Federal Reserve Bulletin, 1997-10

VOLUME 83 • NUMBER 10 • OCTOBER 1997 FEDERAL RESERVE 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 797 EVALUATING INTERNATIONAL ECONOMIC sible for the bank itself and that Congress has POLICY WITH THE FEDERAL RESERVE'S not previously exempted from coverage by sec- GLOBAL MODEL tion 23A. FRB/Global is a large-scale macroeconomic model developed and maintained by the Board's 823 MINUTES OF THE FEDERAL OPEN staff. This article provides a historical perspec- MARKET COMMITTEE MEETING tive on the development of the model, gives HELD ON JULY 1-2, 1997 an overview of its structure, and highlights its At its meeting on July 1-2, 1997, the Commitdynamic properties with three simulation experi- tee reaffirmed the ranges that it had established ments: a reduction in U.S. government pur- in February for 1997 growth of M2 and M3 of chases; a depreciation of the U.S. dollar; and an 1 to 5 percent and 2 to 6 percent respectively increase in the price of oil exported by OPEC. and for domestic nonfinancial debt of 3 to 7 per- The article illustrates other uses of FRB/Global cent. The Committee provisionally set the same by examining the spillover effects of fiscal and ranges for 1998. monetary policy under alternative European For the intermeeting period ahead, the Commonetary policy regimes. mittee adopted a directive that called for maintaining the existing degree of pressure on 818 INDUSTRIAL PRODUCTION AND CAPACITY reserve positions and that retained a bias toward UTILIZATION FOR AUGUST 1997 the possible firming of reserve conditions during the intermeeting period. Industrial production increased 0.7 percent in August, to 121.3 percent of its 1992 average, and output growth in July was revised up 831 LEGAL DEVELOPMENTS 0.2 percentage point, to 0.4 percent. The rate of Various bank holding company, bank service industrial capacity utilization rose to 83.9 percorporation, and bank merger orders; and pendcent, its highest rate since September 1995. ing cases. 821 ANNOUNCEMENTS A1 FINANCIAL AND BUSINESS STATISTICS Amendments to Regulation E. These tables reflect data available as of Modifications of prudential limits on underwrit- August 27, 1997. ing and dealing activities by bank holding companies through section 20 subsidiaries A3 GUIDE TO TABULAR PRESENTATION Extension of the Federal Reserve's "regular" A4 Domestic Financial Statistics billing deposit deadline for ACH transactions A42 Domestic Nonfinancial Statistics A50 International Statistics Proposal to amend the risk-based and tier 1 leverage capital guidelines for state member banks and bank holding companies; proposal to A63 GUIDE TO STATISTICAL RELEASES AND amend Regulation D; and extension of the com- SPECIAL TABLES ment period on a proposal to apply sections 23A and 23B of the Federal Reserve Act to transac- A70 INDEX TO STATISTICAL TABLES tions between a member bank and any subsidiary that engages in activities that are impermis- A72 BOARD OF GOVERNORS AND STAFF Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 FEDERAL OPEN MARKET COMMITTEE AND A78 MAPS OF THE FEDERAL RESERVE SYSTEM STAFF; ADVISORY COUNCILS A80 FEDERAL RESERVE BANKS, BRANCHES, A76 FEDERAL RESERVE BOARD PUBLICATIONS AND OFFICES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Evaluating International Economic Policy with the Federal Reserve's Global Model Andrew Levin, John Rogers, and Ralph Tryon, of adjusts to a target level determined by monetary the Board's Division of International Finance, policy, and all relative prices reach constant values. prepared this article. Asim Husain provided research Fiscal solvency (a condition in which the stock of assistance. government debt grows no faster than nominal GDP) is maintained by assuming the gradual adjustment of FRB/Global is a large-scale macroeconomic model a country's tax rate. Similarly, national solvency (a developed and maintained by the staff of the Board condition in which the stock of net external debt of Governors of the Federal Reserve System. The grows no faster than nominal GDP), is ensured by the model contains the equations of the FRB/US model assumption that the risk premium on a country's (discussed in the April 1997 issue of the Federal external liabilities rises when net external debt is Reserve Bulletin) to represent the macroeconomic high relative to nominal GDP. structure of the U.S. economy. In addition, FRB/ The second feature added to FRB/Global is the Global contains eleven other blocks of equations to explicit treatment of expectations. In the model, represent each of the foreign Group of Seven (G-7) agents' expected values of future variables directly industrial economies (Canada, France, Germany, influence interest rates, consumption and investment Italy, Japan, and the United Kingdom), Mexico, and expenditures, the aggregate wage rate, and the four other groups of industrial and developing exchange rate. Thus, the way in which agents form economies. expectations can have important implications for the Simulation experiments conducted with FRB/ simulation results. In FRB/Global, simulations can be Global assist the Board in analyzing sudden changes performed under either of two assumptions about the in external macroeconomic variables and alternative nature of expectations: (1) limited-information expecpolicy responses in foreign economies. For example, tations, under which agents have incomplete informaexperiments with FRB/Global provide useful infor- tion about the structure of the global economy or mation about the effects of exchange rate movements (2) model-consistent expectations, under which or oil price changes on U.S. unemployment and infla- agents possess all the information contained in the tion. The alternative scenarios studied with FRB/ model. Global also provide a valuable input to forecasts of This article provides a historical perspective on the foreign activity and the U.S. external sector. development of FRB/Global and an overview of the Over the past several years, two important features model's blocks of equations for foreign countries. have been added to the structure of FRB/Global. We use three simulation experiments to highlight the First, the equations have been reformulated to ensure dynamic properties of FRB/Global: a reduction in long-run stability: In response to a macroeconomic U.S. government purchases, a depreciation of the U.S. disturbance, each economy represented in FRB/ dollar, and an increase in the price of oil exported by Global gradually converges to a balanced growth (or countries in OPEC (the Organization of Petroleum equilibrium) path, that is, a path in which actual Exporting Countries). The article also illustrates other output is equal to potential gross domestic product uses of FRB/Global by examining the spillover and in which every inflation-adjusted variable has effects of fiscal and monetary policy under alternative a constant ratio to potential GDP. The inflation rate European monetary policy regimes. A HISTORICAL PERSPECTIVE ON FRB/GLOBAL NOTE. We thank Shaghil Ahmed, David Bowman, Flint Brayton, Christopher Erceg, Dale Henderson, Jaime Marquez, David In the mid-1970s, a variety of factors—increased Reifschneider, Robert Tetlow, and Volker Wieland for valuable comeconomic interaction among countries, the first ments and suggestions during the development of FRB/Global and the preparation of this article. (1973) shock to oil prices, and the floating of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

798 Federal Reserve Bulletin • October 1997 exchange rates—combined to raise interest in global economy (the MPS model) were linked with the macroeconomic modeling. Against this background, foreign equation blocks of the MCM. FRB/Global the Board's staff began the development of a large- has continued this approach of linking foreign equascale macroeconometric model called the Multicoun- tion blocks with the staffs domestic U.S. model. try Model (MCM) to provide an empirical framework Another major restructuring and re-estimation of for analyzing interactions among the major industrial the MCM came in 1991-92. The model continued to countries. One of the first models of its kind, the use individual country blocks for the United States, MCM consisted of about 1,000 equations divided Canada, Germany, Japan, and the United Kingdom, into six blocks: one representing the U.S. economy while the rest-of-world block was disaggregated into (with a more detailed external sector than in previous seven blocks of equations representing France, Italy, models); four others representing Canada, Germany, Mexico, the smaller industrial countries, the newly Japan, and the United Kingdom; and an aggregate industrializing economies, OPEC countries, and other block representing the rest of the world.1 From 1979 developing countries and economies in transition. A onward, the Board staff regularly used the MCM to multilateral trade structure replaced the bilateral one, simulate the effects of alternative policy scenarios thereby greatly simplifying the data requirements and and external shocks. the analysis of simulation results for each country In the early 1980s the staff significantly modified and region. The resulting arrangement—twelve counthe MCM with regard to exchange rate determination tries and regions, each with an equation block conand the capital account of the balance of payments.2 taining multilateral trade equations—is used in the Empirical considerations also led to the elimination current version of FRB/Global. of detailed representations of banking sectors from The staffs most recent reassessment of the MCM the equation blocks of individual countries. In subse- began in 1993 and culminated in FRB/Global in quent versions of the MCM, the monetary authorities 1996.4 Explicit treatment of expectations enabled were assumed to control either the money stock or the model to capture the notion that news about the short-term interest rate. Finally, in the wake of future economic developments can directly affect the second (1979) OPEC oil price shock, the MCM the current economy; for example, the adoption was extended to provide explicit treatment of the oil of a multiyear deficit reduction package can generate sector. an immediate drop in long-term interest rates. To In the mid-1980s, many of the equations in the ensure the long-run stability of the model, error- MCM were re-estimated using methods suggested correction mechanisms were incorporated into the by David Hendry and other econometricians at the behavioral equations, and constraints that preserve London School of Economics.3 The re-estimation fiscal and national solvency were imposed.5 The improved the fit and the dynamic properties of the long-run stability of FRB/Global permits simulations equations and represented a first step toward ensuring under either model-consistent or limited-information the long-run stability of the model. In the late 1980s, expectations.6 the equations in the Board staffs model of the U.S. 4. This work drew heavily on the experimental multicountry model 1. Guy Stevens led the effort to develop the MCM; see Guy V.G. of Joseph E. Gagnon, "A Forward-Looking Multi-Country Model: Stevens, Richard B. Berner, Peter B. Clark, Ernesto Hernandez-Cata, MX-3," International Finance Discussion Papers 359 (Board of Gov- Howard J. Howe, and Sung Y. Kwack, The U.S. Economy in an ernors of the Federal Reserve System, 1989). Interdependent World: A Multicountry Model (Board of Governors of 5. The constraints of fiscal and national solvency in FRB/Global the Federal Reserve System, 1984). are similar to those used in the IMF's multicountry model, MULTI- 2. In particular, equations based on the portfolio balance approach MOD; see P. Masson, S. Symansky, R. Haas, and M. Dooley, "MULto the determination of exchange rates were replaced by modified TIMOD: A Multi-Region Econometric Model," International Moneuncovered interest parity relationships, a specification based on inter- tary Fund, World Economic Outlook, July 1988, pp. 50-104. est rate differentials. The change was prompted by a lack of empirical 6. To represent limited-information expectations, FRB/US uses a support for the portfolio balance model and by the attractive proper- core vector autoregression with auxiliary equations (see F. Brayton ties of the overshooting model of Dornbusch, which incorporated and P. Tinsley, eds., "A Guide to FRB/US: A Macroeconomic Model assumptions of open interest parity, nominal price rigidities, and of the United States," Finance and Economics Discussion Series model-consistent expectations (Rudiger Dornbusch, "Expectations 1996-42 (Board of Governors of the Federal Reserve System, 1996); and Exchange Rate Dynamics," Journal of Political Economy, see also Flint Brayton, Eileen Mauskopf, David Reifschneider, vol. 84, December 1976, pp. 1161-76). Peter Tinsley, and John Williams, "The Role of Expectations in the 3. The results of these and other changes to the MCM are described FRB/US Macroeconomic Model," Federal Reserve Bulletin, vol. 83 in Hali Edison, Jaime Marquez, and Ralph Tryon, "The Structure and (April 1997), pp. 227-45. Individual regression equations are used to Properties of the Federal Reserve Board Multicountry Model," Eco- generate each of the expectation variables in the foreign blocks of nomic Modelling, vol. 4 (April 1987), pp. 115-315. FRB/Global. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Evaluating International Economic Policy with the Federal Reserve's Global Model 799 THE STRUCTURE OF FRB/GLOBAL (NIEs); the 16 countries with fuel-oriented exports (OPEC); and the rest of the world (ROW), which FRB/Global consists of twelve blocks of equations, comprises about 140 developing economies and with each block describing the economy of a country countries in transition. or a group of countries. The U.S. block of FRB/ The structure of the equation blocks for Mexico, Global is taken directly from the staff's model of the the NIEs, and the SOECD is fairly similar to that of domestic economy, FRB/US, which consists of about the foreign G-7 country blocks but with somewhat 50 behavioral equations and about 250 accounting less disaggregation: Each of these blocks consists of identities. Among the FRB/US behavioral equations about 45 behavioral equations and about 75 accountare 4 that determine foreign aggregate demand, the ing identities. The OPEC and ROW blocks are much inflation-adjusted (real) effective exchange rate, the smaller, with about 15 behavioral equations and oil import price deflator, and net investment income 25 accounting identities each. from abroad. FRB/Global replaces these 4 equations Each block of equations in FRB/Global may be with about 1,400 equations that provide a much more divided into five sectors: domestic spending, fiscal detailed representation of macroeconomic develop- accounts, the external sector, aggregate supply (proments outside the United States. duction, employment, wage and price determination), Six blocks of FRB/Global represent the foreign and financial markets (interest rates and exchange G-7 industrial countries (Canada, France, Germany, rates). The remainder of this section outlines the Italy, Japan, and the United Kingdom). The equation specification of these sectors for the foreign G-7 blocks for the foreign G-7 countries represent countries, highlights the role of expectations, and medium-sized open economies in which, in the outlines the features that ensure the long-run stability short run, aggregate demand determines output and of the model. For more details about the foreign employment, and wages and prices respond slowly to blocks of FRB/Global, see appendixes A and B. macroeconomic shocks (a formulation in accord with neo-Keynesian theory). Eventually, however, wages and prices adjust to ensure that the economies return Domestic Spending to a balanced growth path, with output at potential and unemployment at the natural rate (a result con- In the foreign G-7 equations of FRB/Global, six forming to neoclassical theory). Gradual movement expenditure variables constitute domestic spending: of the direct tax rate ensures long-run fiscal solvency, private consumption expenditures, business fixed while the determination of the risk premium on investment, residential investment, changes in busiexternal liabilities ensures national solvency.7 ness inventories, government fixed investment, and To incorporate these features, the equation block other government spending on goods and services for each foreign G-7 country consists of about (referred to as government consumption). Real pri- 60 behavioral equations and about 100 accounting vate expenditures for consumption and for investidentities. The specification of these equations is ment are determined endogenously (that is, by the nearly identical for each country. The behavioral model) through assumptions and empirical findings differences among the six economies have been embodied in behavioral equations. Real government derived from estimation and from calibration of the consumption and investment, on the other hand, are model; the differences in monetary and fiscal policies independent variables—they are determined exogamong the six depend on the assumptions of a par- enously (that is, outside the model). ticular simulation scenario. The behavioral equation for each component of The remaining five blocks of equations in FRB/ private expenditure incorporates an error-correction Global represent Mexico; 16 smaller OECD coun- mechanism that permits realistic short-run dynamics tries (SOECD); the newly industrializing economies while ensuring that the level of expenditure gradually of Hong Kong, Korea, Singapore, and Taiwan adjusts to a long-run equilibrium growth path—that is, a stable ratio of expenditures to real GDP. The equilibrium path of each expenditure variable can be 7. The risk premium on external liabilities (also known as the shifted by a permanent change in real interest rates sovereign risk premium) refers to the extra rate of return demanded by or other specific macroeconomic variables. For examcreditors to compensate them for holding government bonds that have ple, the equilibrium path of real private consumption some degree of credit risk. Credit risk is the risk that the government, or sovereign, will not fully redeem the bonds at maturity. In the depends on real disposable income and the labor model, the risk premium on the net foreign holdings of a country's force participation rate as well as the long-term real government bonds rises when those holdings are rising relative to that interest rate (see box "Determining Private Concountry's GDP. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

800 Federal Reserve Bulletin • October 1997 Determining Private Consumption Expenditures The equilibrium level of real private consumption expendi- below summarizes the response of private consumption to tures, C, depends on real disposable income, Y; the ex ante changes in disposable income and the long-term real interlong-term real interest rate, R, \ and the labor force participa- est rate. In Germany, for example, a permanent 1 percentage tion rate, L/POP.1 An accounting identity relates nominal point increase in R is estimated to reduce private consump- L disposable income to nominal GDP, net investment income tion 0.23 percent within one quarter and 0.76 percent in the from abroad, and taxes less government subsidies and trans- long run. fers to households; then Y is computed by deflating nominal In the short run, C exhibits partial adjustment in response disposable income by the consumption price index. The to permanent changes in Y and R because of liquidity L determination of R is described below. The labor force constraints, information lags, and other factors. In Ger- L participation rate is exogenously determined. many, for example, a permanent 1 percent change in Y For each foreign G-7 country, statistical analysis has been generates an immediate 0.73 percent change in C, so that used to verify that the ratio of private consumption to the consumption-income ratio temporarily falls. The gap disposable income, C/Y, has a stationary long-run relation- between the actual consumption-income ratio and its equiship with R and L/POP, and to estimate the short-run librium value subsequently shrinks at a rate of 30 percent L and long-run characteristics of this relationship.2 The table per quarter (not shown in table). Determinants of private consumption expenditures 1. In the foreign G-7 equation blocks of FRB/Global. private consumption expenditures depend on current and past income so that consumption is sensitive to movements in temporary as well as permanent income. In FRB/US, consumption expenditures also depend on financial wealth and the Canada France Germany Italy Japan U.K. present discounted value of expected future labor and transfer income so that consumption is less sensitive to fluctuations in temporary income; in future Y work, we plan to investigate specifications in the foreign-country equations Short run ... .58 .73 .73 .10 .62 .29 of FRB/Global that are comparable to those in FRB/US. Long run ... 1.0 1.0 1.0 1.0 1.0 1.0 2. The labor force participation rate is highly significant in explaining Rl long-term changes in private saving rates in Germany, Japan, and the United i S hort run ... -.13 -.23 -.23 -.05 -.23 -.19 Kingdom, perhaps because the private saving rate tends to decline as a higher Long run ... -.37 -.76 -.76 -2.4 -1.5 -.65 fraction of the population reaches retirement age. The labor force participation rate is not, however, statistically significant in explaining the private NOTE. The first two rows indicate the elasticity of private consumption saving rate in Canada. For Italy, the relationship between the private saving expenditures, C, with respect to a permanent change in real disposable rate and the rates of long-term interest and labor force participation appears income, Y. The last two rows indicate the percentage change in C arising to be nearly nonstationary; for France, no satisfactory estimates of the from a permanent 1 percentage point increase in the ex ante long-term real relationship could be obtained, so the relationship in Germany was used for interest rate, RL. The "short run" is the first quarter; the "long run" is the France as well. steady-state. sumption Expenditures"). The equilibrium paths of tion function). Therefore, in the model's long run, real business fixed investment and residential invest- business fixed investment is determined in a manner ment are each determined by real GDP, the long-term that will maintain the capital-output ratio at a level real interest rate, and the corresponding depreciation consistent with the long-term real interest rate and the rate. Finally, the equilibrium path of real inventory depreciation rate. investment depends on domestic sales and the short- In the short run, however, fluctuations in the term real interest rate (see box "Determining Busi- growth of real GDP strongly influence business fixed ness Inventory Investment"). investment through an accelerator effect. Business The determination of business fixed investment fixed investment also incorporates a partial adjustprovides a useful example of the long-run stability ment mechanism: For each of the foreign G-7 econoand flexible dynamics associated with an error- mies, the gap between current fixed investment and correction mechanism. In each period, the business its equilibrium level shrinks at an estimated rate of capital stock changes by the amount of business fixed about 25 percent per quarter. investment less depreciation. Assuming competitive For an illustration of these properties in the determarkets for inputs (land, labor, and capital) and out- mination of business fixed investment, consider a put, microeconomic theory holds that the marginal permanent 1 percent increase in real GDP (both product of capital should equal the real rental rate on actual and potential) for Germany, with no change in capital, which is the sum of the real interest rate and the real rental rate on capital (chart 1, top panel). The the depreciation rate. In FRB/Global, the marginal dynamic accelerator generates a 3.5 percent increase product of capital is inversely proportional to the in business fixed investment during the first year and ratio of capital to GDP (the Cobb-Douglas produc- an additional 0.75 percent increase over the subse- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Evaluating International Economic Policy with the Federal Reserve's Global Model 801 from direct taxes, social security payroll taxes, fuel Determining Business Inventory Investment taxes, and other indirect taxes. The most important feature of this sector is that the direct tax rate is In the equations for each foreign G-7 country, real inven- determined endogenously to prevent a shock from tory investment depends on domestic sales, the stock of causing a continuous rise or fall in the ratio of real business inventory, and the ex ante short-term real intergovernment debt (nominal debt deflated by the GDP est rate. Domestic sales include all private and governprice deflator) to potential GDP. That is, each counment consumption and fixed investment expenditures. try's block of equations has a specified target path for The equilibrium ratio of the inventory stock to domestic the debt-GDP ratio; if a shock causes the ratio to sales depends on the cost of holding inventories, which is deviate from that path, the direct tax rate is adjusted mainly determined by the ex ante short-term real interest rate. Thus, with domestic sales held unchanged along a to ensure that the ratio gradually returns to its target. constant growth path, an increase in the short-term real For an illustration of this mechanism, consider the interest rate reduces the target stock of business inven- effects of a permanent reduction in government tories and thereby depresses the equilibrium level of consumption expenditures under two different fiscal inventory investment. policy assumptions. Under the first assumption, the In the very short run, an increase in the level of target ratio of government debt to GDP is unchanged. domestic sales generates negative inventory investment In this case, the direct tax rate will gradually move as firms use inventories as a buffer against sudden downward so that the drop in government spending is changes in sales. The target inventory-sales ratio remains matched by a similar drop in direct tax revenue and unchanged, assuming a constant short-term real interest by a corresponding increase in disposable income. As rate. Thus, over the medium term, the increase in domesalready noted, the equilibrium level of private contic sales stimulates higher inventory investment until the sumption expenditures moves in proportion to real stock of business inventories eventually rises in proportion to the increase in domestic sales. disposable income. Thus, in the long run, the drop in quent two years. These changes in investment repre- Illustration of error correction in FRB/Global: sent a small fraction of the existing stock of business Business fixed inves<mentin Germany fixed capital, so that the capital stock rises gradually Percent in response to the output shock. With a constant real Response to 1 percent rise in real GDP rental rate, the equilibrium value of the capitaloutput ratio remains unchanged, so that the capital stock eventually stabilizes at 1 percent above its initial level. Given the constant depreciation rate, fixed investment also rises 1 percent in the long run. A permanent 1 percentage point increase in the real Business fixed investment rental rate on capital in Germany, with no change in actual or potential output, also illustrates the model's adjustment properties (chart 1, bottom panel). The drop in the equilibrium capital-output ratio leads to pnai MUCK. a 1.8 percent reduction in business fixed investment over the first several years. The stock of business Response to 1 percentage point rise in real interest rate fixed capital gradually falls about 0.4 percent, to its — 0.5 new equilibrium level, with a similar long-run drop in the level of business fixed investment. Fiscal Accounts The model's representation of the fiscal accounts of the foreign G-7 countries is relatively straightforward: Government expenditures consist of consumption, investment, subsidies, transfers to households, and interest payments; government revenues come Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

802 Federal Reserve Bulletin • October 1997 government consumption is offset by a roughly equal increase in private consumption. Determining Export Volumes Under the second assumption, the debt-GDP target ratio gradually adjusts downward toward a new For each foreign G-7 country, the volume of nonfuel merchandise exports, X , is determined by foreign tradevalue, so that the direct tax rate remains constant over G weighted imports, M*, and relative prices, RP . We use the first twenty-five years of the experiment. During XG the equation block for Germany to illustrate the constructhis period, lower real interest rates stimulate private tion of the variables for foreign demand and relative expenditures to keep real output at potential and prices. avoid deflationary pressures, and potential GDP itself Foreign demand for German exports is the weighted gradually rises in response to the higher level of average of nonfuel goods imports by Germany's trading private investment. Eventually, however, the down- partners, in which the weights are constructed using the ward trajectory of the debt-GDP ratio must be halted bilateral export data for Germany. The relative-price variby reducing the direct tax rate, so that the long-run able measures German competitiveness in each of its effects are the same as those described for the previ- export markets. For example, the share of German ous experiment. exports in total French imports depends on the relative price of German exports compared with other exporters to France. Thus, in constructing the relative-price measure for Germany, RP , the French component is defined The External Sector XG as the ratio of the German nonfuel goods export price deflator to the weighted average of foreign export prices, For each foreign G-7 country, exports and imports in which the weights are constructed using bilateral are divided into three components: fuel, nonfuel mer- import data for France. Finally, the overall measure of chandise, and services. German competitiveness, RP , is computed as a weighted XG The volume of net fuel imports equals the differ- average across German export markets, using bilateral ence between domestic fuel production and domestic export weights for Germany. fuel consumption, in which fuel production is deter- Using these measures of foreign demand and relative mined exogenously, and fuel consumption depends prices, an error-correction mechanism determines the volume of nonfuel merchandise exports. With constant relaon domestic nonfuel output and the relative price of tive prices, the ratio of X to M* remains on its baseline fuel. G path; that is, each country exports a fixed share of world The imports of services and nonfuel merchandise imports. If relative prices change, the ratio of X to M* G are determined as follows. Under the assumption of gradually adjusts toward its new equilibrium value at worldwide balanced growth in the long run, the equia rate of 15 percent per quarter. Real exports of services librium ratio of real nonfuel merchandise imports are determined by a similar error-correction mechanism to real domestic spending is set by the ratio of the involving foreign trade-weighted service imports and the import price deflator for nonfuel goods to the price relative price of service exports. deflator for nonfuel domestic output. In the short run, real nonfuel merchandise imports adjust at a rate of 30 percent per quarter toward the equilibrium level. The determination of imports of services involves the Phillips curve). For example, a monetary stimulus relative price of such imports and follows essentially initially generates a drop in the unemployment rate the same error-correction mechanism as nonfuel and a relatively small increase in wage and price merchandise. inflation; as wages and prices rise further, unemploy- Exports of services and nonfuel merchandise are ment gradually returns to its natural rate. determined by error-correction mechanisms (see box In particular, real GDP is determined by aggregate "Determining Export Volumes"). demand, which is the sum of domestic spending and net exports. The employment level (and hence the unemployment rate) adjusts to equate aggregate Aggregate Supply supply to aggregate demand. Potential GDP is determined by the size of the labor force, the natural For each foreign G-7 country, wage and price unemployment rate, the stocks of business fixed capidetermination causes the rates of inflation and unem- tal and residential capital, and net fuel imports. When ployment to move inversely in the short run (a output exceeds potential (unemployment is below the downward-sloping Phillips curve); in the long run, natural rate), wages initially move little but gradually unemployment settles on its "natural" rate, the point rise in response to pressures generated by excess at which the inflation rate is constant (a vertical aggregate demand. An error-correction mechanism Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Evaluating International Economic Policy with the Federal Reserve's Global Model 803 ensures that the price deflator for domestic output Taylor.10 Under this form of rule, the short-term gradually moves toward its equilibrium path, which interest rate is adjusted in response to the current is a markup over the aggregate wage rate and the output gap and to the current deviation of consumer domestic fuel price index. price inflation from an exogenously specified target. The specific formulation of aggregate wage behav- France and Italy are usually assumed to maintain ior depends on how expectations are formed. Under fixed exchange rates with respect to the German limited-information expectations, the aggregate wage mark. Although these are typical monetary policy inflation rate is a function of past wage inflation rates, assumptions, FRB/Global has been designed so that current and past output gaps, consumer price inflation they can be modified easily from one simulation to rates, and short-term interest rates.8 Under model- the next, a feature that will be highlighted later in this consistent expectations, the aggregate wage rate is article. determined by the overlapping nominal wage contract specification of Taylor. In this case, the new Long-Term Interest Rates wage contracts signed each period depend on expectations about future aggregate wages and deviations Under limited-information expectations, the longof unemployment from its natural rate; the aggregate term nominal interest rate is specified as a function of wage rate is defined as the average value of the wage current and past short-term interest rates, inflation contracts currently in effect.9 rates, and output gaps. The long-term interest rate also exhibits partial adjustment, so that the spread between short-term and long-term rates initially Financial Markets widens and then gradually shrinks in response to a shock to the short-term interest rate. Under model- The financial-market equations for the foreign counconsistent expectations, the long-term interest rate is tries cover short- and long-term interest rates, determined as a geometrically declining weighted expected inflation, and exchange rates. For countries average of future short-term interest rates. whose currencies are assumed to be pegged to the German mark, interest rates and expected inflation move in parallel with the corresponding variables in Expected Inflation Germany, apart from an endogenously determined risk premium on each country's external liabilities. Under limited-information expectations, short-term The premium is related to the ratio of net external expected inflation is equal to the current inflation debt to GDP and helps avoid continuously rising or rate; long-term expected inflation is a moving averfalling levels of net external debt. age of current and past short-term inflation rates, with For the countries with independent monetary poli- a relatively slow adjustment of 5 percent per quarter cies, the monetary policy regime and the method of in response to a persistent change in the inflation rate. expectations formation are crucial in the determina- Under model-consistent expectations, short-term tion of long-term interest rates, expected inflation, expected inflation is equal to the actual one-stepand the bilateral U.S. dollar exchange rate. ahead inflation rate, while long-term expected inflation is determined as a weighted average of future short-term inflation rates (using the same geometri- Short-Term Interest Rates cally declining weights as in the long-term interest rate equation). In a typical FRB/Global simulation, Canada, Germany, Japan, and the United Kingdom follow inde- Exchange Rates pendent monetary policies using a rule of the form proposed by Henderson and McKibbin and by For those countries with independent monetary policies, the bilateral exchange rate under both limited- 8. Regression analysis has been used to estimate the parameters of this relationship for each foreign G-7 country. 9. John Taylor, "Aggregate Dynamics and Staggered Contracts," 10. In Carnegie-Rochester Conference Series on Public Policy, Journal of Political Economy, vol. 88 (February 1980), pp. 1-23. This vol. 39 (June 1993), see Dale Henderson and W. McKibbin, "A specification of wage determination under model-consistent expecta- Comparison of Some Basic Monetary Policy Regimes for Open tions is highly simplified; alternative specifications of wage determina- Economies: Implications of Different Degrees of Instrument Adjusttion for the foreign G-7 countries will be considered in subsequent ment and Wage Persistence," pp. 221-318; and John Taylor, "Discreresearch. tion versus Policy Rules in Practice," pp. 195-214. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

804 Federal Reserve Bulletin • October 1997 information and model-consistent expectations is power parity. For example, under limited-information determined by real interest parity (the bilateral differ- expectations, the bilateral exchange rate depends on ential in real interest rates) and the risk premium on the corresponding differential in long-term interest external liabilities, which depends on the ratio of net rates as adjusted for long-term expected inflation. In external debt to GDP, both measured in U.S. dollars this case, a 1 percentage point increase in the differ- (see box "Determining Exchange Rates under Alter- ential between U.S. and German long-term real internative Types of Expectations"). Thus, an increase in est rates generates a 0.08 percent real appreciation of the relative magnitude of U.S. net external debt puts the dollar against the German mark. downward pressure on the real value of the dollar, Under model-consistent expectations, the exchange thereby preventing explosive paths for the net stock rate is determined by short-term real interest parity. If of external debt. the U.S. three-month real interest rate temporarily Under either method of expectations formation, an exceeds the German three-month real interest rate by unanticipated temporary increase in U.S. interest rates 1 percentage point, then investors are willing to hold generates an initial rise in the exchange value of the assets denominated in German marks only if the U.S. U.S. dollar, followed by depreciation back toward its dollar is expected to depreciate 1 percent against the equilibrium value, a point referred to as purchasing mark over the subsequent quarter. Thus, the temporary interest rate differential generates an immediate 1 percent jump in the value of the dollar, followed by Determining Exchange Rates depreciation back to its long-run value in the subsequent period. under Alternative Types of Expectations THE DYNAMIC PROPERTIES OF FRB/GLOBAL Limited-information expectations: The dynamic properties of FRB/Global are described RER, = 0.08[(RLys ~ ftp) - (RL, - ft,)] here through three simulation experiments, each „ , NXDEBT t us - NXDEBT, featuring a different type of shock: an exogenous -0.1 : reduction in U.S. government spending, an exog- GDPVD"S + GDPVD, enous depreciation of the exchange value of the U.S. Model-consistent expectations: dollar, and an exogenous increase in the OPEC oil export price. In each experiment, expectations are RER, - RER, , = (RSW - j£f») - (RS, - n,) + assumed to be formed with limited information. The effects of each shock are evaluated under two _ NXDEBTVS _ NXDEBT, 1 alternative U.S. monetary policy rules: "active" and GDPVD[JS + GDPVD, "passive." Under the active rule, the nominal federal Definitions funds rate adjusts in response to the output gap and to the deviation of consumer price inflation from the RER, = the natural logarithm of the bilateral real target rate. Thus, for each percentage point that outexchange rate as adjusted by consumer put exceeds potential, the short-term nominal interest prices, where the exchange rate is defined rate rises 50 basis points. For each percentage point in units of local currency per U.S. dollar increase in average annual inflation (based on the RL, = the current long-term interest rate current and previous three quarters), the short-term nominal interest rate rises 150 basis points. Under the RS, = the current short-term interest rate passive monetary policy rule, the nominal federal NXDEBT, = the net external debt position in funds rate is held constant throughout the simulation. U.S. dollars In each simulation experiment, Canada, Germany, GDPVD, = nominal GDP in U.S. dollars Japan, and the United Kingdom follow independent monetary policies under the same active monetary Long-term expected inflation, rip is computed using policy rule just described for the United States. limited-information expectations. The one-step-ahead Meanwhile, the French franc, Italian lira, and inflation rate, n r+s , and the one-step-ahead real exchange SOECD currencies remain fixed to the German mark. rate, RER l+ j, are computed using model-consistent expec- The Mexican peso and the OPEC and ROW curtations. The US superscript indicates the corresponding rencies are assumed to be pegged to the U.S. dollar, variable in the U.S. block of equations. Each equation while the NIE currencies are assumed to be pegged to includes an intercept and a residual term (not shown). a trade-weighted basket of foreign currencies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Evaluating International Economic Policy with the Federal Reserve's Global Model 805 The results of each experiment are reported in the trade-weighted real exchange rate and foreign terms of deviations from the baseline path; the con- trade-weighted GDP—are each determined by a struction of the baseline is described in appendix C. single equation; in FRB/Global, they are jointly determined by 1,400 equations. Yet, in the case of the real exchange rate, the paths generated by the two Experiment 1: A Reduction in U.S. Government models are quite close, especially over the first three Spending years of the simulation (chart 2, bottom-left panel). The differences in the paths for foreign GDP are In this experiment, real U.S. government purchases slightly larger (bottom-right panel), but the effect on of goods and services are permanently reduced by U.S. exports (not shown) is small. 1 percent of the baseline path of U.S. GDP, starting in This example illustrates the general result that, the first quarter of year 1, while U.S. tax rates are held for domestic shocks, FRB/Global produces essenconstant through year 14. During year 1, the spending tially the same results as FRB/US. Thus, the natural reduction amounts to about $70 billion. Because the role for FRB/Global is in analyzing the effects of US. spending shock originates within the United States, shocks on foreign economies and the effects of exterwhere foreign trade is a fairly small part of the nal shocks on the U.S. economy as well as foreign economy, the experiment also serves as a useful economies. benchmark for comparing the simulation results from FRB/Global with those from FRB/US. The two models generate nearly identical paths for Active U.S. Monetary Policy Rule U.S. real GDP and consumer price inflation (chart 2, top panels). In FRB/US, the two foreign variables Examining the U.S. government spending shock that enter into the determination of U.S. net exports— over its first three years provides a good comparison 2. Comparison of FRB/Global and FRB/US: A shock in U.S. government spending Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

806 Federal Reserve Bulletin • October 1997 of its effects on four of the countries with indepen- foreign real interest rates in response to the active dent monetary policies—the United States, Canada, monetary policy rules in Canada, Germany, and Japan Germany, and Japan—under both active and passive lead to real appreciation of the U.S. dollar. As long U.S. monetary rules (chart 3, sections A and B). In as the U.S. federal funds rate remains constant, these the active-policy experiment, real GDP in Canada contractionary influences will grow in magnitude, closely tracks the contraction and recovery in U.S. output (chart 3.A, top-left panel), inasmuch as exports from Canada to the U.S. comprise a relatively large share of aggregate demand in Canada. The U.S. Effects of selected shocks on the trade balances and contraction has a much smaller effect on Japan and current accounts of countries and country groups in Germany. FRB/Global, years 1 through 3 The active monetary policy rule prescribes a cut in U.S. dollars short-term interest rates in each country (chart 3.A, A. U.S. government spending shock bottom-left panel). The short rate in Canada falls a full percentage point, whereas the Japanese and Ger- Trade balance Current account man short rates fall only about 20-40 basis points. Country or Year YYeeaarr Long-term real interest rates in all three foreign region countries fall less than in the United States 1 2 3 1 2 3 (chart 3.A, bottom-right panel). Thus, each foreign United States 15.1 16.9 11.8 24.3 27.8 23.7 currency exhibits real appreciation relative to the U.S. .1 .2 .1 -.8 -.8 -1.3 -.6 -1.4 -1.6 -5.3 -7.4 -9.0 dollar (see the equations for determining exchange -1.5 -1.3 -1.2 -1.0 -.9 -.9 .1 -.3 -.7 -.4 -1.0 -1.7 rates), accounting for the depreciation in the trade- Italy .1 -.3 -.4 .0 -.7 -.9 weighted U.S. real exchange rate (chart 2, bottom-left United Kingdom -.8 -.6 -.4 -1.6 -1.8 -1.8 Smaller OECD -1.0 -1.7 -1.1 -.8 -1.6 -1.1 panel). -.3 -.5 -.6 -.2 -.4 -.6 NIEs -1.6 -1.2 -.4 -1.1 -1.2 -.8 The U.S. fiscal shock under an active U.S. mone- OPEC -4.4 -3.0 -1.0 -4.9 -4.1 -2.8 ROW -5.1 -6.8 -4.3 -8.3 -7.9 -2.9 tary policy improves the U.S. trade balance by about $15 billion (table l.A); the improvement arises B. U.S. currency shock from a combination of the depreciation in the real exchange rate and lower domestic spending. The U.S. United States -2.8 23.8 34.7 -3.6 18.1 28.2 current account improves even more as lower rates of 2.2 4.3 2.8 -2.4 -2.0 -4.3 -1.1 -5.6 -10.5 -1.4 -3.8 -10.6 profit and interest reduce the rates of return paid on Canada .5 1.2 .6 .3 .8 .5 3.7 2.3 -1.6 1.6 -1.2 -5.9 direct investment and portfolio liabilities. The rise in 2.4 .4 -1.1 3.1 -1.9 -3.5 U.S. net exports is reflected in a fairly even drop in United Kingdom -3.0 -4.0 -4.1 -3.1 -10.0 -10.0 Smaller OECD 3.3 -.9 -2.4 5.8 2.1 .8 net exports among the other eleven blocks. The rest- .4 1.4 1.8 -.5 .0 .5 NIEs -12.1 -14.2 -13.5 -5.3 -6.4 -6.7 of-world (ROW) trade balance is determined by the -2 1 _ 2 9 7 5 2 -3 5 ROW 13.5 -6.7 -6.4 15.1 9.6 14.5 constraint that the global trade deficit remain at its baseline value. Nevertheless, the decline of about C. OPEC oil export price shock $5 billion in ROW net exports seems to be reasonable in light of the fact that the ROW block accounts for United States -13.1 -4.0 -1.8 -14.2 -3.1 -1.0 about 30 percent of U.S. imports. Germany -4.1 -3.3 -3.0 -4.6 -3.8 -3.8 -12.3 -7.9 -5.7 -11.4 -10.1 -9.3 1.3 .3 .2 .9 .5 .5 -2.7 -2.1 -1.9 -2.6 -2.5 -2.6 -3.0 -2.6 -2.3 -3.2 -3.1 -2.9 United Kingdom .5 -.2 -.2 .0 -1.0 -1.1 Smaller OECD -1.2 .2 1.7 -1.1 .1 1.6 Passive U.S. Monetary Policy Rule 1.4 1.4 1.4 1.4 1.6 1.5 NIEs -3.2 -4.4 -4.8 -2.5 -3.0 -3.7 OPEC 34.5 26.8 21.8 35.3 30.7 28.0 ROW 2.7 -4.1 -5.5 2.0 -6.1 -7.2 When the United States maintains a constant federal funds rate, U.S. real GDP remains stagnant, at NOTE. Each shock begins at the start of year 1. In each simulation, the U.S. monetary authorities follow the active monetary policy rule, in which the fedabout 1 percent below baseline, during the first three eral funds rate is adjusted to counteract movements in the output gap and in years of the simulation (chart 3.B, top-left panel), deviations of consumer price inflation from the target rate. The U.S. government spending shock is a permanent reduction in spending while consumer price inflation falls because of the equal to 1 percent of the baseline path of U.S. GDP. downward-sloping short-run Phillips curve (top- The U.S. currency shock is a 5 percent depreciation in the exchange value of the U.S. dollar versus the Canadian dollar and a 10 percent depreciation versus light panel). Thus, expected long-term inflation falls, the currencies of the rest of the G-7, the smaller OECD countries, and the newly and the long-term real interest rate gradually industrializing economies (NIEs). The OPEC oil export price shock is an increase of $5 per barrel above the increases (bottom-right panel). Meanwhile, falling baseline path. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Evaluating International Economic Policy with the Federal Reserve's Global Model 807 3. U.S. government spending shock under active and passive U.S. monetary policy rules A. Active monetary policy rule Percent Percent Output gap Consumption price deflator — 0.5 — — 0.5 Germany Canada United States Percentage points Percentage points Short-term nominal interest rate Long-term interest rate B. Passive monetary policy rule Percent Percent Consumption price deflator Percentage points Percentage points Short-term nominal interest rate Long-term interest rate NOTE. For definitions of shock and active monetary policy rule, see note to table 1. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

808 Federal Reserve Bulletin • October 1997 generating an explosive downward spiral for U.S. remains fixed at $5 above the baseline thereafter output and prices.11 (chart 5 and table l.C). This shock roughly corresponds to a 25 percent rise in the fuel import prices faced by all countries and regions in the model. Experiment 2: A Depreciation in the Exchange Under the active monetary policy rule, the U.S. con- Value of the U.S. Dollar sumer price level rises about 0.3 percent by the end of year 1 (chart 5.A, top-right panel). In this simulation, the exchange value of the US. To push inflation back toward its target rate, the dollar depreciates 5 percent against the Canadian active policy raises the federal funds rate 20 basis dollar and 10 percent against the currencies of the points, causing a mild contraction in which U.S. real other foreign G-7 countries, the SOECD, and the GDP falls about 0.3 percent (chart 5.A, top-left NIEs. After the depreciation in year 1, these exchange panel). As inflationary pressures subside, the federal rates remain fixed at the new level throughout the funds rate returns to baseline, and by year 3 the simulation period. Because the depreciation is not output gap is almost closed. By contrast, U.S. output triggered by a change in expectations about future remains close to the baseline under a constant federal interest rates, it may be viewed as arising from an funds rate (chart 5.B, top-left panel), but consumer exogenous downward shift in preferences for holding prices rise about 0.5 percent (chart 5.B, top-right dollar-denominated assets. panel), nearly twice as much as under the active Under the active as well as the passive monetary policy rule. policy regime, the exchange rate depreciation improves U.S. external competitiveness and stimulates net exports, thereby raising real GDP about 0.6 percent within about a year (charts 4.A and 4.B, ILLUSTRATIVE APPLICATIONS OF FRB/GLOBAL top-left panels). The exchange rate depreciation also passes gradually into U.S. import prices and ulti- FRB/Global can be used to analyze the spillover mately into higher consumer price inflation (top-right effects of fiscal and monetary policy under alternative panels). The active monetary policy rule prescribes European monetary policy regimes, an area of interan increase of almost 150 basis points in the federal est given the movement toward a European monetary funds rate by the middle of year 2 and gradually union. Simulations inform the forecasts of the pushes up the long-term real interest rate (chart 4.A, Board's staff regarding foreign activity and the U.S. top-right panel). external sector. This section discusses three examples Under the active U.S. monetary policy rule, the of such simulations. U.S. trade balance displays a standard J-curve response to the exchange rate depreciation, with a small initial deterioration yielding to an improvement of $35 billion by the end of year 3 (table l.B). The A Comparison of EMS and EMU U.S. current account improves a smaller amount as higher rates of interest and profit generate higher net The first scenario highlights the effects of different factor payments. Japan and the NIEs bear the brunt monetary policy regimes on simulations for France of the increase in U.S. net exports. The ROW is not and Germany of a fiscal shock originating in Gerseverely affected—its price level adjusts fairly many. The shock is a permanent increase in German quickly to maintain a constant trade-weighted real government spending equal to 1 percent of German exchange rate. GDP beginning at the outset of year 1. Although hypothetical, this shock is comparable to the fiscal expansion in Germany that followed reunification in Experiment 3: An Increase in OPEC Oil 1990. Export Prices The scenario covers two monetary policy regimes: the current arrangements (the European Monetary In this case, the export price of OPEC oil increases System, or EMS) and those envisioned under the $5 per barrel above its baseline path in year 1 and Economic and Monetary Union (EMU). Under the EMS regime, monetary policy in Germany follows 11. These results are consistent with standard economic theory, an active rule (German short rates respond to deviawhich holds that the domestic price level is indeterminate (that is, not tions of German output and inflation from target), tied down by macroeconomic fundamentals) under a fixed nominal while France, Italy, and the SOECD countries peg interest rate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Evaluating International Economic Policy with the Federal Reserve's Global Model 809 4. U.S. currency shock under active and passive U.S. monetary policy rules A. Active monetary policy rule Output gap Consumption price deflator 0.5 United States 0.5 0.5 Germany 05 1.0 Percentage points Percentage points Short-term nominal interest rate Long-term real interest rate 0.2 0.2 0.4 B. Passive monetary policy rule Percent Percent Percentage points Percentage points Short-term nominal interest rate Long-term real interest rate 0.5 1.0 2 Year NOTE. For definitions of shock and active monetary policy rule, see note to table 1. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

810 Federal Reserve Bulletin • October 1997 5. Shock to the export price of OPEC oil under active and passive U.S. monetary policy rules A. Active monetary policy rule Percent Percent Output gap Consumption price deflator — 0.4 Germany Canada United States Percentage points Percentage points Short-term nominal interest rate Long-term real interest rate B. Passive monetary policy rule Percent Percent Output gap Consumption price deflator Percentage points Percentage points Short-term nominal interest rate Long-term real interest rate NOTE. For definitions of shock and active monetary policy rule, see note to table 1. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Evaluating International Economic Policy with the Federal Reserve's Global Model 811 their currencies to the German mark.12 In this experi- effects of a German-specific fiscal expansion on the ment, the United States, Canada, Japan, and the rates of GDP and inflation in all member countries United Kingdom follow independent monetary poli- are much smaller than the effect on Germany; therecies under the EMS. fore, interest rates rise less than they do under the Under the model's EMU regime, the European EMS, in which interest rates target only the German Central Bank would implement monetary policy for output and inflation gaps. the member countries; it would use an active mone- In addition, output and prices in Germany rise tary policy rule in which the interest rate on the more under the EMU than they do under the EMS common currency (the euro) responds to the weighted in response to the fiscal expansion (chart 6.A, top average of the output gaps and inflation deviations of panels). These results highlight the point that relative all member countries. This rule highlights the con- to the EMS, the EMU will tend to generate somewhat trast between the EMU and the EMS regimes; in the higher variability of output and inflation in Germany latter, short-term interest rates in all member coun- because German short-term interest rates will reflect tries are determined by the output and inflation gap in economic conditions in all member countries and not Germany (apart from a risk premium on external just those in Germany, as they do under the EMS. liabilities). Likewise, under the EMU, the contractionary The actual composition of the EMU and the rela- effects in France arising from fiscal expansion in tive influence of its members remain open issues. For Germany are much smaller than they are under the this experiment, all members of the European Union EMS (chart 6.B). In particular, the variability of except the United Kingdom are assumed to join the French output and inflation are markedly lower. EMU, and the influence of specific countries in the These results illustrate the general point that, as modequation governing the European Central Bank's eled by FRB/Global, a country that currently pegs its simulated response are represented by weights cal- currency to the German mark will tend to reduce the culated from the relative dollar values of GDP of volatility of its output and inflation by joining EMU. the member states. On that basis, Germany's weight is slightly more than lA, France and Italy each have a weight of about Vs, and the SOECD weight is A Comparison of Independent Monetary Policy about lA. and Participation in EMU Under the EMS, the fiscal expansion in Germany has a direct positive effect on German GDP and Although countries that currently participate in the prices (chart 6.A, top panels). The German central EMS (other than Germany) may experience a reduced bank responds to the shock by raising short-term volatility of inflation and output under the EMU, a interest rates substantially (about 75 basis points) non-EMS country joining the EMU presumably (chart 6.A, bottom-left panel). France must raise would sacrifice some control over domestic macrointerest rates by a similar magnitude in order to economic outcomes by giving up its independent maintain the exchange rate peg (chart 6.B, bottom- monetary policy. To test the latter proposition, we left panel). The interest rate hike in France has analyze a fiscal shock similar to that considered strongly contractionary effects on real GDP and above—a permanent increase in fiscal spending of prices in France (chart 6.B, top panels), which are 1 percent of GDP—but this time within the United only partially offset by higher net exports to Kingdom instead of Germany. We consider its effects Germany. on the United Kingdom under each of two monetary Under the EMU regime, the same fiscal shock policy scenarios: U.K. membership in the EMU and produces a rise in the interest rate in each country an independent monetary policy in the United (about 60 basis points) that is somewhat smaller than Kingdom. under the EMS (as noted, about 75 basis points) Under the EMU scenario, the European Central (chart 6.A and 6.B, bottom-left panels). The smaller Bank is assumed to adjust interest rates using the rise in interest rates reflects the fact that the European active monetary policy rule discussed above, except Central Bank adjusts interest rates according to the that the United Kingdom is now included in the set effects of a shock on the output gaps and inflation of member countries. In this simulation, the United rates of all member countries. Under the EMU, the Kingdom receives a relatively small GDP-based weight of Vs. Under an independent monetary policy, the United Kingdom uses a variant of the active 12. Because the SOECD block includes Australia and New monetary policy rule, in which the short-term interest Zealand, the simulations are intended to only approximately represent rate is adjusted to keep U.K. output at its target level. both EMS and EMU. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

812 Federal Reserve Bulletin • October 1997 6. German fiscal shock under EMS-style and EMU-style monetary policies A. Effects on Germany Percent Percent Real GDP Consumption price deflator EMU Percentage points Percent Short-term interest rate Nominal exchange rate 0.50 B. Effects on France Percent Real GDP Consumption price deflator Percentage points Percent Short-term interest rate Long-term interest rate NOTE. The shock begins at the start of year 1 and consists of a permanent increase in German central government spending equal to 1 percent of GDP. See text for definition of monetary policy alternatives. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Evaluating International Economic Policy with the Federal Reserve's Global Model 813 After the fiscal expansion in the United Kingdom, liabilities. That is, choosing to link its economy to a output there initially rises sharply (to 1 percent above common monetary policy could enhance a country's baseline) if the country is in the EMU (chart 7, status as an inflation fighter, which would tend to top-left panel); in contrast, an independent U.K. lower the risk premium on its external liabilities. monetary policy could basically target output at baseline. The monetary tightening and the resulting rise in The Formation of Expectations U.K. interest rates under an independent policy is considerably more aggressive than that which would The final scenario examines the implications of be taken by the ECB if the United Kingdom were one alternative assumptions about expectations. The of its members (bottom-left panel). implications are most apparent in the case of shocks The simulation just described illustrates how a whose effects arise after the start of the simulation. country such as the United Kingdom stands to incur We compare the results obtained from expectations some increase in the variability of output and infla- that are formed with limited information to the results tion by forgoing an independent monetary policy. obtained with model-consistent expectations—those Although the FRB/Global simulations help to assess formed with the benefit of all the information conthese costs, the simulations do not take into account tained in the model. some potential benefits of joining EMU, including Limited-information expectations depend excluthe microeconomic benefits of lower transaction costs sively on past information; hence, shocks are unforethat come with a common currency. Another poten- seen. By contrast, with model-consistent expectatial benefit is the "credibility effects" that could tions, agents are assumed to have perfect foresight reduce the risk premium on a country's external about the shock, meaning that they know the entire 7. U.K. fiscal shock: Effects on the United Kingdom under independent and EMU-style monetary policies Percent — PercCm Consumption price deflator 1.0 0.5 Independent U.K. — 0.5 0.5 Percentage points Percentage points Short-term nominal interest rate Long-term real interest rate 1.0 — 2 0.5 3 3 Year Year NOTE. The shock begins at the start of year 1 and consists of a permanent increase in U.K. central government spending equal to 1 percent of GDP. See text for definition of the monetary policy alternatives. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

814 Federal Reserve Bulletin • October 1997 future path of the variable whose value is being on Germany of a German fiscal expansion (chart 6. A) exogenously changed in the simulation. The assump- because that simulation was also conducted under tion of such foresight enables the model to capture limited-information expectations. the notion that news about future economic develop- Under model-consistent expectations, agents in ments can affect the current economy. year 1 can use the information that the European Under each variant of the model, we consider the Central Bank will be in operation as of the beginning short- and medium-term response of agents to an of year 3: As soon as the forthcoming year-3 shock is announcement by the German government at the announced, agents realize that the central bank will beginning of year 1 that, at the beginning of year 3, it have to raise short-term interest rates beginning in will permanently add to its spending an amount equal year 3 to restrain the effects of the projected fiscal to 1 percent of GDR The monetary policy regime expansion on output and prices. The expectation of in years 1 and 2 is assumed to be the EMS; in the rise in future short rates (chart 8, bottom-left year 3, the EMU. (The United Kingdom conducts panel) causes an immediate rise in long-term rates an independent monetary policy throughout these (bottom-right panel). The rise in long rates in turn simulations.) causes real activity to contract somewhat in years 1 In Germany, limited-information expectations pro- and 2, so in this simulation, a future fiscal expansion duce no response until the spending rise is imple- has a contractionary effect in the short run. mented in year 3 (chart 8). Even long-term interest Thus, FRB/Global accommodates two different, rates fail to respond (bottom-right panel), an indica- and somewhat extreme, perspectives on the formation that, until the shock is implemented, agents do tion of expectations. The degree of divergence in the not expect future short-term rates to rise. From year 3 results produced by each perspective in a given sceforward, however, the limited-information dynamics nario depends on whether the effects of the shock are are like those in the previous simulation of the effects anticipated by economic agents. 8. Future German fiscal shock: Model-consistent vs. limited-information expectations Percent Real GDP Consumption price deflator Limited-information Percentage points Percentage points Short-term interest rate Long-term interest rate NOTE. The shock, of the magnitude given in chart 6, is announced in year 1 for implementation in year 3. See text for definition of expectations alternatives. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Evaluating International Economic Policy with the Federal Reserve's Global Model 815 APPENDIX A: THE FOREIGN G-7 EQUATION wage rate and total employment.15 The fuel tax rate is BLOCKS specified on a per-barrel basis, and the value of the tax per barrel is indexed to the GDP price deflator but The equation blocks for the foreign G-7 countries not to the current price of fuel. Other indirect taxes cover government expenditures, tax revenue, net (for example, the value-added tax) are assumed to factor income, potential output, aggregate wages, and vary proportionally with the value of private condomestic prices. sumption and investment expenditures. Government Expenditures Net Investment Income from Abroad Total government expenditures are divided into five Net investment income from abroad is divided into components: consumption, investment, subsidies, four components: direct investment payments and transfers to households, and interest payments. Real receipts and portfolio investment payments and government consumption and investment expendi- receipts. Each of the four is computed by multiplying tures on goods and services are exogenously deter- the outstanding stock of claims or liabilities by the mined; the corresponding nominal values are appropriate rate of return. The rate of return on direct obtained using price deflators for government con- investment liabilities varies with the domestic output sumption and investment. The nominal value of gap, while the rate of return on direct investment government subsidies moves proportionally with claims varies with a weighted average of foreign the level of nominal GDP. In contrast, real transfers output gaps in which the weights are computed using to households are assumed to be acyclical, depend- bilateral export data. The rate of return on portfolio ing only on potential GDP; nominal transfers are liabilities is assumed to be a weighted average of two obtained using the GDP price deflator. Finally, inter- components: the current short-term interest rate and est payments are computed by multiplying the stock a moving average of past long-term interest rates. of government debt by the average rate of return on Finally, the rate of return on portfolio investment outstanding government securities. The average rate claims is a weighted average of foreign rates of of return is assumed to be a weighted average of two return on portfolio investment liabilities, adjusted for components: the current short-term Treasury bill rate exchange rate movements. and a moving average of past long-term bond rates.13 Potential Output Tax Revenue Potential domestic nonfuel output is determined by a Total government revenues are divided into four com- Cobb-Douglas production function exhibiting conponents: direct taxes, social security payroll taxes, stant returns to scale with respect to labor, the busifuel taxes, and other indirect taxes.14 Direct tax reve- ness fixed capital stock, the residential capital stock, nue consists mainly of personal and corporate income and domestic fuel consumption.16 Potential GDP is taxes and is computed by multiplying the direct tax defined as potential nonfuel output less net fuel rate by nominal net national product (nominal GDP imports, a formula that reflects the concept of GDP plus net factor income from abroad, less depreciation as a measure of value added (gross output less raw allowances). The direct tax rate is endogenously materials). determined to stabilize the ratio of real government debt to potential GDP. Aggregate Wages Payroll taxes are assumed to vary proportionally with labor income, which is the product of the hourly Under limited-information expectations, the inflation rate of aggregate wages is specified as a function of 13. In all foreign G-7 country blocks, the weights on the short-term and long-term components are 10 percent and 90 percent respectively. The long-term component assigns weights of 0.05 to the current 15. Hours of work are assumed to be constant in the current long-term bond rate and 0.95 to the previous period's long-term version of FRB/Global; this variable will be determined endogenously component. In future work, we intend to construct new weights in future work. that reflect cross-country differences in the maturity structure of 16. These four inputs have output elasticities of 0.7, 0.15, 0.1, and government debt. 0.05 respectively. Future work on FRB/Global will incorporate 14. Strictly speaking, payroll taxes are a subcategory of direct country-specific production parameters and will relax the assumption taxes, so direct taxes in this discussion should be understood as that the industrial sector uses a constant fraction of total domestic fuel referring to the nonpayroll component of direct tax revenue. consumption. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

816 Federal Reserve Bulletin • October 1997 past wage inflation rates as well as current and past Import and Export Prices output gaps, consumer price inflation rates, and shortterm interest rates. Under model-consistent expecta- The import price deflators for services and nonfuel tions, the aggregate wage rate is determined by over- goods are determined by a weighted average of forlapping nominal wage contracts, as formulated by eign export prices converted into local currency units, Taylor.17 At the beginning of each quarter, one-fourth with the weights constructed from bilateral import of the work force is assumed to sign new wage data. contracts of annual duration. When unemployment The export price deflators for services and nonfuel remains at its natural rate, each contract specifies a goods are determined by the price of domestic nonwage rate equal to the average expected aggregate fuel output and a weighted average of foreign output wage rate over the subsequent year. In addition, the prices converted into local currency, with the weights wage contract is adjusted to account for the average constructed from bilateral export data. expected deviation of unemployment from its natural The price deflators for fuel exports and imports are rate over the subsequent year. In particular, for a determined by the local-currency equivalent of the given value of the average expected aggregate wage, OPEC oil export price, which is expressed in U.S. a 1 percentage point increase in unemployment dollars per barrel. throughout the coming year reduces the current contract wage rate 0.02 percent. Finally, the aggregate wage rate is defined as the average of the four wage APPENDIX B: OTHER FOREIGN-COUNTRY contracts currently in effect. EQUATION BLOCKS OF FRB/GLOBAL Three blocks of equations represent Mexico, the Domestic Prices NIEs, and the SOECD. These three blocks have a structure similar to that of the foreign G-7 blocks but The price deflator for domestic nonfuel output is with no disaggregation of private investment, governdetermined as a markup over the aggregate wage rate ment revenue, and the capital account. The currencies and the domestic fuel price index.18 The markup rate of the SOECD are assumed to be pegged to the is assumed to be mildly procyclical: Given employ- German mark, so that SOECD interest rates and ment and fuel costs, a persistent 1 percentage point expected inflation move in parallel with the correincrease in the output gap generates a 0.36 percent sponding German variables, apart from differences rise in the domestic nonfuel output price deflator. The in risk premiums on external liabilities. Similarly, gap between the markup rate and its equilibrium the Mexican peso is assumed to be pegged to the value shrinks about 33 percent per quarter. Given U.S. dollar, and the NIE currencies are assumed prices for fuel imports and exports and the price to be pegged to a trade-weighted basket of foreign deflator for nonfuel output, nominal GDP is com- currencies. puted as nominal domestic nonfuel output less net The OPEC block is intended to represent fuelfuel imports, and nominal domestic spending is com- export-oriented developing economies with no inertia puted as nominal GDP plus net nonfuel imports. The in their nominal macroeconomic variables. The GDP price deflator is then determined by the ratio of OPEC currencies are assumed to be fixed to the U.S. nominal to real GDP, and the domestic spending dollar, and the OPEC nonfuel output price level deflator is determined as the ratio of nominal to real adjusts in a flexible way to maintain a stable tradedomestic expenditures. The private and government weighted real exchange rate. OPEC imports adjust price deflators for consumption and investment move gradually to maintain a constant ratio of net external proportionally with the domestic spending deflator, assets to nominal GDP. The OPEC oil export price is so that the relative prices of the components of endogenously determined by world fuel consumption domestic spending are held constant. Finally, the and a trade-weighted index of foreign prices condomestic fuel price depends on the price of imported verted into U.S. dollars. For example, a 1 percent fuel and the fuel tax rate. increase in world fuel consumption generates a 1 percent increase in the equilibrium OPEC oil export price, with an adjustment rate of 40 percent per quarter toward the new equilibrium price level. The ROW block of FRB/Global plays a crucial 17. Taylor, "Aggregate Dynamics and Staggered Contracts." role in ensuring that all global adding-up constraints 18. The relative weights are identical to those in the production are satisfied. Thus, all ROW variables related to the function: 0.92 on labor and 0.08 on fuel. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Evaluating International Economic Policy with the Federal Reserve's Global Model 817 current account and capital account are defined by about ten years, and each component of aggregate accounting identities; for example, ROW net nonfuel demand converges to a constant fraction of real GDR merchandise exports are determined by the sum of Consumer price inflation gradually converges to a net nonfuel merchandise imports of the other eleven constant rate of 3 percent, and each wage and price blocks. deflator eventually becomes constant relative to the At the same time, the ROW block is intended to be consumer price index. Finally, tax rates are adjusted representative of small open developing economies so that fiscal balance is achieved within about twenty with no nominal inertia. Thus, the ROW nonfuel years. • output price index adjusts fairly quickly in response to changes in the ratio of net external debt to nominal GDR Since the ROW currencies are assumed to be C.2. Highlights of the FRB/Global baseline fixed with respect to the U.S. dollar, these movements Percent in the ROW price level translate directly into the trade-weighted real exchange rate, which in turn Ratio to country's or region's GDP CCoouunnttrryy oorr SShhaarree ooff influences the net exports of the other eleven blocks rreeggiioonn wwoorrlldd GGDDPP Net external Government Exports and contributes to the long-run stability of the global assets debt model. United States 24 11 -14 49 Germany 8 24 11 77 15 10 20 59 2 38 -43 107 5 24 -1 44 APPENDIX C: CONSTRUCTION OF THE Italy 4 24 -5 119 United Kingdom .. 4 29 7 56 FRB/GLOBAL BASELINE SOECD 12 27 16 63 1 32 -65 n.a. NIEs 3 56 16 n.a. The data used to construct the FRB/Global baseline OPEC 2 31 125 n.a. ROW 20 20 -20 n.a. come from a variety of sources (table C.l). The FRB/Global baseline (tables C.2 and C.3) is extrapo- NOTE. Averages for 1995. n.a. Not available. lated to the fourth quarter of 2025 under the assumption of a gradual transition to a balanced growth path. Thus, all output gaps in the model are closed within C.3. Merchandise imports of the United States, Germany, and Japan in the FRB/Global baseline, distributed by exporter Percent C. 1. Sources of baseline data for FRB/Global variables Exporter United States Germany Japan Variables Sources United States 5 19 United States 5 4 Domestic FRB/US baseline 15 5 External sector Baseline of a Federal Reserve Canada 18 .5 3 international transactions model France 2 11 2 Italy 2 8 2 Foreign industrial countries United Kingdom 3 6 2 National accounts, fiscal SOECD 6 39 15 and trade data BIS database 8 .1 .4 Foreign direct and portfolio NIEs 10 4 12 investment IIMMFF bbaallaannccee ooff ppaayymmeennttss ssttaattiissttiiccss OPEC 4 2 13 Bilateral export and import shares IMF direction of trade statistics ROW 27 20 27 Fiscal data, stocks of government debt IMF government finance statistics Total 100 100 100 Oil production, consumption, and trade OECD-IEA oil and gas statistics NOTE. Averages for 1995. Imports measured in U.S. dollars. Oil prices and tax rates OECD-IEA energy prices and taxes . . . Not applicable. Real capital stocks, depreciation rates Penn world tables Developing countries Mexico and NIEs data IMF international finance statistics Additional data for NIEs DRI database OPEC and ROW data IMF World Economic Outlook BIS Bank for International Settlements IMF International Monetary Fund OECD-IEA Organisation for Economic Cooperation and Development- International Energy Agency Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

818 Industrial Production and Capacity Utilization for August 1997 Released for publication September 15 cent higher than in August 1996. The rate of industrial capacity utilization rose to 83.9 percent—its Industrial production increased 0.7 percent in August, highest rate since September 1995. with widespread gains in manufacturing. In addition, The acceleration in industrial production between output growth in July was revised up 0.2 percentage July and August was concentrated in manufacturing; point to 0.4 percent. The upward revision in July was much of it was related to the 10 percent jump in the largely the result of higher manufacturing output— assembly of autos and light trucks, which had especially nondurables. At 121.3 percent of its 1992 dropped 5 percent from June to July. Excluding motor average, industrial production in August was 4.7 per- vehicles and parts, manufacturing production rose Industrial production indexes Twelve-month percent change Twelve-month percent change Materials Durable manufacturing 10 Products J I L 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 1 1 1 1 1 1 1 Percent of capacity Percent of capacity Total industry Manufacturing Utilization - 90 Utilization — 90 80 - J ^ r ^ ^r 80 70 70 1 1 1 1 1 1 1 I 1 t i ll I ll 1983 1985 1987 1989 1991 1993 1995 1997 1983 1985 1987 1989 1991 1993 1995 1997 All series are seasonally adjusted. Latest series, August. Capacity is an index of potential industrial production. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

819 Industrial production and capacity utilization, August 1997 Industrial production, index, 1992=100 Percentage change Category 1997 19971 Aug. 1996 to May' Juner Julyr Aug.p May1" Juner Julyr Aug. Aug. 1997 Total 119.5 119.9 120.4 121.3 4.7 Previous estimate 119.3 119.6 119.8 Major market groups Products, total2 115.9 116.1 116.3 117.2 .4 .2 .2 4.4 Consumer goods ... 112.6 112.5 112.8 113.5 .4 -.1 .3 .6 3.1 Business equipment 136.1 137.5 139.0 141.7 .4 1.0 1.1 1.9 11.0 Construction supplies 120.6 120.3 118.8 119.2 .4 -.2 -1.2 .4 .1 Materials 125.2 125.9 127.0 127.8 -.2 .6 .9 .7 5.2 Major industry groups Manufacturing 121.0 121.6 122.2 123.4 .1 .4 .5 1.0 5.3 Durable 132.7 134.1 134.7 136.8 .3 1.0 .4 1.6 7.4 Nondurable 108.7 108.4 109.0 109.3 .0 -.3 .6 .3 2.9 Mining 108.1 107.4 106.8 105.8 1.9 -.6 -.5 -.9 1.3 Utilities 112.4 112.1 112.7 111.4 -1.0 -.3 .5 -1.1 .5 Capacity utilization, percent MMMEEEMMMOOO CCCaaapppaaaccciiitttyyy,,, pppeeerrr--ccceeennntttaaagggeee 1996 1997 AAvveerraaggee,, LLooww,, HHiigghh,, ccchhhaaannngggeee,,, 11996677--9966 11998822 11998888--8899 AAAuuuggg... 111999999666 Aug. May' Juner Julyr Aug.? tttooo AAAuuuggg... 111999999777 Total 82.1 71.1 85.3 83.2 83.5 83.5 83.6 83.9 3.9 Previous estimate 83.3 83.3 83.1 Manufacturing 81.2 69.0 85.7 82.3 82.4 82.5 82.6 83.1 4.2 Advanced processing 80.6 70.4 84.2 80.4 80.3 80.6 80.7 81.3 5.1 Primary processing . 82.3 66.2 88.9 86.5 87.1 86.9 86.9 87.3 2.3 Mining 87.5 80.3 86.8 91.9 94.6 93.9 93.2 92.2 1.0 Utilities 87.2 75.9 92.6 88.5 88.5 88.2 88.5 87.4 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. 0.7 percent in August, as it had in July, with large consumer energy products was unchanged in August increases in the output of commercial aircraft, com- because a large gain in the output of automotive puters, semiconductors, and primary metals. Output gasoline was nearly offset by a drop in residential at mines, however, declined 0.9 percent, and that at electricity sales. utilities fell 1.1 percent. The output of business equipment expanded at a 1.9 percent pace, marking a third straight month of sizable gains; this index has increased 11.0 percent MARKET GROUPS since August 1996. While the growth in business equipment was led by solid gains in the output of Led by a 2.1 percent advance in the production of business vehicles, it was also accompanied by further durable goods, the overall output of consumer goods strong increases in information processing equipgrew 0.6 percent in August; the production of non- ment, especially computers and related equipment, durable goods advanced 0.3 percent. The gain in and by large gains in commercial aircraft and in farm consumer durables resulted from the sharp rebound machinery and equipment. Moreover, after several in the output of motor vehicles, which more than months of weakness, the production of industrial offset noticeable declines in the production of appli- equipment rebounded with big increases in both July ances and most other consumer durables. Among and August. The output of defense and space equipnondurable consumer goods, the production of non- ment rose 0.6 percent. energy products increased for the second consecutive After a drop of 1.2 percent in July, the output of month, with advances in food and tobacco products construction supplies recovered partially with a and in chemical and paper products. The output of 0.4 percent increase; nevertheless, the August index Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

820 Federal Reserve Bulletin • October 1997 for this market group was just 0.1 percent above fabricated metals, industrial machinery and computits August 1996 level. Meanwhile, the production ers, electrical machinery, aerospace, and instruments. of materials posted another sizable gain, led by a The output of nondurable goods, which had been 1.5 percent increase in the output of durable goods weak since the beginning of the year, rebounded materials; strong gains in the production of equip- 0.6 percent in July and gained another 0.3 percent in ment parts, particularly semiconductors, and parts for August. Only two nondurables industries—apparel consumer durables, especially motor vehicles, sup- and paper—had output losses, while tobacco, petroplied much of the boost. Energy materials fell 0.9 per- leum, rubber and plastic products, and leather had cent, with noticeable declines in coal mining and substantial gains. electricity generation. The output of nondurable A large drop in coal mining largely accounted for goods materials decreased 0.3 percent; a large gain in the decline in mining output, and losses in electricity container output was more than offset by drops in the generation and sales reduced utility output. other major categories of materials. Led by a 7.3 percentage point increase in the operating rate at auto and light truck factories, the overall factory operating rate increased 0.5 percent- INDUSTRY GROUPS age point, to 83.1 percent—its highest level since September 1995. Similarly, the utilization rate for Manufacturing output increased 1.0 percent in August advanced-processing industries increased 0.6 perafter a 0.5 percent increase in July; excluding motor centage point, to 81.3 percent—also its highest level vehicles and parts, production rose 0.7 percent for a since September 1995. The rate for primarysecond month. The gains in manufacturing output processing industries increased 0.4 percentage point, were largely concentrated in durable goods indus- to 87.3 percent, about the same as its level in March. tries, which increased 1.6 percent. In addition to the The operating rate at mines decreased 1.0 percentage gain in motor vehicles and parts, there were strong point, to 92.2 percent, while the rate at utilities increases in furniture and fixtures, primary metals, decreased 1.1 percentage points, to 87.4 percent. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

821 Announcements REGULATION E: AMENDMENTS • Internal controls • Interlocks restriction • Customer disclosure The Federal Reserve Board on August 13, 1997, • Credit for clearing purposes adopted amendments to its Regulation E (Electronic • Funding of securities purchases from a sec- Fund Transfers), to carry out statutory amendments tion 20 affiliate to the Electronic Fund Transfer Act. These changes • Reporting requirement became effective September 15, 1997. • Application of sections 23A and 23B to foreign The amendments to the regulation exempt certain "needs-tested" electronic benefit transfer (EBT) pro- banks. grams established or administered by state or local government agencies, such as the food stamp pro- The Board has concluded that the narrower set of gram, from requirements of the Electronic Fund restrictions will be fully consistent with safety and Transfer Act. The modified regulatory requirements soundness and should improve operating efficiencies that the Board established in its 1994 rulemaking at section 20 subsidiaries and increase options for would continue to apply to federally administered their customers. EBT programs and state and local employmentrelated EBT programs, such as state pension programs. EXTENSION OF THE FEDERAL RESERVE'S Generally, EBT programs involve the issuance "REGULAR " BILLING DEPOSIT DEADLINE FOR of access cards and personal identification numbers ACH TRANSACTIONS to recipients of government benefits so that they can obtain their benefits through automated teller The Federal Reserve Board on August 29, 1997, machines and point-of-sale terminals. announced a five-hour extension of the Federal Reserve Banks' automated clearinghouse (ACH) "regular" billing deposit deadline. ACH operates twenty-four hours a day. MODIFICATIONS OF PRUDENTIAL LIMITS ON Effective October 1, 1997, the "regular" process- UNDERWRITING AND DEALING ACTIVITIES ing window will begin at 3:00 a.m. Eastern Time and THROUGH SECTION 20 SUBSIDIARIES close at 1:00 a.m. rather than 8:00 p.m. The fees assessed to Federal Reserve Bank customers during The Federal Reserve Board on August 22, 1997, this regular billing period are 0.9 cents per transacannounced modifications to the prudential limits or tion and a file fee of $1.75 for files of up to 2,500 firewalls that currently apply to bank holding compa- transactions and 0.7 cents per transaction and a file nies engaged in securities underwriting and dealing fee of $6.75 for files of more than 2,500 transactions. activities through section 20 subsidiaries. The modifi- The new "premium" hours will be between cations are effective October 31,1997. 1:00 a.m. and 3:00 a.m. Eastern Time, and the trans- The Board is eliminating those restrictions that action surcharge assessed during this period will have proved to be unduly burdensome or unnecessary remain 0.5 cents on each ACH item deposited with in light of other laws or regulations and is consolidat- the Reserve Banks. ing the remaining restrictions in a series of eight The change will reduce fees charged to customers operating standards. originating ACH transactions by approximately The new operating standards will cover the follow- $2.1 million annually. This is the fourth time the ing areas: Federal Reserve has reduced its ACH fees in the past twelve months. These price reductions reflect the • Capital requirement for bank holding company efficiencies the Federal Reserve is realizing from its and section 20 subsidiaries centralized ACH processing environment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

822 Federal Reserve Bulletin • October 1997 PROPOSED ACTIONS to choose whether to aggregate reserves on a nationwide basis in a single account at one Reserve Bank or The Federal Reserve Board on August 1, 1997, to continue to have separate accounts on a samerequested comment on a proposal to amend its risk- state-same-District basis as they do today. Comments based and tier 1 leverage capital guidelines for state were requested by September 12, 1997. member banks and bank holding companies to The Federal Reserve Board on August 22, 1997, address the treatment of servicing assets on both extended the comment period from September 3, mortgage assets and financial assets other than mort- 1997, to October 3, 1997, on its proposal to apply gages (nonmortgages). Comments were requested by sections 23A and 23B of the Federal Reserve Act to October 6, 1997. transactions between a member bank and any subsid- The Federal Reserve Board on August 5, 1997, iary that engages in activities that are impermissible requested comment on a proposal to amend its Regu- for the bank itself and that the Congress has not lation D (Reserve Requirements of Depository Insti- previously exempted from coverage by section 23A. tutions) to allow U.S. branches and agencies of The extension is granted to give the public additional foreign banks and Edge and agreement corporations time to comment on the proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

823 Minutes of the Federal Open Market Committee Meeting Held on My 1-2, 1997 A meeting of the Federal Open Market Committee Messrs. Reifschneider1 and Small,1 Section Chiefs, was held in the offices of the Board of Governors of Divisions of Research and Statistics and Monetary Affairs respectively, Board of the Federal Reserve System in Washington, D.C., on Governors Tuesday, July 1, 1997, at 2:30 p.m. and continued on Wednesday, July 2, 1997, at 9:00 a.m. Mr. Sichel, Senior Economist, Division of Research and Statistics, Board of Governors Present: Mr. Elmendorf,1 and Ms. Garrett, Economists, Mr. Greenspan, Chairman Division of Monetary Affairs, Board of Mr. McDonough, Vice Chairman Governors Mr. Broaddus Mr. Guynn Mr. Lebow,2 and Ms. Lindner,2 Economists, Division Mr. Kelley of Research and Statistics, Board of Governors Mr. Moskow Mr. Meyer Ms. Low, Open Market Secretariat Assistant, Mr. Parry Division of Monetary Affairs, Board of Ms. Phillips Governors Ms. Rivlin Ms. Holcomb, First Vice President, Federal Reserve Messrs. Hoenig, Jordan, Melzer, and Ms. Minehan, Bank of Dallas Alternate Members of the Federal Open Market Committee Ms. Browne, Messrs. Dewald, Hakkio, Kos, Lang, Rolnick, Rosenblum, and Sniderman, Senior Messrs. Boehne, McTeer, and Stern, Presidents of the Vice Presidents, Federal Reserve Banks of Federal Reserve Banks of Philadelphia, Dallas, Boston, St. Louis, Kansas City, New York, and Minneapolis respectively Philadelphia, Minneapolis, Dallas, and Cleveland respectively Mr. Kohn, Secretary and Economist Ms. Rosenbaum, Vice President, Federal Reserve Mr. Bernard, Deputy Secretary Bank of Atlanta Mr. Coyne, Assistant Secretary Mr. Gillum, Assistant Secretary Mr. Mattingly, General Counsel By unanimous vote, the minutes of the meeting of Mr. Baxter, Deputy General Counsel the Federal Open Market Committee held on May 20, Mr. Prell, Economist 1997, were approved. Mr. Truman, Economist The Manager of the System Open Market Account reported on developments in foreign exchange mar- Messrs. Beebe, Goodfriend, Hunter, Lindsey, kets since the meeting on May 20, 1997. There were Mishkin, Promisel, Siegman, Slifman, no System open market transactions in foreign curand Stockton, Associate Economists rencies during this period, and thus no vote was required of the Committee. Mr. Fisher, Manager, System Open Market Account The Manager also reported on developments in domestic financial markets and on System open mar- Mr. Ettin, Deputy Director, Division of Research and Statistics, Board of Governors Messrs. Madigan and Simpson, Associate Directors, 1. Attended portions of meeting relating to the Committee's review Divisions of Monetary Affairs and Research and of the economic outlook and establishment of its monetary and debt Statistics respectively, Board of Governors ranges for 1998. Ms. Johnson, Assistant Director, Division of 2. Attended portion of meeting relating to price measurement issues International Finance, Board of Governors for monetary policy. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

824 Federal Reserve Bulletin • October 1997 ket transactions in government securities and federal Personal consumption expenditures, in real terms, agency obligations during the period May 20, 1997, rose substantially in May after having changed little through June 30, 1997. By unanimous vote, the Com- on balance over the preceding three months. Spendmittee ratified these transactions. ing on services remained on a solid uptrend in May, The Committee then turned to a discussion of the while aggregate purchases of goods turned up after economic outlook, the ranges for the growth of three months of lackluster spending on nondurable money and debt in 1997 and 1998, and the imple- goods and motor vehicles. The unusual weather patmentation of monetary policy over the intermeeting terns of late winter and early spring apparently had period ahead. A summary of the economic and finan- a depressing effect on consumer expenditures, especial information available at the time of the meeting cially for seasonal items; however, the combination and of the Committee's discussion is provided below, of strong job gains, buoyant sentiment, and increased followed by the domestic policy directive that was household net worth pointed to a possible resumption approved by the Committee and issued to the Federal of more robust spending by consumers. Reserve Bank of New York. Housing activity appeared to have been generally The information reviewed at this meeting sug- well maintained in recent months. Although housing gested that the economic expansion slowed substan- starts were down somewhat in May from the relatially in the second quarter after having surged in late tively elevated average rate for the first four months 1996 and earlier this year. Consumer spending decel- of the year, this slowing might have been, at least in erated considerably, but business spending on durable part, the result of unusually mild winter weather that equipment increased substantially further and hous- enabled an early start on spring building activity. The ing demand appeared to have been well maintained. latest information on home sales suggested continued Employment growth moderated recently, while indus- firm demand for single-family housing: Sales of trial production continued to rise appreciably. Price existing homes rose in May and were among the inflation remained subdued despite high rates of highest monthly totals on record, and sales of new resource utilization, notably that of labor. homes in April (latest data available) were down only Private nonfarm payroll employment rose at a a little from the brisk pace of earlier months in the reduced pace in May after having registered sizable year. advances over the first four months of the year. Job Available information suggested further sizable growth remained brisk in the services sector despite a gains in business fixed investment. Shipments of further drop in employment at temporary help agen- nondefense capital goods edged higher in May after cies that might have reflected constraints on the avail- having posted large increases in earlier months of the ability of workers for hire. Although employment year. Shipments of computers had been particularly in construction recovered in May from the weather- strong this year in conjunction with rapidly falling depressed level in April, the underlying growth in prices, but shipments of other categories of capital such jobs seemed to have slowed. Employment in goods also had been robust on balance. Recent data manufacturing changed little over April and May on orders pointed to further brisk growth in comafter having increased moderately in the first quarter. ing months. Nonresidential construction activity The average workweek for production or nonsupervi- appeared to have eased recently, with constructionsory workers was unchanged in May but was slightly put-in-place slipping in March and April from the below the average for the first quarter. The civilian elevated pace of the first two months of the year. unemployment rate fell slightly further to 4.8 percent However, other information suggested that the downin May. turn might be shortlived: Vacancy rates for office Industrial production continued to grow briskly in space had been declining, prices for commercial real May. Manufacturing output recorded a substantial estate had been edging up, and recent data on congain and mining production rose considerably; how- tracts suggested that building activity would improve ever, cooler-than-average weather led to a drop in in coming months. utility output. Much of the rise in manufacturing Business inventory investment picked up sharply reflected a rebound in the production of motor vehi- in April from the slow pace in March but, overall, cles and parts from strike-depressed levels in April stocks remained at a low level in relation to sales. and strength in the output of business equipment, In manufacturing, much of the increase in stocks construction supplies, and materials. With output occurred in capital goods industries in which producgenerally keeping pace with the rapid expansion of tion was expanding briskly. In the wholesale sector, a factory capacity, the rate of utilization of manufactur- substantial decline in stocks in April more than offset ing capacity remained at a relatively high level. a sizable increase in March, and the aggregate stock- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 825 sales ratio for the sector fell further over the March- with moderate growth of M2 and M3 over coming April period. Retail inventories rose considerably in months. April, with notable increases in stocks of apparel and Open market operations were directed throughout general merchandise. In a departure from the general the intermeeting period toward maintaining the existdowntrend of recent months, inventory-sales ratios ing degree of pressure on reserve positions, and the for most types of retail establishments were up appre- federal funds rate averaged close to the intended level ciably in April. of 5'/2 percent. Most other market interest rates The nominal deficit on U.S. trade in goods and declined somewhat on balance during the period. services narrowed somewhat in April from a Market participants apparently concluded that the downward-revised average rate in the first quarter. likelihood of further policy tightening had decreased The value of exports in April rose substantially from substantially in light of incoming data that suggested the first-quarter level, led by increases in exports of slowing growth of final demand and continued submachinery and aircraft. The value of imports also dued inflation. Share prices in equity markets rose rose but less than that of exports; imports were up in considerably further. most trade categories except petroleum products. In foreign exchange markets, the trade-weighted Recent information suggested that, on average, eco- value of the dollar in terms of the other G-10 currennomic activity in the major foreign industrial coun- cies was up on balance over the intermeeting period; tries continued to grow at a moderate rate in the the advance occurred despite a smaller decline on second quarter. Growth remained robust in Canada average in long-term interest rates abroad than in the and the United Kingdom and was improving in Ger- United States. The dollar rose appreciably against the many, France, and Italy. Economic activity appeared German mark and most other continental European to have flattened temporarily in Japan after an currencies amid growing market concerns that there increase in the consumption tax in April. would be broad participation in the European Mone- Price inflation remained subdued. For a third tary Union despite the fact that the major European straight month, consumer prices recorded only a countries would not be able to comply strictly with slight increase in May. Favorable developments in the Maastricht fiscal standards and related expecfood and energy continued to hold down the overall tations that the euro would be a weak currency. In rise and accounted for a much smaller advance in the contrast, the dollar fell against the Japanese yen and index of prices of all consumer items over the twelve the British pound; the yen moved up as markets months ended in May than over the previous twelve focused more closely on recent and prospective months. The decline in core CPI inflation over the increases in Japan's current account surplus, and the same time period was much less, though this measure pound strengthened in anticipation of further policy of inflation also remained relatively restrained. At the tightening by the Bank of England. producer level, prices of finished goods other than Expansion of M2 and M3 slowed sharply in May food and energy fell further in May and were little in association with a swing in household balchanged over the year ended that month. At earlier ances related to large tax payments; growth of M2 stages of processing, producer prices for intermediate rebounded in June, but M3 accelerated less. For the materials other than food and energy changed little year through June, M2 increased at a rate near the over the year ended in May, and producer prices upper bound of its range for the year. Rapid growth at the crude level advanced only slightly. The tight of M3 over the first half of the year, partly in conjuncconditions prevailing in labor markets were associ- tion with robust expansion of bank credit, placed ated with a somewhat larger increase in average growth of this aggregate somewhat above the upper hourly earnings in the twelve months ended in May bound of its range. The rate of increase in total than in the year-earlier period. domestic nonfinancial debt had been a little higher in At its meeting on May 20, 1997, the Committee recent months; for the year to date, this aggregate had adopted a directive that called for maintaining the grown at a rate near the middle of its range. existing degree of pressure on reserve positions. The staff forecast prepared for this meeting sug- Because the members saw the potential need for gested that the economy would expand at a pace some tightening in monetary policy to counter rising somewhat above that of its estimated potential in the inflationary pressures, perhaps in the relatively near second half of the year but would slow to a rate of term, the directive included a bias toward the pos- increase more in line with that of potential in 1998. sible firming of reserve conditions during the inter- Growth of consumer spending, supported by high meeting period. The reserve conditions associated levels of household wealth and further projected with this directive were expected to be consistent gains in employment and income, was expected to be Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

826 Federal Reserve Bulletin • October 1997 relatively brisk for some time. Business spending on of the growth in real and nominal GDP, the rate of equipment and structures was anticipated to continue unemployment, and the rate of inflation for the years outpacing the overall expansion of the economy, 1997 and 1998. The forecasts of the rate of expansion though the differential would tend to narrow in asso- in real GDP for 1997 as a whole had a central ciation with the gradual diminution of increases in tendency of 3 to 3XA percent and for 1998 were sales and profits that was expected to occur in centered on a range of 2 to 2 Vz percent. With regard the context of moderating economic growth. Housing to the growth of nominal GDP, most of the forecasts construction was projected to drift lower over the were in ranges of 5 to 5Vi percent for 1997 and 4'/2 to forecast period. The staff anticipated that fiscal policy 5 percent for 1998. The civilian rate of unemployand the external sector would exert mild restraint on ment associated with these forecasts had a central the expansion of economic activity. With labor com- tendency of 43A to 5 percent in the fourth quarters of pensation gradually accelerating in the context of both years. Projections of the rate of inflation, as high resource utilization, core consumer price infla- measured by the consumer price index, pointed to a tion was forecast to drift slightly higher. sizable moderation this year from the rate in 1996 In the Committee's discussion of current and and a partially offsetting rise in 1998, with prices of prospective economic developments, members com- food and energy accounting for much of the swing. mented on the continuing exceptional performance of Specifically, the projections converged on CPI inflathe economy, including widespread indications of tion rates of 2XU to 1xh percent in 1997 and 2Vi to strength in business activity and subdued inflation. 3 percent in 1998. After a surge in late 1996 and earlier this year, the In their review of the outlook for economic activity rate of expansion had moderated considerably in in major sectors of the economy, members referred to recent months, and the members generally expected the generally sluggish pace of retail sales in recent economic activity to settle into a pattern of growth months. It was noted, however, that the slowdown over the next six quarters that would approximate the was perhaps in part an adjustment to very strong economy's estimated output potential. A major factor growth of sales in previous months, and some memin that outlook was their expectation of some decel- bers commented on anecdotal indications of some eration in demands for consumer durables and busi- pickup in recent weeks. More importantly, underness plant and equipment in light of the substantial lying trends and fundamentals pointed to prospective buildup of such assets that already had taken place in growth in consumer expenditures at a pace that was recent years. However, given the underlying strength likely to continue to provide key support for further of the expansion, favorable financial conditions, and moderate expansion in overall economic activity. In the absence of major imbalances in the economy, the particular, jobs and incomes had continued to post risks of a different outcome were judged to be in the sizable gains; further large increases in stock market direction of somewhat faster growth than currently prices had raised wealth-to-income ratios sharply; projected. The outlook for inflation was subject to and consumer optimism had risen to new highs. On particular uncertainty. Despite an economy that had the other hand, the accumulation of consumer durabeen operating for a considerable period at rates of bles that had occurred over the course of the current resource utilization that were very close to, and by cyclical advance was likely to exert a retarding influsome estimates somewhat above, sustainable levels, ence on the rise in consumer spending. Other someinflation had remained relatively low and indeed had what restraining factors included the prospect of declined on the basis of some broad measures of some softening in housing demand and related purprices. Such an outcome was very much welcome, chases of household goods and the already heavy but the reasons for it were not completely understood debt repayment burdens of many consumers. Some and appeared to include some factors that might exert members also noted that a possible correction from only temporary restraint on price increases. Conse- the currently elevated levels of stock market prices quently, continuing pressures on resources associated could have adverse effects on consumer sentiment with economic growth in line with the members' and purchasing power. On balance, growth in percurrent forecasts could well be reflected in rising sonal consumer expenditures was seen as likely to inflation over time. approximate the moderate rate of increase projected In keeping with the practice at meetings when the in overall domestic demand. Committee sets its long-run ranges for the money and The members viewed the prospects for further debt aggregates, the members of the Committee and growth in business fixed investment as another the Federal Reserve Bank presidents not currently important supportive factor in the outlook for serving as members provided individual projections sustained economic expansion. Current indicators Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 827 pointed to the continuation of very rapid growth in given already high levels of capacity use and their such spending over the near term, but some modera- expectations of appreciable further economic growth. tion was likely over the course of coming quarters in Nonetheless, the relatively low inflation experienced conjunction with the projected slowing in the increase despite a lengthy period of fully employed resources of overall demand and the very large buildup in the suggested that the timing of a potential upturn in stock of capital that already had occurred in recent inflation—indeed whether inflation would in fact years. Even so, investment spending was likely to be pick up—could not be predicted with any degree of relatively robust over the projection horizon in the confidence on the basis of past historical patterns. context of continuing incentives to hold down pro- The reasons for the persistence of a relatively benign duction costs in highly competitive markets and to inflation performance in the current expansion were take advantage of falling prices and wider applica- not fully understood. They included some temporary tions for certain types of new equipment, notably factors such as the effect of the rise in the dollar on computer-related equipment. The ready availability import prices and the restraint on health care costs. of both debt and equity finance on favorable terms, More fundamentally, they presumably also involved an upbeat outlook for sales in many industries, and the favorable effects on production costs of widegenerally high profit levels were other positive spread business restructurings and the large volume factors. The outlook for nonresidential construction of investment in more productive technology in activity also seemed to be relatively favorable. Mem- recent years, the impact of both factors on the job bers referred to declining vacancy rates and rising security concerns of workers and their willingness to rents for commercial structures in many parts of the accept reduced increases in compensation, and the country and noted that construction contracts for new effects of an intense degree of competition among office buildings and hotels recently had turned up on domestic and foreign producers in U.S. markets. With a nationwide basis after a pause earlier this year. In regard to the possibility that more robust productivity sum, the growth in business fixed investment seemed increases would be holding down production costs, it likely to continue to outpace that of overall demand was noted that a surge in economic activity, such as in coming quarters. had occurred in late 1996 and early 1997, tended to Some restraint on aggregate demand would come be accompanied by above-trend gains in productivity. from other sectors of the economy—notably govern- A slower pace of economic growth in the second ment spending, net exports, housing, and perhaps quarter and beyond might provide an opportunity to business inventories. None of these factors seemed assess whether productivity increases were on a clear likely to exert a substantially negative effect, but in uptrend and could help to explain the favorable total they were expected to help keep the pace of the behavior of prices over an extended period. In any expansion close to the estimated rate of increase in event, it was too early to reach any firm conclusion the economy's potential over coming quarters. on this issue or the broader question of whether or During the course of the Committee's discussion, when a rise in inflation might materialize under many of the members commented on the persistence anticipated economic conditions. of an impressively benign inflation performance The members also discussed a staff study of the despite widespread indications of very high, and by relative performance of various price indexes as some measures increasing, levels of capacity use. measures of inflation. Members noted that most broad Indeed, most broad measures of prices pointed to measures of inflation moved together over extended subdued or even declining inflation, and it was diffi- periods of time, but they did not always do so over cult to find evidence of rising inflation pressures short intervals. Differences in construction, coverage, in "pipeline" price data or the wage structure. The and other factors meant that none of the individual members anticipated that inflation as measured by measures was clearly superior in assessing general the consumer price index would decrease appreciably inflation trends, and several members commented over 1997 as a result of favorable developments in that all measures needed to be monitored. the food and especially the energy sectors of the In keeping with the requirements of the Full economy and declining import prices associated with Employment and Balanced Growth Act of 1978 the previous appreciation of the dollar. These positive (the Humphrey-Hawkins Act), the Committee at this influences would wane over time, however, and con- meeting reviewed the ranges for growth of the monesumer prices were likely to rise at a somewhat faster tary and debt aggregates that it had established in pace in 1998. February for 1997, and it decided on tentative ranges The members agreed that the risks to their price for those aggregates for 1998. The current ranges set forecasts were in the direction of higher inflation, in February for the period from the fourth quarter of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

828 Federal Reserve Bulletin • October 1997 1996 to the fourth quarter of 1997 were unchanged mittee's ranges would not in itself call for a policy from the ranges for 1996 and included expansion of adjustment but would continue to be interpreted in 1 to 5 percent for M2 and 2 to 6 percent for M3. An the context of a broad range of business and financial unchanged range of 3 to 7 percent also was set in developments bearing on the prospective perfor- January for growth of total domestic nonfinancial mance of the overall economy. debt in 1997. The Committee members were unanimously in All the members favored retaining the current favor of retaining the current range of 3 to 7 percent ranges for this year and extending them on a provi- for growth of total domestic nonfinancial debt in sional basis to 1998. They anticipated that growth of 1997 and extending that range on a provisional basis M2 probably would continue at rates in the upper part to 1998. They took account of a staff projection of its current range in both years and that of M3 at indicating that growth of the debt aggregate was rates approximating or even slightly above the upper likely to slow somewhat from its pace in 1995 and bound of its range, given the Committee's expecta- 1996, reflecting a small reduction in the expansion of tions for the performance of the economy and prices. federal government debt. According to the staff pro- The current ranges were not expected to be guides jection, growth in the debt measure would be near the to money growth under anticipated conditions in the midpoint of the existing range over the period period ahead, but instead could be viewed as anchors through 1998. or benchmarks for money growth that would be asso- At the conclusion of this discussion, the Commitciated with approximate price stability and sustained tee voted to reaffirm the ranges for growth of M2, economic growth, assuming behavior of velocity in M3, and total domestic nonfinancial debt that it had line with historical experience. Accordingly, a reaffir- established in February for 1997. For the year 1998, mation of those ranges would underscore the Com- the Committee approved provisional ranges for the mittee's commitment to a policy of achieving price three aggregates that were unchanged from the 1997 stability over time, and in the view of at least some ranges. In keeping with its usual procedure under members, higher ranges could raise questions in this the Humphrey-Hawkins Act, the Committee would regard. review its preliminary ranges for 1998 early next Over the past few years, in contrast to earlier in the year, or sooner if interim conditions warranted, in 1990s, the behavior of the broad aggregates, espe- light of their growth and velocity behavior and ongocially that of M2, in relation to nominal GDP and ing economic and financial developments. Accordshort-term interest rates had displayed a pattern that ingly, the Committee voted to incorporate the followwas in line with historical norms before the 1990s. ing statement regarding the 1997 and 1998 ranges in The members viewed this as an encouraging develop- its domestic policy directive: ment in that it raised the possibility of giving more weight at some point to the performance of these The Federal Open Market Committee seeks monetary aggregates as useful indicators in formulating mone- and financial conditions that will foster price stability and tary policy. However, the period of more predictable promote sustainable growth in output. In furtherance of M2 and M3 behavior was still relatively brief, and these objectives, the Committee reaffirmed at this meeting the ranges it had established in February for growth of M2 such behavior had occurred at a time of generally and M3 of 1 to 5 percent and 2 to 6 percent respectively, settled conditions in financial markets and the overmeasured from the fourth quarter of 1996 to the fourth all economy. The prospective performance of these quarter of 1997. The range for growth of total domestic aggregates in periods of rapid changes in financial nonfinancial debt was maintained at 3 to 7 percent for the and economic conditions was still an open question, year. For 1998, the Committee agreed on tentative ranges for monetary growth, measured from the fourth quarter of and in light of the uncertainties that were involved 1997 to the fourth quarter of 1998, of 1 to 5 percent for M2 the members concluded that it would be premature and 2 to 6 percent for M3. The Committee provisionally set to place increased reliance on them in the conduct the associated range for growth of total domestic nonfinanof policy. Accordingly, the Committee decided that cial debt at 3 to 7 percent for 1998. The behavior of the despite projected growth of M2 and M3 at rates in the monetary aggregates will continue to be evaluated in the light of progress toward price level stability, movements in vicinity of the upper limits of the current ranges, their velocities, and developments in the economy and prevailing uncertainties made it desirable to retain financial markets. those ranges as benchmarks for the achievement of price stability rather than to establish higher ranges that seemed more likely to capture expected out- Votes for this action: Messrs. Greenspan, McDonough, Broaddus, Guynn, Kelley, Meyer, Moskow, Parry, comes. In the circumstances, any tendency for growth Mses. Phillips and Rivlin. Votes against this action: of the monetary aggregates to move outside the Com- None. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 829 In the Committee's discussion of policy for the inflation. Indeed, in the interest of fostering a continuintermeeting period ahead, all the members favored ation of sustainable growth of the economy, it would or could support a proposal to maintain an unchanged be desirable to tighten on the basis of early signs of policy stance, and they strongly supported the reten- potentially intensifying inflation and before higher tion of a bias toward restraint. An unchanged policy inflation actually materialized. seemed appropriate with inflation still quiescent and At the conclusion of the Committee's discussion, business activity projected to settle into a pattern all the members indicated that they could support a of moderate growth broadly consistent with the directive that called for maintaining the existing economy's long-run output potential. While the mem- degree of pressure on reserve positions and that bers assessed risks surrounding such a forecast as retained a bias toward the possible firming of reserve decidedly tilted to the upside, the slowing of the conditions during the intermeeting period. Accordexpansion should keep resource utilization from ris- ingly, in the context of the Committee's long-run ing substantially further, and this outlook together objectives for price stability and sustainable ecowith the absence of significant early signs of rising nomic growth, and giving careful consideration to inflationary pressures suggested the desirability of a economic, financial, and monetary developments, the cautious "wait and see" policy stance at this point. In Committee decided that somewhat greater reserve the current uncertain environment, this would afford restraint would be acceptable and slightly lesser the Committee an opportunity to gauge the momen- reserve restraint might be acceptable during the intertum of the expansion and the related degree of pres- meeting period. The reserve conditions contemplated sure on resources and prices. The risks of waiting at this meeting were expected to be consistent with appeared to be limited, given that the evidence at moderate expansion in M2 and M3 over coming hand did not point to a step-up in inflation despite months. low unemployment and that the current stance of The Federal Reserve Bank of New York was authomonetary policy did not seem to be overly accommo- rized and directed, until instructed otherwise by the dative, at least on the basis of some measures such Committee, to execute transactions in the System as the level of real short-term interest rates. In these Account in accordance with the following domestic circumstances, any tendency for price pressures to policy directive: mount was likely to emerge only gradually and to be reversible through a relatively limited policy adjustment. Some members commented, however, The information reviewed at this meeting suggests that that in the absence of unanticipated weakness in the economic expansion slowed substantially in the second quarter after surging in late 1996 and earlier this the economy, some tightening of policy was likely year. Private nonfarm payroll employment increased at a to be needed in the relatively near future, and one reduced pace in May, but the civilian unemployment rate expressed the view that a tightening action at this fell slightly further to 4.8 percent. Industrial production meeting seemed desirable to forestall or limit the registered another sizable gain in May. Personal consumprisks of intensifying inflationary pressures. However, tion expenditures, in real terms, rose substantially in May after having changed little over the preceding three months. waiting was an acceptable alternative given the favor- Housing activity appears to have been well maintained in able economic news and the persisting uncertainties recent months. Available indicators point to further sizable surrounding the relationship of output to prices. gains in business fixed investment. The nominal deficit on In their discussion of possible adjustments to pol- U.S. trade in goods and services narrowed somewhat in April from its downward-revised average rate in the first icy during the intermeeting period, all the members quarter. Price inflation has remained subdued. indicated that they wanted to retain the existing asym- Market interest rates generally have declined somewhat metry toward restraint adopted at the May meeting. since the day before the Committee meeting on May 20, An asymmetric directive was consistent with their 1997; share prices in equity markets have risen considview that the risks clearly were in the direction of erably further. In foreign exchange markets, the tradeexcessive demand pressures in the economy and an weighted value of the dollar in terms of the other G-10 currencies was up slightly on balance over the intermeeting associated upward trend in inflation. Such a bias in period. the directive also would serve the purpose of signal- Growth of M2 and M3 fluctuated sharply from April to ing the Committee's ongoing commitment to curb May in association with a swing in household balances inflation in the interest of fostering maximum sustain- related to large tax payments; on balance, both aggregates able economic growth and employment. The mem- expanded at a moderate pace over the two months, and available data pointed to further moderate growth in June. bers agreed that the current environment called for For the year through June, M2 expanded at a rate near the careful monitoring of developments and for prompt upper bound of its range for the year and M3 at a rate action by the Committee if needed to counter rising somewhat above the upper bound of its range. Total domes- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

830 Federal Reserve Bulletin • October 1997 tic nonfinancial debt has continued to expand in recent pressure on reserve positions. In the context of the Commonths and is near the middle of its range. mittee's long-run objectives for price stability and sustain- The Federal Open Market Committee seeks monetary able economic growth, and giving careful consideration to and financial conditions that will foster price stability and economic, financial, and monetary developments, somepromote sustainable growth in output. In furtherance of what greater reserve restraint would or slightly lesser these objectives, the Committee reaffirmed at this meeting reserve restraint might be acceptable in the intermeeting the ranges it had established in February for growth of M2 period. The contemplated reserve conditions are expected and M3 of 1 to 5 percent and 2 to 6 percent respectively, to be consistent with moderate growth in M2 and M3 over measured from the fourth quarter of 1996 to the fourth coming months. quarter of 1997. The range for growth of total domestic nonfinancial debt was maintained at 3 to 7 percent for the Votes for this action: Messrs. Greenspan, McDonough, year. For 1998, the Committee agreed on tentative ranges Broaddus, Guynn, Kelley, Meyer, Moskow, Parry, for monetary growth, measured from the fourth quarter of Mses. Phillips and Rivlin. Votes against this action: 1997 to the fourth quarter of 1998, of 1 to 5 percent for M2 None. and 2 to 6 percent for M3. The Committee provisionally set the associated range for growth of total domestic nonfinancial debt at 3 to 7 percent for 1998. The behavior of the It was agreed that the next meeting of the Commitmonetary aggregates will continue to be evaluated in the tee would be held on Tuesday, August 19, 1997. light of progress toward price level stability, movements in The meeting adjourned at 11:55 a.m. on July 2. their velocities, and developments in the economy and financial markets. In the implementation of policy for the immediate future, Donald L. Kohn the Committee seeks to maintain the existing degree of Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

831 Legal Developments FINAL RULE—AMENDMENT TO REGULATION E point-of-sale terminals, but does not include an account for distributing needs-tested benefits in a program estab- The Board of Governors is amending 12 C.F.R. Part 205, lished under state or local law or administered by a state its Regulation E (Electronic Fund Transfers). The revisions or local agency. implement an amendment to the Electronic Fund Transfer Act ("EFTA"), contained in the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, that FINAL RULE—AMENDMENT TO RULES REGARDING exempts certain electronic benefit transfer ("EBT") pro- DELEGATION OF AUTHORITY grams from the EFTA. Generally, EBT programs involve the issuance of access cards and personal identification The Board of Governors is amending 12 C.F.R. Part 265, numbers to recipients of government benefits so that they its Rules Regarding Delegation of Authority, to remove the can obtain their benefits through automated teller machines delegation to the Board's General Counsel to approve and point-of-sale terminals. The Board's amendments to provisions of Federal Reserve Bank operating circulars Regulation E exempt needs-tested EBT programs that are related to uniform services. Under a newly amended superestablished or administered by state or local government visory letter, other Board officials will review uniform agencies. Federally administered EBT programs and state Reserve Bank operating circulars, in consultation with the and local employment-related EBT programs (such as state General Counsel. pension programs) remain covered by Regulation E subject Effective August 21, 1997, 12 C.F.R. Part 265 is to modified requirements. amended as follows: Effective September 15, 1997, 12 C.F.R. Part 205 is amended as follows: Part 265—Rules Regarding Delegation of Authority Part 205—Electronic Fund Transfers (Regulation E) 1. The authority citation for Part 265 continues to read as follows: 1. The authority citation for Part 205 is revised to read as Authority. 12 U.S.C. 248(i) and (k). follows: Section 265.6[Amended] Authority. 15 U.S.C. 1693-1693r. 2. Section 205.15 is amended by revising paragraph (a) to 2. In section 265.6, paragraph (a)(5) is removed. read as follows: Section 205.15—Electronic fund transfer of ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT government benefits. Orders Issued Under Section 3 of the Bank Holding (a) Government agency subject to regulation. (1) A govern- Company Act ment agency is deemed to be a financial institution for purposes of the act and this part if directly or indirectly it Northwest Bancorp, MHC issues an access device to a consumer for use in initiat- Warren, Pennsylvania ing an electronic fund transfer of government benefits from an account, other than needs-tested benefits in a Northwest Bancorp, Inc. program established under state or local law or adminis- Warren, Pennsylvania tered by a state or local agency. The agency shall comply with all applicable requirements of the act and this part, Order Approving Formation of a Bank Holding Company except as provided in this section. and Acquisitions by Bank Holding Companies (2) For purposes of this section, the term account means an account established by a government agency for Northwest Bancorp, MHC ("MHC"), Warren, Pennsylvadistributing government benefits to a consumer electron- nia, a bank holding company within the meaning of the ically, such as through automated teller machines or Bank Holding Company Act ("BHC Act") and organized Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

832 Federal Reserve Bulletin • October 1997 in mutual form, has requested the Board's approval under present adverse considerations under the financial and mansection 3 of the BHC Act (12 U.S.C. § 1842) to reorganize agerial resources and future prospects and convenience and its corporate structure by forming Northwest Bancorp, Inc. needs factors required to be reviewed under the BHC Act.4 ("Bancorp"), as a majority owned subsidiary stock bank After carefully reviewing all the facts of record, including holding company that would own all the voting shares of MHC's commitments requiring Bank to retain any divi- MHC's subsidiary bank, Northwest Savings Bank dends waived, and the fulfillment of the conditions im- ("Bank"), all of Warren, Pennsylvania. Bancorp also has posed by the Federal Deposit Insurance Corporation requested the Board's approval to become a bank holding ("FDIC") and the Pennsylvania Department of Banking, company under section 3 of the BHC Act. the Board concluded that these factors were consistent with Notice of this proposal, affording interested persons an approving the formation of MHC.5 opportunity to submit comments, has been published The formation of Bancorp as a subsidiary stock com- (62 Federal Register 3513 (1997)). The time for filing pany between MHC and Bank potentially raises the same comments has expired, and the Board has considered the adverse considerations discussed in the Northwest Order. proposal and all comments received in light of the factors Bancorp, for example, as a company controlled by MHC, set forth in section 3 of the BHC Act. could pay a dividend to insider minority shareholders, Bank is the 19th largest depository institution in Penn- notwithstanding MHC's dividend waiver commitment, by sylvania, controlling approximately $1.5 billion in depos- issuing special classes of stock with dividend rights to the its, representing less than 1 percent of all deposits in minority shareholders. In addition, insider minority sharedepository institutions in the state.1 Based on all the facts holders could increase the value of their shares at no cost of record, including the fact that the transaction represents through the repurchase of MHC stock by Bancorp, or by a corporate reorganization to form a second-tier bank hold- repurchases of insider minority shareholdings at above ing company, the Board concludes that consummation of market prices. The Board is also concerned that the preferthe proposal would not have a significantly adverse effect ence to purchase new shares of Bank or shares of MHC on competition or on the concentration of banking re- that was provided to Bank's depositors by the Northwest sources in any relevant banking market, and that competi- Order could be circumvented through the sale of new tive considerations are consistent with approval. shares of Bancorp.6 In every application under section 3 of the BHC Act, the To address these concerns, MHC and Bancorp have Board is required to consider the financial and managerial made a number of commitments set forth in the Appendix. resources and future prospects of the companies and banks In particular, MHC or its subsidiaries will not issue any concerned, and the convenience and needs of the communi- securities that would give the holder a right to acquire ties to be served. MHC owns approximately 69 percent of equity securities or convey an interest in the retained the voting shares of Bank. The remaining 31 percent of earnings of the issuer to a person other than MHC without Bank's shares are owned by members of the public, includ- the Board's approval. Bancorp also will seek the Board's ing minority shareholders who serve as senior management approval before repurchasing any equity securities from of Bank and members of MHC's board of trustees. Share- MHC, will repurchase equity securities from shareholders holders of Bank would exchange their stock for voting other than MHC only at the current market price, and will shares of Bancorp, and would own the same percentage of shares of Bancorp as they currently own of Bank.2 When the Board approved the formation of MHC in 4. The Board noted that a waiver of dividends by MHC could 1994, the Board noted that, because MHC did not own all reduce or impair its ability to serve as a source of strength for Bank. the voting shares of Bank, equity could be transferred from The Board also concluded that a decision by MHC's board of trustees the mutual owners of the holding company to the minority to execute such a waiver, without a corresponding waiver by the shareholders of Bank at the expense of the mutual owners minority shareholders, raised a potential conflict of interest because, as minority shareholders, board members had a financial interest in the if MHC were the only shareholder to waive dividends from waiver. The potential conflict was of particular concern in a company Bank.3 The Board concluded that such a result could that was organized in mutual form because, unlike a stock company whose management may be replaced by its shareholders, state law did not provide a mechanism for management of a mutual holding company to be changed by its mutual owners. See Northwest Order at 1. All banking data are as of September 30, 1996. In this context, 1132-33. depository institutions include commercial banks, savings banks, and 5. The commitments and conditions discussed in the Northwest savings and loan associations. Order are specifically incorporated by reference as commitments and 2. Bancorp would be formed through a series of transactions that conditions in connection with the Board's action on this proposal. would occur simultaneously. Bancorp would initially be formed as a 6. The Office of Thrift Supervision's ("OTS") regulations require wholly owned subsidiary of Bank. Bancorp would then charter an that if a stock thrift subsidiary of a mutual holding company issues interim savings bank as a wholly owned subsidiary. Bank would stock, the thrift must first offer the stock to its depositors before merge with the interim savings bank and, as the surviving institution, oifering shares to the public, including stock issuances to fund an become a wholly owned subsidiary of Bancorp. The shareholders of acquisition. FDIC regulations require the FDIC to take into account Bank would then exchange their Bank stock for Bancorp stock on a the extent to which a proposal to convert a state chartered savings one-for-one basis and Bancorp would own all the voting stock of bank to stock form complies with the OTS regulations, including Bank. stock issuances and depositor preference rules. MHC has agreed to 3. See Northwest Bancorp, MHC, 80 Federal Reserve Bulletin 1131 commitments that are consistent with the OTS's depositor preference (1994) ("Northwest Order"). rules and the commitments in the Northwest Order. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 833 maintain detailed records of all stock repurchases. Finally, unless MHC and Bancorp seek prior approval of the Board Bank's depositors will be accorded the same preference to and the Board approves the issuance; purchase shares that is provided by the Northwest Order (2) In any conversion of MHC from mutual to stock form, for any sale, transfer or issuance of shares of Bank or the holding company will file an application for approval Bancorp to any person other than MHC. The Board be- of the conversion with the Board and will comply with the lieves that these commitments permit the Board to monitor rules and regulations of the Office of Thrift Supervision and address the issues raised when a mutual holding com- ("OTS") as if Bank were a savings association and MHC pany owns less than all the voting shares of a savings bank and Bancorp were savings and loan holding companies, through a subsidiary stock holding company. In this light, respectively, except that such rules shall be administered and based on all the facts of record, including consultations by the Board; with federal and state banking supervisory agencies, the (3) In connection with commitments 1 and 2, MHC and Board concludes the financial and managerial resources Bancorp agree with the following: and future prospects of MHC, Bancorp, and Bank are A. In any sale, transfer or issuance of shares of Bank or consistent with approval, as are the convenience and needs Bancorp to any person other than MHC, the depositors and other supervisory factors that the Board must consider of Bank will be accorded the same stock purchase priorunder section 3 of the BHC Act. ities given to depositors of a mutual savings association Based on the foregoing and other facts of record, the in connection with such association converting to stock Board has determined that the applications should be, and form, unless such condition is waived by the Board. In hereby are, approved. The Board's approval of the pro- making such sale, or transferring or issuing such shares, posal is expressly conditioned on compliance with all the MHC and Bancorp and their management will comply commitments made by the applicants in connection with with any fiduciary duty they owe. the applications, including the commitments and condi- B. The Board will take into account the extent to which tions discussed in the order, and is conditioned on receipt the proposed transactions conform with the provisions by the applicants of all necessary approvals from all rele- and purpose of the regulations of the OTS (12C.F.R. vant regulators, and compliance with the requirements Parts 563b and 575) and the FDIC (12 C.F.R. 303.15 and imposed by those regulators. For purposes of this action, 333.4), as currently in effect at the time the Board the commitments and conditions relied on by the Board in reviews the required materials related to the proposed reaching this decision are deemed to be conditions im- transactions. Any nonconformity with those provisions posed in writing and, as such, may be enforced in proceed- will be closely scrutinized. Conformity with the OTS ings under applicable law. and FDIC requirements, however, will not be sufficient This proposal shall not be consummated before the fif- for Board regulatory purposes if the Board determines teenth calendar day after the effective date of this order or that the proposed transaction would pose a risk to the later than three months after the effective date of this order, institution's safety and soundness, violate any law or unless such period is extended for good cause by the Board regulations, or present a breach of fiduciary duty. or by the Federal Reserve Bank of Cleveland, acting pursu- (4) Bancorp commits to seek the Board's prior approval ant to delegated authority. before repurchasing any equity securities from MHC. Ban- By order of the Board of Governors, effective corp commits that any repurchases of equity securities August 18, 1997. from shareholders other than MHC shall be at the current market price for such share repurchase. Bancorp shall Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and maintain detailed records of all stock repurchases for re- Governors Kelley, Phillips, and Meyer. view by the Board; (5) MHC and Bancorp commit not to incur debt without JENNIFER J. JOHNSON receiving prior approval from the Board; and Deputy Secretary of the Board (6) MHC and Bancorp commit not to pledge the stock of Bancorp in support of any borrowing without receiving prior approval from the Board. APPENDIX Santa Barbara Bancorp Santa Barbara, California (1) MHC will not sell, transfer, or otherwise dispose of any of its shares in Bancorp, or Bank to any person (including Order Approving the Acquisition of a Bank, the Merger an Employee Stock Ownership Plan) and Bancorp will not of Banks, and Establishment of Branches sell, transfer, or otherwise dispose of any of its shares of Bank without the prior approval of the Board. Bancorp, Santa Barbara Bancorp, Santa Barbara ("Bancorp"), a Bank, or any other direct or indirect subsidiary of MHC bank holding company within the meaning of the Bank will not issue equity securities or any securities that would Holding Company Act ("BHC Act"), has requested the accord the holder the right to acquire equity securities or Board's approval under section 3 of the BHC Act that would bestow upon the holder an interest in the (12 U.S.C. § 1842) to acquire Citizens State Bank of Santa retained earnings of the issuer to persons other than MHC, Paula, Santa Paula ("Citizens Bank"), both in California. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

834 Federal Reserve Bulletin • October 1997 Bancorp's subsidiary bank, Santa Barbara Bank and Trust, The Herfindahl-Hirschman Index ("HHI") for the bank- Santa Barbara, California ("SB Bank"), also has requested ing market would increase by 12 points to 1469.3 The the Board's approval under section 18(c) of the Federal increase in market concentration as measured by the HHI Deposit Insurance Act (12 U.S.C. § 1828(c)) (the "Bank would be well within the Department of Justice Merger Merger Act") to merge with Citizens Bank, and under Guidelines. The Department of Justice has advised the section 9 of the Federal Reserve Act (12 U.S.C. 321) (the Board that consummation of the proposal would not likely "FRA") to establish branches at the existing offices of have any significantly adverse competitive effects in the Citizens Bank set forth in the Appendix. Oxnard-Ventura banking market or any other relevant Notice of the proposal, affording interested persons an banking market. opportunity to submit comments, has been published Based on these and all the facts of record, the Board (62 Federal Register 35,397 (1997)). As required by the concludes that consummation of the proposal is not likely Bank Merger Act, reports on the competitive effects of the to have a significantly adverse effect on competition or on merger were requested from the United States Attorney the concentration of banking services in the Oxnard- General ("Department of Justice"). The time for filing Ventura banking market or any other relevant market. comments has expired, and the Board has considered the proposal and all comments received in light of the factors Other Factors set forth in section 3(c) of the BHC Act, the Bank Merger Act, and the FRA. The BHC Act and the Bank Merger Act also require the Bancorp is the 35th largest depository institution in Board, in acting on an application, to consider the financial California, controlling deposits of approximately $1 bil- and managerial resources of the companies and banks lion, representing less than 1 percent of total deposits in involved, the convenience and needs of the communities to depository institutions in the state.1 Citizens Bank is the be served, and certain other supervisory factors. 252nd largest depository institution in California, controlling approximately $68 million in deposits, representing A. Financial, Managerial, and Other Supervisory less than 1 percent of total deposits in depository institu- Factors tions in the state. On consummation of the proposal, Bancorp would remain the 35th largest depository institution The Board has carefully considered the financial and manand continue to control less than 1 percent of total deposits agerial resources and future prospects of Bancorp, in depository institutions in the state. SB Bank, and Citizens Bank, and other supervisory factors SB Bank and Citizens Bank compete directly in the in light of all the facts of record. The facts include supervi- Oxnard-Ventura, California, banking market.2 SB Bank is sory reports of examination assessing the financial and the eighth largest depository institution in the banking managerial resources of the organizations, and confidential market, controlling deposits of approximately $68 million, financial information provided by Bancorp. Based on these representing 2.4 percent of total deposits in depository and all other facts of record, the Board concludes that all institutions in the market ("market deposits"). Citizens the supervisory factors under the BHC Act and the Bank Bank is the ninth largest depository institution in the Merger Act, including the financial and managerial re- Oxnard-Ventura market, controlling deposits of approxi- sources and future prospects of the institutions involved, mately $67.6 million, representing 2.4 percent of market are consistent with approval of the proposal. deposits. On consummation of the proposal, SB Bank would become the fifth largest depository institution in the B. Convenience and Needs Factor market, controlling deposits of approximately $135.6 million, representing approximately 5 percent of market de- The Board also has carefully considered the effect of the posits. Twenty-one competitors would remain in the proposal on the convenience and needs of the communities Oxnard-Ventura banking market. to be served in light of all the facts of record. In reviewing convenience and needs considerations, the Board notes that SB Bank provides a range of financial services including mortgage, consumer, agricultural and small business loans. 1. In this context, depository institutions include commercial banks, savings banks, and savings associations. State deposit, market share, and rank data are as of lune 30, 1996, and incorporate structural changes through May 1997. Market share data are based on a calcula- 3. Under the revised Department of Justice Merger Guidelines, tion in which the deposits of thrift institutions are included at 49 Federal Register 26,823 (June 29, 1984), a market in which the 50 percent. The Board previously has indicated that thrift institutions post-merger HHI is between 1000 and 1800 is considered to be have become, or have the potential to become, significant competitors moderately concentrated. The Department of Justice has informed the of commercial banks. See WM Bancorp, 76 Federal Reserve Bulletin Board that a bank merger or acquisition generally will not be chal- 788 (1990); National City Corporation, 70 Federal Reserve Bulletin lenged (in the absence of other factors indicating anticompetitive 743 (1984). Thus, the Board has regularly included thrift deposits in effects) unless the post-merger HHI is at least 1800 and the merger the calculation of market share on a 50-percent weighted basis. See, increases the HHI by more than 200 points. The Department of Justice e.g., First Hawaiian Inc., 11 Federal Reserve Bulletin 52 (1991). has stated that the higher than normal HHI thresholds for, screening 2. The Oxnard-Ventura banking market is approximated by the bank mergers for anticompetitive effects implicitly recognize the Oxnard-Ventura RMA and the towns of Fillmore, Ojai, Piru, Port competitive effect of limited-purpose lenders and other nondepository Hueneme and Santa Paula, all in California. financial entities. 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Legal Developments 835 SB Bank also provides financing for affordable housing high cost of housing in Santa Barbara County. To address and community development. Bancorp has indicated that housing-related credit needs, SB Bank offers a number of SB Bank plans to continue to offer credit products cur- residential mortgage products5 and actively participates in rently offered by Citizens Bank and may adopt portions of programs that provide affordable housing to LMI individu- Citizen Bank's program for helping to meet community als. Overall, the bank estimates that it made 17 loans credit needs into SB Bank's program after consummation totalling approximately $22.6 million to 9 affordable housof the proposal. Moreover, Bancorp expects that the acqui- ing organizations and developers since 1996. The bank sition of Citizens Bank would strengthen SB Bank's ability has, for example, provided financing to the Santa Barbara to provide financial services throughout the combined ser- Housing Authority totalling approximately $5.9 million vice areas, including service areas comprised primarily of since 1996. In addition, SB Bank has made approximately low- and moderate-income ("LMI") individuals and small $1 million in loans since 1996 through the Santa Barbara businesses. County Home Buyers Assistance Program for the South The Board also has long held that consideration of the Coast Region. SB Bank also is affiliated with the Coastal convenience and needs factor includes a review of the Housing Partnership which offers a loan program with records of the relevant depository institutions under the flexible underwriting guidelines called the Housing for Community Reinvestment Act (12U.S.C. § 2901 et seq.) Employees Loan Program. Since 1996, the bank has made ("CRA"). The CRA performance records of the institu- 65 loans, totalling approximately $1.6 million through the tions involved are reviewed below in light of all the facts program. SB Bank also provides financing to other develof record, including comments received on the proposal. opers specializing in the construction of affordable housing CRA Performance Examinations. As provided in the for LMI individuals in Santa Barbara and Ventura Coun- CRA, the Board evaluates the convenience and needs ties.6 factor in light of examinations of the CRA performance The SB Bank Examination also concluded that the bank records of the relevant institutions by their primary federal was very responsive to the credit needs of small busisupervisor. An institution's most recent CRA performance nesses. One SB Bank product, for example, offered small evaluation is a particularly important consideration in the business loans in amounts less than $35,000 within applications process because it represents a detailed on-site 24 hours after completion of a one-page application. In evaluation of the institution's overall record of perfor- addition, the bank's Community Banking Group focused mance under the CRA by its primary federal supervisor.4 on the credit needs of small businesses with less than SB Bank received a "satisfactory" rating from the Fed- $1 million in gross revenues. Examiners found that eral Reserve Bank of San Francisco ("Reserve Bank") at SB Bank made more than 1000 commercial loans, totalling its most recent examination for CRA performance, as of approximately $17.3 million, for amounts of less than July 15, 1996 ("SB Bank Examination"). Citizens Bank $100,000, and 12 loans, totalling $11.1 million, for agriculreceived an "outstanding" rating from the Reserve Bank at tural purposes, during the examination period. The its most recent examination for CRA performance, as of SB Examination noted that although loans secured by March 10, 1997. mixed-use property were difficult to obtain in the community, SB Bank made 5 such loans totalling $2.5 million. In CRA Performance Record of SB Bank. addition, examiners noted that the bank made 17 loans, totalling approximately $652,000 to start-up businesses.7 Lending. Examiners considered the overall lending activi- In 1996, SB Bank originated 696 small business loans, totalling approximately $52.4 million. SB Bank also made ties of SB Bank to be very responsive to community credit business development loans through its affiliation with the needs. They noted that LMI census tracts comprised California Coastal Rural Development Corporation,8 and 37 percent of the bank's delineated community and that participated in a number of small business organizations, 41 percent of its loans were made to borrowers with zip including Women's Economic Ventures, Santa Barbara codes in LMI areas during the period from July 1994 to July 1996 covered by the SB Bank Examination. Examiners also considered the geographic distribution of SB Bank's loans to be good and favorably noted that 5. Examiners noted that SB Bank offered 50 different residential mortgage loans and had made 496 mortgage loans totalling 92 percent of the bank's loans were made within its delin- $103 million during the examination period. Examiners concluded eated community. that SB Bank's overall lending levels reflect responsiveness to the The SB Bank Examination concluded that residential community's credit needs. mortgage lending to LMI borrowers in the bank's delin- 6. SB Bank has operated in Ventura County for approximately two eated community was particularly difficult because of the years and would expand its presence in the county through the acquisition of Citizens Bank. SB Bank has developed programs for LMI residents in Ventura County similar to the programs offered in Santa Barbara County. 4. The Statement of the Federal Financial Supervisory Agencies 7. SB Bank estimates that since 1996, the bank made 14 business Regarding the Community Reinvestment Act ("Agency CRA State- development loans totalling approximately $698,000 to 13 small ment") provides that a CRA examination is an important and often businesses. controlling factor in the consideration of an institution's CRA record, 8. Examiners noted that SB Bank made 13 small business loans and that reports of these examinations will be given great weight in totalling $1 million in affiliation with this non-profit small business the applications process. 54 Federal Register 13,742, 13,745 (1989). development organization. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

836 Federal Reserve Bulletin • October 1997 Hispanic Chamber of Commerce, and Ventura County are based, in large measure, on data filed by SB Bank Economic Development. under the Home Mortgage Disclosure Act (12 U.S.C. 2801 Marketing and Ascertainment. The SB Examination et seq.) ("HMDA").12 found that the bank's marketing program informed all The Board has reviewed the 1994, 1995, and 1996 segments of the community of general financial products HMDA data reported by SB Bank in light of the comand services offered, including those that had been devel- ments. These data reflect some disparities in the rate of oped to address identified community credit needs. More- loan originations, denials, and applications by racial group over, examiners considered the bank's ascertainment ef- or income level. The Board is concerned when the record forts to be satisfactory in light of management's regular of an institution indicates such disparities, and believes that contact with various community organizations and its for- all banks are obligated to ensure that their lending practices mal call program. The examiners reported that senior man- are based on criteria that ensure not only safe and sound agement satisfactorily responded to local input regarding lending, but also equal access to credit by creditworthy community credit needs and the changing marketplace. applicants regardless of race. The Board recognizes, how- SB Bank established a Hispanic Marketing Committee ever, that HMDA data alone provide an incomplete meato focus on the credit needs of Hispanic residents within its sure of an institution's lending in its community because delineated community. In 1996, the bank made 116 small these data cover only a few categories of housing-related business loans, totalling $4.9 million, in the seven census lending. Moreover, HMDA data provide only limited infortracts with the largest Hispanic populations in bank's delin- mation about the covered loans.13 HMDA data, therefore, eated community. In addition, SB Bank has Spanish- have limitations that make the data an inadequate basis, speaking employees in 19 of its 21 branches, with 46 of its absent other information, for concluding that an institution 224 employees available for Spanish-speaking customers.9 has engaged in illegal lending discrimination. SB Bank also stated that it would more prominently dis- In light of the limitations of HMDA data, the Board has play brochures in Spanish that describe the products and carefully reviewed other information, particularly examinaservices available in all its branches. tion reports that provide an on-site evaluation of compli- Branch Locations. The SB Bank Examination found that ance with the fair lending laws by SB Bank. The SB Bank's branches were readily accessible to all seg- SB Examination found no evidence of prohibited discrimiments of SB Bank's community, that office hours and services were tailored toward the convenience and needs of the community, and that the bank periodically reviewed the submissions from commenters and SB Bank regarding information effectiveness of its branches. Since the SB Bank Examina- provided to the commenters by SB Bank after the close of the comment period. The comments discuss efforts by commenters to tion, the bank's branch closing policies have been modified resolve issues raised in their timely comments through commitments to include the consideration of the impact of a branch to increase lending to affordable housing projects, small businesses, closing on the community before closing the branch. community development projects, and to increase other CRA-related SB Bank has not closed a branch since it was chartered activities. Although the Board has indicated in previous orders and in 37 years ago, and it does not anticipate branch closings as a the Agency CRA Statement that communication by depository institutions with community groups provides a valuable method of assessing result of the proposal.10 and determining how best to address the credit needs of the commu- Comments on the proposal. The Board has carefully nity, the Board concludes that the substance of the comments does not reviewed comments contending that SB Bank's efforts in involve matters required to be considered by the Board. Neither the lending and outreach to LMI and minority residents, partic- CRA nor the Agency CRA Statement require an insured depository institution to enter into commitments with community representatives. ularly Hispanic residents, are inadequate.11 These concerns In reviewing an application under the BHC Act and the Bank Merger Act, the CRA and the Agency CRA Statement instead require the Board to focus on the established record of performance of the 9. The two branches without Spanish speaking employees are institutions involved and the programs and policies that the institulocated in areas with small Hispanic populations. tions have in place to assist in meeting the credit needs of their entire 10. The Board previously has noted that federal banking law communities. In this case, the facts of record indicate that SB Bank addresses branch closings by specifically requiring an insured deposi- has programs to help meet the credit needs of its community. tory institution to provide notice to the appropriate regulatory agency 12. Commenters also maintain SB Bank should establish a branch in prior to closing a branch. See section 42 of the Federal Deposit Piru, California, to serve the unmet banking needs of the LMI resi- Insurance Corporation Act (12 U.S.C. § 183lr-1), as implemented by dents in this small rural community. As discussed above, the SB Bank the Joint Policy Statement Regarding Branch Closing (58 Federal Examination found that the bank's branches were readily accessible to Register 49,083 (1993)). The statute, however, does not authorize the all segments of SB Bank's community. Moreover, SB Bank would federal regulators to prevent the closing of any branch. Similarly, the acquire and keep open a branch of Citizens Bank located in Fillmore, BHC Act and the Bank Merger Act do not make approval of a California, which is approximately seven miles from Piru. The record proposal contingent on an applicant's commitment to keep open all indicates that residents in this area of California regularly drive to branches of the resulting institution. Instead, branch closings resulting work in Valencia and Ventura which are located 10 miles and from a proposed acquisition are reviewed insofar as they affect the 33 miles, respectively, from Piru. In this light, Piru residents would general availability of bank services and offices as one of the several continue to have reasonable access to banking services from SB Bank factors the Board considers in assessing the effect of the acquisition on after consummation of the proposal. the convenience and needs of the community to be served. See 13. These data, for example, do not provide a basis for an indepen- Westamerica Bank, 83 Federal Reserve Bulletin 614 (1997). dent assessment of whether an applicant who was denied credit was, 11. The commenters are The California Reinvestment Committee, in fact, creditworthy. Credit history problems and excessive debt the Santa Clara Valley Citizens for Economic Vitality and the Board levels relative to income — reasons most frequently cited by a credit of Supervisors of Ventura County. The Board also has received denial — are not available from HMDA data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 837 nation or illegal credit practices, and found the bank to be Conclusion in substantial compliance with antidiscrimination laws and regulations.14 The record also indicates that SB Bank has For these reasons, and in light of all the other facts of taken a number of steps to ensure compliance with the fair record, the Board has determined that the application lending laws. Examiners found, for example, that the board should be, and hereby is, approved.16 The Board's approval of directors and senior management have developed ade- is expressly conditioned on compliance with all the comquate policies and training programs supporting nondis- mitments made in connection with the applications. The crimination in lending and credit activities. As a part of commitments relied on by the Board in reaching this these programs, bank personnel receive periodic training in decision shall be deemed to be conditions imposed in fair lending policy and compliance bulletins and articles writing by the Board in connection with its findings and regarding fair lending issues. decision, and, as such, may be enforced in proceedings under applicable law. Conclusion on Convenience and Needs Considerations The transactions shall not be consummated before the fifteenth calendar day following the effective date of this The Board has carefully considered all the facts of record, order, or later than three months after the effective date of including the public comments received, responses to those this order, unless such period is extended for good cause by comments, and the CRA performance records of SB Bank the Board or by the Federal Reserve Bank of San Franand Citizens Bank, including relevant reports of examina- cisco, acting pursuant to delegated authority. tion.15 Based on a review of the entire record, and for the By order of the Board of Governors, effective Aureasons discussed in this order, the Board has concluded gust 21, 1997. that convenience and needs considerations, including the CRA records of performance of SB Bank and Citizens Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Bank, are consistent with approval of this proposal. Governors Kelley, Phillips, and Meyer. JENNIFER J. JOHNSON C. FRA Factors Deputy Secretary of the Board SB Bank also has applied under section 9 of the FRA to establish branches at the offices of Citizens Bank listed in the appendix. The Board has considered the factors it is APPENDIX required to consider when reviewing applications for estab- Branches of SB Bank to be established at Citizens Bank lishing branches pursuant to the FRA and, for the reasons locations: discussed in this order, finds those factors to be consistent with approval. 1. 948 East Main Street, Santa Paula, California 93060 2. 537 West Harvard Boulevard, Santa Paula, California 93060 14. Commenters point out that examiners noted widespread viola- 16. Commenters have requested that the Board hold a public heartions of technical provisions of Regulation C and HMDA in the ing or meeting on this proposal. Section 3(b) of the BHC Act does not SB Examination. In considering the overall managerial record and require the Board to hold a public hearing on an application unless the convenience and needs factor in this case, the Board has carefully appropriate supervisory authority for the bank to be acquired makes a reviewed these violations in light of information regarding the type timely written recommendation of denial of the application. In this and scope of the violations, the response of SB Bank to the findings, case, the Board has not received such a recommendation from any and additional supervisory information. The Board concludes that state or federal supervisory authority. In addition, neither the Bank SB Bank's response adequately addresses the issues raised by examin- Merger Act nor the FRA require a public meeting on an application. ers at this time. If future examinations by the Reserve Bank indicate Under its rules, the Board also may, in its discretion, hold a public that additional steps are necessary, the Board retains sufficient supervi- hearing or meeting on an application or notice to clarify factual issues sory authority to require corrective action. related to the proposal and to provide an opportunity for testimony. 15. Commenters contend that SB Bank's CRA performance rating See 12 C.F.R. 225.25(a)(2), 262.3(e), and 262.25(d). The Board has should have been less than satisfactory in light of certain remarks carefully considered commenters' requests for a hearing or meeting in made by examiners in the SB Examination. Commenters also main- light of all the facts of record. In the Board's view, commenters have tain that the acquisition of Citizens Bank by a bank with a lower CRA had ample opportunity to submit views, and have, in fact, provided performance rating raises concerns about the possible adverse impact written submissions that have been considered by the Board in acting the acquisition will have on the community currently served by on this proposal. The requests fail to demonstrate why these written Citizens Bank. Although the SB Bank Examination noted some areas submissions do not adequately present commenters' allegations. After in which bank could improve its CRA performance, the examiners a careful review of all the facts of record, the Board has concluded rated the bank's overall performance as "satisfactory." In addition, that these requests fail to identify any genuine dispute about facts that SB Bank has initiated measures that satisfactorily respond to the are material to the Board's decision or any other basis on which a examiners' comments. Moreover, SB Bank's record of CRA perfor- hearing or meeting would be warranted. Based on all the facts of mance indicates that the convenience and needs of the communities record, the Board has determined that a public hearing or meeting is currently served by Citizens Bank would continue to be served after not necessary to clarify the factual record in the proposal, and is not consummation of the proposal in a manner consistent with the require- otherwise warranted in this case. Accordingly, the request for a public ments of the BHC Act, the Bank Merger Act, and the CRA. hearing or meeting on the proposal is hereby denied. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

838 Federal Reserve Bulletin • October 1997 3. 316 Central Avenue, Fillmore, California 93015 notice and all comments received in light of the factors set forth in section 4(c)(8) of the BHC Act. Orders Issued Under Section 4 of the Bank Holding CoreStates, with total consolidated assets of approxi- Company Act mately $45.3 billion, is the 21st largest banking organization in the United States.2 CoreStates operates bank subsid- CoreStates Financial Corporation iaries in Pennsylvania, New Jersey, and Delaware, and Philadelphia, Pennsylvania engages through its subsidiaries in a broad range of permissible nonbanking activities. Company is, and will continue Order Approving a Notice to Engage in Certain to be, registered as a broker-dealer with the Securities and Nonbanking Activities Exchange Commission ("SEC") under the Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.) and a member CoreStates Financial Corporation, Philadelphia, Pennsylva- of the National Association of Securities Dealers, Inc. nia ("CoreStates"), a bank holding company within the ("NASD"). Accordingly, Company is, and will continue to meaning of the Bank Holding Company Act ("BHC Act") be, subject to the recordkeeping and reporting obligations, has requested the Board's approval under section 4(c)(8) of fiduciary standards, and other requirements of the Securithe BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.24 ties Exchange Act of 1934, the SEC, and the NASD. of the Board's Regulation Y (12 C.F.R. 225.24) to engage in the following nonbanking activities through its wholly Underwriting and Dealing in Bank-Ineligible Securities owned subsidiary, CoreStates Securities Corporation, Philadelphia, Pennsylvania ("Company"): The Board has determined that, subject to the prudential (1) Underwriting and dealing in, to a limited extent, framework of limitations established in previous decisions certain municipal revenue bonds (including certain un- to address the potential for conflicts of interests, unsound rated municipal revenue bonds), 1-4 family mortgage- banking practices, or other adverse effects, the proposed related securities, consumer receivable-related securi- activities of underwriting and dealing in bank-ineligible ties, and commercial paper (collectively, "bank- securities are so closely related to banking as to be a proper ineligible securities"); incident thereto within the meaning of section 4(c)(8) of (2) Providing financial and investment advisory ser- the BHC Act.3 CoreStates has committed that Company vices, pursuant to section 225.28(b)(6) of Regulation Y will conduct the underwriting and dealing activities using (12 C.F.R. 225.28(b)(6)); the same methods and procedures and subject to the same (3) Buying and selling all types of securities on the order prudential limitations established by the Board in the Secof customers as a "riskless principal," pursuant to sec- tion 20 Orders.4 tion 225.28(b)(7)(ii) of Regulation Y (12 C.F.R. The Board also has previously determined that conduct 225.28(b)(7)(ii)); of the proposed activities is consistent with section 20 of (4) Acting as agent in the private placement of all types the Glass-Steagall Act (12 U.S.C. § 377), provided that the of securities, pursuant to section 225.28(b)(7)(iii) of company engaged in underwriting and dealing activities Regulation Y (12 C.F.R. 225.28(b)(7)(iii»; derives no more than 25 percent of its gross revenues from (5) Providing other transactional services, pursuant to underwriting and dealing in bank-ineligible securities over section 225.28(b)(7)(v) of Regulation Y (12 C.F.R. a two-year period.5 CoreStates has committed that Com- 225.28(b)(7)(v)); and (6) Providing investing and trading services, pursuant to section 225.28(b)(8)(ii) of Regulation Y (12 C.F.R. 2. Asset and ranking data are as of March 31, 1997. 225.28(b)(8)(ii). 3. See Citicorp, 73 Federal Reserve Bulletin 473 (1987), aff'd sub nom. Securities Industry Ass'n v. Board of Governors of the Federal Reserve System, 839 F.2d 47 (2d Cir.), cert, denied. 486 U.S. 1059 In addition, CoreStates proposes that Company engage in (1988), as modified by Review of Restrictions on Director, Officer and extending credit and servicing loans, activities related to Employee Interlocks, Cross-Marketing Activities, and the Purchase extending credit, leasing personal and real property, and and Sale of Financial Assets Between a Section 20 Subsidiary and an management consulting and counseling activities that are Affiliated Bank or Thrift, 61 Federal Register 57,679 (1996) (collectively, "Section 20 Orders"). related to Company's underwriting and dealing, private 4. In connection with its proposal, CoreStates proposes to underplacement, riskless principal, and other securities activiwrite and deal in unrated municipal revenue bonds. CoreStates has ties. These activities would be conducted in accordance committed that Company will not underwrite unrated municipal revewith the Board's Regulation Y.1 nue bonds until the Federal Reserve System has reviewed Company's policies and procedures with respect to such activities. In conducting Notice of the proposal, affording interested persons an this activity, Company will in each case conduct an independent credit opportunity to submit comments, has been published review to determine that the securities are of investment grade quality. (62 Federal Register 32,117 (1997)). The time for filing CoreStates also has provided other commitments previously relied on comments has expired, and the Board has considered the by the Board in authorizing a section 20 company to underwrite and deal in unrated municipal revenue bonds. See Letter Interpreting Section 20 Orders, 81 Federal Reserve Bulletin 198 (1995); BOK Financial Corporation, 83 Federal Reserve Bulletin 510 (1997). 1. Sections 225.28(b)(1), (b)(2), (b)(3), and (b)(9) of Regulation Y 5. See Section 20 Orders. Compliance with the revenue limitation (12 C.F.R. 225.28(b)(1), (b)(2), (b)(3), and (b)(9)). shall be calculated in accordance with the method stated in the Sec- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 839 pany will conduct its bank-ineligible securities underwrit- of the notificant and its subsidiaries and the effect the ing and dealing activities subject to the Board's revenue transaction would have on such resources.11 The Board has limit.6 carefully examined the financial resources, management expertise, and risk management policies of CoreStates and Other Activities Approved by Regulation its subsidiaries. Based on all the facts of record, the Board concludes that financial and managerial considerations are As noted above, Company proposes to engage in providing consistent with approval. credit, servicing loans, and activities related to extending The Board expects that the de novo entry of Company credit; leasing personal or real property; providing finan- into the market for the proposed services would provide cial and investment advisory services; providing riskless added convenience to CoreStates's customers and would principal, private placement and other transactional ser- increase the level of competition among existing providers vices; providing investing and trading services; and provid- of these services. As noted above, CoreStates has commiting management consulting and counseling services.7 The ted that Company will conduct its bank-ineligible securi- Board previously has determined by regulation that each of ties underwriting and dealing activities in accordance with the proposed activities is closely related to banking for the prudential framework established by the Board's Secpurposes of section 4(c)(8) of the BHC Act.8 CoreStates tion 20 Orders. Under the framework and conditions estaband Company will conduct these activities in accordance lished in this order and the Section 20 Orders, the Board with the limitations set forth in Regulation Y, and the concludes that Company's proposed limited conduct of Board's orders and interpretations relating to each of these underwriting and dealing in bank-ineligible securities is activities.9 not likely to result in significantly adverse effects, such as undue concentration of resources, decreased or unfair com- Proper Incident to Banking Standard petition, conflicts of interest, or unsound banking practices that would outweigh the public benefits. Similarly, the To approve this notice, the Board also must consider Board finds no evidence that Company's riskless principal, whether performance of the proposed activities is a proper private placement, and other nonbanking activities— incident to banking, that is, whether the activities proposed conducted under the framework and conditions established "can reasonably be expected to produce benefits to the in this order and Regulation Y—would likely result in any public . . . that outweigh possible adverse effects, such as significant adverse effects that would outweigh the public undue concentration of resources, decreased or unfair com- benefits of the proposal. Accordingly, the Board has deterpetition, conflicts of interests, or unsound banking practic- mined that performance of the proposed activities by Corees."10 As part of its evaluation of these factors, the Board States are a proper incident to banking for purposes of considers the financial condition and managerial resources section 4(c)(8) of the BHC Act. Conclusion tion 20 Orders, as modified by the Order Approving Modifications to the Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989) and Based on all the facts of record, and subject to the commit- 10 Percent Revenue Limit on Bank-Ineligible Activities of Subsidiaries ments made by CoreStates, as well as the terms and condiof Bank Holding Companies Engaged in Underwriting and Dealing in tions set forth in this order and in the Board's orders and Securities, 61 Federal Register 48,953 (1996) and Revenue Limit on regulations noted above, the Board has determined that the Bank-Ineligible Activities of Subsidiaries of Bank Holding Companies notice should be, and hereby is, approved. Approval of the Engaged in Underwriting and Dealing in Securities, 61 Federal Register 68,750 (1996) (collectively, "Modification Orders"). proposal also is conditioned on compliance by CoreStates 6. Company may provide services that are necessary incidents to the and Company with the commitments made in connection proposed underwriting and dealing activities. Unless Company re- with the notice, the conditions referenced in this order, and ceives specific approval under section 4(c)(8) of the BHC Act to the above-cited Board regulations and orders. The Board's conduct the activities independently, any revenues from the incidental activities must be treated as ineligible revenues subject to the Board's determination also is subject to all the terms and conditions revenue limitation. set forth in Regulation Y, including those in sections 225.7 7. As provided in the Section 20 Orders, no corporate reorganiza- and 225.25(c) (12 C.F.R. 225.7 and 225.25(c)), and to the tion of any subsidiary engaged in underwriting and dealing in bank- Board's authority to require modification or termination of ineligible securities may be consummated without prior Board approval. CoreStates has stated that Company will not engage in any the activities of a bank holding company or any of its additional activities or transfer assets or businesses into Company subsidiaries as the Board finds necessary to assure compliwithout first consulting with the Board. ance with, and to prevent evasion of, the provisions of the 8. See 12 C.F.R. 225.28(b)(1), (b)(2), (b)(3), (b)(6), (b)(7)(ii), BHC Act and the Board's regulations and orders issued (b)(7)(iii), (b)(7)(v), (b)(8)(ii), and (b)(9). thereunder. In approving the proposal, the Board has relied 9. CoreStates also proposes that Company enter into a dualon all the facts of record and all the representations and employee arrangement with a third party insurance agent to sell annuity products. CoreStates has committed that the dual-employee arrangement will be consistent with the BHC Act and the restrictions and limitations previously established by the Board on such insurance sales arrangements. See, e.g., Letter dated December 6, 1995, from 11. See 12 C.F.R. 225.24; see also The Fuji Bank, Limited, J. Virgil Mattingly, Jr., to Russell J. Bruemmer, Esq. 75 Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 10. 12 U.S.C. § 1843(c)(8). 73 Federal Reserve Bulletin 155 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

840 Federal Reserve Bulletin • October 1997 commitments made by CoreStates. These commitments By order of the Board of Governors, effective August 4, and conditions shall be deemed to be conditions imposed 1997. in writing by the Board in connection with its findings and decisions, and may be enforced in proceedings under appli- This action was taken pursuant to the Board's Rules Regarding Delegation of Authority (12 C.F.R. 265.4(b)(1)) by a committee of cable law. Board members. Voting for this action: Chairman Greenspan and This transaction shall not be commenced later than three Governors Phillips and Meyer. Absent and noting voting: Vice Chair months after the effective date of this order, unless such Rivlin and Governor Kelley. period is extended for good cause by the Board or the Federal Reserve Bank of Philadelphia, acting pursuant to JENNIFER J. JOHNSON delegated authority. Deputy Secretary of the Board INDEX OF ORDERS ISSUED OR ACTIONS TAKEN BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (April 1, 1997-July 31, 1997) Bulletin Volume Applicant Merged or Acquired Bank or Activity Date of Approval and Page Agricultural Bank of China, To establish a representative office in May 14, 1997 83, 617 Beijing, People's Republic of China New York, New York Allied Irish Banks, pic, Dauphin Deposit Corporation, May 19, 1997 83, 607 Dublin, Ireland Harrisburg, Pennsylvania First Maryland Bancorp, Dauphin Bank and Trust Company, Baltimore, Maryland Harrisburg, Pennsylvania Amboy Bancorporation, The Community Bank of New Jersey, April 14, 1997 83, 507 Old Bridge, New Jersey Freehold, New Jersey AMCORE Financial, Inc., Country Bancshares Corporation, June 16, 1997 83, 666 Rockford, Illinois Mount Horeb, Wisconsin Belleville Bancshares Corporation, Belleville, Wisconsin State Bank of Mount Horeb, Mount Horeb, Wisconsin Montello State Bank, Montello, Wisconsin State Bank of Argyle, Argyle, Wisconsin Citizens State Bank, Clinton, Wisconsin Belleville State Bank, Belleville, Wisconsin AmSouth Bank of Alabama, AmSouth Bank of Florida, June 1, 1997 83, 528 Birmingham, Alabama Tampa, Florida AmSouth Bank of Georgia, Rome, Georgia AmSouth Bank of Tennessee, Chattanooga, Tennessee AmSouth Bank of Walker County, Jasper, Alabama Banc One Corporation, Liberty Bancorp, Inc., April 29, 1997 83, 520 Columbus, Ohio Oklahoma City, Oklahoma Banc One Oklahoma Corporation, Liberty Bank & Trust Company of Oklahoma City, Oklahoma Oklahoma City, N.A., Oklahoma City, Oklahoma Liberty Bank & Trust Company of Tulsa, N.A., Tulsa, Oklahoma Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 841 Index of Orders Issued—Continued Bulletin Volume Applicant Merged or Acquired Bank or Activity Date of Approval and Page Banc One Corporation, Inc., First USA, Inc., May 14, 1997 83, 602 Columbus, Ohio Dallas, Texas First USA Federal Savings Bank, Wilmington, Delaware Banco Popular de Puerto Rico, Roig Commercial Bank, May 27, 1997 83, 612 Hato Rey, Puerto Rico Humacao, Puerto Rico Bank SinoPac, Far East National Bank, June 11, 1997 83, 669 Taipei, Taiwan Los Angeles, California SinoPac Bancorp, Los Angeles, California BOK Financial Corporation, Alliance Securities Corporation, April 28, 1997 83, 510 Tulsa, Oklahoma Tulsa, Oklahoma Commerzbank AG, CAM Acquisition, LLC, June 16, 1997 83, 678 Frankfurt am Main, Wilmington, Delaware Federal Republic of Germany Montgomery Asset Management, L.P., San Francisco, California Montgomery Services, LLC, San Francisco, California Crestar Financial Corporation, Crestar Securities Corporation, April 14, 1997 83, 512 Richmond, Virginia Richmond, Virginia Exchange Bankshares Corporation of The Farmers and Merchants State Bank, June 30, 1997 83, 671 Kansas, Effingham, Kansas Atchison, Kansas First Bank System, Inc., U.S. Bancorp, June 23, 1997 83, 689 Minneapolis, Minnesota Portland, Oregon U.S. National Bank of Oregon, Portland, Oregon U.S. Bank of Washington, N.A., Seattle, Washington U.S. Bank of Nevada, Reno, Nevada U.S. Bank of Utah, Salt Lake City, Utah U.S. Bank of Idaho, Boise, Idaho U.S. Bank of California, Sacramento, California First State Bank of Oregon, Canby, Oregon Sun Capital Bank, St. George, Utah Business & Professional Bank, Woodland, California G.B. Financial Services, Inc., Border Bancshares, Inc., April 21, 1997 83, 509 Greenbush, Minnesota Greenbush, Minnesota Border State Bank, Roseau, Minnesota Marshall & Ilsley Corporation, Security Capital Corporation, June 30, 1997 83, 672 Milwaukee, Wisconsin Milwaukee, Wisconsin Marshall & Ilsley Bank, Security Bank SSB, Milwaukee, Wisconsin Milwaukee, Wisconsin Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

842 Federal Reserve Bulletin • October 1997 Index of Orders Issued—Continued Bulletin Volume Applicant Merged or Acquired Bank or Activity Date of Approval and Page Mellon Bank Corporation, Buck Consultants, Inc., June 16, 1997 83, 681 Pittsburgh, Pennsylvania New York, New York Mercantile Bancorporation Inc., Roosevelt Financial Group, Inc., June 4, 1997 83, 683 St. Louis, Missouri Chesterfield, Missouri Ameribanc, Inc., Roosevelt Bank, St. Louis, Missouri Chesterfield, Missouri National Canton Bancshares, Inc., Sturm Investment, Inc., June 11, 1997 83, 676 Canton, Illinois Denver, Colorado The Union National Bank of Macomb, Macomb, Illinois NationsBank Corporation, First National Security Company, May 12, 1997 83, 593 Charlotte, North Carolina DeQueen, Arkansas NB Holdings Corporation, Calvin B. Taylor Bankshares, Inc., Charlotte, North Carolina Berlin, Maryland First Perry Bancorp, Inc., Pinckneyville, Illinois The First National Bank in Falfurrias, Falfurrias, Texas Shoreline Financial Corporation, SJS Bancorp, Inc., April 21, 1997 83, 515 Benton Harbor, Michigan St. Joseph, Michigan SJS Federal Savings Bank, St. Joseph, Michigan SJS Financial Corporation, St. Joseph, Michigan Southern National Corporation, United Carolina Bancshares Corporation, May 29, 1997 83, 596 Winston-Salem, North Carolina Whiteville, North Carolina United Carolina Bank, Whiteville, North Carolina United Carolina Bank of South Carolina, Greer, South Carolina Stichting Prioriteit ABN AMRO Holding, Standard Federal Bancorporation, Inc., April 10, 1997 83, 518 Amsterdam, The Netherlands Troy, Michigan Stichting Administratiekantoor ABN Standard Federal Bank, AMRO Holding, Troy, Michigan Amsterdam, The Netherlands Standard Brokerage Services, Inc., ABN AMRO Holding N.V., Troy, Michigan Amsterdam, The Netherlands ABN AMRO Bank N.V., Amsterdam, The Netherlands ABN AMRO North America, Inc., Chicago, Illinois Westamerica Bank, ValliWide Bank, May 27, 1997 83, 614 San Rafael, California Fresno, California Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 843 APPLICATIONS APPROVED UNDER BANK HOLDING COMPANY 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. Section 3 Applicant(s) Bank(s) Reserve Bank Effective Date AMFED Financial, Inc., Norwest Bank Nevada, F.S.B., Minneapolis July 28, 1997 Minneapolis, Minnesota Las Vegas, Nevada Norwest Bank Nevada, National Association, Las Vegas, Nevada Bank of Elmwood Employee Stock Elmwood Financial Corporation, Chicago August 8, 1997 Ownership Plan and Trust, Racine, Wisconsin Racine, Wisconsin Banterra Corp., 1st Bancorp Vienna, Inc., St. Louis July 23, 1997 Eldorado, Illinois Vienna, Illinois The First State Bank of Vienna, Vienna, Illinois Big Lake Financial Corporation, CNB Financial Corporation, Atlanta August 21, 1997 Okeechobee, Florida Clewiston, Florida Clewiston National Bank, Clewiston, Florida Bryan Family Management Trust, The First National Bank of Bryan, Dallas July 24, 1997 Bryan, Texas Bryan, Texas Bryan-Heritage Limited Partnership, Bryan, Texas Commerce Bancshares, Inc., CNB Bancorp, Inc., Kansas City August 14, 1997 Kansas City, Missouri Independence, Kansas CBI-Kansas, Inc., Kansas City, Missouri The Commercial Bancorp, Inc., Commercial Bank of Volusia County, Atlanta August 20, 1997 Ormond Beach, Florida Ormond Beach, Florida Community Bankshares, Inc., Upper Rio Grande Bank Corporation, Kansas City August 6, 1997 Denver, Colorado Del Norte, Colorado Community First Bancshares, Inc., Citizens Bank, Kansas City August 15, 1997 Butler, Missouri Appleton City, Missouri Community National Community National Bank, Chicago August 1, 1997 Bancorporation, Waterloo, Iowa Waterloo, Iowa Edison Bancshares, Inc., Edison National Bank, Atlanta August 1, 1997 Fort Myers, Florida Fort Myers, Florida First Fairland Bancshares, Inc., Fairland Holding Company, Inc., Kansas City August 8, 1997 Fairland, Oklahoma Neosho, Missouri First Midwest Bancorp, Inc., SparBank, Inc., Chicago July 31, 1997 Itasca, Illinois McHenry, Illinois FMB Acquisition Corporation, McHenry State Bank, Itasca, Illinois McHenry, Illinois First National Bank Shares, Ltd., BankWest, Kansas City August 6, 1997 Great Bend, Kansas Castle Rock, Colorado Harris Financial, Inc., Harris Savings Bank, Philadelphia August 19, 1997 Harrisburg, Pennsylvania Harrisburg, Pennsylvania Harris Financial, MHC, Harrisburg, Pennsylvania Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

844 Federal Reserve Bulletin • October 1997 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Hibernia Corporation, Unicorp Bancshares-Texas, Inc., Atlanta August 14, 1997 New Orleans, Louisiana Orange, Texas OrangeBank, Orange, Texas Hometown Independent Bancorp, Morton Community Bank, Chicago August 20, 1997 Inc., Morton, Illinois Morton, Illinois Lexington B&L Financial Corp., Lafayette Bancshares, Inc., Kansas City August 7, 1997 Lexington, Missouri Lexington, Missouri Lafayette County Bank of Lexington/Wellington, Lexington, Missouri B&L Bank, Lexington, Missouri Marquette Bancshares, Inc., Marquette Bank Rochester, N.A., Minneapolis August 14, 1997 Minneapolis, Minnesota Rochester, Minnesota Maypearl Bancshares, Inc., First State Bank, Dallas August 19, 1997 Maypearl, Texas Maypearl, Texas Maypearl Holdings, Inc., Wilmington, Delaware Northwest Suburban Bancorp, Inc., Mount Prospect National Bank, Chicago August 4, 1997 Arlington Heights, Illinois Mt. Prospect, Illinois Norwest Corporation, The Bank of the Southwest, N.A., Minneapolis August 7, 1997 Minneapolis, Minnesota Pagosa Springs, Colorado Otto Bremer Foundation, Halo Bancorporation, Inc., Minneapolis August 20, 1997 St. Paul, Minnesota Devils Lake, North Dakota Bremer Financial Corporation, St. Paul, Minnesota Peoples Community Bancshares, Farmers Bank of Malone, Atlanta August 14, 1997 Inc., Malone, Florida Colquitt, Georgia People's Community Capital People's Community Bank of South Richmond August 21, 1997 Corporation, Carolina, Aiken, South Carolina Aiken, South Carolina Progress Bancshares, Inc., Progress Bank of Sullivan, St. Louis August 15, 1997 Sullivan, Missouri Sullivan, Missouri Progressive Bancorp, Inc., Pekin Savings, s.b., Chicago August 19, 1997 Pekin, Illinois Pekin, Illinois Provident Bancorp, Inc., Florida Gulfcoast Bancorp, Inc., Cleveland July 31, 1997 Cincinnati, Ohio Sarasota, Florida FGBI Acquisition Corp., Enterprise National Bank of Sarasota, Cincinnati, Ohio Sarasota, Florida RCB Holding Company, Inc., Northeastern Oklahoma Banshares, Inc., Kansas City July 31, 1997 Claremore, Oklahoma Inola, Oklahoma Ready Bank of Fort Walton Beach Ready Bank of West Florida, Atlanta July 25, 1997 Holding Company, Inc., Fort Walton Beach, Florida Fort Walton Beach, Florida Southwestern Bancshares, Inc., Southwestern Bank & Trust Company, Kansas City August 19, 1997 Oklahoma City, Oklahoma Oklahoma City, Oklahoma Sterling Bancshares, Inc., First Houston Bancshares, Inc., Dallas August 7, 1997 Houston, Texas Houston, Texas Houston National Bank, Houston, Texas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 845 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Stockmens Financial Corporation, BankWest, Kansas City August 6, 1997 Rushville, Nebraska Castle Rock, Colorado TNB Bancorporation, Inc., Texas National Bank, Dallas August 1, 1997 Brenham, Texas Brenham, Texas TNB Bancorporation of Delaware, Inc., Wilmington, Delaware Triangle Bancorp, Inc., Bank of Mecklenburg, Richmond August 6, 1997 Raleigh, North Carolina Charlotte, North Carolina United Community Banks, Inc., First Clayton Bancshares, Inc., Atlanta August 20, 1997 Blairsville, Georgia Clayton, Georgia First Clayton Bank & Trust Company, Clayton, Georgia Section 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date BB&T Corporation, Virginia First Financial Corporation, Richmond August 21, 1997 Winston-Salem, North Carolina Petersburg, Virginia BB&T Financial Corporation of Virginia, Winston-Salem, North Carolina Caisse Nationale de Credit Agricole, Credit Agricole Indosuez, Chicago August 1, 1997 Paris, France Paris, France Credit Agricole Group, Indosuez Investment Management Paris, France Services, Inc., Menlo Park, California Central Bancshares, Inc., Cash Now L.L.C., Kansas City August 8, 1997 Kansas City, Missouri Grandview, Missouri Cash Now, Inc., Kansas City, Kansas Citizens Bancshares Company, To engage de novo in the purchasing Kansas City August 4, 1997 Chillicothe, Missouri and servicing of accounts receivable through a joint venture First National Bancshares, Inc. Finance Company of North America, Chicago August 12, 1997 East Lansing, Michigan LLC, East Lansing, Michigan Mellon Bank Corporation, Money Station, Inc., Cleveland August 5, 1997 Pittsburgh, Pennsylvania Columbus, Ohio APT Holdings, Inc., Pittsburgh, Pennsylvania Middleburg Bancorp, Inc., Lincoln Financial Bancorp, Inc., St. Louis August 5, 1997 Middleburg, Kentucky Stanford, Kentucky Lincoln Federal Savings Bank, Liberty, Kentucky Northwest Wisconsin Bancorp, Inc. Heartland Data Center, Inc., Minneapolis August 14, 1997 Chippewa Falls, Wisconsin Cameron, Wisconsin BCB Bancorp, Inc., Chippewa Falls, Wisconsin Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

846 Federal Reserve Bulletin • October 1997 Section 4—Continued Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Norwest Corporation, Family Loan, Inc., Minneapolis August 13, 1997 Minneapolis, Minnesota Stockbridge, Georgia Norwest Financial Services, Inc. Des Moines, Iowa Norwest Financial, Inc., Des Moines, Iowa Norwest Corporation, Fidelity Acceptance Corporation, Minneapolis August 7, 1997 Minneapolis, Minnesota Kansas City, Missouri Norwest Financial Services, Inc. Des Moines, Iowa Norwest Financial, Inc., Des Moines, Iowa P.C.B. Bancorp, Inc., Anchor Savings Bank, F.S.B., Atlanta August 13, 1997 Largo, Florida St. Petersburg, Florida Peoples Bancorp, Inc., Gateway Bancorp, Inc., Cleveland August 8, 1997 Marietta, Ohio Catlettsburg, Kentucky Pioneer Bancshares, Inc., Pioneer Bank, f.s.b., Atlanta August 21, 1997 Chattanooga, Tennessee Chattanooga, Tennessee Royal Bank of Canada, Integrion Financial Network, LLC, New York August 14, 1997 Montreal, Quebec, Canada Atlanta, Georgia VISA Interactive, Inc., Herndon, Virginia Royal Bank of Canada, RBC Dominion Securities Corporation, New York August 4, 1997 Montreal, Quebec, Canada New York, New York SBT Bankshares, Inc., State Bank & Trust Mortgage, L.L.C., Kansas City August 21, 1997 Colorado Springs, Colorado Colorado Springs, Colorado Stichting Administratiekantoor ABN Integrion Financial Network, LLC, Chicago August 14, 1997 AMRO Holding, Atlanta, Georgia Amsterdam, The Netherlands VISA Interactive, Inc., Stichting Prioriteit ABN AMRO Herndon, Virginia Holding, Amsterdam, The Netherlands ABN AMRO Holding N.V., Amsterdam, The Netherlands ABN AMRO Bank N.V., Amsterdam, The Netherlands ABN AMRO North America, Inc., Chicago, Illinois Sections 3 and 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Area Bancshares Corporation, Cardinal Bancshares, Inc., St. Louis July 30, 1997 Owensboro, Kentucky Lexington, Kentucky The Vine Street Trust Company, Lexington, Kentucky HNB Bank, National Association, Harlan, Kentucky First and Peoples Bank, Springfield, Kentucky Jefferson Banking Company, Louisville, Kentucky Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 847 Sections 3 and 4—Continued Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Alliance Bank, FSB, Somerset, Kentucky Mutual Service Corporation, Somerset, Kentucky F.N.B. Corporation, Sun Bancorp, Inc., Cleveland August 15, 1997 Hermitage, Pennsylvania Selinsgrove, Pennsylvania 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 Ambassador Bank of the Wilbur Savings Bank, Philadelphia August 14, 1997 Commonwealth, Bethlehem, Pennsylvania Allentown, Pennsylvania Bank of Mecklenburg, Triangle-Mecklenburg Interim Bank, Richmond August 6, 1997 Charlotte, North Carolina Charlotte, North Carolina Colonial Bank, Dadeland Bank, Atlanta August 20, 1997 Montgomery, Alabama Miami, Florida Colonial Bank, First Independence Bank of Florida, Atlanta August 6, 1997 Montgomery, Alabama Fort Myers, Florida Community Bank & Trust Citizens State Bank, Kansas City August 12, 1997 Company, Galena, Kansas Neosho, Missouri Fifth Third Bank Cincinnati, Great Lakes National Bank, Cleveland July 31, 1997 Cincinnati, Ohio Hamilton, Ohio Fifth Third Bank Columbus, Great Lakes National Bank, Cleveland July 31, 1997 Columbus, Ohio Hamilton, Ohio First Virginia Bank-Southwest, Premier Bank-South, National Richmond August 6, 1997 Roanoke, Virginia Association, Wytheville, Virginia Omni Bank, Farmers State Bank, Chicago July 31, 1997 Macomb, Illinois Ferris, Illinois The Provident Bank, The Provident Bank of Kentucky, Cleveland August 14, 1997 Cincinnati, Ohio Alexandria, Kentucky Provident Bank of Florida, Enterprise National Bank, Atlanta July 31, 1997 Apollo Beach, Florida Sarasota, Florida Resource Bank, Eastern American Bank, F.S.B., Richmond August 7, 1997 Virginia Beach, Virginia Herndon, Virginia Tiskilwa State Bank, Tampico National Bank, Chicago July 31, 1997 Tiskilwa, Illinois Tampico, Illinois The First National Bank of Manlius, Manlius, Illinois UnionBank, UnionBank/Sandwich, Chicago July 31, 1997 Streator, Illinois Sandwich, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

848 Federal Reserve Bulletin • October 1997 PENDING CASES INVOLVING THE BOARD OF GOVERNORS This list of pending cases does not include suits against the Artis v. Greenspan, No. 1:96CV02619 (D.D.C., filed Novem- Federal Reserve Banks in which the Board of Governors is not ber 19, 1996). Employment discrimination action. On named a party. May 30, 1997, the court granted the Board's motion to dismiss the action. The plaintiff filed a notice of appeal on Eliopulos v. Board of Governors, No. 97-1442 (D.C. Cir., August 25, 1997. filed July 17, 1997). Petition for review of a Board order Snyder v. Board of Governors, No. 96-1403 (D.C. Cir., filed dated June 23, 1997, approving the application of First October 3, 1996). Petition for review of Board order dated Bank System, Inc., Minneapolis, Minnesota, to acquire U.S. September 11, 1996, prohibiting John K. Snyder and Bancorp, Portland, Oregon, and thereby acquire U.S. Ban- Donald E. Hedrick from further participation in the banking corp's banking and nonbanking subsidiaries. industry. On May 8, 1997, the court of appeals granted the Greeff v. Board of Governors, No. 97-1976 (4th Cir., filed Board's motion to dismiss the petition. Petitioners' request June 17, 1997). Petition for review of a Board order dated for rehearing or rehearing en banc was denied on July 31, May 19, 1997, approving the application of by Allied Irish 1997. Banks, pic, Dublin, Ireland, and First Maryland Bancorp, American Bankers Insurance Group, Inc. v. Board of Gover- Baltimore, Maryland, to acquire Dauphin Deposit Corpora- nors, No. 96-CV-2383-EGS (D.D.C., filed October 16, tion, Harrisburg, Pennsylvania, and thereby acquire Dau- 1996). Action seeking declaratory and injunctive relief inphin's banking and nonbanking subsidiaries. validating a new regulation issued by the Board under the Inner City Press/Community on the Move v. Board of Gover- Truth in Lending Act relating to treatment of fees for debt nors, No. 97-1394 (D.C. Cir., filed June 12, 1997). Petition cancellation agreements. On October 18, 1996, the district to review a Board order dated May 14, 1997, approving the court denied plaintiffs' motion for a temporary restraining application of Banc One Corporation, Inc., Columbus, Ohio, order. On January 17, 1997, the parties filed cross-motions to merge with First USA, Inc., Dallas, Texas. On June 16, for summary judgment. 1997, petitioners moved for a stay pending appeal. The Artis v. Greenspan, No. 96-CV-02105 (D. D.C., filed Septemmotion was denied on June 27, 1997. On August 11, 1997, ber 11, 1996). Class complaint alleging race discrimination the Board filed a motion to dismiss the petition. in employment. On December 20, 1996, the Board moved Vickery v. Board of Governors, No. 97-1344 (D.C. Cir., filed to dismiss the action. On June 30, 1997, the court granted May 9, 1997). Petition for review of a Board order dated the motion and dismissed the case. The plaintiffs filed a April 14, 1997, prohibiting Charles R. Vickery, Jr., from notice of appeal on August 25, 1997. further participation in the banking industry. Leuthe v. Board of Governors, No. 96-5725 (E.D. Pa., filed Wilkins v. Board of Governors, No. 3:97CV331 (E.D. Va., August 16, 1996). Action against the Board and other filed May 2, 1997). Customer dispute with bank. On Federal banking agencies challenging the constitutionality June 11, 1997, the Board filed a motion to dismiss. of the Office of Financial Institution Adjudication. On Janu- Pharaon v. Board of Governors, No. 97-1114 (D.C. Cir., filed ary 24, 1997, the agencies filed a motion to dismiss the February 28, 1997). Petition for review of a Board order action. dated January 31, 1997, imposing civil money penalties and Long v. Board of Governors, No. 96-9526 (10th Cir., filed an order of prohibition for violations of the Bank Holding July 31, 1996). Petition for review of Board order dated Company Act. July 2, 1996, assessing a civil money penalty and cease and Research Triangle Institute v. Board of Governors, No. 97- desist order for violations of the Bank Holding Company 1282 (4th Cir., filed February 24, 1997). Appeal of district Act. Oral argument was heard on May 12, 1997, and on court's dismissal of contract claim. June 30, 1997, the court affirmed the Board's decision. Jones v. Board of Governors, No. CV97-0198 (W.D. Louisi- Inner City Press/Community on the Move v. Board of Goverana, filed January 30, 1997). Complaint alleging violations nors, No. 96^1008 (2nd Cir., filed January 19, 1996). Petiof the Fair Housing Act. The case was dismissed on tion for review of a Board order dated January 5, 1996, May 29, 1997. approving the applications and notices by Chemical Bank- The New Mexico Alliance v. Board of Governors, No. 96- ing Corporation to merge with The Chase Manhattan Cor- 9552 (10th Cir., filed December 24, 1996). Petition for poration, both of New York, New York, and by Chemical review of a Board order dated December 16, 1996, approv- Bank to merge with The Chase Manhattan Bank, N.A., both ing the acquisition by NationsBank Corporation and NB of New York, New York. Petitioners' motion for an emer- Holdings Corporation, both of Charlotte, North Carolina, of gency stay of the transaction was denied following oral Boatmen's Bancshares, Inc., St. Louis, Missouri. Also on argument on March 26, 1996. The Board's brief on the December 24, 1996, petitioners moved for an emergency merits was filed July 8, 1996. The case was consolidated for stay of the Board's order. The motion for a stay was denied oral argument and decision with Lee v. Board of Governors, by the 10th Circuit on January 3, 1997; on January 6, 1997, No. 95-4134 (2d Cir.); oral argument was held on Janupetitioners' application for emergency stay was denied by ary 13, 1997. On July 2, 1997, the court of appeals disthe Supreme Court. missed the petition for review. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 849 Lee v. Board of Governors, No. 95-4134 (2nd Cir., filed Judge ("ALJ") Arthur L. Shipe, issued following an ad- August 22, 1995). Petition for review of Board orders dated ministrative hearing held between November 1994 and July 24, 1995, approving certain steps of a corporate reorga- August 1995. In the Recommended Decision, the ALJ nization of U.S. Trust Corporation, New York, New York, found that the OCC's Enforcement Counsel had estaband the acquisition of U.S. Trust by Chase Manhattan lished all of the requirements for an order of prohibition: Corporation, New York, New York. On September 12, that both respondents had engaged in misconduct from 1995, the court denied petitioners' motion for an emergency which they gained and the Bank lost, and that reflected stay of the Board's orders. The Board's brief was filed on culpability inconsistent with their continued participation April 16, 1996. Oral argument, consolidated with Inner City in banking. The ALJ therefore recommended that both Press/Community on the Move v. Board of Governors, took respondents be prohibited from participating in banking place on January 13, 1997. On July 2, 1997, the court of without the approval of the appropriate regulatory agenappeals dismissed the petition for review. cies. Respondents filed 424 pages of exceptions to the In re Subpoena Duces Tecum, Misc. No. 95-06 (D.D.C., filed recommended decision in which they concede most of the January 6, 1995). Action to enforce subpoena seeking pre- underlying conduct but argue that it was reasonable and decisional supervisory documents and testimony sought in legitimate. connection with an action by Bank of New England Corpo- Based on a review of the record and the arguments ration's trustee in bankruptcy against the Federal Deposit raised by the Towes, the Board adopts the recommended Insurance Corporation. On August 7, 1997, the court decision and rejects the Towes' exceptions for the reasons granted in part and denied in part the motions to compel. stated by the ALJ, except as specifically noted in this Final Board of Governors v. Pharaon, No. 91-CIV-6250 (S.D. New Decision. York, filed September 17, 1991). Action to freeze assets of individual pending administrative adjudication of civil I. Statement of the Case money penalty assessment by the Board. On September 17, 1991, the court issued an order temporarily restraining the A. Statutory and Regulatory Framework transfer or disposition of the individual's assets. 1. Standards for Prohibition Order Under the FDI Act, the ALJ is responsible for conducting FINAL ENFORCEMENT DECISION ISSUED BY THE BOARD an administrative hearing on a notice of intent to prohibit. OF GOVERNORS 12 U.S.C. § 1818(e)(4). Following the hearing, the ALJ issues a recommended decision that is referred to the In the Matter of Board, and the parties may file exceptions to the ALJ's recommendations. The Board makes the final findings of Edward Towe, Former President and Director, and fact, conclusions of law, and determination whether to Thomas E. Towe, Former Director and issue an order of prohibition. Id.\ 12 C.F.R. 263.40. Chairman of the Board of Directors To issue a prohibition order under the FDI Act, the Board must make each of three findings: First National Bank and Trust Wibaux, Montana (1) There must be a specified type of misconduct— violation of law, regulation, or final cease-and-desist Docket Nos. order, unsafe or unsound practice, or breach of fiduciary OCC-AA-EC-93-42 duty; OCC-AA-EC-93-43 (2) The misconduct must have a prescribed effect— financial gain to the respondent or financial loss or other Final Decision damage to the institution or prejudice to the institution's depositors;1 and This is an administrative proceeding pursuant to section (3) The misconduct must involve culpability of a certain 8(e) of the Federal Deposit Insurance Act ("FDI Act"), degree—personal dishonesty or willful or continuing 12 U.S.C. § 1818(e), in which the Office of the Comptroller disregard for the safety or soundness of the institution. of the Currency of the United States of America ("OCC") seeks to prohibit Respondents Edward and Thomas E. Towe from further participation in the affairs of any federally-supervised financial institution as a result of their 1. The standards for the issuance of an order of prohibition were amended by the Financial Institutions Reform, Recovery, and Enforceconduct during their former affiliation with First National ment Act of 1989 ("FIRREA"), Pub. L. No. 101-73, 103 Stat. 183 Bank and Trust, Wibaux, Montana (the "Bank"). As re- (1989), effective August 9, 1989. Prior to that date, the statute required by statute, the OCC has referred the action to the quired that the loss to the institution be "substantial" and that the Board of Governors of the Federal Reserve System (the prejudice to the depositors be "serious." While the conduct in this case began before the statutory changes and continued thereafter, the "Board") for final decision. ALJ's conclusions of law applied the higher pre-FlRREA standard in The proceeding comes before the Board in the form of a each instance, and therefore more than satisfied the post-FIRREA 219-page Recommended Decision by Administrative Law standards for prohibition. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

850 Federal Reserve Bulletin • October 1997 B. Procedural History Towe controlled the Bank for purposes of section 23A of the Federal Reserve Act, 12 U.S.C. § 371c.3 The OCC initiated this proceeding on March 24, 1993 with The record in this action establishes repeated instances the issuance of an assessment of civil money penalties and on the part of both Edward and Thomas Towe of selfa notice that it would seek an order of prohibition against dealing, conflicts of interest, unsafe and unsound banking the Towes. Recommended Decision ("RD") 1. Both ac- practices, and a willingness to use the Bank for the Towes' tions were addressed in a common hearing before the ALJ personal ends. The Towes arranged for payments to be and by the ALJ's Recommended Decision. The FDI Act made to Edward Towe and his wife in a manner intended to assigns authority for a final decision regarding prohibition avoid an IRS wage levy, knowingly exposing the Bank to to the Board and the final decision as to civil money IRS penalties and resulting in false statements in the penalties to the Comptroller. 12U.S.C. § 1818(h), (i). The Bank's books. Edward Towe operated a family-owned Board takes official notice that on July 25, 1997, the company, Grant Investments, from the Bank's premises Comptroller issued a final Decision and Order adopting and used Bank personnel to service loans made by Grant almost all of the ALJ's recommendations and assessing a without providing adequate compensation to the Bank. penalty of $10,000 against Edward Towe and $25,000 Assets were transferred back and forth between Grant and against Thomas Towe. the Bank in transactions known only to Edward Towe, who "agreed" to both sides of these transactions, and who gave II. Discussion Grant superior rights in collateral held by the Bank. In the so-called "Jacobson Transaction," Edward Towe involved After reviewing the exceptions to the Recommended Deci- the Bank in a transaction the sole purpose of which was to sion of the ALJ, the Board adopts the findings and conclu- cloud the title to property of a former business partner with sions of the ALJ, except as otherwise indicated in this whom he was feuding, leading to a lawsuit against the Order. Bank. Edward and Thomas Towe arranged for a swap of worthless checks, drawn on accounts at the Bank, in order A. Factual Overview to deceive the IRS into believing that a family foundation had liquidated its interest in Grant Investments. On the Edward Towe and his son Thomas Towe have extensive advice of Thomas Towe, the Bank repeatedly violated the banking backgrounds. By the early 1970's, each was a terms of a final cease-and-desist order. These and other director of every bank in a chain of 13 state and national transactions, described in more detail below and in the banks, and Edward Towe was president of all but two. Recommended Decision, amply demonstrate that the re- Recommended Finding of Fact ("RFF") 3. Thomas Towe, quirements for orders of prohibition against Edward Towe an attorney, performed most of the legal work for these and Thomas Towe have been established.4 banks and has practiced generally in the areas of banking law and taxation. RFF 4. B. Disguised Payments to Edward and Florence Prior to January 1987, Edward Towe served as a director Towe of the Bank, but neither he nor the Towe family exercised exclusive control of the Bank. On January 15, 1987, the Beginning in 1986, the IRS served levies on the Bank Towe family gained exclusive control of the Bank, a na- directing it to pay over to the IRS any wages, salary or tional bank subject to the OCC's supervision.2 Edward other income for which the Bank was obligated to Edward Towe became its president, and Thomas Towe became Towe or his wife, Florence Towe. RFF 5. In response, chairman of the Bank's board of directors and served as its Edward Towe ceased to collect director's fees from the legal counsel. RD 5-6. Accordingly, both Edward and Bank. When the Towe family acquired exclusive control of Thomas Towe were subject to the OCC's supervisory the Bank and Edward Towe became its president in Janujurisdiction no later than January 15, 1987. During 1990, ary 1987, the Bank, at Edward Towe's direction and with Edward Towe was given proxies to vote over 66 percent of Thomas Towe's knowledge and assistance, decided not to the Bank's shares, a figure that increased to 82 percent in pay Edward Towe a salary, but instead arranged for the 1991. RFF 165. Thus, during these years at least Edward Bank to compensate him in a variety of ways disguised as something other than salary in an effort to fall outside the terms of the IRS levies. These practices, involving the 3. The Board rejects Respondents' argument that the shares Edward 2. While Edward Towe directly owned only director's qualifying Towe controlled by proxy are irrelevant for purposes of the control shares in the Bank, the remainder of the Bank's shares were largely provisions of section 23A. See 1 F.R.R.S. 3-1144, 3-1146.2. owned by family members or by entities that Towe controlled. Grant 4. The Board bases its conclusion as to Thomas Towe upon his Investments owned about 15.6 percent of the total shares outstanding, status as chairman of the Bank's board, and not on his role as counsel family trusts owned more than 50 percent, and Edward Towe's sisters to the Bank. Because Thomas Towe did not maintain a clear distincowned an additional 31 percent. RFF 315-317. Edward Towe exer- tion between his two capacities with respect to arranging or assisting cised control at shareholders meetings in 1990 and 1991 through the transactions at issue (as opposed to his representation of the Bank proxies executed in his favor representing a majority of the voting in litigation as counsel), he bears responsibility as chairman for those stock. RFF 165-171. actions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 851 manipulation and falsification of Bank records, exposed and fines to the IRS for violation of the levy on Edward the Bank to a suit by the IRS seeking damages, penalties, Towe's salary from the Bank. That liability was realized and interest for the failure to honor the levies, which was when the Bank paid $20,000 to the IRS to settle the penalty eventually settled for a $20,000 payment by the Bank. RFF case. 36; Ex. 711. The Board rejects Respondents' exceptions to the ALJ's The disguised payments purported successively to be conclusions on this point that: the total compensation packreimbursement for travel expenses, "subsistence," and age to Edward Towe was not unreasonable in amount; that consulting fees, and were designed to funnel money to the the payment represented permissible tax avoidance rather Towes in circumvention of the IRS levies rather than to than evasion; and that in any event Edward Towe was purchase services that would benefit the Bank. RFF 28, 31, entitled to payment by the Bank for at least the subsistence 34, 35. From January 1987 until about August 1988, the payments that he received as part of the reimbursed travel Bank issued monthly travel expense checks to Edward expenses because Wibaux was not his legal residence. Towe totalling over $6,000, purporting to compensate him Except. 162-200. Respondents' assertions about the for travel to and from directors' meetings in Wibaux from amount of the reimbursements miss the point. What is his former home in Texas. In fact, Edward Towe incurred important is not whether the amount of money paid by the no significant travel expenses on behalf of the Bank during Bank to Edward Towe was too much, but whether he was this period. For almost all of that time, from January 1987 entitled to receive any travel reimbursement payments and until mid-1988, Edward Towe travelled to directors meet- consulting fees. As explained above, there is no basis for ings from his home in a Bank-owned apartment located concluding that Edward Towe incurred any travel costs on directly above the Bank, where he and his wife lived behalf of the Bank or performed any services for the Bank rent-free, with all utilities paid for by the Bank. RFF 6, 7.5 that he was not already required to perform as the presi- When OCC examiners questioned the travel payments, the dent. Moreover, there is no factual basis to support the Bank redesignated the payments as "subsistence," and claim that Edward Towe was entitled to "subsistence" (or continued to pay them in the same amounts as before from "per diem") payments from the Bank for "temporary" September 1988 until January 1989.6 The month following service as bank president. He was not "temporarily transthe last of these payments, Florence Towe began to be paid ferred" by the Bank from his home in Texas to Wibaux, $300 per month in "consulting fees", though she had no Montana. Instead, he came out of retirement and moved to contract with the Bank, did not report to the Bank's board, Wibaux to work at the Bank after the Towe family asand performed no additional services beyond the "public sumed control of that institution. RD 5; cf. Rev. Rul. relations" work previously performed for free. RFF 24-28. 75-432 (95-2 CCH 21,780 f 8500.069 (discussing tempo- Additionally, the Bank paid Edward Towe a $5,000 "con- rary assignments). sulting fee" on December 18, 1989. RFF 29. These con- The Board rejects Respondents' assertions that the paysulting fees were intended to provide living expenses to the ments constituted permissible tax avoidance. As a general Towes that would not be subject to the IRS levies. The matter, it is not unsafe or unsound or otherwise improper making of these payments by the Bank was initially sugfor a bank to arrange a transaction in a manner so as to gested by Thomas Towe, who advised the board of direcminimize the tax consequences, provided the transaction tors to approve them, but failed to disclose to the other complies with all other applicable legal requirements. Here, board members that he was simultaneously representing however, in the Board's judgment, the payment scheme his parents in connection with the IRS levies. devised by the Towes was not even a facially plausible tax The Board adopts the ALJ's conclusion that as a result avoidance device. First, in making the payments to Edward of the Bank's payments to Edward Towe, Edward and Towe, the Bank was not attempting to minimize its own Thomas Towe engaged in unsafe and unsound practices tax liability, but instead to prevent collection of taxes owed and breaches of their fiduciary duty as directors and offic- by a Bank insider. Second, the scheme involved the false ers of the Bank. Specifically, the Board finds that, by characterization on the Bank's books of the purpose of causing the Bank to make travel and similar reimburse- payments made by the Bank, which itself is a violation of ment payments to Edward Towe for expenses that he never law. incurred, and to pay him and his wife for services that were already obligated to be provided or were in fact already C. Self Dealing Through Commingled Bank and being provided without fee to the Bank, the Towes caused Towe Interests the Bank to expend funds with no corresponding benefit to the Bank. In addition, the Towes' conduct was also unsafe 1. Bank Services to Grant Investments Fund and unsound because it subjected the Bank to a substantial risk of financial loss in that it would have to pay penalties Grant Investments Fund ("Grant") was an investment partnership organized in 1955 by Towe family members for the purpose of making and buying personal and commercial 5. When Edward and Florence Towe moved into a house in Wibaux loans. It was owned by numerous Towe family members in mid-1988 within 10 miles of the Bank, the Bank continued to pay and trusts. Edward Towe acted as general manager of their utility expenses. RFF 8. Grant and it is uncontested that Edward Towe controlled 6. No other member of the board was paid "subsistence" or travel payments for non-travel. Grant for purposes of section 23A of the Federal Reserve Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

852 Federal Reserve Bulletin • October 1997 Act, 12 U.S.C. § 371c. RFF 164; see Exceptions at 235- Towe. Although the Respondents argue in their exceptions 39.7 Edward Towe operated Grant "with virtually unre- that "bank related" loans were made for the benefit of the strained latitude" from his office as president of the Bank, Bank, Edward Towe's own testimony refutes that position. using Bank resources. RD 11-12. Grant made loans pri- RFF 279-282; Tr. 4423. Over a 5>/2 year period, Grant marily to Bank borrowers, many of whom were insuffi- made 79 "bank-related" loans totalling $205,000. ciently creditworthy to qualify for new or additional bank RFF 275. loans. RD 12. Grant also made loans to Thomas Towe. An example is the so-called "Preiss loan." David Preiss RFF 138-139. had borrowed $96,959 from the Bank, secured by commer- Grant's operations were tightly intertwined with those of cial property known as the Stockman Lounge. Preiss began the Bank. Grant used Bank resources in its operations, experiencing financial difficulty in 1986 and 1987. The including operating rent-free from Edward Towe's office at Bank could not make additional loans to Preiss because he the Bank, and using note forms bearing the Bank's name, had become an unacceptably high credit risk. Edward which led to confusion among borrowers as to the identity Towe caused Grant, however, to make Preiss a series of of their creditor. Moreover, at Edward Towe's direction, unsecured loans totalling approximating $10,000 for workthe Bank provided all of the loan servicing for Grant ing capital. These additional loans were evidenced by notes Investment loans: the Bank received and collected pay- bearing the Bank's name, and Preiss was unaware that he ments on the various Grant loans, processed the payments, was borrowing from Grant Investments rather than the maintained documents connected to the loans, issued de- Bank. Later, Edward Towe caused the Bank to transfer the mands for payment, recovered collateral on defaulted collateral for Preiss's Bank loans from the Bank to Grant loans, and provided collection services. These services Investments. He achieved this by physically altering a were originally provided without compensation to the Bank quitclaim deed to substitute Grant for the Bank as the and without any formal agreement between Grant and the grantee. Edward Towe did not deny that he made the Bank; later, Grant began to pay a minimal and below- alteration. Tr. 5379-5381. market amount for loan processing. RD 13; RFF 245-251. Ultimately, Preiss became bankrupt. The Stockman In addition, Edward Towe arranged that all Grant Invest- Lounge property was resold, with the Bank funding ment partners would receive free checking accounts from 100 percent of the new sale price. Grant's loans to Preiss the Bank. RFF 230-233. These practices violated section were repaid out of the proceeds of the second loan, but the 23B of the Federal Reserve Act, 12 U.S.C. § 371c-l, and Bank was never made whole for its original loan. Further, constituted a breach of Edward Towe's fiduciary duty to the new buyers defaulted and the Bank was forced to write the Bank. off its second loan on the property, although Grant subsequently purchased that note from the Bank. RD 22. 2. "Bank Related" Loans by Grant Another example involves property known as the Glendive House, which the Bank had acquired through foreclo- Grant was in the business of lending to "unbankable" sure. There, too, the Bank made an initial loan, Grant made clients, making loans to individuals or companies that additional loans that did not reduce the balance on the could not obtain financing from the Bank either because of Bank's loan, the borrowers defaulted, the Bank reposviolation of loan limits or because they would not qualify sessed and financed the resale of the property, Grant was for Bank lending. RFF 259. In numerous cases, Edward made whole from the new loan proceeds while the Bank Towe categorized these loans as "bank-related." The rele- was not, and the second loan defaulted, causing significant vance of that categorization was that Grant obtained prior- losses. RD 23-25. ity over the Bank on whatever collateral the Bank had from Respondents argue with respect to the "Bank related" the borrower, and would generally get repaid first out of loans that the transactions were intended to help the Bank whatever proceeds were obtained from the borrower or the by enabling borrowers to pay olf Bank loans and that the collateral. The subordination "agreement" between the terms of those transactions were governed by an "unwrit- Bank and Grant pursuant to which these payments were ten agreement" or "oral understanding" subordinating the made existed solely in Edward Towe's mind, was never Bank's claims to Grant's claims to the proceeds of the sale reduced to writing, and was not approved by the Bank's of collateral. Except. 216-263. The Board rejects these board. RFF 272-275. Essentially, however, it meant that arguments. While the ALJ found that Grant did indeed help Grant was protected by the Bank's collateral for any loan it the Bank in some instances, as in its purchase of the second made up to the value of that collateral, even if that meant note in the case of the Preiss loan, that help was offset by that the Bank would suffer a loss on the loan. instances where Grant benefited at the expense of the Grant loans were generally considered "bank-related" if Bank. Moreover, Grant can be found to have "helped" the the borrower was a Bank borrower, and the categorization Bank only by isolating one portion of the constantly cyof a particular loan could change at the whim of Edward cling mix of transactions between the Bank and Grant. The Towes' actions are hardly mitigated by the fact that Grant relieved the Bank of some portion of its loss after they had, 7. Accordingly, at least in 1990 and 1991, the Bank and Grant were by forgery, caused Grant to obtain security that properly "affiliates" for purposes of sections 23A and 23B of the Federal belonged to the Bank, and then funded the payment to Reserve Act, 12U.S.C. §§ 371c and 371c-l. See 12U.S.C. Grant with the proceeds of another bad loan. § 371 c(b)( 1), b(3)(A). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 853 More important, as the ALJ acknowledged, is that these 934 (3d Cir. 1994), quoting In re Bush, OTS AP 91-16 at transactions, whether or not they conferred some transient 11, 15-16. Here, as Respondents admit, Edward Towe was benefit on the Bank, constituted egregious unsafe and repeatedly "on both sides of a transaction," in breach of unsound banking practices. By arranging, with himself, to his fiduciary responsibility to the Bank. subordinate the Bank's secured position to another lender with respect to all "bank-related" loans, and by authoriz- 3. Condominiums ing himself to categorize a given loan as "bank-related," Edward Towe prevented the impartial review of this ar- In another set of transactions, involving condominium rangement by the Bank. While it is conceivable that there properties that the Bank had acquired upon default of the might have been transactions in which a disinterested Bank loans that financed their construction, Respondents used officer would have concluded that the Bank's interests Grant to create the false appearance that the Bank had sold would be served by subordinating its security interest to a the condominiums in compliance with banking regulations third-party lender, no such review was possible. The agree- concerning "other real estate owned" ("OREO"). ment was not reduced to writing, but originated with and RD 28-35. Those regulations required the Bank to dispose remained in the mind of Respondent Edward Towe, as did of the condominiums within five years, and, in order for the identification of a given loan as "bank-related." such sales to be recognized, prohibited the Bank from RD 23.8 There was no independent review by Bank person- financing more than 90 percent of the sale transactions. nel other than Edward Towe to determine if the transaction 12 C.F.R. 7.3025 (1988). was equivalent to one on an arms' length basis. In any The Bank entered into a scheme to make it appear that event, the agreement in which Edward Towe allegedly the Bank had complied with the applicable regulations by represented both the Bank and Grant was frequently unfaselling the foreclosed condominium properties. In particuvorable to the Bank and caused the Bank to make conceslar, the Bank made a series of loans on extremely favorable sions that were not financially or economically justified. terms to marginally creditworthy or uncreditworthy bor- A bank insider who engages in self-dealing transactions rowers to purchase the condominiums, leading to repeated runs a high risk of breaching fiduciary duties and of engag- defaults and resales. Initially, the Bank required only a ing in unsafe and unsound banking practices. In some $200 cash down payment for the condominium units, far cases, such conflicts may be cured by full disclosure of the less than 10 percent of the purchase price of the condominexistence of conflicts and approval by a majority of the iums, and financed the remainder of the purchase price. non-interested members of the Board of directors. Such The ALJ found, and the record shows, that the Bank approval is not possible, of course, where the terms of the extended credit to any purchaser who applied for a loan, transaction have not been reduced to writing and remain without examining the borrower's credit condition. As a subject to change at the whim of the insider. See Greenberg result, the condominium loans experienced an extraordinarv. Board of Governors, 968 F.2d 164, 171 (2d Cir. 1992) ily high default rate, increasing the Bank's losses and (minutes of board of directors meetings silent as to conflict requiring the Bank repeatedly to reacquire title to the relationship). Moreover, an agreement that exists wholly in condominium units. the mind of a single person cannot be said to have any legal Edward and Thomas Towe engaged in conduct that meaning whatsoever. further increased the Bank's risk with respect to the fore- Furthermore, the Towes' commingling of their family closed condominium properties. business interests with those of the Bank breached their fiduciary responsibilities to the Bank (and to the family (a) Diversion of Down Payments. From 1989 until 1991, interests). "The threshold inquiry in assessing whether a down payments made by purchasers buying condominiums director violated his duty of loyalty is whether the director from the Bank were deposited into an account controlled has a conflicting interest in the transaction. Directors are by Edward Towe, which was used for the buyers' real considered to be 'interested' if they either 'appear on both estate expenses associated with the condominiums and to sides of a transaction [] or expect to derive any personal make unrecorded loans to condominium buyers, rather financial benefit from it in the sense of self-dealing, as than being credited to the Bank. RD 40-41. When the opposed to a benefit which devolves upon the corporation Bank's board reviewed expenses each month, it was not or all stockholders generally." In re Seidman, 37 F. 3d 911, shown the expenses paid out of the down payment account. RFF 372. 8. Respondents' argument that the agreement was nonetheless en- (b) Down Payment Loans. When informed of an upcoming forceable has the flavor of a Gilbert and Sullivan farce: "Just because OCC examination, Edward Towe attempted to disguise the Edward Towe is on both sides of an agreement doesn't mean that no Bank's near-100 percent financing of the sales. He caused agreement exists at all. Both parties had the capacity to enter into a contract, both parties intended to enter into a contract, and there Grant to loan each purchaser of a Bank condominium an certainly was a mutual meeting of the minds. Thus all of the elements amount equal to ten percent of the purchase price of each of an agreement exist." Except, at 222. Moreover, the question is not unit, which was applied to reduce the principal amount of whether the agreement was enforceable, but whether it was a good the existing Bank loans. RD 31. This gave the appearance deal for the Bank—a determination no one at the Bank had an that the borrowers had made a 10 percent down payment, opportunity to review since the agreement was not in writing or known to anyone other than Edward Towe. when they had not, and thus that the sales would be Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

854 Federal Reserve Bulletin • October 1997 deemed to comply with the regulatory requirements.9 The owned 13.5 percent of Towe Farms, and understood that down payment loans also made the borrowers' financial Towe Farms's losses on the mortgage insurance would be condition appear stronger than it actually was and created subject to indemnity by Towe Farms' shareholders. RFF the appearance that the loans were performing. RD 32. 526." After Grant had extended these retroactive down pay- The Towes' conduct with respect to the loans to finance ment loans, any payments received from borrowers were the purchases of foreclosed condominium properties conapplied to the Grant loans rather than to the Bank loans. stituted unsafe and unsound practices and breaches of their Edward Towe testified that Grant's preferred status was the fiduciary duty to the Bank. The making of loans to less product of an agreement that he made with himself to than creditworthy borrowers without adequate review, the subordinate the Bank's position to Grant's. RD 32; diversion of the small down payments made by the borrow- Tr. 5778. There is no evidence in the record that there was ers, the subordination of the Bank's loans to the Grant any independent review of this agreement on behalf of the down payment loans, and the Bank's reimbursement of Bank or that the Bank obtained any benefit for the subordi- Towe Farms for mortgage insurance payments all exacernation of its position with regard to these loans. Edward bated the Bank's losses with respect to the condominium and Thomas Towe then falsified the loan ledgers, recon- properties. In addition, the loans to finance the condominstructing them to conceal aspects of these transactions, ium purchases failed to comply with the OCC's regulaincluding the fact that the proceeds of the loans from Grant tions. had been applied to reduce the principal amount of the Bank loans. RD 32-35; RFF 492. 4. Sham Transactions (c) Sham Mortgage Insurance. In December 1988, the (a) Jacobson Sham Transaction. Edward Towe, with OCC informed the Bank that the condominiums were still Thomas Towe's knowledge, caused the Bank to engage in considered to be OREO, despite the down payment loans a sham transaction with the purpose of clouding the title of from Grant. The Bank therefore purchased the down pay- property part-owned by a former business partner, with ment loans from Grant and tried another way to remove the whom he was feuding. The former partner, Ellis Jones, had condominiums from OREO status. The Bank paid Grant built his personal home on land in which he owned an $16,084, representing full principal and interest on the undivided half-interest. Towe family interests owned the down payment loans. Defaults on these loans following other undivided half-interest, which was so encumbered by the Bank's acquisition resulted in losses of over $11,000. IRS liens as to be worthless. RD 16. Edward Towe, through RD 33. Grant, conveyed the Towes' interest in the property to a Under OCC regulations, a bank may finance in excess of nominee, John Jacobson. Towe then caused the Bank to 90 percent of the purchase price of foreclosed OREO purport to loan Jacobson $53,000 secured by the property, property and still consider the transaction to be an effective evidenced by a mortgage that included the Jones home. sale if private mortgage insurance covers the amount of the One day later, the $53,000 was repaid to the Bank by bank's loan in excess of 90 percent of the purchase price. Jacobson through Grant, and Grant took the Jacobson loan As part of this new attempt to establish effective sales of and the mortgage. RD 18. the condominiums, Edward and Thomas Towe arranged The net effect was to cloud Jones's title to the property, for another family entity, Towe Farms, to issue what ap- which led to a lawsuit, settled by the Bank after paying peared to be private mortgage insurance to condominium Thomas Towe $5371 in legal fees. Thomas Towe objected purchasers to cover 10 percent of the loan amount. In to the transaction at a board meeting because it would reality, as the ALJ found, the mortgage insurance was a expose the Bank to a lawsuit for slander of title, but complete sham. RD 36. The Bank was rarely reimbursed Edward Towe insisted on proceeding with the transaction. despite the high default rate, and in those cases where RFF 93-94. Towe Farms did make payments under the policies, the This sham transaction12 had no prospect of producing a Bank frequently reimbursed Towe Farms for the payments. In other cases, Towe Farms' liability to the Bank was "waived" by Edward Towe. RD 35- 37.10 Thomas Towe 11. In 1989 the OCC informed the Bank that it needed to document the legal and financial capacity of Towe Farms to issue private 9. In addition, Grant applied funds to delinquent condominium mortgage insurance, and noted that Montana law requires a certificate loans to create the appearance that the loans were performing. RD 32. of authority to transact insurance. Thomas Towe's response was to Given the relationship between the Bank and Grant, it cannot be call the Montana Insurance Commissioner's office to ask if a "guaranassumed that Grant's down payment loans actually shifted any risk of tee" was subject to the insurance laws. When told that it was not, loss with respect to the condominium loans from the Bank to Grant. Thomas Towe ended his research into the issue. RFF 515-519. 10. Although actual private mortgage insurance on the condomin- 12. Among the indicia that this was a sham transaction were that: ium loans would have required substantial premiums, neither the Bank Jacobson did not file a financial statement or loan application; no title nor the borrowers paid Towe Farms for issuing its mortgage insur- search was performed; the collateral was not appraised; Jacobson did ance. This may explain why, despite defaults on 38 covered mortgage not pay property taxes or secure insurance for the property; Jacobson loans, Towe Farms paid out only three times (excluding those pay- never made a single payment of principal or interest; and Edward ments that were fully reimbursed by the Bank), with total payments of Towe did not believe that Jacobson had the monev to pay the loan. $4715. RFF 508-509, 522. RFF 68-74. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 855 benefit to the Bank,13 in fact caused the Bank a loss at least a $50,000 penalty for an additional year of self-dealing. in the form of unnecessary legal fees, and displayed Ed- RFF 113-115. ward Towe's willingness to misuse the Bank for personal On January 1, 1992, in order to give the appearance of ends. In their exceptions to the ALJ's findings, Respon- complying with that requirement, Edward Towe, with the dents do not dispute the facts concerning the transaction or knowledge and consent of Thomas Towe, effected a circueven its motivation, but argue that it caused no harm and lar transaction between the Towe Foundation and Grant did not constitute wrongdoing. Except, at 200-201. Re- accounts at the Bank. Edward Towe deposited a check spondents argue that in the settlement of the ensuing litiga- drawn on Towe Foundation's account, in the amount of tion with Jones, Jones dropped the slander of title claim $994,500, into Grant's account; simultaneously, he deposand the Bank was able to make a settlement of unrelated ited a check in the same amount, drawn on Grant's acclaims that Thomas Towe regarded as favorable. Except, at count, into Towe Foundation's account. Neither account 202. had sufficient funds to pay the checks; Grant's account had The Board rejects those exceptions. The manipulation of a balance of $3007, and Towe Foundation's account had a a bank for a self-dealing transaction is an unsafe or un- balance of $11,036. Edward Towe admitted that part of the sound practice when it is motivated by spite as well as purpose of the transaction was to produce Bank documents when it is motivated by venality.14 As the Board has that Thomas Towe could use to show to the IRS that the previously observed: Towe Foundation's investment in Grant had been liqui- The safety or soundness element addresses the dated. RFF 111-125. nature, rather than the degree, of the departure from The Board rejects Respondents' argument that the transordinary standards of prudent banking. Conduct action represented a legitimate assignment of assets from departing from such standards represents an unsafe Grant to the Towe Foundation in lieu of cash, and that the or unsound banking practice when it is of a kind exchange of checks was merely Edward Towe's idiosynthat, if continued, would present an abnormal cratic bookkeeping method of recording the transaction. risk—i.e., risks other than those inherent in doing Even though Grant eventually transferred some assets to business—of harm or loss to the bank. Towe Foundation, that was not the transaction reflected by In re Van Dyke, No. AA-EC-87-88 (June 13, 1988), slip the exchange of checks, and it was those cancelled checks op. at 26, aff'd, Van Dyke v. Board of Governors, 876 F.2d that were used to demonstrate to the IRS that Towe Foun- 1377, 1380 (8th Cir. 1989); see Greene County Bank v. dation had liquidated its investment in Grant. FDIC, 92 F.3d 633, 636 (8th Cir. 1996) (unsafe or unsound The Board finds that the Bank's involvement in this practice is conduct deemed contrary to accepted standards transaction, which was designed to mislead the IRS, exof banking operation which might result in abnormal risk posed the Bank to possible financial penalties. Accordor loss to a banking institution or shareholder). ingly, Edward and Thomas Towe engaged in an unsafe and The Jacobson transaction exposed the Bank to substan- unsound transaction and a breach of fiduciary duty by tial financial loss for slander of title, and caused actual loss entering into the transaction. in the form of whatever settlement value was exchanged for the dropping of the claim.15 Furthermore, the transac- 5. Violations of Cease and Desist Order tion cost the Bank a portion of the $5,7103 in legal fees paid to Thomas Towe. (b) New Year's Day Sham Transaction. Edward Towe's tax In 1986, before the Towes assumed control, the Bank problems included a claim by the IRS that Grant was consented to the issuance of a cease and desist order, which Edward Towe's alter ego and that, as such, it had engaged continued in effect throughout the time relevant to the in acts of self-dealing in 1989, 1990, and 1991. RFF 113. Notice. Among other things, the Order required the Bank At the end of 1991, Edward Towe was under pressure from to revise and implement its lending policy, adopt and the IRS to cause the Towe Foundation to liquidate its implement written policies and procedures governing investment in Grant by the end of the year or be subject to charge-offs and recognition of losses, establish a loan review system, adopt and implement policies governing supervision and control of non-accrual loans, and refrain from extending credit without obtaining and analyzing 13. Edward Towe conceded that the transaction was not intended to current and satisfactory credit information. benefit the Bank. RD 18; RFF 100. From January 1987 until June 1992, during the time the 14. Notwithstanding Respondents' arguments that there was noth- Towes were in control, the Bank operated in continuous ing wrong with the use of the Bank to gain revenge against Jones violation of the Order in a host of respects including: (Except, at 214-15), such practices are clearly contrary to generally failing to adhere to workout programs; failing to comply accepted standards of prudent operation and, if continued, could pose an abnormal risk to the institution. They therefore meet the standard with the Bank's loan policy; failing to recognize quarterly for "unsafe or unsound banking practice." losses; and failing to require current and satisfactory credit 15. The Bank settled claims brought by Jones totalling $28,000 for information. RD 50. OCC examiners severely criticized $9000, and it is impossible to determine what portion of the payment these failures in reports in January and September 1987, was associated with the slander of title claim. Similarly, it cannot be 1988, 1989, and 1991. Id. The board of directors failed to determined what portion of the legal fees are properly attributed to the transaction. take effective action to comply because Thomas Towe Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

856 Federal Reserve Bulletin • October 1997 repeatedly reassured the board that the Bank was in com- directors may not simply delegate away their responsibilipliance with almost all provisions of the Order. ties for compliance. The Board rejects Respondents' exception arguing that The violations of the cease and desist order unquestionbecause the Order used the word "adherence" with respect ably caused loss to the Bank. As an example, the condoto one article of the Order, but not others, the Order should minium loans were made in violation of the loan policies be read as excusing non-adherence to the plans, policies, the cease and desist order required the Bank to adopt. The programs and systems that the Order concededly required 1991 examination classified around $300,000 in condominthe Bank to "adopt and implement," or "establish." Ex- ium loans as "loss." cept. 378-384. In construing the terms of the Order, the Board draws upon its institutional experience in requiring Basis For Prohibition the establishment of such programs through cease and desist orders. When an institution displays problems of The Board adopts the ALJ's recommended conclusions sufficient severity to warrant the imposition of a cease and that the conduct of each of the Respondents satisfies all of desist order, it is imperative that action be taken through the requirements for an order of prohibition. such programs to address identified problems in a manner endorsed by and monitored by the supervisor. Thomas Towe's construction of the Order, which implicitly reads it 1. Misconduct as requiring only empty formalities, is at odds with banking reality. The requirement of "adoption" or "establish- a. Unsafe and Unsound Banking Practices ment" and "implementation" of such programs in a cease Respondents participated in a host of unsafe and unsound and desist order therefore necessarily connotes "adher- banking practices reflected by self-dealing transactions inence" to the programs thus established. cluding: the disguised payment of compensation to Edward When the OCC appointed a conservator for the Bank in Towe; the commingling of the business operations of the June 1992, these violations of the Order were cited, among Bank and the other family interests; and the sham transacother things, as grounds for the conservatorship. When tions, which represented the manipulation of Bank rechallenged by the Bank, the OCC's findings were upheld sources for personal reasons rather than for legitimate by the courts, which expressly rejected the contention that Bank business. Each of these practices is contrary to pruthe Order required only "adoption," not actual implemen- dent principles of banking operation and, if continued, tation. of the policies specified. First Nat'I Bank & Trust could result in abnormal risk of harm or loss to the Bank. Dep't of Treasury. 63 F.2d 894, 899 (9th Cir. 1995)(Bank's argument "without merit" because it would "render the b. Breaches of Fiduciary Duty [Order] meaningless"). All of the transactions and practices represented conflicts The very fact that Thomas Towe maintains this untena- of interest between the Respondents' Bank and non-Bank ble argument before the Board undermines his argument duties, and thus breaches of the Respondents' fiduciary that he has been singled out for punishment as an "effec- duties to the Bank (and to the family interests for which tive advocate for the Bank." Except. 378. It instead shows they were fiduciaries.) The surreptitious payment of coma resistance to fundamental principles of banking and bank pensation to Edward Towe benefitted him while putting the regulation inconsistent with service as a bank director. Bank at significant risk, and the sham transactions were The Board also rejects the argument that Respondents undertaken to serve personal interests rather than those of could delegate their responsibility for compliance with the the Bank. Respondents' actions in connection with Grant Order to another bank officer. Except. 398-400. The Board Investments also showed repeated willingness to subordihas previously observed: nate the Bank's interests to those of other entities. Respon- A cease and desist order is the most important tool dents appeared not to recognize the existence of these available to federal banking agencies to ensure that bank- conflicts and took no action to avoid or cure them. ing organizations operate in a safe and sound manner and in conformance with law and regulation . . . The Board c. Violations of Law, Regulations, and Orders believes that these orders must be treated with seriousness Various of the transactions also reflected violations of law by the officers and directors of the companies against and regulation. For example, the transfer of low-quality which they are issued, because they are meant to assure assets between the Bank and the affiliated Towe family that banks operate in a safe and sound manner and do not interests, particularly Grant Investments, violated secput at risk the resources of the federal safety net and the tions 23A and 23B of the Federal Reserve Act (12 U.S.C. taxpayers. Under these circumstances, the Board must ex- §§ 371c and 371 c-1). The provision of free or belowpect and demand that [bank] officers and directors take market Bank services to Grant also violated section 23B. particular care to ensure that the provisions of such orders The Bank's failure legitimately to dispose of the condominare fulfilled, iums within the five-year holding period, and its failure accurately to report its continued holding of this real estate, In re Northwest Indiana Bancshares, Inc. (September 7, constituted violations of 12C.F.R. 7.3025 and 12 U.S.C. 1990) at 32-33, ajf'd sub nom. Stanley v. Board of Gover- § 29 and 161. Edward and Thomas Towe also participated nors, 940 F.2d 267 (7th Cir. 1991). For these reasons. in the Bank's violation of the 1986 cease and desist order. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 857 2. Effects Procedural Exceptions These practices, violations, and breaches unquestionably Administrative law judges are normally accorded wide caused both gain to the Respondents and financial and discretion in dealing with procedural issues before and other loss to the Bank. Respondents received financial gain during the hearing. The ALJ's decisions here were well in a number of the transactions and practices, including the within his authority under the Uniform Rules of Procedure disguised compensation payments (Edward Towe received governing the hearing, and Respondents' procedural excepthe payments that otherwise would have gone to the IRS); tions are therefore denied. See 12 C.F.R. 19.5. the New Years Day sham transaction (Edward Towe received gain through the avoided IRS penalty); and the Conclusion commingled Grant/Bank transactions (Grant, an affiliate of Respondents, gained at the expense of the Bank). In addi- For the foregoing reasons, the Board orders that the attion, the Bank suffered substantial financial loss through a tached Orders of Prohibition issue. number of the transactions and practices, including the By Order of the Board of Governors, this 18th day of disguised compensation payments (which exposed it to the August, 1997. IRS suit that was ultimately settled for $20,000), the provi- Board of Governors of the sion of free or below-market services to Grant, the com- Federal Reserve System mingled transactions which caused it repeatedly to throw good money after bad while Grant was paid off, the diver- WILLIAM W. WILLS sion of condominium down payments from the Bank into Secretary of the Board the account Edward Towe used to pay condominium buyers' expenses, and the violations of the cease and desist Order of Prohibition order that caused losses on the condominium loans, among others. WHEREAS, pursuant to section 8(e) of the Federal Deposit Insurance Act, as amended (the "Act")(12 U.S.C. 3. Culpability § 1818(e)), the Board of Governors of the Federal Reserve System ("the Board") is of the opinion, for the reasons set The record amply reflects that Respondents repeatedly forth in the accompanying Final Decision, that a final displayed willful disregard for the safety or soundness of Order of Prohibition should issue against EDWARD the Bank in every one of the transactions or practices, TOWE and THOMAS E. TOWE; consciously placing the interests of themselves and of their NOW, THEREFORE, IT IS HEREBY ORDERED that: other family interests ahead of the interests of the Bank. (1) In the absence of prior written approval by the Board, The Board also adopts the ALJ recommended conclusion and by any other Federal financial institution regulatory that both respondents engaged in "continuing disregard for agency where necessary pursuant to section 8(e)(7)(B) of the safety and soundness of the institution," a standard that the Act (12 U.S.C. § 1818(e)(7)(B)), EDWARD TOWE and captures conduct reflecting recklessness or indifference THOMAS E. TOWE are hereby prohibited: with respect to an institution's safety. See Brickner v. (a) From participating in the conduct of the affairs of FDIC, 747 F.2d 1198, 1203 n.6. (8th Cir. 1984); Grubb v. any bank holding company, any insured depository FDIC, 34 F.3d 956, 962 (10th Cir. 1994). institution or any other institution specified in Furthermore, a number of the practices also meet the subsection 8(e)(7)(A) of the Act (12 U.S.C. alternative requirement of personal dishonesty in that they § 1818(e)(7)(A)); served the purpose of deception. These practices include (b) From soliciting, procuring, transferring, attemptthe disguised compensation payments, the surreptitious ing to transfer, voting or attempting to vote any proxy, down payment loans, and the New Years Day sham trans- consent, or authorization with respect to any voting action. In addition, Edward Towe's admitted physical alter- rights in any institution described in subsection ation of the terms of the Preiss deed further evidenced 8(e)(7)(A) of the Act (12 U.S.C. § 1818(e)(7)(A)); personal dishonesty. (c) from violating any voting agreement previously Accordingly, all of the elements required for issuance of approved by the appropriate Federal banking agency; an order of prohibition have been amply met.16 or 16. The Board denies Respondents' exception relating to the ALJ's amended recommendation as to the term of prohibition, revising his initial recommendation of a term-limited order to one with an indefi- requests in his motion for clarification. The Board notes that the FDI nite term. In a recent case the Board expressed doubt that it has the Act specifically distinguishes between persons generally participating authority to order any term of prohibition other than indefinite. See In in the conduct of the affairs of a bank, and an independent contractor, re Vickery, 83 Federal Reserve Bulletin 535, 541 (1997). In any event, such as an attorney. 12 U.S.C. § 1813(u)(3)-(4). See Cavallari v. Office the Board would be disinclined on the facts of this case to issue any of the Comptroller of the Currency, 57 F.3d 127 (2d Cir. 1995) term of prohibition other than indefinite. (finding attorney to be an institution-affiliated party under 12 U.S.C. The Board also declines to issue an advisory opinion on the applica- § 1813(u)(4)). Thomas Towe should seek any more specific guidance tion of the Order of Prohibition to Thomas Towe's law practice, as he he desires from the appropriate financial institution regulatory agency. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

858 Federal Reserve Bulletin • October 1997 (d) From voting for a director, or from serving or By Order of the Board of Governors, this 18th day of acting as an institution-affiliated party as defined in August, 1997. section 3(u) of the Act, (12 U.S.C. § 1813(u)), such as an officer, director, or employee. 2. This Order, and each provision hereof, is and shall remain fully eifective and enforceable until expressly Board of Governors of the stayed, modified, terminated or suspended in writing by the Federal Reserve System Board. This Order shall become eifective upon the expiration of WILLIAM W. WILES thirty days after service is made. Secretary of the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A1 Financial and Business Statistics A3 GUIDE TO TABULAR PRESENTATION Federal Finance—Continued All Federal debt subject to statutory limitation DOMESTIC FINANCIAL STATISTICS All Gross public debt of U.S. Treasury— Types and ownership Money Stock and Bank Credit A28 U.S. government securities A4 Reserves, money stock, liquid assets, and debt dealers—Transactions measures A29 U.S. government securities dealers— A5 Reserves of depository institutions, Reserve Bank Positions and financing credit A30 Federal and federally sponsored credit A6 Reserves and borrowings—Depository agencies—Debt outstanding institutions Securities Markets and Corporate Finance Policy Instruments A31 New security issues—Tax-exempt state and local A7 Federal Reserve Bank interest rates governments and corporations A8 Reserve requirements of depository institutions A32 Open-end investment companies—Net sales A9 Federal Reserve open market transactions and assets A32 Corporate profits and their distribution Federal Reserve Banks A32 Domestic finance companies—Assets and liabilities A10 Condition and Federal Reserve note statements A33 Domestic finance companies—Consumer, real estate, A11 Maturity distribution of loan and security and business credit holdings Monetary and Credit Aggregates Real Estate A11 Aggregate reserves of depository institutions A34 Mortgage markets and monetary base A35 Mortgage debt outstanding A12 Money stock, liquid assets, and debt measures A14 Deposit interest rates and amounts outstanding— Consumer Credit commercial and BIF-insured banks A36 Total outstanding A3 6 Terms Commercial Banking Institutions— Assets and Liabilities Flow of Funds A15 All commercial banks A37 Funds raised in U.S. credit markets A16 Domestically chartered commercial banks A39 Summary of financial transactions A17 Large domestically chartered commercial banks A40 Summary of credit market debt outstanding A19 Small domestically chartered commercial banks A41 Summary of financial assets and liabilities A20 Foreign-related institutions DOMESTIC NONFINANCIAL STATISTICS Financial Markets A22 Commercial paper and bankers dollar Selected Measures acceptances outstanding A42 Nonfinancial business activity— All Prime rate charged by banks on short-term Selected measures business loans A42 Labor force, employment, and unemployment A23 Interest rates—money and capital markets A43 Output, capacity, and capacity utilization A24 Stock market—Selected statistics A44 Industrial production—Indexes and gross value Federal Finance A46 Housing and construction A47 Consumer and producer prices A25 Federal fiscal and financing operations A48 Gross domestic product and income A26 U.S. budget receipts and outlays A49 Personal income and saving Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • October 1997 INTERNATIONAL STATISTICS Securities Holdings and Transactions A60 Foreign transactions in securities Summary Statistics A61 Marketable U.S. Treasury bonds and A50 U.S. international transactions—Summary notes—Foreign transactions A51 U.S. foreign trade A51 U.S. reserve assets Interest and Exchange Rates A51 Foreign official assets held at Federal Reserve A61 Discount rates of foreign central banks Banks A61 Foreign short-term interest rates A52 Selected U.S. liabilities to foreign official A62 Foreign exchange rates institutions A63 GUIDE TO STATISTICAL RELEASES AND Reported by Banks in the United States A52 Liabilities to and claims on foreigners SPECIAL TABLES A53 Liabilities to foreigners A55 Banks' own claims on foreigners SPECIAL TABLES A56 Banks' own and domestic customers' claims on A64 Terms of lending at commercial banks, foreigners May 1997 A56 Banks' own claims on unaffiliated foreigners A68 Pro forma balance sheet and income statements A57 Claims on foreign countries— for priced service operations, June 30, 1997 Combined domestic offices and foreign branches A70 INDEX TO STATISTICAL TABLES Reported by Nonbanking Business Enterprises in the United States A58 Liabilities to unaffiliated foreigners A59 Claims on unaffiliated foreigners Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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

A4 Domestic Nonfinancial Statistics • October 1997 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS. AND DEBT MEASURES Percent annual rate of change, seasonally adjusted1 1996 1997 1997 MMoonneellaarryy oorr ccrreeddiitt aaggggrreeggaattee Q3 Q4 Ql Q2 Mar. Apr. May June July Reserves of depositorv institutions' 1 Total -16.4 -17.2 -8.3 -14.3 -17.0 -21.9 -9.7 1.5r -5.6 2 Required -16.5 -18.5 -8.4 —15.0r -20.7 -18.6 -15.8 ,5r -3.8 3 Nonborrowed -17.6 -16.2 -7.2 -16.0 -19.9 -24.5 -9.3 - 1.6r -6.7 4 Monetary base'1 5.3 5.1 5.6 3.3 3.5 1.6 3.6 4.7 7.4 Concepts of money, liquid assets, and debt4 5 M1 -6.5 -7.3 -.7 -5.5 -6.0 -11.3 -2.7 .6 -1.0 6 M2 3.4 5.1 6.1 4.3 5.2 6.1 -.1 4.6 4.5 7 M3 5.5 8.2 8.2 7.1r 7.9 9.5' 2.0r 5.9r 11.0 8 L 6.5 7.2 6.7 7.7 ' 8.2' 10.3' 3.1r 6.4 n.a. 9 Debt 5.2r 5.0 4.5 4.9 5.3 5.9 3.9r 2.6 n.a. Nonlransaction components 10 In M23 7.7 10.3 8.7 8.1 9.6 12.7 .9' 6.2 6.5 11 In M3 only6 13.4r 19.6r 15.6r 16.8r 16.8r 21.3r 8.9' 10.1r 32.7 Time and savings deposits Commercial banks P Savinas, including MMDAs 12.0 17.0 14.0 10.7 17.1 17.6 -3.2 5.7 9.3 13 Smalltime7 3.7 4.7 2.9 5.9 5.1 5.6 6.2 11.6 12.6 14 Large time8'} 19.1 22.9 12.8 23.7 25.5 35.4 4.6 25.6 47.1 Thrift institutions 15 Savinas. including MMDAs .2 .8 2.7 5.8 2.3 9.7 7.7 .0 -1.6 16 Smalltime7 -.3 3.0 .1 -3.1 -10.5 -4.1 3.4 -4.1 -13.3 17 Large time8 9.0 9.1 12.8 5.1 1.5 7.3 -1.5 11.7 21.6 Monet market mutual funds 18 Retail 16.3 17.2 16.3 14.7 19.9 24.5 -4.2 12.1 12.6 19 Institution-onlv 20.7 19.8 15.5 12.5 25.1 -.8 .0 28.1 19.6 Repurchase agreements and Eurodollars 70 Repurchase agreements10 -4.0' 3.0' 8.5r 5.2r -10.1' 16.2' 3.6r — 12.4r 41.9 21 Eurodollars'" 9.7' 48.2r 40.6r 30.8r 21.0r 45.3' 61.7' -50.5r 7.5 Debt components4 2~> Federal 3.8 3.2 1.8 .7 4.7 2.4 -3.9 -3.9 n.a. 23 Nonfederal 5.7r 5.6 5.4r 6.3 5.6r 7.2' 6.6r 4.8 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 daily figures Average of daily figures for week ending on date indicated May July June 18 June 25 July 2 July 9 July 16 July 23 July 30 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 449,169r 447,486 450,254r 456,507 449,824 U.S. government securities2 2 Bought outright—System account3 405,099 407,635 410,681 407,195 409,750 409,846 411,184 411,118 410,818 3 Held under repurchase agreements 10,616 7,801 3,618 6.331 7,427 11,652 3.575 5,039 1,713 Federal agency obligations 4 Bought outright 1,970 1,563 1,220 1,496 1,496 1,422 1,236 1,222 1,209 5 Held under repurchase agreements 680 862 814 659 457 831 1,513 1,096 163 6 Acceptances 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 66 94 105 9 69 425 21 10 27 8 Seasonal credit 176 243 330 221 295 304 294 303 347 9 Extended credit 0 0 0 0 0 0 0 0 0 10 Float 150 474r 497 1,278 -21' 608 754 197 566 11 Other Federal Reserve assets 30,028 30,497 31.534 30,297 30.787 31,419 31,246 31,694 31,540 12 Gold stock 11,051 11,050 11,050 11,050 11,050 11,050 11,050 11,049 11,049 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 25,260r 25,31 lr 25,369 25.310r 25,322r 25,335 25,349 25,363 25,377 ABSORBING RESERVE FUNDS 15 Currency in circulation 448,766r 451,823r 456,114 451,814r 451,528r 453,544 458,067 456,881 455,217 16 Treasury cash holdings 320 343 336 344 344 344 346 345 334 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 11,513 4,750 6,831 11,868 12,577 3,902 4,919 5,212 18 Foreign 175 182 175 172 208 177 171 190 168 19 Service-related balances and adjustments . . . 7,117 7,185 7,309 7,146 7,122 7,559 7,285 7,251 7,293 20 Other 356 366 319 374 338 324 324 321 311 21 Other Federal Reserve liabilities and capital . . 15,132 15,497 15,354 15,198 15,194 15,467 15,172 15,359 15,343 22 Reserve balances with Federal Reserve Banks4 10,918 10,487r 10.063 11,168 9,223r 12,100 10,155 11,026 8,130 End-of-month figures Wednesday figures May July July 2 July 9 July 16 July 23 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 447,054 451,816 449,141 450,131 446,018 U.S. government securities" 2 Bought outright—System account3 405,124 410.914 407,839 407,451 409,719 411,461 410,155 411,733 409,877 3 Held under repurchase agreements 7,453 15,456 6,326 9,211 13,140 3,360 3,415 4,840 1,650 Federal agency obligations 4 Bought outright 1,970 1,496 1,209 1,496 1,496 1,236 1,236 1,209 1,209 5 Held under repurchase agreements 1,847 1,117 743 966 1.400 1,725 1.470 500 190 6 Acceptances 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 353 1,587 14 393 1,142 107 4 1 8 Seasonal credit 219 307 398 268 309 296 291 328 365 9 Extended credit 0 0 0 0 0 0 0 0 0 10 Float 103 461r 959 811 -703r 1,848 1,253 128 948 11 Other Federal Reserve assets 29,986 32,338 31,459 30,562 31,349 30,747 31,214 31,388 31,778 12 Gold stock 11,051 11,050 11,051 11,050 11,050 11,050 11,050 11,049 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 25.284' 25,335r 25,405 25,310' 25,322'' 25,335 25,349 25,363 25,377 ABSORBING RESERVE FUNDS 15 Currency in circulation 451,141r 453,624r 455,103 452,468r 452,834r 456,813 458,689 456,880 455,703 16 Treasury cash holdings 330 343 311 344 343 346 347 336 323 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 5,174 16,368 5,014 9,050 19,285 5,253 4,645 6,562 4,942 18 Foreign 177 178 175 167 468 172 170 265 163 19 Service-related balances and adjustments . . 7,124 7,559 7,139 7,146 7,122 7,559 7,285 7,251 7,293 20 Other 325 321 325 371 337 340 303 317 308 21 Other Federal Reserve liabilities and capital 16,037 15,517 14,785 14,940 15,166 14,971 15,101 15,167 15,138 22 Reserve balances with Federal Reserve Banks" 12,281 15,350r 11,752 11,846 7,120r 11,945 8,200 8,965 7,777 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 • October 1997 1.12 RESERVES AND BORROWINGS Depository Institutions' Millions of dollars Prorated monthly averages of biweekly averages RReesseerrvvee ccllaassssiiffiiccaattiioonn 1994 1995 1996 1997 Dec. Dec. Dec. Jan. Feb. Mar. Apr. May Juner July 1 Reserve balances with Reserve Banks2 24,658 20,440 13,395 11,710 11,455 11,515 12,308 10,916 10,291 9,854 2 Total vault cash1 40,378 42.094 44,426 47,172 43,375 42,116 41,381 41,111 42,398 43,129 3 Applied vault cash4 36,682 37.460 37,848 38,932 36,588 36,029 35,571 35,081 36.319 36,530 4 Surplus vault cash5 3,696 4,634 6,578 8,240 6,788 6,087 5,810 6,030 6,079 6,599 5 Total reserves6 61,340 57,900 51,243 50,642 48,043 47,543 47,879 45,997 46,610 46,383 6 Required reserves 60,172 56,622 49,819 49,419 47,012 46,383 46,869 44,757 45,330 45,179 7 Excess reserve balances at Reserve Banks7 1.168 1,278 1,424 1,223 1,031 1,160 1,010 1,240 1,280 1,204 8 Total borrowings at Reserve Banks8 209 257 155 45 42 156 261 243 367 409 9 Seasonal borrowings 100 40 68 19 21 37 88 173 243 330 10 Extended credit9 0 0 0 0 0 0 0 0 0 0 Biweekly averages of daily figures for two week periods ending on dates indicated 1997 Apr. 9 Apr. 23 May 7 May 21 June 4 June 18 July 2r July 16 July 30 Aug. 13 1 Reserve balances with Reserve Banks" 12,620 12,516 11,493 10,547 11,030 9,782 10,639 10,560 9,007 10,251 2 Total vault cash3 41,640 40,986 41,838 40,879 40,929 43,447 41,664 42,756 43,703 43,250 3 Applied vault cash4 35,916 35.359 35,551 34,780 35,176 36,911 36,009 36,565 36,559 36,665 4 Surplus vault cash'1 5,724 5,627 6,288 6,099 5,753 6,536 5,655 6,191 7,144 6,585 5 Total reserves6 48,536 47,874 47,043 45,326 46,205 46,693 46,648 47,125 45,566 46,916 6 Required reserves 47,313 47,209 45,619 44,280 44,821 45,417 45,398 45,739 44,561 45,576 7 Excess reserve balances at Reserve Banks7 1,223 665 1,424 1,046 1,384 1,276 1,250 1,386 1,005 1,340 8 Total borrowings at Reserve Banks8 344 228 219 189 336 222 547 314 484 426 9 Seasonal borrowings 61 86 127 169 210 205 300 299 363 371 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. 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 credit1 Seasonal credit2 Extended credit3 FFeeddeerraall RReesseerrvvee BBaannkk 9/ O 5/ n 9 7 Effective date Previous rate 9/ O 5/ n 9 7 Eifective date Previous rate 9/ O 5/ n 9 7 Effective date Previous rate Boston 5.00 2/1/96 5.25 5.60 8/28/97 5.55 6.10 8/28/97 6.05 New York 1/31/96 Philadelphia 1/31/96 Cleveland 1/31/96 Richmond 2/1/96 Atlanta 1/31/96 Chicago 2/1/96 St. Louis 2/5/96 Minneapolis 1/31/96 Kansas City 2/1/96 Dallas 1/31/96 San Francisco 5.00 1/31/96 5.25 5.60 8/28/97 5.55 6.10 8/28/97 6.05 Range of rates for adjustment credit in recent years4 Range (or F.R. Bank Range (or F.R. Bank Range (or F.R. Bank level)—All of 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. 1 8.5-9.5 9.5 13 9.5 9.5 Sept. 13 5-5.5 5 3 9.5 9.5 Nov. 22 9-9.5 9 17 5 5 26 9 9 Nov. 6 4.5-5 4.5 1979—July 20 10 10 Dec. 14 8.5-9 9 7 4.5 4.5 Aug. 17 10-10.5 10.5 15 8.5-9 8.5 Dec. 20 3.5-4.5 3.5 20 10.5 10.5 17 8.5 8.5 24 3.5 3.5 Sept. 19 10.5-11 11 21 11 11 1984—Apr. 9 8.5-9 9 1992—July 2 3-3.5 3 Oct. 8 11-12 12 13 9 9 7 3 3 10 12 12 Nov. 21 8.5-9 8.5 26 8.5 8.5 11999944——MMaayy 1177 3-3.5 3.5 1980—Feb. 15 12-13 13 Dec. 24 8 8 1188 3.5 3.5 19 13 13 Aug. 16 3.5-4 4 May 29 12-13 13 1985—May 20 7.5-8 7.5 18 4 4 30 12 12 24 7.5 7.5 Nov. 15 4-4.75 4.75 June 13 11-12 11 17 4.75 4.75 16 11 11 1986—Mar. 7 7-7.5 7 July 28 10-11 10 10 7 7 1995—Feb. 1 4.75-5.25 5.25 29 10 10 Apr. 21 6.5-7 6.5 9 5.25 5.25 Sept. 26 11 11 23. 6.5 6.5 Nov. 17 12 12 July II 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 SSeepptt.. 55.. 11999977 5.00 5.00 14 1987—Sept. 4 5.5-6 6 11 6 6 1. Available on a short-term basis to help depository institutions meet temporary needs for of the Federal Reserve Bank, this time period may be shortened. Beyond this initial period, a funds that cannot be met through reasonable alternative sources. The highest rate established flexible rate somewhat above rates charged on market sources of funds is charged. The rate for loans to depository institutions may be charged on adjustment credit loans of unusual size ordinarily is reestablished on the first business day of each two-week reserve maintenance that result from a major operating problem at the borrower's facility. period, but it is never less than the discount rate applicable to adjustment credit plus 50 basis 2. Available to help relatively small depository institutions meet regular seasonal needs for points. funds that arise from a clear pattern of intrayearly movements in their deposits and loans and 4. For earlier data, see the following publications of the Board of Governors: Banking and that cannot be met through special industry lenders. The discount rate on seasonal credit takes Monetary Statistics, 1914-1941, and 1941-1970; and the Annual Statistical Digest, 1970into account rates charged by market sources of funds and ordinarily is reestablished on the 1979. first business day of each two-week reserve maintenance period; however, it is never less than In 1980 and 1981, the Federal Reserve applied a surcharge to short-term adjustment-credit the discount rate applicable to adjustment credit. borrowings by institutions with deposits of $500 million or more that had borrowed in 3. May be made available to depository institutions when similar assistance is not successive weeks or in more than four weeks in a calendar quarter. A 3 percent surcharge was reasonably available from other sources, including special industry lenders. Such credit may in effect from Mar. 17, 1980, through May 7, 1980. A surcharge of 2 percent was reimposed be provided when exceptional circumstances (including sustained deposit drains, impaired on Nov. 17, 1980; the surcharge was subsequently raised to 3 percent on Dec. 5, 1980, and to access to money market funds, or sudden deterioration in loan repayment performance) or 4 percent on May 5. 1981. The surcharge was reduced to 3 percent effective Sept. 22, 1981, practices involve only a particular institution, or to meet the needs of institutions experiencing and to 2 percent effective Oct. 12, 1981. As of Oct. 1, 1981, the formula for applying the difficulties adjusting to changing market conditions over a longer period (particularly at times surcharge was changed from a calendar quarter to a moving thirteen-week period. The of deposit disintermediation). The discount rate applicable to adjustment credit ordinarily is surcharge was eliminated on Nov. 17, 1981. charged on extended-credit loans outstanding less than thirty days; however, at the discretion Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Nonfinancial Statistics • October 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 deposits' 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 Annual 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 11/2 years was reduced from 3 percent to 11/2 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 x/2 years was reduced from 3 against which the 3 percent reserve requirement applies be modified annually by 80 percent of percent to zero on Jan. 17, 1991. the percentage change in transaction accounts held by all depository institutions, determined The reserve requirement on nonpersonal time deposits with an original maturity of 1 '/2 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 '/2 years (see note 5). Under the Garn-St Germain Depository Institutions Act of 1982, the Board adjusts the amount of reservable liabilities subject to a zero percent reserve requirement each year for the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A9 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS' Millions of dollars 1996 1997 TTyyppee ooff ttrraannssaaccttiioonn 11999944 11999955 11999966 aanndd mmaattuurriittyy Dec. Jan. Feb. Mar. Apr. May June U.S. TREASURY SECURITIES2 Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 17,484 10,932 9,901 0 0 0 0 4,006 0 596 2 Gross sales 0 0 0 0 0 0 0 0 0 0 3 Exchanges 380,327 405,296 426,928 34,211 40,346 33,997 31,720 33,160 47,456 33,022 4 For new bills 380,327 405,296 426,928 34,211 40,346 33.647 31,720 33,160 47,456 33,022 5 Redemptions 0 900 0 0 0 0 0 0 0 0 Others within one vear 6 Gross purchases 733 390 524 0 0 818 0 0 383 494 V Gross sales 0 0 0 0 0 0 0 0 0 0 8 Maturity shifts 0 43,574 30,512 2.259 2,481 5,086 3,143 2,006 5,666 1,476 9 Exchanges -31,949 -35,407 -41.394 -1,950 -550 -2,864 -1,534 -2,100 -4,229 -2,250 10 Redemptions 2,337 1.776 2,015 0 607 0 0 376 0 0 One to five years 11 Gross purchases 9,916 5,366 3,898 0 0 1,125 2,861 1,924 1,102 2,797 12 Gross sales 0 0 0 0 0 0 0 0 0 0 13 Maturity shifts -6.004 -34,646 -25,022 -2,259 -2,481 -4,926 -3,143 -2,006 -4,685 -1,476 14 Exchanges 26,458 26,387 31,459 1.950 550 1,874 1.534 1,700 2,479 2,250 Five to ten years 15 Gross purchases 3,575 1,432 1.116 0 0 0 0 0 734 499 16 Gross sales 0 0 0 0 0 0 0 0 0 0 17 Maturity shifts -3.145 -3,093 - 5,469 0 0 1,236 0 0 -981 0 18 Exchanges 4,717 7,220 6,666 0 0 890 0 400 1.750 0 More than ten years 19 Gross purchases 3,606 2,529 1.655 0 0 0 1.117 0 988 906 20 Gross sales 0 0 0 0 0 0 0 0 0 0 21 Maturity shifts -918 -2,253 -20 0 0 -1,396 0 0 0 0 22 Exchanges 775 1,800 3,270 0 0 450 0 0 0 0 All maturities 23 Gross purchases 35,314 20.649 17,094 0 0 1,943 3,978 5,930 3,206 5,292 24 Gross sales 0 0 0 0 0 0 0 0 0 0 25 Redemptions 2,337 2,676 2,015 0 607 0 0 376 0 0 Matched transactions 26 Gross purchases 1,700,836 2,197,736 3,092,399 272,117 285,667 250,867 288,373 303,056 287,229 293,506 27 Gross sales 1,701,309 2,202,030 3,094,769 273,872 283,240 254,741 288,073 301,177 287,826 293,008 Repurchase agreements 28 Gross purchases 309,276 331.694 457.568 85,924 74,422 48,805 60.425 102,578 46,552 60,286 29 Gross sales 311,898 328,497 450,359 73,501 86,673 45,747 60,718 62,685 89.477 47,070 30 Net change in U.S. Treasury securities 29,882 16.875 19,919 10,669 -10,430 1.127 3.984 47.326 -40,316 19.006 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 1,003 409 12 187 27 17 24 0 474 Repurchase agreements 34 Gross purchases 52,696 36,851 75,354 7,796 17,668 9,795 14,300 10,178 7,954 9.228 35 Gross sales 52,696 36,776 74,842 8,947 17,995 9.454 14.830 10,285 7.096 9,131 36 Net change in federal agency obligations -942 -928 103 -1,163 -514 314 -547 -131 858 -377 37 Total net change in System Open Market Account . . . 28,940 15,948 20,021 9,506 -10,944 1,441 3,437 47,195 -39,458 18,629 1. Sales, redemptions, and negative figures reduce holdings of the System Open Market 2. Transactions exclude changes in compensation for the effects 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 • October 1997 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements1 Millions of dollars Wednesday End of month AAAccccccooouuunnnttt 1997 1997 July 2 July 9 July 16 July 23 July 30 May 31 June 30 July 31 Consolidated condition statement ASSETS 1 Gold certificate account 11,050 11,050 11,049 11,050 11,051 11,051 11,050 11,051 2 Special drawing rights certificate account 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 3 Coin 473 459 468 471 477 531 492 484 Loans 4 To depository institutions 1,438 398 332 366 1,679 571 1,894 411 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 1 Bought outright 1,236 1,236 1,209 1,209 1,209 1,970 1,496 1,209 8 Held under repurchase agreements 1,725 1,470 500 190 975 1,847 1,117 743 9 Total U.S. Treasury securities 414,821 413,570 416,573 411,527 417,919 412,577 426,370 414,165 10 Bought outright2 411,461 410,155 411,733 409,877 408,992 405,124 410,914 407,839 11 Bills 196,077 194,772 196,947 195,091 194,207 194,437 195.531 193,053 12 Notes 161,122 161,122 160,524 160,524 160,524 157,770 161,122 160,524 13 Bonds 54,261 54,261 54,261 54,261 54,261 52,916 54,261 54,261 14 Held under repurchase agreements 3,360 3,415 4,840 1,650 8,927 7,453 15,456 6,326 15 Total loans and securities 419,220 416,674 418,615 413,292 421,782 416,965 430,878 416,529 16 Items in process of collection 8,916 7,988 7,241 6,424 5,733 4,188 2,400 4,833 17 Bank premises 1,251 1,252 1,259 1,259 1,258 1,243 1,251 1,257 Other assets 18 Denominated in foreign currencies3 17,972 17,979 17,986 17,992 17,999 18,080 17,970 17,204 19 All other4 11,696 12,213 12,267 12,400 13,074 10,727 13,295 12,976 20 Total assets 479,778 476,815 478,084 472,088 480,574 471,985 486,536 473,534 LIABILITIES 21 Federal Reserve notes 432,297 434,145 432,321 431,119 430,862 426,718 429,124 430,492 22 Total deposits 25,498 21,051 24,009 20,080 28,624 25,268 40,087 23,646 23 Depository institutions 19,732 15,932 16,865 14,668 22,984 19,592 23,219 18,132 24 U.S. Treasury—General account 5,253 4,645 6,562 4,942 5,153 5,174 16,368 5,014 25 Foreign—Official accounts 172 170 265 163 170 177 178 175 26 Other 340 303 317 308 316 325 321 325 27 Deferred credit items 7,011 6,518 6,586 5,751 5,549 3,962 1,808 4,611 28 Other liabilities and accrued dividends5 4,779 4,691 4,663 4,575 4,929 5,187 5,029 4,919 29 Total liabilities 469,585 466,405 467,580 461,525 469,963 461,135 476,048 463,667 CAPITAL ACCOUNTS 30 Capital paid in 5,055 5,063 5,074 5,079 5,087 4,828 5,050 5,087 31 Surplus 4,496 4,496 4,496 4,496 4,496 4,496 4,496 4,317 32 Other capital accounts 642 852 934 988 1,028 1,527 943 462 33 Total liabilities and capital accounts 479,778 476,815 478,084 472,088 480,574 471,985 486,536 473,534 MEMO 34 Marketable U.S. Treasury securities held in custody for foreign and international accounts 630,606 628,414 627,882 629,980 631,119 643,549 632,925 634,814 Federal Reserve note statement 35 Federal Reserve notes outstanding (issued to Banks) 541,847 541,156 540,855 540,941 541,296 536,348 542,199 541,783 36 LESS: Held by Federal Reserve Banks 109,550 107,010 108,534 109,821 110,434 109,630 113,075 111,291 37 Federal Reserve notes, net 432,297 434,145 432,321 431,119 430,862 426,718 429,124 430,492 Collateral held against notes, net 38 Gold certificate account 11,050 11,050 11,049 11,050 11,051 11,051 11,050 11,051 39 Special drawing rights certificate account 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. Treasury and agency securities 412,047 413,896 412,072 410,869 410,611 406,468 408,874 410,241 42 Total collateral 432,297 434,145 432,321 431,119 430,862 426,718 429,124 430,492 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 All 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holding Millions of dollars Wednesday End of month TTTyyypppeee ooofff hhhooollldddiiinnnggg aaannnddd mmmaaatttuuurrriiitttyyy 1997 1997 July 2 July 9 July 16 July 23 July 30 May 30 June 30 July 31 1 Total loans 1,438 398 332 366 1,677 571 1,894 412 2 Within fifteen days' 1,191 180 209 310 1,610 466 1,726 193 3. Sixteen days to ninety days 248 218 123 56 73 105 169 218 4 Total U.S. Treasury securities2 414,821 413,570 416,573 411,527 417,919 412,577 426,370 414,165 5 Within fifteen days' 12,768 17,059 19,827 15,482 16,820 8,778 23,839 9,419 6 Sixteen days to ninety days 95,093 89,047 87,937 94,167 92,691 100,730 94,494 88,758 7 Ninety-one days to one year 128,617 129,122 131,778 124,847 131,377 127,057 129,694 139,787 8 One year to five years 95,315 95,315 94,034 94,004 94,004 94,392 95,315 93,174 9 Five years to ten years 39,017 39,016 39,016 39,016 39,016 38,516 39,016 39,016 10 More than ten years 44,011 44,011 44,011 44,011 44,011 43,105 44,011 44,011 11 Total federal agency obligations 2,961 2,706 1,709 1,399 2,184 3,797 2,613 2,130 12 Within fifteen days' 1,752 1,497 500 354 1,154 2,301 1,392 922 13 Sixteen days to ninety days 269 329 349 200 185 434 281 185 14 Ninety-one days to one year 210 150 145 130 130 315 210 130 15 One year to five years 416 416 401 401 401 416 416 401 16 Five years to ten years 290 290 290 290 290 307 290 290 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 . Dec. Jan. Feb. Mar. Apr. May Juner July Seasonally adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS2 1 Total reserves" 60.55 59.40 56.39 50.06 50.06 49.52 49.01 48.31 47.43 47.05 47.11 46.89 2 Nonborrowed reserves4 60.46 59.20 56.13 49.91 49.91 49.47 48.97 48.16 47.17 46.81 46.74 46.48 3 Nonborrowed reserves plus extended credit5 60.46 59.20 56.13 49.91 49.91 49.47 48.97 48.16 47.17 46.81 46.74 46.48 4 Required reserves 59.48 58.24 55.11 48.64 48.64 48.29 47.98 47.15 46.42 45.81 45.83 45.68 5 Monetary base6 386.88 418.48 434.52 452.67 452.67 454.14 456.28 457.62 458.24 459.61 461.42 464.25 Not seasonally adjusted 6 Total reserves7 62.37 61.13 58.02 51.52 51.52 50.67 48.12 47.69 48.09 46.26 46.93 46.76 7 Nonborrowed reserves 62.29 60.92 57.76 51.37 51.37 50.62 48.08 47.53 47.83 46.02 46.56 46.35 8 Nonborrowed reserves plus extended credit5 62.29 60.92 57.76 51.37 51.37 50.62 48.08 47.53 47.83 46.02 46.56 46.35 9 Required reserves8 61.31 59.96 56.74 50.10 50.10 49.44 47.09 46.53 47.08 45.02 45.65 45.56 10 Monetary base9 390.59 422.51 439.03 456.72 456.72 455.55 452.56 455.26 458.17 458.30 461.82 465.59 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS10 11 Total reserves" 62.86 61.34 57.90 51.24 51.24 50.64 48.04 47.54 47.88 46.00 46.61 46.38 12 Nonborrowed reserves 62.78 61.13 57.64 51.09 51.09 50.60 48.00 47.39 47.62 45.75 46.24 45.97 13 Nonborrowed reserves plus extended credit5 62.78 61.13 57.64 51.09 51.09 50.60 48.00 47.39 47.62 45.75 46.24 45.97 14 Required reserves 61.80 60.17 56.62 49.82 49.82 49.42 47.01 46.38 46.87 44.76 45.33 45.18 15 Monetary base'2 397.62 427.25 444.45 463.49 463.49 462.71 459.64 462.22 465.06 465.23 468.80 472.62 16 Excess reserves'3 1.06 1.17 1.28 1.42 1.42 1.22 1.03 1.16 1.01 1.24 1.28 1.20 17 Borrowings from the Federal Reserve .08 .21 .26 .16 .16 .05 .04 .16 .26 .24 .37 .41 1. Latest monthly and biweekly figures are available from the Board's H.3 (502) weekly 8. To adjust required reserves for discontinuities that are due to regulatory changes in statistical release. Historical data starting in 1959 and estimates of the effect on required reserve requirements, a multiplicative procedure is used to estimate what required reserves reserves of changes in reserve requirements are available from the Money and Reserves would have been in past periods had current reserve requirements been in effect. Break- Projections Section, Division of Monetary Affairs, Board of Governors of the Federal Reserve adjusted required reserves include required reserves against transactions deposits and nonper- System, Washington, DC 20551. sonal time and savings deposits (but not reservable nondeposit liabilities). 2. Figures reflect adjustments for discontinuities, or "breaks," associated with regulatory 9. The break-adjusted monetary base equals (1) break-adjusted total reserves (line 6), 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 Nonfinancial Statistics • October 1997 1.21 MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES' Billions of dollars, averages of daily figures 1997 Item 1993 1994 1995 1996 Dec. Dec. Dec. Dec. Apr. May June July Seasonally adjusted Measures' 1 Ml 1,129.8 1,150.7 1,129.0 1,081.0 1,065.1 1,062.7 1,063.2 1,062.3 M2 3,486.6 3,502.1 3,655.0 3,834.3 3,905.0 3,904.7 3,919.8 3,934.4 3 M3 4,254.4 4,327.3r 4,592.5r 4,933.0r 5,067.5 5,075.8r 5,100.8r 55,,114477..55 4 1. 5,167.8 5,308.4r 5,697.6r 6,098.7r 6,254.9r 6,270.9r 6,304.2 nn..aa.. Debt 12,508.7 13,150.9 13,866.9r 14,614.0r 14,857.8r 14,905.9r 14,937.8 n.a. Ml components 6 Currency3 322.2 354.4 372.6 395.2 403.7 406.1 407.7 410.3 / Travelers checks4 7.9 8.5 8.9 8.6 8.3 8.2 8.0 8.2 8 Demand deposits5 385.2 384.1 391.1 402.4 395.4 395.6 397.3 396.4 y Other checkable deposits6 414.5 403.8 356.5 274.8 257.7 252.8 250. r 247.4 Nontransaction components 10 In M2 2,356.8 2,351.4 2,526.0 2,753.3 2,839.9 2,842.0r 2,856.6 2,872.1 11 In M3 only8 767.8 825.3r 937.5r l,098.7r 1,162.5 l,171.1r 1,181 .C 1,213.2 Commercial banks 12 Savings deposits, including MMDAs 785.2 752.4 776.0 903.9 947.9 945.4 949.9 957.3 13 Small time deposits9 468.3 503.2 576.0 592.0 598.9 602.0 607.8 614.2 14 Large time deposits'0, " 271.9 298.4 344.7 412.3 439.7 441.4 450.8r 468.5 Thrift institutions 13 Savings deposits, including MMDAs 434.0 397.2 361.1 367.1 373.1 375.5 375.5 375.0 16 Small time deposits'1 314.3 314.3 357.7 353.7 350.8 351.8 350.6 346.7 1/ Large time deposits10 61.5 64.7 75.1 79.2 82.5 82.4 83.2 84.7 Money market mutual funds 18 Retail 354.9 384.3 455.2 536.6 569.2 567.2 572.9 578.9 19 Institution-only 209.5 198.5 246.9 299.3 311.6 311.6 318.9 324.1 Repurchase agreements and Eurodollars 20 Repurchase agreements1- 158.6 182.9 182.1 194.0r 202. lr 202.7r 200.6' 207.6 21 Eurodollars'2 66.4 80.8r 88.7r 113.9'" 126.5r 133.0r 127.4' 128.2 Debt components 22 Federal debt 3,323.3 3,492.2 3,638.8 3,780.4 3,806.8 3,794.3 3,782.1 n.a. 23 Nonfederal debt 9,185.4 9,658.7 10,228. r 10,833.6r 11,051.1r 11,111.6r 11,155.7 n.a. Not seasonally adjusted Measures2 24 Ml 1,153.7 1,174.4 1,152.8 1,103.0 1,071.6 1,051.8 1,062.5 1,063.9 25 M2 3,506.6 3,522.5 3,675.3 3,852.8 3,922.0r 3,887.2 3,917.3' 3,939.2 26 M3 4,274.8 4,347.4r 4,612.0r 4,950.0r 5,075.1 5,057.6r 5,097.0' 55,,114455..33 2/ L 5,197.7 5,338.8r 5,729.5r 6,128.1r 6,266.7r 6,247.4r 6,288.7 nn..aa.. 28 Debt 12,510.7 13,152.4 13,867.3' 14,612.1r 14,820.9r 14,857.6r 14,890.6 n.a. Ml components 29 Currency3 324.8 357.5 376.2 397.9 403.4 406.1 408.4 411.4 3 3 0 1 T D r e a m ve a l n e d r s d c e h p e o c s k it s s 4 5 401 7 . . 8 6 400 8 . .1 3 407 8 . . 3 5 418 8 . . 8 3 396 8. . 2 4 387 8 . . 3 2 396 8 . . 3 2 398 8 . . 1 7 32 Other checkable deposits6 419.4 408.6 360.8 278.0 263.6r 250.2 249.5' 245.6 Nontransaction components 33 In M2 2,352.9 2,348.1 2,522.6 2,749.8 2,850.4 2,835.4 2,854.8' 2,875.4 34 In M3 only8 768.2 824.9r 936.6r l,097.2r l,153.1r 1,170.4r 1,179.7' 1,206.1 Commercial banks 35 Savings deposits, including MMDAs 784.3 751.7 775.3 902.9 949.4 943.7 952.7' 960.7 36 Small time deposits' 466.8 501.5 573.8 589.8 600.6 603.2 608.2 614.8 37 Large time deposits10' " 272.0 298.9 345.7 413.7 435.7 443.6 451.1' 466.0 Thrift institutions 38 Savings deposits, including MMDAs 433.4 396.8 360.8 366.7 373.7 374.8 376.6 376.3 39 Small time deposits9 313.3 313.2 356.3 352.4 351.8 352.5 350.8 347.1 40 Large time deposits'" 61.5 64.8 75.4 79.5 81.8 82.8 83.3 84.2 Money market mutual funds 41 Retail 355.0 385.0 456.3 538.1 574.8 561.1 566.5 576.5 42 Institution-only 210.6 199.8 248.2 300.5 309.2 307.0 313.1 321.0 Repurchase agreements and Eurodollars 43 Repurchase agreements'2 156.6 179.6 178.0 188.8r 200.8r 205.3r 205.8' 208.3 44 Eurodollars12 67.6 81.8r 89.4r 114.7r 125.6r 131.8r 126.5' 126.5 Debt components 45 Federal debt 3,329.5 3,499.0 3,645.9 3,787.9 3,810.3 3,781.3 3,766.2 n.a. 46 Nonfederal debt 9,181.2 9,653.5 10,221.4r 10,824.2r 11,010.6' 1 l,076.3r 11,124.5 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 U.S. government, and foreign banks and official institubalances at depository institutions and money market funds. Seasonally adjusted M2 is tions, less cash items in the process of collection and Federal Reserve float. calculated by summing savings deposits, small-denomination time deposits, and retail money 6. Consists of NOW and ATS account balances at all depository institutions, credit union fund balances, each seasonally adjusted separately, and adding this result to seasonally share draft account balances, and demand deposits at thrift institutions. adjusted Ml. 7. Sum of (1) savings deposits (including MMDAs), (2) small time deposits, and (3) retail M3: M2 plus (1) large-denomination time deposits (in amounts of $100,000 or more) money fund balances. issued by all depository institutions, (2) balances in institutional money funds (money funds 8. Sum of (1) large time deposits, (2) institutional money fund balances, (3) RP liabilities with minimum initial investments of $50,000 or more), (3) RP liabilities (overnight and term) (overnight and term) issued by depository institutions, and (4) Eurodollars (overnight and issued by all depository institutions, and (4) Eurodollars (overnight and term) held by U.S. term) of U.S. addressees. residents at foreign branches of U.S. banks worldwide and at all banking offices in the United 9. Small time deposits—including retail RPs—are those issued in amounts of less than Kingdom and Canada. Excludes amounts held by depository institutions, the U.S. govern- $100,000. All IRAs and Keogh accounts at commercial banks and thrift institutions are ment, money market funds, and foreign banks and official institutions. Seasonally adjusted subtracted from small time deposits. M3 is calculated by summing large time deposits, institutional money fund balances, RP 10. Large time deposits are those issued in amounts of $100,000 or more, excluding those liabilities, and Eurodollars, each seasonally adjusted separately, and adding this result to booked at international banking facilities. seasonally adjusted M2. 11. Large time deposits at commercial banks less those held by money market funds, L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term Treasury depository institutions, the U.S. government, and foreign banks and official institutions. securities, commercial paper, and bankers acceptances, net of money market fund holdings of 12. Includes both overnight and term. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Nonfinancial Statistics • October 1997 1.22 DEPOSIT INTEREST RATES AND AMOUNTS OUTSTANDING Commercial and BIF-insured saving banks' 1996 1997 Item 1995 1996 Dec. Dec. Nov. Dec. Jan. Feb. Mar. Apr. May June July Interest rates (annual effective yields) INSURED COMMERCIAL BANKS 1 Negotiable order of withdrawal accounts2 I.91 n.a. 1.98 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 2 Savings deposits" 3.10 n.a. 2.85 n.a. 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 J 7 to 91 days 4.10 4.03 4.08 4.03 4.03 4.05 4.02 4.01 4.07 4.09 4.08 4 92 to 182 days 4.68 4.63 4.60 4.63 4.63 4.62 4.67 4.72 4.77 4.79R 4.76 5 183 days to 1 year 5.02 5.00 4.99 5.00 5.01 5.02 5.08 5.13 5.15 5.16 5.15 6 More than 1 year to 2^/2 years 5.17 5.22 5.23 5.22 5.25 5.27 5.36 5.46 5.45 5.44 5.41 / More than 2Vl years 5.40 5.46 5.48 5.46 5.49 5.51 5.60 5.69 5.68 5.69 5.63 BIF-INSURED SAVINGS BANKS4 8 Negotiable order of withdrawal accounts" 1.91 n.a. 1.92 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 9 Savings deposits-'1 2.98 n.a. 2.82 n.a. 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 4.67 4.66 4.75 4.73 4.80 4.83 4.81 4.82 4.87 11 92 to 182 days 4.95 5.02 5.03 5.02 5.05 5.04 5.06 5.13 5.15 5.13R 5.13 12 183 days to 1 vear 5.18 5.28 5.29 5.28 5.31 5.31 5.37 5.43 5.45 5.47 5.44 13 More than 1 year to 2'zi years 5.33 5.53 5.56 5.53 5.58 5.59 5.69 5.75 5.77 5.72 5.74 14 More than 2V2 years 5.46 5.72 5.76 5.72 5.77 5.78 5.84 5.91 5.91 5.90R 5.89 Amounts outstanding (millions of dollars) INSURED COMMERCIAL BANKS 15 Negotiable order of withdrawal accounts" 248,417 n.a. 167,503 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 16 Savings deposits-" 776,466 n.a. 896,820 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 17 Personal 615,113 n.a. 713,672 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 18 Nonpersonal 161,353 n.a. 183,148 n.a. 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 7 to 91 days 32,170 32,931 32,044 32,931 32,799 32,796 34,853 34,485 32,561 31,464r 30,115 20 92 to 182 days 93,941 92,301 92,503 92,301 94,955 95,235 93,804 92.432 91,234 91,512r 90,765 21 183 days to 1 year 183,834 201,449 201,281 201,449 201,491 202,329 203,336 207,006 209,296 21 l,961r 211,772 22 More than 1 year to 2 x/2 years 208,601 213,198 214,405 213,198 213,875 212,970 214,066 226,159 220,795 228,783r 231,833 23 More than 2'/2 years 199,002 199,906 198,539 199,906 198,077 197,958 200,282 199,147 198,694 197,903r 195,665 24 IRA and Keogh plan deposits 150,067 151,275 151.389 151,275 150,442 150,356 151,931 151,105 151,192 152,639r 152,137 BIF-INSURED SAVINGS BANKS4 25 Negotiable order of withdrawal accounts" 11,918 n.a. 9,710 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 26 Savings deposits"'1 68,643 n.a. 68,102 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 27 Personal 65,366 n.a. 64,369 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 28 Nonpersonal 3,277 n.a. 3.733 n.a. 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 2,405 2,428 2,542 2,535 2,656 2,698 2,738 2,684 2,596 30 92 to 182 days 12,140 13,013 13,074 13,013 13,112 13,099 13,377 13,463 13,731 13,747r 13,629 31 183 days to 1 year 25,686 28,792 29,329 28.792 29,503 29,510 30,002 30,076 29,661 29,804r 29,850 32 More than 1 year to 2'/2 years 27,482 29,095 28,573 29,095 29,163 29,699 31,028 31,616 31,664 32,126r 32,730 33 More than 2'/2 years 22,866 22,254 21,823 22,254 21,828 21,877 21,731 21,640 21,391 21,472r 21,171 34 IRA and Keogh plan accounts 21,408 21,365 20,627 21,365 20,405 20,423 20,860 20,860 20,683 20,595r 20,557 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 1997r 1997 July Jan. Feb. Mar. Apr. May June July July 9 July 16 July 23 July 30 Seasonally adjusted Assets 1 Bank credit 3,685.6 3,803.8 3,840.4 3,860.1 3,900.9 3,909.2 3,932.4 3,963.0 3,946.3 3,958.6 3,962.1 3,984.7 2 Securities in bank credit 984.7 1,004.4 1,020.1 1,014.2 1,034.0 1,015.7 1,012.5 1,032.5 1,026.1 1,029.6 1,031.3 1,044.0 3 U.S. government securities 708.2 706.4 703.6 708.3 723.6 723.3 726.4 727.2 733.5 724.3 721.7 727.7 4 Other securities 276.5r 298.0 316.5 305.9 310.4 292.4 286.1 305.3 292.5 305.3 309.7 316.3 5 Loans and leases in bank credit2 . . . 2,700.9 2,799.4 2,820.3 2,845.9 2,866.9 2,893.5 2,920.0 2,930.5 2,920.2 2,929.0 2,930.7 2,940.6 6 Commercial and industrial 744.7 785.4 793.7 798.0 805.2 811.0 817.9 822.1 819.9 822.7 821.2 823.9 7 Real estate 1,104.8 1,134.7 1,140.3 1,153.9 1,166.9 1,177.7 1,187.1 1,191.6 1,189.9 1,190.2 1,192.6 1,194.0 8 Revolving home equity 80.1 85.7 86.5 87.9 89.7 90.9 92.4 93.3 93.0 93.2 93.4 93.6 9 Other 1,024.7 1,049.0 1,053.8 1,066.0 1,077.2 1,086.8 1,094.8 1,098.3 1,096.9 1,097.0 1,099.1 1,100.4 10 Consumer 511.8 521.5 520.5 518.1 516.2 519.1 521.7 521.4 520.9 521.1 521.9 522.0 11 Security3 77.9 82.4 83.9 88.2 89.7 89.1 94.0 95.3 91.3 94.9 94.1 100.8 12 Other loans and leases 261.7 275.5 282.0 287.7 288.9 296.6 299.3 300.1 298.2 300.2 301.0 300.0 13 Interbank loans 197.7 198.9 204.7 220.0 216.0 218.6 191.7 186.1 179.2 193.6 189.0 182.8 14 Cash assets4 220.5 232.2 233.4 239.9 246.4 244.0 248.3 244.8 237.8 248.8 244.2 248.5 15 Other assets5 247.7 256.2 265.0 272.8 277.3 277.7 282.7 277.8 277.5 279.1 277.9 277.7 16 Total assets6 4,294.0 4,435.0 4,487.4 4,536.6 4,584.0 4,593.0 4,598.2 4,614.4 4,5833 4,622.8 4,616.0 4,636.5 Liabilities 17 Deposits 2,743.0 2,871.9 2,892.6 2,916.1 2,949.7 2,937.3 2,971.8 2,992.4 2,983.5 3,000.7 2.990.7 2,992.0 18 Transaction 743.9 715.1 705.1 699.8 701.9 690.1 694.5 688.7 673.7 694.8 691.6 696.1 19 Nontransaction 1,999.1 2,156.8 2,187.6 2,216.3 2,247.8 2,247.2 2,277.3 2,303.6 2,309.7 2,305.9 2,299.1 2,295.9 20 Large time 447.3r 526.7 542.3 548.5 567.8 563.2 580.5 599.7 599.3 597.2 599.2 604.0 21 Other 1,551.8r 1,630.1 1,645.2 1,667.8 1,679.9 1,684.0 1,696.7 1,703.9 1,710.5 1,708.7 1,699.9 1,691.9 22 Borrowings 701.1 724.2 735.2 747.9 763.7 766.9 737.6 736.5 728.5 731.3 735.4 749.0 23 From banks in the U.S 287.1 300.6 304.9 313.0 313.2 302.8 271.2 266.5 264.0 270.8 260.0 269.5 24 From others 414.0 423.6 430.3 434.8 450.6 464.0 466.4 470.0 464.6 460.5 475.4 479.5 25 Net due to related foreign offices 257.4 222.3 217.7 209.1 211.5 233.7 229.4 215.3 220.5 225.4 209.1 207.6 26 Other liabilities 219.9 268.5 286.2 277.6 270.3 262.5 263.2 277.3 270.1 272.1 279.9 289.8 27 Total liabilities 3,921.5 4,086.9 4,131.7 4,150.7 4,195.2 4,2003 4,201.9 4,221.5 4,202.5 4,229.4 4,215.0 4,238.5 28 Residual (assets less liabilities)7 372.6 348.1 355.7 385.9 388.8 392.7 396.2 392.9 380.8 393.4 401.0 398.0 Not seasonally adjusted Assets 29 Bank credit 3,682.8 3,802.5 3,833.2 3,850.5 3,900.4 3,913.9 3,936.1 3,958.7 3,945.8 3,952.2 3,951.5 3,980.4 30 Securities in bank credit 983.3 995.8 1,016.7 1,016.9 1.036.4 1,024.8 1,018.9 1,029.7 1,024.5 1,023.6 1,026.0 1,043.9 31 U.S. government securities 705.8 700.4 702.3 712.9 726.3 725.8 726.2 723.1 726.8 719.3 718.2 726.2 32 Other securities 277.5 295.4 314.4 304.0 310.2 299.0 292.8 306.7 297.7 304.4 307.9 317.7 33 Loans and leases in bank credit2 . . . 2,699.5r 2,806.7 2,816.5 2,833.7 2,863.9 2,889.1 2,917.2 2,928.9 2,921.3 2,928.5 2,925.5 2,936.5 34 Commercial and industrial 745.8r 783.1 793.3 800.6 812.5 817.8 821.4 823.4 823.3 823.9 821.7 822.6 35 Real estate 1,104.8 1,136.7 1,137.2 1,147.9 1,162.4 1,173.3 1,185.5 1,191.7 1,190.6 1,190.9 1,191.8 1,193.5 36 Revolving home equity 80.1 85.7 86.1 87.1 88.9 90.6 92.4 93.3 93.0 93.3 93.4 93.7 37 Other 1,024.7 1,051.0 1,051.1 1,060.8 1,073.5 1,082.6 1,093.1 1,098.4 1,097.6 1,097.6 1,098.4 1,099.8 509.7 527.2 521.2 513.5 513.7 517.0 518.8 519.0 516.9 518.3 520.1 521.2 39 Security-1 76.5 81.6 85.0 87.8 90.2 89.5 93.6 93.8 89.4 93.6 92.4 99.6 40 Other loans and leases 262.6 278.1 279.8 283.8 285.1 291.4 298.0 301.1 301.1 301.8 299.5 299.6 195.2 208.7 209.1 216.4 214.4 214.2 189.2 183.8 181.7 191.1 181.8 179.3 42 Cash assets4 217.3 242.5 234.5 230.8 241.7 241.8 244.9 241.1 240.3 245.0 228.9 246.0 43 Other assets5 249.4 256.8 264.9 268.2 275.0 280.0 282.8 279.8 280.9 279.1 276.1 281.9 44 Total assets6 4,287.5 4,454.7 4,485.8 4,509.8 4,574.9 4,593.2 4,596.0 4,606.4 4,591.7 4,610.4 4,5813 4,630.6 Liabilities 45 Deposits 2,734.5 2,875.8 2,877.6 2,904.8 2,947.1 2,928.6 2,967.0 2,983.7 2,991.3 2,990.0 2,958.8 2,982.5 46 Transaction 737.0 726.5 698.1 687.6 705.1 680.2 688.8 682.5 681.2 686.2 664.2 689.8 47 Nontransaction 1,997.4 2,149.2 2,179.5 2,217.3 2,242.0 2,248.4 2,278.2 2,301.2 2,310.1 2,303.8 2,294.6 2,292.6 48 Large time 444.2r 525.4 541.9 548.6 563.5 568.1 580.3 595.4 590.7 592.5 597.2 603.0 49 Other l,553.2r 1.623.8 1,637.6 1,668.6 1,678.5 1,680.4 1,697.9 1,705.9 1,719.4 1,711.3 1,697.3 1,689.7 50 Borrowings 714.7 718.6 719.7 728.4 764.7 776.7 756.7 749.8 740.9 747.3 747.1 759.0 51 From banks in the U.S 296.1 294.8 293.1 301.3 311.9 310.9 284.0 274.4 272.4 279.2 266.4 276.4 52 From others 418.6 423.8 426.6 427.1 452.7 465.8 472.7 475.3 468.5 468.1 480.8 482.6 53 Net due to related foreign offices 252.0 232.7 228.6 218.3 210.1 236.7 220.0 211.5 208.7 217.1 212.9 210.7 54 Other liabilities 218.8 265.8 288.1 275.8 270.6 266.1 265.5 275.6 266.9 270.5 276.8 289.9 55 Total liabilities 3,920.0 4,092.8 4,114.1 4,127.3 4,192.5 4,208.0 4,209.1 4,220.6 4,207.8 4,224.9 4,195.6 4,242.0 56 Residual (assets less liabilities)7 367.5 361.9 371.7 382.4 382.4 385.2 386.9 385.8 383.9 385.5 385.7 388.6 MEMO 57 Revaluation gains on off-balance-sheet items8 n.a. 88.7 101.8 90.4 90.1 81.4 76.7 87.8 78.3 82.5 86.5 90.7 58 Revaluation losses on off-balancesheet items8 n.a. 85.0 98.5 86.9 88.0 85.7 81.4 92.4 80.8 86.4 90.4 96.3 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Financial Statistics • October 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 1997r 1997 July Jan. Feb. Mar. Apr. May June July July 9 July 16 July 23 July 30 Seasonally adjusted - Assets 1 Bank credit 3,216.7 3,288.1 3,309.8 3,334.8 3,367.2 3,369.3 3,389.8 3,417.1 3,402.0 3,415.4 3,422.1 3,429.2 1 Securities in bank credit 833.8 834.4 843.2 841.3 855.9 840.1 835.0 847.5 840.6 847.0 849.9 853.8 3 U.S. government securities 628.0 624.6 618.2 624.7 635.7 633.4 634.1 633.6 635.0 632.7 633.7 632.2 4 Other securities 205.8 209.8 225.0 216.6 220.2 206.8 201.0 214.0 205.6 214.3 216.2 221.6 5 Loans and leases in bank credit2 2,382.9 2,453.7 2,466.6 2,493.5 2,511.3 2,529.1 2,554.7 2,569.5 2,561.4 2,568.4 2,572.3 2,575.3 6 Commercial and industrial 550.7 571.0 576.5 581.9 588.6 591.3 597.3 601.6 599.2 601.9 602.1 602.6 7 Real estate 1,071.8 1,102.8 1,108.2 1,122.3 1.135.5 1,147.1 1,157.5 1,163.1 1,161.1 1,161.8 1,164.2 1,165.4 8 Revolving home equity 80.1 85.7 86.5 87.9 89.7 90.9 92.4 93.3 93.0 93.2 93.4 93.6 9 Other 991.8 1,017.2 1,021.8 1,034.4 1,045.8 1,056.2 1,065.1 1,069.8 1,068.1 1,068.6 1,070.8 1,071.8 10 Consumer 511.8 521.5 520.5 518.1 516.2 519.1 521.7 521.4 520.9 521.1 521.9 522.0 11 Security1 45.9 44.3 44.1 48.4 46.5 45.6 48.0 50.5 49.8 50.6 48.9 52.5 12 Other loans and leases 202.7 214.1 217.2 222.7 224.5 226.0 230.2 233.1 230.5 233.0 235.2 232.8 13 Interbank loans 178.2 176.2 183.8 197.3 197.0 198.0 171.8 166.5 160.7 174.0 168.8 162.9 14 Cash assets4 192.2 201.1 200.5 207.6 213.7 210.0 212.6 210.8 204.4 215.0 210.5 214.2 15 Other assets5 209.8 218.2 223.9 231.8 238.2 238.8 241.5 234.7 233.7 234.4 236.2 235.1 16 Total assets6 3,739.7 3,827.7 3,862.2 3,915.5 3,959.8 3,959.8 3,958.9 3,972.1 3,943.8 3,981.8 3,980.7 3,984.5 Liabilities 17 Deposits 2,563.8 2,646.2 2,654.7 2,673.4 2,691.8 2,685.1 2,713.4 2,721.1 2,710.7 2,732.3 2,720.3 2,717.9 18 Transaction 733.3 704.8 695.4 689.3 691.1 678.8 683.4 677.5 662.4 684.1 680.3 684.7 19 Nontransaction 1.830.5 1,941.4 1,959.3 1,984.1 2,000.7 2,006.3 2,030.1 2,043.6 2,048.4 2,048.2 2,040.1 2,033.2 20 Large time 281.R 313.5 318.1 319.9 323.4 324.9 335.9 342.4 340.5 342.1 342.7 344.2 21 Other 1,549.4 1,627.9 1.641.3 1,664.2 1,677.3 1,681.4 1,694.2 1,701.3 1,707.8 1,706.2 1,697.3 1,689.0 22 Borrowings 577.5 593.9 592.0 607.9 623.7 623.1 596.1 598.8 592.3 593.3 604.0 606.0 23 From banks in the U.S 256.5 272.6 271.0 278.3 280.4 269.7 240.1 235.9 235.9 238.2 231.9 236.7 24 From others 320.9 321.3 321.0 329.6 343.3 353.4 356.0 362.9 356.4 355.1 372.1 369.3 25 Net due to related foreign offices 79.3 72.0 78.2 68.0 77.1 85.1 80.7 85.3 83.5 92.4 83.0 86.1 26 Other liabilities 151.2 178.6 186.4 183.7 178.3 173.1 173.0 180.7 177.3 176.7 183.0 186.9 27 Total liabilities 3,371.8 3,490.7 3,511.3 3,533.0 3,570.9 3,566.5 3,563.3 3,585.8 3,563.8 3,594.6 3,590.3 3,596.9 28 Residual (assets less liabilities)7 367.9 337.0 350.9 382.5 388.9 393.4 395.6 386.3 380.0 387.3 390.4 387.6 Not seasonally adjusted Assets 29 Bank credit 3,212.5 3,289.5 3,302.1 3,325.4 3,366.6 3,371.3 3,393.1 3,412.3 3,403.2 3,409.5 3,410.2 3,423.0 30 Securities in bank credit 832.3 829.6 838.8 843.3 857.9 844.3 840.8 846.0 842.7 843.7 845.0 851.8 31 U.S. government securities 626.7 617.6 615.1 626.3 638.9 635.3 635.2 632.2 633.6 631.2 631.5 631.7 32 Other securities 205.6 212.0 223.7 217.0 219.0 209.0 205.7 213.8 209.1 212.4 213.5 220.1 33 Loans and leases in bank credit2 2,380.2 2,459.9 2,463.2 2,482.1 2,508.7 2,527.0 2,552.2 2,566.4 2,560.5 2,565.8 2,565.2 2,571.2 34 Commercial and industrial 550.7 568.8 576.2 584.9 595.2 597.8 600.0 601.7 601.2 601.9 601.1 601.1 35 Real estate 1,072.0 1,104.8 1,105.1 1,116.4 1,131.4 1,142.9 1,155.9 1,163.2 1,161.8 1,162.6 1,163.4 1,165.2 36 Revolving home equity 80.1 85.7 86.1 87.1 88.9 90.6 92.4 93.3 93.0 93.3 93.4 93.7 37 Other 991.9 1,019.2 1,019.1 1,029.3 1.042.5 1,052.3 1,063.6 1,069.9 1,068.8 1,069.3 1,070.0 1,071.5 38 Consumer 509.7 527.2 521.2 513.5 513.7 517.0 518.8 519.0 516.9 518.3 520.1 521.2 39 Security3 44.5 43.5 45.2 48.1 47.0 46.0 47.6 48.9 47.9 49.3 47.3 51.3 40 Other loans and leases 203.2 215.6 215.5 219.2 221.3 223.2 229.8 233.5 232.7 233.7 233.3 232.4 41 Interbank loans 175.8 186.1 188.2 193.7 195.4 193.6 169.3 164.2 163.2 171.5 161.6 159.5 42 Cash assets4 188.8 211.1 202.4 199.0 209.8 207.8 208.5 207.0 206.8 211.3 195.2 211.5 43 Other assets5 212.2 219.6 223.0 227.8 237.3 240.1 241.7 237.6 238.5 235.4 235.1 239.6 44 Total assets6 3,732.3 3,850.5 3,859.9 3,890.0 3,952.9 3,956.3 3,955.7 3,964.4 3,955.0 3,970.9 3,945.4 3,976.7 Liabilities 45 Deposits 2,557.2 2,649.9 2,642.8 2,662.3 2,695.6 2,675.9 2,708.2 2,715.4 2,725.7 2,724.4 2,689.6 2,708.9 46 Transaction 726.4 716.2 688.2 677.3 694.8 669.4 677.8 671.2 670.1 675.3 653.0 678.5 47 Nontransaction 1,830.8 1,933.8 1,954.7 1,985.0 2,000.9 2,006.5 2,030.5 2,044.2 2,055.6 2,049.2 2,036.6 2,030.4 48 Large time 279.9 312.1 320.9 319.9 324.9 328.7 335.2 341.0 338.8 340.4 341.8 343.5 49 Other l,550.8r 1,621.6 1,633.7 1,665.1 1,676.0 1,677.8 1,695.3 1,703.3 1,716.9 1,708.8 1,694.8 1,686.8 50 Borrowings 583.5 591.5 583.1 594.3 622.1 633.0 610.2 603.0 594.9 598.8 607.4 608.9 51 From banks in the U.S 264.2 265.8 261.5 268.2 278.9 278.2 251.2 242.2 241.4 244.7 238.9 241.9 52 From others 319.3 325.6 321.6 326.1 343.2 354.8 359.0 360.8 353.5 354.1 368.6 367.0 53 Net due to related foreign offices 77.1 73.6 79.9 72.5 78.8 92.3 79.6 82.6 76.3 88.0 83.2 87.6 54 Other liabilities 151.7 176.7 185.8 182.0 178.8 174.1 174.4 181.2 177.2 177.7 183.0 187.6 55 Total liabilities 3,369.4 3,491.8 3,491.7 3,511.1 3,575.4 3,575.4 3,572.3 3,582.2 3,574.0 3,589.0 3,563.2 3,592.9 56 Residual (assets less liabilities)7 362.9 358.7 368.2 378.8 377.5 380.9 383.4 382.1 381.0 381.9 382.2 383.8 MEMO 57 Revaluation gains on off-balance-sheet items8 n.a. 47.5 55.9 49.0 49.5 42.0 38.5 44.3 41.2 42.8 45.5 48.3 58 Revaluation losses on off-balancesheet items8 n.a. 44.0 50.9 43.2 44.6 43.4 40.2 45.7 41.3 43.9 46.9 51.1 59 Mortgage-backed securities9 n.a. 244.9 244.1 246.2 249.5 249.6 249.0 250.2 252.2 251.6 251.4 251.4 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 Liabilities1—Continued C. Large domestically chartered commercial banks Billions of dollars Monthly averages Wednesday figures AAAccccccooouuunnnttt 1996 1997r 1997 July1" Jan. Feb. Mar. Apr. May June July July 9 July 16 July 23 July 30 Seasonally adjusted Assets 1 Bank credit 1,892.5 1,921.1 1,940.0 1,952.0 1,970.3 1,962.3 1,973.9 1,993.6 1,984.2 1,994.0 1,996.4 1.999.8 2 Securities in bank credit 433.8 432.7 443.0 437.5 448.4 431.9 428.1 440.9 435.1 441.0 442.4 446.0 3 U.S. government securities 307.3 303.2 297.8 302.1 311.4 308.2 309.6 308.8 311.4 308.4 308.2 306.5 4 Trading account 20.9 17.3 16.2 18.3 20.3 19.4 23.1 24.9 25.4 25.7 25.1 22.8 5 Investment account 286.3 286.0 281.6 283.8 291.1 288.8 286.4 283.9 286.0 282.7 283.1 283.7 6 Other securities 126.6 129.4 145.2 135.4 137.0 123.7 118.5 132.1 123.7 132.6 134.2 139.5 7 Trading account 58.1 64.6 79.9 69.3 71.9 58.3 51.7 64.1 57.1 65.3 66.3 69.8 8 Investment account 68.5 64.9 65.3 66.0 65.1 65.4 66.8 68.0 66.6 67.4 67.9 69.7 9 State and local government. . 20.6 20.5 21.1 20.8 20.8 21.1 21.7 22.1 22.2 22.0 22.1 22.2 10 Other 47.9 44.3 44.1 45.2 44.3 44.3 45.1 45.9 44.4 45.3 45.8 47.5 11 Loans and leases in bank credit2 . . . 1,458.7 1,488.5 1,497.0 1,514.6 1,521.9 1,530.4 1,545.8 1,552.7 1,549.1 1,553.0 1,554.0 1,553.8 12 Commercial and industrial 385.2 398.2 402.1 406.2 411.7 412.8 417.2 419.3 417.8 419.7 419.8 419.4 13 Bankers acceptances 1.6 1.9 1.6 1.7 1.6 1.6 1.6 1.6 1.5 1.5 1.5 1.5 14 Other 383.6 396.3 400.5 404.5 410.1 411.2 415.6 417.8 416.3 418.1 418.2 417.9 15 Real estate 594.4 599.4 600.1 606.0 609.3 615.8 620.7 619.9 620.6 619.5 619.8 619.5 16 Revolving home equity 57.1 59.2 59.6 60.4 61.0 61.9 63.2 63.9 63.7 63.9 64.0 64.2 17 Other 537.3 540.2 540.4 545.6 548.3 553.9 557.5 556.0 556.9 555.6 555.8 555.3 18 Consumer 295.2 299.7 301.4 300.0 298.5 299.9 300.2 300.6 300.5 301.0 300.9 300.4 19 Security3 41.5 39.8 39.4 43.5 41.9 40.9 43.3 45.7 45.1 45.8 44.1 47.8 20 Federal funds sold to and repurchase agreements with broker-dealers 25.8 23.9 24.0 27.1 23.8 23.3 26.5 28.6 28.3 28.4 27.6 29.8 21 Other 15.7 15.9 15.3 16.5 18.1 17.6 16.9 17.1 16.7 17.5 16.6 18.0 22 State and local government 11.8 11.7 11.6 11.5 11.2 11.1 11.2 11.2 11.2 11.2 11.1 11.1 23 Agricultural 9.1 8.7 8.7 8.7 8.7 8.9 8.8 8.7 8.7 8.6 8.7 8.7 24 Federal funds sold to and repurchase agreements with others 5.6 6.1 5.3 6.2 7.3 5.7 6.3 7.3 7.3 7.1 7.7 6.8 25 All other loans 63.2 61.2 62.7 64.9 64.1 64.8 66.0 65.7 64.1 66.0 67.1 65.1 26 Lease-financing receivables 52.7 63.8 65.8 67.4 69.1 70.5 72.2 74.3 73.8 74.1 74.6 74.9 27 Interbank loans 138.9 129.3 133.8 143.3 148.9 149.6 121.5 115.2 109.7 122.3 117.6 112.3 28 Federal funds sold to and repurchase agreements with commercial banks 93.1 81.4 83.9 92.0 96.8 93.4 69.8 69.5 63.9 77.2 72.4 66.6 29 Other 45.8 47.9 49.9 51.3 52.1 56.3 51.7 45.7 45.8 45.2 45.2 45.7 30 Cash assets4 134.9 139.0 135.5 140.4 145.2 143.0 142.8 141.8 138.2 144.0 141.2 144.8 31 Other assets5 163.4 169.8 173.3 174.4 179.6 181.4 179.3 172.7 173.0 171.9 174.0 172.2 32 Total assets6 2,291.5 2322.7 2346.2 2373.7 2,4073 2399.8 2380.8 2386.6 2368.1 2395.5 2392.6 23925 Liabilities 33 Deposits 1,414.1 1,447.6 1,445.4 1,453.3 1,465.7 1,455.3 1,469.8 1,462.9 1,459.9 1,470.6 1,460.4 1,457.4 34 Transaction 429.4 402.9 392.7 385.8 385.7 375.1 378.3 371.6 364.2 375.9 372.2 374.6 35 Nontransaction 984.7 1,044.8 1,052.7 1,067.6 1,080.0 1,080.1 1,091.4 1,091.3 1,095.7 1,094.7 1,088.2 1,082.8 36 Large time 142.4 159.7 162.8 163.5 167.8 167.9 176.1 180.7 179.2 180.2 181.0 182.0 37 Other 842.4 885.1 890.0 904.1 912.2 912.2 915.3 910.7 916.5 914.5 907.2 900.7 38 Borrowings 436.0 440.0 439.4 453.1 466.2 466.8 438.6 438.4 434.5 434.4 442.0 442.3 39 From banks in the U.S 177.3 188.1 187.4 194.0 195.4 184.2 160.4 160.4 161.3 163.4 155.5 160.2 40 From others 258.7 251.9 252.0 259.1 270.8 282.6 278.2 278.1 273.2 271.0 286.5 282.1 41 Net due to related foreign offices 73.6 68.0 74.2 64.1 72.7 80.9 76.9 80.5 78.2 87.5 78.4 81.3 42 Other liabilities 126.0 154.4 161.5 157.4 152.3 146.4 145.8 154.2 150.9 150.4 156.8 160.2 43 Total liabilities 2,049.8 2,110.0 2,120.5 2,127.9 2,156.8 2,149.4 2,131.1 2,136.0 2,123.5 2,142.9 2,137.6 2,141.2 44 Residual (assets less liabilities)7 241.7 212.7 225.7 245.8 250.4 250.5 249.7 250.6 244.6 252.6 255.0 251.3 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Nonfinancial Statistics • October 1997 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'—Continued C. Large domestically chartered commercial banks—Continued Monthly averages Wednesday figures AAAccccccooouuunnnttt 1996 1997r 1997 Julyr Jan. Feb. Mar. Apr. May June July July 9 July 16 July 23 July 30 Not seasonally adjusted Assets 45 Bank credit 1,8 S7.8 1,924.4 1,937.7 1,947.2 1,969.3 1,964.5 1,976.3 1,988.5 1,984.2 1,986.8 1,984.5 1,994.4 46 Securities in bank credit 433.1 429.4 440.3 438.1 447.0 434.3 432.1 440.1 437.3 438.0 438.4 445.8 47 U.S. government securities 306.7 297.5 296.2 302.6 311.5 308.6 308.8 308.2 310.0 307.4 306.9 307.9 48 Trading account 20.0 16.4 16.4 19.4 20.5 19.6 21.6 23.8 23.4 24.4 23.8 23.2 49 Investment account 286.7 281.2 279.8 283.3 290.9 289.0 287.2 284.4 286.6 283.0 283.0 284.7 50 Mortgage-backed securities. 181.1 181.9 183.7 186.3 186.1 186.4 187.7 188.4 187.9 187.2 187.2 51 Other 99.6 97.4 99.0 104.2 102.4 100.3 96.2 98.1 95.1 95.9 97.5 52 One year or less n.a. 27.5 26.2 26.5 28.9 27.4 27.3 25.7 25.4 25.3 25.2 27.1 53 Between one and five years 58.3 56.1 56.2 57.3 56.5 54.3 50.5 53.6 50.5 49.9 48.8 54 More than five years.... 13.8 15.0 16.3 17.9 18.5 18.7 20.0 19.2 19.3 20.8 21.6 55 Other securities 126.4 131.9 144.1 135.5 135.5 125.7 123.3 131.9 127.3 130.6 131.5 137.9 56 Trading account 58.7 66.5 78.8 69.8 70.7 60.5 56.9 64.8 61.6 64.0 64.7 69.1 57 Investment account 67.7 65.4 65.4 65.7 64.8 65.1 66.4 67.1 65.7 66.6 66.9 68.8 58 State and local government . . 20.2 20.6 21.1 20.8 20.9 21.2 21.8 21.7 21.6 21.6 21.8 21.9 59 Other 47.4 44.8 44.2 44.9 43.8 43.9 44.6 45.4 44.0 45.0 45.1 46.9 60 Loans and leases in bank credit2 . . 1,454.7 1,495.0 1,497.4 1,509.0 1,522.4 1,530.2 1,544.2 1,548.4 1,547.0 1,548.9 1,546.0 1,548.5 61 Commercial and industrial 385.2 396.0 402.1 408.6 417.0 417.9 418.7 419.4 419.1 419.5 419.1 418.7 62 Bankers acceptances 1.5 1.9 1.6 1.6 1.5 1.5 1.6 1.5 1.5 1.5 1.5 1.5 63 Other 383.7 394.2 400.5 407.0 415.5 416.4 417.1 417.9 417.6 418.0 417.6 417.2 64 Real estate 594.1 601.8 599.5 603.1 607.9 613.2 619.3 619.6 621.1 619.6 618.6 618.9 65 Revolving home equity 57.1 59.3 59.4 59.9 60.6 61.8 63.2 63.9 63.7 63.9 64.0 64.2 66 Other n.a. 331.1 328.4 330.3 336.6 340.4 343.2 343.1 345.4 344.4 343.6 343.4 67 Commercial n.a. 209.1 209.4 210.7 208.5 208.7 210.5 210.3 212.1 211.3 211.0 211.2 68 Consumer 293.4 304.3 301.2 297.2 296.5 298.2 299.1 298.4 297.7 298.4 298.8 299.0 69 Security3 40.2 38.9 40.4 43.2 42.4 41.5 43.0 44.3 43.1 44.7 42.8 4466..99 70 Federal funds sold to and repurchase agreements with broker-dealers 25.1 22.9 24.3 26.8 24.8 24.1 26.0 27.9 27.0 28.2 27.3 29.2 71 Other 15.1 16.0 16.1 16.4 17.6 17.4 17.0 16.5 16.1 16.5 15.5 17.7 72 State and local government 11.8 11.5 11.5 11.5 11.2 11.1 11.2 11.2 11.3 11.2 11.2 11.2 73 Agricultural 9.3 8.6 8.4 8.5 8.6 8.9 8.9 8.9 8.9 8.9 9.0 99..00 74 Federal funds sold to and repurchase agreements with others 5.8 6.2 6.1 6.2 7.0 5.8 6.5 7.5 7.4 7.5 7.8 7.0 75 All other loans 62.6 62.9 61.7 63.0 62.8 63.2 65.5 65.1 64.8 65.4 64.9 63.8 76 Lease-financing receivables .... 52.4 64.8 66.4 67.8 68.9 70.4 72.0 73.8 73.5 73.7 73.9 74.2 77 Interbank loans 139.1 137.9 136.1 139.8 146.9 148.6 121.8 115.5 110.8 122.6 115.6 111133..11 78 Federal funds sold to and repurchase agreements with commercial banks 92.5 86.4 85.9 90.0 96.9 94.3 71.2 68.9 64.4 76.2 68.9 66.5 79 Other 46.6 51.5 50.2 49.7 50.0 54.3 50.6 46.7 46.4 46.4 46.7 46.6 80 Cash assets4 132.0 146.8 138.2 134.1 142.7 141.0 140.1 138.4 138.3 141.8 129.1 142.7 81 Other assets5 165.8 170.1 171.0 171.4 179.7 183.1 181.5 175.6 176.4 174.6 174.9 175.6 82 Total assets6 2,286.7 2,342.9 2346.7 2,355.9 2,402.0 2/400.7 2383.0 2381-4 2373.1 23892 2367.6 23893 Liabilities 83 Deposits 1,411.0 1,453.9 1,443.4 1,447.2 1,467.3 1,448.6 1,466.5 1,460.6 1,469.3 1,468.2 1,441.1 1,453.8 84 Transaction 424.8 410.5 389.3 378.1 389.1 369.1 374.3 367.5 366.8 370.7 353.9 372.2 85 Nontransaction 986.2 1,043.4 1,054.0 1,069.1 1,078.2 1,079.5 1,092.1 1,093.1 1,102.5 1,097.5 1,087.2 1,081.6 86 Large time 142.0 159.6 164.9 162.6 168.3 170.9 175.9 180.1 178.5 179.7 180.6 182.0 87 Other 14.2 883.7 889.1 906.5 909.9 908.6 916.2 913.0 923.9 917.8 906.6 899.7 88 Borrowings 442.5 435.9 431.8 444.9 467.2 472.8 449.0 442.7 436.4 440.4 445.4 446.5 89 From banks in the U.S 183.5 181.6 179.7 187.6 194.8 190.3 168.5 165.0 165.3 168.3 160.2 164.4 90 From nonbanks in the U.S 259.0 254.3 252.1 257.3 272.4 282.5 280.5 277.6 271.1 272.1 285.2 282.1 91 Net due to related foreign offices .... 71.4 69.7 76.0 68.6 74.4 88.1 75.8 77.8 71.0 83.2 78.6 82.8 92 Other liabilities 126.3 152.3 160.5 155.4 152.5 147.7 147.6 154.5 150.8 151.1 156.4 160.6 93 Total liabilities 2,051.2 2,111.6 2,111.6 2,116.1 2,161.3 2,157.2 2,138.9 2,135.6 2,1275 2,142.9 2,1215 2,143.8 94 Residual (assets less liabilities)7 235.6 231.3 235.1 239.8 240.7 243.6 244.1 245.8 245.6 246.3 246.1 245.5 MEMO 95 Revaluation gains on off-balancesheet items8 47.5 55.9 49.0 49.5 42.0 38.5 44.3 41.2 42.8 45.5 4488..33 96 Revaluation losses on off-balancesheet items8 44.0 50.9 43.2 44.6 43.4 40.2 45.7 41.3 43.9 46.9 51.1 97 Mortgage-backed securities9 202.7 202.3 203.2 206.1 205.7 203.9 204.0 204.5 204.0 203.6 203.5 98 Pass-through securities n.a. 138.3 138.6 139.9 142.3 142.9 142.0 142.3 142.6 142.6 142.4 141.4 99 CMOs, REMICs, and other mortgage-backed securities . . . 64.4 63.7 63.4 63.8 62.8 61.9 61.7 61.9 61.4 61.2 6622..11 100 Net unrealized gains (losses) on available-for-sale securities10 . . . 2.7 2.7 2.7 1.8 2.1 2.6 3.1 3.1 3.2 3.1 3.2 101 Offshore credit to U.S. residents" ... >8.8 30.9 32.1 32.9 33.3 33.6 33.4 33.7 33.0 34.0 33.8 33.8 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 Account 1996 1997r 1997 Julyr Jan. Feb. Mar. Apr. May June July July 9 July 16 July 23 July 30 Seasonally adjusted Assets 1 Bank credit 1,329.9 1,372.4 1,375.3 1,388.2 1,395.6 1,404.7 1,412.2 1,418.8 1,413.1 1,416.7 1,421.0 1,424.7 2 Securities in bank credit 400.7 402.2 400.6 404.3 406.8 407.3 405.8 405.4 404.3 404.7 406.2 406.5 3 U.S. government securities 321.5 321.8 320.8 323.1 323.6 324.3 323.5 323.7 322.6 323.3 324.5 324.7 4 Other securities 79.2 80.4 79.9 81.3 83.1 83.0 82.2 81.6 81.6 81.4 81.7 81.8 5 Loans and leases in bank credit2 929.2 970.3 974.7 983.9 988.8 997.4 1,006.5 1,013.4 1,008.8 1,012.0 1,014.8 1,018.2 6 Commercial and industrial 166.2 173.5 175.2 176.6 177.5 179.1 180.4 182.5 181.6 182.5 182.5 183.4 7 Real estate 479.8 505.8 510.5 518.6 524.0 528.6 533.8 539.3 536.6 538.4 540.5 542.2 8 Revolving home equity 23.0 26.5 26.9 27.6 28.1 28.4 28.5 28.7 28.6 28.7 28.7 28.8 9 Other 456.8 479.2 483.6 491.1 495.9 500.2 505.2 510.6 508.0 509.8 511.7 513.4 10 Consumer 217.7 223.0 220.3 219.2 218.2 219.7 221.5 220.5 220.1 219.8 220.7 221.3 11 Security5 4.6 4.7 4.9 5.1 4.8 4.8 4.9 4.9 4.9 5.0 5.0 4.9 12 Other loans and leases 60.8 63.2 63.7 64.3 64.3 65.2 65.9 66.1 65.7 66.2 66.2 66.4 13 Interbank loans 43.1 50.5 53.6 57.6 52.1 52.2 53.2 54.1 53.6 54.8 54.0 53.4 14 Cash assets4 57.9 62.8 65.6 67.7 68.8 67.3 70.0 69.2 66.4 71.2 69.5 69.6 15 Other assets5 48.0 50.0 52.1 58.9 59.9 58.7 63.3 63.1 61.9 63.5 63.2 64.0 16 Total assets5 1,459.5 1,516.2 1,527.1 1,553.0 1,556.7 1,563.1 1,578.7 1,584.9 1,574.9 1,586.0 1,5873 1,5913 Liabilities 17 Deposits 1,156.5 1,205.6 1,216.3 1,227.1 1,227.9 1,230.9 1,244.3 1,257.7 1,250.4 1,261.1 1,259.3 1,259.9 18 Transaction 305.7 303.7 304.3 305.2 305.8 303.8 305.2 305.9 298.3 308.3 308.0 310.2 19 Nontransaction 850.7 901.9 911.9 921.9 922.1 927.1 939.1 951.7 952.2 952.9 951.2 949.7 20 Large time 139.0 154.2 155.7 156.8 155.7 157.1 159.6 161.5 161.1 161.6 161.6 161.9 21 Other 711.7 747.7 756.3 765.2 766.4 770.0 779.5 790.2 791.1 791.3 789.7 787.8 22 Borrowings 142.9 155.5 154.2 156.4 158.4 157.0 157.6 160.3 157.7 158.8 162.0 163.7 23 From banks in the U.S 79.2 84.5 83.6 84.3 84.7 85.1 79.0 74.9 73.9 74.1 75.7 75.8 24 From others 63.7 71.0 70.6 72.1 73.7 72.0 78.5 85.5 83.8 84.7 86.2 87.9 25 Net due to related foreign offices 5.7 4.0 4.0 3.9 4.4 4.2 3.8 4.8 5.3 4.9 4.6 4.8 26 Other liabilities 25.2 24.3 25.0 26.4 26.1 26.8 27.3 26.5 26.5 26.4 26.3 26.8 27 Total liabilities 1330J 1,389.4 1399.5 1,413.8 1,416.7 1,419.0 1,432.9 1,4493 1,439.9 1,451.2 1,452.1 1,455.1 28 Residual (assets less liabilities)7 129.3 126.8 127.6 139.2 140.0 144.1 145.8 135.6 135.0 134.8 135.2 136.2 Not seasonally adjusted Assets 29 Bank credit 1,330.4 1,370.5 1,369.8 1,383.7 1,395.9 1,404.5 1,413.1 1,419.2 1,414.2 1,417.9 1,421.0 1,424.0 30 Securities in bank credit 399.9 400.7 399.0 405.7 410.2 409.1 407.5 404.6 404.2 404.4 405.3 404.7 31 U.S. government securities 320.7 320.6 319.4 324.2 326.8 325.8 325.4 322.9 322.6 322.9 323.6 322.7 32 Other securities 79.2 80.2 79.6 81.5 83.4 83.2 82.1 81.7 81.5 81.5 81.7 81.9 33 Loans and leases in bank credit2 930.4 969.8 970.8 978.1 985.7 995.4 1,005.6 1,014.6 1,010.1 1,013.5 1,015.7 1,019.4 34 Commercial and industrial 166.3 173.6 174.9 177.1 178.7 180.5 181.6 182.5 182.4 182.7 182.2 182.7 35 Real estate 480.2 505.4 507.9 515.6 521.3 527.1 533.6 539.7 536.8 539.1 540.9 542.6 36 Revolving home equity 23.1 26.5 26.7 27.3 27.9 28.3 28.5 28.7 28.6 28.7 28.7 28.9 37 Other 457.2 478.9 481.2 488.3 493.4 498.8 505.1 511.0 508.1 510.4 512.2 513.7 38 Consumer 217.5 224.0 221.1 217.4 217.8 219.2 219.7 220.3 218.9 219.6 221.0 221.9 39 Security3 4.5 4.8 5.0 5.1 4.8 4.6 4.7 4.8 5.0 4.8 4.6 4.7 40 Other loans and leases 62.0 62.1 61.8 62.8 63.1 64.0 65.9 67.2 67.0 67.3 66.9 67.5 41 Interbank loans 40.5 51.7 55.6 57.6 52.5 48.8 50.4 51.5 55.0 52.0 48.8 49.1 42 Cash assets4 57.5 64.9 64.9 65.5 67.4 67.1 68.6 68.8 68.6 69.7 66.3 69.0 43 Other assets5 47.9 51.0 53.5 58.0 58.9 58.2 61.3 63.1 63.3 61.9 61.3 64.9 44 Total assets6 1/456.9 1,518.7 1,5243 1,5453 1,555.1 1,558.7 1,5733 1,5823 1,581.0 1,581.4 1,577.1 1,586.8 Liabilities 45 Deposits 1,153.0 1,203.1 1,206.4 1,222.1 1,230.1 1,228.4 1,242.3 1,254.3 1,255.9 1,255.7 1,247.8 1,254.4 46 Transaction 303.4 307.4 300.5 300.9 306.0 300.5 303.5 303.8 303.3 304.6 299.1 306.3 47 Nontransaction 849.6 895.7 906.0 921.3 924.1 927.9 938.8 950.6 952.6 951.1 948.8 948.1 48 Large time 138.3 152.9 156.4 157.7 156.8 157.9 159.1 160.7 160.0 160.5 161.0 161.4 49 Other 711.3 742.8 749.6 763.6 767.3 770.0 779.7 789.9 792.6 790.6 787.7 786.7 50 Borrowings 142.4 157.2 152.9 151.0 155.8 161.0 161.3 160.3 158.5 158.4 162.0 162.3 51 From banks in the U.S 80.7 84.3 81.8 80.6 83.8 87.5 82.0 76.4 75.4 75.7 77.9 76.7 52 From others 61.8 72.9 71.2 70.4 72.0 73.5 79.2 83.9 83.1 82.7 84.1 85.6 53 Net due to related foreign offices 5.7 4.0 4.0 3.9 4.4 4.2 3.8 4.8 5.3 4.9 4.6 4.8 54 Other liabilities 25.4 24.5 25.4 26.7 26.3 26.5 26.8 26.7 26.4 26.7 26.7 27.0 55 Total liabilities 1,326.6 1,388.8 1388.8 1,403.8 1,416.7 1,420.1 1,434.2 1,446.2 1,446.1 1,445.7 1,441.2 1,448.5 56 Residual (assets less liabilities)7 130.4 129.9 135.5 141.5 138.3 138.6 139.2 136.1 134.9 135.7 136.0 138.2 MEMO 57 Mortgage-backed securities9 n.a. 42.2 41.8 42.9 43.4 43.9 45.1 46.2 46.1 46.0 46.2 46.3 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Financial Statistics • October 1997 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'—Continued E. Foreign-related institutions Billions of dollars Monthly averages Wednesday figures Account 1996 1997 1997 July Jan. Feb. Mar. Apr. May June" July July 9 July 16 July 23 July 30 Seasonally adjusted Assets 1 Bank credit 468.9 515.7' 530.5" 525.3" 533.5" 539.8' 543.2 550.0 548.2 547.3 544.0 559.5 2 Securities in bank credit 150.9 170.1r 176.9" 172.9" 177.9" 175.5" 178.0 189.0 189.5 186.7 185.6 194.3 3 U.S. government securities 80.1 81.8 85.4 83.6 87.8 89.9 92.3 93.6 98.5 91.5 88.0 95.4 4 Other securities 70.8 88.3r 91.5" 89.3" 90.1" 85.5" 85.7 95.4 91.0 95.2 97.7 98.8 5 Loans and leases in bank credit2 . . . 318.0r 345.7 353.6 352.4 355.6 364.3 365.2 360.9 358.8 360.5 358.4 365.2 6 Commercial and industrial 194.0 214.4 217.1 216.1 216.6 219.7 220.5 220.5 220.7 220.7 219.1 221.2 7 Real estate 32.9 31.8 32.0 31.5 31.4 30.6 29.6 28.5 28.8 28.4 28.3 28.6 8 Security1 32.0 38.1 39.8 39.7 43.2 43.5 46.0 44.9 41.5 44.3 45.2 48.3 9 Other loans and leases 59.0 61.3 64.7 65.1 64.5 70.5 69.1 67.1 67.8 67.1 65.8 67.1 10 Interbank loans 19.4 22.7 20.9 22.7 18.9 20.6 19.9 19.6 18.5 19.5 20.2 19.8 11 Cash assets4 28.3 31.1 32.9 32.4 32.7 34.0 35.7 34.0 33.3 33.8 33.7 34.3 12 Other assets5 37.8 38.0" 41.1" 41.0" 39.1' 38.8" 41.3 43.9 44.6 45.6 42.6 43.4 13 Total assets6 554.4 607.3R 625.2" 621.1R 624.0R 633.0" 639.9 647.2 644.4 645.9 640.2 656.8 Liabilities 14 Deposits 179.3 225.7 238.0 242.7 257.7 252.0 258.2 271.1 272.6 268.3 270.2 274.0 15 Transaction 10.6 10.3 9.7 10.4 10.8 11.2 11.1 11.3 11.4 10.8 11.3 11.4 16 Nontransaction 168.7 215.4 228.2 232.2 246.9 240.8 247.0 259.9 261.2 257.5 258.9 262.5 17 Large time 166.2 213.2 224.3 228.7 244.5 238.4 244.6 257.4 258.7 255.1 256.4 260.1 18 Other 2.4 2.2 4.0 3.6 2.5 2.4 2.4 2.4 2.5 2.4 2.4 2.5 19 Borrowings 123.6 130.3 143.2" 140.0" 139.8' 143.6" 141.3 137.5 136.1 137.9 131.2 142.8 20 From banks in the U.S 30.5 27.9r 33.9" 34.8" 32.8" 33.2" 31.2 30.6 28.1 32.6 28.1 32.8 21 From others 93.1 102.4r 109.3' 105.2' 107.1' 110.5" 110.2 107.0 108.0 105.2 103.1 110.0 22 Net due to related foreign offices 178.1 150.3 139.4 141.1 134.6 148.7 148.8 130.2 137.1 133.2 126.3 121.7 23 Other liabilities 68.7 89.9" 99.8" 94.0" 92.0" 89.3" 91.0 101.9 98.1 100.6 102.2 108.1 24 Total liabilities 549.7 596.2R 620.4" 617.6R 624.1" 633.7R 639.3 640.8 643.9 640.0 629.9 646.6 25 Residual (assets less liabilities)7 4.7 11.1 4.8" 3.5" -0.1 -0.7" 0.6 6.4 0.5 6.0 10.4 10.2 Not seasonally adjusted Assets 26 Bank credit 470.3 513.0" 531.2" 525.1" 533.6' 542.4" 543.6 550.5 546.7 546.8 545.5 561.6 27 Securities in bank credit 151.0" 166.2" 177.9" 173.5" 178.4" 180.4" 178.7 188.0 186.0 184.1 185.2 196.3 28 U.S. government securities 79.1 82.8 87.2 86.6 87.3 90.5 91.0 90.9 93.2 88.0 86.7 94.5 29 Trading account n.a. 17.0 21.4 20.0 18.6 18.8 18.8 18.2 19.5 16.1 14.8 21.9 30 Investment account n.a. 65.8 65.8 66.6 68.7 71.6 72.2 72.7 73.8 71.9 71.8 72.6 31 Other securities 71.9 83.4' 90.7" 87.0" 91.1" 89.9" 87.7 97.1 92.7 96.1 98.5 101.8 32 Trading account n.a. 58.7' 65.2 60.4 61.1" 59.7" 58.9 65.2 61.2 64.2 66.5 68.8 33 Investment account n.a. 24.8" 25.5" 26.6" 29.9" 30.2" 28.8 31.9 31.5 31.9 32.0 33.0 34 Loans and leases in bank credit2 . . . 319.2 346.8 353.3 351.6 355.2 362.0 364.9 362.5 360.7 362.7 360.3 365.3 35 Commercial and industrial 195.0 214.3 217.1 215.7 217.3 220.0 221.3 221.7 222.0 222.0 220.6 221.5 36 Real estate 32.8 31.8 32.1 31.5 30.9 30.3 29.5 28.4 28.7 28.3 28.3 28.3 37 Security1 32.0 38.1 39.8 39.7 43.2 43.5 46.0 44.9 41.5 44.3 45.2 48.3 38 Other loans and leases 59.4 62.6 64.4 64.6 63.8 68.3 68.2 67.5 68.4 68.2 66.1 67.1 39 Interbank loans 19.4 22.7 20.9 22.7 18.9 20.6 19.9 19.6 18.5 19.5 20.2 19.8 40 Cash assets4 28.5 31.5 32.1 31.8 31.8 34.0 36.4 34.1 33.5 33.8 33.7 34.5 41 Other assets5 37.2 37.3" 41.9" 40.4" 37.7" 39.9" 41.2 43.1 43.3 44.5 41.8 43.2 42 Total assets 555.3 604.2" 625.8R 619.8R 621.8R 636.7" 641.0 647.0 641.7 644.4 640.9 658.8 Liabilities 43 Deposits 177.2 225.8 234.8 242.5 251.3 252.5 258.6 268.1 265.5 265.4 269.0 273.5 44 Transaction 10.6 10.4 9.9 10.2 10.4 10.7 11.1 11.3 11.1 11.0 11.3 11.3 45 Nontransaction 166.7 215.5 224.9 232.3 241.0 241.8 247.5 256.8 254.3 254.5 257.8 262.1 46 Large time 164.3 213.2 221.0 228.7 238.6 239.4 245.1 254.4 251.9 252.1 255.4 259.7 47 Other 2.4 2.2 3.9 3.5 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4 48 Borrowings 131.3 127.1" 136.6" 134.1" 142.3" 143.4" 146.3 146.6 145.9 148.2 139.5 149.9 49 From banks in the U.S 32.0 29.01 31.7" 33.2" 33.0" 32.7" 32.9 32.3 31.0 34.4 27.5 34.4 50 From others 99.3 98.2' 105.0" 100.9" 109.3" 110.7" 113.5 114.3 114.8 113.8 112.0 115.5 51 Net due to related foreign offices 174.9 159.1 148.6 145.8 131.5 144.5 140.6 129.0 132.6 129.2 129.9 123.2 52 Other liabilities 67.2 89.1" 102.3" 93.8" 91.8" 92.0" 92.0 99.6 94.8 97.9 98.9 107.5 53 Total liabilities 550.6 6OI.R 622.4R 616.2" 616.9" 632.5" 637.5 643-3 638.8 640.9 6373 654.1 54 Residual (assets less liabilities)7 4.7 3.1" 3.5" 3.6" 4.8" 4.2 3.5 3.7 2.9 v 3.6 3.5 4.7 MEMO 55 Revaluation gains on off-balance-sheet items8 n.a. 41.1" 45.9" 41.4" 40.5" 39.4" 38.2 43.5 40.5 43.2 44.5 45.9 56 Revaluation losses on off-balancesheet items8 n.a. 41.0" 47.6" 43.7" 43.4" 42.3" 41.2 46.7 43.6 46.6 47.5 49.2 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 capita] (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 effects 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 NonfinancialS tatistics • October 1997 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING Millions of dollars, end of period Year ending December 1997 Item 1992 1993 1994 1995 1996 Feb. Mar. Apr. May June July Dec. Dec. Dec. Dec. Dec. Commercial paper (seasonally adjusted unless noted otherwise) 1 All issuers 545,619 555,075 595,382 674,904 775,371 813,168 836,979 838,366 855,178 864,758 889,494 Financial companies' ? Dealer-placed paper", total 226,456 218,947 223,038 275.815 361 14/ 387,164 402,291 404,727 413,776 414,475 440,262 3 Directly placed paper1, total 171.605 180,389 207.701 210,829 229,662 239,509 246,215 248,920 252,856 256,165 253,971 4 Nonfinancial companies4 147,558 155,739 164,643 188,260 184,563 186,495 188,473 184,719 188,546 194,119 195,260 Bankers dollar acceptances (not seasonally adjusted)5 5 Total 38,194 32,348 29,835 29,242 25,754 Bx 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. n.a. n.a. 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 7.15 1995—Jan. . 8.50 1996—Jan. . 6.75 1995 8.83 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 Oct. . 8.75 Oct. . 8.25 July 7.25 Nov. 8.75 Nov. 8.50 Aug. 7.51 Dec. 8.65 Dec. Sept. 7.75 Ocl 7.75 1997—Jan. . Nov. 8.15 Feb. Dec. 8.50 Mar. Apr. May June July . Aug. 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 Apr. May June July June 27 July 4 July 11 July 18 July 25 MONEY MARKET INSTRUMENTS 1 Federal funds1'2,3 4.21 5.83 5.30 5.51 5.50 5.56 5.52 5.42 5.82 5.48 5.44 5.43 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 paper3'5'6 3 1-month 4.43 5.93 5.43 5.61 5.61 5.60 5.56 5.61 5.62 5.56 5.55 5.54 4 3-month 4.66 5.93 5.41 5.71 5.69 5.65 5.57 5.63 5.63 5.58 5.56 5.55 5 6-month 4.93 5.93 5.42 5.79 5.78 5.69 5.60 5.65 5.66 5.62 5.60 5.57 Finance paper, directly placed3-5-7 6 1-month 4.33 5.81 5.31 5.51 5.53 5.53 5.49 5.54 5.54 5.48 5.49 5.48 7 3-month 4.53 5.78 5.29 5.61 5.61 5.57 5.50 5.55 5.55 5.51 5.50 5.49 8 6-month 4.56 5.68 5.21 5.60 5.66 5.57 5.50 5.53 5.52 5.50 5.51 5.48 Bankers acceptances3'5'8 9 3-month 4.56 5.81 5.31 5.62 5.62 5.59 5.53 5.58 5.58 5.54 5.53 5.51 10 6-month 4.83 5.80 5.31 5.71 5.71 5.63 5.54 5.61 5.61 5.55 5.55 5.52 Certificates of deposit, secondary market3'9 11 1-month 4.38 5.87 5.35 5.57 5.58 5.57 5.54 5.58 5.58 5.54 5.54 5.53 12 3-month 4.63 5.92 5.39 5.71 5.70 5.66 5.60 5.66 5.66 5.61 5.59 5.59 13 6-month 4.96 5.98 5.47 5.90 5.87 5.78 5.70 5.76 5.78 5.71 5.71 5.68 14 Eurodollar deposits, 3-month3'10 4.63 5.93 5.38 5.70 5.69 5.66 5.61 5.63 5.65 5.63 5.63 5.59 U.S. Treasury bills Secondary market3'5 15 3-month 4.25 5.49 5.01 5.16 5.05 4.93 5.05 4.99 5.04 4.99 5.05 5.08 16 6-month 4.64 5.56 5.08 5.37 5.30 5.13 5.12 5.08 5.09 5.09 5.12 5.15 17 1-year 5.02 5.60 5.22 5.64 5.54 5.38 5.24 5.35 5.32 5.24 5.24 5.25 Auction average3'5'" 18 3-month 4.29 5.51 5.02 5.17 5.13 4.92 5.07 4.94 5.12 4.97 5.05 5.11 19 6-month 4.66 5.59 5.09 5.35 5.35 5.14 5.12 5.05 5.14 5.07 5.09 5.17 20 1-year 5.02 5.69 5.23 5.66 5.64 5.35 5.26 5.35 n.a. n.a. n.a. 5.26 U.S. TREASURY NOTES AND BONDS Constant maturities12 21 1-year 5.32 5.94 5.52 5.99 5.87 5.69 5.54 5.65 5.63 5.54 5.56 5.54 22 2-year 5.94 6.15 5.84 6.45 6.28 6.09 5.89 6.04 6.01 5.91 5.90 5.89 23 3-year 6.27 6.25 5.99 6.61 6.42 6.24 6.00 6.20 6.17 6.03 6.02 5.97 24 5-year 6.69 6.38 6.18 6.76 6.57 6.38 6.12 6.33 6.31 6.15 6.14 6.09 25 7-year 6.91 6.50 6.34 6.86 6.66 6.46 6.20 6.42 6.40 6.24 6.22 6.16 26 10-year 7.09 6.57 6.44 6.89 6.71 6.49 6.22 6.45 6.42 6.26 6.23 6.18 27 20-year 7.49 6.95 6.83 7.20 7.02 6.84 6.56 6.80 6.78 6.61 6.57 6.52 28 30-year 7.37 6.88 6.71 7.09 6.94 6.77 6.51 6.73 6.72 6.56 6.52 6.46 Composite 29 More than 10 years (long-term) 7.41 6.93 6.80 7.18 7.00 6.82 6.55 6.78 6.76 6.60 6.55 6.50 STATE AND LOCAL NOTES AND BONDS Moody's series13 30 Aaa 5.77 5.80 5.52 5.66 5.48 5.33 5.33 5.24 5.29 5.24 5.23 n.a. 31 Baa 6.17 6.10 5.79 5.85 5.67 5.53 5.53 5.43 5.48 5.41 5.38 n.a. 32 Bond Buyer series 6.18 5.95 5.76 5.88 5.70 5.53 5.35 5.53 5.53 5.38 5.32 5.28 CORPORATE BONDS 33 Seasoned issues, all industries'5 8.26 7.83 7.66 7.99 7.86 7.68 7.42 7.63 7.62 7.47 7.43 7.37 Rating group 34 Aaa 7.97 7.59 7.37 7.73 7.58 7.41 7.14 7.36 7.35 7.19 7.15 7.09 35 Aa 8.15 7.72 7.55 7.93 7.80 7.62 7.36 7.56 7.55 7.41 7.38 7.31 36 A 8.28 7.83 7.69 7.98 7.86 7.68 7.42 7.62 7.61 7.47 7.43 7.38 37 BBaaaa 8.63 8.20 8.05 8.34 8.20 8.02 7.75 7.96 7.94 7.79 7.76 7.70 38 AA--rraatteedd.. rreecceennttllyy ooffffeerreedd uuttiilliittyy bboonnddss''66 8.29 7.86 7.77 8.23 8.01 7.85 7.62 7.84 7.72 7.62 7.59 7.52 MEMO Dividend-price ratio17 39 Common stocks 2.82 2.56 2.19 1.98 1.85 1.77 1.66 1.76 1.71 1.70 1.65 1.64 1. The daily effective federal funds rate is a weighted average of rates on trades through 12. Yields on actively traded issues adjusted to constant maturities. Source: U.S. Depart- New York brokers. ment of the Treasury. 2. Weekly figures are averages of seven calendar days ending on Wednesday of the 13. General obligation bonds based on Thursday figures; Moody's Investors Service. current week; monthly figures include each calendar day in the month. 14. State and local government general obligation bonds maturing in twenty years are used 3. Annualized using a 360-day year for bank interest. in compiling this index. The twenty-bond index has a rating roughly equivalent to Moodys' 4. Rate for the Federal Reserve Bank of New York. A1 rating. Based on Thursday figures. 5. Quoted on a discount basis. 15. Daily figures from Moody's Investors Service. Based on yields to maturity on selected 6. An average of offering rates on commercial paper placed by several leading dealers for long-term bonds. firms whose bond rating is AA or the equivalent. 16. Compilation of the Federal Reserve. This series is an estimate of the yield on recently 7. An average of offering rates on paper directly placed by finance companies. offered, A-rated utility bonds with a thirty-year maturity and five years of call protection. 8. Representative closing yields for acceptances of the highest-rated money center banks. Weekly data are based on Friday quotations. 9. An average of dealer offering rates on nationally traded certificates of deposit. 17. Standard & Poor's corporate series. Common stock ratio is based on the 500 stocks in 10. Bid rates for Eurodollar deposits at approximately 11:00 a.m. London time. Data are the price index. for indication purposes only. NOTE. Some of the data in this table also appear in the Board's H. 15 (519) weekly and 11. Auction date for daily data; weekly and monthly averages computed on an issue-date G. 13 (415) monthly statistical releases. For ordering address, see inside front cover. basis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 Domestic Nonfinancial Statistics • October 1997 1.36 STOCK MARKET Selected Statistics 1996 1997 IInnddiiccaattoorr Nov. Dec. Jan. Feb. Mar. Apr. May June July Prices and trading volume (averages of daily figures)' Common stock prices (indexes) 1 New York Stock Exchange (Dec. 31, 1965 = 50) 254.16 291.18 357.98 388.75 391.61 403.58 418.57 416.72 401.00 433.36 457.07 480.94 2 Industrial 315.32 367.40 453.57 490.60 494.38 509.18 524.30 523.08 506.69 549.65 578.57 610.42 3 Transportation 247.17 270.14 327.30 348.32 352.28 359.40 364.15 372.37 366.67 395.50 410.93 433.75 4 Utility 104.96 110.64 126.36 135.88 128.55 131.95 142.88 132.38 126.66 140.52 140.24 144.25 5 Finance 209.75 238.48 303.94 345.30 350.01 361.45 388.75 387.19 364.25 392.32 419.12 441.59 6 Standard & Poor's Corporation (1941-43 = lOr 460.42 541.72 670.49 735.67 743.25 766.22 798.39 792.16 763.93 833.09 876.29 925.29 7 American Stock Exchange (Aug. 31, 1973 = 50)3 449.49 498.13 570.86 583.21 582.96 585.09 593.29 593.64 554.13 584.06 619.94 635.28 Volume of trading (thousands of shares) 8 New York Stock Exchange 290,652 345,729 409,740 443,521 431,538 526,631 508.199 496,241 473,094 479,907 516,241 543,006 9 American Stock Exchange 17,951 20,387 22,567 22,151 23,648 24,019 21,250 19,232 19,122 19,634 23.277 25,562 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers4 61,160 76,680 97,400 91,680 97,400 99,460 100,000 100,160 98,870 106,010 113,440 116,190 Free credit balances at brokers' 11 Margin accounts6 14,095 16,250 22.540 20.020 22.540 22,870 22,200 22,930 22,700 22,050 23,860 24,290 12 Cash accounts 28,870 34,340 40.430 36,650 40,430 41,280 40,090 41,050 37,560 39,400 41.840r 43,985 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 dilference 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. I, 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 Feb. Mar. Apr. May June July U.S. budget1 1 Receipts, total 1,258,627 1,351,830 1,453,062 90,293 108.099 228,588 94,493 173,361 109,178 2 On-budget 923,601 1,000,751 1,085,570 59,673 73,869 187,997 63,146 135,922 79,599 3 Off-budget 335,026 351,079 367,492 30,620 34,230 40,591 31,347 37,439 29.579 4 Outlays, total 1.461,731 1,515,729 1,560,330 134,303 129,422 134,650 142,988 118,726r 134,802 5 On-budget 1,181,469 1,227,065 1,259,872 104,964 100,427 107,842 112,625 105,267r 107,049 6 Off-budget 279,372 288,664 300,458 29,339 28,996 26,807 30,362 13,459 27,753 7 Surplus or deficit (—), total -203,104 -163,899 -107,268 -44,010 -21,323 93,939 -48,494 54,635' -25,624 8 On-budget -258,758 -226,314 -174,302 -45,291 -26,558 80,155 -49,479 30,655r -27,450 9 Off-budget 55,654 62,415 67,034 1,281 5.234 13,784 985 23,980 1,826 Source of financing (total) 10 Borrowing from the public 185,344 171,288 129,712 35,968 28,833 -39,001 -19,054 -11.147 -1,408 11 Operating cash (decrease, or increase (—)) 16,564 -2,007 -6,276 21,357 -18,274 -55.908 72,532 -34,387 23,748 12 Other 2 1,196 -5,382 -16,168 -13,315 10,764 970 -4,984 -9,ior 3,284 MEMO 13 Treasury operating balance (level, end of period) 35,942 37,949 44,225 15,222 33,496 89,404 16,872 51,259 27,511 14 Federal Reserve Banks 6,848 8,620 7,700 5,258 5,945 52,215 5,174 16,368 5,014 15 Tax and loan accounts 29,094 29,329 36,525 9,965 27,551 37,189 11,698 34,891 22,496 1. Since 1990, off-budget items have been the social security trust funds (federal old-age net gain or loss for U.S. currency valuation adjustment; net gain or loss for IMF loansurvivors insurance and federal disability insurance) and the U.S. Postal Service. valuation adjustment; and profit on sale of gold. 2. Includes special drawing rights (SDRs); reserve position on the U.S. quota in the SOURCE. Monthly totals: U.S. Department of the Treasury, Monthly Treasury Statement of International Monetary Fund (IMF); loans to the IMF; other cash and monetary assets; Receipts and Outlays of the U.S. Government, fiscal year totals: U.S. Office of Management accrued interest payable to the public; allocations of SDRs; deposit funds; miscellaneous and Budget, Budget of the U.S. Government. liability (including checks outstanding) and asset accounts; seigniorage; increment on gold; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic Nonfinancial Statistics • October 1997 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS' Millions of dollars Fiscal year Calendar year SSSooouuurrrccceee ooorrr tttyyypppeee 1995 1996 1997 1997 11999955 11999966 H2 HI H2 HI May June July RECEIPTS 1 All sources 1,351,830 1,453,062 656,865 767,099 707,551 845,552 94,493 173,361 109,178 2 Individual income taxes, net 590.244 656.417 292.393 347.285 323,884 400,435 30.690 74.381 53,868 3 Withheld 499.927 533,080 256.916 264.177 279.988 292.252 48.097 44,802 51,812 4 Nonwithheld 175,855 212,168 45.521 162.782 53.491 191.050 5.873 31.395 4,003 5 Refunds" 85.538 88,897 10.058 79.735 9.604 82.926 23,300 1,825 1.950 Corporation income taxes 6 Gross receipts 174.422 189.055 88,302 96.480 95.364 106.451 5.005 40.541 5.442 7 Refunds 17,418 17.231 7.518 9.704 10,053 9.635 752 1.169 1.739 8 Social insurance taxes and contributions, net . . . 484.473 509,414 224.269 277.767 240.326 288.251 50.220 48,612 40.572 9 Employment taxes and contributions" 451.045 476.361 211.323 257.446 227,777 268.357 39,835 47,933 38,066 10 Unemployment insurance 28,878 28,584 10.702 18.068 10.302 17.709 9,963 343 2.081 11 Other net receipts3 4.550 4,469 2.247 2.254 2.245 2,184 422 336 425 12 Excise taxes 57.484 54,014 30.014 25.682 27,016 28,084 4,808 5.185 5.369 13 Customs deposits 19.301 18,670 9.849 8.731 9,294 8,619 1.443 1,522 1.799 14 Estate and sift taxes 14.763 17,189 7.718 8.775 8,835 10.477 1,412 1,494 1.552 15 Miscellaneous receipts4 28.561 25.534 11.839 12.087 12,888 12,866 1,667 2.793 2.315 OUTLAYS 16 All types 1,515,729 1,560,330 752,856 785.368 800,184r 797,443r 142,988 118,726r 134,802 17 National defense 272.066 265.748 132,887 132.599 138.350 131,525 26.152 20.613 22.944 18 International affairs 16.434 13.496 6,908 8.076 8.895 5,779 256 472 1.541 19 General science, space, and technology 16.724 16.709 7.970 8.897 9.498 8,939 1,655 1,565 1.763 20 Energv 4.936 2.836 1.992 1,356 806 801 129 - 5 238 21 Natural resources and environment 22.078 21,614 11,392 10.254 11.642 9,688 1.719 1,622 1.909 22 Agriculture 9.778 9,159 3.065 73 10,699 1,433 -205 -255 -35 23 Commerce and housing credit -17,808 -10.646 -3.947 -6,885 -5.865' -7.575'' -62 779' -415 24 Transportation 39.350 39.565 20.725 18,290 21.205 18.046 3.320 3.224 3.667 25 Community and regional development 10.641 10,685 5.569 5.245 6.192 5,699 883 1,207 958 26 Education, training, employment, and social services 54.263 52.001 26.212 25,979 26.032 25,227 3,799 3.702 3.542 27 Health 1 15.418 119,378 57.128 59,989 61,466 61,808 10,374 10.595 9.821 28 Social security and Medicare 495.701 523,901 251.388 264,647 269,410r 278,817 48,887 47.558 47,860 79 Income security 220.493 225,989 104.847 121.186 107,182r 123,874 22.357 11,298 17.921 30 Veterans benefits and services 37.890 36.985 18.678 18.140 21.107 17,697 4.333 1.583 3,409 31 Administration of justice 16.216 17.548 8,091 9,015 9.595 10.643 1.875 1,883 1.863 3' General government 13,835 1 1.892 7.601 4.641 6,544 6.574 484 1.897 366 33 Net interest3 232.169 241.090 119.348 120.576 122.568 122,701 21,162 19,543 71.046 34 Undistributed offsetting receipts6 -44,455 — 37.620 -26.995 -16.716 — 25.141r -24,234 -4,128 -8.556 -3.594 1. Functional details do not sum to total outlays for calendar year data because revisions to 4. Deposits of earnings by Federal Reserv e 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. Soi-RCE. Fiscal year totals: US. Office of Management and Budget. Budget of the U.S. 3. Federal employee retirement contributions and civil service retirement and Government, Fiscal Year 199ft-. monthly and half-year totals: U.S. Department of the Treadisability fund. sury. Monthly Treasury Statement of Receipts and Outlays of the U.S. Government. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A25 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 n1.a. 6 1 H H e e l l d d b b y y p ag u e b n li c c i es 27 0 27 0 2 0 8 28 8 28 8 27 8 27 8 26 8 1 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 Ql 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 tvpe 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 11 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' 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 9I.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 335588..00rr 335533..00 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 l,131.8r 1,199.1 21 Other miscellaneous investors7-9 655.0r 785.5r 843.0r 717.T 774.5r 717.T 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 NonfinancialS tatistics • October 1997 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions' Millions of dollars, daily averages 1997 1997, week ending Item Apr. May June June 4 June 11 June 18 June 25 July 2 July 9 July 16 July 23 July 30 OUTRIGHT TRANSACTIONS2 By type of security 1 U.S. Treasury bills 49,329 42,017 40.559 49,231 40,156R 40,063 39,012 35.964 30,635 32,509 38,791 33,065 Coupon securities, by maturity 2 Five years or less 104.196 107,517 112,860 113.651 114.155R 112,350 111,740 112,630 92,504 98,686 109,764 95,979 3 More than five years 49.121 57.216 56,041 61,943 61.383R 56.678 49,296 51.414 59,006 56,905 56,563 70,380 4 Federal agency 38,194 41,103 39,498 44.927 35,059R 39,975 35.339 47,604 39,648 36,876 36,051 43,617 5 Mortgage-backed 41,984 39,712 48.439 41.622 65,91 lr 45.400 42,808 40,589 68,903 54,575 38,158 45,711 Bx type of counterparty With interdealer broker 6 U.S. Treasury 117,018 120,714 118.504 123,578 122,735 120,481 115,078 108,794 100,433 105.229 116,955 113,020 7 Federal agencv 1.028 1.003 1,378 1.223 1.334 1,821 1.066 1,389 2,053 1,253 1.063 1,710 8 Mortgage-backed 13.923 12.677 15.552 13.036 20,694 15,073 13,753 1133,,229944 17,621 17,207 1111,,999922 15,535 With other 9 U.S. Treasury 85,628 86,036 90,956 101,248 92.959R 88,610 84,970 91,213 81,713 82,870 88,162 86,404 10 Federal agency 37,166 40,100 38,120 43.704 33,726R 38,154 34,273 46,215 37,595 35,623 34,989 41,907 11 Mortgage-backed 28,061 27,035 32,887 28.585 45,217R 30,327 29,055 27,295 51,283 37,368 26,166 30,176 FUTURES TRANSACTIONS3 By type of deliverable security 12 U.S. Treasury bills 191 217 352 244 473 494 155 n.a. n.a. 103 339 135 Coupon securities, by maturity 13 Five years or less 1,720 2.014 2.430 3,447 2.364' 2,558 1,755 2,433 1.082 1,354 1,196 1,425 14 More than five years 12.314 14,506 15,048 18,631 15,656R 15,967 13,281 11,864 13,024 14,384 16,056 15,123 15 Federal agencv 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 US. Treasury bills 0 0 0 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 18 Five years or less 3.195 3.570 3,103 2.342 3,993 4,122 1,655 3,095 2,362 2,494 2,000 1,725 19 More than five years 4,277 5,024 4.018 4,325 4,265 3,691 3,760 4,271 8,238 4,791 6,506 5.726 20 Federal agencv 0 0 0 0 0 0 0 0 0 0 0 0 21 Mortgage-backed 584 560 408 445 530 572 163 304 887 290 557 711 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 w hich delivery is scheduled in thirty business series as of the week ending July 6, 1994. days or less. Stripped securities are reported at market value by maturity of coupon or corpus. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A25 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Millions of dollars 1997 1997, week ending IItteemm Apr. May June June 4 June 11 June 18 June 25 July 2 July 9 July 16 July 23 Positions2 NET OUTRIGHT POSITIONS3 By type of security 1 U.S. Treasury bills 4,082 -5,335 -1,305 10,641 3,197 -5,577 -3,991 -7,425 -5,265 -3,117 -1,038 Coupon securities, by maturity 2 Five years or less -24,459' -22,394 -20,661 -19,961 -16,154 -22,525 -21,468 -23,790 -18,706 -17,720 -12,025 3 More than five years -28,153 -18,077 -20,191 -21,997 -17,990 -19,549 -18,265 -25,420 -21,965 -22,963 -20,857 4 Federal agency 29,723 29,451 31,556 30,873 33,666 33,311 29,410 29,693 31,388 42,158 36,535 5 Mortgage-backed 34,916 35,472 35,836 29,343 37,166 39,500 34,532 35,866 31,276 35,337 35,484 NET FUTURES POSITIONS4 B\ type of deliverable security 6 U.S. Treasury bills -2,308 -974 633 -237 -432 812 1,303 1,355 1,535 1,311 -252 Coupon securities, by maturity 7 Five years or less 4,018 3,100 2,705 3,973 3,485 2,209 1,200 3,676 3,119 3,740 2,769 8 More than five years -5,916 -11,685 -13,430 -9,970 -14,621 -12,934 -15,485 -12,348 -15,715 -17,546 -18,512 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 US. Treasury bills 0 0 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 12 Five years or less -2,458 848 2,660 2,882 3,083 2,692 2,821 1,621 2,506 2,273 2,448 13 More than five years -1,448 -671 2,466 -252 2,147 2,495 4,031 2,857 3,643 1,833 7,081 14 Federal agency 0 0 0 0 0 0 0 0 0 0 0 15 Mortgage-backed 2,437 2,210 240 2,343 -464 -182 22 439 249 43 521 Financing5 Reverse repurchase agreements 16 Overnight and continuing 279,264 293,697 290,312 291,476 283,840 305,383 274,543 299,419 304,295 295,803 285,438 17 Term 537,456 552,156 592,367 555,332 600,039 607,423 626,584 542,271 574,692 584,084 626,375 Securities borrowed 18 Overnight and continuing 213,138 216,864 213,510 215,458 211,755 214,207 209,449 219,116 214,131 214,489 214,679 19 Term 81,206 78,569 87,422 76,489 83,949 93,569 93,508 83,907 91,447 92,001 95,797 Securities received as pledge 20 Overnight and continuing 6,499 4,104 8,826 4,452 4,603 11,328 11,702 10,706 9,885 8,501 8,092 21 Term n.a. 188 163 178 153 165 166 156 137 116 117 Repurchase agreements 22 Overnight and continuing 595,167 602,889 626,329 624,993 637,862 643,690 600,015 623,786 634,318 651,834 638,716 23 Term 484,562 500,610 538,571 492,636 529,437 558,977 586,101 492,997 516,923 532,333 582,543 Securities loaned 24 Overnight and continuing 5,795 6,399 6,774 5,584 5,947 7,346 7,310 7,330 7,473 7,812 8,524 25 Term 4,430 4,352 4,574 4,427 4,879 4,522 4,458 4,497 4,394 4,293 4,990 Securities pledged 26 Overnight and continuing 59,877 62,667 61,239 60,212 61,080 61,646 62,734 59,623 58,453 55,283 52,747 27 Term 2,363 2,956 1,736 1,388 1,386 1,840 1,987 2,009 2,052 2,025 1,858 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 11,503 12,391 13,374 16,226 12,383 13,191 14,074 11,757 13,272 13,790 13,679 MEMO: Matched book6 Securities in 31 Overnight and continuing 281,975 298,289 290,345 290,066 290,077 303,114 272,007 298,739 305,482 294,008 281,480 32 Term 521,831 531,303 575,636 533,488 579,944 594,712 610,520 527,780 565,779 569,975 610,930 Securities out 33 Overnight and continuing 362,687 363,061 380,179 372,527 378,812 405,995 367,276 370,136 384,736 383,121 376,160 34 Term 418,703 432,788 461,838 419,514 453,902 480,866 500,907 425,473 446,662 453,947 500,175 1. Data for positions and financing are obtained from reports submitted to the Federal 4. Futures positions reflect standardized agreements arranged on an exchange. All futures Reserve Bank of New York by the U.S. government securities dealers on its published list of positions are included regardless of time to delivery. primary dealers. Weekly figures are close-of-business Wednesday data. Positions for calendar 5. Overnight financing refers to agreements made on one business day that mature on the days of the report week are assumed to be constant. Monthly averages are based on the next business day; continuing contracts are agreements that remain in effect for more than one number of calendar days in the month. business day but have no specific maturity and can be terminated without advance notice by 2. Securities positions are reported at market value. either party; term agreements have a fixed maturity of more than one business day. Financing 3. Net outright positions include immediate and forward positions. Net immediate posi- data are reported in terms of actual funds paid or received, including accrued interest. tions include securities purchased or sold (other than mortgage-backed agency securities) that 6. Matched-book data reflect financial intermediation activity in which the borrowing and have been delivered or are scheduled to be delivered in five business days or less and lending transactions are matched. Matched-book data are included in the financing break- "when-issued" securities that settle on the issue date of offering. Net immediate positions for downs given above. The reverse repurchase and repurchase numbers are not always equal mortgage-backed agency securities include securities purchased or sold that have been because of the "matching" of securities of different values or different types of collateralizadelivered or are scheduled to be delivered in thirty business days or less. tion. Forward positions reflect agreements made in the over-the-counter market that specify NOTE, "n.a." indicates that data are not published because of insufficient activity. delayed delivery. Forward contracts for U.S. Treasury securities and federal agency debt Major changes in the report form filed by primary dealers induced a break in the dealer data securities are included when the time to delivery is more than five business days. Forward series as of the week ending July 6, 1994. contracts for mortgage-backed agency securities are included when the time to delivery is more than thirty business days. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic NonfinancialS tatistics • October 1997 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1997 AAggeennccyy 11999933 11999944 11999955 11999966 Jan. Feb. Mar. Apr. May 1 Federal and federally sponsored agencies 570.711 738,928 844,611 925,823 939,416 927,400 929.809 960,491 974,331 Federal agencies 45.193 39.186 37.347 29.380 29.481 29.303 28.989 27.762 28.011 T Defense Department' 6 6 6 6 6 6 6 6 6 4 Export Import Bunk-" 5.315 3.455 2.050 1.447 1.437 1.437 1.363 1,357 1.357 S Federal Housing Administration4 255 116 97 84 144 146 26 31 32 6 Government National Mortgage Association certificates ot participation" n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 7 Postal Service6 9.732 8.073 5,765 n.a. n.a. n.a. n.a. n.a. n.a. 8 Tennessee Vallev Authority 29.885 27.536 29.429 27.853 27.831 27.714 27,594 27,756 28.005 9 United Stales Railwav Association6 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 10 523 45"> 699 742 807.764 896,443 909.998 898.097 900.820 932,729 946.320 1 1 Federal Home Loan Banks 139,512 205.817 243,194 263.404 257.055 255.407 266.456 277.880 284.861 12 Federal Home Loan Mortgage Corporation 49.993 93.279 119.961 156.980 163.171 161,532 153,621 162.872 167.407 13 Federal National Mortgage Association 201.1 12 257.230 299.174 331,270 333.302 332.046 336.174 341,789 344.350 14 Farm Credit Banks's 53.123 53.175 57.379 60,053 67.610 60.075 60,884 60.945 61.384 15 Student Loan Marketing Association9 39.784 50.335 47.529 44,763 48,788 48.707 43.105 48.515 47.620 16 Financing Corporation1" 8.170 8.170 8.170 8.170 8.170 8.170 8.170 8.170 8.170 17 Farm Credit Financial Assistance Corporation" 1,261 1.261 1.261 1,261 1.261 1,261 1.261 1.261 1.261 18 Resolution Funding Corporation1- 29.996 29.996 29,996 29.996 29.996 29.996 29,996 53.243R 29,996 MEMO 19 Federal Financing Bank debt11 128,187 103,817 78,681 58,172 57.635 57,625 53.688 n.a. 51.866 l.eiuliim to federal and federally sponsored agencies 20 Export-Import Bank"1 5.309 3.449 2.044 1,431 1.431 1,431 1,357 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 Vallev 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 lending1'* 25 Farmers Home Administration 38.619 33.719 21.015 18,325 17.875 17.875 16,675 16.675 16.505 26 Rural Electrification Administration 17,578 17.392 17,144 16,702 16,702 16,710 15.696 15,696R 15.674 27 Other 45.864 37.984 29,513 21.714 21,627 21.609 21.317 23.919 18.330 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 homeow ners 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 Coiporation. 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 Dec. Jan. Feb. Mar. Apr. May1 June1 July 1 All issues, new and refunding1 153,950 145,657 171,222 17,431 10,340 12,052 13,701 15,741 15,447 19,350 15,496 Bx tvpe of issue i General obligation 54,404 56,980 60,409 4,755 4,160 4.287 5.491 6.224 5.741 6.133 6.95 1 3 Revenue 99,546 88.677 110,813 12.676 6,180 7,765 8.210 9.517 9,706 13.217 8.545 Bx type of issuer 4 Slate 19.186 14.665 13.651 663 728 713 4.037 1,126 1.219 1.197 1,985 Special district or statutory authority" 95.896 93,500 113.228 12.315 6,306 8.341 7.206 1 1.124 9.666 1 3.774 9.694 6 Municipality, county, or township 38.868 37,492 44,343 4,453 3,306 2.998 2.458 3,491 4.562 4.379 3,817 7 Issues for new capital 105,972 102,390 112,298 12,311 6,106 8,409 8,736 11,476 10,507 14,952 9,758 BY use of proceeds X Education 21.267 23,964 26,851 2.306 1,974 1,924 2,330 3.264 2,844 3.498 2.959 9 Transportation 10,836 11.890 12,324 736 808 639 393 1.873 1.225 638 822 10 Utilities and conservation 10,192 9.618 9,791 1.006 749 901 954 425 1.608 1.615 1.388 1 1 Social welfare 20,289 19,566 24,583 3.294 1.265 1.281 2.644 1.929 1.291 4.438 1.641 12 Industrial aid 8.161 6,581 6,287 1,081 231 481 317 765 462 637 355 13 Other purposes 35.227 30,771 32.462 3.888 1.079 3,183 2,098 3,220 3.077 4,126 2.593 1. Par amounts of long-term issues based on date of sale. SOI'RCE. Securities Data Company beginning January 1990; Investment Dealer 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 Nov. Dec. Jan. Feb. Mar. Apr.1 May June 1 All issues' 583,240 n.a. n.a. 57,937 48,747 57,186 53,027 62,41 lr 43.956 54,269 83,468 2 Bonds" 498,039 573,206 n.a. 44,569 39,585 44,027 44,980 54,632 37,672 46,259 72,561 Bx type of offering 3 Public, domestic 365.222 408,804 386 280 38,948 37.108 35,449 35,245 45.886 29.797 38.1 15 60.35 1 4 Private placement, domestic 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 5,621 2,477 8,577 9,735 8,746 7,875 8.144 12.210 Bx industn• group 6 Manufacturing 43.423 61.070 41,959 2.720 5.096 4,088 4.791 3,060 2.276 2.355 3.748 7 Commercial and miscellaneous 40.735 50.689 34.076 4.282 1.727 4.926 2.004 1.641 6.201 4.225 2,771 8 Transportation 6,867 8.430 5.111 270 341 366 100 324 257 4.445 667 9 Public utility 13.322 13.751 8,161 773 680 858 1,476 1.185 47 653 1.377 10 Communication 13.340 22.999 13,320 475 628 1,210 405 2.802 500 300 576 11 Real estate and financial 380,352 416,269 358,446 36,049 31,113 32,578 36,204 45,619 28.391 34,282 6.3,423 12 Stocks" 85,155 100,573 n.a. 13,368 9,162 13,159 8,047 7,779 6.284 8,012 10,907 Bx type of offering 13 Public preferred 12.570 10,917 33.208 5.656 5,452 8,048 1,510 2.740 1.952 2,055 33..884433 14 Common 47.828 57.556 83.052 7,712 3.710 5.111 6.537 5.039 4.332 5,957 7.064 15 Private placement" 24.800 32.100 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Bx industn group 16 Manufacturing 17.798 21.545 1.530 899 608 2.008 1.136 847 1.594 966 17 Commercial and miscellaneous 15.713 27.844 n.a. 3.974 2,922 1.827 3.041 1.923 1.181 1.912 2.933 18 Transportation 2.203 804 367 54 250 258 0 0 35 257 19 Public utility 2.214 1.936 210 103 1,847 96 841 570 200 1,046 20 Communication 494 1.077 42 23 0 28 0 25 0 374 21 Real estate and financial 46.733 47.367 7,219 5.161 8.292 2.575 3.879 3,661 4,219 5,344 I. 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- SOt'RCE. 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 Nonfinancial Statistics • October 1997 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Assets' Millions of dollars 1996 1997 IItteemm 11999955 11999966 Dec. Jan. Feb. Mar. Apr. May June July 1 Sales of own shares2 871,415 1,149,918 122,792 134,460 102,169 101,390 110,721 103,470 112,807 125,639 2 Redemptions of own shares 699,497 853,460 87,949 96,243 73,871 79,976 100,188 76,337 87.056 90,131 3 Net sales3 171,918 296,458 34,843 38,218 28,298 21,413 10,532 27,133 25,752 35,508 4 Assets4 2,067,337 2,637,398 2,637,398 2,752,273 2,772,715 2,700,474 2,782,077 2,952,609 3,067,392 3,279,457 142,572 139,396 137,973 152,297 153,525 160,570 177,979 182,004 180,464 183,044 6 Other 1,924,765 2,498,002 2,499,425 2,599,976 2,619,189 2,539,906 2,604,098 2,770,606 2,886,928 3,096,414 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 1995r 1996r 1997 AAccccoouunntt 11999944rr 11999955rr 11999966rr Q3 Q4 Q1 Q2 Q3 Q4 Qir Q2 1 Profits with inventory valuation and capital consumption adjustment 570.5 650.0 735.9 672.8 685.7 717.7 738.5 739.6 747.8 779.6 794.5 2 Profits before taxes 535.1 622.6 676.6 630.6 634.1 664.9 682.2 679.1 680.0 708.4 717.3 3 Profits-tax liability 186.6 213.2 229.0 218.8 215.3 226.2 232.2 231.6 226.0 241.2 244.4 4 Profits after taxes • 348.5 409.4 447.6 411.8 418.8 438.7 450.0 447.5 454.0 467.2 473.0 5 Dividends 216.2 264.4 304.8 266.8 274.4 300.7 303.7 305.7 309.1 326.8 333.0 6 Undistributed profits 132.3 145.0 142.8 145.0 144.5 138.0 146.4 141.8 144.9 140.3 140.0 7 Inventory valuation -16.1 -24.3 -2.5 -9.3 .4 -5.1 -5.4 -2.7 3.3 3.5 7.6 8 Capital consumption adjustment 51.4 51.6 61.8 51.5 51.1 57.9 61.6 63.2 64.4 67.7 69.6 SOURCE. U.S. Department of Commerce, Survey of Current Business. 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities' Billions of dollars, end of period; not seasonally adjusted 1995r 1996r 1997 AAccccoouunntt 11999944rr 11999955rr 11999966rr Q4 Ql Q2 Q3 Q4 Qlr Q2 ASSETS 1 Accounts receivable, gross" 543.7 607.0 637.1 607.0 613.7 626.7 628.1 637.1 647.2 650.7 2 Consumer 201.9 233.0 244.9 233.0 235.9 240.6 244.4 244.9 248.6 254.3 .3 Business 274.9 301.6 309.5 301.6 303.5 305.7 301.4 309.5 315.2 311.7 4 Real estate 66.9 72.4 82.7 72.4 74.3 80.4 82.2 82.7 83.4 84.8 5 LESS: Reserves for unearned income 52.9 60.7 55.6 60.7 58.9 57.2 54.8 55.6 51.3 57.0 6 Reserves for losses 11.3 12.8 13.1 12.8 12.8 12.7 12.9 13.1 12.8 13.3 7 Accounts receivable, net 479.5 533.5 568.3 533.5 542.0 556.7 560.5 568.3 583.1 580.4 8 All other 216.8 250.9 290.0 250.9 255.0 258.7 268.7 290.0 289.9 308.1 9 Total assets 696.3 784.4 858.3 784.4 796.9 815.4 829.2 858.3 873.0 888.6 LIABILITIES AND CAPITAL 10 Bank loans 14.8 15.3 19.7 15.3 15.4 17.7 18.3 19.7 18.4 18.9 11 Commercial paper 171.6 168.6 177.6 168.6 168.2 169.6 173.1 177.6 185.3 193.8 Debt 12 Owed to parent 41.8 51.1 60.3 51.1 50.5 56.3 57.9 60.3 61.0 61.4 13 Not elsewhere classified 247.4 300.0 332.5 300.0 307.5 319.0 322.3 332.5 324.4 344.6 14 All other liabilities 146.2 163.6 174.7 163.6 165.6 163.2 164.8 174.7 189.1 170.9 15 Capital, surplus, and undivided profits 74.6 85.9 93.5 85.9 89.7 89.7 92.8 93.5 94.8 98.8 16 Total liabilities and capital 696.3 784.4 858.3 784.4 796.9 815.4 829.2 858.3 873.0 888.6 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. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Market and Corporate Finance A33 1.52 DOMESTIC FINANCE COMPANIES Owned and Managed Receivables' Billions of dollars, amounts outstanding 1997 TTyyppee ooff ccrreeddiitt Jan. Feb. Mar. Apr. May June Seasonally adjusted 1 Total 607.3 682.4 762.4 766.6 767.7 773.8 775.6 775.9 783.1 1 Consumer 244.4 281.9 306.6 309.1 311.3 312.5 318.2 318.5 320.5 3 Real estate 66.9 72.4 111.9 112.7 112.8 115.5 116.9 118.0 120.7 4 Business 295.9 328.1 343.8 344.7 ' 343.5 345.8 340.5 3.39.3 342.0 Not seasonally adjusted 5 Total 613.5 689.5 769.7 767.7 766.2 775.0 776.6 777.8 787.2 6 Consumer 248.0 285.8 310.6 310.6 309.9 311.0 315.6 317.5 320.6 7 Motor vehicles loans 70.2 81.1 86.7 86.8 87.1 85.8 83.2 85.1 87.0 8 Motor vehicle leases 67.5 80.8 92.5 93.6 94.3 95.6 96.7 97.3 98.5 9 Revolving2 25.9 28.5 32.5 32.3 32.2 33.2 34.3 34.4 34.1 10 Other3 38.4 42.6 33.2 34.4 34.0 34.0 34.3 34.7 35.3 Securitized assets4 11 Motor vehicle loans 32.8 34.8 36.8 35.0 34.2 34.5 38.3 36.8 36.8 12 Motor vehicle leases 2.2 3.5 8.7 8.6 8.5 8.4 9.4 9.3 9.2 13 Revolving n.a. n.a. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14 Other 11.2 14.7 20.1 19.8 19.7 19.6 19.3 19.9 19.7 15 Real estate 66.9 72.4 111.9 112.7 112.8 115.5 116.9 118.0 120.7 16 One- to four-family n.a. n.a. 52.1 53.2 53.8 53.3 55.0 54.9 55.1 17 Other n.a. n.a. 30.5 30.3 30.2 30.1 30.3 30.3 30.3 Securitized real estate assets4 18 One- to four-family n.a. n.a. 28.9 28.9 28.5 31.8 31.3 32.5 .35.0 19 Other n.a. n.a. 0.4 0.3 0.3 0.4 0.3 0.3 0.3 20 Business 298.6 331.2 347.2 344.4 343.4 348.5 344.1 342.2 345.9 21 Motor vehicles 62.0 66.5 67.1 68.4 71.0 73.8 71.7 70.4 70.7 22 Retail loans 18.5 21.8 25.1 24.9 25.0 25.1 24.6 24.4 25.2 23 Wholesale loans5 35.2 36.6 33.0 34.5 36.9 39.6 37.9 36.6 36.3 24 Leases 8.3 8.0 9.0 9.1 9.1 9.1 9.2 9.3 9.3 25 Equipment 8.3 8.0 9.0 191.9 190.8 192.1 189.9 188.0 188.8 26 Loans 8.3 8.0 9.0 56.1 54.5 55.0 53.8 52.3 52.6 27 Leases 8.3 8.0 9.0 135.8 136.3 137.1 136.1 135.6 136.2 28 Other business receivables6 8.3 8.0 9.0 47.7 48.3 49.3 49.6 50.3 52.2 Securitized assets4 29 Motor vehicles 8.3 8.0 9.0 23.3 20.7 20.5 20.3 21.1 21.3 30 Retail loans 8.3 8.0 9.0 2.6 2.4 2.2 2.1 2.6 2.5 31 Wholesale loans 8.3 8.0 9.0 20.7 18.3 18.2 18.2 18.5 18.7 32 Leases 8.3 8.0 9.0 0.0 0.0 0.0 0.0 0.0 0.0 33 Equipment 8.3 8.0 9.0 10.7 10.3 10.3 9.9 9.9 10.4 34 Loans 8.3 8.0 9.0 4.5 4.2 4.0 3.8 4.0 3.9 35 Leases 8.3 8.0 9.0 6.2 6.0 6.3 6.2 5.9 6.5 36 Other business receivables6 8.3 8.0 9.0 2.4 2.4 2.5 2.6 2.5 2.5 NOTE. This table has been revised to incorporate several changes resulting from the before deductions for unearned income and losses. Components may not sum to totals benchmarking of finance company receivables to the June 1996 Survey of Finance Compa- because of rounding. nies. In that benchmark survey, and in the monthly surveys that have followed, more detailed 2. Excludes revolving credit reported as held by depository institutions that are subsidiarbreakdowns have been obtained for some components. In addition, previously unavailable ies of finance companies. data on securitized real estate loans are now included in this table. The new information has 3. Includes personal cash loans, mobile home loans, and loans to purchase other types of resulted in some reclassification of receivables among the three major categories (consumer, consumer goods such as appliances, apparel, boats, and recreation vehicles. real estate, and business) and in discontinuities in some component series between May and 4. Outstanding balances of pools upon which securities have been issued; these balances June 1996. are no longer carried on the balance sheets of the loan originator. Includes finance company subsidiaries of bank holding companies but not of retailers and 5. Credit arising from transactions between manufacturers and dealers, that is, Hoor plan banks. Data in this table also appear in the Board's G.20 (422) monthly statistical release. For financing. ordering address, see inside front cover. 6. Includes loans on commercial accounts receivable, factored commercial accounts, and 1. Owned receivables are those carried on the balance sheet of the institution. Managed receivable dealer capital; small loans used primarily for business or farm purposes; and receivables are outstanding balances of pools upon which securities have been issued; these wholesale and lease paper for mobile homes, campers, and travel trailers. balances are no longer carried on the balance sheets of the loan originator. Data are shown Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A34 Domestic Nonfinancial Statistics • October 1997 1.53 MORTGAGE MARKETS Mortgages on New Homes Millions of dollars except as noted 1997 IItteemm 11999944 11999955 11999966 Jan. Feb. Mar. Apr. May June July Terms and yields in primary and secondary markets PRIMARY MARKETS Terms1 1 Purchase price (thousands of dollars) 170.4 175.8 182.4 172.4 166.6 169.2 172.5 177.6 181.4 181.4 2 Amount of loan (thousands of dollars) 130.8 134.5 139.2 133.6 130.9 132.1 134.8 137.7 140.6 142.7 3 Loan-to-price ratio (percent) 78.8 78.6 78.2 79.7 80.9 80.8 81.1 80.0 79.9 81.2 4 Maturity (years) 27.5 27.7 27.2 27.9 28.2 28.0 27.8 28.2 28.0 28.7 5 Fees and charges (percent of loan amount)" 1.29 1.21 1.21 1.02 1.03 0.99 1.04 1.00 1.04 1.05 Yield (percent per year) 6 Contract rate1 7.26 7.65 7.56 7.65 7.61 7.72 7.86 7.85 7.79 7.62 7 Effective rate13 7.47 7.85 7.77 7.81 7.78 7.88 8.03 8.01 7.95 7.78 8 Contract rate (HUD series)4 8.58 8.05 8.03 7.94 7.94 8.25 8.19 8.08 7.82 7.62 SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (Section 203)5 8.68 8.18 8.19 8.06 8.08 8.55 8.56 8.05 8.02 7.61 10 GNMA securities6 7.96 7.57 7.48 7.51 7.37 7.69 7.80 7.59 7.37 7.04 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 222,057 253,51 1 287,052 288,504 288,951 292,115 295,804 297,023 297,471 300,439 17 FHA/VA insured 27,558 28,762 30,592 30,352 30,119 30,100 30,839 31,437 31,198 31,065 13 Conventional 194,499 224,749 256,460 258,152 258,832 262.015 264,965 265.586 266,273 269.374 14 Mortgage transactions purchased (during period) 62,389 56,598 68.618 4,128 3,029 5.839 6,683 4.148 3,594 6,417 Mortgage commitments (during period) 15 Issued7 54,038 56,092 65.859 4,384 4,407 8,299 3,898 1,704 6,196 6.956 16 To sell8 1,820 360 130 71 0 1 0 23 115 75 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of periodf 17 Total 72.693 107,424 137,755 138,935 139,925 144,558 147,190 148,698 149,250 151,582 18 FHA/VA insured 276 267 220 216 213 208 205 210 210 210 19 Conventional 72,416 107,157 137,535 138,719 139.712 144,350 146,985 148,488 149,040 151,372 Mortgage transactions (during period) 70 124,697 98.470 128,566 9,507 8,204 7,403 8,981 8,195 8,884 8,374 21 Sales 117,110 85,877 119,702 9,204 10,271 6,796 8,269 7,596 8,321 7,756 22 Mortgage commitments contracted (during period)9 136,067 118,659 128,995 9,021 7,537 7,595 9.746 7,408 9,099 9,054 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-downpavment 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 Ql 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 B\ type of property 2 One- to tour-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 Multifamilv 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 Bv 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 banks" 940.595 1,004,322 1,080,366 1.087,207 1,099.643 1,112,914 1,136.128 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 1 1 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 15 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 Multifamilv 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 -n 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 n 6 2 2 0 2 2 6 24 One- to four-family 15 6 2 i 2 2 2 6 25 Multifamily 7 0 0 0 0 0 0 0 26 Farmers Home Administration4 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-familv 5,364 4,753 5,180 4,228 3.861 3,190 3,524 2,335 33 Multifamilv 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 Multifamilv 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 1 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 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 tive 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 I986: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 Nonfinancial Statistics • October 1997 1.55 CONSUMER CREDIT1 Millions of dollars, amounts outstanding, end of period 1997r HHoollddeerr aanndd ttyyppee ooff ccrreeddiitt 11999944 11999955 11999966 Jan. Feb. Mar. Apr. May June Seasonally adjusted 11 TToottaall 964,568 1,100,712 1,184,022 1,195,181 1,202,877 1,205,557 1,214,512 1,217,035 1,217,011 22 AAuuttoommoobbiillee 326,356 362,097 390,308 390.649 390,823 390,450 394,260 394,399 394,321 33 RReevvoollvviinngg 364,616 441,862 497,977 505,306 510,617 509,476 512,381 514,126 516,627 44 OOtthheerr22 273,596 296,753 295,738 299.226 301,437 305,632 307,871 308,510 306,063 Not seasonally adjusted 5 Total 988,079 1,128,618 1,214,882 1,204,825 1,197,168 1,193,994 1,202,634 1,206,863 1,211,382 By major holder 6 Commercial banks 462,923 507,753 529.417 525,749 518,596 511,584 516,640 517,956 515,785 / Finance companies 134.421 152,123 152,391 153,487 153,275 152,995 151,897 154,177 156,450 8 Credit unions 119,594 131,939 144,148 144,432 143,788 144,415 146,265 147,558 148,674 9 Savings institutions 38,468 40,106 44,711 45,095 45,478 45,860 46,243 46,626 47,009 10 Nonfinancial business3 86,621 85,061 77,745 73,611 70,599 69,954 69,346 67,744 68,039 II Pools of securitized assets4 146,052 211,636 266,470 262,451 265,432 269,186 272,243 272,802 275,425 By major type of credit5 12 Automobile 328,576 364,726 393,189 389,461 387,539 386,713 389,844 391,259 393,437 13 Commercial banks 141,895 149,094 153,983 153,013 151,826 150,458 150.937 151,203 149,029 14 Finance companies 70,157 81,073 86,690 86,809 87,064 85,754 83,230 85,106 86,979 15 Pools of securitized assets4 36,689 44,635 52,363 49,481 48,195 49,334 53,504 51,505 52,739 16 Revolving 383,187 464,134 522,860 513,437 508,559 502,850 504,916 509,207 513,376 1/ Commercial banks 182,021 210,298 228,615 223,184 215,772 207,251 209,031 212,796 215,342 18 Finance companies 25,880 28,460 32,493 32,262 32,206 33,225 34,345 34,411 34,130 19 Nonfinancial business3 56,790 53,525 44,901 41,900 39,813 39,433 38,953 37,078 37,283 20 Pools of securitized assets4 96,130 147,934 188,712 187,865 192,332 194,549 193.798 195,800 196,906 21 Other 276,316 299.758 298,833 301,927 301,070 304,431 307,874 306,397 304,569 22 Commercial banks 139,007 148,361 146,819 149,552 150,998 153,875 156,672 153,957 151.414 23 Finance companies 38.384 42,590 33,208 34,416 34,005 34,016 34,322 34,660 35,341 24 Nonfinancial business3 29,831 31,536 32,844 31,711 30,786 30,521 30,393 30,666 30,756 25 Pools of securitized assets4 13,233 19,067 25,395 25,105 24,905 25,303 24,941 25,497 25,780 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 Dec. Jan. Feb. Mar. Apr. May June INTEREST RATES Commercial banks' 1 48-month new car 8.12 9,57 9.05 n.a. n.a. 8.92 n.a. n.a. 9.20 n.a. 2 24-month personal 13.19 13.94 13.54 n.a. n.a. 13.46 n.a. n.a. 13.81 n.a. Credit card plan 3 All accounts 15.69 16.02 15.63 n.a. n.a. 15.88 n.a. n.a. 15.75 n.a. 4 Accounts assessed interest 15.77 15.79 15.50 n.a. n.a. 15.13 n.a. n.a. 15.72 n.a. Auto finance companies 5 New car 9.79 11.19 9.84 8.60 7.17 7.44 8.08 8.56 7.80 7.64 6 Used car 13.49 14.48 13.53 13.42 12.93 13.08 13.18 13.29 13.48 13.55 OTHER TERMS3 Maturity (months) 7 New car 54.0 54.1 51.6 52.3 55.1 54.6 53.5 52.8 53.2 53.3 8 Used car 50.2 52.2 51.4 49.9 51.5 51.1 51.1 51.2 51.3 51.3 Loan-to-value ratio 9 New car 92 92 91 90 92 92 90 91 93 93 10 Used car 99 99 100 99 99 99 99 99 99 99 Amount financed (dollars) 11 New car 15,375 16,210 16,987 17,670 17.090 16,837 17,198 17,620 18,060 18,171 12 Used car 10,709 11,590 12,182 12,492 12,362 12,202 12,194 12,195 12,261 12,239 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 MARKETS1 Billions of dollars; quarterly data at seasonally adjusted annual rates 1995 1996 1997 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 fiv sector and instrument 1 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 10 Other loans and advances 10.1 -9.4 54.4 59.0 38.8 35.2 61.0 32.9 26.8 79.4 16.2 34.9 1 1 Mortgages 133.5 157.0 196.4 228.0 331.4 247.7 191.0 377.9 339.4 268.0 340.2 296.4 1? 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 n 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 Corporate 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 75 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 15.7 23.2 1199..33 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 4? Credit unions .0 .2 2 -.1 .1 .1 .0 -.1 -.2 .3 .3 -.2 41 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 1.8 -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 17.7 18.9 50 Brokers and dealers 2.7 12.0 -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 • October 1997 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS1—Continued 1995 1996 1997 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr Q3 Q4 Qi Q2 Q3 Q4 Ql All sectors 52 Total net borrowing, all sectors 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 53 Open market paper 13.1 -5.1 35.7 74.3 102.6 85.5 65.3 39.6 126.3 107.6 136.8 203.4 54 U.S. government securities 459.8 421.4 448.1 348.5 376.1 313.7 364.8 377.7 358.4 401.7 366.5 206.2 55 Municipal securities 30.5 74.8 -29.3 -44.2 1.5 -107.2 -12.6 -18.9 37.7 -76.2 63.5 26.8 5b Corporate and foreign bonds 167.1 277.3 153.9 307.2 273.6 332.2 329.9 256.4 287.4 248.2 302.4 142.4 5/ Bank loans n.e.c -9.3 -8.6 62.3 113.5 93.8 91.4 88.6 74.7 113.6 143.1 43.8 135.4 58 Other loans and advances 8.9 8.7 70.7 61.6 66.7 41.3 89.1 28.6 76.1 116.5 45.8 17.9 sy Mortgages 134.1 160.6 206.2 233.8 342.8 252.2 198.7 385.6 350.1 280.9 354.5 312.4 60 Consumer credit 5.0 61.5 126.3 141.6 93.2 156.4 117.5 122.5 91.2 94.2 65.0 80.2 Funds raised through mutual funds and corporate equities 61 Total net issues 312.5 453.9 153.0 156.3 240.1 197.1 228.6 306.3 396.7 91.9 165.4 184.3 62 Corporate equities 103.4 130.1 24.1 -17.7 -18.5 -4.9 -15.9 2.5 53.0 -106.3 -23.2 -54.5 63 Nonfinancial corporations 27.0 21.3 -44.9 -73.8 -81.2 -92.8 -71.2 -92.4 -27.2 -138.8 -66.4 -84.8 64 Foreign shares purchased by U.S. residents 32.4 63.4 48.1 50.7 57.8 88.2 57.4 89.8 69.7 32.1 39.5 47.3 65 Financial corporations 44.0 45.4 20.9 5.5 4.9 -.3 -2.2 5.1 10.5 .5 3.7 -17.0 66 Mutual fund shares 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.l (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 Q4 QI Q2 Q3 Q4 Qi 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 ?. 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 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 9 .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 1? U.S.-chartered banks 69.5 149.6 148.1 186.5 119.7 227.0 118.1 80.5 125.5 123.6 149.2 210.0 13 Foreign banking offices in United States 16.5 -9.8 11.2 75.4 63.3 25.6 36.1 44.2 57.5 72.9 78.5 92.1 14 Bank holding companies 5.6 .0 .9 -.3 3.9 -9.6 4.6 -5.1 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 74 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 3? 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 1,378.2 1,124.7 Other financial sources 35 Official foreign exchange -1.6 .8 -5.8 8.8 -6.3 9.0 -1.9 -.9 11..66 --2266..66 ..77 --2222..22 36 Special drawing rights certificates -2.0 .0 .0 2.2 -.5 8.6 .0 .0 ..00 -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 8855..33 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 --2233..22 -54.5 46 Mutual fund shares 209.1 323.7 128.9 173.9 258.6 202.0 244.5 303.8 343.7 198.2 188.6 238.8 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 --..33 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.l (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 NonfinancialS tatistics • October 1997 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1 Billions of dollars, end of period 1995 1996 1997 4 Q3 Q4 Ql Q2 Q3 Q4 Ql 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 B\ 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 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 9 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 11 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 26 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 47 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. I (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 Mortgage 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 45 Mutual fund shares 1,375.4 1,477.3 1,852.8 2,342.4 1,782.0 1,852.8 1,997.0 2,129.9 2.211.6 2,342.4 2,410.3 46 Security credit 279.0 279.0 305.7 358.1 286.1 305.7 326.9 318.6 317.8 358.1 374.4 47 Life insurance reserves 470.8 505.3 550.2 590.2 540.6 550.2 555.0 563.1 577.2 590.2 604.8 48 Pension fund reserves 4,642.9 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.l 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 • October 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 Nov. Dec. Jan. Feb. Mar. Apr. Mayr Juner July 1 Industrial production1 108.6 112.1 115.2 117.2 117.7 117.8 118.4 118.8 119.3 119.3 119.6 119.8 Market groupings 2 Products, total 106.8 109.3 112.0 114.1 114.3 114.2 114.8 115.3 115.4 115.6 116.0 115.9 3 Final, total 107.1 109.9 112.8 114.8 115.3 115.1 115.6 116.3 116.6 116.7 117.4 117.2 4 Consumer goods 107.4 108.9 110.5 112.3 112.7 111.7 111.6 112.1 112.1 112.1 112.5 112.3 5 Equipment 106.6 111.6 116.8 119.0 119.6 120.8 122.6 123.5 124.31" 124.8 125.8 125.8 6 Intermediate 106.1 107.5 109.4 111.9 111.3 111.6 112.0 112.1 112.0 112.1 111.9 111.8 / Materials 111.3 116.6 120.3 122.2 123.1 123.4 124.1 124.5 125.5r 125.2 125.3 126.0 Industry groupings 8 Manufacturing 109.4 113.2 116.3 118.5 119.2 119.3 120.1 120.6 120.9 121.0 121.3 121.4 9 Capacity utilization, manufacturing (percent)". . 83.1 83.1 82.1 82.4 82.5 82.4 82.6 82.7 82.6 82.4 82.3 82.1 10 Construction contracts3 117.3 121.7r 130.2r 132.0 128.0 130.0 131 0r 133.0 137.0' 136.0 134.0 129.0 11 Nonagricultural employment, total4 112.0 115.0 117.3 118.1 118.3 118.6 118.8 119.0 119.3 119.5 119.7 120.0 12 Goods-producing, total 96.9 98.1 98.3 99.3 99.5 99.6 99.9 100.0 100.0 100.1 100.2 100.2 13 Manufacturing, total 96.4 97.2 96.2 97.1 97.1 97.2 97.2 97.3 97.4 97.4 97.5 97.5 14 Manufacturing, production workers 97.5 98.7 97.5 98.3 98.4 98.5 98.5 98.6 98.6 98.7 98.7 98.8 15 Service-producing 116.8 120.3 123.3 124.1 124.4 124.6 124.9 125.1 125.5 125.7 126.0 126.4 lb Personal income, total I48.9r 158.2r 167.0r 170. lr 171.4r 172.3r 173.6r 174.6r 174.9r 175.5 176.6 n.a. 1/ Wages and salary disbursements 142.6 150.9 159.8r 163.4 165.2r 165.2r 167.2r 168.1r 168.2r 168.7 170.2 n.a. 18 Manufacturing 124.9 130.4 135.7r 137.7r 138.9r 138.9r 139.5r 140.5r 140.7 140.9 141.3 n.a. 19 Disposable personal income5 149.7r 158.7r 166.2r 168.7r 169.7r I70.6r 171,7r 172.5r 172.7r 173.1 174.1 n.a. 20 Retail sales" 144.6 151.2 158.5r 160.5 161.3 163.9 166.1 165.6 163.7 163.3 164.3 165.4 Prices6 21 Consumer (1982-84=100) 148.2 152.4 156.9 158.6 158.6 159.1 159.6 160.0 160.2 160.1 160.3 160.5 22 Producer finished goods (1982=100) 125.5 127.9 131.3 132.6 132.7 132.6 132.2 132.1r 131.6 131.5 131.6 131.3 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 Dec. Jan. Feb. Mar. Apr. Mayr Juner July HOUSEHOLD SURVEY DATA1 1 Civilian labor force2 131,056 132,304 133,943 135,022 135,848 135,634 136,319 136,098 136,173 113366,,220000 113366,,229900 Employment 2 Nonagricultural industries3 119,651 121,460 123,264 124,429 125.112 125.138 125,789 125,887 126,209 125,973 126,226 3 Agriculture 3,409 3,440 3,443 3.426 3,468 3,292 3,386 3,497 3,430 3,391 3,482 Unemployment 4 Number 7,996 7,404 7,236 7,167 7,268 7,205 7,144 6,714 6,534 6,836 6,583 5 Rate (percent of civilian labor force) 6.1 5.6 5.4 5.3 5.4 5.3 5.2 4.9 4.8 5.0 4.8 ESTABLISHMENT SURVEY DATA 6 Nonagricultural payroll employment4 114,172 117,203 119,549 120,659 120,909 121,162 121344 121,671 121,834 122,062 122378 7 Manufacturing 18,321 18,468 18,282 18,448 18,465 18,475 18,489 18,495 18,498 18,520 18,515 8 Mining 601 580 570 571 574 574 572 573 576 576 574 9 Contract construction 4,986 5,158 5,405 5,521 5,542 5,604 5,609 5,599 5,628 5,624 5,627 10 Transportation and public utilities 5,993 6,165 6,318 6,288 6,351 6,376 6,405 6,421 6.431 6,430 6,461 11 Trade 26,670 27,585 28,178 28,471 28,487 28,515 28,556 28.651 28,656 28,711 28,805 12 Finance 6,896 6,830 6,977 6,962 6,971 6,980 6,992 7,019 7,029 7,038 7,064 13 Service 31,579 33,107 34,360 34,884 34,990 35,091 35,176 35,334 35,451 35,521 35,634 14 Government 19,128 19,310 19,459 19,514 19.529 19.547 19,545 19,579 19,565 19,642 19,698 1. Beginning January 1994, reflects redesign of current population survey and population 4. Includes all full- and part-time employees who worked during, or received pay for, the controls from the 1990 census. pay period that includes the twelfth day of the month; excludes proprietors, self-employed 2. Persons sixteen years of age and older, including Resident Armed Forces. Monthly persons, household and unpaid family workers, and members of the armed forces. Data are figures are based on sample data collected during the calendar week that contains the twelfth adjusted to the March 1992 benchmark, and only seasonally adjusted data are available at this day; annual data are averages of monthly figures. By definition, seasonality does not exist in time. population figures. SOURCE. Based on data from U.S. Department of Labor, Employment and Earnings. 3. Includes self-employed, unpaid family, and domestic service workers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A43 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION1 Seasonally adjusted 1996 1997 1996 1997 1996 1997 SSeerriieess Q3 Q4 Ql Q2r Q3 Q4 Ql Q2 Q3 Q4 Ql Q2r Output (1992=100) Capacity (percent of 1992 output) Capacity utilization rate (percent)2 1 Total industry 115.8 117.0 118.3 119.4 139.2 140.5 141.8 143.2 83.2 83.3 83.5 83.4 2 Manufacturing 117.2 118.4 120.0 121.1 142.5 143.9 145.3 146.9 82.3 82.3 82.5 824 3 Primary processing3 113.2 113.9 114.7 115.7 130.7 131.5 132.2 132.9 86.6 86.6 86.8 87.0 4 Advanced processing4 119.1 120.7 122.6 123.7 148.2 150.0 151.9 153.8 80.4 80.4 80.7 80.4 5 Durable goods 127.2 128.1 130.7 132.8 154.5 156.9 159.3 161.8 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 118.6 119.8 119.7 122.3 129.8 131.0 132.1 133.3 91.4 91.5 90.6 91.7 8 Iron and steel 117.9 118.6 118.3 121.1 131.9 133.5 134.9 136.0 89.4 88.9 87.7 89.0 9 Nonferrous 119.4 121.1 121.3 123.5 127.1 127.8 128.6 129.8 93.9 94.8 94.3 95.2 10 Industrial machinery and equipment 158.9 161.5 166.2 171.0 176.3 181.3 186.5 192.3 90.1 89.1 89.1 89.0 1 1 Electrical machinery 164.5 167.2 172.1 178.5 200.6 208.5 216.3 224.2 82.0 80.2 79.6 79.6 12 Motor vehicles and parts 131.3 126.0 130.2 124.6 176.1 177.3 178.2 178.7 74.5 71.0 73.0 69.7 13 Aerospace and miscellaneous transportation equipment , , . 86.7 90.4 93.5 96.4 120.2 119.8 119.7 120.5 72.2 75.5 78.1 80.0 14 Nondurable goods 106.5 108.1 108.6 108.6 129.6 130.1 130.6 131.1 82.2 83.0 83.1 82.8 15 Textile mill products 107.9 107.4 107.1 108.2 130.1 130.8 131.3 131.4 82.9 82.1 81.6 82.3 16 Paper and products 109.0 109.8 111.2 111.9 122.9 123.3 123.6 123.9 88.7 89.0 89.9 90.4 17 Chemicals and products 109.2 112.4 112.8 112.6 139.2 140.3 141.5 142.6 78.4 80.1 79.8 78.9 18 Plastics materials 125.3 125.3 127.0 131.8 134.0 136.2 95.1 93.5 93.3 19 Petroleum products 106.7 107.7 108.1 111.9 113.7 113.8 113.9 114.2 93.9 94.6 94.9 98.0 20 Mining 103.7 103.8 105.8 107.2 113.7 113.7 113.8 114.3 91.2 91.3 93.0 93.8 21 Utilities 110.5 113.0 110.9 111.9 125.2 125.9 126.5 127.0 88.2 89.8 87.7 88.2 22 Electric 110.8 112.4 111.5 111.8 123.6 124.4 125.1 125.6 89.6 90.4 89.1 89.0 1973 1975 Previous cycle5 Latest cycle6 1996 1997 High Low High Low High Low July Feb. Mar. Apr.r Mayr June Julyp Capacity utilization rate (percent)2 1 Total industry 89.2 72.6 87.3 71.1 85.3 78.1 83.2 83.5 83.6 83.6 83.3 83.3 83.1 2 Manufacturing 88.5 70.5 86.9 69.0 85.7 76.6 82.4 82.6 82.7 82.6 82.4 82.3 82.1 3 Primary processing' 91.2 68.2 88.1 66.2 88.9 77.8 86.7 86.9 87.3 87.1 87.2 86.8 86.5 4 Advanced processing4 87.2 71.8 86.7 70.4 84.2 76.1 80.6 80.7 80.7 80.6 80.3 80.3 80.1 5 Durable goods 89.2 68.9 87.7 63.9 84.5 73.2 82.6 82.1 82.3 82.2 82.0 82.0 81.8 6 Lumber and products 88.7 61.2 87.9 60.8 93.6 75.5 84.9 85.5 86.3 86.3 86.4 85.7 85.0 7 Primary tnetals 100.2 65.9 94.2 45.1 92.7 73.7 91.2 90.8 91.5 90.5 92.7 92.0 91.0 8 Iron and steel 105.8 66.6 95.8 37.0 95.2 71.8 89.8 87.6 87.7 87.9 90.8 88.3 87.9 9 Nonferrous 90.8 59.8 91.1 60.1 89.3 74.2 92.9 95.0 96.3 93.7 95.2 96.7 94.8 10 Industrial machinery and equipment 96.0 74.3 93.2 64.0 85.4 72.4 90.2 89.3 88.8 90.0 88.7 88.2 88.3 11 Electrical machinery 89.2 64.7 89.4 71.6 84.0 75.1 82.7 79.7 80.1 79.8 79.4 79.6 80.1 12 Motor vehicles and parts 93.4 51.3 95.0 45.5 89.1 55.9 76.3 72.7 72.3 70.2 69.2 69.7 67.8 13 Aerospace and miscellaneous transportation equipment 78.4 67.6 81.9 66.6 87.3 79.2 71.3 78.2 79.1 79.5 80.0 80.6 81.1 14 Nondurable goods 87.8 71.7 87.5 76.4 87.3 80.7 82.2 83.2 . 83.1 83.0 82.8 82.7 82.4 15 Textile mill products 91.4 60.0 91.2 72.3 90.4 77.7 83.7 81.4 82.4 82.7 81.8 82.4 82.1 16 Paper and products 97.1 69.2 96.1 80.6 93.5 85.0 89.8 89.9 90.6 90.6 91.0 89.4 90.0 17 Chemicals and products 87.6 69.7 84.6 69.9 86.2 79.3 78.6 79.7 79.0 79.6 78.6 78.6 78.2 18 Plastics materials 102.0 50.6 90.9 63.4 97.0 74.8 94.9 93.3 93.0 93.3 92.5 19 Petroleum products 96.7 81.1 90.0 66.8 88.5 85.1 92.7 95.4 94.9 97.0 98.1 98.9 97.3 20 Mining 94.3 88.2 96.0 80.3 86.8 86.1 90.7 93.4 94.3 92.9 94.4 94.0 93.6 21 Utilities 96.2 82.9 89.1 75.9 92.6 83.4 87.6 87.1 86.8 89.6 87.3 87.6 88.8 22 Electric 99.0 82.7 88.2 78.9 95.0 87.1 89.2 88.7 88.1 90.6 88.0 88.4 90.0 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 • October 1997 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data seasonally adjusted 1992 1996 1997 pro- 1996 GGrroouupp por- avg. tion July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr.r May' June Julyp Index (1992 = 100) MAJOR MARKETS 1 Total index 100.0 115.2 115.5 115.8 116.0 116.2 117.2 117.7 117.8 118.4 118.8 119.3 119.3 119.6 119.8 2 Products 60.5 112.0 112.3 112.2 112.7 112.8 114.1 114.3 114.2 114.8 115.3 115.4 115.6 116.0 115.9 3 Final products 46.3 112.8 113.4 113.0 113.3 113.6 114.8 115.3 115.1 115.6 116.3 116.6 116.7 117.4 117.2 4 Consumer goods, total 29.1 110.5 110.7 110.1 110.5 110.8 112.3 112.7 111.7 111.6 112.1 112.1 112.1 112.5 112.3 s Durable consumer goods 6.1 126.2 129.7 128.0 127.1 124.5 127.1 128.4 127.3 129.2 131.0 126.9 128.4 130.6 130.6 6 Automotive products 2.6 125.8 132.1 128.7 127.7 122.0 127.4 127.2 129.6 131.0 131.7 124.4 126.3 128.2 123.7 / Autos and trucks 1.7 132.6 145.7 138.7 134.6 125.7 133.8 135.5 138.7 138.9 138.9 127.1 130.0 132.6 123.6 8 Autos, consumer .9 120.2 137.8 132.5 129.9 112.3 123.5 115.9 120.1 122.3 123.3 116.0 117.7 114.9 118.0 9 Trucks, consumer .7 147.2 161.3 152.3 146.6 147.4 152.4 164.9 167.0 165.0 163.8 146.1 150.5 159.5 136.1 10 Auto parts and allied goods .9 114.5 112.4 113.5 116.2 114.4 116.4 114.0 115.5 118.1 119.7 118.0 118.8 119.6 120.3 11 Other 3.5 126.3 128.0 127.5 126.6 126.2 126.8 129.1 125.5 127.8 130.4 128.6 129.7 132.1 135.2 12 Appliances, televisions, and air conditioners 1.0 173.0 181.1 175.9 174.2 176.5 176.9 181.1 171.2 179.5 183.6 179.0 180.9 187.9 197.9 13 Carpeting and furniture .8 109.9 107.0 111.1 110.5 108.6 110.7 109.3 106.0 106.9 111.6 108.6 111.7 114.2 114.8 14 Miscellaneous home goods 1.6 107.9 108.5 108.0 107.6 106.5 106.4 109.6 109.2 109.2 109.9 110.0 109.6 109.7 110.9 13 Nondurable consumer goods 23.0 106.5 106.0 105.6 106.3 107.3 108.5 108.7 107.8 107.2 107.4 108.3 108.0 108.0 107.7 16 Foods and tobacco 10.3 106.1 105.9 105.4 106.1 106.6 107.2 108.2 107.7 108.0 108.7 107.8 107.6 107.0 107.1 17 Clothing 2.4 95.5 95.4 95.4 95.1 95.5 95.0 94.9 94.0 93.8 94.2 94.4 94.9 93.8 93.2 18 Chemical products 4.5 112.7 112.6 111.3 113.5 115.5 117.3 118.8 117.9 116.2 114.9 117.2 116.3 116.9 115.9 19 Paper products 2.9 101.1 101.4 101.8 101.9 102.9 102.9 103.0 101.1 101.5 102.3 102.6 103.4 104.5 103.4 20 Energy 2.9 112.0 109.1 109.4 109.4 110.7 115.3 111.8 110.4 107.6 107.5 113.0 111.4 112.1 112.6 21 Fuels .8 106.6 106.7 107.7 105.4 108.1 107.8 106.0 105.1 106.2 108.5 110.1 111.9 113.2 110.9 22 Residential utilities 2.1 114.3 109.9 110.0 110.9 111.7 118.5 114.2 112.6 108.0 106.8 114.1 110.9 111.4 113.1 23 Equipment 17.2 116.8 118.1 117.9 118.1 118.4 119.0 119.6 120.8 122.6 123.5 124.3 124.8 125.8 125.8 24 Business equipment 13.2 126.6 128.1 127.7 128.3 128.8 129.8 130.7 132.1 133.8 134.3 135.5 135.9 136.8 137.6 25 Information processing and related 5.4 143.2 144.1 144.6 146.3 147.4 147.1 148.5 149.6 152.4 153.6 155.1 156.2 158.4 159.6 26 Computer and office equipment 1.1 292.0 301.7 306.2 314.3 318.8 323.5 327.1 335.7 343.0 349.9 358.6 365.5 374.6 384.3 21 Industrial 4.0 126.9 127.2 126.7 126.3 127.0 127.1 127.3 127.9 128.2 127.5 130.3 129.3 128.7 128.5 28 Transit 2.5 100.0 104.1 103.0 103.8 101.9 106.6 107.2 109.8 111.8 113.1 110.1 112.1 113.2 114.0 29 Autos and trucks 1.2 115.3 126.5 120.9 117.7 109.4 115.9 113.7 117.2 118.7 118.3 110.0 111.7 111.4 110.1 30 Other 1.3 116.4 118.0 116.1 115.5 118.7 119.9 121.4 123.4 124.4 125.1 128.8 128.3 128.7 130.3 31 Defense and space equipment 3.3 77.0 77.7 77.9 77.7 77.0 76.1 76.2 74.7 75.4 75.6 75.2 75.6 76.4 76.0 32 Oil and gas well drilling .6 120.5 122.1 122.6 117.5 120.2 120.7 123.6 130.8 140.7 153.4 152.5 154.2 161.4 149.6 33 Manufactured homes 2 162.0 163.0 167.4 165.6 165.3 159.8 156.3 163.5 160.9 168.0 166.4 163.1 34 Intermediate products, total 14.2 109.4 108.9 110.0 110.6 110.2 111.9 111.3 111.6 112.0 112.1 112.0 112.1 111.9 111.8 35 Construction supplies 5.3 116.8 117.5 119.2 119.8 117.7 120.7 117.8 117.0 120.0 121.8 120.1 120.9 120.1 119.7 36 Business supplies 8.9 105.1 103.9 104.6 105.3 105.8 106.8 107.4 108.4 107.3 106.5 107.2 107.0 107.1 107.2 37 Materials 39.5 120.3 120.5 121.5 121.2 121.7 122.2 123.1 123.4 124.1 124.5 125.5 125.2 125.3 126.0 38 Durable goods materials 20.8 134.0 134.5 136.2 135.5 135.8 136.5 137.8 138.4 139.2 140.2 141.7 141.8 142.2 142.8 39 Durable consumer parts 4.0 128.8 131.1 133.9 128.3 126.6 129.7 130.3 132.1 129.7 129.8 130.5 127.3 126.1 125.7 40 Equipment parts 7.6 159.2 159.6 161.7 162.6 163.4 165.3 167.9 169.4 172.6 175.6 178.1 180.5 182.3 184.9 41 Other 9.2 118.2 118.2 119.2 119.2 120.0 119.1 119.9 119.3 119.8 120.0 121.0 121.1 121.2 120.9 42 Basic metal materials 3.1 113.1 112.9 113.6 114.7 117.2 114.4 115.7 114.9 116.4 116.4 116.7 118.6 118.6 117.7 43 Nondurable goods materials 8.9 106.4 107.4 106.5 106.9 108.0 108.4 109.5 109.6 110.5 110.6 111.3 109.9 110.0 110.4 44 Textile materials 1.1 106.3 109.9 107.4 107.1 108.4 108.5 105.9 106.8 107.7 104.9 109.5 105.4 106.7 106.0 45 Paper materials 1.8 107.4 109.1 108.2 107.0 108.0 110.9 112.5 111.5 113.2 113.8 114.4 114.7 110.8 112.4 46 Chemical materials 3.9 105.9 106.1 106.2 106.8 109.3 107.7 110.2 111.1 111.2 111.2 111.7 109.9 110.1 110.3 47 Other 2.1 106.1 107.1 104.7 106.2 103.9 106.8 106.3 105.3 107.5 108.4 107.8 107.3 109.8 110.3 48 Energy materials 9.7 103.9 102.4 104.0 103.9 103.9 104.0 103.9 103.8 104.0 103.5 103.8 103.5 102.9 104.5 49 Primary energy 6.3 102.6 101.7 103.2 102.2 102.0 101.6 102.6 101.6 102.8 102.3 101.7 102.0 100.7 102.7 50 Converted fuel materials 3.3 106.2 103.9 105.4 107.0 107.5 108.5 106.3 108.0 106.2 105.9 107.6 106.4 107.0 108.0 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.1 114.9 114.9 115.4 115.7 116.1 116.9 117.4 117.4 118.0 118.5 119.3 119.2 119.5 119.8 52 Total excluding motor vehicles and parts 95.1 114.6 114.6 115.0 115.4 115.9 116.6 117.2 117.1 117.8 118.3 119.0 119.0 119.3 119.7 53 Total excluding computer and office equipment 98.2 112.9 113.1 113.4 113.5 113.7 114.6 115.1 115.1 115.6 116.0 116.4 116.3 116.6 116.7 54 Consumer goods excluding autos and trucks . 27.4 109.2 108.9 108.6 109.2 109.9 111.0 111.4 110.3 110.1 110.7 111.1 111.0 111.3 111.4 55 Consumer goods excluding energy 26.2 110.2 110.9 110.2 110.6 110.8 111.8 112.8 111.9 112.1 112.7 111.9 112.1 112.5 112.2 56 Business equipment excluding autos and trucks 12.0 127.7 128.2 128.3 129.3 130.7 131.2 132.4 133.6 135.3 135.9 138.0 138.4 139.4 140.3 57 Business equipment excluding computer and office equipment 12.1 115.8 116.8 116.1 116.3 116.6 117.5 118.2 119.2 120.5 120.7 121.5 121.6 122.1 122.4 58 Materials excluding energy 29.8 125.4 126.1 127.0 126.6 127.1 127.8 129.0 129.4 130.3 131.0 132.2 131.8 132.1 132.6 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 Group s co ic d - e p p r o o r - - 1 a 9 v 9 g 6 . tion July Aug. Sept. Apr/ Mayr Julyp Index (1992 = 100) MAJOR INDUSTRIES 59 Total index 100.0 115.2 115.5 115.8 116.0 116.2 117.2 117.7 117.8 118.4 118.8 119.3 119.3 119.6 119.8 60 Manufacturing 85.4 116.3 117.0 117.2 117.4 117.6 118.5 119.2 119.3 120.1 120.6 120.9 121.0 121.3 121.4 61 Primary processing 26.5 112.2 113.0 113.1 113.5 113.8 113.8 114.0 113.8 114.8 115.6 115.6 115.9 115.6 115.4 62 Advanced processing 58.9 118.4 118.9 119.2 119.3 119.5 120.8 121.7 122.0 122.6 123.0 123.5 123.5 124.1 124.3 63 Durable goods 45.0 125.7 126.9 127.5 127.2 127.1 128.4 128.8 129.5 130.8 131.7 132.3 132.7 133.4 133.8 64 Lumber and products " ' 24 2.0 109.7 109.3 111.4 110.7 109.2 113.1 108.0 108.6 112.0 113.3 113.6 114.1 113.5 112.9 65 Furniture and fixtures 25 1.4 108.9 108.1 108.8 108.8 110.4 110.5 110.5 109.7 110.3 111.0 112.7 114.0 114.1 114.7 66 Stone, clay, and glass products 32 2.1 111.0 114.1 111.8 113.1 111.7 111.8 111.3 112.7 112.5 113.5 113.8 113.1 113.8 114.0 67 Primary metals 33 3.1 117.2 118.0 118.3 119.5 122.1 118.5 118.8 117.8 120.0 121.3 120.2 123.6 123.0 121.9 68 Iron and steel 331,2 1.7 116.4 118.0 118.2 117.4 123.2 115.9 116.7 118.0 118.2 118.7 119.3 123.6 120.5 120.3 69 Raw steel 331PT .1 112.2 113.3 113.6 112.6 111.5 108.7 112.5 111.7 112.3 114.2 115.5 115.8 115.1 114.1 70 Nonferrous 333-6,9 1.4 118.0 117.9 118.5 121.8 120.7 121.4 121.2 117.6 122.1 124.2 121.3 123.5 125.8 123.8 71 Fabricated metal products. . . 34 5.0 118.6 119.1 119.4 119.3 119.3 119.1 119.5 119.2 119.5 120.4 120.8 121.0 120.1 120.0 72 Industrial machinery and equipment 35 8.0 156.4 157.7 159.6 159.4 159.9 161.7 162.9 164.7 166.6 167.4 171.3 170.5 171.3 173.2 73 Computer and office equipment 357 1.8 296.9 306.5 310.8 319.0 323.6 328.3 332.5 340.3 347.8 354.7 363.8 370.7 379.9 389.7 74 Electrical machinery 36 7.3 163.3 163.8 164.6 165.2 165.6 167.2 168.8 168.6 172.5 175.2 176.7 178.1 180.6 183.9 75 Transportation equipment. . . 37 9.5 106.1 109.5 109.3 107.3 105.3 109.5 109.6 111.9 111.5 111.9 110.6 110.2 111.2 110.1 76 Motor vehicles and parts . 371 4.9 126.9 134.1 132.8 127.0 121.2 128.9 127.9 132.0 129.6 128.9 125.3 123.7 124.7 121.4 77 Autos and light trucks . 371PT 2.6 124.6 137.3 131.0 127.4 117.3 125.7 125.6 128.8 129.4 129.5 119.1 121.6 123.1 117.0 78 Aerospace and miscellaneous transportation equipment 372-6,9 4.6 85.6 85.7 86.5 87.9 89.4 90.3 91.5 92.2 93.5 94.8 95.5 96.4 97.3 98.2 79 Instruments 38 5.4 102.8 102.3 103.0 103.0 103.4 103.0 104.1 103.3 104.6 104.7 104.4 105.2 105.8 105.9 80 Miscellaneous 39 1.3 112.9 113.0 112.9 113.0 113.0 114.1 116.6 116.3 117.1 116.3 116.9 117.0 117.7 118.2 81 Nondurable goods 40.4 106.3 106.4 106.2 106.9 107.4 107.9 108.8 108.5 108.6 108.7 108.7 108.5 108.5 108.3 82 Foods 20 9.4 106.3 106.5 105.5 106.2 107.1 107.6 108.2 108.2 108.4 109.2 108.3 108.1 107.9 107.8 83 Tobacco products 21 1.6 105.6 102.5 104.1 104.9 104.0 105.4 108.9 104.6 105.7 106.9 105.5 104.2 102.8 104.1 84 Textile mill products 22 1.8 106.6 108.7 107.7 107.2 107.6 108.2 106.3 106.3 106.9 108.2 108.6 107.5 108.4 108.0 85 Apparel products 23 2.2 98.2 98.3 98.5 98.2 97.8 97.3 97.2 96.2 95.8 96.3 96.1 96.5 96.3 95.4 86 Paper and products 26 3.6 108.0 110.2 108.1 108.8 107.6 110.1 111.6 110.3 111.1 112.1 112.2 112.8 110.9 111.6 87 Printing and publishing 27 6.7 98.4 97.6 97.9 99.1 99.7 100.0 99.8 100.5 100.6 99.7 99.6 99.8 100.1 99.6 88 Chemicals and products .... 28 9.9 108.9 109.0 108.7 109.7 111.3 111.8 114.0 113.7 112.8 112.0 113.3 112.0 112.4 112.1 89 Petroleum products 29 1.4 106.5 105.3 107.8 106.9 108.4 107.4 107.3 107.4 108.6 108.1 110.7 112.0 113.0 111.4 90 Rubber and plastic products . 30 3.5 120.5 120.7 122.0 122.8 121.4 121.7 122.6 121.1 123.1 124.0 122.3 123.3 123.9 123.8 91 Leather and products 31 .3 80.0 80.0 79.5 79.4 78.4 77.3 80.1 78.3 77.6 78.4 78.8 76.9 76.4 74.9 92 Mining 6.9 102.9 103.1 104.5 103.4 103.4 103.5 104.5 103.6 106.3 107.5 106.0 107.9 107.6 107.2 93 Metal 10 .5 102.0 103.1 104.0 105.3 105.6 102.5 106.3 105.7 105.7 104.8 103.5 104.4 105.7 104.6 94 Coal 12 1.0 105.9 102.7 109.6 106.2 107.5 108.8 109.5 106.4 109.6 105.2 104.1 115.6 107.3 113.8 95 Oil and gas extraction 13 4.8 100.3 100.9 101.1 100.5 100.0 100.2 100.7 100.8 103.1 105.4 104.5 104.4 105.3 103.7 96 Stone and earth minerals 14 .6 118.7 120.6 121.7 118.5 120.0 120.2 122.9 117.2 125.0 128.8 122.3 124.5 126.9 124.5 97 Utilities 7.7 112.8 109.4 110.8 111.1 111.9 114.5 112.6 112.7 110.2 109.9 113.6 110.8 111.3 113.0 98 Electric 491,493PT 6.2 112.7 110.1 111.5 110.9 112.0 112.7 112.6 113.2 110.9 110.3 113.6 110.5 111.2 113.4 99 Gas 492.493PT 1.6 113.2 107.1 108.5 111.8 111.3 120.9 112.7 110.9 107.6 108.7 113.2 111.9 111.7 111.7 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 80.5 115.7 116.0 116.3 116.8 117.3 117.9 118.6 118.6 119.5 120.0 120.6 120.8 121.1 121.3 101 Manufacturing excluding office and computing machines . . . 83.6 113.7 114.3 114.4 114.5 114.7 115.5 116.1 116.2 116.9 117.3 117.5 117.5 117.8 117.8 Gross value (billions of 1992 dollars, annual rates) MAJOR MARKETS 102 Products, total 2,001.9 2,258.7 2,276.1 2,272.9 2,273.4 2,270.7 2,303.5 2,301.1 2,302.9 2,315.3 2,327.5 2,324.7 2,331.5 2,340.3 2,334.5 103 Final 1,552.1 1,760.9 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 1,816.4 1,822.6 1,832.5 1,827.2 104 Consumer goods 1,049.6 1,162.2 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 1,179.4 1,182.6 1,187.8 1,182.0 105 Equipment 502.5 598.0 610.5 607.4 607.8 606.3 612.1 613.7 621.4 630.4 634.2 636.4 639.4 644.1 644.7 106 Intermediate 449.9 498.2 494.3 499.7 502.1 499.3 508.6 504.9 505.1 507.2 508.7 508.9 509.6 508.9 508.2 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 • October 1997 2.14 HOUSING AND CONSTRUCTION Monthly figures at seasonally adjusted annual rates except as noted 1996 1997 item lyy4 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr.1 May June Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 1,372 1,333 1,426 1,391 1,349 1,391 1.405 1,395 1,438 1,457 1,442 1,432 1,402 2 One-family 1,069 997 1,070 1,029 1,003 1,016 999 1,052 1,069 1,034 1,060 1,053 1,049 3 Two-family or more 303 335 356 362 346 375 406 343 369 423 382 379 353 4 Started 1.457 1,354 1.477 1.470 1.407 1,486 1,353 1,375 1,554 1.479 1,483 1.402 1.447 5 One-family 1.198 1,076 1,161 1,148 1.104 1,133 1,024 1.125 1,237 1,142 1,133 1,098 1,111 6 Two-family or more 259 278 316 322 303 353 329 250 317 337 350 304 336 7 Under construction at end of period1 755 775 819 825 825 828 815 818 821 814 812 813 823 8 One-family 584 554 584 592 588 584 571 573 574 566 563 563 567 9 Two-family or more 171 221 235 233 237 244 244 245 247 248 249 250 256 10 Completed 1,346 1,319 1,407 1,356 1,375 1,431 1,484 1.362 1.572 1.471 1,460 1,391 1,282 11 One-family 1,161 1,073 1,124 1,097 1,129 1,151 1,177 1,109 1,267 1,156 1,158 1,104 1,059 12 Two-family or more 185 246 283 259 246 280 307 253 305 315 302 287 223 13 Mobile homes shipped 305 341 362 372 364 354 338 339 353 353 372 356 356 Merchant builder activity in one-family units 14 Number sold 670 667 757 768 706 788 794 822 826 825R 764 772 819 15 Number for sale at end of period1 340 374 326 331 330 327 322 308 300 287 287 283 282 Price of units sold (thousands of dollars)2 16 Median 130.0 133.9 140.0 139.0 143.8 143.5 144.9 145.0 143.0 148.0R 150.0 140.0 142.9 17 Average 154.5 158.7 166.4 167.4 168.4 172.0 171.8 171.9 171.1 172.7R 179.1 168.5 176.4 EXISTING UNITS (one-family) 18 Number sold 3,967 3,812 4,087 4,020 4,000 4,060 3,950 3,910 4,230 4,160 4,060 4,250 4,150 Price of units sold (thousands of dollars)" 19 Median 109.9 113.1 118.2 117.8 116.6 117.4 118.8 120.6 117.5 120.0 120.7 123.1 127.2 20 Average 136.8 139.1 145.5 144.7 143.6 144.1 147.1 149.6 144.7 147.5 150.4 153.1 158.4 Value of new construction (millions of dollars)3 CONSTRUCTION 21 Total put in place 518,644 534,463 567,179 579,959 584,140 586,226 579,109 577,116 592,365 593,908 596,241 597,852 591,507 22 Private 398,646 407,370 435,929 444.388 448,951 448,907 447,045 444,391 452,037 452,728 456,944 462,032 454,792 23 Residential 238,423 231,230 246,659 248,957 247,901 248,259 247,899 246,661 251,402 253,974 259,964 259,469 256,401 24 Nonresidential 160,223 176,140 189,271 195,431 201,050 200,648 199,146 197,730 200,635 198,754 196,980 202,563 198,391 25 Industrial buildings 28,893 32,505 31,997 32,845 34,738 33,244 30,752 31,871 32,161 30,520 29.450 31,088 31,502 26 Commercial buildings 59,480 68,223 74,593 76.713 79,864 80,144 78,395 81,979 83.107 81,015 76,488 80,409 76,991 27 Other buildings 26,988 27,089 30,525 31,281 32,024 33,454 34,409 34,257 35.561 36,012 38.216 38,146 36.054 28 Public utilities and other 44,862 48,323 52,156 54,592 54,424 53,806 55,590 49,623 49,806 51,207 52,826 52,920 53,844 29 Public 119,998 127,092 131,250 135,572 135,188 137,319 132,064 132,725 140,328 141.180 139,297 135,820 136,715 30 Military 2,310 2,983 2,541 2,482 2,531 2,365 2,241 2,542 2,564 2,232 2,433 2,554 2.585 31 Highway 36,933 36,319 37,898 38,338 38,367 38.610 39,585 37,869 41,060 41,473 42,410 40,907 41,437 32 Conservation and development 6,459 6,391 5,807 7,177 5.573 5,710 5,223 5.807 5,727 6,114 5,069 5,206 4,975 33 Other 74,297 81,399 85,005 87,575 88.717 90.634 85,015 86.507 90.977 91,361 89,385 87,153 87.718 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 1996r 1997r 1997 JJJuuulllvvv 11999966 11999977 111999999777 111 JJuullyy JJuullyy Sept. Dec. Mar. June Mar. Apr. May June July CONSUMER PRICES2 (1982-84=100) 1 All items 3.0 2.2 3.1 3.3 1.8 1.0 .1 .1 .1 .1 .2 112.1 Food 3.4 2.5 5.3 3.4 .3 1.5 .0 -.2 .4 .2 .3 157.0 3 Energy items 4.1 -1.0 I.I 16.2 -2.8 -14.7 -1.7 -1.5 -2.4 .0 -.1 111.4 4 All items less food and energy 2.7 2.4 2.7 2.4 2.4 2.4 .2 .3 .2 .1 .2 169.5 Commodities 1.4 .9 1.1 .9 1.1 .6 .1 .3 .1 — ? -.1 141.5 6 Services 3.3 3.1 3.4 3.1 2.7 3.5 .3 .3 .3 .3 .3 185.4 PRODUCER PRICES (1982=100) 7 Finished goods 2.6 -.2 2.5 4.3 -3.3 -3.6 -.2 -,5r -.3 -.1 -.1 131.3 X Consumer foods 4.2 .1 4.6 2.4 -2.0 -3.5 ,8r -.4 .4 -.9 -.2 134.0 9 Consumer energy 5.4 -1.4 7.0 26.2 -16.9 -15.1 -3.r -2.71 -2.1 .7 .1 83.0 10 Other consumer goods 1.6 .1 .6 .6 .6 -.6 .2 .0 -.3 .1 -.1 144.5 1 1 Capital equipment 1.1 -.1 1.2 -.6 .0 -1.2 ,OR -.R -.2 .1 -.1 137.9 Intermediate materials 17 Excluding foods and feeds -.8 -.1 1.0 2.2 -1.9 -1.9 -.6 — ,4r -.2 .2 -.2 125.5 13 Excluding energy -1.8 .4 .0 -.3 .6 .3 .0 .0 .0 .1 .0 134.2 Crude materials 14 Foods 25.1 -14.4 -9.4 -28.5 -2.8 -10.1 2.0r 3.2r -.3 -5.4 .3 112.1 15 Energy 19.9 -3.8 18.7 235.2 -75.5 10.2 -21.3r 2.F 3.4 -2.9 -.4 78.7 16 Other -13.9 3.0 -2.6 -1.3 15.7 -3.5 ,3r -2.5r 1.2 .4 -.5 157.0 1. Not seasonally adjusted. SOURCE. U.S. Department of Labor, Bureau of Labor Statistics. 2. Figures for consumer prices are for all urban consumers and reflect a rental-equivalence measure of homeownership. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • October 1997 2.16 GROSS DOMESTIC PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1996r 1997 AAccccoouunntt 11999944rr 11999955rr 11999966rr Q2 Q3 Q4 Qir Q2 GROSS DOMESTIC PRODUCT 1 Total 6,947.0 7,265.4 7,636.0 7,607.7 7,676.0 7,792.9 7,933.6 8,004.8 By source 2 Personal consumption expenditures 4,717.0 4,957.7 5,207.6 5,189.1 5,227.4 5,308.1 5,405.7 5,429.8 3 Durable goods 579.5 608.5 634.5 638.6 634.5 638.2 658.4 644.0 4 Nondurable goods 1,428.4 1,475.8 1,534.7 1,532.3 1,538.3 1,560.1 1,587.4 1.578.9 Services 2,709.1 2.873.4 3,038.4 3,018.2 3,054.6 3,109.8 3,159.9 3,206.9 6 Gross private domestic investment 1,007.9 1,038.2 1.116.5 1,105.4 1,149.2 1,151.1 1,193.6 1,227.2 / Fixed investment 946.6 1,008.1 1,090.7 1,082.0 1,112.0 1,119.2 1,127.5 1,157.8 8 Nonresidential 660.6 723.0 781.4 769.3 798.6 807.2 811.3 836.4 9 Structures 184.5 200.6 215.2 210.6 217.7 227.0 227.4 230.4 1U Producers' durable equipment 476.1 522.4 566.2 558.7 580.9 580.2 583.9 606.0 11 Residential structures 286.0 285.1 309.2 312.7 313.5 312.0 316.2 321.4 12 Change in business inventories 61.2 30.1 25.9 23.4 37.1 31.9 66.1 69.4 13 Nonfarm 50.5 38.1 23.0 17.2 31.3 28.7 62.2 64.8 14 Net exports of goods and services -90.9 -86.0 -94.8 -93.8 -114.0 -88.6 -98.8 -103.3 13 Exports 721.2 818.4 870.9 865.0 863.7 904.6 922.2 948.4 16 812.1 904.5 965.7 958.7 977.6 993.2 1,021.0 1,051.8 17 Government consumption expenditures and gross investment 1,313.0 1,355.5 1,406.7 1,407.0 1,413.5 1,422.3 1,433.1 1,451.1 18 Federal 510.2 509.6 520.0 524.6 521.6 517.6 516.1 528.0 19 State and local 802.8 846.0 886.7 882.4 891.9 904.7 917.0 923.2 By major type of product 20 Final sales, total 6,885.7 7,235.3 7,610.2 7,584.3 7,638.9 7,761.0 7,867.4 7,935.4 21 Goods 2,520.2 2.637.9 2,759.3 2,759.3 2,760.7 2,795.0 2,838.4 2,835.4 22 Durable 1,072.5 1,133.9 1,212.0 1,214.8 1,216.3 1,233.5 1,248.0 1,258.3 23 Nondurable 1,447.6 1,503.9 1,547.3 1,544.5 1,544.4 1,561.5 1,590.4 1,577.2 24 Services 3,772.4 3,980.7 4,187.3 4,162.2 4,208.1 4,282.7 4,338.2 4,400.9 2b Structures 593.2 616.8 663.6 662.8 670.1 683.3 690.8 699.0 26 Change in business inventories 61.2 30.1 25.9 23.4 37.1 31.9 66.1 69.4 27 Durable goods 33.6 29.1 16.9 18.1 33.3 -1.1 31.8 38.6 28 Nondurable goods 27.7 1.1 9.0 5.3 3.9 33.0 34.3 30.8 MEMO 29 Total GDP in chained 1992 dollars 6,610.7 6,742.1 6,928.4 6,926.0 6,943.8 7,017.4 7,101.6 7,139.7 NATIONAL INCOME 30 Total 5,590.7 5,912.3 6,254.5 6,229.4 6,303.3 6,376.5 6,510.0 n.a. 31 Compensation of employees 4,012.0 4,215.4 4,426.9 4,403.9 4,461.0 4,520.7 4,606.3 4,663.3 32 Wages and salaries 3,254.0 3,442.6 3,633.6 3,612.3 3,664.0 3,718.0 3.792.7 3,842.6 33 Government and government enterprises 602.2 623.0 642.6 640.3 645.5 648.9 657.8 661.7 34 Other 2,651.8 2,819.6 2,991.0 2.972.0 3,018.4 3,069.0 3,134.9 3,180.9 33 Supplement to wages and salaries 758.0 772.9 793.3 791.5 797.0 802.7 813.6 820.7 36 Employer contributions for social insurance 353.0 366.0 385.7 383.6 388.6 393.6 401.3 405.5 37 Other labor income 405.0 406.8 407.6 407.9 408.4 409.1 412.3 415.1 38 Proprietors' income1 471.6 489.0 520.3 520.0 523.8 528.3 534.6 543.6 jy Business and professional1 434.7 465.5 483.1 483.5 483.7 487.9 494.4 499.1 40 Farm1 36.9 23.4 37.2 36.5 40.1 40.4 40.2 44.5 41 Rental income of persons" 124.4 132.8 146.3 144.6 148.0 149.2 149.0 148.6 42 Corporate profits' 570.5 650.0 735.9 738.5 739.6 747.8 779.6 n.a. 43 Profits before tax3 535.1 622.6 676.6 682.2 679.1 680.0 708.4 n.a. 44 Inventory valuation adjustment -16.1 -24.3 -2.5 -5.4 -2.7 3.3 3.5 18.1 43 Capital consumption adjustment 51.4 51.6 61.8 61.6 63.2 64.4 67.7 69.9 46 Net interest 412.3 425.1 425.1 422.5 430.9 430.6 440.5 n.a. 1. With inventory valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.48. 2. With capital consumption adjustment. SOURCE. U.S. Department of Commerce, Survey of Current Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A49 2.17 PERSONAL INCOME AND SAVING Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1996r 1997 AAccccoouunntt 11999944rr II999955rr 11999966rr Q2 Q3 Q4 Ql' Q2 PERSONAL INCOME AND SAVING 1 Total personal income 5,791.8 6,150.8 6,495.2 6,461.3 6,541.9 6,618.4 6,746.2 6,830.0 ? Wage and salary disbursements 3,240.7 3,429.5 3,632.5 3,611.2 3,662.8 3,716.9 3,791.5 3,841.5 3 Commodity-producing industries 824.4 864.4 909.1 906.3 917.2 927.8 942.9 953.3 4 Manufacturing 620.8 648.4 674.7 674.1 680.1 685.6 694.1 700.7 5 Distributive industries 741.4 783.1 823.3 819.2 829.0 840.6 856.8 866.8 6 Service industries 1,072.7 1.159.0 1,257.5 1,245.3 1,271.1 1,299.5 1,334.1 1,359.6 7 Government and government enterprises 602.2 623.0 642.6 640.3 645.5 648.9 657.8 661.7 8 Other labor income 405.0 406.8 407.6 407.9 408.4 409.1 412.3 415.1 9 Proprietors' income' 471.6 489.0 520.3 520.0 523.8 528.3 534.6 543.6 10 Business and professional1 434.7 465.5 483.1 483.5 483.7 487.9 494.4 499.1 11 Farm1 36.9 23.4 37.2 36.5 40.1 40.4 40.2 44.5 12 Rental income of persons" 124.4 132.8 146.3 144.6 148.0 149.2 149.0 148.6 13 Dividends 204.8 251.9 291.2 290.0 292.0 295.2 312.5 318.3 14 Personal interest income 668.1 718.9 735.7 727.8 742.7 749.8 757.2 766.8 15 Transfer payments 954.7 1,015.0 1,068.0 1,064.8 1,072.4 1.081.5 1,107.2 1,117.5 16 Old- age survivors, disability, and health insurance benefits 473.0 507.8 537.6 535.4 540.0 545.6 558.9 564.4 17 LESS: Personal contributions for social insurance 277.5 293.1 306.3 305.0 308.2 311.5 318.2 321.3 18 EQUALS: Personal income 5,791.8 6,150.8 6,495.2 6,461.3 6,541.9 6,618.4 6,746.2 6,830.0 19 LESS: Personal tax and nontax payments 739.1 795.1 886.9 887.8 897.3 922.6 955.7 982.0 20 EQUALS: Disposable personal income 5,052.7 5.355.7 5,608.3 5,573.5 5,644.6 5,695.8 5,790.5 5,848.0 21 LESS: Personal outlays 4,842.1 5,101.1 5,368.8 5,347.8 5,390.6 5,475.4 5.574.6 5,600.1 22 EQUALS: Personal saving 210.6 254.6 239.6 225.7 254.0 220.4 215.9 247.9 MEMO Per capita (chained 1992 dollars) 23 Gross domestic product 25,357.7 25,615.7 26.085.8 26,106.4 26,114.4 26.331.6 26,597.8 26,690.5 2.4 Personal consumption expenditures 17.207.4 17.459.2 17,748.7 17,761.8 17,744.2 17,847.8 18,045.2 18,048.1 25 Disposable personal income 18,431.0 18.861.0 19,116.0 19,081.0 19,161.0 19,152.0 19.331.0 19,435.0 26 Saving rate (percent) 4.2 4.8 4.3 4.1 4.5 3.9 3.7 4.2 GROSS SAVING 27 Gross saving 1,079.2 1,165.5 1,267.8 1,256.3 1,295.9 1,303.0 1,332.9 n.a. 28 Gross private saving 1.030.2 1,093.1 1,125.5 1,106.3 1,145.1 1,131.4 1,134.0 n.a. 29 Personal saving 210.6 254.6 239.6 225.7 254.0 220.4 215.9 247.9 30 Undistributed corporate profits' , 167.6 172.4 202.1 202.6 202.3 212.6 211.5 n.a. 31 Corporate inventory valuation adjustment -16.1 -24.3 -2.5 -5.4 -2.7 3.3 3.5 18.1 Capital consumption allowances 32 Corporate 412.3 428.9 452.3 448.5 455.5 462.0 467.4 472.1 33 Noncorporate 226.3 224.1 230.5 228.3 232.2 235.2 238.0 239.8 34 Gross government saving 49.0 72.4 142.3 150.0 150.8 171.6 198.9 n.a. 35 Federal -117.2 -103.6 -39.3 -40.2 -28.3 -5.9 15.9 n.a. 36 Consumption of fixed capital 69.5 70.9 71.2 71.4 71.2 71.3 71.4 71.5 37 Current surplus or deficit ( —). national accounts -186.7 -174.4 -110.5 -111.6 -99.5 -77.1 -55.5 n.a. 38 State and local 166.2 176.0 181.5 190.2 179.1 177.5 182.9 n.a. 39 Consumption of fixed capital 69.4 72.9 76.2 75.8 76.5 77.2 78.2 79.1 40 Current surplus or deficit ( —), national accounts 96.8 103.1 105.3 114.4 102.6 100.4 104.7 n.a. 41 Gross investment 1,093.8 1,137.2 1,207.9 1,206.0 1,216.4 1,243.5 1,268.6 n.a. 42 Gross private domestic investment 1,007.9 1.038.2 1,116.5 1,105.4 1,149.2 1,151.1 1.193.6 1,227.2 43 Gross government investment 206.0 213.4 224.3 226.3 223.6 225.3 223.3 226.7 44 Net foreign investment -120.0 -114.4 -132.9 -125.6 -156.4 -132.9 -148.4 n.a. 45 Statistical discrepancy 14.6 -28.2 -59.9 -50.2 -79.5 -59.5 -64.3 n.a. 1. With inventory valuation and capital consumption adjustments. SOURCE. U.S. Department of Commerce, Survey of Current Business. 2. With capital consumption adjustment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A50 International Statistics • October 1997 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data seasonally adjusted except as noted1 1996 1997 IItteemm ccrreeddiittss oorr ddeebbiittss 11999944 11999955 11999966 QI 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 claims" -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 -i 4,931 -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. Suney 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 Dec. Jan. Feb. Mar. Apr. May Junep 1 Goods and services, balance -104,416 -101,857 -111,040 -10,601 -11,474 -9,884 -7,755 -8,746 -9,536 -8.158 2 Merchandise -166,192 -173,560 -191,170 -17,695 -18,148 -16,761 -14,877 -15.527 -16,363 -15.013 3 Services 61,776 71,703 80,130 7.094 6,674 6.877 7,122 6,781 6.827 6,855 4 Goods and services, exports 699.646 794,610 848,833 72,444 71,957 74,370 78,193 77,887 77,686 78,420 5 Merchandise 502,398 575,871 612,069 52,133 51,686 53,687 57,155 57,162 56,871 57,456 6 Services 197,248 218,739 236,764 20,311 20,271 20.683 21,038 20,725 20,815 20,964 7 Goods and services, imports -804,062 -896,467 -959,873 -83,045 -83,431 -84,254 -85,948 -86.633 -87,222 -86,578 8 Merchandise -668.590 -749,431 -803,239 -69,828 -69.834 -70,448 -72,032 -72,689 -73,234 -72,469 9 Services -135.472 -147,036 -156,634 -13,217 -13,597 -13,806 -13.916 -13.944 -13.988 -14,109 I. 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 Dec. Jan. Feb. Mar. Apr. May June Julyp 1 Total 73,442 74,335 85,832 75,090 68,200 67,482 67,222 65,873 68,054 67,813 66,119 2 Gold stock, including Exchange Stabilization Fund1 11,053 11.051 11,050 11.049 11,048 11,051 11,050 11,051 11,051 11,050 11,050 3 Special drawing rights2'3 9,039 10,039 11,037 10,312 9,793 9,866 9.879 9,726 10,050 10.023 9,810 4 Reserve position in International Monetary Fund" 11,818 12,030 14.649 15,435 14,372 14,037 13,846 13.660 13,805 13,805 13,677 5 Foreign currencies4 41,532 41,215 49,096 38,294 32,987 32,528 32,447 31,436 32,935 32,935 31,582 1. Gold held "under earmark" at Federal Reserve Banks for foreign and international SDR holdings and reserve positions in the IMF also have been valued on this basis since July accounts is not included in the gold stock of the United States; see table 3.13, line 3. Gold 1974. stock is valued at $42.22 per fine troy ounce. 3. Includes allocations of SDRs by the International Monetary Fund on Jan. 1 of the year 2. Special drawing rights (SDRs) are valued according to a technique adopted by the indicated, as follows: 1970—$867 million; 1971—$717 million; 1972—$710 million; 1979— International Monetary Fund (IMF) in July 1974. Values are based on a weighted average of $1,139 million; 1980—$1,152 million; 1981—$1,093 million; plus net transactions in SDRs. exchange rates for the currencies of member countries. From July 1974 through December 4. Valued at current market exchange rates. 1980. sixteen currencies were used; since January 1981, five currencies have been used. U.S. 3.13 FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS1 Millions of dollars, end of period 1996 1997 AAsssseett 11999933 11999944 11999955 Dec. Jan. Feb. Mar. Apr. May June JulyP 1 Deposits 386 250 386 167 167 229 16 169 176 178 175 Held in custody 2 U.S. Treasury securities* 379,394 441,866 522,170 638,049 646,130 662,375 672,059 668,536 662,747 652,077 653,157 3 Earmarked gold3 12,327 12,033 11,702 11,197 11,197 11,175 11,034 10,944 10.868 10,794 10,793 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 • October 1997 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1996 1997 IItteemm 11999944 11999955 Dec. Jan. Feb. Mar. Apr. May Junep 1 Total1 520,934 630,918 752,663 762,914 771,952 781,077r 777,370r 782,285r 776,610 By type 2 Liabilities reported by banks in the United States" 73,386 107,394 112,182 119,641 116,672 119,881r 117,337 125,584r 122,227 3 U.S. Treasury bills and certificates3 139,571 168,534 193,435 188,076 191,090 191,548 183,628 176,268 161,984 U.S. Treasury bonds and notes 4 Marketable 254,059 293,690 380,565 388,396 398,519 405,625 413,007r 416,384r 427,118 5 Nonmarketable4 6,109 6,491 5,968 6,007 6.043 6,084 5.692 5,730 5,767 6 U.S. securities other than U.S. Treasury securities5 47,809 54,809 60,513 60,794 59,628 57,939 57,706 58,319 59,514 By area 7 Europe1 215,374 222,406 253,099 262,055 260,962 264,919 264,68lr 265,724 271,004 8 Canada 17,235 19,473 21,343 21,151 21,237 21,997 19,677 20,196 20,577 9 Latin America and Caribbean 41,492 66.721 81,807 77,411 79,332 80,232r 77,024 82,292r 88,760 10 Asia 236,824 311,016 383,107 390,803 399,294 401,098 403,526 402,102 381,478 11 Africa 4,180 6,296 7,379 6,717 7,411 7,908 7,765 8,643 8,890 12 Other countries 5.827 5,004 5,926 4,775 3,714 4,921 4,695r 3,326r 5,899 1. Includes the Bank for International Settlements. Venezuela, beginning December 1990, 30-year maturity issue; Argentina, beginning April 2. Principally demand deposits, time deposits, bankers acceptances, commercial paper, 1993, 30-year maturity issue. negotiable time certificates of deposit, and borrowings under repurchase agreements. 5. Debt securities of U.S. government corporations and federally sponsored agencies, and 3. Includes nonmarketable certificates of indebtedness and Treasury bills issued to official U.S. corporate stocks and bonds. institutions of foreign countries. SOURCE. Based on U.S. Department of the Treasury data and on data reported to the 4. Excludes notes issued to foreign official nonreserve agencies. Includes current value of department by banks (including Federal Reserve Banks) and securities dealers in the United zero-coupon Treasury bond issues to foreign governments as follows: Mexico, beginning States, and on the 1989 benchmark survey of foreign portfolio investment in the United March 1988, 20-year maturity issue and beginning March 1990, 30-year maturity issue; States. 3.16 LIABILITIES TO, AND CLAIMS ON, FOREIGNERS Reported by Banks in the United States1 Payable in Foreign Currencies Millions of dollars, end of period 1996 1997 IItteemm 11999933 11999944 11999955 June Sept. Dec. Mar. 1 Banks' liabilities 78,259 89,258 109,713 111,651 111,140 103,383 109,238r 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 customers2 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 States' Payable in U.S. dollars Millions of dollars, end of period 1996 1997 IItteemm 11999944 11999955 11999966 Dec. Jan. Feb. Mar. Apr. May Junep BY HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners 1,014,996 1,099,549 1,137,751 1,137,751 1,135,724 1,158,680 l,154,155r l,163,243r 1,176,959 1,164,065 2 Banks' own liabilities 718,591 753,461 759.026 759,026 765,212 782,714 782,883r 796,555' 812,025 799,548 3 Demand deposits 23,386 24,448 27,034 27,034 26,228 25,084 28,063r 29,745' 26,494 29,803 4 Time deposits2 186,512 192,558 188,000 188,000 187,268 190,257 189,873r 183,860' 184,347 186,306 5 Other1 113,215 140,165 142,464 142,464 158,324 161,313 151,408r 161,326 161,693 164,861 6 Own foreign offices4 395,478 396,290 401,528 401,528 393,392 406,060 413,539r 421,624' 439,491 418,578 7 Banks' custodial liabilities5 296,405 346,088 378,725 378,725 370,512 375,966 371,272 366,688 364,934 364,517 8 U.S. Treasury bills and certificates6 162,938 197,355 220,575 220,575 214,727 217,817 218,271 211,148 200,983 197,877 9 Other negotiable and readily transferable instruments7 42,539 52,200 64,040 64,040 62,971 59,668 55,843 59,341 64,343 65,506 10 Other 90,928 96,533 94,110 94,110 92,814 98,481 97,158 96,199 99,608 101,134 11 Nonmonetary international and regional organizations8 . . . 8,606 11,039 13,864 13,864 14,849 14,626 12,192 13,039 12,315 13,928 12 Banks' own liabilities 8,176 10,347 13,355 13,355 14,170 14,297 11,793 12,787 12,120 13,472 13 Demand deposits 29 21 29 29 55 51 49 30 16 775 14 Time deposits2 3,298 4,656 5,784 5,784 5,792 5,035 6,952 5,238 4,857 6,645 15 Other1 4,849 5,670 7,542 7,542 8,323 9,211 4,792 7,519 7,247 6,052 16 Banks' custodial liabilities5 430 692 509 509 679 329 399 252 195 456 17 U.S. Treasury bills and certificates6 281 350 244 244 494 219 226 154 102 65 18 Other negotiable and readily transferable instruments7 149 341 265 265 185 NO 158 98 88 383 19 Other 0 1 0 0 0 0 15 0 5 8 20 Official institutions9 212,957 275,928 305,617 305,617 307,717 307,762 311,429' 300,965 301,852 284,211 21 Banks' own liabilities 59,935 83,447 79,406 79,406 88,190 87,317 90,70 r 86,794 92,847 96,311 22 Demand deposits 1,564 2,098 1,511 1,511 1,290 1,378 2,390 2,345 1,857 1,559 23 Time deposits" 23,511 30,717 33,336 33,336 32,646 34,457 32,691 33,428 36,627 39,793 24 Other1 34,860 50,632 44,559 44,559 54,254 51,482 55,620' 51,021 54.363 54,959 25 Banks' custodial liabilities5 153,022 192,481 226,211 226,211 219,527 220,445 220,728 214,171 209,005 187,900 26 U.S. Treasury bills and certificates6 139,571 168,534 193,435 193,435 188,076 191,090 191,548 183,628 176,268 161,984 27 Other negotiable and readily transferable instruments7 13,245 23,603 32,350 32,350 31,291 29,008 28,797 30,396 32,485 25,487 28 Other 206 344 426 426 160 347 383 147 252 429 29 Banks'" 678,532 691,412 680,923 680,923 669,225 683,142 687,849r 700,330' 710,688 719,266 30 Banks' own liabilities 563,617 567,834 562,912 562,912 553,650 562,652 567,824r 580,203' 591,295 576,582 31 Unaffiliated foreign banks 168,139 171,544 161,384 161,384 160,258 156,592 154,285' 158,579' 151,804 158,004 32 Demand deposits 10,633 11,758 13,692 13,692 12,898 11,642 13,360 14,909 12,957 14,954 33 Time deposits2 111,171 103,471 90,811 90,811 90,123 89,723 88,784 83,540 81,585 80,416 34 Other1 46,335 56,315 56,881 56,881 57,237 55,227 52,141' 60,130' 57,262 62,634 35 Own foreign offices4 395,478 396,290 401,528 401,528 393,392 406,060 413,539' 421,624' 439,491 418,578 36 Banks' custodial liabilities5 114,915 123,578 118,011 118,011 115,575 120,490 120,025 120,127 119,393 142,684 37 U.S. Treasury bills and certificates6 11,264 15,872 13,886 13,886 13,969 13,289 13,996 14,177 11,223 23,025 38 Other negotiable and readily transferable instruments7 14,506 13,035 12,321 12,321 11,142 11,210 11,204 12,169 14,363 24,140 39 Other 89,145 94,671 91,804 91,804 90,464 95,991 94,825 93,781 93,807 95,519 40 Other foreigners 114,901 121,170 137,347 137,347 143,933 153,150 142,685' 148,909' 152,104 146,660 41 Banks' own liabilities 86,863 91,833 103,353 103,353 109,202 118,448 112,565' 116,771' 115,763 113,183 42 Demand deposits 11,160 10,571 11,802 11,802 11,985 12,013 12,264' 12,461' 11,664 12,515 43 Time deposits" 48,532 53,714 58,069 58,069 58,707 61,042 61,446' 61,654' 61,278 59,452 44 Other1 27,171 27,548 33,482 33,482 38,510 45,393 38,855' 42,656' 42,821 41,216 45 Banks' custodial liabilities5 28,038 29,337 33,994 33,994 34,731 34,702 30,120 32,138 36,341 33.477 46 U.S. Treasury bills and certificates6 11,822 12,599 13,010 13,010 12,188 13,219 12,501 13,189 13,390 12.803 47 Other negotiable and readily transferable instruments7 14,639 15,221 19,104 19,104 20,353 19,340 15,684 16,678 17,407 15,496 48 Other 1,577 1,517 1,880 1,880 2,190 2,143 1,935 2,271 5,544 5,178 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 17,895 9,103 9,934 9,934 9,035 8,745 9,332 10,658 10,916 11,651 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 • October 1997 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States'—Continued 1996 1997 IItteemm 11999944 11999955 11999966 Dec. Jan. Feb. Mar. Apr. May Junep AREA 50 Total, all foreigners 1,014,996 1,099,549 1,137,751 1,137,751 1,135,724 1,158,680 l,154,155r l,163,243r l,176,959r 1,164,065 51 Foreign countries 1,006,390 1,088,510 1,123,887 1,123,887 1,120,875 1,144,054 l,141,963r l,150,204r l,164,644r 1,150,137 52 Europe 390,869 362,819 368.380 368,380 379.641 379,566 374.944R 374,978R 376,406R 390,020 53 Austria 3,588 3,537 5,101 5,101 4,794 4,010 4,589 3,069 3,337 3,194 54 Belgium and Luxembourg 21,877 24,792 23,576 23,576 22,842 23.537 22,107 18,764 20,896 40,698 55 Denmark 2.884 2,921 2,450 2.450 2,213 1,594 1,692 1.647 1,974 2,003 56 Finland 1,436 2,831 1,463 1,463 1,583 1.338 1.017 1.747 953 1,341 5/ France 44.365 39,218 34,365 34,365 34.558 35,457 34,861 40,227 38,444 40,686 58 Germany 27,109 24,035 24,554 24,554 24,871 24,142 25,410 25.697 26,000 27,446 59 Greece 1,400 2.014 1,810 1,810 2,080 1,930 2,392 1,740 2,269 1,675 60 Italy 10.885 10,868 10,701 10,701 10,366 10,610 8,676 9,419 9,660 10,170 61 Netherlands 16,033 13.745 10,995 10,995 9,760 10,946 11,008 11,975 8.625 8,226 62 Norway 2,338 1.394 1.288 1,288 1.860 1,538 1,896 1,357 1,121 841 63 Portugal 2.846 2.761 1,865 1,865 1.741 1,661 1.756 1,995 1.828 1,821 64 Russia 2,726 7.948 7,571 7.571 7,160 6,819 7.771 7,863 9,531 12,261 65 Spain 14,675 10,011 16,920 16,920 20,410 17,963 18,791r 17,674 15,005 16,237 66 Sweden 3,094 3,246 1,291 1,291 2,226 1,483 1,881r 2,190 1,600 1,406 6/ Switzerland 40,724 43,625 44,214 44,214 43,266 46.681 43.315 41.803 43,674 38,973 68 Turkey 3.341 4.124 6.723 6.723 7,051 6,748 7.176 6,585 6,742 6,530 69 United Kingdom 163,733 139,183 151.416 151.416 157,412 157,320 154.182r 156,667r 160,958r 152.706 / 0 Yugoslavia11 245 177 206 206 212 239 248 266 3?4 228 /I Other Europe and other former U.S.S.R.'" 27,770 26,389 21,871 21.871 25.236 25,550 26.176 24,293 23,465 23,578 72 24,768 30.468 38,111 38,111 34.830 33,985 37,118 39,575 37.554 37,090 7 1 3 4 L at A in r g A en m ti e n r a i ca and Caribbean 42 1 3 7 , , 8 2 4 0 7 3 44 1 0 2 . . 2 2 1 3 3 5 46 1 5 3 . . 7 7 3 9 3 4 46 1 5 3 , , 7 7 3 9 3 4 45 1 5 6 . . 4 4 5 7 7 5 47 1 2 7 , , 6 0 0 1 0 8 46 1 4 6 . , 1 7 9 3 1 9 ' 47 1 6 4 , , 6 0 9 57 4 r 49 1 1 6 , , 8 3 7 7 8 9 r 49 1 0 8 , , 4 1 3 7 6 7 /5 Bahamas 104,014 94,991 88.304 88,304 90.460 98,120 89.427r 104,831 100,081 89,434 1 m n /6 9 C B B B h r r e a i r i t l z m i e s i l h u d W a est Indies 229 3 9 8 . , , , 1 1 5 4 2 4 9 2 7 5 9 4 23 2 9 2 4 3 , , , , 0 8 7 8 8 9 9 2 3 7 7 6 25 2 0 2 5 7 , , , , 7 9 6 2 1 8 6 9 5 6 2 9 25 2 0 2 5 7 , , . , 9 6 7 2 1 6 8 9 5 2 6 9 24 2 4 2 5 2 , , . , 6 1 9 4 0 3 8 6 3 3 7 7 24 2 8 3 3 8 , . , . 5 8 4 8 7 5 5 0 1 8 9 3 25 2 3 3 3 8 , , , . 6 2 6 1 9 7 9 9 8 6 3 5 r 25 2 0 3 3 7 , , , , 1 2 3 1 1 9 7 3 7 7 3 2 r 26 2 3 7 6 5 . , , , 2 0 2 4 3 7 6 0 9 5 5 5 r r 26 2 3 9 6 5 , , , , 3 2 0 1 7 1 1 7 1 0 3 6 80 Colombia 4.615 3.659 3,256 3,256 2,791 2,855 2,807 3,165 2.776 2,836 81 Cuba 13 8 21 21 19 19 18r 52 54 55 82 Ecuador 875 1,314 1,767 1.767 1,617 1.633 1,484 1,469 1,608 1,466 83 Guatemala 1,121 1,276 1,282 1.282 1,348 1,410 1,378 1,514 1,457 1,497 84 Jamaica 529 481 628 628 576 576 585 525 472 465 85 Mexico 12,227 24,560 31,230 31,230 27,139 27,442 26,598r 27,722r 27.914r 31,357 86 Netherlands Antilles 5,217 4,673 5,977 5,977 6,401 6,085 3,474 5,334 3,678 6,103 87 Panama 4,551 4,264 4,077 4,077 3,849 4,135 3,847 3.711 4,005 3,969 88 900 974 834 834 967 917 926 881 1,117r 919 89 Uruguay 1.597 1,836 1.888 1,888 1,915 1.857 1,843 1,756 2,063 2,154 90 Venezuela 13.986 11,808 17,361 17,361 18,119 18,125 18,454 18.968 18,897 18,935 91 Other 6.704 7,531 8,652 8,652 8.591 7,717 7,749r 8,790r 9,393r 9,299 92 154,346 240,595 236,673 236.673 236,404 224444,,447733 225500,,770055rr 224422,,332277rr 224444,,119999rr 221166,,555500 China 93 Mainland 10,066 33,750 30,438 30,438 27,914 31,631 31,370 28,580 29,432 7,284 94 Taiwan 9,844 11,714 15,990 15,990 16,680 15,619 15,796 14,669 12,441 12,356 95 Hong Kong 17,104 20,197 18,736 18,736 19,866 20,062 20,106 18,942 19,375 20,147 96 2,338 3,373 3.930 3,930 4,323 4,746 5,430 4,756 4,368 4,241 9/ Indonesia 1,587 2,708 2,297 2,297 2,159 2.473 2,672 2,441 2,788 2,528 98 Israel 5,157 4,041 6,042 6.042 6,597 6,197 5,960r 6,097r 6,413r 5,749 99 Japan 62,981 109,193 107,012 107,012 106,419 108,703 116,066r 114,930r 114,669r 112,998 100 Korea (South) 5,124 5,749 5,949 5,949 6,056 6.257 6,545 7,153 7,851 7,629 101 Philippines 2,714 3,092 3,378 3,378 2,340 2,437 2,389 2,335 2,387 2,469 102 Thailand 6.466 12,279 10,912 10,912 9,873 10,752 9,394 10,361 7,808 6,159 103 Middle Eastern oil-exporting countries13 15.494 15.582 14.303 14.303 12,924 12,767 13,408 13,826 13,972 12,644 104 Other 15.471 18.917 17,686 17.686 21,253 22,829 21,569 18,237 22,695 22,346 105 6.524 7,641 8,063 8.063 8,443 8,110 8,536 9,011 9,824 9,953 106 Egypt 1.879 2.136 2.012 2.012 1,933 2,033 2,001 2,056 2,248 1,977 10/ Morocco 97 104 112 112 111 97 107 129 91 66 108 South Africa 433 739 458 458 610 720 827 784 2,004 1,770 109 Zaire 9 10 10 10 5 7 9 4 9 39 110 Oil-exporting countries'4 1,343 1,797 2,608 2,608 3,095 2,467 2,931 3,344 2,731 3,153 111 Other 2,763 2.855 2,863 2,863 2,689 2,786 2,661 2,694 2,741 2,948 112 Other 6,036 6,774 6,927 6.927 6,100 5,320 6,469 7,619 4,783 6,088 113 Australia 5,142 5.647 5,468 5,468 4.866 4,072 5,098 6.370 3,405r 4,739 114 Other 894 1,127 1,459 1,459 1,234 1,248 1,371 1,249 l,378r 1,349 115 Nonmonetary international and regional organizations. . . 8,606 11.039 13,864 13.864 14,849 14,626 12,192 13,039 12,315r 13,928 116 International15 7,537 9.300 11,991 11,991 13,230 13,000 10,272 11,671 10,64 lr 12,273 117 Latin American regional16 613 893 1,339 1,339 1,103 1,220 1,459 1,050 1,435 1,071 118 Other regional17 456 846 534 534 516 406 461 318 239 584 11. Since December 1992, has excluded Bosnia, Croatia, and Slovenia. 15. Principally the International Bank for Reconstruction and Development. Excludes 12. Includes the Bank for International Settlements. Since December 1992, has "holdings of dollars" of the International Monetary Fund. included all parts of the former U.S.S.R. (except Russia), and Bosnia. Croatia, and Slovenia. 16. Principally the Inter-American Development Bank. 13. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab 17. Asian, African. Middle Eastern, and European regional organizations, except the Bank Emirates (Trucial States). for International Settlements, which is included in "Other Europe." 14. Comprises Algeria, Gabon. Libya, and Nigeria. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A55 3.18 BANKS' OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States1 Payable in U.S. Dollars Millions of dollars, end of period 1996 1997 AArreeaa oorr ccoouunnttrryy 11999944 11999955 11999966 Dec. Jan. Feb. Mar. Apr. May Junep 1 Total, all foreigners 485,432 532,444 600,676 600,676 607,491 633,662 636,645r 641,080r 632,145 651,993 2 Foreign countries 480,841 530,513 598,072 598,072 605,719 631,407 635,139r 638,792r 629,813 650,070 3 Europe 124,124 132,150 166,489 166,489 178,480 193,227 204,790r 183,017r 195,969 191,790 4 Austria 692 565 1,662 1,662 1,643 1,284 1,911 1,541 1,440 1,395 5 Belgium and Luxembourg 6,923 7,624 6,727 6,727 7,611 6,855 8,439 8,054 8,017 8,129 6 Denmark 1,129 403 492 492 678 571 546 888 924 1,010 7 Finland 512 1,055 971 971 1,144 976 1,684 1,194 1,121 1,414 8 France 12,149 15,033 15,246 15,246 18,111 20,576 24,929 15,306 17,492 16,926 9 Germany 7,623 9,263 8,472 8,472 9,659 9,077 11,971 9,537 9,059 9,947 10 Greece 604 469 568 568 636 530 755 453 477 630 11 Italy 6,044 5,370 6,457 6,457 5,419 5,587 6,427 6,166 6,478 7,865 12 Netherlands 2,960 5,346 7,080 7,080 8,119 8,658 7,616 8,866 8,190 10,841 13 Norway 504 665 808 808 1,058 766 1,226 846 1,199 749 14 Portugal 938 888 418 418 420 310 421 326 306 468 15 Russia 973 660 1,669 1,669 1,673 1,704 2,028 1,799 1,881 2,020 16 Spain 3,536 2,166 3,211 3,211 6,507 5,407 6,633 6,301 5,854 6,810 17 Sweden 4,098 2,080 2,673 2,673 2,013 2,314 2,311 1,942 1,870 2,539 18 Switzerland 5,747 7,474 19,798 19,798 21,457 25,258 20,855 21,301 24,574 22,500 19 Turkey 878 803 1,109 1,109 1,029 1,221 1,236 1,216 1,306 1,455 20 United Kingdom 66,863 67,784 85,057 85,057 86,711 96,988 99,129r 90,82 r 101,240 93,161 21 Yugoslavia2 265 147 115 115 108 107 87 78 79 75 22 Other Europe and other former U.S.S.R.3 1,686 4,355 3,956 3,956 4,484 5,038 6,586 6,382 4,462 3,856 23 Canada 18,490 20,874 26,436 26,436 26,348 27,881 35,782r 33,579r 31,336 36,012 24 Latin America and Caribbean 224,229 256,944 274,127 274.127 271,654 275,255 261,155 282,478 264,380 281,329 25 Argentina 5,854 6,439 7,400 7,400 6,987 6,952 6,995 6,870 7,237 7,297 26 Bahamas 66,410 58,818 71,871 71,871 62,679 66,771 67,728 68,219 65,546 66,664 27 Bermuda 8,533 5,741 4,103 4,103 4,444 5,980 6,216 8,125 6,596 6,951 28 Brazil 9,583 13,297 17,259 17,259 17,620 17,758 17,752 17,590 18,588 19,152 29 British West Indies 96,373 124,037 105,510 105,510 108,643 110,143 98,778 111,300 106,921 121,962 30 Chile 3,820 4,864 5,136 5,136 5,509 5,602 5,784 5,636 5,745 5,598 31 Colombia 4,004 4,550 6,247 6,247 6,166 6,033 6,099 6,026 6,041 6,320 32 Cuba 0 0 0 0 0 0 0 0 0 2 33 Ecuador 682 825 1,031 1,031 1,079 1,134 1,155 995 1,092 1,130 34 Guatemala 366 457 620 620 612 634 629 633 619 651 35 Jamaica 258 323 345 345 336 336 366 325 328 334 36 Mexico 17,749 18,024 18,425 18,425 18,323 18,297 19,516 20,292 19,168 19,211 37 Netherlands Antilles 1,404 9,229 25,209 25,209 27,675 24,250 18,926 25,235 14,759 14,022 38 Panama 2,198 3,008 2,786 2,786 2,796 2,911 3,110 3,243 3,347 3,194 39 Peru 997 1,829 2,720 2,720 2,867 2,944 2,510 2,473 2,580 2,606 40 Uruguay 503 466 589 589 623 766 741 682 735 721 41 Venezuela 1,832 1,661 1,702 1,702 1,599 1,452 1,516 1,558 1,710 1,778 42 Other 3,663 3,376 3,174 3,174 3,696 3,292 3,334 3,276 3,368 3,736 43 Asia 107,800 115,336 122,535 122,535 121,362 127,080 124,334r 129,598 128,769 130,743 China 44 Mainland 836 1,023 1,401 1,401 2,035 1,766 1,456 2,201 2,168 2,045 45 Taiwan 1,448 1,713 1,894 1,894 1,249 1,201 1,709 1,532 1,500 1,884 46 Hong Kong 9,222 12,821 12,802 12,802 11,764 11,877 14,143 13,389 14,969 16,056 47 India 994 1,846 1,946 1,946 1,824 1,957 2,194 2,147 2,257 2,336 48 Indonesia 1,472 1,696 1,762 1,762 1,749 1,896 2,081 2,206 2,435 2,569 49 Israel 688 739 633 633 692 617 612 586 909 631 50 Japan 59,569 61,468 59,967 59,967 59,843 64,199 56,483r 59,083 56,484 60,255 51 Korea (South) 10,286 13,975 18,958 18,958 20,214 20,031 19,943 20,863 20,925 21,119 52 Philippines 663 1,318 1,697 1,697 1,492 1,794 1,600 1,746 1,937 2,123 53 Thailand 2,902 2,612 2,679 2,679 3,003 3,092 3,429 3,233 3,069 3,192 54 Middle Eastern oil-exporting countries4 13,982 9,639 10,424 10,424 8,582 8,889 10,078 11,315 10,590 9,085 55 Other 5,738 6,486 8,372 8,372 8,915 9,761 10,606 11,297 11,526 9,448 56 Africa 3,053 2,742 2,776 2,776 2,731 2,772 2,735 3,282 2,847 3,269 57 Egypt 225 210 247 247 246 245 244 231 270 312 58 Morocco 429 514 524 524 489 522 473 478 463 465 59 South Africa 674 465 584 584 572 564 470 452 569 602 60 Zaire 2 1 0 0 0 0 0 1 0 0 61 Oil-exporting countries5 856 552 420 420 408 474 605 1,177 679 1,129 62 Other 867 1,000 1,001 1,001 1,016 967 943 943 866 761 63 Other 3,145 2,467 5,709 5,709 5,144 5,192 6,343 6,838 6,512 6,927 64 Australia 2,192 1,622 4,577 4,577 3,743 3,176 4,101 4,918 4,088 5,042 65 Other 953 845 1,132 1,132 1,401 2,016 2,242 1,920 2,424 1,885 66 Nonmonetary international and regional organizations6 . .. 4,591 1,931 2,604 2,604 1,772 2,255 1,506 2,288 2,332 1,923 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 • October 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 11999944 11999955 11999966 Dec. Jan. Feb. Mar.r Apr.r May Junep 1 Total 601,814 655,211 744,691 744,691 798,617 2 Banks' claims 485,432 532,444 600,676 600,676 607,491 633,662 636,645 641,080 632,145 651,993 3 Foreign public borrowers 23,416 22,518 22,241 22,241 26,061 24,755 28,898 29,215 27,314 28,322 4 Own foreign offices" 283,015 307,427 342,508 342,508 330,261 360,541 360,340 362,790 367,977 379,524 5 Unaffiliated foreign banks 110,410 101,595 113,505 113,505 121,198 118,074 118,396 116,018 112,784 120,043 6 Deposits 59,368 37,771 33,826 33,826 39,266 38,155 37,284 34,592 34,566 35,785 7 Other 51,042 63,824 79,679 79,679 81,932 79,919 81,112 81,426 78,218 84,258 8 All other foreigners 68,591 100,904 122.422 122,422 129,971 130,292 129,011 133,057 124,070 124,104 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 42,679 43,452 47,270 38,815 42,719 44,870 38,214 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.r 1 Total 202,566 202,282 224,932 228,534 232,997 257,924 276,080 By borrower 2 Maturity of one year or less 172,662 170,411 178,857 185,878 189,047 211,740 223,817 3 Foreign public borrowers 17,828 15.435 14,995 14,982 16,003 15,411 19,910 4 All other foreigners 154,834 154,976 163,862 170,896 173,044 196,329 203,907 .5 Maturity of more than one year 29,904 31,871 46,075 42,656 43,950 46,184 52,263 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 34,530 37,028 39,369 43,402 By area Maturity of one year or less 8 Europe 57.413 56,381 55,622 57,138 58,545 55J513 75,011 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 78,586 79,622 103,254 96,867 11 41,418 40,567 40,296 38,111 37,199 38,135 36,495 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 8,189 7,117 6,928 9,478 15 Canada 2,581 3,505 2.751 3,689 3,533 2,645 2,953 16 Latin America and Caribbean 14,025 15,717 27,681 19,538 21,382 24,917 26,771 17 5,606 5,323 7,941 9,234 9,808 9,392 10,773 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. Banks1 Billions of dollars, end of period 1995 1996 1997 AArreeaa oorr ccoouunnttrryy 11999933 11999944 Mar. June Sept. Dec. Mar. June Sept. Dec. Mar. 1 Total 409.5 499.5 545.0 531.9 535.3 551.9 574.6 612.7 586.0 645.0 647.7r 2 G-10 countries and Switzerland 161.9 191.2 212.1 206.5 203.0 206.0 203.4 226.9 220.0 228.1 231.5r 3 Belgium and Luxembourg 7.4 7.2 10.4 9.7 11.0 13.6 11.0 11.4 11.3 11.7 14.1r 4 France 12.0 19.1 19.9 19.9 18.0 19.4 17.9 18.0 17.4 16.6 19.9r 5 Germany 12.6 24.7 31.2 30.0 27.5 27.3 31.5 31.4 33.9 29.8 32. r 6 Italy 7.7 11.8 10.6 10.7 12.6 11.5 13.2 14.9 15.2 16.0 14.4r 7 Netherlands 4.7 3.6 3.5 4.3 4.5 3.7 3.0 4.7 5.9 3.9 4.5r 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 6.3 5.3 6.0r 10 United Kingdom 84.4 85.8 90.1 87.1 80.4 82.4 84.7 101.6 90.5 104.6 99.2r 11 Canada 6.9 10.0 10.8 11.3 12.9 10.3 10.8 12.2 14.8 14.0 16.3r 12 Japan 17.6 21.1 26.7 24.4 26.6 28.5 22.7 23.6 21.7 23.6 21.7 13 Other industrialized countries 26.5 45.7 44.4 43.3 50.5 50.2 61.3 55.5 62.1 65.7 66.4r 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 1.7r 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 6.3r 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 14.4r 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 1.9r 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 21.8r 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 98.5 103.7 104.1 112.6 118.6 126.4 124.1 130.1 128.1r Latin America 32 Argentina 7.7 11.2 11.4 12.3 10.9 12.9 12.7 14.1 15.0 14.3 14.3r 33 Brazil 12.0 8.4 9.2 10.0 13.6 13.7 18.3 21.7 17.8 20.7 22.0r 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 17.2r 37 .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 3.4r 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 10.5r 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 .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 6.5r 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 4.3r 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 .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 8.9r 53 Russia4 1.6 .8 .7 .4 .6 1.0 1.4 1.0 1.8 3.7 3.5r 54 Other 1.6 1.9 1.7 1.3 2.8 3.2 4.9 4.1 3.5 3.2 5.4r 55 Offshore banking centers 73.5 72.9 85.7 83.8 87.5 99.2 101.3 106.2 105.3 134.9 131.3r 56 Bahamas 10.9 10.2 12.5 8.4 12.6 11.0 13.9 17.3 14.2 20.3 20.9' 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 32.8r 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 Z.ff 61 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 62 Hong Kong, China 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 59.6r 1. The banking offices covered by these data include US. 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 • October 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 8 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 it 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 2y 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 Al! 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 3b 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 3y 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 10,42.1 10,421 10,474 11,389 12,238 13,422 13,978 4y 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 countries2 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.p 1 Total 49,159 57,888 52,509 52,509 55,406 60,195 59,048 63,604 63,835 2 Pavable in dollars 45.161 53,805 48.711 48,711 51,007 55.350 53,884 58,592 58,498 3 Pavable 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 Pavable 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 y 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 n 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 1 13 140 157 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 1 19 190 127 50 Mexico 990 1,24.3 993 993 870 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 2,65.5 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 countries2 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 • October 1997 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1997 1996 1997 Transaction, and area or country 1995 1996 J J a u n n . e - Dec. Jan. Feb. Mar. Apr. May Junep U.S. corporate securities STOCKS 1 Foreign purchases 462.950 623,760 454,468 57,051 73,036 73.051 68.450 70.267r 82.604 87,060 451.710 611.832 424.390 56.629 70,132 69.191 68.153 64,433' 75.655 76,826 3 Net purchases, or sales (—) 11,240 11,928 30,078 422 2,904 3,860 297 5,834r 6,949 10,234 4 Foreign countries 11,445 12.002 30,121 451 2,905 3.860 289 5,854r 6,968 10,245 5 Europe 4.912 5.046 25,570 — 729 3.271 5.486 2.116 6,686' 2.440 5,571 6 France -1.099 -2.354 965 -1.064 532 427 -309 679 238 -602 7 Germany -1.837 1.104 4.850 -18 959 1.086 699 648 601 857 8 Netherlands 3,507 1.389 1.252 -160 322 - 334 378 378 382 126 9 Switzerland -2.283 2.710 3.407 -470 289 784 304 810r 184 1,036 10 United Kingdom 8.066 4.119 9.365 1,487 -134 2.950 492 3,274r 218 2.565 11 Canada -1.517 2.221 1.306 -9 422 308 373 141r 27 35 12 Latin America and Caribbean 5.814 5.563 3.650 994 1.364 405 -1,433 -1,982 7,916 2.380 13 Middle East1 -337 -1.598 156 -7 -1 26 10 203 -246 164 14 Other Asia 2.503 906 - 1.087 -232 -2.175 -2.549 -894 729 1.556 2,246 15 Japan -2.725 -372 1.866 - 343 -1.559 -500 -253 1,294 1,763 1.121 16 Africa 2 -81 224 10 -8 58 96 -7 4 81 17 Other countries 68 302 -76 32 126 21 84 27 i -232 18 Nonmonetary international and regional organizations -205 -74 -43 -29 -1 0 8 -20 -19 -11 BONDS2 19 Foreign purchases 293,533 422.249 287.002 43.054 48.955 48,818 43.455 42.663r 44,479 58.632 20 Foreign sales 206,951 294.636 227,049 32.825 37,135 36.424 38,104 31.726' 36.358 47,302 21 Net purchases, or sales (—) 86,582 127,613 59,953 10,229 11,820 12,394 5,351 10,937r 8,121 11,330 72 Foreign countries 87,036 127,442 59.894 10,229 11,824 12,381 5,337 10,941r 8,213 11,198 23 Europe 70.318 75.722 38.196 4,770 6,088 9.612 4.572 5,377'' 5.331 7,216 14 France 1.143 5.124 1.391 252 73 290 340 602 -4 90 25 Germany 5.938 5.164 478 -27 -274 184 493 30 145 -100 26 Netherlands 1.463 7.440 1.766 148 337 125 105 67 978 154 27 Switzerland 494 1.053 -10 -30 -58 -189 98 189 -54 4 28 United Kingdom 57.591 57.590 32.391 4,498 5.911 9.229 2,849 4.313r 3,618 6,471 29 Canada 2.569 4.197 2.684 391 379 1,055 390 512 446 -98 30 Latin America and Caribbean 6.141 22.901 6.21 i 2.940 3.189 -627 -2.434 2.550 1.569 1,964 31 Middle East1 1,869 1.637 1.504 412 480 691 480 16 -179 16 37 Other Asia 5,659 22.715 9.916 1.644 1.661 1.231 2.165 2,185 874 1,800 33 Japan 2.250 13.644 6,591 1,395 1.597 535 1.213 1,229 399 1.618 34 Africa 234 600 674 79 89 243 47 190 44 61 35 Other countries 246 -330 709 -7 -62 176 117 111 128 239 36 Nonmonetary international and regional organizations -454 171 59 0 -4 13 14 -4 -92 132 Foreign securities 37 Stocks, net purchases, or sales (-) -50.291 -57.122 -25.797 -5,902 -3.646 -4.353 -3.827 —4.089r -4.095 -5.787 345.540 456.826 316.685 41,850 47,084 50.139 47.780 49.725 57.612 64.345 39 Foreign sales 395.831 513.948 342.482 47.752 50,730 54.492 51,607 53,814r 61,707 70.132 40 Bonds, net purchases, or sales ( - ) -48,405 -48.793 -12,288 -10.947 -710 - 1.626 -2,979 5.720r -1,328 -11.365 41 Foreign purchases 889.541 1.1 18.678 720.975 99,095 109.567 1 10.510 131.453 117,761' 127.985 P3.699 42 Foreign sales 937.946 1.167.471 733.263 110.042 1 10.277 112.136 134.432 112,041' 129,313 135.064 43 Net purchases, or sales ( —), of stocks and bonds ... -98.696 -105.915 -38,085 -16,849 -4,356 -5,979 -6.806 l,631r -5,423 -17,152 44 Foreign countries -97,891 -105,044 -38,368 -16,838 -4.404 -6,061 -6,872 l,617r -5,480 -17,168 45 Europe -48.125 -55.948 -968 -10.740 740 - 2.030 -3,005 5.732 -13 -2,392 46 Canada -7.812 -6,279 - 166 -2,269 525 1.855 -110 -239 -841 - 1,356 47 Latin America and Caribbean -7.634 -9.503 -17.154 -2.020 -2,264 -3.417 -1.574 -1,240r -1,286 -7,373 48 Asia -34.056 -27.745 -19.732 -773 -2,830 -2,284 -1.517 -3.650' -3,570 -5,881 49 Japan -25.072 -5,888 -13.447 2.218 -332 -2.269 -674 -2,349 -2.878 -4.945 50 Africa -327 -1.529 -248 36 34 -7 -74 -121 15 -95 51 Other countries 63 - 4.040 -100 -1,072 -609 -178 -592 1,135 215 -71 52 Nonmonetary international and regional organizations -805 -871 283 -11 48 82 66 14 57 16 1. Comprises oil-exporting countries as follows: Bahrain, Iran. Iraq, Kuwait. Oman. Qatar, 2. Includes state and local government securities and securities of US. 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 J J a u n n . e - Dec. Jan. Feb. Mar. Apr. May Junep 1 Total estimated 134,115 244,725 132,015 47,662 20,791 30,615 22,076 25,587r 7,752 25,194 2 Foreign countries 133,676 246,567 130,630 46,519 21,257 29,707 22,386 25,127R 7,909 24,244 3 Europe 49,976 118,345 64,699 14,778 3,403 17,117 13,473 10,625 9,688 10,393 4 Belgium and Luxembourg 591 1,486 1,986 370 48 657 83 937 298 -37 5 Germany 6,136 17,647 -3,137 1,499 556 -1,227 -3,124 -1,480 721 1,417 6 Netherlands 1,891 -582 1,416 855 -671 546 343 1,412 194 -408 7 Sweden 358 2,343 -1,037 26 -255 -346 -581 -86 90 141 8 Switzerland -472 327 937 -517 241 992 -1,431 1.029 -223 329 9 United Kingdom 34,754 65,381 47,956 7,265 1,936 13,423 14,242 6,482 6,951 4,922 10 Other Europe and former U.S.S.R 6,718 31,743 16,578 5,280 1,548 3,072 3,941 2,331 1,657 4,029 11 Canada 252 2,389 1,591 -780 667 -402 -317 17 348 1,278 1? Latin America and Caribbean 48,609 25,379 -859 15,228 9,813 -762 -3,336 1,381 -9,495 1,540 13 Venezuela -2 -69 751 212 -3 69 10 -8 93 590 14 Other Latin America and Caribbean 25,152 13,026 13,824 5,292 6,031 1,577 3,763 -2,657 2,004 3,106 15 Netherlands Antilles 23,459 12,422 -15,434 9,724 3,785 -2,408 -7,109 4,046 -11,592 -2,156 16 32,467 98,001 64,305 16,744 8,593 14,217 12,227 13,200 7,537 8,531 17 Japan 16,979 41,390 32,570 7,593 4,264 6,326 1,747 6,604 7,657 5,972 18 Africa 1,464 1,085 415 -2 29 57 -22 -16 27 340 19 Other 908 1,368 479 551 -1,248 -520 361 -80R -196 2,162 20 Nonmonetary international and regional organizations 439 -1,842 1,385 1,143 -466 908 -310 460 -157 950 21 International 9 -1,390 1,025 773 -484 530 -384 467 -172 1,068 22 Latin American regional 261 -779 318 252 -1 362 80 24 -2 -145 MEMO 73 Foreign countries 133,676 246,567 130,630 46,519 21,257 29,707 22,386 25,127R 7,909 24,244 ?4 Official institutions 39,631 86,875 46,553 13,662 7,831 10,123 7,106 7,382R 3,377 10,734 25 Other foreign 94,045 159,692 84,077 32,857 13,426 19,584 15,280 17,745R 4,532 13,510 Oil-exporting countries 76 Middle East2 3,075 10,227 8,255 2,279 1,307 2,604 2,533 2,879 542 --11,,661100 27 2 1 -6 0 0 -1 0 1 -6 0 1. Official and private transactions in marketable U.S. Treasury securities having an 2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab original maturity of more than one year. Data are based on monthly transactions reports. Emirates (Trucial States). Excludes nonmarketable U.S. Treasury bonds and notes held by official institutions of foreign 3. Comprises Algeria, Gabon, Libya, and Nigeria. countries. 3.26 DISCOUNT RATES OF FOREIGN CENTRAL BANKS' Percent per year, averages of daily figures Rate on Aug. 30, 1997 Rate on Aug. 30, 1997 Country Country Month effective Austria. . . 2.5 Apr. 1996 Germany . . . 2.5 Belgium. 2.5 Apr. 1995 Italy 6.25 Canada. . 3.5 June 1997 Japan .5 Denmark . 3.25 Nov. 1996 Netherlands . 2.5 France2 . 3.1 Jan. 1997 Switzerland . 1.0 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 Feb. Mar. Apr. May June July Aug. 1 Eurodollars 4.63 5.93 5.38 5.36 5.50 5.70 5.69 5.66 5.61 5.58 2 United Kingdom 5.45 6.63 5.99 6.16 6.17 6.35 6.41 6.63 6.93 7.12 3 Canada 5.57 7.14 4.49 3.16 3.25 3.49 3.35 3.30 3.57 3.67 4 Germany 5.25 4.43 3.21 3.08 3.16 3.14 3.09 3.05 3.06 3.19 5 Switzerland 4.03 2.94 1.92 1.61 1.77 1.76 1.51 1.25 1.43 1.39 6 Netherlands 5.09 4.30 2.91 2.95 3.12 3.15 3.15 3.14 3.17 3.40 7 France 5.72 6.43 3.81 3.22 3.26 3.28 3.37 3.30 3.27 3.31 8 Italy 8.45 10.43 8.79 7.33 7.40 7.09 6.82 6.85 6.87 6.85 9 Belgium 5.65 4.73 3.19 3.10 3.40 3.22 3.22 3.23 3.39 3.55 10 Japan 2.24 1.20 .58 .54 .55 .55 .58 .60 .67 .58 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 • October 1997 3.28 FOREIGN EXCHANGE RATES1 Currency units per dollar except as noted 1997 CCoouunnttrryy//ccuurrrreennccyy uunniitt 11999944 11999955 11999966 Mar. Apr. May June July Aug. 1 Australia/dollar2 73.161 74.073 78.283 78.747 77.868 77.510 75.422 74.199 74.036 2 Austria/schilling 11.409 10.076 10.589 11.932 12.050 11.998 12.158 12.620 12.946 3 Belgium/franc 33.426 29.472 30.970 34.961 35.328 35.188 35.65 lr 37.040 38.011 4 Canada/dollar 1.3664 1.3725 1.3638 1.3725 1.3942 1.3804 1.3843r 1.3775 1.3905 5 China, P.R./yuan 8.6397 8.3700 8.3389 8.3258 8.3257 8.3229 8.3224 8.3162 8.3187 6 Denmark/krone 6.3561 5.5999 5.8003 6.4628 6.5226 6.4926 6.5804 6.8317 7.0109 7 Finland/markka 5.2340 4.3763 4.5948 5.0632 5.1375 5.1444 5.1794 5.3164 5.5046 8 France/franc 5.5459 4.9864 5.1158 5.7154 5.7672 5.7482 5.8293r 6.0511 6.2010 9 Germany/deutsche mark 1.6216 1.4321 1.5049 1.6946 1.7119 1.7048 1.7277r 1.7939 1.8400 10 Greece/drachma 242.50 231.68 240.82 266.86 270.58 271.95 273.83 281.43 288.41 11 Hong Kong/dollar 7.7290 7.7357 7.7345 7.7460 7.7483 7.7431 7.7445 7.7454 7.7436 12 India/rupee 31.394 32.418 35.506 35.885 35.828 35.825 35.820 35.747 36.009 13 Ireland/pound2 149.69 160.35 159.95 156.57 155.05 151.11 150.60 149.45 145.34 14 Italy/lira 1,611.49 1,629.45 1,542.76 1,691.21 1,694.52 1,684.33 1,694.54' 1,745.91 1,797.12 15 Japan/yen 102.18 93.96 108.78 122.77 125.64 119.19 114.29r 115.38 117.93 16 Malaysia/ringgit 2.6237 2.5073 2.5154 2.4773 2.5028 2.5070 2.5167 2.5815 2.7589 17 Netherlands/guilder 1.8190 1.6044 1.6863 1.9071 1.9256 1.9173 1.9438r 2.0201 2.0709 18 New Zealand/dollar2 59.358 65.625 68.765 69.789 69.220 69.097 68.713 66.097 64.211 19 Norway/krone 7.0553 6.3355 6.4594 6.7915 6.9932 7.0797 7.2240 7.4545 7.6224 20 Portugal/escudo 165.93 149.88 154.28 170.35 171.77 171.72 174.56 181.20 186.50 21 Singapore/dollar 1.5275 1.4171 1.4100 1.4378 1.4417 1.4368 1.4271 1.4521 1.4977 22 South Africa/rand 3.5526 3.6284 4.3011 4.4319 4.4417 4.4668 4.5005 4.5611 4.6856 23 South Korea/won 806.93 772.69 805.00 882.62 895.57 894.67 891.40 893.09 898.71 24 Spain/peseta 133.88 124.64 126.68 143.72 144.48 143.93 145.98 151.33 155.51 25 Sri Lanka/rupee 49.170 51.047 55.289 57.873 58.826 58.862 58.531 58.732 59.189 26 Sweden/krona 7.7161 7.1406 6.7082 7.6502 7.6942 7.6856 7.7506r 7.8188 7.9886 27 Switzerland/franc 1.3667 1.1812 1.2361 1.4634 1.4618 1.4331 1.4424r 1.4824 1.5128 28 Taiwan/dollar 26.465 26.495 27.468 27.551 27.629 27.791 27.903 28.032 28.824 29 Thailand/baht 25.161 24.921 25.359 25.959 26.064 25.751 24.534 30.274 32.399 30 United Kingdom/pound2 153.19 157.85 156.07 160.96 162.93 163.22 164.49r 166.94 160.35 MEMO 31 United States/dollar3 91.32 84.25 87.34 95.60 96.39 95.29 95.42r 97.48 99.96 1. Averages of certified noon buying rates in New York for cable transfers. Data in this 3. Index of weighted-average exchange value of U.S. dollar against the currencies of ten table also appear in the Board's G.5 (405) monthly statistical release. For ordering address, industrial countries. The weight for each of the ten countries is the 1972-76 average world see inside front cover. trade of that country divided by the average world trade of all ten countries combined. Series 2. Value in U.S. cents. revised as of August 1978 (see Federal Reserve Bulletin, vol. 64 (August 1978), p. 700). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A63 Guide to Statistical Releases and Special Tables STATISTICAL RELEASES—List Published Semiannually, with Latest Bulletin Reference Issue Page Anticipated schedule of release dates for periodic releases June 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 August 1996 November 1996 A104 November 1996 February 1997 A68 February 1997 May 1997 A68 May 1997 October 1997 A64 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 A72 March 31, 1997 August 1997 A64 Pro forma balance sheet and income statements for priced service operations June 30, 1996 October 1996 A64 September 30, 1996 January 1997 A64 March 31, 1997 July 1997 A64 June 30, 1997 October 1997 A68 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 • October 1997 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, May 5-9, 1997 A. Commercial and industrial loans made by all commercial banks' Weighted- Weighted- Amount of loans (percent) e a f v f e e r c a ti g v e e Am l o o u an n s t of Avera si g z e e loan m a a v t e u r r a i g ty e 3 ( l p o e a r n c e r n a t t ) e 2 o ( f m d il o l l i l o a n r s s ) (tho d u o s ll a a n r d s s ) of Days S c e o c l u la re te d r a b l y p S re u p p b e a n je y a c m l t t y e t n o t c M o a m d m e i u tm nd e e n r t LOAN RISK 1 All consumer and industrial loans 6.82 113,807 692 241 32.4 22.5 31.0 72.1 2 Minimal risk 6.10 11,450 1,306 38 21.4 31.3 59.5 67.3 3 Low risk 6.24 28.086 1,461 168 29.0 21.8 30.6 53.6 4 Moderate risk 7.05 36,639 602 297 33.0 23.6 23.1 79.6 5 Acceptable risk 7.49 19,762 514 324 42.0 19.7 35.5 87.8 By maturity/repricing interval6 6 Zero interval 15,714 213 490 57.9 21.5 7.5 7 Minimal risk 8.79 280 184 230 41.6 35.8 11.8 95.5 8 Low risk 7.46 2,214 317 374 41.4 19.6 5.9 95.4 9 Moderate risk 8.58 6,014 186 518 65.0 22.4 6.3 92.4 10 Acceptable risk 5,495 267 56.3 22.6 10.6 87.7 11 Daily 6.20 53,142 5,820 37 22.4 26.0 29.8 57.5 12 Minimal risk 5.95 9,411 26,589 14 21.9 26.8 59.5 62.6 13 Low risk 5.96 16,567 8.188 33 26.4 26.8 23.6 32.7 14 Moderate risk 6.43 15,855 4,936 36 20.1 35.2 21.4 74.2 15 Acceptable risk 6.33 5,433 2,918 108 14.7 13.8 38.1 87.2 16 2 to 30 days 6.80 15,608 890 225 28.8 24.4 46.5 81.8 17 Minimal risk 6.20 1,088 2,273 38 6.6 83.0 82.7 94.9 18 Low risk 6.36 2,955 1,796 267 18.3 15.7 38.3 67.0 19 Moderate risk 6.91 4,822 761 319 29.9 16.0 30.9 82.6 20 Acceptable risk 7.54 3,133 591 259 52.1 17.4 58.7 94.9 21 31 to 365 days 6.86 21,841 599 364 35.0 12.1 44.3 87.5 22 Minimal risk 6.89 616 129 189 25.5 4.7 44.9 80.8 23 Low risk 6.42 5,520 879 305 37.7 6.8 56.5 87.4 24 Moderate risk 6.85 7,895 652 334 25.8 6.9 37.2 87.6 25 Acceptable risk 7.26 5,154 746 359 45.9 25.0 49.2 86.3 26 More than 365 days 8.26 3,035 208 69.6 12.7 8.0 51.5 27 Minimal risk . . . 9.26 41 26 89.4 21.9 16.5 27.0 28 Low risk 8.38 230 110 60.3 5.6 .5 57.3 29 Moderate risk . . 8.69 1,548 269 84.2 10.0 10.8 29,2 30 Acceptable risk. . 8.78 424 222 72.7 3.8 9.3 66.2 Weighted- Weighted- average average risk maturity/ rating5 repricing interval6 Days SIZE OF LOAN 31 1-99 9.82 2,799 3.1 202 84.4 31.8 4.5 75.2 32 100-999 8.75 9,843 3.2 92 70.0 24.2 15.1 88.1 33 1,000-9,999 7.15 27,820 3.0 63 36.4 16.7 32.8 83.7 34 10,000+ 6.32 73,346 2.5 47 23.8 24.1 33.5 65.5 BASE RATE OF LOAN4 35 Prime7 9.13 16,746 3.3 165 73.3 23.7 6.1 82.9 36 Fed funds 6.14 43,971 2.4 6 21.1 28.2 26.2 50.8 37 Other domestic 6.29 10,154 2.7 70 11.0 41.8 27.8 67.2 38 Foreign 6.60 29,674 2.7 53 36.5 10.1 60.9 94.2 39 Other 7.01 13,263 3.0 116 25.0 14.8 13.3 83.8 Footnotes appear at the end of the table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A65 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made. May 5-9, 1997 B. Commercial and industrial loans made by large domestic banks' Weighted- Amount of loans (percent) Weighted- Amount of Average loan average Most average loans size maturity common ( l e p o f e a f r n e c c e t r n i a v i t ) e e " o ( f m d il o l l i l o a n r s s ) (tho d u o s ll a a n r d s s ) of Days S c e o c l u la re te d r a b l y Callable p S re u p p b e a n je y a c m l t t y e t n o t c M om ad m e it u m nd en er t base r a p te r icing LOAN RISK- 1 All consumer and industrial loans 7.05 44.201 912 378 35.7 27.9 9.0 65.0 Fed funds 2 Minimal risk 6.60 754 1,891 313 15.9 9.4 67.6 93.9 Domestic Low risk 6.28 8,519 3.558 397 40.6 56.0 10.4 51.3 Fed funds Moderate risk 7.16 16,720 1.067 409 39.2 31.0 8.3 67.1 Prime Acceptable risk 8.11 6.837 420 424 45.1 10.2 8.1 80.9 Prime By malurity/rcpricing interval ' 6 Zero interval 8.19 9.607 378 421 50.3 13.4 5.5 88.2 Prime 7 Minimal risk 8.25 127 770 189 21.8 1 1.7 22.9 99.0 Other 8 Low risk 6.87 ) .364 1,472 271 34.3 10.0 6.3 96.9 Other 9 Moderate risk 8.34 3.765 356 463 57.3 18.1 6.9 94.5 Prime 10 Acceptable risk 8.46 3.348 335 377 48.9 13.1 3.7 87.2 Pri me 11 Daily 6.32 16,396 4.480 109 32.3 49.6 6.0 38.7 Fed funds 12 Minimal risk . 5.97 358 4.855 339 .0 1 1.5 83.3 88.4 Domestic 13 Low risk 6.00 4,571 7,114 263 53.5 81.9 4.3 19.4 Fed funds 14 Moderate risk . 6.38 6.338 5,847 79 32.9 55.1 5.2 49.9 Fed funds 15 Acccptable risk 7.31 590 654 552 39.9 11.3 8 0 75.9 Domestic 16 2 to 30 days .... 6.99 6.389 918 372 29.7 16.1 12.9 72.7 Domestic 17 Minimal risk . . 6.15 108 2.052 266 36.6 51.8 97.5 Foreign 18 Low risk 6.38 1.113 3,400 500 16.3 30.0 12.3 76.9 Domestic 19 Moderate risk . 6.94 2.367 1,478 417 29.6 16.6 12.3 73.6 Domestic 20 Acccptable risk 7.95 1,154 436 474 50.8 13.1 19.6 92.6 Prime 21 31 to 365 days 6.99 6,220 2,367 515 20.5 7.8 14.8 75.7 Foreign Minimal risk . . 6.95 158 2.314 351 31.2 9.5 78.8 100.0 Domestic Low risk 6.55 767 2,562 493 28.4 11.7 25.7 83.1 Foreign Moderate risk . 6.91 2,621 2.316 467 17.2 10.0 11.3 75.6 Foreign Acceptable risk. 7.57 1.364 1.856 247 27.2 1.5 9.4 58.0 Foreign 26 More than 365 days 7.94 2.142 64.8 10.0 53.9 Prime 27 Minimal risk . . . 8.59 3 98.9 99.0 84.9 Prime 28 Low risk 7.89 125 2,148 39.8 .4 69.9 Other 29 Moderate risk . . 8.53 1.180 2.931 82.8 10.7 13.0 27.9 Prime 30 Acceptable risk. . 8.63 296 789 61.4 1.6 [3.7 73.0 Prime Weighted- Weighted- average average risk maturity/ rating'' repricing interval'' Days SIZE OF LOAN 31 1-99 9.53 884 3.6 82.9 40.0 5.1 90.4 Prime 32 100-999 8.83 4.641 3.4 67.2 21.1 8.3 90.7 Prime 33 1.000-9,999 7.32 12,621 33.8 14.1 13.9 79.0 Ol hel- 34 10.000+ 6.51 26,054 29.4 35.4 6.9 52.8 ped funds Average size (thousands of dollars) BASE RATE OF LOAN4 35 Prime' 8.91 9,863 3.3 229 69.3 18.3 6.3 81.2 244 36 Fed funds 6.19 10,659 2.5 6 43.3 56.1 1.9 27.5 10.988 37 Other domestic 6.27 8,173 2.7 73 11.1 39.9 17.5 60.7 5.645 38 Foreign 6.91 6.465 3.1 103 25.0 6.7 17.9 80.1 2.665 39 Other 6.83 9,041 3.0 51 20.0 6.3 8.8 84.8 2.227 Footnotes appear at the end of the table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 Special Tables • October 1997 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, May 5-9, 1997 C. Commercial and industrial loans made by small domestic banks' Weighted- Weighted- Amount of loans (percent) e a f v f e e r c a ti g v e e Am l o o u an n s t of Avera si g z e e loan m a a v t e u r r a i g ty e " ^ 1 ( l p o e a r n c e r n at t e )- o ( f m d il o l l i l o a n r s s ) (tho d u o s ll a a n r d s s ) of S c e o c l u la re te d r a b l y p S re u p p e b n a je a y c l m t t y e - t n o t c M o a m d m e it u m nd e e n r t LOAN RISK5 1 All consumer and industrial loans 7.96 13.374 126 487 57.2 20.9 23.9 66.8 2 Minimal risk 8.43 524 65 360 47.8 36.8 14.6 64.5 3 Low risk 7.16 3.237 217 321 39.6 12.5 34.7 54.6 4 Moderate risk 8.26 3,913 95 594 62.5 16.4 24.3 61.1 5 Acceptable risk 8.30 2,711 141 501 73.9 22.9 21.8 76.3 By maturity/repricing inter\'alb 6 Zero interval 9.15 4.278 94 524 80.8 30.3 5.5 85.5 7 Minimal risk 9.78 128 97 275 69.0 50.6 .1 91.1 8 Low risk 8.93 605 107 650 70.0 25.6 4.9 91.3 9 Moderate risk 9.09 1,692 82 557 86.8 27.5 5.6 85.2 10 Acceptable risk 9.31 1,203 125 417 82.4 32.6 8.7 79.5 11 Daily 6.48 2,640 654 62 24.1 4.2 71.1 28.1 12 Minimal risk 6.50 72 544 9 4.7 20.4 78.4 78.1 13 Low risk 6.01 920 1,077 17 14.1 75.9 15.1 14 Moderate risk 6.45 861 506 79 14.7 5.4 80.9 16.4 15 Acceptable risk 6.50 403 565 66 26.7 2.6 64.0 35.5 16 2 to 30 days 7.81 1,415 160 373 46.0 29.1 23.0 70.9 17 Minimal risk 8.13 126 314 138 25.5 63.1 .2 74.6 18 Low risk 6.94 473 497 237 32.1 15.3 39.6 42.3 19 Moderate risk 8.33 315 79 585 53.2 21.7 11.1 85.7 20 Acceptable risk 8.24 250 111 510 74.7 22.9 14.6 89.6 2131 to 365 days 7.48 3.259 108 490 56.3 18.2 17.5 76.8 22 Minimal risk 8.32 148 32 259 62.0 9.3 9.6 34.2 23 Low risk 7.08 1.115 207 356 43.4 13.9 18.7 72.9 24 Moderate risk 7.89 635 68 545 52.2 2.6 17.5 58.5 25 Acceptable risk 7.40 691 141 672 80.5 17.6 27.8 96.9 26 More than 365 day> 9.04 80.9 14.4 45.7 27 Minimal risk . . 9.31 38 88.6 22.3 15.1 22.6 28 Low risk 8.97 104 85.0 12.2 41.9 29 Moderate risk . 9.17 369 88.9 7.8 3.9 33.6 30 Acceptable risk. 9.13 129 98.8 8.7 50.6 Weighted- Weighted- average average risk maturity/ rating repricing interval'' Days SIZE OF LOAN 31 1-99 10.01 1.849 272 86.1 28.0 3.6 67.2 32 100-999 9.16 3.523 3.0 177 83.6 28.1 6.9 81.3 33 1,000-9.999 7.64 3,901 2.9 176 57.4 23.3 13.7 83.4 34 10,000+ 6.30 4.100 2.7 35 21.4 8.3 59.6 38.3 BASE RATE OF LOAN4 35 Prime7 9.51 5.427 3.1 97 83.3 30.8 5.0 81.7 36 Fed funds 6.02 2.729 2.7 30 12.6 7.5 84.5 12.9 37 Other domestic 7.12 420 2.0 257 36.2 59.1 76.3 38 Foreign 6.81 2.441 3.0 104 47.6 13.3 17.2 90.9 39 Other 7.96 2,356 2.8 487 62.6 13.4 4.5 68.2 Footnotes appear at the end of the table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A67 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, May 5-9, 1997 D. Commercial and industrial loans made by U.S. branches and agencies of foreign banks' Weighted- Weighted- Amount of loans (percent) e a f v f e e r c a ti g v e e Am l o o u an n s t of Avera si g z e e loan m a a v t e u r r a i g ty e 3 ( l p o e a r n c e r n a t t ) e 2 o ( f m d il o l l i l o a n r s s ) (tho d u o s ll a a n r d s s ) of Days S c e o c l u la re te d r a b l y p S re u p p b e a n je y a c m l t t y e t n o t c M om ad m e it u m nd e e n r t LOAN RISK 1 All consumer and industrial loans 6.37 56,233 5,548 23.8 19.0 47.8 79.0 2 Minimal risk 5.95 10,172 36,351 20.4 32.6 61.2 65.5 3 Low risk 6.03 16,330 8,425 20.9 6.3 39.9 54.7 4 Moderate risk 6.63 16,006 4,094 118 19.3 17.7 37.2 97.3 5 Acceptable risk 6.85 10,215 3,448 220 31.5 25.1 56.2 95.6 By maturity/repricing interval6 6 Zero interval 8.42 1,829 644 876 44.2 42.9 22.3 99.5 7 Minimal risk 6.51 25 558 176 2.0 81.3 16.3 100.0 8 Low risk 7.11 245 557 332 10.3 58.4 6.2 96.6 9 Moderate risk 8.63 557 509 995 50.8 36.2 5.3 100.0 10 Acceptable risk 8.63 944 952 949 49.7 43.3 37.8 100.0 11 Daily 6.12 34,107 23,749 10 17.6 17.2 36.7 12 Minimal risk 5.94 8,982 60,629 2 22.9 27.5 58.4 61.4 13 Low risk 5.94 11,076 21,028 2 16.3 6.3 27.0 39.6 14 Moderate risk 6.47 8,656 20,227 3 11.2 23.5 26.5 97.7 15 Acceptable risk 6.18 4,441 17,987 57 10.2 15.2 39.3 93.5 16 2 to 30 days 6.47 7,804 4,505 25.0 30.1 76.2 91.2 17 Minimal risk * 18 Low risk 6.14 1,369 3,738 15.1 4.2 59.1 67.5 19 Moderate risk 6.68 2,140 2,954 179 26.8 14.5 53.2 92.1 20 Acceptable risk 7.17 1,729 4,203 94 49.6 19.4 89.2 97.2 21 31 to 365 days 6.64 12,362 3.262 259 36.7 64.5 96.2 22 Minimal risk 6.18 309 5,367 72 5.2 44.5 93.3 23 Low risk 6.20 3.638 6,096 251 37.9 3.5 74.3 92.7 24 Moderate risk 6.68 4.639 2,847 232 27.1 5.8 53.9 98.4 25 Acceptable risk 7.09 3,099 2,421 3.38 46.5 37.0 67.8 96.4 26 More than 365 days 27 Minimal risk . . . 28 Low risk 29 Moderate risk 30 Acceptable risk.. Weighted- Weighted- average average risk maturity/ rating5 repricing interval6 Days SIZE OF LOAN 31 1-99 8.46 66 3.3 56.3 33.9 19.2 94.5 32 100-999 7.66 1,679 3.2 49.1 24.2 48.3 95.4 33 1.000-9,999 6.78 11,297 3.0 32.1 17.3 57.0 89.0 34 10,000+ 6.20 43,191 2.4 20.6 19.2 45.4 75.7 BASE RATE OF LOAN4 35 Prime7 9.22 1,457 3.5 62.7 32.9 9.5 36 Fed funds 6.14 30,582 2.3 14.2 20.7 29.4 37 Other domestic 6.19 1,561 3.2 3.6 46.4 77.6 38 Foreign 6.48 20,768 2.6 38.8 10.8 75.9 39 Other 6.67 1,865 3.3 1.6 49.9 39.9 NOTE. This table has been revised to reflect several changes in the E.2 statistical release. 5. A complete description of these risk categories is available from the Banking and First, business loan pricing information is now disaggregated by risk categories for most Money Market Statistics Section, Mail Stop 81, Board of Governors of the Federal Reserve loans. Second, the previous disaggregation of loans by maturity categories has been replaced System, Washington, DC 20551. The category "Moderate risk" includes the average loan, by a "maturity/repricing interval," which measures the period from the day the loan is made under average economic conditions, at the typical lender. The category "Acceptable risk" may until it is next scheduled to reprice (for loans that reprice), or the period from the day the loan include a small volume of special mention or classified loans. The weighted-average risk is made until it is scheduled to mature (for loans that do not reprice). Third, information on ratings published for loans in rows 31-39 are calculated by assigning a value of "1" to whether loans are callable or subject to prepayment penalties is now being collected and minimal risk loans; "2" to low risk loans; "3" to moderate risk loans, "4" to acceptable risk published. In addition to these new loan characteristics, the survey now includes gross loans; and "5" to special mention and classified loans. These values are weighted by loan business loan extensions of U.S. branches and agencies of foreign banks. amount and exclude loans with no risk rating. Some of the loans in lines 1,6, 11, 16, 21, 26, 1. As of December 31, 1996, assets of most of the large banks were at least $7.0 billion. and 31-39 are not rated for risk. Median total assets for all insured banks were roughly $62 million. Assets at all U.S. branches 6. The maturity/repricing interval measures the period from the date the loan is made until it and agencies averaged 1.3 billion. first may reprice or it matures. For floating-rate loans that are subject to repricing at any 2. Effective (compounded) annual interest rates are calculated from the stated rate and time—such as many prime-based loans—the maturity/repricing interval is zero. For floating-rate other terms of the loans and weighted by loan amount. The standard error of the loan rate for loans that have a scheduled repricing interval, the maturity/repricing interval measures the number all commercial and industrial loans in the current survey (line 1, column 1) is 0.11 percentage of days between the date the loan is made and the date on which it is next scheduled to reprice. For points. The chances are about two out of three that the average rate shown would differ by less loans having rates that remain fixed until the loan matures (fixed-rate loans), the maturity/repricing than this amount from the average rate that would be found by a complete survey of the interval measures the number of days between the date the loan is made and the date on which it universe of all banks. matures. Loans that reprice daily mature or reprice on the business day after they are made. Owing 3. Average maturities are weighted by loan amount and exclude loans with no stated to weekends and holidays, such loans may have maturity/repricing intervals in excess of one day; maturities. such loans are not included in the "2 to 30 day" category. 4. The most common base pricing rate is that used to price the largest dollar volume of 7. For the current survey, the average reported prime rate, weighted by the amount of Digitized for FloRanAs. SBEaseR p ricing rates include the prime rate (sometimes referred to as a bank's "base" or loans priced relative to a prime base rate, was 8.54 percent for all banks; 8.50 percent for "reference" rate); the federal funds rate; domestic money market rates other than the prime large domestic banks, 8.62 percent for small domestic banks; and 8.50 percent for U.S. http://fraser.stralote uainsd ftehed f.eodregra/l funds rate; foreign money market rates; and other base rates not included branches and agencies of foreign banks. Federal Reseirnv thee Bfoarengokin go fc laSssti.f iLcaotiuoniss.

A68 Special Tables • October 1997 4.31 PRO FORMA FINANCIAL STATEMENTS FOR FEDERAL RESERVE PRICED SERVICES A. Pro forma balance sheet Millions of dollars Item June 30, 1997 June 30, 1996 Short-term assets (Note 1) Imputed reserve requirement on clearing balances 663.5 603.0 Investment in marketable securities 5.971.5 5,427.0 Receivables 64.1 61.9 Materials and supplies 2.9 11.0 Prepaid expenses 24.5 24.6 Items in process of collection 2.905.6 2,154.8 Total short-term assets 9,632.2 8,282.2 Long-term assets (Note 2) Premises 385.1 377.1 Furniture and equipment 136.3 149.5 Leases and leasehold improvements 33.2 21.2 Prepaid pension costs 318.6 266.3 Total long-term assets 873.3 814.0 Total assets 10,505.4 9,096.3 Short-term liabilities Clearing balances and balances arising from early credit of uncollected items 7,049.4 6,093.5 Deferred-availability items 2,491.2 2,091.2 Short-term debt 91.5 97.5 Total short-term liabilities 9,632.2 8,282.2 Long-term liabilities Obligations under capital leases .7 2.3 Long-term debt 187.6 181.0 Postretirement/postemployment benefits obligation 186.5 183.7 Total long-term liabilities 374.8 367.0 Total liabilities 10,006.9 8,649.2 Equity 498.5 447.1 Total liabilities and equity (Note 3) 10,505.4 9,096.3 NOTE. Components may not sum to totals because of rounding. The priced services (2) LONG-TERM ASSETS financial statements consist of these tables and the accompanying notes. Consists of long-term assets used solely in priced services, the priced-services portion of (1) SHORT-TERM ASSETS long-term assets shared with nonpriced services, and an estimate of the assets of the Board of Governors used in the development of priced services. Effective Jan. 1, 1987, the Reserve The imputed reserve requirement on clearing balances held at Reserve Banks by depository Banks implemented the Financial Accounting Standards Board's Statement of Financial institutions reflects a treatment comparable to that of compensating balances held at corre- Accounting Standards No. 87, Employers' Accounting for Pensions (SFAS 87). Accordingly, spondent banks by respondent institutions. The reserve requirement imposed on respondent the Federal Reserve Banks recognized credits to expenses of $15.6 million in the second balances must be held as vault cash or as nonearning balances maintained at a Reserve Bank; quarter of 1997, $15.6 million in the first quarter of 1997, $12.0 million in the second quarter thus, a portion of priced services clearing balances held with the Federal Reserve is shown as of 1996, and $12.2 million in the first quarter of 1996, and corresponding increases in this required reserves on the asset side of the balance sheet. The remainder of clearing balances is asset account. assumed to be invested in three-month Treasury bills, shown as investment in marketable securities. Receivables are (1) amounts due the Reserve Banks for priced services and (2) the share of (3) LIABILITIES AND EQUITY suspense-account and difference-account balances related to priced services. Materials and supplies are the inventory value of short-term assets. Under the matched-book capital structure for assets that are not "self-financing," short-term Prepaid expenses include salary advances and travel advances for priced-service personnel. assets are financed with short-term debt. Long-term assets are financed with long-term debt Items in process of collection is gross Federal Reserve cash items in process of collection and equity in a proportion equal to the ratio of long-term debt to equity for the fifty largest (CIPC) stated on a basis comparable to that of a commercial bank. It reflects adjustments for bank holding companies, which are used in the model for the private-sector adjustment factor intra-System items that would otherwise be double-counted on a consolidated Federal (PSAF). The PSAF consists of the taxes that would have been paid and the return on capital Reserve balance sheet; adjustments for items associated with non-priced items, such as those that would have been provided had priced services been furnished by a private-sector firm. collected for government agencies; and adjustments for items associated with providing fixed Other short-term liabilities include clearing balances maintained at Reserve Banks and availability or credit before items are received and processed. Among the costs to be deposit balances arising from float. Other long-term liabilities consist of obligations on capital recovered under the Monetary Control Act is the cost of float, or net CIPC during the period leases. (the difference between gross CIPC and deferred-availability items which is the portion of gross CIPC that involves a financing cost), valued at the federal funds rate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A69 4.31 PRO FORMA FINANCIAL STATEMENTS FOR FEDERAL RESERVE PRICED SERVICES B. Pro forma income statement Millions of dollars Quarter ending June 30, 1997 Quarter ending June 30, 1996 Revenue from services provided to depository institutions (Note 4) 195.8 196.0 Operating expenses (Note 5) 164.8 162.3 Income from operations 31.0 33.7 Inputed costs (Note 6) Interest on float 1.8 1.1 Interest on debt 4.4 4.3 Sales taxes 2.3 2.6 FDIC insurance 0.5 0.0 8.0 Income from operations after imputed costs 25.7 Other income and expenses (Note 7) Investment income on clearing balances 91.7 75.7 Earnings credits 87.6 68.6 7.1 Income before income taxes 32.8 Inputed income taxes (Note 8) 9.8 Net income 23.0 MEMO Targeted return on equity (Note 9) 10.7 Six months ending June 30, 1997 Six months ending June 30, 1996 Revenue from services provided to depository institutions (Note 4) 388.9 390.1 Operating expenses (Note 5) 328.1 323.4 Income from operations Imputed costs (Note 6) Interest on float 11.8 Interest on debt 8.6 Sales taxes 4.9 5.4 FDIC insurance 1.0 20.8 0.0 25.8 Income from operations after imputed costs 39.9 40.9 Other income and expenses (Note 7) Investment income on clearing balances 180.1 147.2 Earnings credits 165.8 134.0 13.2 Income before income taxes 54.2 54.1 Imputed income taxes (Note 8) 17.4 16.2 Net income 36.8 37.9 MEMO Targeted return on equity (Note 9) 27.1 21.0 NOTE. Components may not sum to totals because of rounding. The priced services Unrecovered float includes float generated by services to government agencies and by other financial statements consist of these tables and the accompanying notes. central bank services. Float recovered through income on clearing balances is the result of the increase in investable clearing balances; the increase is produced by a deduction for float for (4) REVENUE cash items in process of collection, which reduces imputed reserve requirements. The income on clearing balances reduces the float to be recovered through other means. As-of adjustments Revenue represents charges to depository institutions for priced services and is realized from and direct charges are mid-week closing float and interterritory check float, which may be each institution through one of two methods: direct charges to an institution's account or recovered from depositing institutions through adjustments to the institution's reserve or charges against its accumulated earnings credits. clearing balance or by valuing the float at the federal funds rate and billing the institution directly. Float recovered through per-item fees is valued at the federal funds rate and has been (5) OPERATING EXPENSES added to the cost base subject to recovery in the second quarters of 1997 and 1996. Operating expenses consist of the direct, indirect, and other general administrative expenses (7) OTHER INCOME AND EXPENSES of the Reserve Banks for priced services plus the expenses for staff members of the Board of Governors working directly on the development of priced services. The expenses for Board Consists of investment income on clearing balances and the cost of earnings credits. staff members were $0.7 million in the first and second quarters of 1997 and 1996. The credit Investment income on clearing balances represents the average coupon-equivalent yield on to expenses under SFAS 87 (see note 2) is reflected in operating expenses. three-month Treasury bills applied to the total clearing balance maintained, adjusted for the effect of reserve requirements on clearing balances. Expenses for earnings credits granted to depository institutions on their clearing balances are derived by applying the average federal (6) IMPUTED COSTS funds rate to the required portion of the clearing balances, adjusted for the net effect of Imputed costs consist of interest on float, interest on debt, sales taxes, and the FDIC reserve requirements on clearing balances. assessment. Interest on float is derived from the value of float to be recovered, either (8) INCOME TAXES explicitly or through per-item fees, during the period. Float costs include costs for checks, book-entry securities, noncash collection, ACH, and funds transfers. Imputed income taxes are calculated at the effective tax rate derived from the PSAF model Interest is imputed on the debt assumed necessary to finance priced-service assets. The (see note 3). sales taxes and FDIC assessment that the Federal Reserve would have paid had it been a (9) RETURN ON EQUITY private-sector firm are among the components of the PSAF (see note 3). The following list shows the daily average recovery of float by the Reserve Banks for the Represents the after-tax rate of return on equity that the Federal Reserve would have earned second quarter of 1997 and 1996 in millions of dollars: had it been a private business firm, as derived from the PSAF model (see note 3). This amount is adjusted to reflect the recovery of automation consolidation costs of $1.9 million for the 1997 1996 second quarter of 1997, $2.3 million for the first quarter of 1997, $1.6 million for the second quarter of 1996, and $1.2 million for the first quarter of 1996. The Reserve Banks plan to Total float 404.1 413.4 recover these amounts, along with a finance charge, by the end of the year 2001. Unrecovered float 20.1 15.4 Float subject to recovery 384.0 398.0 Sources of float recovery Income on clearing balances 38.0 40.3 As-of adjustments 251.9 318.4 Direct charges 83.2 107.7 Per-item fees 10.9 (68.5) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Index to Statistical Tables References are to pages A3-A69 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 Federal credit agencies, 30 Domestic finance companies, 32, 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, 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 Federal Reserve notes, 10 Federal Reserve Banks, 10 Federal Reserve System Central banks, discount rates, 61 Balance sheet for priced services, 68, 69 Certificates of deposit, 23 Condition statement for priced services, 68, 69 Commercial and industrial loans Federally sponsored credit agencies, 30 Commercial banks, 15-21, 64-67 Finance companies Weekly reporting banks, 17, 18 Commercial banks Assets and liabilities, 32 Business credit, 33 Assets and liabilities, 15-21 Loans, 36 Commercial and industrial loans, 15-21, 64-67 Paper, 22, 23 Consumer loans held, by type and terms, 36, 64-67 Float, 5 Deposit interest rates of insured, 14 Flow of funds, 37-41 Real estate mortgages held, by holder and property, 35 Foreign currency operations, 10 Terms of lending, 64-67 Foreign deposits in U.S. banks, 5 Time and savings deposits, 4 Foreign exchange rates, 62 Commercial paper, 22, 23, 32 Foreign-related institutions, 20 Condition statements (See Assets and liabilities) Foreign trade, 51 Construction, 42, 46 Foreigners Consumer credit, 36 Consumer prices, 42 Claims on, 52, 55, 56, 57, 59 Consumption expenditures, 48, 49 Liabilities to, 51, 52, 53, 58, 60, 61 Corporations GOLD Profits and their distribution, 32 Certificate account, 10 Security issues, 31,61 Stock, 5, 51 Cost of living (See Consumer prices) Government National Mortgage Association, 30, 34, 35 Credit unions, 36 Gross domestic product, 48, 49 Currency in circulation, 5, 12 Customer credit, stock market, 24 HOUSING, new and existing units, 46 DEBT (See specific types of debt or securities) INCOME and expenses, Federal Reserve System, 68, 69 Demand deposits, 15-21 Income, personal and national, 42, 48, 49 Depository institutions Industrial production, 42, 44 Reserve requirements, 8 Insurance companies, 27, 35 Reserves and related items, 4, 5, 6, 11 Interest rates Deposits (See also specific types) Bonds, 23 Commercial banks, 4, 15-21 Commercial banks, 64-67 Federal Reserve Banks, 5, 10 Consumer credit, 36 Interest rates, 14 Deposits, 14 Discount rates at Reserve Banks and at foreign central banks and Federal Reserve Banks, 7 foreign countries (See Interest rates) Foreign banks, U.S. branches and agencies, 67 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

A71 International organizations, 52, 53, 55, 58, 59 Residential mortgage loans, 34, 35 Inventories, 48 Retail credit and retail sales, 36, 42 Investment companies, issues and assets, 32 Investments (See also specific types) SAVING Commercial banks, 4, 15-21 Flow of funds, 37-41 Federal Reserve Banks, 10, 11 National income accounts, 48 Financial institutions, 35 Savings institutions, 35, 36, 37-41 Savings deposits (See Time and savings deposits) LABOR force, 42 Securities (See also specific types) Life insurance companies (See Insurance companies) Federal and federally sponsored credit agencies, 30 Loans (See also specific types) Foreign transactions, 60 Commercial banks, 15-21, 64-67 New issues, 31 Federal Reserve Banks, 5, 6, 7, 10, 11 Prices, 24 Federal Reserve System, 68, 69 Special drawing rights, 5, 10, 50, 51 Financial institutions, 35 State and local governments Insured or guaranteed by United States, 34, 35 Holdings of U.S. government securities, 27 New security issues, 31 MANUFACTURING Rates on securities, 23 Capacity utilization, 43 Stock market, selected statistics, 24 Production, 43, 45 Stocks (See also Securities) Margin requirements, 24 New issues, 31 Member banks (See also Depository institutions) Prices, 24 Reserve requirements, 8 Mining production, 45 Student Loan Marketing Association, 30 Mobile homes shipped, 46 Monetary and credit aggregates, 4, 11 TAX receipts, federal, 26 Money and capital market rates, 23 Thrift institutions, 4. (See also Credit unions and Savings Money stock measures and components, 4, 12 institutions) Mortgages (See Real estate loans) Time and savings deposits, 4, 12, 14, 15-21 Mutual funds, 12, 32 Trade, foreign, 51 Mutual savings banks (See Thrift institutions) Treasury cash, Treasury currency, 5 Treasury deposits, 5, 10, 25 NATIONAL defense outlays, 26 Treasury operating balance, 25 National income, 48 UNEMPLOYMENT, 42 U.S. government balances OPEN market transactions, 9 Commercial bank holdings, 15-21 Treasury deposits at Reserve Banks, 5, 10, 25 PERSONAL income, 49 U.S. government securities Prices Bank holdings, 15-21, 27 Consumer and producer, 42, 47 Dealer transactions, positions, and financing, 29 Stock market, 24 Federal Reserve Bank holdings, 5, 10, 11, 27 Prime rate, 22 Foreign and international holdings and Producer prices, 42, 47 transactions, 10, 27, 61 Production, 42, 44 Open market transactions, 9 Profits, corporate, 32 Outstanding, by type and holder, 27, 28 Rates, 23 REAL estate loans US. international transactions, 50-62 Banks, 15-21, 35 Utilities, production, 45 Terms, yields, and activity, 34 Type of holder and property mortgaged, 35 Reserve requirements, 8 VETERANS Administration, 34, 35 Reserves Commercial banks, 15-21 WEEKLY reporting banks, 17, 18 Depository institutions, 4, 5, 6, 11 Wholesale (producer) prices, 42, 47 Federal Reserve Banks, 10 U.S. reserve assets, 51 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A72 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 Adviser THEODORE E. ALLISON, Assistant to the Board for Federal CHARLES J. SIEGMAN, Senior Adviser Reserve System Affairs LEWIS S. ALEXANDER, Associate Director LYNN S. FOX, Deputy Congressional Liaison DALE W. HENDERSON, Associate Director WINTHROP P. HAMBLEY, Special Assistant to the Board PETER HOOPER III, Associate Director BOB STAHLY MOORE, Special Assistant to the Board KAREN H. JOHNSON, Associate Director DIANE E. WERNEKE, Special Assistant to the Board DAVID H. HOWARD, Senior Adviser PORTIA W. THOMPSON, Equal Employment Opportunity DONALD B. ADAMS, Assistant Director Programs Adviser THOMAS A. CONNORS, Assistant Director CATHERINE L. MANN, Assistant Director LEGAL DIVISION DIVISION OF RESEARCH AND STATISTICS J. VIRGIL MATTINGLY, JR., General Counsel MICHAEL J. PRELL, Director SCOTT G. ALVAREZ, Associate General Counsel EDWARD C. ETTIN, Deputy Director RICHARD M. ASHTON, Associate General Counsel DAVID J. STOCKTON, Deputy Director OLIVER IRELAND, Associate General Counsel MARTHA BETHEA, Associate Director KATHLEEN M. O'DAY, Associate General Counsel WILLIAM R. JONES, Associate Director ROBERT DEV. FRIERSON, Assistant General Counsel MYRON L. KWAST, Associate Director KATHERINE H. WHEATLEY, Assistant General Counsel PATRICK M. PARKINSON, Associate Director THOMAS D. SIMPSON, Associate Director LAWRENCE SLIFMAN, Associate Director OFFICE OF THE SECRETARY MARTHA S. SCANLON, Deputy Associate Director WILLIAM W. WILES, Secretary PETER A. TINSLEY, Deputy Associate Director JENNIFER J. JOHNSON, Deputy Secretary DAVID S. JONES, Assistant Director BARBARA R. LOWREY, Associate Secretary' and Ombudsman STEPHEN A. RHOADES, Assistant Director CHARLES S. STRUCKMEYER, Assistant Director ALICE PATRICIA WHITE, Assistant Director DIVISION OF BANKING JOYCE K. ZICKLER, Assistant Director SUPERVISION AND REGULATION GLENN B. CANNER, Senior Adviser RICHARD SPILLENKOTHEN, Director JOHN J. MINGO, Senior Adviser STEPHEN C. SCHEMERING, Deputy Director WILLIAM A. RYBACK, Associate Director DIVISION OF MONETARY AFFAIRS HERBERT A. BIERN, Associate Director DONALD L. KOHN, Director ROGER T. COLE, Associate Director DAVID E. LINDSEY, Deputy Director GERALD A. EDWARDS, JR., Deputy Associate Director BRIAN F. MADIGAN, Associate Director STEPHEN M. HOFFMAN, JR., Deputy Associate Director RICHARD D. PORTER, Deputy Associate Director JAMES V. HOUPT, Deputy Associate Director VINCENT R. REINHART, Assistant Director JACK P. JENNINGS, Deputy Associate Director NORMAND R.V. BERNARD, Special Assistant to the Board MICHAEL G. MARTINSON, Deputy Associate Director SIDNEY M. SUSSAN, Deputy Associate Director DIVISION OF CONSUMER MOLLY S. WASSOM, Deputy Associate Director AND COMMUNITY AFFAIRS HOWARD A. AMER, Assistant Director NORAH M. BARGER, Assistant Director GRIFFITH L. GARWOOD, Director BETSY CROSS, Assistant Director GLENN E. LONEY, Associate Director RICHARD A. SMALL, Assistant Director DOLORES S. SMITH, Associate Director WILLIAM SCHNEIDER, Project Director, MAUREEN P. ENGLISH, Assistant Director National Information Center IRENE SHAWN MCNULTY, Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A73 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 EARL G. HAMILTON, Assistant Director DAVID L. SHANNON, Director JEFFREY C. MARQUARDT, Assistant Director JOHN R. WEIS, Associate Director FLORENCE M. YOUNG, Assistant Director JOSEPH H. HAYES, JR., 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

74 Federal Reserve Bulletin • October 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

A75 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

A76 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, $35.00 per year or $.80 each. Federal Reserve Bank Board of Directors Federal Reserve Banks REGULATIONS OF THE BOARD OF GOVERNORS OF THE FEDERAL Organization and Advisory Committees RESERVE SYSTEM. A Consumer's Guide to Mortgage Lock-Ins ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— A Consumer's Guide to Mortgage Settlement Costs Regulation Z) Vol. I (Regular Transactions). 1969. 100 pp. A Consumer's Guide to Mortgage Refinancings Vol. 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

All 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 21 pp. 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

A78 Maps of the Federal Reserve System 1 9 2~ BOS•T ON MINNEAPOLIS ^ ^ • NEW YORK CHICAGO! CLEVELAND PSLADELPHIA 10 SAN FRANCISCO KANSAS CITY I RICHMOND ST. LOUIS 6 ll ATLANTA DALLAS ALASKA HAWAII LEGEND Both pages Facing page • Federal Reserve Bank city • Federal Reserve Branch city n 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

A79 1-A 2-B 3-C 4-D 5-E Bvaltimlo^re MD ( CT VT • [ / \ NH Buffalo 'Cincinnati MA f NY CT NJ sc BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 6-F 7-G 8-H •Nashville TN- KY Birmingham ^ n. ; w Detroit • Louisville MS MO LA Jacksonville •Memphis New Orleans PL Little" Y Miami ATLANTA CHICAGO ST. LOUIS 9-1 MINNEAPOLIS 10-J 12-L WY 1 NE CO Omaha* MO • Denver „ • , Seattle KM 1 Oklahoma City OK KANSAS CITY 11-K tx Salt Late City ii •• Mi I-A EEll PPaass ~~r^HouSton •Los Angeles San At ttoSio^- DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A80 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 Robert B. Schaub RICHMOND* 23219 Claudine B. Malone J. Alfred Broaddus, Jr. Robert L. Strickland Walter A. Varvel Baltimore 21203 Rebecca Hahn Windsor William J. Tignanelli' 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 EI 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. StuII1 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

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

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

Federal Reserve Statistical Releases Available on the Commerce Department's Economic Bulletin Board The Board of Governors of the Federal Reserve Sys- For further information regarding a subscription to tem makes some of its statistical releases available to the economic bulletin board, please call (202) 482the public through the U.S. Department of Com- 1986. The releases transmitted to the economic bullemerce's economic bulletin board. Computer access tin board, on a regular basis, are the following: to the releases can be obtained by subscription. Reference Number Statistical release Frequency of release H.3 Aggregate Reserves Weekly/Thursday H.4.1 Factors Affecting Reserve Balances Weekly/Thursday H.6 Money Stock Weekly/Thursday H.8 Assets and Liabilities of Insured Domestically Chartered Weekly/Monday and Foreign Related Banking Institutions H.10 Foreign Exchange Rates Weekly/Monday H.15 Selected Interest Rates Weekly/Monday G.5 Foreign Exchange Rates Monthly/end of month G.17 Industrial Production and Capacity Utilization Monthly/midmonth G.19 Consumer Installment Credit Monthly/fifth business day Z. 1 Flow of Funds Quarterly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis