109.2 108.4 108.1 108.0 83 Tobacco products 21 1.6 105.6 105.1 102.5 104.1 104.9 104.0 105.4 108.9 104.6 105.7 106.9 105.5 104.3 102.9 84 Textile mill products 22 1.8 106.6 108.0 108.7 107.7 107.2 107.6 108.2 106.3 106.3 106.9 108.2 108.9 108.7 108.6 85 Apparel products 23 2.2 98.2 99.0 98.3 98.5 98.2 97.8 97.3 97.2 96.2 95.8 96.3 96.2 96.7 97.2 86 Paper and products 26 3.6 108.0 108.5 110.2 108.1 108.8 107.6 110.1 111.6 110.3 111.1 112.1 112.4 112.8 112.3 87 Printing and publishing 27 6.7 98.4 97.1 97.6 97.9 99.1 99.7 100.0 99.8 100.5 100.6 99.7 99.8 100.2 100.7 88 Chemicals and products .... 28 9.9 108.9 107.9 109.0 108.7 109.7 111.3 111.8 114.0 113.7 112.8 112.0 113.5 113.0 112.9 89 Petroleum products 29 1.4 106.5 106.3 105.3 107.8 106.9 108.4 107.4 107.3 107.4 108.6 108.1 110.7 113.3 113.4 90 Rubber and plastic products . 30 3.5 120.5 120.9 120.7 122.0 122.8 121.4 121.7 122.6 121.1 123.1 124.0 122.0 123.3 123.2 91 Leather and products 31 .3 80.0 81.0 80.0 79.5 79.4 78.4 77.3 80.1 78.3 77.6 78.4 77.8 77.0 76.3 92 Mining 6.9 102.9 104.4 103.1 104.5 103.4 103.4 103.5 104.5 103.6 106.3 107.5 106.1 108.2 108.1 93 Metal "lo .5 102.0 101.7 103.1 104.0 105.3 105.6 102.5 106.3 105.7 105.7 104.8 103.2 103.0 102.8 94 Coal 12 1.0 105.9 108.9 102.7 109.6 106.2 107.5 108.8 109.5 106.4 109.6 105.2 104.1 115.6 107.3 95 Oil and gas extraction 13 4.8 100.3 101.5 100.9 101.1 100.5 100.0 100.2 100.7 100.8 103.1 105.4 104.6 104.8 106.6 96 Stone and earth minerals 14 .6 118.7 120.6 120.6 121.7 118.5 120.0 120.2 122.9 117.2 125.0 128.8 123.3 124.7 125.3 97 Utilities 7.7 112.8 114.0 109.4 110.8 111.1 111.9 114.5 112.6 112.7 110.2 109.9 113.3 110.3 110.7 98 Electric 491,493PT 6.2 112.7 114.2 110.1 111.5 110.9 112.0 112.7 112.6 113.2 110.9 110.3 113.6 110.1 110.8 99 Gas 492.493PT 1.6 113.2 113.6 107.1 108.5 111.8 111.3 120.9 112.7 110.9 107.6 108.7 112.0 110.8 110.4 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 80.5 115.7 115.6 116.0 116.3 116.8 117.3 117.9 118.6 118.6 119.5 120.0 112200..66 112211..11 112211..33 101 Manufacturing excluding office and computing machines .. . 83.6 113.7 113.8 114.3 114.4 114.5 114.7 115.5 116.1 111166..22 111166..99 111177..33 111177..55 111177..88 111188..11 Gross value (billions of 1992 dollars, annual rates) MAJOR MARKETS 102 Products, total 2,001.9 2,258.7 2,274.2 2,276.1 2,272.9 2,273.4 2,270.7 2,303.5 2,301.1 2302.9 23153 2327.5 2324.2 2335.1 2345.6 103 Final 1,552.1 1,760.9 1,775.7 1,782.8 1,773.6 1,771.6 1,771.8 1.795.1 1,796.8 1,798.4 1,808.8 1.819.6 1,816.1 1,825.4 1,836.9 104 Consumer goods 1,049.6 1,162.2 1,172.5 1,171.6 1,165.5 1,163.0 1,164.7 1.182.2 1,182.3 1,176.3 1,177.7 1.184.7 1,179.6 1,185.2 1,190.1 105 Equipment 502.5 598.0 602.4 610.5 607.4 607.8 606.3 612.1 613.7 621.4 630.4 634.2 636.0 639.6 646.2 106 Intermediate 449.9 498.2 499.0 494.3 499.7 502.1 499.3 508.6 504.9 505.1 507.2 508.7 508.7 510.4 509.8 1. Data in this table also appear in the Board's G.17 (419) monthly statistical release. For ments," Federal Reserve Bulletin, vol. 83 (February 1997), pp. 67-92. For a detailed the ordering address, see 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 ments and Historical Revision," Federal Reserve Bulletin, vol. 76, (April 1990), 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 • September 1997 2.14 HOUSING AND CONSTRUCTION Monthly figures at seasonally adjusted annual rates except as noted 1996 1997' IItteemm 11999944 11999955 11999966 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar.' Apr.' May Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 1,372 1,333 1,426 1,405 1,391 1,349 1,391 1,405 1,395 1,438 1,457 1,442 1,432 2 One-family 1,069 997 1,070 1,061 1,029 1,003 1,016 999 1,052 1,069 1,034 1,060 1,053 3 Two-family or more 303 335 356 344 362 346 375 406 343 369 423 382 379 4 Started 1,457 1,354 1,477 1,515 1,470 1,407 1,486 1,353 1,375 1,554 1,479 1,483 1,385 5 One-family 1,198 1,076 1,161 1,222 1,148 1,104 1,133 1,024 1,125 1,237 1,142 1,133 1,082 6 Two-family or more 259 278 316 293 322 303 353 329 250 317 337 350 303 7 Under construction at end of period1 755 775 819 820 825 825 828 815 818 821 814 815 816 8 One-family 584 554 584 593 592 588 584 571 573 574 566 565 565 9 Two-family or more 171 221 235 227 233 237 244 244 245 247 248 250 251 10 Completed 1,346 1,319 1,407 1,449 1,356 1,375 1,431 1,484 1,362 1,572 1,471 1,467 1,372 11 One-family 1,161 1,073 1,124 1,153 1,097 1,129 1,151 1,177 1,109 1,267 1,156 1,162 1,083 12 Two-family or more 185 246 283 296 259 246 280 307 253 305 315 305 289 13 Mobile homes shipped 305 341 362 369 372 364 354 338 339 353 353 372 356 Merchant builder activity in one-family units 14 Number sold 670 667 757 814 768 706 788 794 822 826' 838 770 825 15 Number for sale at end of period1 340 374 326 343 331 330 327 322 308 300 287 285 280 Price of units sold (thousands of dollars)2 16 Median 130.0 133.9 140.0 137.0 139.0 143.8 143.5 144.9 145.0 145.0 150.0 139.9 17 Average 154.5 158.7 166.4 159.7 167.4 168.4 172.0 171.8 171.9 171.1' 172.5 179.7 166.9 EXISTING UNITS (one-family) 18 Number sold 3,967 3,812 4,087 4,100 4,020 4,000 4,060 3,950 3,910 4,230 4,160 4,060 4,250 Price of units sold (thousands of dollars)2 19 Median 109.9 113.1 118.2 122.3 117.8 116.6 117.4 118.8 120.6 117.5 120.0 120.7 123.1 20 Average 136.8 139.1 145.5 149.9 144.7 143.6 144.1 147.1 149.6 144.7 147.5 150.4 153.1 Value of new construction (millions of dollars) CONSTRUCTION 21 Total put in place 518,644r 534,463r 567, Yl¥ 570,996r 579,959"" 584,140' 586,226' 579,109r 577,116r 592,365r 593,908 595,677 585,034 22 Private 398,646' 407,370' 435,929' 443,553' 444,388' 448,951' 448,907' 447,045' 444,391' 452,037' 452,728 456,043 453,744 23 Residential 238,423' 231,230' 246,659' 249,211' 248,957' 247,901' 248,259' 247,899' 246,661' 251,402' 253,974 254,239 253,637 24 Nonresidential 160,223r 176,140' 189,271' 194,342' 195,431' 201,050' 200,648' 199,146' 197,730' 200,635' 198,754 201,804 200,107 25 Industrial buildings 28,893r 32,505' 31,997' 30,968' 32,845' 34,738' 33,244' 30,752' 31,871' 32,161' 30,520 30,862 31,386 26 Commercial buildings 59,480r 68,223' 74,593' 77,569' 76,713' 79,864' 80,144' 78,395' 81,979' 83,107' 81,015 79,419 78,816 27 Other buildings 26,988r 27,089' 30,525' 31,197' 31,281' 32,024' 33,454' 34,409' 34,257' 35,561' 36,012 38,636 37,606 28 Public utilities and other 44,862r 48,323' 52,156' 54,608' 54,592' 54,424' 53,806' 55,590' 49,623' 49,806' 51,207 52,887 52,299 29 Public 119,998r 127,092' 131,250' 127,443' 135,572' 135,188' 137,319' 132,064' 132,725' 140,328' 141,180 139,634 131,290 30 Military 2,310r 2,983' 2,541' 2,278' 2,482' 2,531' 2,365' 2,241' 2,542' 2,564' 2,232 2,438 2,559 31 Highway 36,933r 36,319' 37,898' 35,196' 38,338' 38,367' 38,610' 39,585' 37,869' 41,060' 41,473 42,454 37,462 32 Conservation and development 6,459' 6,391' 5,807' 6,154r 7,177' 5,573' 5,710' 5,223' 5,807' 5,727' 6,114 5,247 5,490 33 Other 74,297' 81,399' 85,005' 83,815' 87,575' 88,717' 90,634' 85,015' 86,507' 90,977' 91,361 89,495 85,779 1. Not at annual rates. SOURCE. Bureau of the Census estimates for all series except (1) mobile homes, which are 2. Not seasonally adjusted. private, domestic shipments as reported by the Manufactured Housing Institute and season- 3. Recent data on value of new construction may not be strictly comparable with data for ally adjusted by the Census Bureau, and (2) sales and prices of existing units, which are previous periods because of changes by the Bureau of the Census in its estimating techniques. published by the National Association of Realtors. All back and current figures are available For a description of these changes, see Construction Reports (C-30-76-5), issued by the from the originating agency. Permit authorizations are those reported to the Census Bureau Census Bureau in July 1976. from 19,000 jurisdictions beginning in 1994. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A47 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data except as noted Change from 12 Change from 3 months earlier Change from 1 month earlier months earlier (annual rate) IIInnndddeeexxx llleeevvveeelll,,, IIIttteeemmm 1996 1997 1997 JJJuuunnneee 11999966 11999977 111999999777 ''' JJuunnee JJuunnee Sept. Dec. Mar. June Feb. Mar. Apr. May June CONSUMER PRICES2 (1982-84=100) 1 All items 2.8 2.3 3.1 3.3 1.8 1.0 .3 .1 .1 .1 .1 160.3 7 Food 3.2 2.6 5.3 3.4 .3 1.5 .3 .0 -.2 .4 .2 156.6 3 Energy items 3.5 -.1 1.1 16.2 -2.8 -14.7 .3 -1.7 -1.5 -2.4 .0 112.3 4 All items less food and energy 2.7 2.4 2.7 2.4 2.4 2.4 .2 .2 .3 .2 .1 169.2 5 Commodities 1.5 .9 1.1 .9 1.1 .6 .1 .1 .3 .1 -.2 142.2 6 Services 3.2 3.1 3.4 3.1 2.7 3.5 .3 .3 .3 .3 .3 184.6 PRODUCER PRICES (1982=100) 7 Finished goods 2.7 -.1 2.5 4.3 -3.0 -3.9 — ,3r -,2r -.6 -.3 -.1 131.6 8 Consumer foods 4.9 .3 4.6 2.4 -1.8 -3.8 -.4 .9 -.4 .4 -.9 134.0 9 Consumer energy 4.1 -1.3 7.0 26.2 -17.3 -14.7 - 1.2r -3.2r -2.6 -2.1 .7 83.6 10 Other consumer goods 1.9 .3 .6 .6 .6 -.6 ,0r ,2r .0 -.3 .1 144.9 11 Capital equipment 1.3 -.1 1.2 -.6 1.2 -2.3 -.1 .3 -.4 -.2 .1 138.1 Intermediate materials 12 Excluding foods and feeds -.6 -.2 1.0 2.2 -2.2 -1.6 -.1 -.6 -.3 -.2 .2 125.7 13 Excluding energy -1.3 .1 .0 -.3 .6 .3 .1 .0 .0 .0 .1 134.2 Crude materials 14 26.3 -13.6 -9.4 -28.5 -3.1 -9.8 — 1.4r 1.9r 3.3 -.3 -5.4 111.5 15 Energy 8.5 1.8 18.7 235.2 -67.1 -17.9 - 17.9r — 15.3r -5.2 3.4 -2.9 79.0 16 Other -14.0 1.8 -2.6 -1.3 15.2 -3.0 l.lr ,2r -2.3 1.2 .4 158.1 1. Not seasonally adjusted. SOURCE. U.S. Department of Labor, Bureau of Labor Statistics. 2. Figures for consumer prices are for all urban consumers and reflect a rental-equivalence measure of homeownership. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • September 1997 2.16 GROSS DOMESTIC PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1996 1997 AAccccoouunntt 11999944 11999955 11999966 Ql Q2 Q3 Q4 Qlr 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 7,871.0 Bv 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 5,336.0 3 Durable goods 580.9 606.4 632.1 625.2 637.6 630.5 635.2 658.9 4 Nondurable goods 1,429.7 1,485.9 1,545.1 1,522.1 1,544.7 1,546.5 1,566.8 1,593.7 3 Services 2,690.3 2,832.6 2,974.3 2,913.2 2,957.1 2,988.5 3,038.3 3,083.4 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 1,204.3 ) Fixed investment 954.9 1,028.2 1,101.5 1,070.7 1,088.0 1,119.6 1,127.8 1,149.8 8 Nonresidential 667.2 738.5 791.1 769.0 773.8 807.0 814.5 830.8 y Structures 180.2 199.7 214.3 208.4 207.4 213.5 227.8 232.5 10 Producers' durable equipment 487.0 538.8 576.8 560.6 566.3 593.5 586.7 598.3 n Residential structures 287.7 289.8 310.5 301.7 314.2 312.6 313.3 319.0 12 Change in business inventories 59.5 37.0 15.4 -1.7 8.0 36.6 18.8 54.5 13 Nonfarm 48.0 39.6 17.3 2.7 11.3 35.4 19.7 53.9 14 Net exports of goods and services -94.4 -94.7 -98.7 -86.3 -99.2 -120.2 -89.1 -99.5 15 Exports 719.1 807.4 855.2 839.5 850.0 844.3 887.0 904.5 16 Imports 813.5 902.0 953.9 925.8 949.2 964.5 976.0 1,004.0 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 1,430.3 18 Federal 516.4 516.6 523.1 518.6 529.6 525.5 518.5 520.4 iy State and local 798.4 841.7 883.3 865.1 879.2 889.3 899.8 909.9 By major type of product 20 Final sales, total 6,876.2 7,216.7 7,560.7 7,428.6 7,537.1 7,579.6 7,697.4 7,816.5 21 Goods 2,534.4 2,662.2 2,784.4 2,749.3 2,782.0 2,785.0 2,821.1 2,879.3 22 Durable 1,086.2 1,147.3 1,219.6 1,192.1 1,219.1 1,225.5 1,241.7 1,271.2 23 Nondurable 1,448.3 1,515.0 1,564.8 1,557.1 1,562.9 1,559.5 1,579.5 1,608.1 24 Services 3,746.5 3,926.9 4,105.2 4,027.9 4,087.0 4,122.0 4,183.8 4,233.3 25 Structures 595.3 627.6 671.1 651.4 668.0 672.6 692.5 703.9 26 Change in business inventories 59.5 37.0 15.4 -1.7 8.0 36.6 18.8 54.5 27 Durable goods 31.9 34.9 12.7 12.3 9.9 34.7 -6.0 25.9 28 Nondurable goods 27.7 2.2 2.7 -14.0 -1.9 2.0 24.8 28.6 MEMO 29 Total GDP in chained 1992 dollars 6,608.4 6,742.2 6,906.8 6,813.8 6,892.1 6,928.1 6,993.3 7,094.4 NATIONAL INCOME 30 Total 5,535.2 5,828.9 6,164.2 6,027.5 6,132.2 6,216.6 6,280.6 6,426.5 31 Compensation of employees 4,009.8 4,222.7 4,448.5 4,344.3 4,420.9 4,482.9 4,546.0 4,636.2 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 3,793.3 33 Government and government enterprises 602.5 621.7 641.2 634.0 638.9 644.6 647.2 655.5 34 Other 2,654.8 2,811.5 2,988.9 2,906.1 2,967.5 3,015.1 3,067.0 3,137.7 35 Supplement to wages and salaries 752.4 789.5 818.4 804.1 814.4 823.3 831.8 842.9 36 Employer contributions for social insurance 350.2 365.5 382.2 375.0 380.4 384.6 388.8 396.8 37 Other labor income 402.2 424.0 436.2 429.1 434.0 438.6 442.9 446.1 4 3 3 0 8 9 Pro B F p a u r r s i m e in t 1 o e r s s s ' a i n n d c o p m ro e f 1 essional1 4 43 6 3 0 4 4 . . . 0 4 3 4 4 8 5 2 6 8 7 . . . 1 2 9 4 5 8 2 4 2 7 4 . . . 6 7 3 4 5 7 0 3 8 1 6 . . . 1 5 6 4 5 8 2 4 0 4 4 . . . 1 5 6 4 5 8 3 5 5 0 5 . . . 1 5 6 4 5 9 4 4 3 7 0 . . . 1 9 9 5 5 4 0 4 5 3 9 . . . 8 3 0 41 Rental income of persons2 112.1 111.7 115.0 114.5 112.4 115.2 117.9 116.8 4 4 2 3 Co P rp ro o f r i a ts te b p e r f o o f r i e t s t ' ax3 5 5 5 3 4 1 . . 1 2 6 5 0 9 4 8 . . 8 9 6 63 7 9 0 . . 9 2 6 6 6 4 1 2 . . 2 2 6 6 7 4 2 4 . . 1 6 6 6 3 7 5 7 . . 6 3 6 6 7 3 0 7 . . 1 1 7 6 1 6 2 8 . . 5 5 44 Inventory valuation adjustment -13.3 -28.1 -8.9 -17.4 -11.0 2.0 -9.2 -.4 45 Capital consumption adjustment 36.2 34.0 39.2 36.4 38.6 39.7 42.2 44.4 46 Net interest 394.9 403.6 403.3 399.5 402.3 405.6 405.7 412.0 1. With inventory valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.48. 2. With capital consumption adjustment. SOURCE. U.S. Department of Commerce, Survey of Current Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A49 2.17 PERSONAL INCOME AND SAVING Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1996 1997 AAccccoouunntt 11999944 11999955 11999966 Ql Q2 Q3 Q4 Ql' PERSONAL INCOME AND SAVING 1 Total personal income 5,762.0 6,112.4 6,449.5 6,304.5 6,409.6 6,498.9 6,584.9 6,698.1 2 Wage and salary disbursements 3,241.8 3,430.6 3,630.1 3,538.2 3,606.5 3,659.6 3.716.1 3,791.3 3 Commodity-producing industries 824.9 863.5 902.7 878.7 900.3 911.0 920.9 935.6 4 Manufacturing 621.1 648.4 672.5 654.8 671.8 678.5 685.0 693.6 Distributive industries 739.2 783.7 827.9 810.5 822.3 832.4 846.5 864.3 6 Service industries 1,075.2 1,161.6 1,258.3 1,215.1 1,244.9 1,271.6 1,301.5 1,336.0 7 Government and government enterprises 602.5 621.7 641.2 634.0 638.9 644.6 647.2 655.5 8 Other labor income 402.2 424.0 436.2 429.1 434.0 438.6 442.9 446.1 9 Proprietors' income1 464.4 486.1 527.3 508.1 524.6 535.6 540.9 549.0 in Business and professional1 430.0 458.2 482.6 471.5 480.5 485.5 493.1 503.3 11 Farm' 34.3 27.9 44.7 36.6 44.1 50.1 47.9 45.8 12 Rental income of persons' 112.1 111.7 115.0 114.5 112.4 115.2 117.9 116.8 13 Dividends 199.6 214.8 230.6 226.6 229.3 231.5 234.8 240.0 14 Personal interest income 663.7 717.1 738.2 726.1 733.1 742.9 750.5 755.6 15 Transfer payments 956.3 1,022.6 1,079.7 1,063.0 1,075.6 1,085.1 1,095.0 1,119.9 16 Old age survivors, disability, and health insurance benefits 472.9 507.4 539.1 529.9 536.3 541.7 548.2 562.2 17 LESS: Personal contributions for social insurance 278.1 294.5 307.5 301.0 305.8 309.7 313.4 320.8 18 EQUALS: Personal income 5,762.0 6,112.4 6,449.5 6,304.5 6,409.6 6.498.9 6.584.9 6.698.1 19 LESS: Personal tax and nontax payments 731.4 794.3 863.8 824.9 870.6 872.5 887.2 918.6 20 EQUALS: Disposable personal income 5,030.6 5,318.1 5,585.7 5,479.6 5,539.0 5,626.4 5,697.7 5,779.5 21 LESS: Personal outlays 4,832.3 5,071.5 5,314.0 5,218.1 5,300.7 5,329.8 5,407.5 5.505.3 22 EQUALS: Personal saving 198.3 246.6 271.6 261.5 238.3 296.6 290.2 274.1 MEMO Per capita (chained 1992 dollars) 23 Gross domestic product 25,348.8 25,625.9 26,014.5 25,751.4 25,988.4 26,065.0 26,251.3 26,580.6 24 Personal consumption expenditures 17,158.2 17,399.6 17,667.3 17,570.2 17,675.7 17,657.9 17,764.8 17,976.6 25 Disposable personal income 18,362.0 18,789.0 19,158.0 19,028.0 19,053.0 19,233.0 19,315.0 19,471.0 26 Saving rate (percent) 3.9 4.6 4.9 4.8 4.3 5.3 5.1 4.7 GROSS SAVING 27 Gross saving 1,055.9 1,152.3 1,275.9 1,218.4 1,245.0 1,314.6 1,325.7 1,369.6 28 Gross private saving 1,006.3 1,072.3 1,161.0 1,134.3 1,122.1 1,196.7 1,190.6 1,205.3 29 Personal saving 198.3 246.6 271.6 261.5 238.3 296.6 290.2 274.1 30 Undistributed corporate profits 147.8 158.7 192.9 187.9 192.6 198.6 192.5 212.1 31 Corporate inventory valuation adjustment -13.3 -28.1 -8.9 -17.4 -11.0 2.0 -9.2 -.4 Capital consumption allowances 32 Corporate 416.4 435.9 457.9 449.6 454.7 461.1 466.1 471.4 33 Noncorporate 228.3 228.5 238.6 233.5 236.5 240.5 243.7 245.8 34 Gross government saving 49.6 80.0 115.0 84.1 122.9 117.8 135.0 164.3 35 Federal -119.6 -87.9 -54.6 -82.0 -54.1 -48.4 -34.0 -10.1 36 Consumption of fixed capital 70.6 73.8 72.5 73.2 72.6 72.3 71.9 72.2 37 Current surplus or deficit (—), national accounts -190.2 -161.7 -127.1 -155.2 -126.7 -120.8 -105.9 -82.3 38 State and local 169.2 167.9 169.6 166.1 177.0 166.3 169.0 174.4 39 Consumption of fixed capital 69.4 72.9 76.6 75.1 76.0 77.1 78.1 79.0 40 Current surplus or deficit ( —), national accounts 99.7 95.0 93.0 91.0 101.0 89.2 90.9 95.3 41 Gross investment 1,090.4 1,150.9 1,200.8 1,167.9 1,187.0 1,215.9 1,232.5 1,274.1 42 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 1,204.3 43 Gross government investment 212.3 221.9 233.4 228.8 235.1 234.2 235.3 234.6 44 Net foreign investment -136.4 -136.3 -149.5 -129.9 -144.2 -174.6 -149.4 -164.7 45 Statistical discrepancy 34.5 -1.5 -75.1 -50.6 -58.1 -98.7 -93.2 -95.4 1. With inventory valuation and capital consumption adjustments. SOURCE. U.S. Department of Commerce, Survey of Current Business. 2. With capital consumption adjustment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A50 International Statistics • September 1997 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data seasonally adjusted except as noted' 1996r 1997 IItteemm ccrreeddiittss oorr ddeebbiittss 11999944rr 11999955rr 11999966rr Ql Q2 Q3 Q4 Qlp 1 Balance on current account -133,538 -129,095 -148,184 -32,884 -35,585 -42,833 -36,874 -40,966 2 Merchandise trade balance" -166,192 -173,560 -191,170 -42,925 -47,562 -52,493 -48,190 -49,787 3 Merchandise exports 502,398 575,871 612,069 150,048 153,411 150,764 157,846 162,527 4 Merchandise imports -668,590 -749,431 -803,239 -192,973 -200,973 -203,257 -206,036 -212,314 5 Military transactions, net 1,874 3,866 3,786 485 1,214 792 1,295 518 6 Other service transactions, net 59,902 67,837 76,344 17,901 18,569 19,185 20,697 20,152 7 Investment income, net 9,723 6,808 2,824 2,061 883 -1,370 1,250 -3,140 8 U.S. government grants -15,671 -11,096 -14,933 -4,321 -2,423 -2,690 -5.499 -2,162 9 U.S. government pensions and other transfers -4,544 -3,420 -4.331 -1,136 -1,081 -1,064 -1,050 -1,098 10 Private remittances and other transfers -18,630 -19,530 -20,704 -4,949 -5,185 -5,193 -5,377 -5,449 11 Change in U.S. government assets other than official reserve assets, net (increase, —) -352 -549 -690 -210 -358 162 -284 31 12 Change in U.S. official reserve assets (increase, -) 5,346 -9,742 6,668 17 -523 7,489 -315 4,480 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -441 -808 370 -199 -133 848 -146 72 15 Reserve position in International Monetary Fund 494 -2,466 -1,280 -849 -220 -183 -28 1,055 16 Foreign currencies 5,293 -6,468 7,578 1,065 -170 6,824 -141 3,353 17 Change in U.S. private assets abroad (increase, —) -165,510 -296,916 -358,422 -70,575 -48,817 -85,193 -153,837 -104,298 18 Bank-reported claims3 -4,200 -75,108 -98,186 1,868 192 -33,589 -66,657 -56,560 19 Nonbank-reported claims -31,739 -34,997 -64,234 -15,778 -5,047 -17,294 -26,115 20 U.S. purchases of foreign securities, net -60,309 -100.074 -108,189 -34,455 -20,328 -23,206 -30,200 -14,510 21 U.S. direct investments abroad, net -69,262 -86,737 -87,813 -22,210 -23,634 -11,104 -30,865 -24,628 22 Change in foreign official assets in United States (increase, +) 40,385 110,729 122,354 52,014 13,154 24,089 33,097 28,337 23 U.S. Treasury securities 30,750 68,977 111,253 55,600 -3,383 25,472 33,564 23,107 24 Other U.S. government obligations 6,077 3,735 4,381 52 1,258 1,217 1,854 651 25 Other U.S. government liabilities4 2,366 744 720 -143 -204 907 160 377 26 Other U.S. liabilities reported by U.S. banks3 3,665 34,008 4,722 -3,284 14,198 -1,922 -4,270 7,489 27 Other foreign official assets5 -2,473 3,265 1,278 -211 1,285 -1,585 1,789 -3,287 28 Change in foreign private assets in United States (increase, +) 256,952 340,505 425,201 36,219 92,960 134,540 161,482 130,530 29 U.S. bank-reported liabilities3 104,338 30.176 9,784 -33,535 2,319 2,040 38,960 18,891 30 U.S. nonbank-reported liabilities -7,710 34,588 31,786 6,800 7,288 20,610 -2,912 31 Foreign private purchases of U.S. Treasury securities, net 34,274 99.548 155,578 11,832 31,212 43,402 67,338 32 Foreign purchases of other U.S. securities, net 56,971 96,367 133,798 36,475 29,761 35,115 32,447 38,738 33 Foreign direct investments in United States, net 45,679 67,526 76,955 15,877 17,440 25,977 17,661 21,700 34 Allocation of special drawing rights 0 0 0 0 0 0 0 0 35 Discrepancy -3,283 -14,931 -46,927 15,419 -20,831 -38,254 -3,269 -18,114 36 Due to seasonal adjustment 6,228 -1,076 -7,830 2,669 7,325 37 Before seasonal adjustment -3,284 -14,931 -46,926 9,191 -19,755 -30,424 -5,938 -25,439 MEMO Changes in official assets 38 U.S. official reserve assets (increase, —) 5,346 -9,742 6,668 17 -523 7,489 -315 4,480 39 Foreign official assets in United States, excluding line 25 (increase, +) 38,019 109,985 121,634 52,157 13,358 23,182 32,937 27,960 40 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22) -1,529 4,239 12,278 -1,539 5,239 5,263 3,315 6,717 1. Seasonal factors are not calculated for lines 12-16, 18-20, 22-34, and 38-^0. 4. Associated primarily with military sales contracts and other transactions arranged with 2. Data are on an international accounts basis. The data differ from the Census basis data, or through foreign official agencies. shown in table 3.11, for reasons of coverage and timing. Military exports are excluded from 5. Consists of investments in U.S. corporate stocks and in debt securities of private merchandise trade data and are included in line 5. corporations and state and local governments. 3. Reporting banks include all types of depository institutions as well as some brokers and SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current dealers. Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A51 3.11 U.S. FOREIGN TRADE1 Millions of dollars; monthly data seasonally adjusted 1996 1997 IItteemm 11999944 11999955 11999966 Nov. Dec. Jan. Feb. Mar. Apr. Mayp 1 Goods and services, balance -104,416 -101,857 -111,040 -7,665 -10,601 -11,474 -9,884 -7,755 -8.746 -10,230 2 Merchandise -166,192 -173,560 -191,170 -15,176 -17,695 -18,148 -16,761 -14,877 -15.527 -17,043 3 Services 61,776 71,703 80,130 7,511 7,094 6,674 6,877 7,122 6,781 6,813 4 Goods and services, exports 699,646 794,610 848,833 73,969 72,444 71,957 74,370 78,193 77,887 77,236 5 Merchandise 502,398 575,871 612,069 53,209 52,133 51,686 53,687 57,155 57,162 56,349 6 Services 197,248 218,739 236,764 20,760 20,311 20,271 20,683 21,038 20,725 20,887 7 Goods and services, imports -804,062 -896,467 -959,873 -81,634 -83,045 -83,431 -84,254 -85,948 -86,633 -87,466 8 Merchandise -668,590 -749,431 -803,239 -68,385 -69,828 -69,834 -70,448 -72,032 -72,689 -73,392 9 Services -135,472 -147,036 -156,634 -13,249 -13,217 -13,597 -13,806 -13,916 -13,944 -14,074 1. Data show monthly values consistent with quarterly figures in the U.S. balance of SOURCE. FT900, U.S. Department of Commerce, Bureau of the Census and Bureau of payments accounts. Economic Analysis. 3.12 U.S. RESERVE ASSETS Millions of dollars, end of period 1996 1997 AAsssseett 11999933 11999944 11999955 Nov. Dec. Jan. Feb. Mar. Apr. May Junep 1 Total 73,442 74,335 85,832 75,444 75,090 68,200 67,482 67,222 65,873 68,054 67,813 2 Gold stock, including Exchange Stabilization Fund' 11,053 11,051 11,050 11,049 11,049 11,048 11,051 11,050 11,051 11,051 11,050 3 Special drawing rights2'1 9,039 10,039 11,037 10,386 10,312 9,793 9,866 9,879 9,726 10,050 10,023 4 Reserve position in International Monetary Fund2 11,818 12,030 14,649 15,516 15,435 14,372 14,037 13,846 13,660 13,805 13,805 5 Foreign currencies4 41,532 41,215 49,096 38,493 38,294 32,987 32,528 32,447 31,436 32,935 32,935 1. Gold held "under earmark" at Federal Reserve Banks for foreign and international SDR holdings and reserve positions in the IMF also have been valued on this basis since July accounts is not included in the gold stock of the United States; see table 3.13, line 3. Gold 1974. stock is valued at $42.22 per fine troy ounce. 3. Includes allocations of SDRs by the International Monetary Fund on Jan. 1 of the year 2. Special drawing rights (SDRs) are valued according to a technique adopted by the indicated, as follows: 1970—$867 million; 1971—$717 million; 1972—$710 million; 1979— International Monetary Fund (IMF) in July 1974. Values are based on a weighted average of $1,139 million; 1980—$1,152 million; 1981—$1,093 million: plus net transactions in SDRs. exchange rates for the currencies of member countries. From July 1974 through December 4. Valued at current market exchange rates. 1980, sixteen currencies were used; since January 1981, live currencies have been used. U.S. 3.13 FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS1 Millions of dollars, end of period 1996 1997 AAsssseett 11999933 11999944 11999955 Nov. Dec. Jan. Feb. Mar. Apr. May Junep 1 Deposits 386 250 386 170 167 167 229 16 169 176 178 Held in custody 2 U.S. Treasury securities2 379.394 441,866 522,170 634,165 638,049 646,130 662,375 672,059 668,536 662 652 3 Earmarked gold3 12.327 12,033 11,702 11,198 11,197 11,197 11,175 11,034 10,944 10,868 10,794 1. Excludes deposits and U.S. Treasury securities held for international and regional 3. Held in foreign and international accounts and valued at $42.22 per fine troy ounce; not organizations. included in the gold stock of the United States. 2. Marketable U.S. Treasury bills, notes, and bonds and nonmarketable U.S. Treasury securities, in each case measured at face (not market) value. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A52 International Statistics • September 1997 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1996 1997 IItteemm 11999944 11999955 Nov. Dec. Jan.r Feb/ Mar.r Apr. Mayp 1 Total1 520,934 630,918 737,534r 752,663r 762,914 771,952 781,076 777,340 782,155 By type 2 Liabilities reported by banks in the United States" 73,386 107,394 107,072r 112,182 119,641 116,672 119,880 117,337 125,434 3 U.S. Treasury bills and certificates3 139,571 168,534 119977,,669922 119933,,443355 118888,,007766 119911,,009900 119911,,554488 118833,,662288 117766,,226688 U.S. Treasury bonds and notes 4 Marketable 254,059 293,690 366,903 380,565 388,396 398,519 405,625 412,977 416,404 5 Nonmarketable 6,109 6,491 5,929 5,968 6,007 6,043 6,084 5,692 5,730 6 U.S. securities other than U.S. Treasury securities5 47,809 54,809 59,938r 60,513r 60,794 59,628 57,939 57,706 58,319 By area 7 Europe1 215.374 222,406 250,873r 253,099 262.055 260,962 264,919 264,631 265,724 8 Canada 17,235 19,473 21,360 21,343 21,151 21,237 21,997 19,677 20,196 9 Latin America and Caribbean 41,492 66,721 76,977 81,807 77,411 79,332 80,231 77,024 82,142 10 Asia 236,824 311,016 375,320r 383,107r 390,803 399,294 401,098 403,526 402,102 11 Africa 4.180 6.296 7.034 7,379 6,717 7,411 7,908 7,765 8,643 12 Other countries 5,827 5,004 5,968 5,926 4,775 3,714 4,921 4,715 3,346 1. Includes the Bank for International Settlements. Venezuela, beginning December 1990, 30-year maturity issue; Argentina, beginning April 2. Principally demand deposits, time deposits, bankers acceptances, commercial paper, 1993, 30-year maturity issue. negotiable time certificates of deposit, and borrowings under repurchase agreements. 5. Debt securities of U.S. government corporations and federally sponsored agencies, and 3. Includes nonmarketable certificates of indebtedness and Treasury bills issued to official U.S. corporate stocks and bonds. institutions of foreign countries. SOURCE. Based on U.S. Department of the Treasury data and on data reported to the 4. Excludes notes issued to foreign official nonreserve agencies. Includes current value of department by banks (including Federal Reserve Banks) and securities dealers in the United zero-coupon Treasury bond issues to foreign governments as follows: Mexico, beginning States, and on the 1989 benchmark survey of foreign portfolio investment in the United March 1988, 20-year maturity issue and beginning March 1990, 30-year maturity issue; States. 3.16 LIABILITIES TO, AND CLAIMS ON, FOREIGNERS Reported by Banks in the United States' Payable in Foreign Currencies Millions of dollars, end of period 1996 1997 IItteemm 11999933 11999944 11999955 June Sept. Dec.r Mar.r 1 Banks' liabilities 78,259 89,258 109,713 111,651 111,140 103,383 109,205 2 Banks' claims 62,017 60,711 74,016 65,825 68,120 66,018 72,589 3 Deposits 20,993 19,661 22,696 20,890 24,026 22,467 24,542 4 Other claims 41,024 41,050 51,320 44,935 44,094 43,551 48,047 5 Claims of banks' domestic customers" 12,854 10,878 6,145 7,554 7,390 10,978 9,357 1. Data on claims exclude foreign currencies held by U.S. monetary authorities. 2. Assets owned by customers of the reporting bank located in the United States that represent claims on foreigners held by reporting banks for the accounts of the domestic customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A53 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1 Payable in U.S. dollars Millions of dollars, end of period 1996 1997 IItteemm 11999944 11999955 11999966 Nov. Dec. Jan. Feb. Mar. Apr. Mayp BY HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners 1,014,996 1,099,549 l,137,751r l,116,727r l,137,751r l,135,724r l,158,680r l,154,115r 1,163,210 1,176,138 2 Banks' own liabilities 718,591 753,461 759,026r 740,950r 759,026r 765,212r 782,714r 782,843' 796,522 812,041 3 Demand deposits 23,386 24,448 27,034 27,637 27,034 26,228 25,084 28,061' 29,743 26,614 4 Time deposits2 186,512 192,558 188,OOOr 191,907r 188,000r 187,268r 190,257' 189,871' 183,855 184,467 5 Other3 113,215 140,165 142,464r 144,308r 142,464r 158,324r 161,313' 151,397' 161,326 161,493 6 Own foreign offices4 395,478 396,290 401,528 377,098r 401,528 393,392 406,060 413,514 421,598 439,467 7 Banks' custodial liabilities5 296,405 346,088 378,725 375,777 378,725 370,512 375,966 371,272' 366,688 364,097 8 U.S. Treasury bills and certificates6 162,938 197,355 220,575 225,046 220,575 214,727 217,817 218,271 211,148 200,983 9 Other negotiable and readily transferable instruments7 42,539 52,200 64,040 54,568 64,040 62,971 59,668 55,843 59,341 64,500 10 Other 90,928 96,533 94,110 96,163 94,110 92,814 98,481 97,158' 96,199 98,614 11 Nonmonetary international and regional organizations8. . . 8,606 11,039 13,864 14,772 13,864 14,849 14,626 12,192 13,039 12,601 12 Banks' own liabilities 8,176 10,347 13,355 13,434 13,355 14,170 14,297 11,793 12,787 12,406 13 Demand deposits 29 21 29 46 29 55 51 49 30 16 14 Time deposits2 3,298 4,656 5,784 4,906 5,784 5,792 5,035 6,952 5,238 5,195 15 Other3 4,849 5,670 7,542 8,482 7,542 8,323 9,211 4,792 7,519 7,195 16 Banks' custodial liabilities5 430 692 509 1,338 509 679 329 399 252 195 17 U.S. Treasury bills and certificates6 281 350 244 1,088 244 494 219 226 154 102 18 Other negotiable and readily transferable instruments7 149 341 265 226 265 185 110 158 98 88 19 Other 0 1 0 24 0 0 0 15 0 5 20 Official institutions9 212,957 275,928 305,617 304,764r 305,617 307,717r 307,762' 311,428' 300,965 301,702 21 Banks' own liabilities 59,935 83,447 79,406 82,715r 79,406 88,190r 87,317' 90,700' 86,794 92,697 22 Demand deposits 1,564 2,098 1,511 2,180 1,511 1,290 1,378 2,390 2,345 1,982 23 Time deposits2 23,511 30,717 33,336r 34,826r 33,336' 32,646r 34,457' 32,691' 33,428 36,502 24 Other3 34,860 50,632 44,559r 45,709r 44,559r 54,254r 51,482' 55,619' 51,021 54,213 25 Banks' custodial liabilities5 153,022 192,481 226,211 222,049 226,211 219,527 220,445 220,728 214,171 209,005 26 U.S. Treasury bills and certificates6 139,571 168,534 193,435 197,692 193,435 188,076 191,090 191,548 183,628 176,268 27 Other negotiable and readily transferable instruments7 13,245 23,603 32,350 24,000 32,350 31,291 29,008 28,797 30,396 32,485 28 Other 206 344 426 357 426 160 347 383 147 252 29 Banks10 678,532 691,412 680,923r 667,620r 680,923r 669,225r 683,142' 687,846' 700,336 709,772 30 Banks' own liabilities 563,617 567,834 562,912r 547,026' 562,912r 553,650r 562,652' 567,821' 580,209 591,313 31 Unaffiliated foreign banks 168,139 171,544 161,384r 169,928r 161,384r 160,258r 156,592' 154,307' 158,611 151,846 32 Demand deposits 10,633 11,758 13,692 13,304 13,692 12,898 11,642 13,360' 14,909 12,957 33 Time deposits2 111,171 103,471 90,81 r 94,175r 90,8 llr 90,123r 89,723' 88,784' 83,540 81,595 34 Other3 46,335 56,315 56,88 lr 62,449r 56,88 lr 57,237r 55,227' 52,163' 60,162 57,294 35 Own foreign offices4 395,478 396,290 401,528 377,098r 401,528 393,392 406,060 413,514 421,598 439,467 36 Banks' custodial liabilities5 114,915 123,578 118,011 120,594 118,011 115,575 120,490 120,025' 120,127 118,459 37 U.S. Treasury bills and certificates6 11,264 15,872 13,886 1144,,222277 1133,,888866 13,969 13,289 1133,,999966 14,177 1111,,222233 38 Other negotiable and readily transferable instruments7 14,506 13,035 12,321 13,295 12,321 11,142 11,210 11,204 12,169 14,423 39 Other 89,145 94,671 91,804 93,072 91,804 90,464 95,991 94,825' 93,781 92,813 40 Other foreigners 114,901 121,170 137,347' 129,57 lr 137,347r 143,933r 153,150' 142,649' 148,870 152,063 41 Banks' own liabilities 86,863 91,833 103,353r 91,115' 103,353r 109,202r 118,448' 112,529' 116,732 115,625 42 Demand deposits 11,160 10,571 11,802 12,107 11,802 11,985 12,013 12,262 12,459 11,659 43 Time deposits2 48,532 53,714 58,069r 58,000 58,069r 58,707r 61,042' 61,444' 61,649 61,175 44 Other3 27,171 27,548 33,482r 27,668r 33,482r 38,510r 45,393' 38,823' 42,624 42,791 45 Banks' custodial liabilities5 28,038 29,337 33,994 31,796 33,994 34,731 34,702 30,120 32,138 36,438 46 U.S. Treasury bills and certificates6 11,822 12,599 13,010 12,039 1133,,001100 12,188 13,219 1122,,550011 1133,,118899 1133,,339900 47 Other negotiable and readily transferable instruments7 14,639 15,221 19,104 17,047 19,104 20,353 19,340 15,684 16,678 17,504 48 Other 1,577 1,517 1,880 2,710 1,880 2,190 2,143 1,935 2,271 5,544 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 17,895 9,103 9,934 10,540 9,934 9,035 8,745 9,332 10,658 10,916 1. Reporting banks include all types of depository institutions as well as some brokers and 6. Includes nonmarketable certificates of indebtedness and Treasury bills issued to official dealers. Excludes bonds and notes of maturities longer than one year. institutions of foreign countries. 2. Excludes negotiable time certificates of deposit, which are included in "Other negotia- 7. Principally bankers acceptances, commercial paper, and negotiable time certificates of ble and readily transferable instruments." deposit. 3. Includes borrowing under repurchase agreements. 8. Principally the International Bank for Reconstruction and Development, the Inter- 4. For U.S. banks, includes amounts owed to own foreign branches and foreign subsidiar- American Development Bank, and the Asian Development Bank. Excludes "holdings of ies consolidated in quarterly Consolidated Reports of Condition filed with bank regulatory dollars" of the International Monetary Fund. agencies. For agencies, branches, and majority-owned subsidiaries of foreign banks, consists 9. Foreign central banks, foreign central governments, and the Bank for International principally of amounts owed to the head office or parent foreign bank, and to foreign Settlements. branches, agencies, or wholly owned subsidiaries of the head office or parent foreign bank. 10. Excludes central banks, which are included in "Official institutions." 5. Financial claims on residents of the United States, other than long-term securities, held by or through reporting banks for foreign customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 International Statistics • September 1997 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States'—Continued 1996 1997 IItteemm 11999944 11999955 11999966 Nov. Dec. Jan. Feb. Mar. Apr. MayP AREA 50 Total, all foreigners 1,014,996 1,099,549 l,137,751r l,116,727r l,137,751r l,135,724r l,158,680r l,154,115r 1,163,210 1,176,138 51 Foreign countries 1,006,390 1,088,510 l,123,887r l,101,955r 1,123,887"" l,120,875r l,144,054r 1,141,923r 1,150,171 1,163,537 52 Europe 390,869 362,819 368,380r 381,233' 368,380' 379,641' 379,566' 374,943' 374,977 376,405 53 Austria 3,588 3,537 5,101 6,250 5,101 4,794 4,010 4,589 3,069 3,337 54 Belgium and Luxembourg 21,877 24,792 23,576 21,006 23,576 22,842 23,537 22,107' 18,764 20,896 55 Denmark 2,884 2,921 2,450 2,790 2,450 2,213 1,594 1,692' 1,647 1,974 56 Finland 1,436 2,831 1,463 1,557 1,463 1,583 1,338 1,017 1,747 953 51 France 44,365 39,218 34,365 40,021 34,365 34,558 35,457 34,861' 40,227 38,444 58 Germany 27,109 24,035 24,554 21,650 24,554 24,871 24,142 25,410' 25,697 26,000 59 Greece 1,400 2,014 1,810 2,222 1,810 2,080 1,930 2,392 1,740 2,269 60 Italy 10,885 10,868 10,701 10,262 10,701 10,366 10,610 8,676' 9,419 9,660 61 Netherlands 16,033 13,745 10,995 11.132 10,995 9,760 10,946 11,008' 11,975 8,625 62 Norway 2,338 1,394 1,288 1,882 1,288 1,860 1,538 1,896' 1,357 1,121 63 Portugal 2,846 2,761 1,865 1,723 1,865 1,741 1,661 1,756 1,995 1,828 64 Russia 2,726 7,948 7,571 8,215 7,571 7,160 6,819 7,771 7,863 9,531 65 Spain 14,675 10,011 16,920' 18,227' 16,920' 20,410' 17,963 18,790' 17,674 15,005 66 Sweden 3,094 3,246 1,291 1,656 1,291 2,226' 1,483' 1,882' 2,190 1,600 67 Switzerland 40,724 43,625 44,214' 37,979' 44,214' 43,266 46,681 43,315' 41,803 43,674 68 Turkey 3.341 4,124 6,723 7,311 6,723 7,051 6,748' 7,176' 6,585 6,742 69 United Kingdom 163,733 139,183 151,416' 165,845' 151,416' 157,412' 157,320' 154,181' 156,666 160,957 70 Yugoslavia" 245 177 206 232 206 212 239 248 266 324 /I Other Europe and other former U.S.S.R.'" 27,770 26,389 21,871 21,273' 21,871 25,236 25,550 26,176 24,293 23,465 72 Canada 24,768 30,468 38,111 33,035 38,111 34,830 33,985 37,118' 39,575 37,554 73 Latin America and Caribbean 423,847 440,213 465,733' 438,573' 465,733' 455,457' 472,600' 464,169' 476,680 490,788 74 Argentina 17,203 12,235 13,794 13,860 13,794 16,475 17,018 16,739 14,057 16,379 /5 Bahamas 104,014 94.991 88,304 91,494 88,304 90,460 98,120 89,417 104,831 100,081 76 Bermuda 8,424 4,897 5,299 6,443 5,299 5,103 8,803 8,196 7,197 6,265 II Brazil 9,145 23,797 27,662' 26,919' 27,662' 22,467' 23,858' 23,693' 23,373 25,325 78 British West Indies 229,599 239,083 250,786' 226,502 250,786' 244,633 248,571 253,685 250,187 265,943 79 Chile 3,127 2,826 2,915 2,728 2,915 2,987 3,459 3,278 3,117 3,239 80 Colombia 4,615 3,659 3,256 2,838 3,256 2,791 2,855 2,807 3,165 2,776 81 Cuba 13 8 21 18 21 19 19 19 52 54 82 Ecuador 875 1,314 1,767 1,574 1,767 1,617 1,633 1,484 1,469 1,608 83 Guatemala 1,121 1,276 1.282 1,235 1,282 1,348 1,410 1,378 1,514 1,457 84 Jamaica 529 481 628 564 628 576 576 585 525 472 85 Mexico 12,227 24,560 31,230 27,981 31,230 27,139 27,442 26,594 27,718 27,908 86 Netherlands Antilles 5,217 4,673 5,977 4,437 5,977 6,401 6,085 3,474 5,334 3,678 87 Panama 4,551 4,264 4,077 4,002 4,077 3,849 4,135 3,847 33,,771111 4,005 88 Peru 900 974 834 942 834 967 917 926 888811 1,098 89 Uruguay 1,597 1,836 1,888 1,753 1,888 1,915 1,857 1,843 1,756 2,063 90 Venezuela 13,986 11.808 17,361 17,377 17,361 18,119 18,125 18,454 18,968 18,897 91 Other 6,704 7,531 8,652 7,906 8,652 8,591 7,717 7,750 8,825 9,540 92 154,346 240.595 236,673' 223333,,772288'' 236,673' 223366,,440044'' 224444,,447733'' 225500,,668888 224422,,330099 224444,,118833 China 93 Mainland 10,066 33,750 30,438' 29,407' 30,438' 27,914' 31,631' 31,370' 28,580 29,432 94 Taiwan 9,844 11,714 15,990 16,611' 15,990 16,680' 15,619' 15,796' 14,669 12,441 95 Hong Kong 17,104 20,197 18,736' 18,707' 18,736' 19,866' 20,062' 20,106' 18,942 19,375 96 India 2,338 3,373 3,930' 3,825' 3,930' 4,323' 4,746' 5,430' 4,756 4,368 9/ Indonesia 1,587 2,708 2,297 2,401 2,297 2,159 2,473 2,672' 2,441 2,788 98 Israel 5,157 4,041 6,042 5,723 6,042 6,597 6,197 5,955 6,082 6,400 99 Japan 62,981 109,193 107,012' 103,678' 107,012' 106,419' 108,703' 116,054 114,927 114,666 100 Korea (South) 5,124 5,749 5,949' 5,843' 5,949' 6,056' 6,257' 6,545' 7,153 7,851 101 Philippines 2,714 3,092 3,378 3,264 3,378 2,340 2,437 2,389 2,335 2,387 102 Thailand 6,466 12,279 10,912 12,729 10,912 9,873 10,752 9,394 10,361 7,808 103 Middle Eastern oil-exporting countries13 15,494 15,582 14,303 13,145 14,303 12,924 12,767 13,408 13,826 13,972 104 Other 15,471 18,917 17,686' 18,395' 17,686' 21,253' 22,829' 21,569' 18,237 22,695 105 Africa 6,524 7,641 8,063 7,671 8,063 8,443 8,110 8,536 9,011 9,824 106 Egypt 1,879 2,136 2,012 1,901 2,012 1,933 2,033 2,001 2,056 2,248 107 Morocco 97 104 112 66 112 111 97 107 129 91 108 South Africa 433 739 458 641 458 610 720 827 784 2,004 109 Zaire 9 10 10 10 10 5 7 9 4 9 110 Oil-exporting countries'4 1,343 1,797 2,608 2,384 2,608 3,095 2,467 2,931 3,344 2,731 111 Other 2,763 2,855 2,863 2,669 2,863 2,689 2,786 2,661 2,694 2,741 112 Other 6,036 6,774 6,927 7,715 6,927 6,100 5,320 6,469' 7,619 4,783 113 Australia 5,142 5,647 5,468 6,196 5,468 4,866 4,072 5,098' 6,370 3,411 114 Other 894 1,127 1,459 1,519 1,459 1,234 1,248 1,371 1,249 1,372 115 Nonmonetary international and regional organizations.. . 8,606 11,039 13,864 14,772 13,864 14,849 14,626 12,192 13,039 12,601 116 International15 7,537 9,300 11,991 12,974 11,991 13,230 13,000 10,272 11,671 10,927 117 Latin American regional'6 613 893 1,339 1,172 1,339 1,103 1,220 1,459 1,050 1,435 118 Other regional17 456 846 534 626 534 516 406 461 318 239 11. Since December 1992, has excluded Bosnia, Croatia, and Slovenia. 15. Principally the International Bank for Reconstruction and Development. Excludes 12. Includes the Bank for International Settlements. Since December 1992. has "holdings of dollars" of the International Monetary Fund. included all parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, and Slovenia. 16. Principally the Inter-American Development Bank. 13. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar. Saudi Arabia, and United Arab 17. Asian. African, Middle Eastern, and European regional organizations, except the Bank Emirates (Trucial States). for International Settlements, which is included in "Other Europe." 14. Comprises Algeria, Gabon, Libya, and Nigeria. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A55 3.18 BANKS' OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States' Payable in U.S. Dollars Millions of dollars, end of period 1996 1997 AArreeaa oorr ccoouunnttrryy 11999944 11999955 11999966 Nov. Dec. Jan. Feb. Mar." Apr. Mayp 1 Total, all foreigners 485,432 532,444 600,676r 574,906r 600,676r 607,491r 633,662" 636,629 641,072 632,400 2 Foreign countries 480,841 530,513 598,072r 573,433r 598,072" 605,719r 631,407r 635,123 638,784 630,068 3 Europe 124,124 132,150 166,489r 168,794 166,489" 178,480" 193,227" 204,792 183,019 195,970 4 Austria 692 565 1,662 1,097 1,662 1,643 1,284 1,911 1,541 1,440 5 Belgium and Luxembourg 6,923 7,624 6,727 6,403 6,727 7,611 6,855 8,439 8,054 8,017 6 Denmark 1,129 403 492 651 492 678 571 546 888 924 7 Finland 512 1,055 971 1,228 971 1,144 976 1,684 1,194 1,121 8 France 12,149 15,033 15,246 12,198 15,246 18,111 20,576 24,929 15,306 17,492 9 Germany 7,623 9,263 8,472 7,190" 8,472 9,659 9,077 11,971 9,537 9,059 10 Greece 604 469 568 571 568 636 530 755 453 477 11 Italy 6,044 5,370 6,457 5,957 6,457 5,419 5,587 6,427 6,166 6,478 12 Netherlands 2,960 5,346 7,080 7,350 7,080 8,119 8,658 7,616 8,866 8,190 13 Norway 504 665 808 1,894 808 1,058 766 1,226 846 1,199 14 Portugal 938 888 418 341 418 420 310 421 326 306 15 Russia 973 660 1,669 1,533 1,669 1,673 1,704 2,028 1,799 1,881 16 Spain 3,536 2,166 3,211 4,181 3,211 6,507 5,407 6,633 6,301 5,854 17 Sweden 4,098 2,080 2,673 2,882 2,673 2,013" 2,314" 2,311 1,942 1,870 18 Switzerland 5,747 7,474 19,798 18,076" 19,798 21,457 25,258 20,855 21,301 24,574 19 Turkey 878 803 1,109 1,131 1,109 1,029 1,221 1,236 1,216 1,306 20 United Kingdom 66,863 67,784 85,057 92,143 85,057 86,711 96,988 99,131 90,823 101,242 21 Yugoslavia2 265 147 115 112 115 108 107 87 78 79 22 Other Europe and other former U.S.S.R.3 1,686 4,355 3,956r 3,856 3,956" 4,484 5,038 6,586 6,382 4,461 23 Canada 18,490 20,874 26,436 22,013 26,436 26,348 27,881 35,772 33,569 31,326 74 Latin America and Caribbean 224,229 256,944 274,127 253,761 274,127 271,654 275,255 261,155 282,478 264,375 25 Argentina 5,854 6,439 7,400 7,212 7,400 6,987 6,952 6,995 6,870 7,237 26 Bahamas 66,410 58,818 71,871 64,911 71,871 62,679 66,771 67,728 68,219 65,546 27 Bermuda 8,533 5,741 4,103 5,019 4,103 4,444 5,980 6,216 8,125 6,596 28 Brazil 9,583 13,297 17,259 16,141 17,259 17,620 17,758 17,752 17,590 18,588 79 British West Indies 96,373 124,037 105,510 105,234 105,510 108,643 110,143 98,778 111,300 106,911 30 Chile 3,820 4,864 5,136 4,554 5,136 5,509 5,602 5,784 5,636 5,744 31 Colombia 4,004 4,550 6,247 4,960 6,247 6,166 6,033 6,099 6,026 6,041 37 Cuba 0 0 0 0 0 0 0 0 0 2 33 Ecuador 682 825 1,031 952 1,031 1,079 1,134 1,155 995 1,090 34 Guatemala 366 457 620 568 620 612 634 629 633 619 35 Jamaica 258 323 345 365 345 336 336 366 325 328 36 Mexico 17,749 18,024 18,425 17,993 18,425 18,323 18,297 19,516 20,292 19,182 37 Netherlands Antilles 1,404 9,229 25,209 15,074 25,209 27,675 24,250 18,926 25,235 14,745 38 Panama 2,198 3,008 2,786 2,621 2,786 2,796 2,911 3,110 3,243 3,347 39 Peru 997 1,829 2,720 2,629 2,720 2,867 2,944 2,510 2,473 2,577 40 Uruguay 503 466 589 551 589 623 766 741 682 735 41 Venezuela 1,832 1,661 1,702 1,626 1,702 1,599 1,452 1,516 1,558 1,710 42 Other 3,663 3,376 3,174 3,351 3,174 3,696 3,292 3,334 3,276 3,377 43 Asia 107,800 115,336 122,535' 120,271" 122,535" 121,362 127,080" 124,326 129,598 129,038 China 44 Mainland 836 1,023 1,401 1,292 1,401 2,035 1,766 1,456 2,201 2,161 45 Taiwan 1,448 1,713 1,894 1,413 1,894 1,249 1,201 1,709 1,532 1,500 46 Hong Kong 9,222 12,821 12,802 13,550 12,802 11,764 11,877 14,143 13,389 14,954 47 India 994 1,846 1,946 2,027 1,946 1,824 1,957 2,194 2,147 2,256 48 Indonesia 11,,447722 1,696 1,762 1,636 1,762 1,749 1,896 2,081 2,206 2,432 49 Israel 668888 739 633 624 633 692 617 612 586 909 50 Japan 59,569 61,468 59,967 59,886 59,967 59,843 64,199 56,475 59,083 56,779 51 Korea (South) 10,286 13,975 18,958" 18,066" 18,958" 20,214 20,031" 19,943 20,863 20,925 52 Philippines 663 1,318 1,697 1,519 1,697 1,492 1,794 1,600 1,746 1,937 53 Thailand 2,902 2,612 2,679 2,820 2,679 3,003 3,092 3,429 3,233 3,069 54 Middle Eastern oil-exporting countries4 13,982 9,639 10,424 10,311 10,424 8,582 8,889 10,078 11,315 10,590 55 Other 5,738 6,486 8,372 7,127 8,372 8,915 9,761 10,606 11,297 11,526 56 Africa 3,053 2,742 2,776" 2,557 2,776" 2,731 2,772 2,735 3,282 2,847 57 Egypt 225 210 247 212 247 246 245 244 231 270 58 Morocco 429 514 524 587 524 489 522 473 478 463 59 South Africa 674 465 584 551 584 572 564 470 452 569 60 Zaire 2 1 0 0 0 0 0 0 1 0 61 Oil-exporting countries5 856 552 420 427 420 408 474 605 1,177 679 62 Other 867 1,000 1,001" 780 1,001" 1,016 967 943 943 866 63 Other 3,145 2,467 5,709 6,037 5,709 5,144 5,192 6,343 6,838 6,512 64 Australia 2,192 1,622 4,577 4,336 4,577 3,743 3,176 4,101 4,918 4,088 65 Other 953 845 1,132 1,701 1,132 1,401 2,016 2,242 1,920 2,424 66 Nonmonetary international and regional organizations6. .. 4,591 1,931 2,604 1,473 2,604 1,772 2,255 1,506 2,288 2,332 1. Reporting banks include all types of depository institutions as well as some brokers and 4. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab dealers. Emirates (Trucial States). 2. Since December 1992, has excluded Bosnia, Croatia, and Slovenia. 5. Comprises Algeria, Gabon, Libya, and Nigeria. 3. Includes the Bank for International Settlements. Since December 1992, has included all 6. Excludes the Bank for International Settlements, which is included in "Other Europe." parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, and Slovenia. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A56 International Statistics • September 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 TTyyppee ooff ccllaaiimm Nov. Dec/ Jan/ Feb/ Mar/ Apr. Mayp 1 Total 601,814 655,211 744,691 744,691 798,601 2 Banks' claims 485,432 532,444 600,676 574,906R 600,676 607,491 633,662 636,629 641,072 632,400 3 Foreign public borrowers 23,416 22,518 22,241 20,433R 22,241 26,061 24,755 28,864 29,176 27,264 4 Own foreign offices2 283,015 307,427 342,508 335,075R 342,508 330,261 360,541 360,340 362,599 368,036 5 Unaffiliated foreign banks 110,410 101,595 113,505 107,928 113,505 121,198 118,074 118,429 116,247 113,038 6 Deposits 59,368 37,771 33,826 32,420 33,826 39,266 38,155 37,286 34,594 34,553 7 Other 51,042 63,824 79,679 75,508 79,679 81,932 79,919 81,143 81,653 78,485 8 All other foreigners 68,591 100,904 122,422 111,470R 122,422 129,971 130,292 128,996 133,050 124,062 9 Claims of banks' domestic customers3 116,382 122,767 144,015 144,015 161,972 10 Deposits 64,829 58,519 77,673 77,673 95,147 11 Negotiable and readily transferable instruments4 36,111 44,161 51,207 51,207 49,518 12 Outstanding collections and other claims 15,442 20,087 15,135 15,135 17,307 MEMO 13 Customer liability on acceptances 8,427 8,410 10,437 10,437 11,247 14 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States5 32,796 30,717 42,679 41,581 42,679 43,452 47,270 38,815 42,719 44,870 1. For banks' claims, data are monthly; for claims of banks' domestic customers, data are principally of amounts due from the head office or parent foreign bank, and from foreign for quarter ending with month indicated. branches, agencies, or wholly owned subsidiaries of the head office or parent foreign bank. Reporting banks include all types of depository institution as well as some brokers and 3. Assets held by reporting banks in the accounts of their domestic customers. dealers. 4. Principally negotiable time certificates of deposit, bankers acceptances, and commercial 2. For U.S. banks, includes amounts due from own foreign branches and foreign subsidiar- paper. ies consolidated in quarterly Consolidated Reports of Condition filed with bank regulatory 5. Includes demand and time deposits and negotiable and nonnegotiable certificates of agencies. For agencies, branches, and majority-owned subsidiaries of foreign banks, consists deposit denominated in U.S. dollars issued by banks abroad. 3.20 BANKS' OWN CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Banks in the United States' Payable in U.S. Dollars Millions of dollars, end of period 1996 1997 MMaattuurriittyy,, bbyy bboorrrroowweerr aanndd aarreeaa22 11999933 11999944 11999955 June Sept. Dec/ Mar. 1 Total 202,566 202,282 224,932 228,534 232,997 257,924 276,064 By borrower 2 Maturity of one year or less 172,662 170,411 178,857 185,878R 189,047 211,740 223,815 3 Foreign public borrowers 17,828 15,435 14,995 14,982 16,003 15,411 19,876 4 All other foreigners 154,834 154,976 163,862 170,896R 173,044 196,329 203,939 5 Maturity of more than one year 29,904 31,871 46,075 42,656R 43,950 46,184 52,249 6 Foreign public borrowers 10,874 7,838 7,522 8,126 6,922 6,815 8,861 7 All other foreigners 19,030 24,033 38,553 34,530R 37,028 39,369 43,388 By area Maturity of one year or less 8 Europe 57,413 56,381 55,622 57,138 58,545 55,513 75,013 9 Canada 7,727 6,690 6,751 6,806 8,811 8,339 10,404 10 Latin America and Caribbean 60,490 59,583 72,504 78,586R 79,622 103,254 96,867 11 Asia 41,418 40,567 40,296 38,11 R 37,199 38,135 36,491 12 Africa 1,820 1,379 1,295 1,279 1,320 1,316 1,451 13 All other3 3,794 5,811 2,389 3,958 3,550 5,183 3,589 Maturity of more than one year 14 Europe 5,310 4,358 4,995 8,189R 7,117 6,928 9,478 15 Canada 2,581 3,505 2,751 3,689 3,533 2,645 2,943 16 Latin America and Caribbean 14,025 15,717 27,681 19,538R 21,382 24,917 26,771 17 Asia 5,606 5,323 7,941 9,234R 9,808 9,392 10,769 18 Africa 1,935 1,583 1,421 1,410 1,349 1,361 1,204 19 All other3 447 1,385 1,286 596 761 941 1,084 1. Reporting banks include all types of depository institutions as well as some brokers and 2. Maturity is time remaining until maturity. dealers. 3. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A57 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. and Foreign Offices of U.S. Banks' Billions of dollars, end of period 1995 1996 1997 Area or country 11999933 11999944 Mar. June Sept. Dec. Mar. June Sept. Dec. Mar. 1 Total 409.5 499.5 545.0 531.9 535.3 551.9 574.6 612.7r 586.0 645.0 657.0 2 G-10 countries and Switzerland 161.9 191.2 212.1 206.5 203.0 206.0 203.4 226.9 220.0 228.1 239.9 3 Belgium and Luxembourg 7.4 7.2 10.4 9.7 11.0 13.6 11.0 11.4 11.3 11.7 14.3 4 France 12.0 19.1 19.9 19.9 18.0 19.4 17.9 18.0 17.4 16.6 20.6 5 Germany 12.6 24.7 31.2 30.0 27.5 27.3 31.5 31.4 33.9 29.8 32.3 6 Italy 7.7 11.8 10.6 10.7 12.6 11.5 13.2 14.9 15.2 16.0 14.6 7 Netherlands 4.7 3.6 3.5 4.3 4.5 3.7 3.0 4.7 5.9 3.9 4.7 8 Sweden 2.7 2.7 3.1 3.1 2.9 2.7 3.3 2.7 3.0 2.6 3.4 9 Switzerland 5.9 5.1 5.7 6.2 6.6 6.7 5.2 6.3 6.3r 5.3 6.3 10 United Kingdom 84.4 85.8 90.1 87.1 80.4 82.4 84.7 101.6 90.5 104.6 105.7 11 Canada 6.9 10.0 10.8 11.3 12.9 10.3 10.8 12.2 14.8 14.0 16.4 12 Japan 17.6 21.1 26.7 24.4 26.6 28.5 22.7 23.6 21.7 23.6 21.7r 13 Other industrialized countries 26.5 45.7 44.4 43.3 50.5 50.2 61.3 55.5 62.1 65.7 66.9 14 Austria .7 1.1 .9 .7 1.2 .9 1.3 1.2 1.0 1.1 1.9 15 Denmark 1.0 1.3 1.7 1.1 1.8 2.6 3.4 3.3 1.7 1.5 1.8 16 Finland .4 .9 1.1 .5 .7 .8 .7 .6 .6 .8 .7 17 Greece 3.2 4.5 4.9 5.0 5.1 5.7 5.6 5.6 6.1 6.7 6.4 18 Norway 1.7 2.0 2.4 1.8 2.3 3.2 2.1 2.3 3.0 8.0 5.3 19 Portugal .8 1.2 1.0 1.2 1.9 1.3 1.6 1.6 1.4 .9 1.0 20 Spain 9.9 13.6 14.1 13.0 13.3 11.6 17.5 13.6 16.1 13.2 14.5 21 Turkey 2.1 1.6 1.4 1.4 2.0 1.9 2.0 2.3 2.8 2.7 2.7 22 Other Western Europe 3.2 3.2 2.8 2.9 3.3 4.7 3.8 3.4 4.8 4.7 6.3 23 South Africa 1.1 1.0 1.5 1.4 1.3 1.2 1.7 2.0 1.7 2.0 2.0 24 Australia 2.3 15.4 12.6 14.3 17.4 16.4 21.7 19.6 22.8 24.0 24.4 25 OPEC2 17.6 24.1 19.5 20.3 22.7 22.1 21.2 20.1 19.2 19.7 21.9 26 Ecuador .5 .5 .5 .7 .7 .7 .8 .9 .9 1.1 1.1 27 Venezuela 5.1 3.7 3.5 3.5 3.0 2.7 2.9 2.3 2.3 2.4 1.9 28 Indonesia 3.3 3.8 4.0 4.1 4.4 4.8 4.7 4.9 5.4 5.2 4.9 29 Middle East countries 7.6 15.3 10.8 11.5 13.9 13.3 12.3 11.5 10.1 10.6 13.2 30 African countries 1.2 .9 .7 .6 .6 .6 .6 .5 .4 .4 .7 31 Non-OPEC developing countries 83.2 96.0 98.5 103.7 104.1 112.6 118.6 126.4 124.1 130.1 128.8r Latin America 32 Argentina 7.7 11.2 11.4 12.3 10.9 12.9 12.7 14.1 15.0 14.3 14.4 33 Brazil 12.0 8.4 9.2 10.0 13.6 13.7 18.3 21.7 17.8 20.7 22.4 34 Chile 4.7 6.1 6.4 7.1 6.4 6.8 6.4 6.7 6.6 7.0 6.8 35 Colombia 2.1 2.6 2.6 2.6 2.9 2.9 2.9 2.8 3.1 4.1 3.7 36 Mexico 17.9 18.4 17.9 17.6 16.3 17.3 16.1 15.4 16.1 16.2 17.5 37 Peru .4 .5 .6 .8 .7 .8 .9 1.2 1.3 1.6 1.6 38 Other 3.1 2.7 2.4 2.6 2.6 2.8 3.1 3.0 3.0 3.3 3.5 Asia China 39 Mainland 2.0 1.1 1.1 1.4 1.7 1.8 3.3 2.9 2.6 2.5 2.7 40 Taiwan 7.3 9.2 8.5 9.0 9.0 9.4 9.7 9.8 10.3 10.2 10.2 41 India 3.2 4.2 3.8 4.0 4.4 4.4 4.7 4.2 3.8 4.3 4.9 42 Israel .5 .4 .6 .7 .5 .5 .5 .6 .5 .5 .6' 43 Korea (South) 6.7 16.2 16.9 18.7 18.0 19.1 19.3 21.7 21.9 21.5 14.6 44 Malaysia 4.4 3.1 3.9 4.1 4.3 4.4 5.2 5.3 5.5 5.9 6.6 45 Philippines 3.1 3.3 3.0 3.6 3.3 4.1 3.9 4.7 5.4 5.8 6.0 46 Thailand 3.1 2.1 3.3 3.8 3.9 4.9 5.2 5.4 4.8 5.7 6.8 47 Other Asia 3.1 4.7 4.9 3.5 3.7 4.5 4.3 4.8 4.1 4.1 4.2 Africa 48 Egypt .4 .3 .4 .4 .4 .4 .5 .5 .6 .7 .9 49 Morocco .7 .6 .6 .9 .9 .7 .7 .8 .7 .7 .6 50 Zaire .0 .0 .0 .0 .0 .0 .0 .0 .0 .1 .0 51 Other Africa3 .8 .8 .7 .6 .8 .9 .8 .8 1.0 .9 .9 52 Eastern Europe 3.2 2.7 2.3 1.8 3.4 4.2 6.3 5.1 5.3 6.9 9.3 53 Russia4 1.6 .8 .7 .4 .6 1.0 1.4 1.0 1.8 3.7 3.7 54 Other 1.6 1.9 1.7 1.3 2.8 3.2 4.9 4.1 3.5 3.2 5.6 55 Offshore banking centers 73.5 72.9 85.7 83.8 87.5 99.2 101.3 106.2 105.3 134.9 130.6 56 Bahamas 10.9 10.2 12.5 8.4 12.6 11.0 13.9 17.3 14.2 20.3 20.0 57 Bermuda 8.9 8.4 8.7 8.4 6.1 6.3 5.3 4.1 4.0 4.5 6.7 58 Cayman Islands and other British West Indies 18.4 21.4 20.7 25.3 25.1 32.4 28.8 26.1 32.0 37.2 33.0 59 Netherlands Antilles 2.8 1.6 1.2 2.8 5.7 10.3 11.1 13.2 11.7 26.1 19.9 60 Panama5 2.4 1.3 1.1 1.2 1.3 1.4 1.6 1.7 1.7 2.0 1.9 61 Lebanon 62 China, Hong Kong 18'8 20^0 22^5 23.1 23.7 25.0 25.3 27.8 26.2 28.1 30.8 63 Singapore 11.2 10.1 19.2 14.8 13.3 13.1 15.4 15.9 15.4 16.7 17.9 64 Other" .1 .1 .0 .0 .1 .1 .1 .1 .1 .1 .1 65 Miscellaneous and unallocated7 43.6 66.9 82.5 72.6 64.2 57.6 62.6 72.7 50.0 59.5 59.8 1. The banking offices covered by these data include U.S. offices and foreign branches of 2. Organization of Petroleum Exporting Countries, shown individually; other members of U.S. banks, including U.S. banks that are subsidiaries of foreign banks. Offices not covered OPEC (Algeria, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, and United include U.S. agencies and branches of foreign banks. Beginning March 1994, the data include Arab Emirates); and Bahrain and Oman (not formally members of OPEC). large foreign subsidiaries of U.S. banks. The data also include other types of U.S. depository 3. Excludes Liberia. Beginning March 1994 includes Namibia. institutions as well as some types of brokers and dealers. To eliminate duplication, the data 4. As of December 1992, excludes other republics of the former Soviet Union. are adjusted to exclude the claims on foreign branches held by a U.S. office or another foreign 5. Includes Canal Zone. branch of the same banking institution. 6. Foreign branch claims only. These data are on a gross claims basis and do not necessarily reflect the ultimate country 7. Includes New Zealand, Liberia, and international and regional organizations. risk or exposure of U.S. banks. More complete data on the country risk exposure of U.S. banks are available in the quarterly Country Exposure Lending Survey published by the Federal Financial Institutions Examination Council. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A58 International Statistics • September 1997 3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States Millions of dollars, end of period 1995 1996 1997 TTyyppee ooff lliiaabbiilliittyy,, aanndd aarreeaa oorr ccoouunnttrryy 11999933 11999944 11999955 Dec. Mar. June Sept. Dec. Mar.p 1 Total 50,597 54,309 46,448 46,448 49,907 48,990 51,695 54,822 54,619 2 Payable in dollars 38,728 38,298 33,903 33,903 36,273 35,385 36.465 39,003 39,394 3 Payable in foreign currencies 11,869 16,011 12,545 12,545 13,634 13,605 15,230 15,819 15,225 By type 4 Financial liabilities 29,226 32,954 24,241 24,241 26,570 24,844 25,492 26,089 25,449 5 Payable in dollars 18,545 18,818 12,903 12,903 13,831 12,212 11,319 11,374 11,241 6 Payable in foreign currencies 10,681 14,136 11,338 11,338 12,739 12,632 14,173 14,715 14,208 7 Commercial liabilities 21,371 21,355 22,207 22,207 23,337 24,146 26,203 28,733 29,170 Trade payables 8,802 10.005 11,013 11,013 10,815 11,081 11,791 12,720 11,520 y Advance receipts and other liabilities 12,569 11,350 11,194 11,194 12,522 13,065 14,412 16,013 17,650 10 Payable in dollars 20,183 19,480 21,000 21,000 22,442 23,173 25,146 27,629 28,153 li Payable in foreign currencies 1,188 1,875 1,207 1,207 895 973 1,057 1,104 1,017 By area or country Financial liabilities 12 Europe 18,810 21.703 15,622 15,622 16,950 16,434 16,133 16,242 15,962 13 Belgium and Luxembourg 175 495 369 369 483 498 547 632 769 14 France 2,539 1,727 999 999 1,679 1,011 1,220 1,091 1,205 15 Germany 975 1,961 1,974 1,974 2,161 1.850 2,276 1,834 1,589 16 Netherlands 534 552 466 466 479 444 519 556 507 17 Switzerland 634 688 895 895 1,260 1,156 830 699 694 18 United Kingdom 13,332 15,543 10,138 10,138 10,246 10,790 9,884 10,224 9,756 19 Canada 859 629 632 632 1,166 951 973 1,401 602 20 Latin America and Caribbean 3,359 2,034 1,783 1,783 1,876 969 1,169 1,668 1,834 21 Bahamas 1,148 101 59 59 78 31 50 236 284 22 Bermuda 0 80 147 147 126 28 25 50 27 23 Brazil 18 207 57 57 57 8 52 78 75 24 British West Indies 1,533 998 866 866 946 826 764 1,030 927 25 Mexico 17 0 12 12 16 11 13 17 16 26 Venezuela 5 5 2 2 2 1 1 1 1 27 Asia 5,956 8.403 5,988 5,988 6,390 6,351 6,969 6,400 6,347 28 Japan 4,887 7,314 5,436 5,436 5,980 6,051 6,602 5,846 5,771 29 Middle Eastern oil-exporting countries' 23 35 27 27 26 26 25 25 72 30 Africa 133 135 150 150 131 72 153 38 29 31 Oil-exporting countries2 123 123 122 122 122 61 121 0 0 32 All other3 109 50 66 66 57 67 95 340 675 Commercial liabilities 33 Europe 6,827 6,773 7,700 7,700 8,425 7,916 8,702 9,767 9,582 34 Belgium and Luxembourg 239 241 331 331 370 326 427 479 643 35 France 655 728 481 481 648 678 657 680 688 36 Germany 684 604 767 767 867 839 959 1,002 1,045 37 Netherlands 688 722 500 500 659 617 668 766 553 38 Switzerland 375 327 413 413 428 516 409 624 486 39 United Kingdom 2,039 2,444 3,568 3,568 3,525 3,266 3,664 4,303 4,165 40 Canada 879 1,037 1,040 1,040 959 998 1,145 1,090 1.070 41 Latin America and Caribbean 1,658 1,857 1,740 1,740 2,110 2,301 2,396 2,574 2,573 42 Bahamas 21 19 1 1 28 35 33 63 43 43 Bermuda 350 345 205 205 570 509 355 297 479 44 Brazil 214 161 98 98 128 119 203 196 207 45 British West Indies 27 23 56 56 10 10 15 14 14 46 Mexico 481 574 416 416 468 475 451 665 637 47 Venezuela 123 276 221 221 243 283 341 328 318 48 Asia 10,980 10,741 10,421 10,421 10,474 11,389 12,238 13,422 13,978 49 Japan 4,314 4,555 3,315 3,315 3,725 3,943 4,150 4,614 4,503 50 Middle Eastern oil-exporting countries' 1,534 1,576 1,912 1,912 1,747 1,784 1,951 2,168 2,495 51 Africa 453 428 619 619 708 924 1,020 1,040 1,037 52 Oil-exporting countries" 167 256 254 254 254 462 490 532 479 53 Other3 574 519 687 687 661 618 702 840 930 1. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab 2. Comprises Algeria, Gabon, Libya, and Nigeria. Emirates (Trucial States). 3. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A59 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States Millions of dollars, end of period 1995 1996 1997 TTyyppee ooff ccllaaiimm,, aanndd aarreeaa oorr ccoouunnttrryy 11999933 11999944 11999955 Dec. Mar. June Sept. Dec. Mar.1' 1 Total 49,159 57,888 52,509 52,509 55,406 60,195 59,048 63,604 63,835 2 Payable in dollars 45,161 53,805 48.711 48,711 51,007 55,350 53,884 58,592 58,498 3 Payable in foreign currencies 3,998 4,083 3,798 3,798 4,399 4,845 5,164 5,012 5,337 By type 4 Financial claims 27,771 33,897 27,398 27.398 30,772 35,251 34,200 35.268 36,400 5 Deposits 15.717 18,507 15.133 15.133 17,595 19,507 19,877 21,404 19,240 6 Payable in dollars 15,182 18,026 14,654 14,654 17,044 19.069 19,182 20,631 18,137 7 Payable in foreign currencies 535 481 479 479 551 438 695 773 1.103 8 Other financial claims 12,054 15,390 12,265 12,265 13,177 15,744 14,323 13,864 17,160 9 Payable in dollars 10,862 14,306 10,976 10,976 11,290 13,347 12,234 12,069 15,383 10 Payable in foreign currencies 1,192 1,084 1,289 1,289 1,887 2,397 2,089 1,795 1,777 11 Commercial claims 21,388 23.991 25,111 25,111 24,634 24,944 24,848 28,336 27.435 12 Trade receivables 18,425 21,158 22,998 22,998 22,123 22,353 22,410 25,713 24,698 13 Advance payments and other claims 2,963 2,833 2,113 2,113 2,511 2,591 2,438 2,623 2,737 14 Payable in dollars 19,117 21,473 23,081 23,081 22.673 22,934 22,468 25,892 24,978 15 Payable in foreign currencies 2,271 2.518 2,030 2,030 1,961 2,010 2,380 2,444 2,457 By area or country Financial claims 16 Europe 7,299 7,936 7,609 7,609 8,929 10,498 9,777 9,282 9,317 17 Belgium and Luxembourg 134 86 193 193 159 151 126 185 119 18 France 826 800 803 803 1.015 679 733 694 761 19 Germany 526 540 436 436 320 296 272 276 324 20 Netherlands 502 429 517 517 486 488 520 493 567 21 Switzerland 530 523 498 498 470 461 432 474 570 22 United Kingdom 3,585 4,649 4,303 4,303 5,568 7,426 6,603 6,119 6,075 23 Canada 2,032 3,581 2,851 2,851 5,269 4,773 4,502 3,445 4,817 24 Latin America and Caribbean 16,224 19,536 14,500 14,500 13,827 17,644 17,241 19,577 19,453 25 Bahamas 1,336 2,424 1,965 1,965 1,538 2,168 1,746 1,452 1,894 26 Bermuda 125 27 81 81 77 84 113 140 157 27 Brazil 654 520 830 830 1,019 1,242 1,438 1,468 1,404 28 British West Indies 12,699 15,228 10,393 10,393 10,100 13,024 12,809 15,182 14,846 29 Mexico 872 723 554 554 461 392 413 457 517 30 Venezuela 161 35 32 32 40 23 20 31 22 31 Asia 1,657 1,871 1,579 1,579 1,890 1,571 1,834 2.221 2,068 32 Japan 892 953 871 871 1,171 852 1,001 1,035 831 33 Middle Eastern oil-exporting countries' 3 141 3 3 13 9 13 22 12 34 Africa 99 373 276 276 277 197 177 174 183 35 Oil-exporting countries" 1 0 5 5 5 5 13 14 14 36 All other3 460 600 583 583 580 568 669 569 562 Commercial claims 37 Europe 9,105 9,540 9,824 9,824 9.776 9,842 9,266 10,424 9,827 38 Belgium and Luxembourg 184 213 231 231 247 239 213 225 364 39 France 1,947 1,881 1,830 1,830 1.803 1,659 1,532 1,644 1,514 40 Germany 1,018 1,027 1,070 1,070 1,410 1,335 1,240 1,336 1,360 41 Netherlands 423 311 452 452 442 481 424 561 582 42 Switzerland 432 557 520 520 579 602 590 642 405 43 United Kingdom 2,377 2,556 2,656 2,656 2,607 2,658 2,515 2,946 2,625 44 Canada 1,781 1,988 1,951 1,951 2,045 2,074 2,082 2,165 2,380 45 Latin America and Caribbean 3,274 4,117 4,364 4,364 4,151 4,347 4,399 5,264 5.048 46 Bahamas 11 9 30 30 30 28 14 35 40 47 Bermuda 182 234 272 272 273 264 290 275 159 48 Brazil 460 612 898 898 809 838 963 1,291 1,201 49 British West Indies 71 83 79 79 106 103 119 190 127 50 Mexico 990 1,243 993 993 870 1,021 931 1,128 1,098 51 Venezuela 293 348 285 285 308 313 316 357 330 52 Asia 6.014 6,982 7,312 7,312 7,100 6,939 7,278 8,372 8,283 53 Japan 2,275 2.655 1.870 1,870 2,010 1,877 1,918 2,003 2,052 54 Middle Eastern oil-exporting countries' 704 708 974 974 1,024 903 945 971 1,078 55 Africa 493 454 654 654 667 688 731 745 717 56 Oil-exporting countries" 72 67 87 87 107 83 142 166 100 57 Other3 721 910 1,006 1,006 895 1,054 1,092 1,366 1,180 1. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab 2. Comprises Algeria, Gabon, Libya, and Nigeria. Emirates (Trucial States). 3. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A60 International Statistics • September 1997 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1997 1996 1997 Transaction, and area or country 1995 1996 J M an ay .- Nov. Dec. Jan. Feb.r Mar.r Apr. Mayp U.S. corporate securities STOCKS 1 Foreign purchases 462,950 623,760 367,465 65,571 57,051 73,036' 73,051 68,450 70,244 82,684 2 Foreign sales 451,710 611,832' 347,737 63,436 56,629 70,132 69,191 68,153 64,424 75,837 3 Net purchases, or sales (—) 11,240 ll,928r 19,728 2,135 422 2,904" 3,860 297 5,820 6,847 4 Foreign countries 11,445 12,002' 19,760 2,138 451 2,905" 3,860 289 5,840 6,866 5 Europe 4,912 5,046' 19,881 270 -229 3,271' 5,486 2,116 6,674 2,334 6 France -1,099 -2,354 1,567 -248 -1,064 532 427 -309 679 238 7 Germany -1,837 1,104 3,994 -5 -18 959 1,086 699 648 602 8 Netherlands 3,507 1,389 1,126 163 -160 322 -334 378 378 382 9 Switzerland -2,283 2,710 2,347 686 -470 289 784 304 803 167 10 United Kingdom 8,066 4,119 6,716 658 1,487 -134' 2,950 492 3,270 138 II Canada -1,517 2,221 1,279 704 -9 422 308 373 139 37 12 Latin America and Caribbean 5,814 5,563 1,270 964 994 1,364 405 -1,433 -1,982 2,916 13 Middle East' -337 -1,598 -9 -53 -7 -1 26 10 203 -247 14 Other Asia 2,503 906 -3,337 267 -232 -2,175 -2,549 -894 729 1,552 13 Japan -2,725 -372 745 -579 -343 -1,559 -500 -253 1,294 1,763 16 Africa 2 -81 143 -23 10 -8 58 96 -7 4 17 Other countries 68 -55 533 9 -76 32 126 21 84 270 18 Nonmonetary international and regional organizations -205 -74 -32 -3 -29 -1 0 8 -20 -19 BONDS2 19 Foreign purchases 293,533 422,249' 228,037 46,613' 43,054 48,955 48,818 43,455 42,693 44,116 20 Foreign sales 206,951 294,636' 179,325 34,285' 32,825 37,135' 36,424 38,104 31,696 35,966 21 Net purchases, or sales (—) 86,582 127,613r 48,712 12,328" 10,229 11,820" 12,394 5,351 10,997 8,150 22 Foreign countries 87,036 127,442" 48,785 12,338" 10,229 11,824" 12,381 5,337 11,001 8,242 23 Europe 70,318 75,722' 31,075 5,701" 4,770 6,088" 9,612 4,572 5,437 5,366 24 France 1,143 5,124' 1,301 72 252 73 290 340 602 -4 23 Germany 5,938 5,164 578 237 -27 -274 184 493 30 145 26 Netherlands 1,463 2,440 1,612 533 148 337 125 105 67 978 27 Switzerland 494 1,053" -14 -127" -30 -58 -189 98 189 -54 28 United Kingdom 57,591 57,590' 26,016 4,600" 4,498 5,911' 9,229 2,849 4,373 3,654 29 Canada 2,569 4,197 2,776 402 391 379 1,055 390 512 440 30 Latin America and Caribbean 6,141 22,901 4,247 2.201 2,940 3,189 -627 -2,434 2,550 1,569 31 Middle East' 1,869 1,637 1,488 513 412 480 691 480 16 -179 32 Other Asia 5,659 22,715" 8,116 3,384 1,644 1,661 1,231 2,165 2,185 874 33 Japan 2,250 13,644' 4,973 2,245 1,395 1.597 535 1,213 1,229 399 34 Africa 234 600 613 132 79 89 243 47 190 44 35 Other countries 246 -330 470 5 -7 -62 176 117 111 128 36 Nonmonetary international and regional organizations -454 171 -73 -10 0 -4 13 14 -4 -92 Foreign securities 37 Stocks, net purchases, or sales (-) -50,291 -57,122" -20,028 -2,161 -5,902 -3,646' -4,353 -3,827 -4,084 -4,118 38 Foreign purchases 345,540 456,826 251,067 46,838 41,850 47,084 50,139 47,780 49,725 56,339 39 Foreign sales 395,831 513,948' 271,095 48.999 47,752 50,730" 54,492 51,607 53,809 60,457 40 Bonds, net purchases, or sales (-) -48,405 -48,793 34 -2,973 -10,947 -710 -1,626 -2,979 6,202 -853 41 Foreign purchases 889,541 1,118,678 597,093 104,662 99,095 109,567 110,510 131,453 117,756 127,807 42 Foreign sales 937,946 1,167,471 597,059 107,635 110,042 110,277 112,136 134,432 111,554 128,660 43 Net purchases, or sales (—), of stocks and bonds .... -98,696 -105,915" -19,994 -5,134 -16,849 -4,356" -5,979 -6,806 2,118 -4,971 44 Foreign countries -97,891 -105,044" -20,261 -5,166 -16,838 -4,404" -6,061 -6,872 2,104 -5,028 45 Europe -48,125 -55,948' 1,434 -3,174 -10,740 740' -2,030 -3,005 5,732 -3 46 Canada -7,812 -6,279 1,171 -667 -2,269 525' 1,855 -110 -239 -860 4/ Latin America and Caribbean -7,634 -9,503 -9,131 3,571 -2,020 -2,264 -3,417 -1,574 -811 -1,065 48 Asia -34,056 -27,745 -13,553 -4,135 -773 -2,830' -2,284 -1,517 -3,592 -3,330 49 Japan -25,072 -5,888 -8,500 -633 2,218 -332 -2,269 -674 -2,349 -2,876 30 Africa -327 -1,529 -153 -115 36 34 -7 -74 -121 15 31 Other countries 63 -4,040 -29 -646 -1,072 -609 -178 -592 1,135 215 52 Nonmonetary international and regional organizations -805 -871 267 32 -11 48 82 66 14 57 1. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, 2. Includes state and local government securities and securities of U.S. government Saudi Arabia, and United Arab Emirates (Trucial States). agencies and corporations. Also includes issues of new debt securities sold abroad by U.S. corporations organized to finance direct investments abroad. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Holdings and Transactions/Interest and Exchange Rates A61 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions' Millions of dollars; net purchases, or sales (-) during period 1997 1996 1997 AArreeaa oorr ccoouunnttrryy 11999955 11999966 Jan.- Nov. Dec. Jan.r Feb.r Mar.r Apr. Mayp May 1 Total estimated 134,115 244,725 106,827 21,283 47,662 20,791 30,615 22,076 25,628 7,717 2 Foreign countries 133,676 246,567 106,392 22,475 46,519 21,257 29,707 22,386 25,168 7,874 3 Europe 49,976 118,345 54,288 9,312 14,778 3,403 17,117 13,473 10,625 9,670 4 Belgium and Luxembourg 591 1,486 2,023 335 370 48 657 83 937 298 5 6,136 17,647 -4,554 3,024 1,499 556 -1,227 -3,124 -1,480 721 6 1,891 -582 1,824 676 855 -671 546 343 1,412 194 7 358 2,343 -1,178 -52 26 -255 -346 -581 -86 90 8 Switzerland -472 327 608 -207 -517 241 992 -1,431 1,029 -223 9 United Kingdom 34,754 65,381 43,016 801 7,265 1,936 13,423 14,242 6,482 6,933 in Other Europe and former U.S.S.R 6,718 31,743 12,549 4,735 5,280 1,548 3,072 3,941 2,331 1,657 11 Canada 252 2,389 296 -23 -780 667 -402 -317 17 331 12 Latin America and Caribbean 48,609 25,379 -2,399 12,745 15,228 9,813 -762 -3,336 1,381 -9,495 13 Venezuela -2 -69 161 -68 212 -3 69 10 -8 93 14 Other Latin America and Caribbean 25,152 13,026 10,718 2,715 5,292 6,031 1,577 3,763 -2,657 2,004 15 Netherlands Antilles 23,459 12,422 -13,278 10,098 9,724 3,785 -2,408 -7,109 4,046 -11,592 16 32,467 98,001 55,774 1,337 16,744 8,593 14,217 12,227 13,200 7,537 17 16,979 41,390 26,598 1,219 7,593 4,264 6,326 1,747 6,604 7,657 18 1,464 1,085 75 -12 -2 29 57 -22 -16 27 19 Other 908 1,368 -1,642 -884 551 -1,248 -520 361 -39 -196 20 Nonmonetary international and regional organizations 439 -1,842 435 -1,192 1,143 -466 908 -310 460 -157 71 International 9 -1,390 -43 -1,146 773 -484 530 -384 467 -172 22 Latin American regional 261 -779 463 -2 252 -1 362 80 24 -2 MEMO 73 Foreign countries 133,676 246,567 106,392 22,475 46,519 21,257 29,707 22,386 2255,,116688 7,874 74 Official institutions 39,631 86,875 35,839 3,840 13,662 7,831 10,123 7,106 7,352 3,427 25 Other foreign 94,045 159,692 70,553 18,635 32,857 13,426 19,584 15,280 17,816 4,447 Oil-exporting countries 76 Middle East2 3,075 10,227 9,865 332 2,279 1,307 2,604 2,533 22,,887799 554422 27 2 1 -6 0 0 0 -1 0 1 -6 1. Official and private transactions in marketable U.S. Treasury securities having an 2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab original maturity of more than one year. Data are based on monthly transactions reports. Emirates (Trucial States). Excludes nonmarketable U.S. Treasury bonds and notes held by official institutions of foreign 3. Comprises Algeria, Gabon, Libya, and Nigeria. countries. 3.26 DISCOUNT RATES OF FOREIGN CENTRAL BANKS' Percent per year, averages of daily figures Rate on July 31, 1997 Rate on July 31, 1997 Country Country Month Month effective effective Austria. . 2.5 Apr. 1996 Germany . . . 2.5 Apr. 1996 Belgium. 2.5 Apr. 1995 Italy 6.25 June 1997 Canada. . 3.5 June 1997 Japan .5 Sept. 1995 Denmark 3.25 Nov. 1996 Netherlands . 2.5 Apr. 1996 France2 . 3.1 Jan. 1997 Switzerland . 1.0 Sept. 1996 1. Rates shown are mainly those at which the central bank either discounts or makes 2. Since February 1981, the rate has been that at which the Bank of France discounts advances against eligible commercial paper or government securities for commercial banks or Treasury bills for seven to ten days, brokers. For countries with more than one rate applicable to such discounts or advances, the rate shown is the one at which it is understood that the central bank transacts the largest proportion of its credit operations. 3.27 FOREIGN SHORT-TERM INTEREST RATES' Percent per year, averages of daily figures 1997 TTyyppee oorr ccoouunnttrryy 11999944 11999955 11999966 Jan. Feb. Mar. Apr. May June July 1 Eurodollars 4.63 5.93 5.38 5.44 5.36 5.50 5.70 5.69 5.66 5.61 2 United Kingdom 5.45 6.63 5.99 6.28 6.16 6.17 6.35 6.41 6.63 6.93 3 Canada 5.57 7.14 4.49 3.18 3.16 3.25 3.49 3.35 3.30 3.57 4 Germany 5.25 4.43 3.21 3.03 3.08 3.16 3.14 3.09 3.05 3.06 5 Switzerland 4.03 2.94 1.92 1.72 1.61 1.77 1.76 1.51 1.25 1.43 6 Netherlands 5.09 4.30 2.91 2.94 2.95 3.12 3.15 3.15 3.14 3.17 7 France 5.72 6.43 3.81 3.23 3.22 3.26 3.28 3.37 3.30 3.27 8 Italy 8.45 10.43 8.79 7.21 7.33 7.40 7.09 6.82 6.85 6.87 9 Belgium 5.65 4.73 3.19 3.00 3.10 3.40 3.22 3.22 3.23 3.39 10 Japan 2.24 1.20 .58 .53 .54 .55 .55 .58 .60 .67 1. Rates are for three-month interbank loans, with the following exceptions: Canada, finance company paper; Belgium, three-month Treasury bills; and Japan, CD rate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A62 International Statistics • September 1997 3.28 FOREIGN EXCHANGE RATES1 Currency units per dollar except as noted 1997 CCoouunnttrryy//ccuurrrreennccyy uunniitt 11999944 11999955 11999966 Feb. Mar. Apr. May June July 1 Australia/dollar2 73.161 74.073 78.283 76.768 78.747 77.868 77.510 75.422 74.199 2 Austria/schilling 11.409 10.076 10.589 11.785 11.932 12.050 11.998 12.158 12.620 3 Belgium/franc 33.426 29.472 30.970 34.556 34.961 35.328 35.188 35.659 37.040 4 Canada/dollar 1.3664 1.3725 1.3638 1.3556 1.3725 1.3942 1.3804 1.3842 1.3775 5 China, P.R./yuan 8.6397 8.3700 8.3389 8.3227 8.3258 8.3257 8.3229 8.3224 8.3162 6 Denmark/krone 6.3561 5.5999 5.8003 6.3867 6.4628 6.5226 6.4926 6.5804 6.8317 7 Finland/markka 5.2340 4.3763 4.5948 4.9792 5.0632 5.1375 5.1444 5.1794 5.3164 8 France/franc 5.5459 4.9864 5.1158 5.6536 5.7154 5.7672 5.7482 5.8307 6.0511 9 Germany/deutsche mark 1.6216 1.4321 1.5049 1.6747 1.6946 1.7119 1.7048 1.7281 1.7939 10 Greece/drachma 242.50 231.68 240.82 262.42 266.86 270.58 271.95 273.83 281.43 11 Hong Kong/dollar 7.7290 7.7357 7.7345 7.7474 7.7460 7.7483 7.7431 7.7445 7.7454 12 India/rupee 31.394 32.418 35.506 35.891 35.885 35.828 35.825 35.820 35.747 13 Ireland/pound2 149.69 160.35 159.95 158.60 156.57 155.05 151.11 150.60 149.45 14 Italy/lira 1,611.49 1.629.45 1,542.76 1,655.00 1,691.21 1,694.52 1,684.33 1,694.99 1,745.91 15 Japan/yen 102.18 93.96 108.78 122.96 122.77 125.64 119.19 114.35 115.38 16 Malaysia/ringgit 2.6237 2.5073 2.5154 2.4866 2.4773 2.5028 2.5070 2.5167 2.5815 17 Netherlands/guilder 1.8190 1.6044 1.6863 1.8812 1.9071 1.9256 1.9173 1.9443 2.0201 18 New Zealand/dollar2 59.358 65.625 68.765 69.084 69.789 69.220 69.097 68.713 66.097 19 Norway/krone 7.0553 6.3355 6.4594 6.6323 6.7915 6.9932 7.0797 7.2240 7.4545 20 Portugal/escudo 165.93 149.88 154.28 168.24 170.35 171.77 171.72 174.56 181.20 21 Singapore/dollar 1.5275 1.4171 1.4100 1.4193 1.4378 1.4417 1.4368 1.4271 1.4521 22 South Africa/rand 3.5526 3.6284 4.3011 4.4557 4.4319 4.4417 4.4668 4.5005 4.5611 23 South Korea/won 806.93 772.69 805.00 868.39 882.62 895.57 894.67 891.40 893.09 24 Spain/peseta 133.88 124.64 126.68 141.85 143.72 144.48 143.93 145.98 151.33 25 Sri Lanka/rupee 49.170 51.047 55.289 57.772 57.873 58.826 58.862 58.531 58.732 26 Sweden/krona 7.7161 7.1406 6.7082 7.4069 7.6502 7.6942 7.6856 7.7518 7.8188 27 Switzerland/franc 1.3667 1.1812 1.2361 1.4541 1.4634 1.4618 1.4331 1.4427 1.4824 28 Taiwan/dollar 26.465 26.495 27.468 27.554 27.551 27.629 27.791 27.903 28.032 29 Thailandftaht 25.161 24.921 25.359 25.957 25.959 26.064 25.751 24.534 30.274 30 United Kingdom/pound" 153.19 157.85 156.07 162.56 160.96 162.93 163.22 164.47 166.91 MEMO 31 United States/dollar3 91.32 84.25 87.34 94.52 95.60 96.39 95.29 95.44 97.49 1. Averages of certified noon buying rates in New York for cable transfers. Data in this 3. Index of weighted-average exchange value of U.S. dollar against the currencies of ten table also appear in the Board's G.5 (405) monthly statistical release. For ordering address, industrial countries. The weight for each of the ten countries is the 1972-76 average world see inside front cover. trade of that country divided by the average world trade of all ten countries combined. Series 2. Value in U.S. cents. revised as of August 1978 (see Federal Reserve Bulletin, vol. 64 (August 1978), p. 700). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

63 Guide to Statistical Releases and Special Tables STATISTICAL RELEASES—List Published Semiannually, with Latest Bulletin Reference Issue Page Anticipated schedule of release dates for periodic releases June 1997 A72 SPECIAL TABLES—Data Published Irregularly, with Latest Bulletin Reference Title and Date Issue Page Assets and liabilities of commercial banks June 30, 1996 November 1996 A100 September 30, 1996 February 1997 A64 December 31, 1996 May 1997 A64 March 31, 1997 September 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 June 30, 1996 November 1996 A108 September 30, 1996 February 1997 A72 December 31, 1996 May 1997 All March 31, 1997 August 1997 A64 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 December 31, 1991 August 1992 A83 September 30, 1992 March 1993 A71 Residential lending reported under the Home Mortgage Disclosure Act 1994 September 1995 A68 1995 September 1996 A68 1996 September 1997 A68 Disposition of applications for private mortgage insurance 1996 September 1997 A76 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 Special Tables • September 1997 4.20 DOMESTIC AND FOREIGN OFFICES Insured Commercial Bank Assets and Liabilities Consolidated Report of Condition, March 31, 1997 Millions of dollars except as noted Banks with domestic Banks with foreign offices' offices only2 IItteemm TToottaall Total Foreign Domestic Over 100 Under 100 1 Total assets3 4,613,200 2,867,474 761,863 2,221,829 1,451,201 294,524 2 Cash and balances due from depository institutions 305,405 219,579 78,580 140,999 71,474 14,352 3 Cash items in process of collection, unposted debits, and currency and coin < 104,385 3,106 101,279 40,179 F 4 Cash items in process of collection and unposted debits n.a. n.£ . 78,846 27,240 1 5 Currency and coin n.a. n.E . 22,433 12,939 n.a. 6 Balances due from depository institutions in the United States n.a. 27,646 11,182 16,464 18,772 1 7 8 B B a a l l a a n n c c e e s s d d u u e e f f r r o o m m b F a e n d k e s r a i l n R f e o s r e e r i v g e n c B o a u n n k t s r ies and foreign central banks 7 11 3 33 , ,, 6 99 1 33 2 77 64,1 . 8 1 1 2 1 9 3 , , 4 8 3 2 1 5 4 8 , , 4 1 0 2 1 3 •1 MEMO 9 Non-interest-bearing balances due from commercial banks in the United States (included in balances due from depository institutions in the United States) n.a. n. i. 13,125 14,776 5,782 10 Total securities, held-to-maturity (amortized cost) and available-for-sale (fair value) 803,067 381,538 48,234 333,304 334,647 86,883 11 U.S. Treasury securities 167,101 71,643 1,912 69,731 72,841 22,616 12 U.S. government agency and corporation obligations (excludes mortgage-backed securities) 131,212 28,639 84 28,554 7711,,554477 31,026 13 Issued by U.S. government agencies 6,209 2,925 n.a. n.a. 2,312 972 14 Issued by U.S. government-sponsored agencies 125,003 25,714 n.a. n.a. 69,235 30,054 15 Securities issued by states and political subdivisions in the United States 74,807 20,994 267 20,727 39,973 13,840 16 General obligations 56,070 14,907 n.a. n.a. 31,012 10,151 17 Revenue obligations 18,084 5,762 n. t. n.a. 8,681 3,641 18 Industrial development and similar obligations 653 325 n. i. n.a. 280 49 19 Mortgage-backed securities (MBS) 339,108 189,409 4,426 184,983 133,036 16,663 20 Pass-through securities 229,216 132,186 4,279 127,907 86,807 10,223 21 Guaranteed by GNMA 77,598 51,072 n. i. n.a. 23,404 3,122 22 Issued by FNMA and FHLMC 149,357 79,488 n. i. n.a. 62,816 7,052 23 Privately issued 2,260 1,625 0 1,625 587 48 24 Other mortgage-backed securities (includes CMOs, REMICs, and stripped MBS) 109,893 57,223 147 57,076 46,229 6,441 25 Issued or guaranteed by FNMA, FHLMC or GNMA 8 3,830 44,067 1 44,066 38,713 6,051 26 Collateralized by MBS issued or guaranteed by FNMA, FHLMC, or GNMA 2,455 960 n. a. n.a. 1,250 245 27 All other mortgage-backed securities 18,608 12,197 n. a. n.a. 6,267 144 28 Other debt securities 6 3,479 57,828 40,365 17,463 9,225 1,426 29 Other domestic debt securities n.a. 14,367 955 13,412 8,809 n.a. 30 Foreign debt securities n.a. 43,461 39,410 4,051 416 n.a. 31 Equity securities 22,360 13,025 1,180 11,845 8,025 1,310 32 Investments in mutual funds and other equity securities with readily determinable fair value 7,541 4,762 471 4,291 2,362 417 33 All other equity securities 14,819 8,262 708 7,554 5,663 893 34 Federal funds sold and securities purchased under agreements to resell 255,379 193,628 76,927 116,701 47,599 14,152 35 Total loans and lease-financing receivables, gross 2,761,738 1,652,971 260,378 1,392,593 938,023 170,744 36 LESS: Unearned income on loans 4,590 1,989 834 1,155 1,885 716 37 Total loans and leases (net of unearned income) 2,757,149 1,650,982 259,544 1,391,438 936,138 170,028 38 LESS: Allowance for loan and lease losses 53,316 32,894 n.a. n.a. 17,882 2,541 39 LESS: Allocated transfer risk reserves 36 36 n.a. n.a. 0 0 40 EQUALS: Total loans and leases, net 2,703.796 1,618,053 n.a. n.a. 918,256 167,487 Total loans and leases, gross, by category 41 Loans secured by real estate 1,147,785 574,018 2288,, 848 545,170 447777,,224411 9966,,552266 42 Construction and land development \ F 1 30,695 40,161 6,964 43 Farmland 2,677 11,531 11,023 44 One- to four-family residential properties \ 1 354,558 255,610 50,174 45 Revolving, open-end loans, extended under lines of credit n a. n.a. n. a. 52,960 31,316 2,388 46 All other loans 1 1 301,598 224,294 47,786 47 Multifamily (five or more) residential properties 1 1 19,156 17,495 2,136 48 Nonfarm nonresidential properties T 138,084 152,444 26,229 49 Loans to depository institutions 87,199 81,672 21,549 60,122 5,378 149 50 Commercial banks in the United States n.a. 49,001 1,333 47,669 4,735 n.a. 51 Other depository institutions in the United States n a. 7,651 81 7,570 407 n.a. 52 Banks in foreign countries n.a. 25,019 20,135 4,884 236 n.a. 53 Loans to finance agricultural production and other loans to farmers 39,151 7,279 34 6,394 14,989 16,882 54 Commercial and industrial loans 728,194 541,346 139,211 402,135 158,080 28,769 55 U.S. addressees (domicile) n.a. 426,089 28,713 397,377 157,446 n.a. 56 Non-U.S. addressees (domicile) n.a. 115,256 110,498 4,758 633 n.a. 57 Acceptances of other banks 1,860 1,509 992 517 277 75 58 U.S. banks n a. 277 2 275 n.a. n.a. 59 Foreign banks n.a. 1,232 990 241 n.a. n.a. 60 Loans to individuals for household, family, and other personal expenditures (includes purchased paper) 541,188 263,599 33,022 230,576 251,561 26,029 61 Credit cards and related plans 218,587 96,471 n. a. n.a. 120,570 1,546 62 Other (includes single payment and installment) 322,601 167,127 n.a. n.a. 130,990 24,483 63 Obligations (other than securities) of states and political subdivisions in the United States (includes nonrated industrial development obligations) 18 ,042 9,607 34 9,573 7,579 855 64 All other loans 115,721 104,740 31,921 72,819 10,180 801 65 Loans to foreign governments and official institutions n.a. 8,121 7,510 611 29 n.a. 66 Other loans n .a. 96,619 24,411 72,208 10,152 n.a. 67 Loans for purchasing and carrying securities n .a. n.a. n a. 19,058 1,900 n.a. 68 All other loans (excludes consumer loans) n .a. n.a. n.a. 53,150 8,252 n.a. 69 Lease-financing receivables 82,598 69,202 3,914 65,288 12,738 658 70 Assets held in trading accounts 255,925 254,797 F 1,093 11 71 Premises and fixed assets (including capitalized leases) 64,465 37,362 1 21,828 55,,227755 72 Other real estate owned 5,289 3,058 n.a. 1,776 455 73 Investments in unconsolidated subsidiaries and associated companies 5,564 5,058 n.a. 1 474 32 74 Customers' liability on acceptances outstanding 19,068 18,778 • 277 12 75 Net due from own foreign offices, Edge Act and agreement subsidiaries, and IBFs n.a. n.a. 40,544 n.a. n.a. 76 Intangible assets 54,850 37,328 n.a. 16,721 801 77 Other assets 140,391 98,296 n.a. 37,056 5,040 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banks A65 4.20 DOMESTIC AND FOREIGN OFFICES Insured Commercial Bank Assets and Liabilities—Continued Consolidated Report of Condition, March 31, 1997 Millions of dollars except as noted Banks with domestic Banks with foreign offices' offices only* IItteemm TToottaall Total Foreign Domestic Over 100 Under 100 78 Total liabilities, limited-life preferred stock, and equity capital 4,613,200 2,867,474 n.a. n.a. 1,451,201 294,524 79 Total liabilities 4,225,142 2,648,099 761,863 2,002,454 1,313,301 263,742 80 Total deposits 3,172,634 1,831,773 475,485 1,356,288 1,085,908 254,954 81 Individuals, partnerships, and corporations 2,814,217 1,572,949 303,033 1,269,916 1,009,859 231,409 82 U.S. government n.a. n.a. n.a. 4,026 1,347 248 83 States and political subdivisions in the United States n.a. n.a. n.a. 40,837 55,479 19,807 84 Commercial banks in the United States 67,396 57,636 35,023 22,613 8,900 861 85 Other depository institutions in the United States n.a. n.a. n.a. 2,668 1,155 1,061 86 Banks in foreign countries n.a. 94,480 87,509 6,970 306 n.a. 87 Foreign governments and official institutions n.a. 41,442 40,301 1,140 31 n.a. 88 Certified and official checks 17,085 5,962 1,172 7,789 6,568 1,555 89 Residual4 273,937 56,305 8,447 n.a. n.a. 14 90 Total transaction accounts 394,952 273,263 73,585 91 Individuals, partnerships, and corporations 341,150 241,120 64,612 92 U.S. government 1,997 1,042 158 93 States and political subdivisions in the United States 14,673 16,593 6,811 94 Commercial banks in the United States 19,838 6,766 335 95 Other depository institutions in the United States 1,939 868 102 96 Banks in foreign countries 6,970 306 n.a. 97 Foreign governments and official institutions 596 2 n.a. 98 Certified and official checks 7,789 6,568 1,555 99 Residual4 n.a. n.a. 13 100 Demand deposits (included in total transaction accounts) 347,781 181,891 37,038 101 Individuals, partnerships, and corporations 299,224 161,043 33,456 102 U.S. government 1,957 990 144 103 States and political subdivisions in the United States 9,484 5,377 1,438 104 Commercial banks in the United States 19,828 6,744 334 105 Other depository institutions in the United States 1,936 862 98 106 Banks in foreign countries 6,970 306 n.a. 107 Foreign governments and official institutions n.a. n.a. n.a. 592 2 n.a. 108 Certified and official checks 7,789 6,568 1,555 109 Residual4 n.a. n.a. 13 110 Total nontransaction accounts 961,336 812,645 181,368 111 Individuals, partnerships, and corporations 928,766 768,739 166,796 112 U.S. government 2,030 305 90 113 States and political subdivisions in the United States 26,164 38,887 12,996 114 Commercial banks in the United States 2,775 2,134 526 115 U.S. branches and agencies of foreign banks 0 0 n.a. 116 Other commercial banks in the United States 0 0 n.a. 117 Other depository institutions in the United States 729 2,359 959 118 Banks in foreign countries 328 191 n.a. 119 Foreign branches of other U.S. banks 0 0 n.a. 120 Other banks in foreign countries 0 0 n.a. 121 Foreign governments and official institutions 545 30 n.a. 122 Residual n.a. n.a. 1 173 Federal funds purchased and securities sold under agreements to repurchase 38{5 ,931 301,931 59,101 242,830 84,227 2,773 1 ?4 Demand notes issued to the U.S. Treasury 20,832 16,681 0 16,681 3,962 118888 1?5 Trading liabilities 165,866 165,641 n.a. n.a. 225 00 126 Other borrowed money 292,151 179,270 36,751 142,519 109,692 3,189 127 Banks' liability on acceptances executed and outstanding 19,123 18,833 4,616 14,217 278 12 128 Notes and debentures subordinated to deposits 52,100 47,393 n.a. 4,685 22 179 Net due to own foreign offices, Edge Act and agreement subsidiaries, and IBFs n.a. n.a. 75,673 n.a. n.a. 130 All other liabilities 113,505 8( 3,576 n.a. 24,324 2,605 131 Total equity capital 38 5,057 219,376 n.a. 137,900 30,782 MEMO 132 Total individual retirement (IRA) and Keogh plan accounts 69,881 66,947 14,097 133 Total brokered deposits 26,601 20,420 1,118 134 Fully insured brokered deposits n.a. 21,243 18,098 1,061 135 Issued in denominations of less than $100,000 3,880 3,114 854 136 Issued in denominations of $100,000, or in denominations greater than $100,000 and participated out by the broker in shares of $100,000 or less n.a. n.a. 17,363 14,984 208 137 Money market deposit accounts (MMDAs) 365,807 194,385 26,256 138 Other savings deposits (excluding MMDAs) 166,523 137,863 26,707 139 Total time deposits of less than $100,000 272,560 347,901 97,623 140 Total time deposits of $100,000 or more 156,447 132,496 30,782 141 All negotiable order of withdrawal (NOW) accounts 46,369 89,553 35,653 142 Number of banks 9,434 180 n.a. n.a. 2,975 6,279 Footnotes appear at the end of table 4.22 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 Special Tables • September 1997 4.22 DOMESTIC OFFICES Insured Commercial Bank Assets and Liabilities Consolidated Report of Condition, March 31, 1997 Millions of dollars except as noted Members NNoonn-- IItteemm TToottaall mmeemmbbeerrss Total National State 1 Total assets 3,967,555 3,107,152 2,306,406 800,746 860,403 2 Cash and balances due from depository institutions 226.825 187,045 142.030 45,015 39,780 3 Total securities, held-to-maturity (amortized cost) and available-for-sale (fair value) 421,529 229,187 173,912 55,275 192.342 4 U.S. Treasury securities 95,457 49.380 35,778 13.602 46.077 5 U.S. government agency and corporation obligations (excludes mortgage-backed securities) 102,573 49,191 37,182 12,009 53,383 6 Securities issued by states and political subdivisions in the United Stales 53,813 28,304 20,707 7,596 25,510 1 Mortgage-backed securities (MBS) 149,699 91,039 71,135 19,904 58,660 8 Pass-through securities 97,029 60,084 47,210 12,874 36,946 9 Issued or guaranteed by FNMA, FHLMC, or GNMA 96,395 59,691 46,990 12,701 36,703 10 Other pass-through securities 635 393 220 173 242 11 Other mortgage-backed securities (includes CMOs. REMICs, and stripped MBS) 52,670 30.955 23,925 7,030 21,715 12 Issued or guaranteed by FNMA, FHLMC, or GNMA 44.764 27.173 21,406 5,767 17.591 13 All other mortgage-backed securities 7,906 3,782 2,519 1,264 4,124 14 Other debt securities 10,651 5,699 4,688 1,011 4,952 15 Equity securities 9,335 5,575 4,422 1,153 3,760 16 Investments in mutual funds and other equity securities with readilv determinable fair values 2,778 1.200 956 245 1.578 17 All other equity securities 6.557 4,375 3.466 909 2,182 18 Federal funds sold and securities purchased under agreements to resell 178,452 149,323 102,867 46,456 29,129 19 Total loans and lease-financing receivables, gross 2,501,360 1,954,738 1,515,894 438,844 546.622 20 LESS: Unearned income on loans 3,756 2,141 1,718 423 1,615 21 Total loans and leases (net of unearned income) 2,497,604 1,952,597 1,514,175 438,421 545,007 Total loans and leases, gross, by category 22 Loans secured by real estate 1,118,937 823,821 640,367 183.454 295,116 23 Construction and land development 77,820 52,448 40,885 11,563 25,372 24 Farmland 25,231 12,063 9,368 2.695 13,168 25 One- to four-family residential properties 660,342 509,113 393,573 115,541 151,228 26 Revolving, open-end loans, extended under lines of .credit 86,664 71,405 57,827 13,578 15,259 27 All other loans 573,677 437,708 335,746 101,962 135,969 28 Multifamily (five or more) residential properties 38,787 27,455 21,661 5.794 11,332 29 Nonfarm nonresidential properties 316.758 222.742 174,881 47.861 94,016 30 Loans to depository institutions 65,650 64,020 58,913 5,106 1,630 31 Loans to finance agricultural production and other loans to farmers 38,265 20,788 16,785 4,003 17,478 32 Commercial and industrial loans 588.984 490,743 364,565 126,177 98,241 33 Acceptances of other banks 868 564 233 331 304 34 Loans to individuals for household, family, and other personal expenditures (includes purchased paper) 508.166 390,809 325,464 65,346 117,356 35 Obligations (other than securities) of states and political subdivisions in the United States 18,007 14.790 11,298 3.493 3.217 36 All other loans 83,800 77.768 45.817 31,951 6,031 37 Lease-financing receivables 78.684 71.435 52,452 18,983 7,249 38 Net due from own foreign offices. Edge Act and agreement subsidiaries, and IBFs 40,544 38.416 10,359 28,056 2,129 39 Remaining assets 602,600 550,585 363,063 187,522 52,015 40 Total liabilities 3,579,497 2,803,593 2,082,500 721,093 775,904 41 Total deposits 2,697,149 2,036,362 1,543,375 492,987 660,787 42 Individuals, partnerships, and corporations 2,511,184 1.900.807 1,442,636 458,172 610,376 43 U.S. government 5,621 4,883 4,332 550 738 44 States and political subdivisions in the United States 116,123 77,737 55,965 21,772 38,387 45 Commercial banks in the United States 32,374 28,517 24,014 4,503 3,857 46 Other depository institutions in the United States 4,883 3,234 2,506 728 1,649 47 Certified and official checks 15,912 11,892 8,958 2,935 4,020 48 Banks in foreign countries, foreign governments, and foreign official institutions 8.981 8,095 3,872 4,223 886 49 Total transaction accounts 741,800 570,168 433.609 136,559 171.632 50 Individuals, partnerships, and corporations 646.882 494,729 376,916 117,814 152,153 51 U.S. government 3,196 2,694 2,189 505 502 52 States and political subdivisions in the United States 38,077 26,230 19,454 6,776 11,847 53 Commercial banks in the United States 26,938 25,070 21,137 3,932 1.869 54 Other depository institutions in the United States 2,908 2,455 1,907 548 454 55 Certified and official checks 15,912 11,892 8,958 2,935 4.020 56 Banks in foreign countries, foreign governments, and foreign official institutions 7,887 7,098 3,048 4,050 789 57 Demand deposits (included in total transaction accounts) 566,710 461,646 351,184 110.462 105,064 58 Individuals, partnerships, and corporations 493,723 399,447 304,141 95,306 94.276 59 U.S. government 3,091 2,641 2.148 493 450 60 States and political subdivisions in the United States 16,299 13.082 9,884 3,198 3.217 61 Commercial banks in the United States 26,906 25.038 21,106 3,932 1,868 62 Other depository institutions in the United States 2,896 2,452 1,904 548 444 63 Certified and official checks 15.912 11,892 8,958 2,935 4,020 64 Banks in foreign countries, foreign governments, and foreign official institutions 7,882 7,094 3,044 4,050 788 65 Total nontransaction accounts 1,955,349 1,466,194 1,109,766 356,428 489,155 66 Individuals, partnerships, and corporations 1,864,302 1,406,078 1,065,720 340.358 458,224 67 U.S. government 2,425 2,189 2,143 45 236 68 States and political subdivisions in the United States 78,047 51,507 36,511 14,996 26,540 69 Commercial banks in the United States 5,435 3,447 2,877 570 1,988 70 Other depository institutions in the United States 4,047 1,977 1,692 285 2,070 71 Banks in foreign countries, foreign governments, and foreign official institutions 1,094 997 824 173 97 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banks A67 4.22 DOMESTIC OFFICES Insured Commercial Bank Assets and Liabilities—Continued Consolidated Report of Condition, March 31, 1997 Millions of dollars except as noted Members IItteemm TToottaall mmee NN mm oo bb nn ee -- rrss Total National State 72 Federal funds purchased and securities sold under agreements to repurchase 329,830 291,418 206,877 84,540 38,412 73 Demand notes issued to the U.S. Treasury 20.832 19.002 10,545 8.457 1,830 74 Other borrowed money 255,400 207,096 158,435 48,662 48,304 75 Banks liability on acceptances executed and outstanding 14,507 14,228 9,885 4,343 279 76 Net due to own foreign offices, Edge Act and agreement subsidiaries, and IBFs 75,673 65,162 46,017 19,146 10,511 77 Remaining liabilities 186,106 170.325 107.367 62,959 15,781 MEMO 78 Trading assets at large banks5 76,431 76,069 40.412 35.657 362 79 U.S. Treasury securities (domestic offices) 14,682 14,626 10.704 3.922 56 80 U.S. government agency corporation obligations 2,053 2,026 1,675 351 26 81 Securities issued by states and political subdivisions in the United States 853 847 674 172 6 82 Mortgage-backed securities 5,930 5,850 562 5,288 81 83 Other debt securities 7,552 7.551 5,020 2,530 2 84 Certificates of deposit 1,306 1.306 630 675 0 85 Commercial paper 271 166 166 0 105 86 Bankers acceptances 1,537 1,501 813 688 36 87 Other trading assets 5,365 5.327 1,983 3,343 39 88 Revaluation gains on interest rate, foreign exchanee rate, and other commodity and equity contracts 36,881 36,870 18,183 18,687 11 89 Total individual retirement (IRA) and Keogh plan accounts 150,926 112,465 87,608 24,857 38,461 90 Total brokered deposits 48,139 33,030 23.374 9.657 15.109 91 Fully insured brokered deposits 40,403 28,415 19,938 8,478 11,987 92 Issued in denominations of less than $100,000 7,847 5,379 2.893 2,486 2,468 93 Issued in denominations of $100,000, or in denominations greater than $100,000 and participated out by the broker in shares of $100,000 or less 32,555 23,036 17,045 5,992 9.519 94 Money market deposit accounts (MMDAs) 586.448 485.733 381,091 104,642 100,715 95 Other savings deposits 331,093 258,036 186,154 71,882 73,057 96 Total time deposits of less than $100,000 718,084 497,588 387.858 109,730 220,496 97 Total time deposits of $100,000 or more 319,724 224,837 154,663 70,174 94,887 98 All negotiable order of withdrawal (NOW) accounts 171,575 106,513 81.130 25,382 65.062 99 Number of banks 9,434 3,731 2,726 1,005 5,703 NOTE. The notation "n.a." indicates the lesser detail available from banks that don't have 2. "Over 100" refers to banks whose assets, on June 30 of the preceding calendar year, foreign offices, the inapplicability of certain items to banks that have only domestic offices or were $100 million or more. (These banks file the FFIEC 032 or FFIEC 033 Call Report.) the absence of detail on a fully consolidated basis for banks that have foreign offices. "Under 100" refers to banks whose assets, on June 30 of the preceding calendar year, were 1. All transactions between domestic and foreign offices of a bank are reported in "net due less than $100 million. (These banks file the FFIEC 034 Call Report.) from" and "net due to" lines. All other lines represent transactions with parties other than the 3. Because the domestic portion of allowances for loan and lease losses and allocated domestic and foreign offices of each bank. Because these intraoflice transactions are nullified transfer risk reserves are not reported for banks with foreign offices, the components of total by consolidation, total assets and total liabilities for the entire bank may not equal the sum of assets (domestic) do not sum to the actual total (domestic). assets and liabilities respectively of the domestic and foreign offices. 4. "Residual" equals the sum of the "n.a." categories listed above it. Foreign offices include branches in foreign countries, Puerto Rico, and U.S. territories and 5. Components of "Trading assets at large banks" are reported only by banks with either possessions; subsidiaries in foreign countries; all offices of Edge Act and agreement corpora- total assets of $ 1 billion or more or with $2 billion or more in the par/notional amount of their tions wherever located; and IBFs. off-balance-sheet derivative contracts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 Special Tables • September 1997 4.34 RESIDENTIAL LENDING ACTIVITY OF FINANCIAL INSTITUTIONS COVERED BY HMDA, 1984-96 Number Item 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1 Loans or applications (millions)2 1.86 1.98 2.83 3.42 3.39 3.13 6.59 7.89 12.01 15.38 12.19 11.23 14.81 2 Reporting institutions 8,491 8,072 8,898 9,431 9,319 9,203 9,332 9,358 9,073 9,650 9,858 9,539 9,328 3 Disclosure reports 11,799 12,567 12,329 13,033 13,919 14,154 24,041 25,934 28,782 35,976 38,750 36,611 42,946 1. Before 1990, includes only home purchase, home refinancing, and home improvement 2. Revised from preliminary data published in Glenn B. Canner and Dolores S. Smith, loans originated by covered institutions; beginning in 1990 (first year under revised reporting "Home Mortgage Disclosure Act: Expanded Data on Residential Lending," Federal Reserve system), includes such loans originated and purchased, applications approved but not ac- Bulletin, vol. 77 (November 1991), p. 861, to reflect corrections and the reporting of cepted by the applicant, applications denied or withdrawn, and applications closed because additional data. information was incomplete. SOURCE. FFIEC, Home Mortgage Disclosure Act. 4.35 APPLICATIONS FOR HOME LOANS REPORTED UNDER HMDA By Type of Dwelling, Purpose of Loan, and Loan Program, 1996 Thousands One- to four-family dwellings MMuullttiiffaammiillyy LLooaann pprrooggrraamm AAllll ddwweelllliinnggss'' Home purchase Home refinancing Home improvement All I FHA 838.5 191.2 218.4 1,248.1 * 1,248.5 2 VA 282.6 93.9 * 376.8 * 376.8 3 FmHA 22.8 3.1 .6 26.5 * 26.5 4 Conventional 5,163.1 4,237.3 1,923.9 11,324.3 33.3 11,357.6 5 Total 6,306.9 4,525.5 2,143.2 12,975.6 33.8 13,009.4 •Fewer than 500. SOURCE. FFIEC, Home Mortgage Disclosure Act. 1. Multifamily dwellings are those for five or more families. 4.36 HOME LOANS ORIGINATED BY LENDERS REPORTING UNDER HMDA By Type of Dwelling, Purpose of Loan, and Type of Lender, 1996 Percent One- to four-family dwellings Type of lender Home purchase Multifamily Home Home dwellings' refinancing improvement VA- FmHAguaranteed insured 1 Commercial bank . . . 8.3 9.4 14.2 24.6 20.9 31.9 62.7 30.9 52.4 2 Savings association.. 9.5 9.6 8.4 21.8 18.9 16.0 7.0 16.2 39.7 3 Credit union .2 2.0 .1 2.0 1.7 4.1 11.3 3.9 .6 4 Mortgage company2.. 82.1 79.1 77.2 51.5 58.4 48.0 19.0 49.0 7.3 5 Total 100 100 100 100 100 100 100 100 100 MEMO Distribution of loans 6 Number 651,552 211,971 16,717 2,926,097 6,337 2,577,787 1,105,799 7,489,923 23,268 7 Percent 8.7 2.8 .2 38.9 50.7 34.3 14.7 99.7 .3 *Less than 0.05 percent. 2. Comprises all covered mortgage companies, including those affiliated with a commer- 1. Multifamily dwellings are those for five or more families. cial bank, savings association, or credit union. SOURCE. FFIEC, Home Mortgage Disclosure Act. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Mortgage Disclosure A69 4.37 APPLICATIONS FOR LOANS FOR ONE- TO FOUR-FAMILY HOMES REPORTED UNDER HMDA By Purpose of Loan and Characteristics of Applicant and Census Tract, 1996 Home purchase Home refinancing Home improvement Government-backed Characteristic MEMO MEMO Percentage of Percentage of characteristic's characteristic's home purchase home purchase loans loans Racial/ethnic identity 1 American Indian or Alaskan Native . . . 5,107 .5 12.5 35,626 14,780 10,322 2 Asian or Pacific Islander 17,967 1.6 11.9 132,581 2.7 96,734 2.7 24,150 1.5 3 Black 158,862 14.5 29.1 386,805 7.8 297,244 8.3 181,665 11.6 4 Hispanic 143,734 13.2 33.2 289,780 5.9 191,018 5.3 133,427 8.5 5 White 723,690 66.2 15.6 3,909,737 79.3 84.4 2,862,904 79.8 1,169,544 74.7 6 Other 6,885 .6 12.5 48,070 1.0 87.5 53,805 1.5 18,058 1.2 7 All 36,394 3.3 22.5 125,036 2.5 77.5 70,087 2.0 28,466 1.8 8 Total 1,092,639 100.0 18.1 4,927,635 100.0 81.9 3,586,572 100.0 1,565,632 100.0 Income (percentage of MSA median)2 9 Less than 80 401,326 41.8 26.7 1,104,236 31.0 73.3 994,536 29.3 610,570 36.2 10 80-99 205,039 21.4 29.5 490,525 13.8 70.5 496,362 14.6 254,899 15.1 11 100-119 142,297 14.8 24.8 430,426 12.1 75.2 446,152 13.2 220,344 13.1 12 120 or more 210,724 22.0 12.0 1,539,747 43.2 88.0 1,453,606 42.9 600,560 35.6 13 Total 959,386 100.0 21.2 3,564,934 100.0 78.8 3,390,656 100.0 1,686,373 100.0 CENSUS TRACT Racial/ethnic compostion (minorities as percentage of population) 14 Less than 10 363,776 37.5 16.3 1,862,839 51.8 83.7 1,818,366 49.7 752,526 44.2 15 10-19 223,969 23.1 22.4 777,714 21.6 77.6 696,220 19.0 316,004 18.6 16 20-49 247,606 25.5 28.0 636,157 17.7 72.0 622,544 17.0 327,076 19.2 17 50-79 78,115 8.1 27.9 201,602 5.6 72.1 253,381 6.9 137,692 8.1 18 80-100 56,892 5.9 32.2 119,853 3.3 67.8 267,725 7.3 169,277 9.9 19 Total 970,358 100.0 21.2 3,598,165 100.0 78.8 3,658,236 100.0 1,702,575 100.0 Income 3 20 Low or moderate 179,887 18.3 26.4 501,023 13.9 73.6 619,444 16.9 382,286 22.1 21 Middle 560,903 57.2 23.8 1,798,183 49.9 76.2 1,880,950 51.3 905,699 52.3 22 Upper 240,397 24.5 15.6 1,301,405 36.1 84.4 1,166,120 31.8 442,967 25.6 23 Total 981,187 100.0 3,600,611 3,666,514 1,730,952 100.0 Location 4 24 Central city 456,154 46.0 24.3 1,423,485 38.8 75.7 1,465,266 39.4 782,096 44.4 25 Non-central city 536,052 54.0 19.3 2,244,134 61.2 80.7 2,256,574 60.6 978,297 55.6 26 Total 992,206 100.0 3,667,619 78.7 3,721,840 100.0 1,760,393 NOTE. Lenders reported 13,009,405 applications for home loans in 1996. Not all character- median family income for the MSA in which the tract is located. Categories are defined as istics were reported for all applications; thus the number of applications being distributed by follows: Low or moderate income, median family income for census tract less than 80 percent characteristic varies by characteristic. of median family income for MSA; Middle income, median family income at least 80 percent 1. Loans backed by the Federal Housing Administration, the Department of Veterans and less than 120 percent of MSA median; Upper income, median family income 120 percent Affairs, or the Farmers Home Administration. and greater of MSA median. 2. MSA median is median family income of the metropolitan statistical area (MSA) in 4. For census tracts located in MSAs. which the property related to the loan is located. SOURCE. FFIEC, Home Mortgage Disclosure Act. 3. Census tracts are categorized by the median family income for the tract relative to the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Special Tables • September 1997 4.38 APPLICATIONS FOR LOANS FOR ONE- TO FOUR-FAMILY HOMES REPORTED UNDER HMDA By Purpose of Loan, with Denial Rate, and by Characteristic of Applicant, 1996 Home purchase HHoommee rreeffiinnaanncciinngg HHoommee iimmpprroovveemmeenntt AAAppppppllliiicccaaannnttt ccchhhaaarrraaacccttteeerrriiissstttiiiccc111 Government-backed" Conventional Distribution Denial rate Distribution Denial rate Distribution Denial rate Distribution Denial rate American Indian or Alaskan Native 1 One male 32.40 13.60 29.30 51.00 28.50 22.00 38.10 54.10 2 Two males 2.10 11.80 1.40 51.70 1.30 22.80 1.20 39.40 3 One female 26.00 14.10 26.40 53.10 25.00 21.10 25.20 41.00 4 Two females 1.70 13.60 2.40 55.90 2.40 26.30 1.00 45.70 5 One male and one female 37.80 12.50 40.50 47.80 42.80 19.70 34.40 32.40 6 Total3 100.00 12.70 100.00 50.20 100.00 21.00 100.00 42.90 Asian or Pacific Islander 7 One male 21.70 9.40 19.30 16.90 15.10 22.30 24.30 40.00 8 Two males 4.10 12.20 2.70 17.00 1.90 20.90 1.20 33.80 9 One female 14.60 9.30 14.10 17.10 13.60 22.40 16.10 36.90 10 Two females 2.60 7.90 2.00 17.10 1.60 21.60 1.00 31.00 11 One male and one female 57.00 10.10 61.90 11.80 67.80 18.50 57.50 28.70 12 Total3 100.00 9.90 100.00 13.80 100.00 19.70 100.00 33.20 Black 13 One male 27.00 15.10 26.10 48.80 23.90 26.70 27.20 44.90 14 Two males 1.00 15.00 .90 51.00 .70 26.50 .50 42.70 15 One female 32.70 14.70 35.10 51.10 31.20 26.30 36.70 45.10 16 Two females 2.80 17.10 3.30 56.30 2.00 26.20 1.70 45.40 17 One male and one female 36.50 16.20 34.70 45.70 42.20 24.80 33.90 38.60 18 Total3 100.00 15.50 100.00 48.80 100.00 25.80 100.00 42.80 Hispanic 19 One male 22.60 10.50 27.60 39.40 18.90 25.70 30.80 44.30 20 Two males 7.00 8.40 3.20 33.00 1.80 25.70 1.30 43.80 21 One female 11.40 10.30 15.80 36.80 15.90 23.80 21.10 44.70 22 Two females 2.20 10.80 2.00 37.80 1.50 24.80 1.10 45.50 23 One male and one female 56.80 10.20 51.50 30.90 61.80 23.90 45.70 36.00 24 Total3 100.00 10.20 100.00 34.40 100.00 24.30 100.00 40.60 White 25 One male 23.80 9.20 21.60 29.80 17.90 18.30 21.60 28.10 26 Two males 1.50 9.30 1.80 35.50 .90 16.20 .60 25.90 27 One female 15.70 8.10 16.40 28.80 13.90 16.80 17.40 27.50 28 Two females 1.20 9.10 1.20 32.80 .80 15.80 .80 31.70 29 One male and one female 57.80 8.40 59.00 20.20 66.50 13.20 59.50 20.10 30 Total3 100.00 8.60 100.00 24.10 100.00 14.70 100.00 23.30 All 31 One male 24.10 10.40 22.30 32.20 18.50 19.70 23.20 32.80 32 Two males 2.20 9.40 1.90 35.20 .90 18.20 .70 30.70 33 One female 17.70 10.20 17.90 32.80 15.50 19.00 20.10 33.20 34 Two females 1.60 11.50 1.50 37.10 1.00 18.70 1.00 36.00 35 One male and one female 54.40 9.50 56.50 21.90 64.10 14.60 55.10 22.80 36 Total3 100.00 9.90 100.00 26.60 100.00 16.30 100.00 27.40 1. Applicants are categorized by race of first applicant listed on Loan Application Register, 3. Includes all applicants from racial or ethnic group regardless of whether gender was except for joint white and minority applications, which are not shown in this table. reported. 2. Loans backed by the Federal Housing Administration, the Department of Veterans SOURCE. FFIEC, Home Mortgage Disclosure Act. Affairs, or the Farmers Home Administration. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Mortgage Disclosure A69 4.39 APPLICATIONS FOR HOME LOANS REPORTED UNDER HMDA By Loan Program and Size of Dwelling, 1996 Percent One- to four-family dwellings Home purchase Home refinancing Type of loan Approved Approved Approved Approved and but not Denied Withdrawn File closed Total and but not Denied Withdrawn File closed Total accepted accepted accepted accepted 1 FHA 77.7 2.0 10.0 8.9 1.4 100 58.4 6.9 10.5 19.8 4.5 100 2 VA 75.0 2.2 9.5 12.1 1.2 100 63.0 6.6 7.8 17.9 4.7 100 3 FmHA 73.5 2.1 14.4 8.9 1.2 100 40.9 .5 55.5 2.8 .3 100 4 Conventional 56.7 8.7 26.8 6.8 1.0 100 56.8 8.1 20.8 11.9 2.4 100 5 All 60.4 7.5 23.7 7.4 1.1 100 57.0 8.1 20.1 12.4 2.5 100 One- to four-family dwellings Mumramny dwellings Home improvement Approved Approved Approved Approved and but not Denied Withdrawn File closed Total and but not Denied Withdrawn File closed Total accepted accepted accepted accepted 1 FHA 32.1 11.4 41.7 12.4 2.4 100 78.6 1.2 7.3 12.1 .7 100 2 VA 45.6 5.7 18.4 26.6 3.6 100 68.0 * 16.0 16.0 * 100 3 FmHA 23.9 1.0 73.7 1.3 .2 100 70.0 * 30.0 * * 100 4 Conventional 53.8 7.7 31.4 6.0 1.0 100 68.8 3.6 15.3 10.5 1.8 100 5 All 51.6 8.1 32.5 6.7 1.1 100 68.9 3.6 15.2 10.5 1.8 100 NOTE. Loans approved and accepted were approved by the lender and accepted by the *Less than 0.05 percent, applicant. Loans approved but not accepted were approved by the lender but not accepted by 1. Multifamily dwellings are those for five or more families, the applicant. Applications denied were denied by the lender, and applications withdrawn SOURCE. FFIEC, Home Mortgage Disclosure Act. were withdrawn by the applicant. When an application was left incomplete by the applicant, the lender reported file closed and took no further action. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A72 Special Tables • September 1997 4.40 APPLICATIONS FOR ONE- TO FOUR-FAMILY HOME LOANS REPORTED UNDER HMDA By Disposition of Loan and Characteristics of Applicant and Census Tract, 1996 A. Home Purchase Loans Percent Government-backed 1 Conventional CChhaarraacctteerriissttiicc Approved Denied Withdrawn File closed Total Approved Denied Withdrawn File closed Total APPLICANT Racial or ethnic identity 1 American Indian or Alaskan Native 75.9 12.7 9.5 1.9 100 43.5 50.2 5.6 .7 100 2 Asian or Pacific Islander. . 78.9 9.9 10.1 1.2 100 75.0 13.8 9.4 1.8 100 3 Black 72.0 15.5 10.6 2.0 100 44.1 48.8 6.0 1.1 100 4 Hispanic 78.5 10.2 10.0 1.3 100 56.1 34.4 8.0 1.5 100 5 White 82.6 8.6 7.8 1.0 100 68.8 24.1 6.2 .9 100 6 Other 75.5 12.4 10.5 1.6 100 61.3 30.0 7.2 1.5 100 7 Joint2 79.8 10.5 8.7 1.0 100 60.3 32.3 6.5 .9 100 Income ratio (percentage of MSA median)' 8 Less than 80 79.4 11.2 8.2 1.2 100 59.1 34.2 5.7 .9 100 9 American Indian or Alaskan Native . . . 76.2 13.5 8.8 1.6 100 48.2 45.6 5.4 .8 100 10 Asian or Pacific Islander 79.1 10.3 9.4 1.2 100 72.5 17.0 8.8 1.6 100 11 Black 72.4 15.9 10.0 1.8 100 48.0 44.5 6.1 1.4 100 12 Hispanic 79.8 10.7 8.2 1.2 100 54.9 37.5 6.2 1.4 100 13 White 82.2 9.5 7.3 1.0 100 62.0 32.1 5.1 .7 100 14 Other 75.5 14.0 9.1 1.3 100 54.6 39.1 5.1 1.2 100 15 Joint2 77.2 13.1 8.5 1.1 100 44.0 50.9 4.6 .5 100 16 80-99 84.1 8.0 7.1 .9 100 71.8 20.5 6.6 1.0 100 17 American Indian or Alaskan Native . . . 80.0 11.2 6.9 1.9 100 59.0 33.3 6.7 1.1 100 18 Asian or Pacific Islander 82.0 8.2 8.8 1.0 100 78.4 11.7 8.4 1.5 100 19 Black 77.1 12.6 8.9 1.4 100 57.1 33.6 7.6 1.7 100 20 Hispanic 81.9 8.8 8.3 1.0 100 63.2 27.3 8.0 1.6 100 21 White 86.3 6.6 6.3 .7 100 74.7 18.6 5.9 .8 100 22 Other 81.0 9.0 8.8 1.2 100 65.4 25.7 7.2 1.7 100 23 Joint2 83.1 9.1 6.9 .9 100 63.0 29.7 6.4 1.0 100 24 100-119 84.7 7.3 7.1 .9 100 76.3 15.8 6.9 1.0 100 25 American Indian or Alaskan Native . . . 83.8 9.3 6.3 .6 100 64.5 26.6 7.5 1.4 100 26 Asian or Pacific Islander 82.3 8.4 8.7 .7 100 78.8 11.4 8.4 1.4 100 27 Black 77.5 12.3 8.9 1.3 100 61.3 28.9 8.0 1.7 100 28 Hispanic 81.2 8.7 8.8 1.2 100 65.4 24.2 8.7 1.7 100 29 White 87.1 6.0 6.3 .7 100 78.9 14.0 6.2 .8 100 30 Other 80.1 9.8 8.9 1.2 100 70.5 21.2 6.7 1.6 100 31 Joint2 84.3 7.9 7.1 .7 100 72.3 20.0 6.7 .9 100 32 120 or more 84.0 7.0 8.0 1.0 100 81.6 9.8 7.4 1.1 100 33 American Indian or Alaskan Native . . . 81.3 8.5 8.1 2.0 100 73.0 16.6 9.1 1.3 100 34 Asian or Pacific Islander 80.8 8.9 9.2 1.1 100 78.5 10.6 9.1 1.7 100 35 Black 78.2 11.4 9.1 1.4 100 68.2 20.4 9.4 1.9 100 36 Hispanic 79.2 8.3 11.3 1.2 100 71.4 16.7 10.1 1.8 100 37 White 86.6 5.8 6.8 .8 100 83.7 8.6 6.7 1.0 100 38 Other 76.1 11.6 10.7 1.7 100 74.8 14.5 9.1 1.7 100 39 Joint2 83.5 7.7 7.9 1.0 100 79.8 11.4 7.6 1.2 100 CENSUS TRACT Racial or ethnic composition (minorities as percentage of population) 40 Less than 10 83.4 7.5 8.1 .9 100 77.0 15.8 6.3 .9 100 41 10-19 82.2 8.5 8.3 1.0 100 72.6 18.9 7.3 1.2 100 42 20-49 79.8 10.0 9.0 1.2 100 66.3 24.8 7.6 1.3 100 43 50-79 76.1 12.2 10.1 1.6 100 60.9 29.2 8.3 1.6 100 44 80-100 71.9 12.9 13.0 2.2 100 55.4 33.1 9.4 2.1 100 Income4 45 Low or moderate 76.7 11.6 10.1 1.6 100 59.8 31.7 7.2 1.3 100 46 Middle 81.6 8.8 8.5 1.1 100 70.9 21.4 6.6 1.0 100 47 Upper 82.3 7.8 8.9 1.0 100 79.7 11.7 7.5 1.1 100 Location5 48 Central city 79.9 10.0 8.9 1.3 100 70.4 21.1 7.2 1.2 100 49 Non-central city 81.7 8.3 9.0 1.0 100 73.6 18.6 6.8 1.0 100 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Mortgage Disclosure A69 4.40 APPLICATIONS FOR ONE- TO FOUR-FAMILY HOME LOANS REPORTED UNDER HMDA By Disposition of Loan and Characteristics of Applicant and Census Tract, 1996—Continued B. Home Refinancing and Home Improvement Loans Percent Home refinancing Home improvement CChhaarraacctteerriissttiicc Approved Denied Withdrawn File closed Total Approved Denied Withdrawn File closed Total APPLICANT Racial or ethnic identity 1 American Indian or Alaskan Native 60.4 21.0 15.2 3.4 100 53.2 42.9 3.4 .5 100 2 Asian or Pacific Islander. . 64.8 19.7 12.7 2.8 100 58.6 33.2 5.4 2.8 100 3 Black 57.6 25.8 13.4 3.2 100 52.0 42.8 4.5 .7 100 4 Hispanic 58.6 24.3 14.2 3.0 100 54.2 40.6 4.2 1.1 100 5 White 73.9 14.7 9.5 1.9 100 72.1 23.3 4.0 .6 100 6 Other 51.9 32.4 13.5 2.2 100 51.1 36.5 10.5 1.9 100 7 Joint2 69.0 18.3 10.5 2.3 100 68.4 26.5 4.0 1.1 100 Income ratio (percentage of MSA median)3 8 Less than 80 58.8 26.2 12.6 2.4 100 50.8 42.2 5.9 1.0 100 9 American Indian or Alaskan Native . . . 54.7 25.1 16.6 3.5 100 54.1 40.8 4.5 .6 100 10 Asian or Pacific Islander 59.6 24.7 13.0 2.7 100 47.3 45.7 4.8 2.2 100 11 Black 55.8 28.1 13.0 3.1 100 46.1 48.9 4.3 .6 100 12 Hispanic 55.1 29.1 12.9 2.9 100 45.6 49.0 4.2 1.2 100 13 White 68.7 19.4 10.0 2.0 100 63.4 31.8 4.2 .6 100 14 Other 46.9 38.4 12.9 1.8 100 39.9 47.8 9.0 3.3 100 15 Joint2 62.1 24.7 10.9 2.3 100 54.4 40.2 4.1 1.3 100 16 80-99 65.7 20.6 11.4 2.2 100 59.8 32.4 6.7 1.2 100 17 American Indian or Alaskan Native . . . 63.5 19.7 14.2 2.5 100 62.8 33.0 4.1 .2 100 18 Asian or Pacific Islander 65.9 19.3 12.1 2.8 100 57.7 34.2 5.2 2.8 100 19 Black 58.2 26.2 12.6 3.1 100 53.7 41.3 4.4 .6 100 20 Hispanic 58.4 25.4 13.4 2.8 100 54.2 40.2 4.5 1.2 100 21 White 74.4 14.9 8.9 1.8 100 71.4 24.0 4.0 .6 100 22 Other 53.4 32.3 12.3 2.1 100 51.7 36.7 10.2 1.4 100 23 Joint2 66.7 21.0 10.1 2.2 100 64.2 31.1 3.6 1.2 100 24 100-119 68.1 18.8 11.0 2.2 100 63.6 28.4 6.7 1.3 100 25 American Indian or Alaskan Native . . . 62.6 19.9 14.8 2.8 100 68.8 26.7 4.0 .5 100 26 Asian or Pacific Islander 67.3 18.5 11.7 2.5 100 62.9 29.4 4.9 2.8 100 27 Black 59.1 24.6 13.2 3.0 100 56.5 38.1 4.6 .8 100 28 Hispanic 58.8 25.1 13.1 3.0 100 57.4 37.3 4.1 1.1 100 29 White 76.3 13.5 8.5 1.7 100 74.7 20.8 3.8 .6 100 30 Other 55.3 29.6 12.8 2.2 100 57.1 31.2 10.3 1.4 100 31 Joint2 70.0 18.7 9.1 2.1 100 67.5 26.7 4.6 1.1 100 32 120 or more 71.7 15.6 10.5 2.2 100 70.3 21.9 6.4 1.4 100 33 American Indian or Alaskan Native . . . 65.7 18.1 13.3 2.9 100 73.4 22.5 3.3 .8 100 34 Asian or Pacific Islander 67.6 17.9 11.6 2.9 100 65.7 25.8 5.4 3.1 100 35 Black 61.2 23.4 12.3 3.0 100 63.3 31.7 4.2 .8 100 36 Hispanic 62.7 20.5 14.1 2.6 100 64.7 30.9 3.4 .9 100 37 White 77.9 11.8 8.5 1.8 100 80.1 15.6 3.5 .8 100 38 Other 58.1 25.8 13.1 3.0 100 60.2 26.2 12.2 1.4 100 39 Joint2 71.8 16.6 9.5 2.1 100 74.7 20.7 3.4 1.2 100 CENSUS TRACT Racial or ethnic composition (minorities as percentage of population) 40 Less than 10 70.8 16.5 10.6 2.1 100 69.3 24.4 5.6 .7 100 41 10-19 65.0 19.7 12.6 2.7 100 59.6 31.2 7.7 1.4 100 42 20 49 59.6 23.2 14.2 3.0 100 52.6 37.2 8.4 1.8 100 43 50-79 54.2 26.7 15.7 3.3 100 46.0 44.4 7.8 1.8 100 44 80-100 50.0 28.9 17.4 3.7 100 42.6 48.9 7.1 1.4 100 Income4 45 Low or moderate 55.5 26.6 14.9 3.0 100 48.5 43.7 6.6 1.2 100 46 Middle 65.6 19.7 12.2 2.5 100 61.0 31.2 6.7 1.1 100 47 Upper 69.5 16.4 11.6 2.5 100 66.4 25.2 7.0 1.5 100 Location5 48 Central city 62.3 21.7 13.3 2.7 100 56.0 36.0 6.8 1.3 100 49 Non-central city 67.1 18.6 11.8 2.4 100 62.8 29.4 6.6 1.1 100 NOTE. Applicant income ratio is applicant income as a percentage of MSA median. MSA 4. Census tracts are categorized by the median family income for the tract relative to the median is median family income of the metropolitan statistical area (MSA) in which the median family income for the MSA in which the tract is located. Categories are defined as property related to the loan is located. follows: Low or moderate income, median family income for census tract less than 80 percent 1. Loans backed by the Federal Housing Administration, the Department of Veterans of median family income for MSA; Middle income, median family income at least 80 percent Affairs, or the Farmers Home Administration. and less than 120 percent of MSA median; Upper income, median family income 120 percent 2. White and minority. and greater of MSA median. 3. MSA median is median family income of the metropolitan statistical area (MSA) in 5. For census tracts located in MSAs. which the property related to the loan is located. SOURCE. FFIEC, Home Mortgage Disclosure Act. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 Special Tables • September 1997 4.41 HOME LOANS SOLD By Purchaser and Characteristics of Borrower and Census Tract, 1996 Fannie Mae Ginnie Mae Freddie Mac FmHA Commercial bank Number Percent Number Percent Number Percent Number Percent Number Percent 1 All 1,092.445 100.0 824.445 100.0 843.859 100.0 3,444 100.0 116.675 100.0 BORROWER Racial or ethnic identity 2 American Indian or Alaskan Native .... 2,877 .3 2,267 .4 1.740 38 1.2 275 .3 3 Asian or Pacific Islander 33,501 3.7 8,736 1.6 20,189 2.9 76 2.4 2,225 2.4 4 Black 35,624 3.9 68.130 12.7 21,447 3.1 386 12.1 7.714 8.2 5 Hispanic 46,711 5.1 64,146 12.0 25,363 3.6 422 13.2 7,368 7.8 6 White 772,148 84.1 374,431 69.8 612,093 87.5 2,156 67.7 73,830 78.1 / Other 7,579 .8 3,530 .7 4,886 .7 21 .7 732 .8 8 Joint 19,228 2.1 14,987 2.8 13.483 1.9 86 2.7 2,329 2.5 9 Total 917,668 100.0 536,227 100.0 699,201 100.0 3,185 100.0 94,473 100.0 Income ratio (percentage of MSA median) 10 Less than 80 176,873 21.6 140,033 38.7 127.580 20.6 1,146 40.9 21,241 24.9 11 80-99 127,591 15.6 78,882 21.8 94.046 15.2 557 19.9 13,234 15.5 12 100-119 123,771 15.1 57,412 15.9 95,269 15.4 363 12.9 11,782 13.8 13 120 or more 390,102 47.7 85,632 23.7 302,177 48.8 739 26.3 39,142 45.8 14 Total 818,337 100.0 361,959 100.0 619,072 100.0 2,805 100.0 85,399 100.0 CENSUS TRACT Racial or ethnic composition (minorities as percentage of population) 15 Less than 10 512,872 54.8 268,952 36.5 429.231 59.9 1,360 45.1 48,249 47.3 lb 10-19 201,014 21.5 175,616 23.9 145.551 20.3 643 21.3 22,430 22.0 W 20-49 150,895 16.1 192.339 26.1 101,211 14.1 620 20.5 20,858 20.5 18 50-79 45,387 4.8 59,212 8.0 27,171 3.8 188 6.2 5,674 5.6 19 80-100 26,257 2.8 39,901 5.4 13,896 1.9 207 6.9 4,717 4.6 20 Total 936,425 100.0 736,020 100.0 717,060 100.0 3,018 100.0 101,928 100.0 Income 21 Low or moderate 87,520 9.3 123,376 16.6 59,853 8.3 659 21.9 13,710 13.3 22 Middle 468,804 50.0 430,471 58.0 365,890 51.0 1,694 56.3 51,083 49.5 23 Upper 380,803 40.6 188,483 25.4 291,249 40.6 654 21.7 38,440 37.2 24 Total 937,127 100.0 742,330 100.0 716,992 100.0 3,007 100.0 103,233 100.0 Location 25 Central city 350.330 37.4 328.997 44.3 253,414 35.3 1.341 44.4 41.827 40.5 26 Non-central city 587,447 62.6 413.644 55.7 464.003 64.7 1,677 55.6 61,485 59.5 27 Total 937,777 100.0 742,641 100.0 717,417 100.0 3,018 100.0 103,312 100.0 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Home Mortgage Disclosure A69 4.41 HOME LOANS SOLD By Purchaser and Characteristics of Borrower and Census Tract, 1996—Continued Savings bank or savings and loan Life insurance company association Characteristic 59,616 1,422,144 BORROWER Racial or ethnic identity 2 American Indian or Alaskan Native . . . 149 .3 13 .2 2,175 .5 6,139 .5 3 Asian or Pacific Islander 1,140 2.2 154 2.4 18,952 4.3 30,153 2.6 4 Black 3,203 6.2 570 8.7 31,459 7.1 120,071 10.2 5 Hispanic 2,256 4.3 172 2.6 19,624 4.4 92,545 7.9 6 White 43,828 84.4 5,462 83.6 357,428 80.2 885,935 75.3 7 Other 317 .6 33 .5 4,117 .9 11.345 1.0 8 Joint 1,023 2.0 130 2.0 11,947 2.7 29.670 2.5 9 Total 51,916 100.0 6,534 100.0 445,702 100.0 1,175,858 100.0 Income ratio (percentage of MSA median) 10 Less than 80 11,189 22.5 1,599 29.1 96.767 27.3 332,835 32.8 1 1 2 1 8 1 0 0 - 0 9 - 9 1 19 6 6 , , 9 3 5 5 0 0 1 12 4 . . 8 0 9 7 5 6 9 9 1 1 7 4 . . 5 0 4 3 5 8 , , 1 8 5 9 6 0 1 12 1 . . 8 0 1 1 3 6 4 5 , , 1 1 2 6 9 3 1 1 3 6 . . 2 3 13 120 or more 25,287 50.8 2,161 39.4 173,022 48.9 383,310 37.7 14 Total 49,776 100.0 5,4 100.0 353,835 100.0 1,015,437 100.0 CENSUS TRACT Racial or ethnic composition (minorities as percentage of population) 15 Less than 10 33,274 62.3 3,990 64.2 205,063 52.2 499,606 42.7 16 10-19 9,825 18.4 1,061 17.1 89,275 22.7 262.766 22.5 17 20-49 6,523 12.2 770 12.4 65,388 16.6 244,674 20.9 18 50-79 2,015 3.8 239 3.8 20,060 5.1 84.527 7.2 19 80-100 1,753 3.3 154 2.5 13,309 3.4 78,279 6.7 20 Total 53,390 100.0 6,214 100.0 393,095 100.0 1,169,852 100.0 Income 21 Low or moderate 6,099 11.4 703 11.3 46,515 11.8 196,004 16.7 22 Middle 24.267 45.3 3,304 53.2 181,652 46.0 597.756 51.0 23 Upper 23,209 43.3 2,203 35.5 167,050 42.3 378,351 32.3 24 Total 53,575 6,210 395,217 1,172,111 Location 25 Central city 16,976 31.6 2,254 36.3 150,373 38.0 490,394 41.8 26 Non-central city 36,668 68.4 3,960 63.7 245,060 62.0 682,933 58.2 27 Total 53,644 6,214 395,433 1,173,327 Note. Includes securitized loans. See also notes to table 4.40. FmHA—Farmers Home Administration Fannie Mae—Federal National Mortgage Association Affiliate—Affiliate of institution reporting the loan Ginnie Mae—Government National Mortgage Association SOURCE. FFIEC, Home Mortgage Disclosure Act. Freddie Mac—Federal Home Loan Mortgage Corporation Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 Special Tables • September 1997 4.42 APPLICATIONS RECEIVED AND POLICIES WRITTEN FOR PRIVATE MORTGAGE INSURANCE By Insurance Company, 1993-96 19931 1994 1995 1996 CCoommppaannyy Applications P w o r l i i t c t i e e n s Applications P w o r l i i t c t i e e n s Applications P w o r l i i t c t i e e n s Applications P w o r l i i t c t i e e n s 1 Amerin Guaranty 1,071 1,071 23,239 20,673 48,266 48,229 61,401 61,378 2 Commonwealth Mortgage Assurance 47,723 36,886 113,862 81,606 127,734 95,476 151,261 106,768 3 GE Capital Mortgage Insurance 112,621 91,411 406,440 314,144 281,755 221,450 269,133 199,728 4 Mortgage Guaranty Insurance 119,207 98,579 388,248 317.499 331,534 267,423 360,167 283,897 5 PMI Mortgage Insurance 76,458 56,442 212,352 155,966 157,929 119,582 181,904 142,896 6 Republic Mortgage Insurance 43,047 33,960 133,307 107,927 119,147 94,038 158,731 123,289 7 Triad Guaranty Insurance 5,451 4,491 20,020 15,459 18,910 14,699 23,942 19,143 8 United Guaranty 50,826 36,242 186,108 134,348 150,962 118,092 170,868 132,661 9 Total 456,404 359,112 1,483,576 1,147,622 1,236,237 978,989 1,377,407 1,069,760 1. First year of data collection; covers only fourth quarter. SOURCE. Federal Financial Institution Examination Council. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Private Mortgage Insurance All 4.43 APPLICATIONS RECEIVED AND POLICIES WRITTEN FOR PRIVATE MORTGAGE INSURANCE By Purpose of Loan and Insurance Company, 1996 Percent Home purchase Home refinance Total CCoommppaannyy Applications Policies written Applications Policies written Applications Policies written 1 Amerin Guaranty 4.5 5.7 4.1 5.8 4.5 5.7 2 Commonwealth Mortgage Assurance 10.8 9.9 11.9 10.5 11.0 10.0 3 GE Capital Mortgage Insurance 19.6 18.6 19.4 19.0 19.5 18.7 4 Mortgage Guaranty Insurance 26.2 26.7 26.0 25.9 26.1 26.5 5 PMI Mortgage Insurance 13.1 13.3 13.5 13.4 13.2 13.4 6 Republic Mortgage Insurance 11.6 11.6 11.2 11.4 11.5 11.5 7 Triad Guaranty Insurance 1.7 1.8 1.8 1.8 1.7 1.8 8 United Guaranty 12.5 12.5 12.1 12.1 12.4 12.4 9 Total 100.0 100.0 100.0 100.0 100.0 100.0 MEMO 10 Number of applications or policies 1,134,947.0 897,108.0 242,460.0 172,652.0 1,377,407.0 1,069,760.0 SOURCE. Federal Financial Institutions Examination Council. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A78 Special Tables • September 1997 4.44 APPLICATIONS FOR PRIVATE MORTGAGE INSURANCE By Purpose of Loan and Characteristic of Applicant and Census Tract, 1996 Home purchase Home refinance CChhaarraacctteerriissttiicc Number Percent Number Percent APPLICANT Race or ethnic group 1 American Indian or Alaskan native 2,920 .3 628 .3 2 Asian or Pacific Islander 29,102 3.0 6,973 3.5 3 Black 59,740 6.2 11,772 5.9 4 Hispanic 68,826 7.2 10,673 5.4 5 White 768,437 79.9 161,407 81.3 6 Other 9,287 1.0 2,111 1.1 7 Joint (white and minority) 23,151 2.4 4,932 2.5 8 Total 961,463 100.0 198,496 100.0 Income (percentage of MSA median)' 9 Less than 80 148,589 20.7 24,349 13.9 10 80-99 113,054 15.7 26,242 15.0 11 100-119 111,289 15.5 28,593 16.4 12 120 or more 346,208 48.1 95,424 54.7 13 Total 719,140 100.0 174,608 100.0 CENSUS TRACT Racial composition (minorities as percentage of population) 14 Less than 10 368,371 50.8 83,212 47.4 15 10-19 162,465 22.4 40,157 22.9 16 20-49 127,427 17.6 34,425 19.6 17 50-79 42,171 5.8 11,159 6.3 18 80-100 24,978 3.4 6,784 3.9 19 Total 725,412 100.0 175,737 100.0 Income2 20 Lower 81,194 11.2 17,775 10.1 21 Middle 357,261 49.3 93,090 53.0 22 Upper 286,435 39.5 64,701 36.9 23 Total 724,890 100.0 175,566 100.0 Location3 24 Central city 295,268 40.7 62,660 35.7 25 Non-central city 430,200 59.3 113,079 64.3 26 Total 725,468 100.0 175,739 100.0 NOTE. Not all characteristics were reported for all loans. 3. For census tracts located in MSAs. 1. MSA median is median family income of the metropolitan statistical area (MSA) in SOURCE. Federal Financial Institutions Examination Council, which the property related to the loan is located. 2. Lower: median family income for census tract less than 80 percent of median family income for MSA. Middle: 80 percent to 120 percent. Upper: 120 percent or more. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Private Mortgage Insurance A79 4.45 APPLICATIONS FOR PRIVATE MORTGAGE INSURANCE By Purpose of Loan, Disposition of Application, Characteristic of Applicant, and Census Tract, 1996 Percent Home purchase Home refinance CChhaarraacctteerriissttiicc Approved Denied Withdrawn File closed Total Approved Denied Withdrawn File closed Total 1 Total 87.4 8.8 3.1 .7 100.0 87.8 8.2 3.5 .5 100.0 APPLICANT Race or ethnic group 2 American Indian or Alaskan Native 83.3 11.6 3.9 1.2 100.0 82.6 13.4 4.0 .0 100.0 3 Asian or Pacific Islander 83.5 11.5 4.1 .9 100.0 84.1 10.4 4.9 .6 100.0 4 Black 76.3 18.2 4.4 1.1 100.0 79.9 14.9 4.4 .8 100.0 5 Hispanic 77.3 16.8 4.7 1.1 100.0 80.9 13.6 4.7 .7 100.0 6 White 88.5 8.0 2.9 .7 100.0 88.2 8.0 3.3 .5 100.0 7 Other 88.0 8.0 3.6 .4 100.0 88.9 7.1 3.7 .3 100.0 8 Joint (white and minority) 86.9 9.4 2.9 .7 100.0 89.4 7.1 3.0 .4 100.0 Income (percentage of MSA median/ 9 Less than 80 83.6 12.8 3.0 .7 100.0 83.1 12.4 3.8 .7 110000..00 10 80-99 88.6 8.3 2.5 .6 100.0 87.5 8.5 3.5 .5 100.0 11 100-119 90.4 6.9 2.3 .5 100.0 88.7 7.6 3.3 .4 100.0 12 120 or more 91.0 6.1 2.4 .5 100.0 89.5 6.8 3.3 .4 100.0 CENSUS TRACT Racial composition (minorities as percentage of population) 13 Less than 10 91.9 5.6 2.0 .4 100.0 9900..55 66..22 22..99 ..44 110000..00 14 10-19 89.1 7.8 2.6 .6 100.0 88.4 7.7 3.4 .4 100.0 15 20-49 85.5 10.8 3.0 .7 100.0 86.3 9.3 3.8 .5 100.0 16 50-79 80.9 14.3 4.0 .8 100.0 82.3 12.7 4.4 .7 100.0 17 80-100 76.9 17.4 4.6 1.0 100.0 78.3 15.7 5.1 .9 100.0 Income2 18 Lower 82.9 13.0 3.3 .7 100.0 83.5 11.9 4.0 .6 100.0 19 Middle 89.0 8.0 2.5 .5 100.0 88.3 7.9 3.3 .5 100.0 20 Upper 90.8 6.4 2.4 .5 100.0 89.3 7.0 3.3 .5 100.0 Location3 21 Central city 88.3 8.5 2.6 .6 100.0 87.5 8.5 3.5 .5 100.0 22 Non-central city 89.5 7.5 2.5 .5 100.0 88.6 7.6 3.3 .4 100.0 NOTE. Not all characteristics were reported for all loans. 3. For census tracts located in MSAs. 1. MSA median is median family income of the metropolitan statistical area (MSA) in SOURCE. Federal Financial Institutions Examination Council, which the property related to the loan is located. 2. Lower: median family income for census tract less than 80 percent of median family income for MSA of tract. Middle: 80 percent to 120 percent. Upper: 120 percent or more. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

80 Index to Statistical Tables References are to pages A3-A79 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, 15-21, 64-67 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, 15-21. (See also Foreigners) Federal Home Loan Banks, 30 Bonds (See also U.S. government securities) Federal Home Loan Mortgage Corporation, 30, 34, 35 New issues, 31 Federal Housing Administration, 30, 34, 35 Rates, 23 Federal Land Banks, 35 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, 15-21, 64-72 Federal Reserve notes, 10 Federal Reserve Banks, 10 Federally sponsored credit agencies, 30 Central banks, discount rates, 61 Finance companies Certificates of deposit, 23 Commercial and industrial loans Assets and liabilities, 33 Commercial banks, 15-21, 64—67 Business credit, 33 Weekly reporting banks, 17 Loans, 36 Commercial banks Paper, 22, 23 Assets and liabilities, 15-21, 64—67 Float, 5 Commercial and industrial loans, 15-21, 64-67 Flow of funds, 37-41 Consumer loans held, by type and terms, 36 Foreign currency operations, 10 Deposit interest rates of insured, 15 Foreign deposits in U.S. banks, 5 Number, by classes, 64-67 Foreign exchange rates, 62 Foreign-related institutions, 20 Real estate mortgages held, by holder and property, 35, 74 Foreign trade, 51 Time and savings deposits, 4 Foreigners Commercial paper, 22, 23, 33 Claims on, 52, 55, 56, 57, 59 Condition statements (See Assets and liabilities) Liabilities to, 51, 52, 53, 58, 60, 61 Construction, 42, 46 Consumer credit, 36 Consumer prices, 42 GOLD Consumption expenditures, 48, 49 Certificate account, 10 Corporations Stock, 5, 51 Profits and their distribution, 32 Government National Mortgage Association, 30, 34, 35 Security issues, 31, 61 Gross domestic product, 48, 49 Cost of living (See Consumer prices) Credit unions, 36 HOME Mortgage Disclosure Act Currency in circulation, 5, 12 Applications for home loans, 68-73 Customer credit, stock market, 24 Home loans by lenders, 68, 74, 75 Residential lending by financial institutions, 68, 71, 74, 75 DEBT (See specific types of debt or securities) Housing, new and existing units, 46 Demand deposits, 15-21 Depository institutions INCOME, personal and national, 42, 48, 49 Reserve requirements, 8 Industrial production, 42, 44 Reserves and related items, 4, 5, 6, 11, 64-67 Insurance companies, 27, 35 Deposits (See also specific types) Insurance, mortgage, 76-79 Commercial banks, 4, 15-21, 64-67 Interest rates Federal Reserve Banks, 5, 10 Bonds, 23 Interest rates, 14 Consumer credit, 36 Discount rates at Reserve Banks and at foreign central banks and Deposits, 14 foreign countries (See Interest rates) Federal Reserve Banks, 7 Discounts and advances by Reserve Banks (See Loans) Foreign central banks and foreign countries, 61 Dividends, corporate, 32 Money and capital markets, 23 Mortgages, 34 EMPLOYMENT, 42 Prime rate, 22 Eurodollars, 23, 61 International capital transactions of United States, 50-61 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

81 International organizations, 52, 53, 55, 58, 59 Reserve requirements, 8 Inventories, 48 Reserves Investment companies, issues and assets, 32 Commercial banks, 15-21 Investments (See also specific types) Depository institutions, 4, 5, 6, 11 Commercial banks, 4, 15-21, 64-67 Federal Reserve Banks, 10 Federal Reserve Banks, 10, 11 U.S. reserve assets, 51 Financial institutions, 35 Residential mortgage loans, 34, 35, 68-75 Retail credit and retail sales, 36, 42 LABOR force, 42 Life insurance companies (See Insurance companies) SAVING Loans (See also specific types) Flow of funds, 37^11 Commercial banks, 15-21, 64-67, 74, 75 National income accounts, 48 Conventional, 68, 71 Savings institutions, 35, 36, 37^41 Fannie Mae, 74 Savings deposits (See Time and savings deposits) Federal Reserve Banks, 5, 6, 7, 10, 11 Securities (See also specific types) FHA, 68, 71 Federal and federally sponsored credit agencies, 30 Financial institutions, 35 Foreign transactions, 60 FmHA, 68, 71, 74 New issues, 31 Freddie Mac, 74 Prices, 24 Ginnie Mae, 74 Special drawing rights, 5, 10, 50, 51 Home purchase, 72 State and local governments Insured or guaranteed by United States, 34, 35 Holdings of U.S. government securities, 27 VA, 68,71 New security issues, 31 Rates on securities, 23 MANUFACTURING Stock market, selected statistics, 24 Capacity utilization, 43 Stocks (See also Securities) Production, 43, 45 New issues, 31 Margin requirements, 24 Prices, 24 Member banks (See also Depository institutions) Federal funds and repurchase agreements, 6 Student Loan Marketing Association, 30 Reserve requirements, 8 Mining production, 45 TAX receipts, federal, 26 Mobile homes shipped, 46 Thrift institutions, 4. (See also Credit unions and Savings Monetary and credit aggregates, 4, 11 institutions) Money and capital market rates, 23 Time and savings deposits, 4, 12, 14, 15-21, 64-67 Money stock measures and components, 4, 12 Trade, foreign, 51 Mortgage insurance, 76-79 Treasury cash, Treasury currency, 5 Mortgages (See Real estate loans) Treasury deposits, 5, 10, 25 Mutual funds, 12, 32 Treasury operating balance, 25 Mutual savings banks (See Thrift institutions) UNEMPLOYMENT, 42 U.S. government balances NATIONAL defense outlays, 26 Commercial bank holdings, 15-21 National income, 48 Treasury deposits at Reserve Banks, 5, 10, 25 U.S. government securities OPEN market transactions, 9 Bank holdings, 15-21, 27 Dealer transactions, positions, and financing, 29 Federal Reserve Bank holdings, 5, 10, 11, 27 PERSONAL income, 49 Foreign and international holdings and Prices Consumer and producer, 42, 47 transactions, 10, 27, 61 Stock market, 24 Open market transactions, 9 Prime rate, 22 Outstanding, by type and holder, 27, 28 Private mortgage insurance, 76-79 Rates, 23 Producer prices, 42, 47 U.S. international transactions, 50-62 Production, 42, 44 Utilities, production, 45 Profits, corporate, 32 VETERANS Administration, 34, 35 REAL estate loans Banks, 15-21, 35 WEEKLY reporting banks, 17 Terms, yields, and activity, 34 Wholesale (producer) prices, 42, 47 Type of holder and property mortgaged, 35 Repurchase agreements, 6 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

82 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 DIVISION OF RESEARCH AND STATISTICS LEGAL DIVISION MICHAEL J. PRELL, Director J. VIRGIL MATTINGLY, JR., General Counsel EDWARD C. ETTIN, Deputy Director SCOTT G. ALVAREZ, Associate General Counsel DAVID J. STOCKTON, Deputy Director RICHARD M. ASHTON, Associate General Counsel MARTHA BETHEA, Associate Director OLIVER IRELAND, Associate General Counsel WILLIAM R. JONES, Associate Director KATHLEEN M. O'DAY, Associate General Counsel MYRON L. KWAST, Associate Director ROBERT DEV. FRIERSON, Assistant General Counsel PATRICK M. PARKINSON, Associate Director KATHERINE H. WHEATLEY, Assistant General Counsel THOMAS D. SIMPSON, Associate Director LAWRENCE SLIFMAN, Associate Director MARTHA S. SCANLON, Deputy Associate Director OFFICE OF THE SECRETARY PETER A. TINSLEY, Deputy Associate Director WILLIAM W. WILES, Secretary DAVID S. JONES, Assistant Director JENNIFER J. JOHNSON, Deputy Secretary STEPHEN A. RHOADES, Assistant Director BARBARA R. LOWREY, Associate Secretary and Ombudsman CHARLES S. STRUCKMEYER, Assistant Director ALICE PATRICIA WHITE, Assistant Director DIVISION OF BANKING JOYCE K. ZICKLER, Assistant Director GLENN B. CANNER, Senior Adviser SUPERVISION AND REGULATION JOHN J. MINGO, Senior Adviser RICHARD SPILLENKOTHEN, Director STEPHEN C. SCHEMERING, Deputy Director DIVISION OF MONETARY AFFAIRS WILLIAM A. RYBACK, Associate Director HERBERT A. BIERN, Deputy Associate Director DONALD L. KOHN, Director ROGER T. COLE, Deputy Associate Director DAVID E. LINDSEY, Deputy Director HOWARD A. AMER, Assistant Director BRIAN F. MADIGAN, Associate Director GERALD A. EDWARDS, JR., Assistant Director RICHARD D. PORTER, Deputy Associate Director STEPHEN M. HOFFMAN, JR., Assistant Director VINCENT R. REINHART, Assistant Director JAMES V. HOUPT, Assistant Director NORMAND R.V. BERNARD, Special Assistant to the Board JACK P. JENNINGS, Assistant Director MICHAEL G. MARTINSON, Assistant Director DIVISION OF CONSUMER 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

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

84 Federal Reserve Bulletin • September 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 STEPHEN G. CECCHETTI, 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

85 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

86 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. $300 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 The Board of Governors of the Federal Reserve System CHARTS. Weekly. $30.00 per year or $.70 each in the United The Federal Open Market Committee States, its possessions, Canada, and Mexico. Elsewhere, Federal Reserve Bank Board of Directors $35.00 per year or $.80 each. 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. II (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

87 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 general interest. Requests to obtain single copies of the full text or 1993. 18 pp. 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. 111 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

88 Maps of the Federal Reserve System 1 ^2 BOS•T ON M ^ • NEW YORK CLEVELAND PSLADELPHIA 4 f RICHMOND . Louis ATLANTA I Hi m^mmmt^mm M ill ALASKA HAWAII LEGEND Both pages Facing page • Federal Reserve Bank city • Federal Reserve Branch city Q 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

89 1-A 2-B 3-C 4-D 5-E Baltimore MD VA N I CT / V ' I NH Buffalo MA I / CT sc BOSTON NEW YORK PHILADELPHIA RICHMOND 6-F 7-G 8-H TN—»> •Nashville KY AL MI Birmingham \M WI Detroit • Louisville MS ( UA IIAA -4 * * TN LA Jacksonville IL •Memphis New Orleans IN >> M MMiiaammii ATLANTA CHICAGO ST. LOUIS 9-1 • Helena MINNEAPOLIS 10-J 12-L WY 1 NE CO OOmmaahhaa** MMOO IICCSS Dewer NM 1 Oklahoma City OK KANSAS CITY 11-K Salt Lake City •Los Angeles San Antonio' DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

90 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. Turnipseed1 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. Cerino1 Pittsburgh 15230 John T. Ryan, III Harold J. Swart1 RICHMOND* 23219 Claudine B. Malone J. Alfred Broaddus, Jr. Robert L. Strickland Walter A. Varvel Baltimore 21203 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- Fred R. 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. Allardice1 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. Gambs1 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, III1 San Antonio 78295 H. B. Zachry, Jr. James L. Stull1 SAN FRANCISCO .... 94120 Judith M. Runstad Robert T. Parry Gary G. Michael John F. Moore Los Angeles 90051 Anne L. Evans Mark L. 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. 2. Executive Vice President Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis