Federal Reserve Bulletin, 1999-01

Volume 85 • Number 1 • January 1999 Federal Reserve BULLETIN Board of Governors of the Federal Reserve System, Washington, D.C. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Table of Contents 1 AGGREGATE DISTURBANCES, MONETARY 34 INDUSTRIAL PRODUCTION AND CAPACITY POLICY, AND THE MACROECONOMY: UTILIZATION FOR NOVEMBER 1998 THE FRB/US PERSPECTIVE Industrial production declined 0.3 percent in The FRB/US macroeconometric model of the November, to 131.8 percent of its 1992 average, U.S. economy was created at the Federal Reserve after an upwardly revised increase of 0.2 percent Board for use in policy analysis and forecasting. in October. Capacity utilization fell 0.6 percent- This article begins with an examination of the age point, to 80.6 percent, a level 1 Vi percentage model's characterization of the monetary trans- points below its 1967-97 average. mission mechanism—the chain of relationships describing how monetary policy actions influence financial markets and, in turn, output and infla- 37 ANNOUNCEMENTS tion. The quantitative nature of this mechanism is Reduction in the discount rate. illustrated by estimates of the effect of movements in interest rates and other factors on spend- Reduction in fees for payment services of the ing in different sectors and by simulations of the Federal Reserve Banks. effect of a change in the stance of policy on the economy as a whole. After the discussion of Provision for enhanced settlement services to the transmission mechanism, the article considers depository institutions. the influence of monetary policy on the macro- Decrease in the net transaction accounts to which economic consequences of specific events by a 3 percent reserve requirement will apply in showing how the predicted effects of selected 1999. disturbances change under alternative policy responses. These examples illustrate an important Joint statement on the allowance for loan losses policy tradeoff in the FRB/US model involving of depository institutions. the variability (but not the level) of output and inflation: Past some point, lower variability in Enforcement actions. inflation can be obtained only at the expense of greater fluctuations in output and interest rates. 40 MINUTES OF THE FEDERAL OPEN MARKET COMMITTEE MEETING HELD ON 20 INDUSTRIAL PRODUCTION AND CAPACITY SEPTEMBER 29, 1998 UTILIZATION: 1998 ANNUAL REVISION In late 1998, the Federal Reserve published the At its meeting held on September 29, 1998, the results of an annual revision of its measures of Committee adopted a directive that called for industrial production, capacity, and capacity utili- conditions in reserve markets that would be conzation, which cover the nation's manufacturing, sistent with a slight decrease in the federal funds mining, and electric and gas utilities industries. rate to an average of about 5 lA percent and that The revision involved both the incorporation of contained a bias toward a possible further easing newly available and more comprehensive source of reserve conditions and a lower funds rate. data and, for some series, the introduction of modified methods for compiling the series. The 49 LEGAL DEVELOPMENTS revised figures show stronger growth of both production and capacity since 1996; however, the Various bank holding company, bank service coroverall capacity utilization rate was little changed poration, and bank merger orders; and pending from the previous data. cases. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

AI FINANCIAL AND BUSINESS STATISTICS A68 BOARD OF GOVERNORS AND STAFF These tables reflect data available as of COMMITTEE AND A?Q FED£RAL QpEN MARKET November 26, 1998. ^^ ADVISQRY COUNCILS A3 GUIDE TO TABULAR PRESENTATION ^ .^ M2 RESERV£ BQARD P(JBUCATI0NS A4 Domestic Financial Statistics A42 Domestic Nonfinancial Statistics A74 MAPS OF THE FEDERAL RESERVE SYSTEM A50 International Statistics A76 FEDERAL RESERVE BANKS, BRANCHES, A63 GUIDE TO STATISTICAL RELEASES AND AND OFFICES SPECIAL TABLES A66 INDEX TO STATISTICAL TABLES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

PUBLICATIONS COMMITTEE Lynn S. Fox, Chairman • S. David Frost 3 Karen H. Johnson • Donald L. Kohn • J. Virgil Mattingly, Jr. • Michael J. Prell • Dolores S. Smith • Richard Spillenkothen The Federal Resen>e Bulletin is issued monihly under the direction of (lie 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 Multimedia Technologies Center under the direction of Christine S. Griffith, and Publications Services supervised by Linda C. Kylev Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Aggregate Disturbances, Monetary Policy, and the Macroeconomy: The FRB/US Perspective David Reifschneider, Robert Tetlow, and John Wil- tary policy influences the macroeconomic conseliams, of the Board's Division of Research and Statis- quences of specific events in the FRB/US model by tics, prepared this article. showing how the predicted effects of selected disturbances change under alternative policy responses. The U.S. economy is continually buffeted by dis- Because these disturbances—a decline in the value of turbances originating both within and outside our the stock market, a period of unexpectedly rapid borders. To assess the influence of such events on wage growth, and an adverse shock to the productivemployment, inflation, and other measures of macro- ity of American firms and workers—differ in their economic performance, economists often use models implications for output and inflation, they illustrate of the economy—systems of mathematical equations some of the choices faced by policymakers in the describing the interactions among various measures context of the model. In the final section of the of activity in the markets for labor, goods, and finan- article, these choices are summarized in terms of cial instruments. Although no model can replicate in policy frontiers that show how, past some point, full detail the complex behavior of the real world, reductions in the variability of inflation are obtained one can construct models that are consistent with only through increases in the variability of output. both economic theory and historical data. Such models shed light on the way the economy works and how it responds to disturbances and policy actions PROPERTIES OF THE FRB/US MODEL that are similar to those encountered historically. The FRB/US model of the U.S. economy is main- FRB/US is what is often called a New Keynesian tained at the Federal Reserve Board for use in policy model because of the assumptions it incorporates. analysis and forecasting. With FRB/US, the Board's In the model, households and firms are forwardstaff can gauge the likely consequences of specific looking—that is, they base their decisions on the events through simulation analysis—computational income and sales, financial conditions, and prices that "what-if" exercises in which the model is used to they expect for the future. However, rather than being predict the outcomes from alternative assumptions instantaneous, the response to changes in these fundaregarding fiscal and monetary policy, international mental factors is gradual because capital installation conditions, and so forth. In a similar manner, the staff costs, contracts, and other considerations create sigcan use model simulations to assess possible implica- nificant frictions that slow the process. For this reations for economic performance of the full range of son, the failure of markets to clear quickly after disturbances likely to be experienced over extended disturbances to the economy can result in periods periods of time. of over- or under-utilization of labor and capital This article examines the properties of the FRB/US resources (see box "An Overview of the FRB/US model and the ways in which they shape the model's Model"). predictions. To a large extent, the discussion centers According to the viewpoint embedded in the on the monetary transmission mechanism—the chain model, monetary policy can mitigate these swings in of relationships embedded in the model that describe aggregate resource utilization by altering financial how monetary policy actions influence financial mar- market conditions and thereby exerting an indirect kets and, in turn, aggregate output and inflation. The influence on output and employment in the short term quantitative nature of this mechanism is illustrated by and on inflation over the longer term. In FRB/US, estimates of the effect of movements in interest rates policymakers alter financial conditions by changing and other factors on spending in different sectors and the short-term interest rate under the control of the by simulations of the effect of a change in the stance Federal Reserve—the federal funds rate. Current and of policy on the economy as a whole. anticipated changes in this rate influence prices and After the discussion of the transmission mecha- rates of return on various financial assets, including nism, the article considers the ways in which mone- bonds and corporate equities, and on foreign exchange. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • January 1999 Changes in these financial conditions in turn influ- affect the rate of inflation. (For alternative views on ence spending by households and firms and, by alter- how monetary policy may influence the economy, see ing resource utilization in labor and product markets, box "Other Monetary Transmission Channels.") An Overview of the FRB/US Model Macroeconomic models sometimes differ in their predic- Expectations also play a key role in determining prices tions about the effect of a particular event on the economy, in the financial market sector of the model. However, the owing to differences in theoretical design, empirical specifi- motivation for this dependence on expectations is somecation, and degree of aggregation. For this reason, review- what different because financial decisions are assumed to ing the structure of the FRB/US model is useful for under- be unaffected by frictions, given the negligible cost of such standing the model's behavior.1 transactions. Rather, expectations figure prominently in this The equations of FRB/US are specified in accordance sector because the return on many financial investments with standard economic theory. In particular, households, is a stream of payments stretching well into the future. In businesses, and investors are assumed to be forward-looking FRB/US, expectations are modeled explicitly, but in a in their decisionmaking as they seek to optimize their flexible manner that allows Board staff to make alternative welfare. Individuals choose a path for current and future assumptions about the amount of information available to consumption that maximizes their lifetime utility, subject to households, firms, and investors in forming their expectaa budget constraint; this assumption implies that consumer tions about the future course of the economy. spending today is related to the present value of expected Because of the presence of frictions that delay the adjustfuture earnings and the current value of assets. Similarly, ment of nonfinancial variables, FRB/US belongs to a class firms maximize expected profits in hiring workers, invest- of models often described as "New Keynesian."2 In such ing in capital goods, and setting prices; this assumption models, prices and quantities do not adjust quickly enough implies, among other things, that the desired stock of busi- to ensure full resource utilization at afl times. These models ness equipment is a function of expected sales and the cost predict that the labor market, in particular, will be out of of capital. In financial markets, investors equate expected equilibrium periodically. For example, during economic rates of return on different assets, subject to premiums that downturns an unusually large percentage of the labor force compensate borrowers and lenders for differences in risk may be willing to work at current wage rates but be unable and liquidity. to find a job. Alternatively, during periods of above-average In their decisionmaking, households and firms are activity, the unemployment rate may temporarily fall to a assumed to face significant frictions that slow the speed at low level, and employees may be required to work a longer which they adjust prices and quantities to changes in funda- workweek than desired. However, these Keynesian features mental economic factors. Although not explicitly incor- of FRB/US diminish over time, and in the long run, when porated into the structure of FRB/US. the sources of these adjustment is complete, all markets clear. frictions are varied; they include the cost of adjusting a An aspect of FRB/US that is closely related to slow firm's work force and physical capital, labor contracts and market adjustment is the behavior of inflation. In the model, other agreements, and an apparent reluctance of households firms seek to pay workers the value of their marginal to change spending habits quickly. The existence of such product and to price their output as a markup over trend unit frictions means that households and firms have an incentive labor and energy costs. However, labor contracts and other to be forward-looking in their behavior because costs of factors create frictions that slow the speed at which wages adjusting spending and prices can be reduced by correctly and prices adjust to shifts in demand and supply. (Commodanticipating their preferred values in the future. As a result, ity prices are an exception to this behavior because they many decisions in the nonfinancial sectors depend not only adjust quickly on world spot markets). Such "sticky-price" on conditions today and in the recent past but also on the behavior is incorporated into the equations of FRB/US that way conditions are expected to change in the near future. govern the response of inflation to changes in economic conditions. An important implication of this view of the inflation process is that policy-directed changes in shortterm nominal interest rates have a temporary influence on 1. For a more extended discussion of rile FRB/US model and its uses, sec Flint Brayton and Peter Tinsley, "A Guide to FRB/US: A Macroeconomic the real rate of interest. Through this influence over real Model of the United States." Finance and Economic Discussion Series, interest rates, monetary policy can affect real prices and 1996-42 (Board of Governors of the Federal Reserve System, October 1996): Flint Brayton, Eileen Mauskopf, David Reifschneider, Peter Tinsley, and yields on a variety of financial assets and thereby indi- John Williams, "The Role of Expectations in the FRB/US Macro- rectly influence economic activity in various sectors of the economic Model," Federal Reserve Bulletin, vol. 83 (April 1997), economy. pp. 227-45: and Flint Brayton. Andrew Levin. Ralph Tryon, and John B. Williams, "The Evolution of Macro Models at the Federal Reserve Board," Carnegie-Rochester Conference Series on Public Policy, vol. 47 (1997), 2. For further infontoution, see N. Gregory Mankiw and David Romer, pp. 43-81. eds.. New Keynesian Economics (MIT Press, 1991). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Aggregate Disturbances. Monetary Policy, and the Macroeconomy: The FRB/US Perspective 3 The Influence of Policy Actions on Financial Here /?,„, is the yield to maturity on an m-period Markets bond; r, j is the value of the overnight interbank loan + rate (the federal funds rate) expected j periods in the The set of relationships linking policy actions to future; and the weights, (fij, sum to unity. As the movements in aggregate output and inflation is com- formula shows, a bond's yield is, in part, a weighted monly known as the monetary transmission mecha- average of the funds rate expected well into the nism. In FRB/US, the first step in this chain is the future. The remaining term, <p,, denotes the premium connection between two markets—that for overnight paid to investors to compensate for uncertainty in the interbank loans and related short-term instruments future course of short-term interest rates and for the (strongly influenced by Federal Reserve operations) chance of default. and that for long-term government and corporate Given this arbitrage relationship—which is asbonds. Specifically, these markets are linked by the sumed to hold at all times because financial markets, expectations theory of the term structure, which states with their low transaction costs, are relatively that investors seek to equalize—up to a premium to unaffected by the frictions that slow adjustment in compensate for differences in risk—the yield from other sectors—policy can influence long-term yields holding a bond to maturity with the yield expected in at least two ways. First, it can alter the current from a sequence of short-term investments in the value of the funds rate. By itself, however, such an money market. Mathematically, the theory implies action has only a minor direct influence on long-term that the yield on a bond is given by the following yields because the weight on the current period's formula: setting of the funds rate is relatively small. Second, policy can affect investors' expectations for the future course of the funds rate—an influence that is potentially quite powerful. In the FRB/US model, the Other Monetary Transmission Channels The discussion in the text focuses on the aspects of the face significantly higher costs if funds are raised from bank monetary transmission channel explicitly incorporated loans and other outside sources than if internal cash sources in the structure of the FRB/US model. In the real are used. Moreover, banks may restrict the amount lent to world, other channels may also help transmit monetary limit borrowers' exposure to default risk. According to this policy actions through the economy. Here in brief are view, when monetary policy is tight, not only do high real two such mechanisms that have been discussed in the interest rates deter spending, but as income and profits fall, economics literature: the real balance effect and the credit many households and firms see their savings and cash channel. reserves diminish. Given the high cost and limited availability of outside financing, households and firms curtail spend- The Real Balance Effect. The monetary base—the sum ing even more than the change in interest rates implies. of currency and bank reserves—makes up part of the pub- Although it is difficult to incorporate fully the effects of lic's financial wealth. Movements in the federal funds rate such credit market imperfections into a macroeconomic are accomplished through changes in the monetary base; for model like FRB/US, in two spending categories allowance example, an increase in the federal funds rate necessitates a is made for such effects. For a portion of households— decrease in the monetary base. Unlike debt between private estimated to account for about 10 percent of aggregate parties, for which a change in value affects only the distribu- consumption—consumer outlays move one-for-one with tion of real wealth and not its overall level, changes in the current income. Similarly, a portion of business investment monetary base do affect the level of private wealth and in equipment depends on current profits, capturing the relitherefore should, in theory, alter consumption spending. ance of many firms on internal funds. More generally, However, relative to movements in other forms of wealth, household spending is estimated to be more procyclical movements of the monetary base are very small in size, and than standard theory would imply, perhaps because of the thus, in reality, the real balance effect is likely to be quanti- effects of the credit channel. tatively unimportant. 1. For a recent review of this literature, see Ben S. Bernanke. "Credit in The Credit Channel. A number of economists have the Macroeconomy," Federal Reserve Bank of New York Quarterly Review argued that financial markets do not function as flawlessly (Spring 1993). pp. 50-70. For an empirical evaluation of different views of the monetary transmission channels, see Christina D. Romer and David H. as depicted in the standard framework embedded in Romer, "New Evidence on the Monetary Transmission Mechanism," Brookthe FRB/US model.' In particular, households and firms ings Papers on Economic Activity, vol. 1 (1990), pp. 149-213. 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4 Federal Reserve Bulletin • January 1999 public expects policymakers to respond to changes in icy operations, see box "How Does the Federal economic conditions in a systematic manner, raising Reserve Set the Funds Rate?") the funds rate when output is above potential and Similar asset-pricing formulas, based on the same inflation is high and lowering rates when output is principle of equalizing risk-adjusted expected rates below potential and inflation is low. In forming their of return across investments, link the value of corpoexpectations, households, firms, and investors use rate equities to the yield on bonds and expectations this expected policy response to guide their forecasts of future corporate earnings. In addition, arbitrage not only of the future course of interest rates but also across international markets implies that variations in of output, inflation, and other macroeconomic vari- the return on investments in the United States cause ables.1 (For additional information on monetary pol- changes in the foreign exchange value of the dollar. ]. Further information on the treatment of expectations in the The Influence of Financial Market Conditions FRB/US model can be found in Flint Brayton and others, "The Role on Spending of Expectations in the FRBrtJS Macroeconomic Model," Federal Reserve Bulletin, vol. 83 (April 1997), pp. 227^15. Changes in financial conditions, whether or not driven by shifts in the stance of monetary policy, are an important factor in the spending decisions of How Does the Federal Reserve households and firms. For example, swings in interest Set the Funds Rate? rates can greatly affect the cost of financing purchases of goods on credit. In the case of the stock Throughout this article, monetary policy actions are char- market, equity price movements have historically acterized as setting the nominal federal funds rate—the been a large component of changes in household interest rate that banks pay to each other for overnight wealth, which alter the desired level of consumer loans of reserves held in the Federal Reserve System. In spending. Finally, changes in the foreign exchange fact, the Federal Reserve does not directly control the value of the dollar alter the price of domestically federal funds rate; instead, the funds rate is a market rate determined by the supply and demand for reserves. The produced goods relative to the price of products Federal Reserve uses open market transactions—buying produced abroad and thereby influence the volume and selling Treasury securities—to expand or contract and direction of foreign trade. the supply of reserves. By choosing the right supply of These financial effects manifest themselves in reserves to the banking system, the Federal Reserve can FRBAJS in several ways. For example, the stock of effectively keep the funds rate near its desired level.1 capital equipment that firms hold is sensitive to An alternative representation of monetary policy pro- movements in the relative price of that stock, which cedures is one in which the Federal Reserve, instead of includes the cost of raising funds in both the bond choosing a level for the funds rate, strives to keep the and the equity markets. These financing costs are money supply near a target level. If the reserves-torelated to expected real yields on both types of money multiplier were stable, the money supply target assets—that is, the nominal yield that must be paid to would imply a particular level for the supply of reserves. If the demand for both money and reserves were also an investor for holding a bond or a corporate equity stable, the money supply target would be associated less the average rate of inflation expected to prevail with a particular level of the federal funds rate. There- over the holding period. Similarly, movements in real fore, targeting the money supply and targeting the fed- mortgage and bank loan rates influence the desired eral funds rate need not be fundamentally different level of the housing stock and consumer holdings of approaches. In practice, however, substantial disturbances motor vehicles and other durable goods. to money demand occurred as a result of financial deregu- We use the model to derive the quantitative imporlation during the early 1980s and financial innovation in tance of these financial effects for different categories the early 1990s. Current discussions of monetary policy of stocks and spending by computing the response of and Federal Reserve practice therefore focus on the direct setting of the federal funds rate.2 individual sectors to changes in interest rates, wealth, and the exchange rate in isolation from the rest of the economy (table 1). In particular, no allowance is 1. For a detailed account of open market operations, see Ann-Marie Meulendyke, US. Monetary Policy and Financial Markets (Federal made here for feedback effects—that is, for a simu- Reserve Bank of New York, 1989), and "Open Market Operations during lated change in sectoral spending to alter, in turn, 1997." Federal Reserve Bulletin, vol. 84 (July I99S). pp. 517-32. 2. See Joshua N. Feinman and Richard D. Porter. "The Continuing the original change in financial conditions. This type Weakness in M2," Federal Reserve Board Finance and Economics Dis- of calculation, typically dubbed partial-equilibrium cussion Series 1992-209 (September 1992). analysis, provides a direct measure of the quantita- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Aggregate Disturbances, Monetary Policy, and the Macroeconomy: The FRB/US Perspective 5 1. Partial-equilibrium response of capital stocks and investment outlays for all three categories is substanprivate spending to changes in financial conditions, tial in the first year, with spending rising further over with other factors constant the next year or two and even climbing above its Percent long-run percentage change in the case of consumer Response inlevelat end of year durable goods and housing. Such a hump-shaped Gttejutytf riaefc anil speeding t 2 3 IS pattern in the response of investment flows (as opposed to the corresponding stocks) is called the I perceniage point decrease in interest rales accelerator effect. It arises because gross investment spending is typically small in relation to the size of Capital slocks Consumer durable goods . .3 .7 the capital stock, implying that a given percentage Housing .1 .3 ,5 1.3 Producers' durable change in stocks, if it is to be achieved rapidly, equipment t.0 4.0 requires a much larger percentage movement in Private invtsnhem spending investment outlays. This phenomenon is particularly Consumer durable goods 1.7 1.7 1.3 Housing 4,8 6,8 5,7 1.3 important for housing, where the ratio of investment Producers' durable equipment1 IJ 3.1 3.8 4.0 outlays to the capital stock is so low that it would take an increase of approximately 25 percent in 2fi percent incrca.su in sKx-tt market wealth spending to raise the capital stock 1 percent within a Private spending year. Consumer durable goods .9 1.3 1,1 .6 Housing 2.4 35 2.9 .6 As noted previously, financial conditions should Consumer .spending on nondurable gnods and have a major influence on private spending through services .4 wealth effects because the desired level of consumer 6 percent depreciation of the dollar spending depends, in part, on the current value of net household assets. An important component of the Exports 1.7 4.8 5.5 5.7 Imports -1.1 -3.5 -3.8 -3.7 latter is corporate equity, whether held directly or 1. Includes effect of a i percentage point fall in the rate of return on equity. owned indirectly in the form of mutual fund shares and pension fund reserves. Such stock market wealth (which currently accounts for roughly one-third of tive importance of these parts of the transmission household net worth) is highly variable over time and mechanism. has a tendency to rise whenever real long-term inter- In the FRB/US model, a decrease in all interest est rates fall, because of arbitrage between the bond rates—with inflation, income, and other factors he]d and stock markets. According to the model's pricing constant—boosts the desired stocks of consumer formula for the stock market, a 1 percentage point durable goods, business equipment, and residential decrease in the real yield on bonds should be accomstructures by lowering the relative cost of investment panied by a 20 percent increase in the value of goods (top portion of table 1). Because of frictions corporate equity, all else being equal.3 Such a boost that make rapid installation of new capital costly, to wealth stimulates the various components of households and firms do not instantaneously adjust household spending by an appreciable amount, parcapital stocks to the new long-run desired levels. ticularly in the short run for investment expenditures Instead, adjustment is gradual, especially in the case (middle portion of table I).4 of producers' durable equipment and housing, for which only a fraction of the long-run rise in the capital stock is in place at the end of three years.2 3. In equilibrium, the dividend-price ratio for equities is approxi- The gradual adjustment of stocks does not imply mately equal to r + 9 - g, where ;• is the expected yield on bonds, 8 is that associated investment spending—that is, expen- a premium paid to investors to compensate them for the greater riskiness of equity, and g is the expected growth rate of dividends. ditures on new equipment and structures intended to Because the historical mean of r + 9 - g is about 5, a I percentage cover depreciation of the existing stocks as well as point increase in the yield on bonds reduces equity prices on average any desired net increments to stocks—is slow to by one-fifth, or 20 percent, all else being equal. Although in theory the sensitivity of stock prices to a change in interest rates should shift as respond to a sustained change in interest rates. In /•, 9, and g move over time, this nonlinear effect is ignored in the fact, the opposite is true: The percentage increase in FRB/US model. 4. Wealth effects such as these are often described in terms of how much an additional dollar of wealth increases consumer spending. In 2. In FRB/US, movements in interest rates have no direct effect on the FRB/US model, an extra dollar of stock market wealth increases two other categories of investment—nonresidential structures and spending on average about y/i cents in the long run. However, inventories. Although such investment should, in theory, depend on because the elasticity of spending with respect to wealth is constant in interest rates, the empirical evidence for such interest sensitivity is the model, at the present high valuation of the stock market the weak. estimated wealth effect is closer to 2 cents. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

6 Federal Reserve Bulletin U January 1999 The final major influence of financial markets on 2. Partial-equilibrium response of capital stocks and spending occurs through the market for foreign private spending to a 1 percent increase in the level of aggregate income, sales, output, and wealth, exchange. As with stock prices, the exchange value with other factors constant of the dollar with respect to foreign currencies fluc- Percent tuates widely over time. However, arbitrage across international money and bond markets causes move- Response in level at end of year Category of stock ments in the exchange rate to be correlated with and spending 3 15 changes in U.S. interest rates. A version of this relationship, called the uncovered interest parity condi- Capital stocks Consumer durable goods 2 .9 1.0 tion, implies that a 1 percentage point fall in real Housing II .4 1.0 Producers' durable equipment .. .1 A .8 1.0 domestic long-term interest rates should produce an Inventories I.I 1.0 1.0 immediate 6 percent depreciation of the dollar, all Private investment spending else being equal.5 In FRB/US, such a depreciation of Consumer durable goods 1.5 2.0 1.7 1.0 Housing 3.9 5.7 4.7 1.0 the dollar boosts the demand for U.S. exports almost Producers' durable equipment 1.3 2.0 1.8 1.0 Nonresidential structures I.I 1.4 1.3 1.0 6 percent by lowering the price of American goods Inventories' .8 .3 -.1 .0 expressed in a weighted average of foreign currencies Other private spending (bottom portion of table 1). In the same manner, Consumer nondurable goods and services .4 .7 1.0 depreciation of the dollar increases the domestic price Imports 1.9 1.5 1.3 1.0 of foreign-produced goods, decreasing the volume of I. Change in four-quarter growth rale of inventory stocks. imports almost 4 percent in the long run. In both cases, the adjustment of trade volumes is not instantaprices, interest rates, and other factors held constant. neous but is spread over two or three years. Because wealth equals the present value of expected future dividends, interest, and other forms of capital income, the net worth of households has also been The Influence of Changes in Aggregate Income increased 1 percent. In these simulations, the income and Sales on Spending shift is permanent and is assumed to be immediately recognized as such by firms and households. Changes in sectoral spending, whether caused by The table reveals an important feature of the behavfinancial factors or other forces, alter the level of ior of households and firms—the speed at which the aggregate sales, output, and income. Changes in these public adjusts its spending to a change in income and economywide factors, in turn, further influence the sales. For example, in the model the level of conspending of households and firms beyond the finansumer spending depends on both income and wealth. cial effects just described. Such general-equilibrium In response to a rise in income and wealth of 1 pereffects are incorporated into simulations of the full cent, outlays on consumer nondurable goods and FRB/US model. However, as in the analysis of the services would be expected to rise proportionally direct effects on spending of changes in financial in the absence of any frictions slowing adjustment. conditions, examining this feedback portion of However, because such impediments to rapid adjustthe monetary transmission mechanism in a partialment are estimated to be significant, this category of equilibrium framework is instructive. consumer spending rises to its new long-run level Table 2 summarizes the response of different cateonly after three or four years.6 gories of private spending to a 1 percent increase in Households also behave in a gradual manner when the level of aggregate income, output, and sales, with adjusting their holdings of durable goods and housing, as do firms when investing in productive capital. But unlike spending on nondurable goods and services, gradual adjustment in these areas manifests 5. Ignoring risk considerations, ihe uncovered interest parity condition implies that, if the expected yield on a dollar-denominated bond is higher than the yield on a bond denominated in a foreign currency, investors will hold the foreign bond only if the dollar is expected to 6. Households and firms are much less sensitive to transitory depreciate by enough to equate the two yields when both are measured changes in income and sales; for example, the first-year responses in a common currency. For this reason, when domestic interest rates shown in table 2 would be roughly halved if the income shift were rise relative to foreign rates, the dollar immediately appreciates to only temporary. In part, this response results from the life-cycle view ensure the requisite amount of future depreciation. Under the assump- of consumer choice built into the model, according to which a tempotion that the duration of the average bond is about six years, a rary blip in household income yields only a small change in the value 1 percentage point decrease in the spread between domestic and of lifetime resources. But households and firms are also less willing to foreign interest rates should therefore yield a 6 percent depreciation of respond to changes in income and interest rates viewed as temporary the dollar. because of habit persistence and adjustment costs. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Aggregate Disturbances, Monetary Policy, and the Macroeconomy: The FRB/US Perspective 1 itself in the response of capital stocks to the perma- Partial equilibrium effect on inflation of a reduction nent rise in aggregate income and sales: As in the of 1 percentage point in the unemployment rate previous example of a change in financial conditions, Percentage point change investment spending responds quickly. Because private investment spending is a major component of Sustained reduction aggregate demand, composing almost one-quarter of nominal gross domestic product (GDP), these accelerator effects have important implications for the dynamic response of the overall economy to disturbances.7 Two-year reduction The Influence of Changes in Output on Inflation n il II I I I I I I I M I II I I 8 The final step in the FRB/US transmission mechanism concerns the behavior of inflation. Because of predicts that, all else being equal, if the unemploylabor contracts and other frictions, wages and prices ment rate is held 1 percentage point below its equilibare slow to adjust to changes in economic conditions. rium level on a sustained basis, inflation should climb Such "sticky-price" behavior, which is readily appar- steadily about 0.4 percentage point a year, provided ent in the historical data, is incorporated into the that the public's expectations for long-run inflation model by making the current rate of aggregate price rise gradually in response to the actual pickup in inflation depend on five factors: (1) the degree to inflation. Alternatively, if the decline in unemploywhich the markup of prices over unit labor and ment is temporary, lasting only two years, then the energy costs is out of line with its historical mean; long-term change in the rate of inflation is limited, (2) the recent past rate of price inflation; (3) the rate settling in at about 0.8 percentage point. of growth of unit labor and energy costs expected to These partial-equilibrium simulation results have prevail in the future; (4) the current and expected two important implications for monetary policy in the degree of slack in labor and product markets; and context of FRB/US. The first concerns the absence of (5) movements in the relative prices of food, energy, a long-run tradeoff between the level of unemployand imports.8 ment and that of inflation. Because inflation stabi- In the model, inflation is predicted to decline as lizes only if unemployment returns to its equiliblong as labor and capital are underutilized and to rise rium level—a property known as the natural rate whenever resource utilization is above average. Dia- hypothesis—long-run economic stability requires real gram 1 illustrates this behavior. The FRB/US model interest rates and other financial conditions to be consistent with a balance between aggregate spending and the productive potential of the economy. For 7. Business inventory decisions tend to augment these accelerator this balance to be achieved, in the long run the effects because the desired stock of inventories is proportional to the level of aggregate sales. This relation implies that a permanent jump nominal value of the federal funds rate must be set to in spending leads to a temporary surge in stockpiling lhat quickly reflect both the prevailing rate of inflation and the fades. Another area in which spending responds in a hump-shaped underlying determinants of spending and production. pattern is imports, which rise almost 2 percent in the first year after a sustained jump in GDP but then fall back to only 1 percent. In contrast The second implication for policy concerns the to investment spending, the response of imports to shifts in domestic cost of altering the rate of inflation. If the prevailing activity acts as a stabilizing force for the U.S. economy by diverting a rate of inflation has risen because of past episodes of portion of any increase in domestic demand to foreign firms. This stabilizing property of import demand is even greater in many other over-utilization of resources or other disturbances models of foreign trade because they do not impose the equilibrium directly boosting inflation, then a return to the origicondition of stable long-run import shares of GDP but allow the long-run income elasticity of imports to be 2 or higher. nal inflation rate requires a period of tight monetary 8. Aggregate wages are determined in a similar manner, in that policy—that is, for a time, the level of the real funds wage inflation depends primarily on past wage inflation, expected rate must be elevated above its long-run equilibrium future growth in consumer prices and labor productivity, and aggrelevel, causing the unemployment rate to be tempogate resource utilization. Wage inflation is also influenced by changes in the minimum wage and payroll taxes. Taking the wage and price rarily above its equilibrium level. If inflation has equations together, the FRB/US specification of the inflation process fallen, then the opposite holds: Restoration of the is in certain respects similar to the traditional "Phillips curve" model; previous growth rate of prices allows a period of low however, unlike a Phillips curve, it is derived from optimizing behavior and explicitly accounts for the effects of expectations. real interest rates and above-average employment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

8 Federal Reserve Bulletin LJ January 1999 Full-Model Effects of an Easing 3. Monetary transmission mechanism in the FRB/US in Monetary Policy model: Full-model simulated effect of a 1 percentage point fall in the federal funds rate So far the analysis of the FRB/US transmission Percent mechanism has dealt with each of its components Response at end of year in isolation from one another. Now we can put Item 1 2 the pieces together and show how the transmission mechanism functions in its entirety by examining the Change from baseline way a drop in the federal funds rate, acting through Financial markets sector-specific responses to induced changes in finan- Yield on 10-year Treasury bonds -.3 -JS Slock market prices 8.8 12.7 cial conditions and income, works to influence aggre- Exchange rale value of the dollar -2.2 -4.9 gate output, unemployment, and inflation. Aggregate activity Table 3 summarizes the simulated response GDP (chain-weighted 1992 dollars) .6 1.7 Unemployment rate -.2 -.7 (expressed relative to baseline) of the full FRB/US Consumer price inflation rate .2 .6 model to a policy action that lowers the federal funds Portion of total response rate by I percentage point on a sustained basis. In this Decomposition of GDP response into simulation, the public initially interprets the drop in expenditure allegories' the federal funds rate as a temporary action that will Consumer spending, durable goods (8.3) . 24.0 18.6 Consumer spending, other (59.4) 28.0 26.2 be reversed relatively quickly. Thus, their expecta- Business fixed investment (10.6) 13.0 18.5 Residential investment (4.0) 26.2 24.0 tions for the future are little changed at first. As time Inventory investment (0.8) 16.4 10.7 Exports (11.9) 7.1 13.0 passes, however, the public interprets the easier Imports (-13.1) -17.5 -14.8 stance as a signal that the long-run objectives of Government (17.9) 2.4 3.4 monetary policy have changed and that policymakers Decomposition of GDP response into transmission channels seek to raise the level of inflation permanently. For Cost of borrowing 26.9 36.4 this reason, beliefs about the future are revised more Slock market 16.0 20.7 Exchange rate value of the dollar 6.9 17.3 and more as the reduction in the funds rate is Anticipated nonlinancial responses 50.2 25.7 sustained. Decomiwsition of inflation response into transmission channels The evolving nature of expectations explains why Resource utilization 10.6 33,1 the 1 percentage point decrease in the funds rate Exchange rate value of the dollar 24.8 22.4 Anticipated nonlinancial responses 64.6 44.5 initially leads to only a small drop in long-term I. 1997 nominal shares of GDP in parentheses. interest rates (upper portion of table 3). As investors come to believe that the policy easing represents a long-term shift in policy objectives, they gradually increase in the level of real GDP. This increase is revise down their estimate of the average level of initially modest, but as adjustment proceeds and short-term interest rates likely to prevail over the next accelerator effects kick in, the response of aggregate ten years. As a result, bond yields are V2 percentage spending quickens, and by the end of two years, real point below baseline by the end of two years.9 Arbi- GDP has risen about P/4 percent above its baseline trage considerations cause this fall in bond yields to level. As suggested by the earlier discussion of finanaffect other asset markets and to lead both to higher cial influences on spending, investment spending stock prices and to a depreciation of the dollar.10 accounts for a disproportionate share of the increase The improvement in financial conditions stim- in GDP (table 3, lower portion). For example, at the ulates activity in various sectors and leads to an end of two years the change in residential investment accounts for about one-quarter of the increase in output even though it constitutes only 4 percent of 9. The decline in bond yields is also limited by (he public's aggregate spending, and the portions of the GDP expectation that nominal short-term interest rates, after falling for an response attributable to outlays on consumer durable extended time, will eventually recover and then increase by the goods and business fixed investment are roughly amount of the revision to the expected long-run rate of inflation. 10. In this simulation and throughout most of the article, it is twice their expenditure shares. Inventory investment assumed that the public forms its expectations about the future course also plays a disproportionate role in the rise of aggreol the economy using a small-scale forecasting system that includes gate demand. output, inflation, the federal funds rale, an estimate of the economy's long-run equilibrium real short-term interest rate, and an estimate of Another way to decompose the GDP response is the long-run trend level of inflation sought by policymakers. This to break it down into its primary transmission particular characterization of expectations is discussed in Brayton and others, "The Role of Expectations in the FRB/US Macroeconomic channels—that is, the separate effects on spending Model.' of changes in the cost of borrowing, stock market Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Aggregate Disturbances, Monetary Policy, and the Macweconomy: The FRB/US Perspective 9 wealth, and the exchange rate discussed earlier, as looks at the monetary mechanism in a slightly differwell as a fourth channel, anticipated nonfinancial ent way by examining monetary policy responses to responses. In the model simulation, changes in the disturbances originating from elsewhere in the econfunds rate exert a direct influence on expectations of omy. These experiments show that the way in which future movements in output and inflation. In essence, monetary policy reacts to shocks, together with the this influence can be thought of as an anticipation of nature of the shock itself, influences the way in which the effects of the other three channels on aggregate the economy evolves over time. activity that have yet to materialize. For this reason, Simple macroeconometric models have only a few the importance of this anticipatory channel fades as possible types of disturbances, often just generic the direct effects of the other channels emerge in full shifts in aggregate demand and supply. But in a larger and expectations of future conditions are realized in model like FRB/US, as well as in the real world, the actual developments. kinds of disturbances are numerous (see box "On But the anticipations channel is powerful in the Defining and Measuring Shocks"). In this section, short run, and it accounts for about half of the total the focus is on the implications for policy of two response of aggregate output in the first year (lower general classes of disturbances: shocks whose priportion of table 3). By contrast, only a quarter of the mary initial influence is on spending ("demand" first-year GDP response is directly attributable to disturbances) and shocks whose initial effect is current and past declines in the cost of borrowing; mainly on prices or production ("supply" disturwealth effects and dollar depreciation account for bances). All shocks differ, and their classification is even smaller shares. By the second year, the impor- not always straightforward. There are, however, some tance of anticipated changes in aggregate income and broad similarities of disturbances within a class and other variables that have not yet materialized is con- important differences in the policy implications of siderably diminished. Commensurately, that of the each type of shock. three standard channels is raised—particularly the exchange rate channel, where adjustment of trade flows to dollar depreciation is especially drawn out. A Shift in the Equity Premium As with the GDP response, the movement in aggregate price inflation can also be decomposed into its As just noted, demand shocks include any disturprimary determinants, including a channel that mea- bance directly affecting people's willingness to sures the anticipated effect of the policy easing on spend. In FRB/US, shifts in foreign demand, perexpected changes in the future growth rate of trend sonal income taxes, and asset prices are examples of unit production costs that have yet to emerge. Such demand disturbances. In regard to the last example, anticipation effects—related in part to the public's movements in stock market wealth that are not evolving view of the long-run rate of inflation sought explained by changes in interest rates and other funby policymakers—are extremely important in the damentals are frequent occurrences. These may occur short run and account for almost half of the two-year because people suddenly reassess the riskiness of change in actual inflation. However, their effect by the stock market and demand a higher or a lower the end of the third year—not shown in table 3—is rate of return for holding equities relative to bonds. zero. The contribution of current and past changes in This reassessment is called a change in the equity resource utilization is also considerable, as is that of premium. exchange rate depreciation. The latter arises because For illustrative purposes, we use the FRB/US a large portion of the induced decline in the foreign model to simulate a permanent rise in the equity exchange value of the dollar is passed through into premium that is sufficient to bring about an initial the dollar-denominated price of imports, which in 20 percent decline in stock market wealth. Many turn directly boosts consumer prices. policy responses to this disturbance could be considered; results for three of them, expressed as changes from baseline, are summarized in diagrams 2 and 3. SOME MACROECONOMIC CONSEQUENCES Policy cannot completely offset the consequences OF AGGREGATE DISTURBANCES of the rise in the equity premium for stock prices; so regardless of the policy response, the initial fall in The preceding discussion showed how policy actions real stock-market wealth is essentially the same (diaare transmitted throughout the economy, affecting gram 2, upper-left panel). For consumers, this develreal variables, such as consumption and output, and opment represents a significant decline in the wealth nominal variables, such as inflation. This section that can be allocated to fund current and future expen- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

10 Federal Reserve Bulletin • January 1999 ditures. For firms, the higher premium implies an other frictions discussed earlier (diagram 3, top increase in the cost of financing capital outlays panels). using equity. The FRB/US model predicts that, in Falling demand and the associated rise in unemthe absence of adjustment costs, consumers would ployment put downward pressure on inflation. Monerespond to this change in financial conditions by tary policy can reinforce this effect on output and reducing the level of consumption approximately inflation if it fails to respond to the change in the 0.6 percent and firms would cut equipment invest- macroeconomic environment. Because the rise in the ment a bit more than 0.8 percent per year. (That is, equity premium is permanent, it leads to a sustained the frictionless responses to the rise in the equity loss in wealth and a permanent increase in the saving premium would be identical to the fifteen-year rate. As a result, permanently lower real interest rates partial-equilibrium changes shown in table 1.) How- are necessary after the shock to restore equilibrium. ever, neither category of expenditures falls by this Thus, if the nominal federal funds rate were kept amount at first because of the adjustment costs and constant, the initial value of the real federal funds On Defining and Measuring Shocks In the context of a model, a disturbance is any factor debate.2 Such uncertainty over the duration of disturbances affecting spending and other variables that is not itself complicates monetary policy because of the significant lag determined by the equations of the model—that is, any between changes in the federal funds rate and the response factor exogenous to the system. These exogenous factors of aggregate output, unemployment, and inflation. Thus, fall into two categories. The first includes all explanatory policymakers must often act before they have complete variables determined outside macroeconomic models, such information; for example, in the case of an unexplained as population growth. The second category includes the movement in equity prices, they must act without knowing errors—the difference between the model's predictions and how long the bull or bear market will last. actual historical outcomes—made by the model's equa- Finally, the definition and measurement of shocks is tions. This definition of shocks makes it clear that the influenced by the theoretical approach used to construct the decomposition of movements in economic data into the economic model. New Keynesian models such as FRB/US portion explained by a model's structure and the portion allow for direct disturbances to many sectors of the econattributable to autonomous influences depends on the model omy without inquiring too closely into the exact nature of used in the analysis. these disturbances.3 By contrast, another class of models— For example, in the FRB/US model, movements in the known as dynamic stochastic general equilibrium, or DSGE, relative price of oil are treated as autonomous and not models—are based on the view that the economy is subject affected by changes in energy use and production. However, to only a small number of fundamental disturbances to a model of greater complexity might include equations for consumer tastes and production technology.4 Such models the world demand and supply of petroleum and thus would place more importance than do New Keynesian models attribute at least some changes in the price of oil to factors on the role of productivity shocks in explaining economic internal to the model, rather than classifying them as distur- fluctuations. These models also interpret historical bances. Similarly, FRB/US and other models with a fully responses of output and employment to disturbances as articulated supply side distinguish between exogenous people's optimal adjustments, rather than as a failure of changes in prices and autonomous disturbances to produc- markets to clear. Accordingly, DSGE models assign a much tivity. However, in smaller models that lack an aggregate smaller role to monetary policy in mitigating the effects of production function, such as the IS-LM-Phillips-curve sys- macroeconomic disturbances than do New Keynesian modtem of many textbooks, the wage-price block is often els like FRB/US. simply called a short-run supply curve, and price disturbances are therefore frequently referred to as supply 2. See Charles R. Nelson and Charles I. Plosser, "Trends and Random shocks.1 Walks in Macroeconomic Time Series: Some Evidence and Implications." Journatof Monetary Economics, vol. 10 (September 1982), pp. 139-62, and The measurement of shocks is also influenced by empiri- Pierre Perron, "The Great Crash, the Oil Price Shock, and the Unit Root cal methodology, as illustrated by research in the early Hypothesis," Ecanometrica. vol. 57 (November 1989). pp. 1361-401, for 1980s that suggested that permanent shocks to supply are examples of research into the permanence of supply shocks. 3. One consequence of this approach is that a real-world event may important in explaining movements in real GDP. The relamanifest itself as a set of simultaneous disturbances to different portions of tive importance and the persistence of supply and demand the model. For example, the recent Asian financial crisis appears as an shocks remain subjects of considerable research and autonomous decline in foreign output, a reduction in relative oil prices, an unexpected appreciation of the dollar, and a fall in the premium incorporated into U.S. bond yields. I. See Laurence Ball and N. Gregory Mankiw, "Relative-Price Changes 4. For an introduction to DSGE models, see Edward Prescott, "Theory as Aggregate Supply Shocks." Quarterly Journal of Economics, vol. 110 ahead of Business Cycle Measurement," Federal Reserve Bank of Minneapo- (February 1995). pp. 161-93. lis Quarterly Review, vol. 10 (Fall 1986). pp. 9-21. 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Aggregate Disturbances, Monetary Policy, and the Macroeconomy: The FRB/US Perspective 1 ] rate would be too high (diagram 2, lower-right panel). Thus, fixing the real rate is also destabilizing in the The high real rate would put additional downward long run. Therefore, in response to a demand shock, pressure on aggregate spending and thereby raise and in the absence of some additional countervailing unemployment and push down inflation (diagram 2, disturbance, the real rate must be moved in the same middle-left and middle-right panels respectively). As direction as the movement in demand resulting from a result, the real funds rate would rise further. If the equity shock. allowed to persist, this policy would result in a con- One policy response that fits this description is tinuing downward spiral of falling output and infla- shown by the curve for stabilizing policy in the tion, driven by ever-rising real interest rates. lower-left panel of diagram 2. The reduction in the An alternative policy is to fix the real interest rate funds rate shown is small but long lasting and so is at its initial level. The lower-left panel of diagram 2 sufficient for bringing inflation and unemployment shows a substantial decline in the nominal funds rate back to their previous levels. The mechanism through associated with this policy (curve for fixed real funds which this policy works is that described previously rate). As already noted, however, a recovery in aggre- in the full-model simulation of the effects of an gate demand requires that the real interest rate fall. easing in policy: According to the FRB/US model, a 2. A permanent increase in the equity premium (deviation from baseline) Percentage point change Percentage point change Real slock market wealth Real GDP — 5.0 — 10.0 15.0 Fixed nominal funds rate -I 1 I I I 1 I 1 L. Unemployment rate Consumer inflation (four-quarter average) — 0.4 — 0.2 — r— 0.4 I I i I j L i I i i i I Nominal federal funds rate Real federal funds; rate — 0.2 — 0.4 J U j L j L I I I I I I 1 I J [_ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

12 Federal Reserve Bulletin • January 1999 3. A permanent increase in the equity premium and the components of spending (deviation from baseline) Percentage point change Percentage point change Camsamer goods and services Producers' durable goads i i I i i i reduction in the federal funds rate today lowers real and a slight increase in unemployment are borne by interest rates today and generates expectations of the economy. The increase in inflation is attributable lower rates and of higher output in the future. These to exchange-rate pass-through, for the fall in the expectations, in turn, elicit higher domestic spending dollar also leads to higher prices of imported conby raising the target level of consumption and invest- sumer goods, which are then passed through into a ment spending. These effects are supplemented by an higher rate of consumer price inflation. For the most expectations-driven decrease in corporate bond rates, part, this ability to offset simultaneously the output which helps the stock market recover some of its and the inflation consequences of demand disturinitial losses." Finally, the reduction in domestic bances is a feature of the FRB/US model, and of all interest rates puts downward pressure on the models of its class: Stabilizing both output and inflaexchange value of the U.S. dollar, improving interna- tion are complementary objectives in the presence of tional competitiveness and strengthening the trade a shift in aggregate demand. balance (diagram 3, bottom panels). As diagram 2 shows, there is a monetary policy The stabilizing policy promptly returns both infla- setting associated with a path for the real interest rate tion and resource utilization close to their original that stabilizes inflation and unemployment. However, levels. Only a brief, small acceleration in inflation under this policy, consumer expenditures are significantly lower throughout the period shown in I I. The value of stock-market wealth recovers somewhat in the the upper-left panel of diagram 3 and for the period quarter immediately following the shift in the equity premium because beyond. Thus, monetary policy cannot fully replace of expectations on the part of bond-market participants that the initial loss of wealth will reduce the equilibrium real interest rate. Equity the loss of wealth and consumption caused by the prices rise in response to this expectation because of asset arbitrage. rise in the equity premium. This result illustrates Beyond the first quarter or two, expected real corporate bond rates fall the general principle that in the long run policy can because of expectations of lower short-term nominal interest rates in the future and sluggish adjustment of price inflation. This fall permits only restore normal levels of resource utilization the modest recovery in stock market wealth to persist. However, when and determine the prevailing rate of inflation; it the nominal federal funds rate is held fixed, once expectations of cannot undo all the effects of permanent shifts in declines in the federal funds rate go unrealized, stock market wealth begins to fall once again. fundamentals. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Aggregate Disturbances, Monetary Policy, and the Macroeconomy: The FRB/US Perspective 13 An Acceleration in Wage Compensation consider an autonomous temporary acceleration in wage inflation without any accompanying shocks to In contrast to demand shocks, some macroeconomic aggregate demand, labor supply, or the like. For this disturbances affect prices directly and only afterward experiment, the shock raises the four-quarter wage have an influence on real quantities. Shocks in this inflation rate by 1 percentage point after a year. category include autonomous movements in the Having established that there are circumstances prices of food and energy. Such shocks, together with under which pegging either nominal or real interest direct disruptions to the supply of labor or other rates leads to macroeconomic instability, we restrict aspects of production, present policymakers with our attention to policies that stabilize either unemshort-term tradeoffs not encountered in the case of ployment or inflation. Simulation results are shown demand shocks. in diagram 4. One typical example of a price shock is an unan- As expected, the wage-growth disturbance acts ticipated change in wage compensation. This change directly and immediately on wages and prices and may occur for a number of reasons: In the context of then on measures of real activity. And as before, a macroeconomic model, the precise origin of shocks monetary policy cannot realistically offset the initial is not always clear. For present purposes it suffices to effects of the shock: Wage inflation rises by essen- 4. Transitory increase in wage compensation (deviation from baseline) Percentage point change Percentage point change Nominal wage growth Consumer inflation (four-quarter average) (four-quarter average) Inflation stabilization 1 I i t i I i i i I i i i 1 i i i I i i i l i i i 1 i i i I t i i I \ , i Real GDP Unemployment rate — 0.6 — 0.4 — 0.5 — 1.0 I i i i I i i i 1 i i i I i i i I i i i i i l i i i I : i l 1 Nominal federal funds rate Real federal funds rate — 1.0 — —•• 1.0 — 0.5 — — 0.5 — 0.5 — — 0.5 I I I I I I ! i i I I i | I I I t I I 1 F I Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

14 Federal Reserve Bulletin • January 1999 tially the same amount over the first year of the A Shift in the Level of Productivity scenario, regardless of the policy responses considered (diagram 4, upper-left panel). All else being Besides being subject to shifts in relative prices, the equal, the acceleration in wages squeezes the profit economy is affected by disturbances to the availabilmargins of firms, inducing a wage-price spiral as ity or efficiency of inputs to the production process. firms push up prices in an attempt to re-establish their Changes in labor supply, crop failures, and technoprofit margins. A policy of keeping the inflation rate logical innovations are common examples of such close to its original level must therefore raise the shocks to supply. nominal (and real) federal funds rate early and by A supply disturbance that economists often study a substantial amount (the curves for inflation sta- is a shift in total factor productivity—that is, an bilization, bottom panels). This policy tightening unanticipated change in the volume of output that can results in an extended period of higher unemploy- be produced with a given level of productive inputs. ment (middle-right panel). Over time, expectations of Some implications of a temporary slowdown in profuture price and wage inflation are brought into line ductivity growth are illustrated in diagram 5. In the with policy objectives, and real variables return to simulation, the slowdown gradually reduces the level equilibrium levels. of potential output 1 percent over two years, after The depiction of the economy when policy at- which productivity growth returns to normal but tempts to stabilize unemployment contrasts sharply the level of potential output remains permanently with the inflation-stabilization case. Because unem- lower (upper-right panel). One reason for such ployment is slow to respond to falling profit margins, a decline in productivity might be that research under this strategy the federal funds rate initially and development expenditures temporarily yield an remains unchanged (bottom-left panel). The shock abnormally low flow of technical innovations. therefore propagates into higher and longer-lasting Two policy responses to such an event are considinflation than is the case when policy reacts promptly ered. In one, policy acts to bring inflation promptly to head off an emerging wage-price spiral (top- back to its original level, and in the other, policy right panel). Under this policy, only when growing stabilizes inflation more gradually. In either case, demand pressure begins to show up in employ- policymakers and the public are assumed to underment do nominal interest rates rise, and then only stand that the reduction in the level of productivity is enough to maintain unemployment near its baseline permanent. level (middle-right panel). By this time, the experi- The effect of this shock on real GDP can be split ence of higher inflation has become entrenched in into two parts. First, the level of potential output falls expectations. by 1 percent, so that if resource utilization does not Beyond the end of the period shown, price and change, the level of real GDP must fall proportionwage inflation do not return to their original levels: ally. Second, the other dynamic aspects of adjusting Without an active effort by the monetary authority spending behavior cause the initial decline in outlays to contain the actual and expected growth of prices to be greater than that of potential output, with the at the original low rates, inflation tends to drift with result that unemployment rises. whatever relative-price disturbances hit the economy. On the price side, the fall in productivity reduces This result is a direct consequence of the natural rate the equilibrium real wage by 1 percent. Rehypothesis embedded in the FRB/US and most other establishment of labor market equilibrium requires models. For all such models, full employment is that the real wage fall to this new equilibrium level; consistent with any constant inflation rate, and for the monetary policy influences whether the reduction in economy to arrive at a particular inflation rate, the the real wage occurs through a period of low wage monetary authority must take appropriate action— growth, of higher price inflation, or a combination of that is, it must establish a nominal anchor.12 both. For monetary policy to keep price inflation close to its original level (curve for rapid stabilization of inflation, middle-right panel), the nominal federal 12. An extensive literature compares the virtues of possible nomi- funds rate needs to rise immediately and by a substannal anchors, which include the price level, the nominal exchange rate, tial amount (lower-left panel). Raising the funds rate commodity prices, nominal income, and the inflation rate. For a in this way counteracts the expectation that some of general discussion of this issue, see Bennett T. McCallum "Issues in the Design of Monetary Policy Rules" in John B. Taylor and Michael the adjustment in real wages will take place through Woodford. eds., Handbook of Macroeconomics (North-Holland, forth- higher prices. coming). A readable guide to inflation targeting is Ben S. Bernanke With this policy response, the upward pressure and others, Inflation Targeting: Lessons from the International Experience (Princeton University Press, 1999). on prices is short-lived. The decline in productivity Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Aggregate Disturbances, Monetary Policy, and the Macroeconomy: The FRB/US Perspective 15 5. Temporary reduction in productivity growth (deviation from baseline) Percentage point change Penwilagc point change Real GDP Potential output Gradual stabilization of inflation Rapid stabilization of inflation Wage inflation Consumer inflation (four-quarter average) (four-quarter average) — 0.05 1 L I I I I t 1 1 i 1 _ i 1 .1 I I i I I 1 1 U-J l i lt i_J L_J I I. ,1. .1 ..I. Nominal federal funds rate Real federal funds tale — 1.0 — 1.0 — 0.5 — 0.5 — 1.0 l I I I I I I i II reduces the desired capital stock, bringing down curves for gradual stabilization show another, more investment. Similarly, the falling real wage reduces gradual response to the shift in potential output. The labor income, bringing down consumption. The early tightening of policy in this case is designed to accelerator mechanisms discussed in the previous be one-half the size of the tightening just discussed, section tend to make producers' durable equipment as measured by the nominal funds rate. This policy and consumption expenditures overshoot their new, results in more of the real wage adjustment taking lower long-run levels. Accordingly, significant excess place through prices, rather than through nominal supply emerges by the second year. wages. It also results in less short-run fluctuation in The initial tightening in policy thus gives way aggregate spending (upper-left panel). Finally, this shortly thereafter to substantial easing to support less-aggressive policy results in less variability of the aggregate demand and contain emerging expectations nominal federal funds rate throughout the period. of disinflation. In the end, the policy succeeds in These alternative policies show that, in the context achieving tight control of inflation but at the cost of of the FRB/US model, policy that seeks to stabilize sizable swings in output around potential. inflation must establish a nominal anchor in the long This policy response is just one of many that are run, but doing so still leaves considerable latitude for consistent with keeping the inflation rate from drift- different short-run responses to disturbances. In the ing over long periods of time. In the diagram, the case of supply shocks (broadly defined to include Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

16 Federal Reserve Bulletin l_ January 1999 price disturbances), policies that work aggressively as they occur. For this reason, it is useful to consider against movements in inflation do so at the expense generalized policy responses that have the property of greater variability in output and interest rates. In of gradually stabilizing output and inflation in the contrast, policies that are less strict about short-run face of a wide range of economic disturbances. control of inflation result in lower variability of out- A simple example of such a policy is the Taylor put and interest rates by accepting larger fluctuations rule.13 According to the rule, the nominal federal of inflation. Thus, although there is no long-run funds rate is raised by 150 basis points for each tradeoff between the level of employment and that percentage point increase in the rate of inflation. In of inflation, supply shocks in the FRB/US model do addition, the rule also increases the federal funds rate present policymakers with tradeoffs in variability by 50 basis points for each percentage point that real among output, inflation, and interest rates. GDP exceeds its potential level (a measure usually referred to as the output gap). In the context of the FRB/US model, the rule's procedure for setting the Lconomic Disturbances and General Policy federal funds rate stabilizes the economy for a wide Responses range of macroeconomic disturbances. As shown in the right-hand portion of table 4, the Taylor rule does The disturbances discussed above are merely three not ensure that complete stabilization of output and among the many whose economic effects can be inflation will be achieved in a period as short as three simulated using the FRB/US model. The macroeco- years. Relative to a policy of holding the real funds nomic consequences of a selection of these shocks, rate constant, however, the rule does successfully including the three just presented, are summarized in prevent longer-term macroeconomic instability: For table 4. Some of these disturbances—a fall in stock all the disturbances, both unemployment and inflation market wealth, a rise in foreign output, and a change are within 0.1 percentage point of their baseline in fiscal policy—can be classified as demand shocks. values after ten years.14 Others—higher wage inflation, a fall in productivity, an increase in oil prices, and a hike in the minimum wage—are examples of supply disturbances. Still MONETARY POLICY AND AVERAGE others—a depreciation of the dollar and a decline in MA CR0EC0N0M1C PERFORM A NCE the relative price of capital goods—combine features of both types of shocks in that they directly affect The simulations of various disturbances discussed both spending and production (or prices). above are examples of the ways in which monetary To simplify the comparison of results across the policy actions affect movements in prices and unemdifferent disturbances, the effects of each disturbance ployment after disturbances to aggregate demand are first simulated holding the real federal funds rate and supply. As was noted, disturbances to aggregate constant (table 4, left-hand portion). Comparing demand typically do not present policymakers with a results for the various disturbances reveals a range of tradeoff between the objective of price stability and macroeconomic outcomes, indicating that each shock that of employment stability: Adjusting the stance of has its unique influence on the economy. The results monetary policy to bring the level of economic activalso provide guidance on the direction of the change ity closer to its potential simultaneously acts to damp in the federal funds rate that would be needed to any upward or downward pressure on inflation. By stabilize employment or inflation or both in the contrast, production and price disturbances do present model, as well as a rough sense of which shocks policymakers with a tradeoff between the variability would require greater or smaller shifts in the stance of output and that of inflation, though not between of policy. the levels: In FRB/US, there is no long-run tradeoff In theory, individualized policy responses could be crafted to accompany each specific disturbance, with the goal of delivering particular macroeconomic out- 13. The Taylor rule was introduced "lo preserve the concept of... comes, subject to the limitation that policy cannot a polity nile in an environment where it is practically impossible to eliminate all short-run fluctuations in both aggregate follow mechanically the algebraic formulas economists write down to employment and inflation in the case of supply describe their preferred policy rules." John B. Taylor, "Discretion versus Policy Rules in Practice" Carnegie-Rochester Conference shocks. In practice, however, the economy often Series on Public Policy, vol. 39 (1993). p. 197. experiences several disturbances at the same time; 14. For many of the disturbances, GDP and the federal funds rate in addition, policymakers and the public alike may do not return to baseline. Such long-run shifts occur when the shock permanently alters the level of potential GDP or the steady-stale rate find it difficult to identify the precise nature of shocks of interest or both. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Aggregate Disturbances, Monetary Policy, and the Macroeconomy: The FRB/US Perspective 17 4. Simulated inacroeconomic effects of selected disturbances under alternative monetary policies Percent change from baseline except as noted Constant real funds rate Taylor rule Macroeconomic measure Response at end of year Response at end of year 10 10 Stock market: Reduction in stock market wealth of 20 percent ex ante, caused by permanent increase in the equity premium GDP1 -.8 -1.0 -2.1 -.2 -.3 -.3 -.1 Unemployment rate .3 .4 .1 .1 .1 .0 Consumer price inflation - . _ 2 -.4 -1.4 .0 .0 .0 .0 Nominal federal funds rate -2 -.4 -1.4 -.3 -.4 Wages: Four quarters of unanticipated increases in nominal wage growth cumulating to I percentage point GDP1 -.2 -.3 -I .0 -.3 -.5 -.1 Unemployment rale .1 .2 .0 .0 .2 .3 .0 Consumer price inflation3 . .7 .6 .3 .2 .6 .5 .1 Nominal federal funds rale .7 .6 ,3 .2 .8 .6 .1 Potential GDP: Eight-quarter reduction in total factor productivity growth cumulating to a permanent 1 percent fall in the level GDP1 -1.2 -1.4 -.5 -1.3 -1.3 -.9 Unemployment rate .1 .3 .0 .0 .2 .3 .0 Consumer price inflation2 . .3 .1 -.1 .1 .3 .1 .0 Nominal federal funds rate .3 -.1 .1 -.1 .0 Exchange rale: Permanent ex ante 10 percent reduction in the real exchange value of the dollar GDP1 1.6 2.5 3.8 .4 1.0 1.2 -.5 Unemployment rale -.4 -1.0 -1.9 -.1 -.2 -.5 -.1 Consumer price inflation - . .5 .4 3.0 .4 .4 -.1 Nominal federal funds rate .5 .4 3.0 .7 1.2 .8 Oil prices: Permanent increase in relative oil prices cumulating to $10 per barrel over four quarters GDP1 -.2 -.2 -.3 — 4 -I.I Unemployment rate .1 -.3 .2 .1 .0 Consumer price inflation2 . .2 .4 .5 .3 .1 -.1 Nominal federal funds rale .2 .4 .5 .2 .2 .1 Foreign output: Permanent 5 percent increase in the trend level of foreign GDP GDP' .9 1.6 .6 .4 .2 -.2 Unemployment rate -.5 -.2 -.2 -.2 .0 Consumer price inflation3 . .4 1.3 .0 .1 .1 .0 Nominal federal funds rate .4 1.3 .4 .4 .4 .4 Income taxes: Permanent increase in federal personal income taxes equal to 1 percent of GDP ex ante GDP1 -.4 -1.0 -1.5 -.3 -.5 -.5 -.1 Unemployment rate .1 .4 .7 .1 .2 .2 .1 Consumer price inflation2 ., .0 -.3 -1.2 .0 .0 .0 .0 Nominal federal funds rate . .0 -.3 -1.2 -.2 -.4 -.4 -.7 Government expenditures: Permanent increase in federal government purchases of goods and services equal to I percent of GDP GDP1 1.4 1.4 1.1 1.1 I.I .5 .0 Unemployment rate -.5 -.7 -.7 -.6 -.3 -.3 -.2 Consumer price inflation2 .. .5 .7 1.4 .0 .1 Nominal federal funds rale . .5 .6 1.4 .7 .7 .5 Minimum wage: Permanent $1 per hour increase in the minimum wage, indexed to inflation GDP1 .0 -.3 -.2 -.1 -.0 — 4 -.4 Unemployment rate .0 .2 .2 .0 .0 .2 .3 Consumer price inflation - .. .3 .7 .5 ,3 .3 .7 .4 Nominal federal funds rale . .3 .7 .5 .2 ,4 .8 .4 Capital goods prices: Permanent 5 percent fall in the relative price of business equipment GDP1 .2 .6 1.0 2.2 .2 .5 .7 .7 Unemployment rate .0 -.2 -.3 -.6 .0 -.1 „ 2 .0 Consumer price inflation3 . .0 .0 ' 1.0 .0 .0 .0 Nominal federal funds rate .0 .0 1.0 .2 .3 1. Gross domestic product measured in chain-weighted 199^ dollars. 2. Four-quarter growth rate of chain-weighted price index for personal consumption expenditures. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

18 Federal Reserve Bulletin D January 1999 between unemployment and inflation.15 Thus, as seen policies that respond aggressively to inflation—that in the experiment of a negative shock to productivity, is, ones for which the value of c is large—will be a policy that forcefully acts to keep inflation in associated with a lower average volatility of inflation. check achieves this objective at the cost of more The coefficient b on the lagged funds rate measures to pronounced fluctuations in economic activity and what extent the current setting of the funds rate unemployment. Alternatively, a more muted initial depends on past observations of inflation and output. policy response limits the magnitude of the fall in The FRB/US model can be used to evaluate the employment but does so at the cost of larger swings relationship between policy and macroeconomic flucin inflation. tuations. With a specific set of coefficient values for In the context of the full range of demand and the generalized policy rule, one can compute the supply disturbances hitting the economy, any system- standard deviations of inflation and the output gap atic policy response to changes in macroeconomic associated with that specific policy rule, based on conditions embodies its own particular average stochastic simulations in which the FRB/US model is tradeoff between variability of output and that of repeatedly subjected to random supply and demand inflation. For example, because the Taylor rule dis- shocks based on the experience of the past thirty cussed earlier responds to movements in inflation and years.17 The shocks include random disturbances to the output gap in a fixed fashion, it generates a pre- the labor, goods, financial, and foreign markets. This dictable stabilization path for different economic process is then repeated for many different sets of measures following any given set of macroeconomic policy coefficients. disturbances. Taking account of all the possible Diagram 6 summarizes the results of this experishocks that might be encountered over time, and ment. The shaded area shows the inflation and output adjusting for their likelihood, one can compute the volatilities that result from choices of coefficients in average variability of output, inflation, and interest the generalized policy rule, subject to a constraint rates likely to be experienced under the Taylor rule. that the variability of the federal funds rate does not Similar calculations can be made for other systematic exceed a specified level.18 This limit on funds rate policy responses—for example, policies that allow variability serves the purpose of excluding from the for larger or smaller responses to movements in inflaanalysis "unreasonable" policy rules that are highly tion and the output gap or that include responses to effective in offsetting aggregate disturbances (in parpast or projected levels of interest, inflation, and ticular those to demand) but, in so doing, generate other variables. wild swings in interest rates. For purposes of these To analyze the stability implications of the Taylor simulations, we assume that the public is fully aware rule and other systematic policy responses, policy is of the policy in place and forms expectations consisassumed to follow a generalized policy rule of the tent with that policy and the structure of the model.19 form In addition, the long-run inflation goal of policymakers is assumed to be constant. r, = a + br, _ , + CK, + dv,, In general, points in the lower left portion of the shaded region represent better outcomes, in terms of where r, denotes the federal funds rate in quarter /, a lower variability of both inflation and output, than n is the four-quarter inflation rate, y is the output gap, and a, b, c, and d are the coefficients of the policy rule. The coefficients of such a generalized policy rule determine how quickly and aggres- 17. For a complete description of the methodology used in this experiment see Andrew T. Levin, Volker Wieland, and John C. sively policy responds both to deviations of inflation Williams, "Robustness of Simple Monetary Policy Rules under Model from its target rate and to the output gap.16 The Uncertainty," in Monetary Policy Rules, John B. Taylor, ed. (Univerchoice of coefficient values thus affects the volatility sity of Chicago Press, forthcoming). 18. In the FRB/US model, the connection between the level of the of inflation and output in the economy. For example, output gap and the unemployment rate is close. Thus, in terms of the diagram, greater volatility of the output gap implies greater volatility of the unemployment rate around its equilibrium level. 19. Such expectations are called model consistent, and they differ 15. In ihe model, there is a limited long-run effect of inflation on somewhat from those in the previous sections of the article, in which the level of real GDP because [he tax system is not neutral in relation the public was assumed to have an approximate, but not exact, to the average rate of inflation. Thus, a change in the average rate of understanding of monetary policy and the workings of the economy in inflation affects the after-tax cost of capital, investment, and potential general. In the present context, model-consistent expectations have GDP. the advantage of preventing expectational errors caused by the pub- 16. For the Taylor rule, b = 0, c = 1.5, d = 0.5, and the intercept a lic's misunderstanding of policy procedures—errors that would be depends on ihe economy's equilibrium real interest rate and the unlikely to occur in the long run if policymakers were to adopt long-run rate of inflation sought by policymakers. standard procedures. 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Aggregate Disturbances, Monetary Policy, and the Macroeconomy: The FRB/US Perspective 19 6. FRB/US policy frontier Demand shocks, however, present no such conflict: A policy that offsets demand shocks effectively stabi- SlwKjani deviation of oulpul gap lizes both inflation and output.20 Not surprisingly, policies that respond relatively aggressively to inflation and only moderately to output generate outcomes of low inflation variability and high output variability. For example, point B on the policy frontier results from a policy that is about 50 percent more responsive to inflation and about 50 percent less responsive to the output gap than the policy associated with point A on the frontier. A couple of caveats are worth mentioning. First, these results are specific to the FRB/US model; other 1.3 1.4 1.5 1.6 1.7 1.8 2.0 models may provide different conclusions regard- Standard deviation of inflation rate ing the existence and characteristics of the tradeoff between inflation variability and output variability. do points in the upper right. The curve on the bound- Second, an assumption of the experiment is that the ary of the shaded region, labeled "policy frontier," policymaker faces no uncertainty regarding the shows the minimum output variability attainable for a coefficients or structure of the model and the accugiven amount of inflation variability. Thus, the fron- racy of the data, factors that in reality greatly comtier represents the best attainable set of outcomes for plicate policymakers' decisionmaking. Uncertainties the types of policy considered here. regarding the state of the economy, the "true" model Many policies, however, are associated with out- of the economy, and the incidence of supply versus comes well away from the frontier. Modifications to demand shocks may suggest modifications to the such inefficient policies can lead to outcomes in types of policy rules considered here.21 which the fluctuations of inflation and output are both In summary, this analysis using the FRB/US model smaller on average. For example, a policy associated shows that, for well-chosen policies, there is a with the outcome labeled point C in the diagram can tradeoff between reducing the magnitude of fluctuabe changed so that the resulting outcome is given by tions in inflation and reducing those in employment point B, which represents a lower variability of both and output. Within the set of efficient policies—that inflation and output. is, those associated with the policy frontier—the One can draw a number of conclusions from these choice of appropriate monetary policy depends on the results. First, among policies on the frontier, there is, weights that policymakers place on stabilizing inflaas expected, a tradeoff between inflation variability tion relative to stabilizing employment. C and output variability. As in the examples of shocks to wages and productivity, a policy that decreases the variability of inflation does so at the cost of an 20. Demand shocks cause a different kind of tradeoff, that between increase in the variability of output. As noted, the stabilizing inflation and output and minimizing the volatility of movevariability tradeoff stems fundamentally from the ments in interest rates. According to the FRB/US model, to fully offset existence of supply shocks. Shocks of this type the effect of all demand disturbances, it would be necessary to regularly raise or lower the federal funds rate by multiple percentage present policymakers with the choice of keeping a points within a year. Because such violent movements in interest rates tight rein on inflation and accepting large movements may have harmful repercussions on the efficient operation of financial in resource utilization or allowing the inflation rate to markets, monetary policy in practice is limited to damping the effects fluctuate significantly in the short run while temper- of demand disturbances—it cannot eliminate them. 21. Fora further discussion of these issues, see John B. Taylor, ed., ing the movements in unemployment and output. Monetary Policy Rules (forthcoming). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

20 Industrial Production and Capacity Utilization: 1998 Annual Revision Charles Gilbert and Richard Raddock, of the REVISIONS TO PRODUCTION, CAPACITY, Board's Division of Research and Statistics, prepared AND UTILIZATION this article. Robert Ritterbeck provided research assistance. Production In late 1998, the Federal Reserve published revised The revised increases in the total IP index are about indexes of industrial production (IP) and the related the same as those shown previously for 1993 and measures of capacity and utilization for the period 1994 but are faster for 1995-98 (table A.3). The January 1992 through October 1998. For the third revised annual rate of growth has averaged 4.5 perquarter of 1998, the revision placed the production cent since 1994, 0.8 percentage point higher than index at 131.6 percent of output in 1992, compared previously shown; the upward revision for 1996 forwith 128.2 percent reported previously, and the ward was close to 1 percentage point per year. The capacity index at 161.5 percent of output in 1992, index shows the same pattern of output growth since compared with 158.1 percent reported previously.1 1992: No quarter shows a decrease in output, but As a result, the rate of industrial capacity gains were slower between the second quarter of utilization—the ratio of production to capacity—for 1995 and the first quarter of 1996, and again beginthat quarter was revised up 0.3 percentage point, to ning with the first quarter of 1998. The slowing in the 81.5 percent. (Summary data for total industry and latter period reflects the effects of the economic turmanufacturing are shown in appendix tables A.I and moil in Asia. A.2.) The updated measures reflect both the incorporation of newly available, more comprehensive source By Market Groups data typical of annual revisions and, for some series, the introduction of modifications in the methods for Among major market groups, the expansion of output compiling the series. The new source data, which are was pervasive and substantial in 1996 and 1997, with principally derived from the 1996 Annual Survey of strength concentrated in business equipment, durable Manufactures and the 1997 Survey of Plant Capacity, consumer goods, and related materials; only the proaffect data for 1995 and thereafter. The modified duction of defense and space equipment declined in methods affect data for 1992 onward. these years. The production of nondurable consumer Growth in the output and capacity of high- products advanced relatively slowly; solid growth in technology industries is now estimated to have been the consumer chemical products industry was offset more rapid than previously shown. Outside of the by declines in apparel production for 1995 through high-technology industries, revisions to the output the present. indexes for individual industries were largely offset- In 1998, growth was slower in the production ting and had little net effect on the overall IP index of consumer goods, business equipment other than through 1997 (chart 1). information processing equipment, and both durable and nondurable materials. The output of information processing and related equipment continued to increase strongly, and the output of construction sup- NOTE. Other contributors to the revision and this article include the plies accelerated after having risen slowly in 1997. following: Ana Aizcorbe, William Cleveland, Carol Corrado, Maura The output of energy products and materials also Doyle, Norman Morin, and Dixon Tranum. I. The revisions to the industrial production data tor August picked up, on balance, a move reflecting the unusual through October 1998 and the new data for November from the weather patterns since last fall. The output of defense Board's G.17 statistical release on "Industrial Production and Capacand space equipment edged up after having declined ity Utilization." issued on December 16, 1998, have been incorporated in all the statistics and tables presented in this article. substantially for most of this decade. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

21 1. Industrial production, capacity, and utilization Index. 1992 output = 100. ratio scale Percent of capacity . Revised .Earlier Capacity — 80 I I I M I I II I I I I II I I I I I I I [ M I I I I ] I I I 1 1 I 1967 1971 1975 1979 1983 1987 1991 1995 1999 1987 1991 1995 1999 NOTE. The production indexes and utilization rates are seasonally adjusted. All the revised measures extend ihrough November 1998; ihe earlier measures extend through October 1998. By Industry Groups liminary results of the 1997 Survey of Plant Capacity conducted by the Bureau of the Census, which The revised figures continue to show that during the yielded utilization rates for manufacturing industries past two years growth among the broad industry for the fourth quarter of 1997. groups was concentrated in durable manufacturing, As was the case with the IP index, the rate of which advanced 11.1 percent in 1997 before easing growth of manufacturing capacity was revised to a 4.2 percent annual rate in the first three quarters upward for 1995 forward (table A.5). The revised of 1998. The relatively rapid expansion in this sector figures show that the annual rate of growth jumped to has been supported over the years by sustained rapid 6.0 percent in 1995 and 6.4 percent in 1996. It has increases in the output of computers, semiconductors slowed a bit in the past two years; 1998 growth and related electronic components, and communica- is estimated to have been 5.6 percent. The rapid tions equipment. According to the revised index, the growth and upward revisions were again concenannual rate of growth of production in these high- trated in durable manufacturing, especially in the technology industries averaged nearly 40 percent for high-technology industries. The capacity increase in 1994 through 1997, substantially higher than pre- these industries peaked at 46.3 percent in 1996 and viously shown (table A.4). The growth of output of then decelerated to 34.8 percent by 1998. In contrast, other manufacturing industries, which was revised capacity growth in the rest of manufacturing was little on balance for the 1994-97 period, advanced approximately 3 percent in 1995 and 1996 and then 3.0 percent over the four quarters of 1996 and declined to an estimated 2.6 percent by 1998. 4.3 percent over 1997 before edging down in 1998. In Capacity expansion in mining and utilities was 1998, the economic troubles in Asia have, either considerably slower. In particular, the North Amerithrough more imports or fewer exports, reduced the can Electric Reliability Council reduced its estimate domestic production of iron and steel, semiconducof generating capacity for the winter of 1997 and tors, some chemicals, and other internationally traded projected increases in capacity short of probable goods. However, the revised series for civilian airincreases in demand. Moreover, the drop in world craft shows stronger growth in the first half of 1998 demand for crude oil and its low price have led to a than shown previously. sharp drop in work in domestic oil fields. Capacity Capacity Utilization The revised measures of capacity and utilization For 1997 and 1998, the upward revisions to manufacreflect the new IP indexes, updated estimates of turing capacity were relatively smaller than the revimanufacturing capital input, new information on sions to output; consequently, the rate of manufacturphysical capacity and utilization for selected indus- ing capacity utilization was revised up 0.3 percentage tries provided mainly by trade associations, and pre- point for the fourth quarter of 1997 and 0.6 percent- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

22 Federal Reserve Bulletin ! ' January 1999 age point for the third quarter of 1998 (table A.6). series, up from 264 at the time of the previous annual The largest upward revision of utilization was for revision. Individual series were changed for electhe transportation equipment industry. Utilization tronic components, coal, aircraft, and lawn and garin manufacturing in the third quarter of 1998 was den equipment. 80.2 percent, a level that is 0.9 percentage point less The electronic components industry, SIC 367, was than the 1967-97 average, as the rates in both previously covered by two indexes, one for TV tubes primary- and advanced-processing industries fell and the second for semiconductors and other compomore than 2 percentage points over the first three nents. Now, four new indexes cover electronic comquarters of 1998. In contrast to the general easing in ponents other than TV tubes: (1) semiconductors manufacturing utilization rates, the rate rose further and related devices, SIC 3674; (2) printed circuit for petroleum products, to 96.5 percent. The low boards, SIC 3672; (3) other electronic components, price of crude oil pushed refining activity toward SIC 3675-8 and part of 3679; and (4) printed circuit capacity limits. assemblies and loaded boards, part of SIC 3679. The capacity utilization rate for mining for the Development of the estimates of production of semithird quarter of J998 was revised down 2.5 percent- conductors and related devices is discussed below; age points, leaving it more than a percentage point the other three series are derived from monthly below its long-term average. Although the rate for Bureau of Labor Statistics data on worker hours and gas utilities also was revised down, to a below- productivity trends determined by annual data. The average level, the rate for electric utilities was four series appear within the industry structure of the revised upward to 97.7 percent, its highest level since IP index in the subgroup electronic components, 1970. Strong summer demand for air conditioning SIC 367; and within the market structure in equipdue to high temperatures forced some utilities to limit ment parts, a subgroup within durable goods materitheir supply of electricity to industrial companies. als, as shown in the following table: Semiconductors and Related Electronic Components TECHNICAL ASPECTS within the Market Structure OF THE ANNUAL REVISION 1997 The revision incorporates the updating of the compre- Series value added share hensive annual data and of the monthly source data used in the estimation of production, capacity, and Materials 40.2 Durable goods materials 24.0 utilization. More up-to-date results were obtained Equipment parts 9.2 from the 1996 Annual Survey of Manufactures, the Computer and other board assemblies and parts .9 Printed circuit assemblies and loaded boards 1997 Survey of Plant Capacity, other annual industry (SIC 3679pl) .5 Semiconductors, printed circuit boards, and other reports, recent information on prices, and revised electronic components 3.7 monthly source data on physical products and on Printed circuit boards (SIC 3672) .3 Semiconductors and related devices (SIC 3674) ... 2.8 labor and electricity inputs.2 Productivity relation- Other electronic components (SIC 3675-8,9pt) .6 ships were revised on the basis of the differences between the new annual and monthly data and The new production measure for semiconductors applied to the individual monthly source data to and related devices (SIC 3674) attempts to capture determine the final individual production indexes. advances in the capability of these devices as well as Along with the individual production series and sea- changes in volumes produced by aggregating detailed sonal factors, the annual value-added weights used in information on physical quantities and average unit aggregating the indexes to market and industry values for about 300 distinct devices.3 A chained groups were also updated. Fisher quantity index of semiconductor output is derived by dividing an estimate of nominal domestic production by a chained Fisher price index. Changes to Individual Production Series Nominal domestic production is estimated using The industry and market structures of the index of monthly data from the World Semiconductor Trade industrial production now comprise 267 individual 3. The data for the individual devices are aggregated using Fisher 2. Information about the sources of monthly data used to calculate aggregation methods. See Carol Corrado, Charles Gilbert, and Richthe indexes can be found in "Table I: Industry structure of indus- ard Raddock, "Industrial Production and Capacity Utilization: Historitrial production: Classification, value-added weights, and descrip- cal Revision and Recent Developments," Federal Reserve Bulletin, tion of series" on the Board's World Wide Web site (hup:// vol. 83 (February 1997), pp. 67-92, for a general description of the www.federalreserve.gov/releases/gl7/About.htm). methodology. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Industrial Production and Capacity Utilization: 1998 Annual Revision 23 Statistics monthly (WSTS) issued by the Semicon- ton of coal from Appalachia provides more heat, ductor Industries Association and estimates of the expressed in British thermal units (Btu), than a ton of U.S. share of world shipments based on data from the lignite coal from North Dakota, Texas, or Louisiana. Census Bureau's annual Current Industrial Reports The growth in coal production over the past decade for semiconductors. or so has been concentrated in subbituminous coal, Data on physical quantities and average unit values which is extracted by surface mining at low cost in for the different semiconductor devices are obtained Wyoming and western Montana and is relatively low from several sources and used to construct price in Btu content. Therefore, the revised index of coal indexes for about a dozen categories of chips. Data production weights the tonnage produced in a region on metal oxide semiconductor (MOS) microproces- by the Btu content typical of a ton of coal mined in sors (MPUs) come from MicroDesign Resources; that region. data on MOS memories and selected MOS logic Completed aircraft, SIC 3721, includes both comchips other than MPUs come from Dataquest; and mercial and military aircraft. The benchmark annual data on other devices come from the WSTS. levels for this industry are gross output levels for the The price indexes computed from these data for industry, derived from data from the ASM and from MOS memories and MOS MPUs are quantitatively price deflators from the Bureau of Economic Analyvery similar to those published by the Bureau of sis. These benchmark levels are split into military Economic Analysis for the period 1992 through 1996, and civilian components on the basis of more detailed and to the new producer price indexes (PPI) pub- ASM product shipments. lished by the Bureau of Labor Statistics since January The goal of the revision for this industry was to 1997.4 In contrast, the price indexes that are used make the IP indexes reflect actual aircraft operations. in the industrial production system for non-MOS Previously the indexes were based on monthly devices and MOS logic chips other than MPUs show production-worker hours and rested on productivity steeper price declines than the corresponding PPI assumptions that were developed from historical measures. trends. One of the difficulties with this approach was Some minor products of SIC 3674 are not included that the information on production-worker hours does in the semiconductor indicator described above. The nominal gross output data from the Annual Survey of Manufactures (ASM) for the industry include all of Data Changes and Availability the products made by the industry, so the price deflator constructed above is augmented by producer price Data on production, capacity, and utilization are pubindexes for the secondary products of the industry lished monthly in the Board's G.I7 statistical release when computing the deflator for the nominal gross "Industrial Production and Capacity Utilization." As output data for the industry. The final industrial pro- described in the accompanying article, the data for 1992 duction estimate for semiconductors and related and after have been revised. This revision marks die devices includes a correction to align the monthly introduction of one new market group: semiconductors, output index to the deflated gross output data for the printed circuit boards, and other electronic components. industry. Files containing all the historical data can be found 00 the Board's web site (http://www.federalreserve,gov) Changes to individual series other than those in the under "Statistics: Releases and historical data." For paid electronic components subgroup include revised IP access to these files through the Department of Comseries for coal, completed commercial aircraft, and merce's Economic Bulletin Board or web site, please call lawn and garden equipment. The coal series had been STAT-USA at 1-800-STAT-USA (1-202-482-1986). based directly on tonnage production. However, the Diskettes containing either historical data (through quality of U.S. coal varies by region.5 For example, a 1985) or more recent date (1986 to those most recently published in the G. 17 statistical release) are available from Publications Services, Board of Governors of 4. See Bruce T. Grimm, "Price Indexes for Selected Semiconduc- the Federal Reserve System, Washington, DC 20551 tors, 1974-96," Survey of Current Business (U.S. Department of (202-452-3245). Commerce, Bureau of Economic Analysis, February 1998); and Mike Holdway, "Changes in the PPI for Semiconductors Indexes," Pro- A document with printed tables of the revised estiducer Price Indexes: PPI Detail Report (U.S. Department of Labor, mates of series shown in the G.17 release is available Bureau of Labor Statistics, January 1997). upon request to the Industrial Output Section, Mail 5. See A. Denny Ellerman, Thomas M. Stoker, and Ernst R. Stop 82, Division of Research and Statistics, Board of Berndt, "Sources of Productivity Growth in the American Coal Indus- Governors of the Federal Reserve System, Washington, try, 1972-95" (paper prepared for a meeting of the Conference on DC 20551. Research on Income and Wealth, New Directions in Productivity Analysis, Washington, D.C., March 1998). 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24 Federal Reserve Bulletin LH January 1999 not distinguish hours used in the production of com- prices. The weights required for aggregating IP in the mercial aircraft from hours used in the production most recent period are (1) estimated from available of military aircraft. Under the new procedure, the data on producer prices through the most recent year production measure for commercial aircraft approxi- and (2) extrapolated for the following year, given the mately equals a forward-looking ten-month moving persistence of many relative price trends. average of actual or future planned completions (deliveries plus the change in stock) of commercial Revised Monthly Data aircraft by Boeing Corporation. The final IP index is also constructed so that its monthly changes are The monthly physical product data that are used to positively correlated with the monthly changes in measure the monthly movements of many IP indexes production-worker hours. have been updated to capture data that became avail- The estimates of military aircraft productivity were able after the closing of the regular four-month also improved, using annual information on planned reporting window. For many individual IP indexes, production of military aircraft, including fighters, monthly data on production-worker hours or sales of bombers, cargo planes, and AWACS planes, which electric power to industry groups, in kilowatt-hours, were combined into an annual aggregate military along with estimates of trends in output per worker aircraft production indicator using prices available on hour or kilowatt-hour, are used to indicate the Department of Defense web sites. This indicator, monthly change in output. This revision incorporates combined with the estimate of commercial aircraft the Bureau of Labor Statistics benchmark of the production, provides a good estimate of the overall employment data for March 1997. It also incorpoproduction of complete aircraft through the current rates revised data on the sales of electricity to indusyear. tries for 1992 onward. The monthly kilowatt-hour Finally, a physical product series for lawn and sales figures were benchmarked to data on the annual garden equipment, SIC 3524, was developed using use of electric power reported in the Annual Survey data for production of lawn and garden tractors, of Manufactures through 1996. The incorporation of mowers, rotary tillers, and snow throwers from the new data resulted in an average upward revision Stark's Component Ledger. The data represent output in industrial use of electric power of 0.3 percentage for the three-month period from the third month of a point per year over the period 1994 through 1996 given calendar quarter through the second month of (table A.8). Seasonal factors for the electric power the following quarter. Through 1992, the monthly scries were reestimated using data through May indicator for this series remains production-worker I998.7 hours. This revision also introduced an improvement in the techniques for adjusting monthly electric power Weights data for systematic influences of the weather. Data on electric power use by establishments in fifty three- The IP index is an annually weighted Fisher index.6 digit SIC industries are used as monthly indicators In the revision, the annual value-added weights for for production in forty-two component IP series. the aggregation of the IP indexes and the capacity Unusually warm or cool temperatures appear at times utilization rates, which are derived from annual esti- to have caused the use of electricity to rise or mates of industry value added, were updated and fall independently of its use in production. Staff extrapolated (table A.7). Data from the Annual Sur- research indicated that the usual seasonal adjustment vey of Manufactures, together with revenue and techniques did not adequately capture the influence expense data reported by the Department of Energy of the weather on electric power usage by thirteen and the American Gas Association, provided infor- industries, which are used to infer production for mation on industry value added for manufacturing almost 16 percent of the IP index. The revised IP and utilities through 1996; the latest value-added data index estimates for these thirteen industries incorpofor mining came from the Census of Mineral Indus- rate electric power use series with the effects of tries for 1992. The weights are expressed as unit unseasonable weather removed; the procedure uses value added. Generally, the unit-value-added mea- data on national heating and cooling degree days to sures track broad changes in corresponding producer model weather effects. 6. The aggregation procedures are described in Corrado, Gilbert, 7. Seasonal factors for worker hours were based on data through and Raddock, "Industrial Production and Capacity Utilization: His- October 1998: factors for the monthly physical product series were torical Revision and Recent Developments." based on data through June or later in the summer. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Industrial Production and Capacity Utilization: 1998 Annual Revision 25 Measurement of Capacity Procedure for Estimating Capacity The revisions to capacity and utilization incorporate the revised production indexes, the preliminary The Federal Reserve's procedure for constructing individual capacity indexes involves several steps. First preresults of the 1997 Survey of Plant Capacity, updated liminary, implied end-of-the-year indexes of capacity are measures of 1997 and 1998 capacity in physical units calculated by dividing a production index by a utilization for selected industries, and revised estimates of indusrate obtained from a survey for that end-of-year period. try capital input. The 1997 Survey of Plant Capacity, These ratios, like the indexes of industrial production, are which was conducted by the Bureau of the Census expressed as percentages of 1992 production; they give and partially funded by the Federal Reserve, returned the general level and trend of the capacity estimates.' to being conducted annually; from 1989 to 1996, Once the preliminary implied capacity indexes are results from the survey were received every two calculated, measures of physical capacity or of capital years. input are used to estimate and extrapolate the annual The Survey of Plant Capacity is the Federal movements of the capacity indexes. For most manufac- Reserve's source of utilization rates for most manu- turing industries, physical measures of capacity are lacking; in these cases, the annual growth in the capacity facturing industries. The preliminary results of the estimates is related to the growth in an industry's capital 1997 survey, along with revisions to the 1996 survey, input. The capital input measures are developed princisuggested that trends in manufacturing utilization pally from investment data reported in the Annual Survey rates were roughly in line with those previously estiof Manufactures. mated by the Federal Reserve for those years. However, dividing the industrial production indexes for 1. Each implied capacity index number is an estimate of a sustainable high-technology industries, which were generally maximum level of output expressed as a percentage of actual output in 1992. Thus, if in the fourth quarter of 1992 the production index is 100 revised substantially upward, by the Census utiliza- and a related utilization rate from a survey is 80 percent, then the implied tion rates yielded a noticeable upward revision of capacity index is I00/.8, or 125. The capacity indexes capture the concept of sustainable practical capacity in those industries. capacity, which is defined as the greatest level of output that a plant can maintain within the framework of a realistic work schedule after taking An estimate of capital input for an industry is account of normal downtime and assuming sufficient availability of inputs typically the third major component, along with an IP to operate the machinery and equipment in place. The questions asked in both the broad Census Bureau survey and the narrower surveys of index and a survey utilization rate, in the Federal selected industries are generally consistent with this definition of capacity. Reserve's procedure for estimating capacity by indus- The concept itself generally conforms to that of a full-input point on a production function, with the qualification that capacity represents a try (see box "Procedure for Estimating Capacity"). realistically sustainable maximum, rather than some higher unsustainable Revised BEA estimates of business investment and short-term maximum. See Carol Corrado and Joe Mattey, "Capacity Utilization," Journal of Economic Perspectives^ vol. II (Winter 1997), deflators by asset type through mid-1998 were incorpp. 151-67. porated with this revision. The effect of these new In the absence of utilization rale information for an industry, which is data on the overall manufacturing capital input mea- the case for a few series in mining, trends through peaks in production are used to estimate capacity output for that industry. sure was very small. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

26 Federal Reserve Bulletin • January 1999 APPENDIX A: SUMMARY TABLES BASED ON THE G.17 RELEASE, DECEMBER 16, 1998 A. 1. Revised data for industrial production, capacity, and utilization for total industry, 1987-98 Seasonally adjusted data except as noted Quarter Year Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dee. A a n v n g u .1 al 1 2 3 4 Industrial production (percentage change) 1987 -.6 1.2 .4 .4 .4 .9 .6 .1 -.1 1.4 .3 .6 4.2 6.7 5.6 7.1 4.6 1988 .1 .3 .0 .6 .1 .1 .7 .5 -.4 .3 .8 .5 3.2 3.1 3.9 3.6 4.5 1989 .6 -.8 .9 3. -.6 -.2 -1.0 .4 -.2 -.5 .4 .5 3.8 .5 -AA -.1 1.8 1990 -.5 .5 .5 -.6 .4 .0 .0 .2 .1 -.6 -1.3 -.6 2.0 .6 1.0 -5.8 -.2 1991 -.5 -.8 -& .3 .8 1.2 .1 1.0 — 1 -.1 -.6 -8.3 1.5 6.2 1.1 -2.0 1992 .2 .6 .7 .7 .2 -.1 .8 -.3 .4 .6 .5 .1 1.3 6.1 2.7 4.6 3.1 1993 .. ,5 5 ,2 .4 -.5 .2 2 -.4 1.0 .4 .5 .8 4.3 1.5 1.2 6.4 3.5 1994 . .2 .5 .7 .4 .7 .5 .3 .5 .2 .7 .8 1.1 6.1 7.1 5.2 7.6 5.4 1995 .5 -.1 .2 -.1 .3 .4 -.3 1.1 .3 .0 .2 .0 6.3 1.3 3.5 3.0 4.9 1996 . . . -.2 1.3 — 2 1.2 .9 .7 .2 .5 .1 ,1 .6 .3 2.8 9.6 5.5 3.5 4.5 1997 ,5 .7 .4 .6 .3 .5 .7 .6 .5 .6 .5 .3 6.6 6.0 7.2 6.6 6.0 1998 .0 -.1 .4 ,5 .4 -.9 -.1 1.4 -.4 .2 _ 3 1.6 2.8 .9 Industrial production (index) I9g7 90.2 91.2 91.6 92,0 92.4 93.2 93.7 93.8 93.7 95.0 95.3 95.9 91.0 92.5 93.8 95.4 93.2 1988 .. 959 96.2 96.3 96.8 96.9 97.0 97.6 98.1 97.8 98.0 98.8 99.3 96.1 96.9 97.8 98.7 97.4 1989 , 99.8 99.0 10O.O 100,2 99.6 99.4 98.4 98.8 98.6 98.2 98.6 99.0 99.6 99.7 98.6 98.6 99.1 1990 98.6 99.1 99.6 99.0 99.4 99.3 99.3 99.5 99.6 99.1 97.7 97.2 99.1 99.2 99.5 98.0 98.9 1991 . » 96.7 95.9 95.0 95.4 96.1 97.2 97.3 97.4 98.4 98.3 98.1 97.5 95.9 96.2 97.7 98.0 97.0 1992 97.7 98.2 98.9 99.6 99.9 99.7 100.5 100.2 100.6 101.2 101.7 101.8 98.3 99.8 100.4 101.5 100.0 1993 102.3 102.7 102,9 103,3 102.7 103.0 103.2 102.8 103.9 104.3 104.8 105.7 102.6 103.0 103.3 104.9 103.5 1994 ... . 105.9 106.4 107.2 107.6 108.4 108.9 109.3 109.8 110.0 110.8 111.6 112.9 106.5 108.3 109.7 111.7 109.1 1995 113.4 113.4 113.6 113.4 113.8 114.3 113.9 115.1 115.4 115.5 115.7 115.8 113.5 113.8 114.8 115.7 114.4 1996... . 115.5 117.0 116.8 118.2 119.2 120.0 120.3 120.9 121.1 121.2 121,9 122.3 116.5 119.2 120.8 121.8 119.5 1997 123.0 123.9 124.4 125-1 125.5 126.1 127.0 127.8 128.5 129.3 129.9 130.3 123.7 125.6 127.8 129.8 126.8 1998 130.3 130.2 130.7 131.3 131.9 130.6 130.5 132.4 131.9 132.2 131.8 130.4 131.3 131.6 Capacity (index) 1987 .... 114.0 114.1 114.2 114.3 114.4 114.5 114.6 114.7 114.9 115.0 115.1 1152 114.1 114.4 114.7 115.1 114.6 1988 115.3 115.5 115.6 115.7 115.8 115.9 116.0 116.2 116.3 116.4 116.5 116.7 115.5 115.8 116.2 116.5 116.0 ,1989 . .. 116.8 117.0 117.2 117.4 117.6 117.8 118.0 118.2 118.4 118.6 118.8 119.0 J17.0 117.6 118.2 118.8 117.9 1990 119.2 119.3 119,5 119.7 119,9 120.1 120.2 120.4 120.6 120.8 121.0 121.2 119.3 119.9 120.4 121.0 120.2 1991 121.4 121.6 121.7 121.9 122.1 122.2 122.4 122.6 122.7 122.9 123.0 123.2 121.6 122.1 122.6 123.0 122.3 1992 123.4 123.6 123.8 124.0 124.2 124.5 124.7 124.9 125.1 125.3 125.5 125.7 123.6 124.2 124.9 125.5 124.5 1993 125.9 126.2 126.4 126.6 126.9 127.1 127.4 127.6 127.8 128.1 128.3 128.6 126.2 1265 127.6 128.3 127.2 1994 128.9 129.3 129.7 130.1 130.5 1305 131.3 131.7 132.1 132,6 133.0 133.4 129.3 130.5 131.7 133.0 131.1 1995 .... 133.9 134.5 135,1 135.7 136.4 137.0 137.6 138.2 138.8 139.5 140.1 140.8 134.5 136.4 138.2 140.1 137.3 1996 141.4 142.1 142.8 143.4 144.1 144.8 145.5 146.1 146.8 147.4 148.1 148.8 142.1 144.1 146.1 148.1 145.1 1997 149.4 150.1 150.7 151.3 152,0 152.6 153.2 153.8 154.4 155.0 155.7 156.3 150.1 152.0 153.8 155.7 152.9 1998 157.0 157.6 15&3 158.9 159.6 160.3 160.9 161.5 162.2 162.8 163.5 157.6 159.6 161.5 Utilization (level,percent) 1987 . . 79.1 80.0 80.2 80.5 80.7 81.4 81.8 81.8 81.6 82.6 82.8 83.2 79.8 80.8 81.7 82.9 81.3 1988 83.2 83.4 83.3 83.7 83.7 83.6 84.1 84.5 84.1 84.2 84.8 85.1 83.3 83.7 84.2 84.7 84.0 1989 85.4 84.6 85.3 85.3 84.7 84.4 83.4 83.6 83.3 82.8 83.0 83.2 85.1 84.8 83.4 83.0 84.1 1990 82.7 83.0 83.3 82.7 82.9 82.7 82.6 82.6 82.6 82.0 80.8 80.2 83.0 82.8 82.6 81.0 82.3 1991 79.6 78,9 78.1 78.2 78.7 79.6 79.5 79.5 80.2 80.0 79.8 79,2 78.9 78.8 79.7 79.6 79.3 1992 79.2 79.5 79.9 80.3 80.4 80.1 80.6 80.2 80.4 80.8 81.0 81.0 79.5 80.3 80.4 80.9 80.3 1993 . 81.2 81.4 81.4 8J.5 SI.O 81.0 81.0 80.6 81.3 81.4 81.7 82.2 81.3 81.2 81.0 81.8 81.3 1994 82.1 82,3 82.6 82.7 83.1 83.2 83.2 83.4 83.3 83.5 83.9 84.6 82.4 83.0 83.3 84.0 83.2 1995 . .. 84.7 84.3 84.1 83.5 83.4 83.4 82.7 83.3 83.1 82.8 82.6 82.3 84.3 83.5 83.1 82.6 83.4 1996 . SJ.7 82.4 81.8 82.4 82.7 82.9 82.7 82.8 82.5 82.2 82.3 82.2 82.0 82.7 82.7 82.2 82.4 1997 82.3 82.6 82.5 82.7 82.6 82.6 82.9 83.1 83.2 83.4 83.4 83.4 82.5 82.6 83.1 83.4 82.9 1998 83.0 82.6 82,6 82.6 82.6 81.5 81.1 82.0 81.3 81.2 80.6 82.7 82.3 81.5 NOTE. Monthly percentage change figures show change from the previous In this and subsequent tables, data for September 1998 onward are subject to month; quarterly figures show the change from (he previous quarter at a revision in future monthly G.17 statistical releases. compound annual rate of growth. Production and capacity indexes are expressed 1. Annual averages of industrial production are calculated from indexes that as percentages of output in 1992. are not seasonally adjusted. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Industrial Production and Capacity Utilization: 1998 Annual Revision 27 A.2. Revised data for industrial production, capacity, and utilization for manufacturing industries, 1987-9 Seasonally adjusted data except as noted Quarter Annual Year Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. avg.1 1 2 3 4 Industrial production (percentage change) 1987 -.8 1.6 .2 .5 .3 1.0 .7 -.2 .1 1.3 .•> .6 5.0 7.0 5.5 7.6 5.3 1988 ........ -.2 .4 -.1 1.0 -.1 .0 .7 .3 2 .2 .9 .6 2.3 4.1 3.7 5.2 4.7 1989 .9 -1.2 .8 .1 -.7 .0 -1.1 3 -.3 -.6 .4 .1 4.3 -.7 -4.5 -1.4 1.9 1990 -.2 .9 .3 -.8 .4 -I .0 .3 -.1 -.6 -1.3 -.6 2.9 -.1 .8 -6.3 1991 -.9 -.7 -1.1 .3 .7 1.4 .2 .2 I.I -.1 -.2 -.5 -9.7 1,2 7.8 1.7 -2.4 1992 .3 .7 .8 .6 .4 .0 .7 -.2 .3 .5 .6 -.1 2,7 6.8 3.4 4.0 4.0 1993 .9 2 .2 6 -.4 0 .2 -5 1 2 4 5 9 4.9 2 1 .5 69 37 1994 .1 .6 .9 .7 .8 .2 .5 .6 .3 .8 .9 I.I 6.3 8.8 5.8 9.2 6.0 1995 .. . .6 -.2 -.1 .i .5 -.5 .9 .7 .1 .1 .1 6.7 1.1 2.9 3.8 5.4 1996 -.3 1.3 -.3 1.4 1.0 .8 .5 .5 2 .0 ,7 .4 2.1 10.6 7.0 3.9 4,7 1997 ... .5 .9 .5 .6 3 .7 7 8 4 6 .8 .3 72 6.6 7.7 7.5 6.8 1998 . . . -.1 .3 .6 .3 -1.2 -.1 1.6 -.4 .6 .0 2.4 2.5 .4 Industrial production (index) 1987 89.6 91.0 91.2 91 6 91 9 92 8 93 4 93.3 93 4 94 6 95 1 95 6 90.6 92 1 93.4 95 1 92.8 1988 95.4 95.8 95.7 96.7 96.6 96.6 97.3 97.5 97.7 97.9 98.9 99.4 95.6 96.6 97.5 98.7 97.1 1989 100.3 99.1 99.9 100.0 99 4 994 98 3 98 7 98 4 97 8 98 •? 98 3 99 8 99 6 98 5 98 1 99 0 1990 98.1 99.0 99.3 98.6 99.0 98.9 98.8 99.1 99.0 98.4 97.2 96.6 98.8 98.8 99.0 97.4 98.5 1991 95.8 95.1 94.1 94.4 95.0 96.3 96.6 96,8 97.8 97.8 97.6 97.1 95.0 95.2 97.0 97.5 96.2 1992 97.4 98.1 98.9 99.5 99.9 99.9 100 6 100 4 100.7 101.2 101 8 101 7 98.1 99.7 100.6 101.6 1O0.O 1993 102.6 102.8 103.0 103.6 103.2 103.2 103.4 102.9 104,1 104.5 105.1 106.0 102.8 103.3 103.5 105.2 103.7 1994 . . 106.1 106.7 107.6 108.4 109.3 109.5 110.1 110.7 III.l 112.0 U3.0 114.3 106.8 109.1 110.7 113.1 109.9 1995 , . 115.0 114.8 115.1 1150 115.1 1157 115 1 1162 117.0 117 1 117 2 1173 115 0 115.3 116 1 117.2 115.9 1996 116.9 118.4 118.1 119.7 120.9 121.8 122.4 123.0 123.3 123.3 124.2 124.7 117.8 120.8 122.9 124.1 121.4 1997 125.3 126.4 127.0 127.7 128.1 129.0 129.8 130.8 131.4 132.2 133.3 133.7 126.2 128.3 130.7 133.1 129.7 1998 133.8 133,7 134.1 134.9 135.4 133.7 133.6 135.7 135.2 136.0 135.9 133.8 134.7 134.8 Capacity (index) 1987 113.2 113.4 113.6 113.8 113.9 114.1 114.2 114.4 114.6 114.7 114.9 115.0 113.4 113.9 114.4 114.9 114,1 1988 115.2 115.3 115.4 115.6 115.7 115.8 116.0 116.1 116.3 116.5 116.6 116.8 115.3 115.7 116.1 116.6 115.9 1989 1170 117 3 117 5 117 8 1180 1183 1185 1187 119.0 1192 1195 119.7 117.3 118.0 118.7 119.5 118.4 1990 119.9 120.1 120.3 120.5 120.7 120.9 121.1 121.3 121.5 121,7 122.0 122.2 120.1 120.7 121.3 122.0 121.0 1991 122.4 122.6 122.8 123.0 123.1 123.3 123.5 123.7 123.8 124.0 124.2 124,3 122.6 123.1 123.7 i24.2 123.4 1992 124.5 124.8 125.0 125.2 125.5 125.7 125.9 126.2 126.4 126.6 126.9 127,1 124.8 125.5 126.2 126.9 125.8 1993 127.4 127.6 127.9 128.2 128.4 128.7 129.0 129.3 129.5 129.8 130.1 130.3 127.6 128.4 129,3 130.1 128.8 1994 130.7 131.1 131.6 132.0 132.5 132.9 133.4 133.8 134.3 134.8 135.2 135.7 131.1 132.5 133.8 135.2 133.2 1995 . 136.3 137.0 137.7 138.4 139.1 139.8 140.5 141.2 141.9 142.6 143.4 144.2 137.0 139.1 141.2 143.4 140.2 1996 . . 144.9 145.7 146.4 147.2 148.0 148.8 149.5 150.3 151.0 151.8 152.5 153.3 145.7 148.0 150.3 152.5 149.1 1997 154.1 154.8 155.5 156.2 157 0 157 8 1584 159 1 159 9 160 6 161 3 1621 154 8 1570 159 1 1613 158 1 1998 162.8 163.5 164.3 165.1 165.8 166.6 167.3 168.1 168.8 169.5 170.3 163.5 165.8 168.1 Utilization (level,pereeni) 1987 , 79.1 80.2 80.3 80 6 80.7 81.4 81.8 81.5 81.5 82.5 82.8 83.1 79.9 80.9 81.6 82.8 81.3 1988 82.9 83.1 82.9 83.7 83.5 83.4 83.8 84.0 84.0 84.1 84.8 85.1 83.0 83.5 83.9 84.7 83.8 1989 . 85.7 84.5 85.0 85.0 84.2 84.1 83.0 83.1 82.7 82.1 82.2 82,1 85.1 84.4 82.9 82.1 83.6 1990 , 81.8 82.5 82,6 81.8 82.0 81.8 81.6 81.7 81.5 80.9 79.7 79.0 82.3 81.9 81.6 79.9 81.4 1991 78.2 77.5 76.6 76.8 77.1 78.1 78.2 78.2 79.0 78.9 78.6 78.1 77.5 77.3 78.5 78.5 77.9 1992 .. 78.2 78.6 79.1 79.4 79.6 79.5 79.9 79.6 79.7 79.9 80.2 80.0 78.6 79.5 79.7 80.1 79.5 1993 80.5 80.6 80.5 80.8 80.4 80.1 80.1 79.6 80.4 80.5 80.8 81.4 80.5 80.4 80.0 80.9 80.5 1994 ... 81.2 81.4 81.8 82.2 82.5 82.4 82.6 82.8 82.7 83.1 83.6 84.2 81.5 82.4 82.7 83.6 82.5 1995 84.4 83.8 83.6 83.1 82.8 82.7 81.9 82.3 82.4 82.1 81.7 81.3 83.9 82.9 82.2 81.7 82.7 1996 ... ., 80.7 81 3 80.6 81 3 81.7 81 9 81 9 81.8 81 6 81.2 81.4 81.3 80.9 SI.6 81.8 81.3 81.4 1997 81.3 81.7 81.7 81.7 81.6 81.7 81.9 82.2 82.2 82.3 82.6 82.5 81.6 81.7 82.1 82.5 82.0 1998 82.2 81.8 81.6 81.7 81.6 80.2 79.8 80.7 80.1 80.2 79.8 81.8 81.2 80.2 NOTE. See general note to table A. I. 1. Annual averages of industrial production are calculated from indexes that are not seasonally adjusted. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

28 Federal Reserve Bulletin • January 1999 A3. Rates of growth in industrial production, by major market group, 1994-98 Difference between growth rates: Revised growth rate revised less earlier Market group (percent) (percentage points) 1994 1995 1996 1997 1998 1994 1995 1996 1997 1998 Tbtal index 6.5 3.5 5.3 6.6 1.8 .0 1.1 Products, total 4.7 2.1 4.2 5.0 2.4 .1 .3 .3 .3 1.3 Final products 4.8 2-6 4.4 5.6 2.3 .2 .3 .4 .5 1.6 Consumer goods 4.3 1.3 2.2 2.7 -.5 -.1 -.4 -.2 -.1 .4 Durable 6.5 .3 2.3 6.5 .9 -.3 -.3 .5 1.5 Automotive products 5.4 -2.4 2.0 9.3 -6.5 -.6 -.4 A .6 -.8 Autos and trucks 5.2 -4.7 2.5 113 -14.0 -1.0 -.5 .9 1.2 -1.0 Autos 5.8 -7.3 -3.8 3.4 -7.0 -.8 -.4 .0 -.3 -.3 Trucks 3.0 1.3 8.1 15.7 -17.0 -1.4 -.3 2 -.2 -.2 Auto parts and allied goods 5.6 1.8 1.0 4.7 6.9 .0 -.1 — 3 -.3 -.3 Other durable goods 7.4 2.5 2.6 4.3 7.0 -.1 -.3 -2J2 .4 3.6 Appliances and electronics 14.4 9.0 8.9 11.8 17.5 .9 .1 1.0 4.1 .4 Appliances and air conditioning .. 2.7 -2.0 -.2 -.5 9.5 -.6 ^1.1 -2.1 .4 -1.4 Home electronics 28.1 20.1 18.3 24.2 25.3 2.9 4.7 3.0 5.2 1.0 Carpeting and furniture 5.8 -3.0 3.0 2.4 3.1 .3 -1.6 -2.4 -.1 2,3 Miscellaneous 3.5 1.1 -1.7 .9 3.0 -.8 .0 -4.2 -1.9 5,2 Nondurable 3.7 1.6 2.2 1.7 -.9 -.1 -.4 .1 -.3 .1 Nonenergy , 4.9 .9 2.1 1.7 -1.9 -.1 -.4 .2 -,1 Foods and tobacco 6.6 -.3 1.4 1.3 -1.0 -.2 -.7 -.4 -.3 -A Clothing 4J -3.5 -.2 -2.0 -3.7 -.2 1.9 3.9 -.6 .9 Chemical products 5.3 5.1 4.9 2.9 -1.9 .1 -.2 .2 -1.2 -.5 Paper products -.5 2.1 1.9 3.8 -3.9 -.1 -1.6 -.5 1.0 1.2 Energy products -4.2 6.3 2.3 1.6 6.5 -.1 .0 -.4 -.4 2.2 Fuels -2.2 1.4 3.5 1.8 1.7 .1 .1 .2 .0 -1.5 Utilities -5.1 8.6 1.8 1.5 -.1 -.2 -.8 -.4 4.1 Equipment, total 5.8 4.6 8.0 10.4 6.5 .7 1.5 1.2 1.6 3.4 Business equipment 9.4 7.0 9.8 13.1 9.0 .8 1.6 1.5 2.3 4.3 Information processing and related — 13.4 14.9 16.5 16.2 15.4 -.1 1.9 4.7 4.0 6.2 Computer and office 29.5 44.7 41.9 43.7 58.1 -.3 1.7 4.5 9.2 10.4 Industrial 10.0 8.5 1.2 5.2 3.0 .8 1.2 -.5 .1 Transit ..., 1.5 -9.4 14.3 22.8 9.7 4.1 3.3 -4.9 5.2 73 Autos and trucks 8.4 -6.0 -3.0 12.3 -8.3 5.7 1.6 -2.9 3.8 ,1 Other 5.9 1.9 5.5 10.4 .9 -.2 .1 .7 .9 3.3 Defense and space equipment -6.7 -7.2 -1.0 -3.9 .5 .9 1.5 .5 -1.3 -.2 Oil and gas well drilling -6.7 2.4 7.6 9.4 -19.8 .3 .4 .6 .2 -2,0 Manufactured homes 8.6 8.7 -.7 -.7 6.7 1.0 2.0 .2 .5 -5.0 Intermediate products ... 4.3 .5 3.8 3.2 2.6 -.1 .0 .0 -.4 .4 Construction supplies 7.2 -.3 5.9 2.4 4.8 .0 .2 .1 .2 -1.3 Business supplies 2.5 1.1 2.4 3.8 1.3 -.2 -.2 .0 -.8 1.3 Materials 9J 5.7 6.9 9.0 .9 -.3 .3 2.2 1.7 Durable 13.5 11.0 10.2 13.3 2.0 -.4 .6 3.5 2.1 .7 Consumer parts 10.3 3.6 1.2 7.3 -4.8 .2 1.3 f.t .4 .0 Equipment parts 21.4 26.3 22.7 26.4 10.0 -1.3 .5 7.8 4.8 1.7 Semiconductors, printed circuit boards, and other electrical components ... 53.2 65.4 49.4 53.3 20.7 n.a. n.a. n.a. n.a. n.a. Other 8.9 13 3.9 5.0 -2.1 -.1 .2 .8 .4 .0 Basic metals 6.9 1.6 3.9 4.3 -4.7 _ 2 .2 1.3 -A -.7 Nondurable , 5.9 -2.5 3.6 4.5 -2.6 -.2 -.1 -.1 1.0 -.5 Textile 8.9 -7.2 2.7 3.2 -5.2 -.2 .1 1.8 -.7 5 Paper 5.1 -2.8 4.3 4.7 -1.4 -.1 1.1 1.4 1.5 "~.3 Chemical 5.7 -.8 5.1 5.0 -4.0 -.4 -.6 -1.0 1.7 -1.5 Other 5.6 -3.0 .5 3.8 .4 -.2 -.2 — 1 .0 1.1 Energy 2.0 .6 .8 .3 1.9 -.1 -.2 .3 -.8 -.9 Primary 3.3 .3 -.7 .2 1.9 .0 -.2 .3 -.2 -1.4 Convened fuel -.3 1.1 3.6 .5 1.9 -.1 -.1 .6 -1.8 .0 Special aggregates Total excluding: Computers and office equipment. 6.1 2.9 4.6 5.9 .7 .2 .9 .6 .5 Business equipment excluding: Computers and office equipment. 7.7 3.8 6.8 10.5 4.6 1.5 I.I 1.5 3.0 NOTE. Growth rates are calculated as the percentage change in the seasonally of the year specified. For 1998, the growth rates are calculated from the fourth adjusted index from (he fourth quarter of the previous year to the fourth quarter quarter of 1997 to the third quarter of 1998 and annualized. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Industrial Production and Capacity Utilization: 1998 Annual Revision 29 A.4. Rates ut'prowtli in industrial production, hy industry group, 1904 9S Difference between growth rates: Revised growth rate revised less earlier Series c S o I d C e1 (percent) (percentage points) 1994 1995 1996 1997 1998 1994 1995 1996 J997 1998 Total index 6.5 3.5 5.3 6.6 1.8 .0 .3 1.1 Manufacturing. 7.5 3.6 5.9 7.3 1.8 .0 .3 1.2 1.0 Primary processing .. 6.5 -.3 4.1 3.9 -.9 -.1 .1 .6 .4 -.3 Advanced processing 8.0 5.5 6.7 8.8 3.0 .0 .4 1.5 1.2 1.7 Durable manufacturing 9.9 6.9 8.6 11.1 4.2 .0 .8 2.1 1.6 1.8 Lumber and products 24 5.3 .8 1.8 3.1 3.7 .2 -.4 -1.0 1.0 -I.I Furniture and fixtures 25 5.6 -.8 4.7 3.3 1.4 .3 -1.2 -26 -.3 3.8 Stone, clay, and glass products 32 5.2 2.7 6.3 2.6 2.5 -.3 1.2 2.5 -2.0 2.5 Primary metals 33 8.7 -.2 4.6 4.9 -6.4 -.2 .2 I.I -.7 -1.1 Iron and steel 331,2 7.7 -.3 3.6 5.0 -9.6 -.1 .6 1.3 -.7 -l.l Raw steel 331pt 6.2 .7 -1.7 7.3 -2.6 .0 .0 .0 .0 .0 Nonferrous metals 333-«.9 10.1 5.9 4.9 -2.5 -.3 -.3 .9 -.6 Fabricated metal products 34 8.9 \.2 4.1 4.5 -.3 -.1 .0 .9 .7 Industrial machinery and equipment . 35 15.3 14.1 9.8 13.4 14.8 .0 1.6 2.1 2.1 4.0 Computer and office equipment ... 357 30.8 41.6 42.9 43.6 55.9 .4 3.7 6.4 7.2 5.6 Electrical machinery 36 25.4 25.9 22.2 24.2 9.2 -1.8 .2 9.6 5.7 1.6 Semiconductors and related electronic components 3672-9 48.8 58.0 44.6 48.6 18.0 -6.1 -1.3 19.1 8.8 Transportation equipment 37 2.1 -4.2 4.9 13.1 -1.3 1.0 -.6 .9 2.1 Motor vehicles and parts 371 8.9 -.6 -1.4 12.8 -9.2 1.1 1.0 ,0 .9 .0 Autos and light trucks 371 pi 4.2 -5.1 1.9 10.9 -12.9 -1.0 -.6 .9 1.3 -1.1 Aerospace and miscellaneous transportation equipment .. 372-6,9 -6.7 -9.7 15.3 13.4 9.9 .4 1.1 -1.7 .8 5.1 Instruments 38 1.9 4.2 3.0 3.6 1.3 1.3 2.3 -1.2 .3 ,7 Miscellaneous manufactures 39 3.8 2.5 2.7 1.4 -1.6 -.2 -.7 -2.5 -3.4 Nondurable manufacturing . 4.8 -.3 2.6 26 -1.3 -.1 -.2 .1 .0 -.1 Foods 20 2.3 .5 1.1 1.9 -.4 -.1 -I.I -.6 .0 .2 Tobacco products 21 43.6 -4A -.1 — R -5.3 .0 .8 -2.4 -2.7 -3.8 Textile mill products 22 5.9 -4.6 1.9 sis -1.6 .0 .6 1.8 -.5 .8 Apparel products 23 6.4 -3.6 -.9 -2.0 -4.0 -.2 .9 2.5 -.1 Paper and products 26 4.5 -2.5 3.0 4.2 -.9 -.2 .4 .7 1.1 Printing and publishing 27 1.1 1.9 3.6 -2.2 -.1 -.2 3 -.3 2.7 Chemicals and products 28 4.6 1.6 4.9 3.1 -2.5 -.1 -.5 -.5 .2 -1.2 Petroleum products 29 -.8 .7 3.7 2.0 3.0 .1 .2 .4 -.2 -3.0 Rubber and plastic products 30 9.6 .2 4.0 4.3 2.3 .0 .2 .7 .4 -.1 Leather and products 31 -8.4 -5.6 1.3 -8.7 -8.3 .5 5.4 5.3 -1.5 2.0 Mining .8 -.9 2.0 2.1 -2.7 -.1 -.1 .4 .0 -2.5 Metal mining 10 -3.2 4.6 4.6 4.4 -6.1 -.2 .1 1.2 1.7 .0 Coal mining 12 8.9 -1.4 4.3 2.2 5.9 _2 -1.3 1.8 -2.5 3.2 Oil and gas extraction ... 13 -1.2 -1.4 1.0 7!s -5.1 !l .1 .1 -.1 -3.5 Stone and earth minerals , 14 6.7 -1.1 4.8 2.3 -.2 .0 -.5 2.8 -7.7 3.4 Utilities ... -.4 6.3 1.1 1.9 6.4 -.1 -.1 -.3 -.5 1.9 Electric . 49l.493pt 1.7 5.2 1.0 2.6 7.1 .0 -.1 .0 -.3 1.0 Gas .... 492,493pl -8.0 10.8 1.8 -1.3 2.9 -.3 .0 -1.3 -2.1 4.9 Special aggregates Computers, communications equipment, and semiconductors2 36.6 42.0 36.7 38.5 25.1 -2.6 1.4 13.8 7.9 4.8 Manufacturing excluding computers, communications equipment, and semiconductors- 5.4 3.0 4.3 -.5 Manufacturing excluding motor vehicles and parts 7.4 3.9 6.4 6.9 2.5 -.1 .3 1.3 1.0 1.1 NOTE. Growth rales are calculated as the percentage change in ihe seasonally publishing, chemical products and other agricultural chemicals, leather and adjusted index from Ihe fourth quarter of the previous year to the founh quarter products, furniture and fixtures, industrial and commercial machinery and of the year specified. For 1998. the growth rates are calculated from the fourth computer equipment, electrical machinery, transportation equipment, instruquarter of 1997 lo the third quarter of 1998 and annualized. ments, and miscellaneous manufactures. Primary-processing manufacturing includes textile mill products; paper and 1. Standard Industrial Classification; see Executive Office of Ihe President, products; industrial chemicals, synthetic materials, and fertilizers; petroleum Office of Management and Budget, Standard Industrial Classification Manual, products; rubber and plastics products; lumber and products; primary metals; 1987 (U.S. Government Priming Office. 1987). fabricated metals; and stone, clay, and glass products. Advanced-processing 2. Semiconductors include related electronic components, manufacturing includes foods, tobacco products, apparel products, printing and pt Part of classification. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

30 Federal Reserve Bulletin • January 1999 A.5. Kak-s n! growth m C:\\Kicily. b\ imliivtiy I'J'U '),S Difference between growlh rates: Revised growlh rate revised less earlier Industry group SIC (percent) (percentage points) code1 1994 1995 1996 1997 1998- 1994 1995 1996 1997 I9982 Total index 3.6 5.4 5.7 5.1 5.0 -— 1 .5 1.2 .4 .6 Manufacturing . 4.0 6.0 6.4 5.8 5.6 — I .5 1.2 .5 .7 Primary processing .. 2.4 3.3 3.8 3.9 3.0 .1 .4 .5 .6 _ 1 Advanced processing 4.8 7.4 7.4 6.4 6.6 .6 1.5 -> .9 Durable manufacturing 5,8 9,5 9.7 8.6 7,9 -.1 I.I 2.2 .6 .3 Lumber and products ' ' 24 3.1 3.0 3.9 4.2 2.9 2 -.8 -.5 .2 1.4 Furniture and fixtures 25 2,0 2.5 5.9 5.1 1.9 -.5 -1.4 .1 2 -.6 Stone, clay, and glass products 32 -.1 5.7 4.9 2.9 .6 -.9 3.4 1.6 -.8 -2.7 Primary metals 33 3.0 2.7 3.6 3.4 3.4 .6 2 .0 -.4 -1.5 Iron and steel 331,2 2.8 1.9 5.0 3.9 5,1 .0 .3 .7 .1 -.1 Raw steel 331 pi .9 3.1 2.8 5.8 6.8 .0 .0 .0 .0 1.2 Nonferrous melals 333-6,9 3.2 .3.5 2.0 2.8 1.4 1.3 ,0 -.8 -.8 -3.1 Fabricated metal products 34 3.0 5.2 5.5 6,5 4.3 ,4 1,3 ,8 1.5 -.3 Industrial machinery and equipment 35 9.2 11.5 13.0 12.1 14.6 .9 .7 1.7 .4 4.1 Computer and office equipment .. 357 21.7 34.7 46.1 43,2 59.4 -.2 3..5 6.2 2.2 17.8 Electrical machinery 36 16.3 28.8 30.3 23.6 18,4 -2.0 2.9 11.0 4.4 ,6 Semiconductors and related electronic components 3672-9 31.6 58.7 56.6 46,7 33,4 -9.6 2.7 24.8 9.9 -1.7 Transportation equipment 37 2.7 4.3 2.5 2.0 2.1 -.5 .5 ,1 -1.4 -1.6 Motor vehicles and pans 371 5.5 8.4 3.9 3.2 2.5 -1.5 .3 -.8 -1.4 -1.8 Autos and light trucks 37lpt 3.7 4.5 -.5 .8 2.7 -1.5 -1.4 -1.7 -1,5 ,2 Aerospace and miscellaneous transportation equipment 372-^,9 -.6 — 4 ,5 2 1.4 .5 .9 1.3 -1.6 -1.3 Instruments 38 1.6 2.6 .1 1.3 2.4 1.5 2,2 -.6 -.5 -.9 Miscellaneous manufactures 39 1.5 1.7 1.9 1,9 1,9 -.4 -I.I -1.3 -1.4 -1.6 Nondurable manufacturing 1.9 2.1 2.3 2,0 2.6 -.1 _2 " 1 -2 .8 Foods 20 1.7 2 2 2.0 1.2 2.8 -.5 -n -5 -L2 .9 Textile mill products 22 3.4 2.0 2 2 4.6 ,9 -.3 -1.2 .1 2.7 -.1 Apparel products 23 1.3 2.3 .7 1.8 — 7 — 1 ,1 .4 1.8 .0 Paper and products 26 1,7 2.4 2,9 2.4 3'o .3 .1 .5 .6 .9 Printing and publishing 27 .6 .7 .3 .1 3.1 .0 -.6 -.7 2.2 Chemicals and products 28 2.5 2.8 3.5 2.7 2.5 — 2 .0 -.1 -.6 2 Petroleum products 29 1.9 -.2 .8 1.3 I.I .0 .0 .5 -.4 -L9 Rubber and plastics products 30 4.7 4.4 4.9 5.1 4.8 .3 -.6 .5 .9 1.5 Leather and products 31 -1.5 3.4 3.5 -3.3 -.4 .7 5.9 5.9 -.6 4.5 Mining .9 -.4 .4 1.5 .9 -.1 .1 2 .8 -.1 Metal mining 10 -1.5 ,7 1.6 2.9 .8 .0 _ 7 .9 2.2 -.7 Coal mining 12 .3.3 .6 1.7 1.7 1.7 -.8 ,9 •7 .0 .0 Oil and gas extraction .. 13 .3 -1.0 „ 2 1.0 .4 .0 .0 .1 .8 ~ 1 Stone and earth minerals 14 2.4 2.4 3.5 4.4 4.0 .0 -.1 7 .4 .5 Utilities ... 1.2 1.7 1.9 .3 .7 -.1 -.3 .4 -I.I _ 7 Electric . 49l'.3pl 1.0 "> i 1.9 -.1 .6 .0 -4 .3 -1.5 — 4 Gas .... 49? 3pt .4 .5 2.1 1.9 1.5 .0 .0 .0 .0 -.1 Special aggregate.* Computers, communications equipment, and semiconductors' 23.2 41.0 46.3 37.4 34.8 -4,2 3.2 16.2 7.0 Manufacturing excluding computers, communications equipment, and semiconductors3 2.5 3.2 2.7 2.6 -.1 NOTE. See general note to table A.4. 3. Semiconductors include related electronic components, 1. Standard Industrial Classification; see table A.4, note I. pi Part of classification. 2. Through the fourth quarter of 1998. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Industrial Production and Capacity Utilization: 1998 Annual Revision 31 A.6. Capacity utilization rates, by industry group, 1967-9 Difference between rates: Revised rate revised less earlier SIC (percent of capacity, seasonally adjusted) (percentage points) Item code1 1967-97 1988-89 1990-91 199&Q4 1997-Q4 I998:Q3 I99&Q4 I997-Q4 I998:Q3 avg. high low Total index 82.1 85.4 78.1 82.2 83.4 81.5 _ I .2 Manufacturing. 81.1 85.7 76.6 81.3 82.5 80.2 -.1 .3 Primary processing .., 82.3 88.9 77.7 85.4 853 82.8 -.5 -.7 -.9 Advanced processing 80.5 84.2 76.1 79.6 81.4 793 .2 1.0 1.4 Durable manufacturing 79.4 84.6 73.1 80.2 82.1 79.9 -a .5 1.4 Lumber and products 24 82,5 93.6 75.5 82.1 81.3 81.7 -.6 .1 -1.4 Furniture and fixtures 25 81.4 86.6 72.5 79.2 77.9 77.6 -1.8 -2.1 .4 Stone, clay, and glass products 32 78,2 83.5 69.7 80.9 80.7 81.7 -.5 -1.4 1.7 Primary metals 33 81.1 92.7 73.7 90.7 92.0 85,4 -.1 -.3 -.1 Iron and steel 331,2 81.1 95.2 71.8 90.9 91.8 .810 .7 .0 -.7 Raw steel 331m 80.9 92.7 71.5 88.8 90.0 84.Q .1 .1 -.6 Nonferrous metals 333-6,9 8U 993 74.2 90.5 92.3 89.S -10 -.9 .7 Fabricated metal products 34 78.0 82.0 7J.9 80.3 78.8 76.1 -3 -.8 -.1 Industrial machinery and equipment 35 81.3 85.4 723 84.4 85.4 $5.6 -.4 .9 1.0 Computer and office equipment 357 81.2 86.9 66.9 83.3 83.5 82.5 .8 3.7 -1.0 Electrical machinery 36 81.1 84.0 75.0 813 81.7 76.6 -.7 .2 .6 Semiconductors and related electronic components 3672-9 80.0 81.1 75.6 82.7 83.8 76.0 -13 Transportation equipment 37 75.9 85.8 68.5 72.2 80.0 78.0 3 2.0 4.0 Motor vehicles and parts 371 76.8 89.1 55.9 74.4 813 74.2 2.3 4,2 4.7 Autos and light trucks- .... 371pt 92.3 533 79.6 87.6 773 3-0 5.5 4.1 Aerospace and miscellaneous transportation equipment 372-6.9 75.0 873 79.2 69.3 78.4 83.3 -IX -.7 3.0 Instruments 38 81.7 81.4 77.2 79.1 80.8 S0.2 -.4 3 1.2 Miscellaneous manufactures .... 39 75.6 79.0 71,7 80.1 79.7 77.6 .9 -.7 -.1 Nondurable manufacturing . 83.4 87.3 80.7 82,8 833 81.0 .2 .4 -.1 Foods 20 83.0 85.4 82.7 81.6 82.1 80.2 .7 1.6 13 Textile mill products .... 22 85.7 90.4 77,7 85.5 84.7 83.0 3.0 .4 .9 Apparel products 23 81.1 85.1 753 79.1 76,2 74.2 Z2 .8 .8 Paper and products 26 89.2 93.5 85.0 87.8 89.3 86.8 -.7 -1.2 Printing and publishing 27 85J 91.7 79.6 82.1 85.1 81.9 1.0 1.5 Chemicals and products 28 79.S 86.2 79.3 79.5 79.8 76.8 .4 -.4 Petroleum produett 29 86.6 8&5 ss.i 94.5 95.2 96.5 .1 3 -.5 Rubber and plastics products . 30 84.5 89.6 77.4 mi 85.5 84,0 -1.7 -2.1 -3.0 Leather and products 31 80.8 83.3 76.1 70,9 66.9 63JB -.4 -1.0 -1.9 Mining 87.5 88.0 87.0 88.1 88.6 863 -2 -.9 -2.5 Metal mining 10 79.1 89.4 79.9 90.8 912 87.3 A — 1 .2 Coal mining 12 86.6 91.5 83.4 84.2 84.5 87.1 -2.0 -42 -23 Oil and gas extraction .., 13 88.6 88.2 88.7 88.9 89,6 86.0 .2 -.6 -2.9 Stone and earth minerals . 14 84.8 89.0 79.4 86.3 85.5 84.5 -S 1.5 -3.4 Utilities ... 87.3 92.6 83.4 89.4 90.8 94.6 -.6 -.1 1.4 Elcciric . 491.3pt 89.2 95.0 87.1 90.8 93.2 97.7 1.0 2.0 Gas ..., 492.3pt 82.4 8S.0 67.1 83.7 81.1 81.9 -1.6 -33 -.2 Special aggregates Computers, communications equipment, and semiconductors' 80.3 81.9 72.4 81.4 82.0 77.4 Manufacturing excluding computers, communications equipment, and semiconductors* 81.2 86.1 76.8 81.3 82.6 80.7 -.1 NOTE. The "high" column refers to periods in which utilization generally 1. Standard Industrial Classification: see table A.4, note I. peaked; the "low" column refers 10 recession years in which utilization gener- 2. Series begins in 1977. ally bottomed out. The monthly highs and lows are specific to each series, and 3. Semiconductors include related electronic components, all did not occur in the same month. pt Pan of classification. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

32 Federal Reserve Bulletin J January 1999 A.7. Annual proportions in industrial production, by industry group, 1990-97 Iiem c S o I d C e1 1990 1991 1992 1993 1994 1995 i 1996 1997 Total index 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Manufacturing 84.4 84.5 85.4 85.9 86.7 86.8 86.8 87.8 Primary processing 26.8 26.1 26.6 27.0 28.2 28.0 27.6 27.8 Advanced processing 57.6 58.4 58.9 58.9 58.5 58.8 59.2 60.0 Durable manufacturing 44.8 44.2 44.9 45.6 46.3 46.8 47.6 48.5 Lumber and producls ' ' 24 1.8 1.8 2.1 2.2 2.2 2.1 2.1 2.1 Furniture and fixtures 25 1.4 1.3 1.4 1.4 1.4 1.4 1.4 1.4 Stone, clay, and glass products 32 2.2 2.1 2.1 2.1 2.2 2.2 2.3 2.4 Primary metals 33 3.3 3.1 3.1 3.3 3.5 3.5 3.5 3.6 Iron and steel 331,2 1.9 1.7 1.8 1.9 2.0 1.9 1.9 2.0 Raw steel 33Ipt .1 .1 .1 .1 .1 .1 .1 .1 Nonferrous metals 333-6.9 1.4 1.4 1.4 1.4 1.6 1.6 1.6 1.6 Fabricated metal products 34 5.1 4.9 5.0 5.1 5.2 5.3 5.4 5.5 Industrial machinery and equipment 35 8.3 7.9 7.8 8.1 8.4 8.9 9.2 9.4 Computer and office equipment 357 1.8 1.6 1.6 1.6 1.6 1.7 1.8 1.9 Electrical machinery 36 6.7 6.8 7.1 7.4 7.8 8.3 8.6 8.8 Semiconductors and related electronic components 3672-9 2.2 2.3 2.5 2.6 2.9 3.4 3.6 3.7 Transportation equipment 37 9.7 9.6 9.4 9.5 9.3 8.9 8.8 9.2 Motor vehicles and pans 371 4.7 4.6 4.7 5.1 5.5 5.4 5.2 5.3 Autos and light trucks- 371 pi 2.7 2.6 2.5 2.6 2.8 2.7 2.7 2.6 Aerospace and miscellaneous transportation equipment 372-6,9 5.0 5.0 4.7 4.4 3.8 3,5 3.6 3.9 Instruments 38 5.1 5.4 5.4 5.3 4.9 4.8 4.9 4.8 Miscellaneous manufactures 39 1.3 1.3 1.3 1.3 1.3 1,3 1.4 1.4 Nondurable manufacturing 39.6 40.3 40.6 40.3 40.4 40.1 39.3 39.3 Foods ' ' 20 9.0 9.4 9.6 9.6 9.3 9.2 9.0 8.9 Tobacco products 21 1.5 1.6 1.6 1.1 1.2 1.3 1.3 1.3 Textile mill producls 22 1.7 1.7 1.8 1.8 1.8 1.7 1.6 1,6 Apparel products 23 2.1 2.2 2.2 2.1 2.1 2.0 1.9 1.8 Paper and products 26 3.7 3.7 3.5 3.4 3.8 3.9 3.5 3,5 Printing and publishing 27 6.7 6.8 6.8 6.8 6.6 6.6 6.6 6,7 Chemicals and products 28 9.8 9.9 10.0 9.9 10.0 9.9 9.7 9.8 Petroleum products 29 1.6 1.5 1.4 1.5 1.6 1.5 1.6 1.6 Rubber and plastics products 30 3.2 3.3 3.5 3.6 3.8 3.7 3.7 3.8 Leather and producls 31 .3 .3 .3 .3 .2 .2 .2 .2 Mining : 7.9 7.5 6.8 6.4 6.0 6.1 6.5 5.9 Metal mining 10 .5 .5 .5 .4 .5 .5 .4 .4 Coal mining 12 1.2 I.I 1.0 .9 .9 .9 .9 .9 Oil and gas extraction 13 5.6 5.3 4.7 4.4 4.0 4.1 4.6 4.1 Stone and earth minerals 14 .6 .6 .6 .6 .6 .6 .6 .6 Utilities 7.7 8.0 7.8 7.7 7.4 7.1 6.7 6.3 Electric 491.3pl 6.3 6.5 6.2 ft.l 5.S 5.6 5.4 5.2 Gas 492.3pl 1.5 1.5 1.6 1.6 1.5 1.5 1.3 I.I Special ugxrexates Computers, communications equipment. and semiconductors - 5.4 5.3 5.7 5.8 6.2 6.9 7.3 7.6 Manufacturing excluding computers, communications equipment, and semiconductors2 79.0 79.2 79.8 80.1 80.4 80.0 79.5 80.1 Nuit. The IP proportion data arc estimates of ihe industries' relative contri- 1. Standard Industrial Classification; see table A.4. note I. bution to overall IP growth in the following year. For example, a 1 percent 2. Semiconductors include related electronic components, increase in durable goods manufacturing in 1998 would account for a 0.485 per- pi Pan of classification. cent increase in total [P. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Industrial Production and Capacity Utilization: 1998 Annual Revision 33 A.8. Rates of growth in electric power use, 1994-98 Revised growth rate Difference between growth rates: revised less earlier Item SIC (percent) (percentage points) code1 1994 1995 1996 1997 1998 1994 1995 1996 1997 1998 Total 4.9 -.8 1.5 1.0 -2.6 .2 .3 .5 -.1 .0 Manufacturing. 5.1 -.9 1.4 I.I -2.9 .2 .3 .5 .0 .0 Durable manufacturing 3.4 .5 _ 2 3.1 -1.0 .1 .4 .7 _ ^ 1.1 Lumber and products 24 2.9 1.5 43 -.1 5.4 .0 -.6 -.8 -1.4 -2.0 Furniture and fixtures 25 7.6 -3.6 4.2 1.4 -1,4 .4 -.3 I _ 2 .8 Stone, clay, and glass products . 32 2.1 3.4 .8 .6 .6 .4 A __ •) .9 Primary metals 33 3.0 1.5 -3.8 4.0 -1.2 .0 1.4 2.3 -.7 .6 Fabricated metal products 34 5.5 1 3.7 3.1 -2.0 .3 .4 .2 _ 2 .4 Industrial machinery and equipment . 35 4.0 .4 1.4 3.0 2.6 .5 .5 -.2 -.1 1.2 Electrical machinery 36 2.4 1.5 2.5 2.3 2.0 2 -1.0 -1.1 -.8 5.1 Transportalion equipment 37 4.1 -2.0 _ ^ 5.2 -7.5 -.5 -.8 -.7 -.4 I.I Instruments 38 1.7 .4 -2^8 .6 1.3 .8 .9 .6 -.3 -.6 Miscellaneous manufactures 39 II.1 -4.7 6.9 .3 -3.8 _ 2 -I.I -1.4 -.7 .7 Nondurable manufacturing . 6.5 -2.0 2.6 -.5 -4.4 .3 2 .3 .3 -.9 Foods 20' 4.5 2.5 1.7 2 2 — ? 1.0 .9 .7 .5 -.7 Tobacco products 21 -5.5 6.3 — ? ~,5 -5.0 -.3 -1.2 -2.2 -2.3 3.2 Textile mill products 22 6.0 -3.4 2^9 2.1 2.6 .6 -.2 .3 -1.0 -.9 Apparel products 23 6.8 -6.4 -1.8 -2.0 -8.5 .5 .4 .8 .5 .3 Paper and products 26 2.7 -.6 .4 2.2 -4.0 -1 -.1 .0 1.3 ,1 Printing and publishing 27 4.2 .7 .8 3.0 -2.3 .5 .0 .3 _ J .8 Chemicals and products 28 9.7 -6.5 5.7 -4.2 -9.7 .3 .2 1 -.1 -2.2 Petroleum products 29 2.7 7.3 -3.3 2.5 -2.0 .0 1.1 1.2 2.0 1.2 Rubber and plastics products. 30 9.0 — 5 3.4 .6 3.7 .3 -.3 -.2 -.4 -.! Leather and products 3! -3.5 -9^2 -1.4 -1.7 -s.o -.6 .8 -4.5 -.6 1.4 Mining 2.2 1.0 2.8 -.4 1.8 .0 .0 .5 -1.2 .6 Metal mining 10 5.6 8.5 2.5 .4 .0 -.2 -.2 — 1 -I -1.6 Coal mining 12 7.4 -1.3 .0 -.6 8.1 -I .0 .0 ,3 1.0 Oil and gas extraction ... 13 -».8 -4-9 4.4 1.0 -4.5 .0 .0 1.4 -.8 -1.0 Stone and earth minerals . 14 7.5 5.7 3.7 -4.2 10.5 .2 .5 2 -5.8 7.3 Su/Jplemeniary groups Total, excluding nuclear nondelense 3.7 .6 .9 2.2 -1.5 .2 .3 .4 -.1 .2 Utilities sales to industry 5.3 -1.2 1.9 1.0 -2.6 .3 .4 .3 .1 .4 Industrial generation 1.3 4.8 -5.7 .8 2.4 -.3 _ | -.1 .4 .4 NOTE. Growih rates are calculated as ihe percentage change in the seasonally 1. Standard Industrial Classification; sec table A.4, note 1. adjusted index from the fourth quarter oi the previous year to the fourth quarter of the year specified. For 1998. the growth rates are calculated from the fourth quarter of 1997 to Ihc third quarter of 1998 and annualized. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

34 Industrial Production and Capacity Utilization for November 1998 Released for publication December 16 output was unchanged after having risen 0.6 percent in October. At 131.8 percent of its 1992 average, Industrial production declined 0.3 percent in Novem- industrial production in November was 1.5 perber after an upwardly revised increase of 0.2 percent cent higher than it was in November 1997. Capacity in October. The decline in the index resulted from utilization fell 0.6 percentage point, to 80.6 percent, a fall of 3.4 percent in the output of utilities and of a level \l/i percentage points below its 1967-97 1.2 percent in the output of mines. Manufacturing average. Industrial production and capacity utilization Ratio scale, 1992= 100 Percent of capacity Industrialproduction Capacity utilization 130 y - Manufacturing ~J3? 120 A/*\ Total industry - 85 J^ Total industry _ - 110 - 80 * Manufacturing - 100 \ V 1 1 i i i i i 1 1 1 1 1 1 1990 1992 1994 1996 1998 1988 1990 1992 1994 1996 1998 Industrial production, market groups Ratio scale. 1992 = 100 Ratio scale, 1992 = 100 f __ Consumer goods \ 135 _ Intermediate products - 135 — Durable . — 125 125 115 Construction supplies /S'\ss'* ~/*~ - 115 — 105 105 ^— ^J\f Nondurable - 95 Yyf^vF Business supplies -- 95 / i r 1 1 1 1 1 1 1 Ratio scale. 1992 = 100 Ratio scale, 1992 =100 Equipment 175 Materials — 175 — 160 160 145 145 - Business - 130 — 130 115 - Durable gcods /* 115 ^ - 100 100 Nondurable goods and energy _ Defense and space -- 85 85 ^ 1 i 1 1 1 1 1 1 1 1990 1992 1994 1996 1998 1990 1992 1994 1996 1998 All scries are seasonally adjusted. Latest series. November. Capacity is an index ot potential industrial production. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

35 Industrial production and capacity utilization, November 1998 Industrial production, index, 1992= 100 Percentage change Category 1998 1998' Nov. 1997 to Aug.' Sept.' Oct.' Nov. P Aug.r Sept.' Oct.' Nov. Nov. 1998 Total 132.4 131.9 132.2 131.8 1.4 -.4 .2 -.3 1.5 Previous estimate 132.5 132.0 132.0 1.6 -.4 .0 Major market groups Products, total2 124.9 124.2 124.8 124.4 1.3 -.6 .5 -3 1.8 Consumer goods .... 116.1 114.8 115.3 115.4 1.9 -1.1 .4 .1 -.5 Business equipment . 166.6 167.2 168.7 167.7 1.9 .4 .9 -.6 7.9 Construction supplies 128.0 126.7 128.1 129.0 -.3 -1.0 1.1 .7 • 4.4 Materials 144.4 144.4 144.1 143.7 1.7 .0 -.2 -.3 .9 Major industry groups Manufacturing 135.7 135.2 136.0 135.9 1.6 -.4 .6 .0 2.0 Durable 159.8 159.5 160.7 160.4 3.5 -.2 .8 -.2 4.7 Nondurable 1113 110.6 111.0 -.6 .4 -1.3 Mining 103.7 102.7 101.9 100.7 -.9 -1.0 -.8 -1.2 -4.1 Utilities 120.2 120.5 116.1 I 12.5! 1.6 .2 -3.7 -3.4 -1.2 Capacity utilization, percent MEMO Capacity, percentage 1997 1998 change, Average, Low, High, Nov. 1997 1967-97 1982 1988-89 Nov. Aug.1 Sept.' Oct.1 Nov. i' Nov. t o 1998 Total 82.1 71.1 85.4 83.4 82.0 81.3 81.2 80.6 5.0 Previous estimate 82.0 81.4 81.1 Manufacturing 81.1 69.0 85.7 82.6 80.7 80.2 79.8 5.6 Advanced processing .. 80.5 70.4 84.2 81.6 79.9 79.5 79.6 79.3 6.6 Primary processing 82.3 66.2 85.4 83.1 82.0 82.1 81.7 3.0 Mining 87.5 80.3 88.0 87.9 86.3 85.4 84.7 83.5 .9 Utilities 87.3 75.9 92.6 90.3 95.1 95.2 91.6 88.5 .7 NOTE. Data seasonally adjusted or calculated from seasonally adjusted 2. Contains components in addition to those shown, monthly data. r Revised, 1. Change from preceding month. p Preliminary. MARKET GROUPS A notable exception was the production of computers, where continued strength pushed up the reading The output of consumer goods edged up 0.1 percent on the output of information processing equipment. after an upwardly revised increase of 0.4 percent in Declines in the production of civilian aircraft and October. Among consumer durables, production of business vehicles lowered the overall output of transit automotive products decreased, but remained near equipment, and further weakness in the production of the high level in October; the decline was offset, farm machinery reduced output in the "other equiphowever, by a 0.7 percent increase in the production ment" category. of other consumer durables, mainly computers and The output of construction supplies increased appliances. The output of nondurable consumer 0.7 percent after having risen 1.1 percent in October. goods other than energy products, which rose 0.3 per- Gains continued to be widespread among most of the cent, was led by a second month of strong gains underlying components of this index. In contrast, the in the production of foods and consumer chemicals. production of business supplies fell 1.0 percent, a The output of consumer energy products fell 1.2 per- drop that reflected, in part, the reduced commercial cent, a drop that reflected the lowering of residential use of energy. demand for electricity and gas that came from the The production of materials fell 0.3 percent after abnormally warm weather during the month. having dropped 0.2 percent in October. The produc- The production of business equipment fell 0.6 per- tion of durable goods materials edged up 0.2 percent, cent, reversing the upward-revised increase in Octo- as continued strength in the production of semiconber. The drop reflected widespread declines in the ductors, printed circuit boards, and other electronic production of most types of business equipment. components was only partly offset by a sharp drop in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

36 Federal Reserve Bulletin • January 1999 the production of basic metals; the production of iron (IP), capacity, capacity utilization, and industrial use and steel fell 5.0 percent. The output of nondurable of electric power. The revisions began with 1992 and goods materials slipped again, with weakness in the incorporated updated source data for more recent production of chemicals, textiles, and paper. Because years. of the drop in electricity generation, the output of This regular updating of source data for IP included energy materials fell 1.8 percent. annual data from the Bureau of the Census's 7996 Annual Survey of Manufactures and from selected editions of its 7997 Current Industrial Reports. INDUSTRY GROUPS Annual data from the Department of the Interior on metallic and nonmetallic minerals (except fuels) for Manufacturing output was unchanged as gains in the 1996 and 1997 were also introduced. The updating production of nondurable goods were offset by a also included revisions to the monthly indicators for falloff in the production of durables. Among dura- each industry (physical product data, productionbles, declines in the production of primary metals, worker hours, or electric power usage) and revised industrial machinery other than computers, and trans- seasonal factors. In addition, the revision introduced portation equipment contributed to the November improved measures of production for semiconducweakness. In contrast, the production of nondurable tors, coal, lawn and garden equipment, and aircraft. goods edged up 0.2 percent and was led by increases Capacity and capacity utilization were revised of '/2 percent or more in the production of foods, to incorporate preliminary data from the Census petroleum products, and rubber and plastic products. Bureau's 7997 Survey of Plant Capacity. The statis- The reading on mining production continued to fall, tics on the industrial use of electric power incorpobeing pulled down by the continued contraction in oil rated more complete reports received from utilities and gas extraction and declines in natural gas output for the past few years as well as data from the 7996 and coal mining activity. Annual Survey of Manufactures. The factory operating rate dropped 0.4 percentage The revised data are available on the Board's point, to 79.8 percent—more than 23A percentage web site, http://www.federalreserve.gov/releases/gl7, points below the level it had reached in Novem- and on diskettes from Publications Services (teleber 1997. Utilization rates for both primary- and phone 202-452-3245). Further information on these advanced-processing industries have fallen this year revisions is available from the Board's Industrial to levels below their historical averages. Similarly, Output Section (telephone 202-452-3197). utilization at mines fell to 83.5 percent—more than A document with printed tables of the revised 4 percentage points below its year-ago level and well estimates of series shown in the G.17 release is below its historical averages. available upon request to the Industrial Output Section, Mail Stop 82, Division of Research and Statistics, Board of Governors of the Federal Reserve REVISION OF INDUSTRIAL PRODUCTION AND System, Washington, DC 20551. • CAPACITY UTILIZATION On November 24, the Federal Reserve published revisions to its measures of industrial production Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

37 Announcements REDUCTION IN THE DISCOUNT RATE for Fedwire and automated clearinghouse (ACH) transactions. In large part, the savings reflect the The Federal Reserve on November 17, 1998, efficiencies gained from the successful completion announced the following set of policy actions: of a five-year project to consolidate the Federal Reserve's computer facilities. • The Board of Governors approved a reduction in For 1999, the Reserve Banks will reduce the basic the discount rate by 25 basis points from 43/4 percent fee for a Fedwire funds transfer and a Fedwire securito 4'/2 percent. ties transfer by almost 30 percent and 25 percent • The federal funds rate is expected to fall 25 basis respectively. The Reserve Banks will eliminate some points from around 5 percent to around 43A percent. ACH fees and reduce other fees for their ACH customers, including the fee for items received, which Although conditions in financial markets have will decline more than 12 percent. settled down materially since mid-October, unusual Fees for paper check products, which include strains remain. With the 75 basis point decline in the forward-processed, fine-sort, and returned checks, federal funds rate since September, financial condi- will increase about 2.6 percent on a volume-weighted tions can reasonably be expected to be consistent basis (a 3.7 percent increase from January 1998 fee with fostering sustained economic expansion while levels). This increase is driven primarily by increases keeping inflationary pressures subdued. in fine-sort and returned-check fees. In taking the discount rate action, the Board Fees for forward-processed items will remain approved requests submitted by the boards of direc- stable. Fees for payor bank services, which include tors of the Federal Reserve Banks of New York, electronic check products, will increase about 0.6 per- Philadelphia, and Dallas. Subsequently, the Board cent (a 1.2 percent increase from January 1998 fee approved similar actions by the board of directors of levels). the Federal Reserve Bank of San Francisco, also Besides these fee changes, the Reserve Banks will effective November 17; by the boards of directors of implement a volume-based fee structure for the Fedthe Federal Reserve Banks of Boston, Richmond, wire funds transfer service and a new fee structure for Atlanta, and Kansas City, effective November 18; by the Fedwire securities transfer service. These structhe board of directors of the Federal Reserve Bank ture changes become effective February 1, 1999. of St. Louis, effective November 19; and by the During the first quarter of 1999, the Reserve Banks boards of directors of the Federal Reserve Banks of will also implement an enhanced multilateral settle- Cleveland, Chicago, and Minneapolis, also effective ment service that will allow participants in settlement November 19. The discount rate is the interest rate arrangements to submit settlement files to the Federal that is charged depository institutions when they bor- Reserve electronically, improving operational effirow from their District Federal Reserve Banks. ciency over current methods. The fees and fee structure for the new and existing multilateral settlement services have been revised by lowering the per-entry fee, introducing a settlement file fee, and increasing REDUCTIONS IN FEES FOR PAYMENT SERVICES the off-line surcharge. OF THE FEDERAL RESERVE BANKS Working with other industry participants, the Reserve Banks also plan to expand their efforts to The Federal Reserve Board on November 4, 1999, educate depository institutions and end users about announced continued price reductions in fees for the benefits of the ACH. This campaign, coupled electronic payment services provided to depository with ACH fee decreases for 1999, is expected to spur institutions by the Federal Reserve Banks. Most of commercial ACH growth and help broaden the use of the new fees become effective January 4, 1999. electronic payment systems. Prices across all electronic payment services will The Monetary Control Act of 1980 requires that decline 17.5 percent in 1999, reflecting lower prices the Federal Reserve recover the costs of providing Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

38 Federal Reserve Bulletin • January 1999 certain payment services over the long term. During The Board also changed from $4.7 million to the 1988-97 period, the Reserve Banks recovered $4.9 million the amount of reservable liabilities of 99.6 percent of the costs of priced services. each depository institution that is subject to a reserve The Reserve Banks project that they will recover requirement of 0 percent. 101.0 percent of their priced services costs for 1999, Additionally, the Board increased the deposit cutincluding imputed expenses and targeted return on off levels that are used in conjunction with the equity, generating a net income of $64.2 million. The exemption level to determine the frequency and detail Reserve Banks estimate that they will recover of deposit reporting required for each institution from 102.2 percent of their costs in 1998. $78.9 million to $81.9 million for nonexempt deposi- On November 4, 1998, the Board also approved tory institutions and from $50.7 million to $52.6 milthe 1999 private-sector adjustment factor (PSAF) for lion for exempt depository institutions. Reserve Bank priced services of $115.8 million, an For depository institutions that report weekly, the increase of $7.3 million, or 6.7 percent, from the low reserve tranche adjustment and the reservable 1998 targeted PSAF of $108.5 million. The PSAF is liabilities exemption adjustment will apply to the an allowance for taxes and other imputed expenses reserve computation period that begins Tuesday, that would have been paid and return on capital that December 1, 1998, and the corresponding reserve would have been earned had the Federal Reserve's maintenance period that begins Thursday, Decempriced services been provided by a private business ber 31, 1998. firm. For institutions that report quarterly, the low reserve tranche adjustment and the reservable liabilities exemption adjustment, will apply to the reserve PROVISION FOR ENHANCED SETTLEMENT computation period that begins Tuesday, Decem- SERVICES TO DEPOSITORY INSTITUTIONS ber 15, 1998, and the corresponding reserve maintenance period that begins Thursday, January 14, 1999. The Federal Reserve Board on November 3, 1998, announced plans for providing an enhanced settlement service to depository institutions. The enhanced JOINT STATEMENT ON THE ALLOWANCE FOR service combines and improves selected features LOAN LOSSES OF DEPOSITORY INSTITUTIONS from the Reserve Banks' existing net settlement services. The Securities and Exchange Commission, the Fed- Under the enhanced service beginning March 29, eral Deposit Insurance Corporation, the Federal 1999, the Federal Reserve Banks will offer a fully Reserve Board, the Office of the Comptroller of the automated settlement service that provides partici- Currency, and the Office of Thrift Supervision on pants in clearing arrangements with finality of settle- November 24, 1998, jointly issued the following ment intraday on the settlement date. statement on the allowance for loan losses of deposi- The service will provide the settling participants tory institutions. with an on-line mechanism to submit an electronic file of settlement information to the Federal Reserve. The Securities and Exchange Commission, Federal Besides increasing operational efficiency, the en- Deposit Insurance Corporation, Federal Reserve Board, hanced service is intended to facilitate a reduction Office of the Comptroller of the Currency and Office of Thrift Supervision (the Agencies) recognize the imporin the duration of settlement risk for private-sector tance of meaningful financial statements and disclosure for clearing arrangements. both the benefit of investors and a safe and sound financial system. The Agencies also recognize the importance of depository institutions having prudent, conservative, but DECREASE IN THE NET TRANSACTION not excessive loan loss allowances that fall within an acceptable range of estimated losses. Accordingly, the ACCOUNTS TO WHICH A 3 PERCENT RESERVE Agencies are issuing this Statement to better ensure the REQUIREMENT WILL APPLY IN 1999 consistent application of loan loss accounting policy and to improve the transparency of financial statements. The Federal Reserve Board on November 24, 1998, In 1986, the Securities and Exchange Commission announced a decrease from $47.8 million to issued FRR 28 concerning Procedural Discipline in Determining the Allowance and Provision for Loan Losses to be $46.5 million in the net transaction accounts to which Reported. In 1993, the four Federal banking agencies a 3 percent reserve requirement will apply in 1999. jointly issued the lnteragency Policy Statement on the This adjustment is known as the low reserve tranche Allowance for Loan and Lease Losses (lnteragency Stateadjustment. ment). These documents provide guidance to depository Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 39 institutions on the establishment and maintenance of an tives and investor protection objectives. The banking agenallowance consistent with generally accepted account- cies understand that the SEC's general concerns about ing principles (GAAP). As these materials make clear, the earnings management issues extend to all SEC registrants, allowance for loan losses should reflect estimated credit not merely banking organizations, and that questions have losses for specifically identified loans, as well as estimated arisen with respect to loan loss allowances in this conprobable credit losses inherent in the remainder of the loan text only with regard to a small number of banking portfolio at the balance sheet date. When determining the organizations. appropriate level for the allowance, management should The Agencies today have agreed to work together with always ensure that the overall allowance appropriately the public accounting profession and banking industry in reflects a margin for the imprecision inherent in most developing further guidance consistent with GAAP, the estimates of expected credit losses. Management's judg- Interagency Statement and FRR 28. This additional guidment should be exercised in a disciplined manner that is ance will help to ensure the transparency of the reported based on and reflective of adequate detailed analyses of the amounts, improve auditability, and serve as a benchmark loan portfolio. for the exercise of prudent judgment. The Chief Accoun- Although management's process for determining allow- tants of each of the Agencies will meet quarterly to coordiance adequacy is judgmental and results in a range of nate this and other projects of mutual interest. estimated losses, it must not be used to manipulate earnings or mislead investors, funds providers, regulators or other affected parties. Management's process must be ENFORCEMENT ACTIONS based on a comprehensive, adequately documented, and consistently applied analysis of the institution's loan portfolio. The depository institution must ensure that its The Federal Reserve Board on November 17, 1998, allowance is supportable in light of the accompanying announced the issuance of a cease and desist order disclosures made to investors, including those made in against the Frontier Bank of Laramie County, Cheymanagement's discussion and analysis and financial footenne, Wyoming. notes, with respect to the underlying economics and trends The order, which includes provisions addressing in the portfolio and any other factors that significantly affect the collectibility of loans. year 2000 readiness, was issued jointly with the The Agencies have discussed their respective concerns Wyoming Department of Audit, Division of Banking. about accounting for allowances for loan losses and agree Also on November 17, 1998, the Federal Reserve that the approach to the allowance should be consistent Board announced the issuance of a cease and desist with the guidance noted above. Accordingly, each of the order against William Shilstone, a former institution- Agencies will continue to fulfill its respective responsibilities for ensuring that the allowance for loan losses is affiliated party of the New York branch of Societe appropriately determined and that earnings are not improp- Generate, New York, New York. • erly managed, consistent with safety and soundness objec- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

40 Minutes of the Federal Open Market Committee Meeting Held on September 29, 1998 A meeting of the Federal Open Market Committee Messrs. Alexander, Hooper, and Ms. Johnson, Associate Directors, Division of International was held in the offices of the Board of Governors of Finance, Board of Governors the Federal Reserve System in Washington, D.C., on Tuesday, September 29, 1998, at 9:00 a.m. Mr. Reinhart, Deputy Associate Director, Division of Monetary Affairs, Board of Governors Present: Mr. Greenspan, Chairman Mr. Struckmeyer, Assistant Director, Division of Mr. McDonough, Vice Chairman Research and Statistics, Board of Governors Mr. Ferguson Mr. Gramlich Ms. Low, Open Market Secretariat Assistant, Mr. Hoenig Division of Monetary Affairs, Board of Mr. Jordan Governors Mr. Kelley Mr. Meyer Messrs. Spillenkothen and Parkinson,2 Director, Ms. Minehan Division of Supervision and Regulation, and Mr. Poole Associate Director, Division of Research and Ms. Rivlin Statistics respectively, Board of Governors Messrs. Boehne, McTeeir, Moskow, and Stern, Mr. Connolly, First Vice President, Federal Reserve Alternate Members of the Federal Open Market Bank of Boston Committee Messrs. Eisenbeis, Goodfriend, Hunter, Kos, Lang, Messrs. Broaddus, Guynn, and Parry, Presidents of and Rolnick, Senior Vice Presidents, Federal the Federal Reserve Banks of Richmond, Reserve Banks of Atlanta, Richmond, Chicago, Atlanta, and San Francisco respectively New York, Philadelphia, and Minneapolis Mr. Kohn, Secretary and Economist respectively Mr. Bernard, Deputy Secretary Ms. Fox, Assistant Secretary Messrs. Judd and Rosengren, Vice Presidents, Federal Mr. Gillum, Assistant Secretary Reserve Banks of San Francisco and Boston Mr. Mattingly, General Counsel respectively Mr. Baxter, Deputy General Counsel Mr. Truman, Economist Ms. Yucel, Research Officer, Federal Reserve Bank of Dallas Messrs. Cecchetti, Dewald, Hakkio, Lindsey, Simpson, Sniderman, and Stockton, Associate By unanimous vote, the minutes of the meeting Economists of the Federal Open Market Committee held on Mr. Fisher, Manager, System Open Market Account August 18, 1998, were approved. The Manager of the System Open Market Account Mr. Winn, Assistant to the Board, Office of Board reported on recent developments in foreign exchange Members, Board of Governors' markets. There were no open market operations in Mr. Ettin, Deputy Director. Division of Research and foreign currencies for the System's account in the Statistics, Board of Governors period since the previous meeting, and thus no vote was required of the Committee. Messrs. Madigan and Slifman, Associate Directors, The Manager also reported on developments in Divisions of Monetary Affairs and Research and Statistics respectively, Board of Governors domestic financial markets and on System open mar- I. Attended portion of the meeting relating the Committee's 2. Attended portion of meeting relating to developments stemming disclosure policies. from the financial difficulties of a large hedge fund. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

41 ket transactions in government securities and federal vehicles, but non-auto sales continued to rise at agency obligations during the period August 18, a brisk pace. The gains were widespread, with 1998, through September 28, 1998. By unanimous increases in spending on furniture and appliances, vote, the Committee ratified these transactions. apparel, and miscellaneous nondurables especially The Committee then turned to a discussion of the strong. Purchases of services also were up appreciaeconomic and financial outlook, and the implementa- bly further in July and August after a rapid secondtion of monetary policy over the intermeeting period quarter rise. Sales and construction of residential ahead. A summary of the economic and financial buildings remained quite strong on balance, reflecting information available at the time of the meeting and very favorable homebuying conditions. Housing of the Committee's discussion is provided below, starts slipped in August but were still above the high followed by the domestic policy directive that was level of the first half of the year. Sales of existing approved by the Committee and issued to the Federal homes dropped back in August from the record high Reserve Bank of New York. registered in July, while sales of new homes were The information reviewed at this meeting sug- slightly higher in July (latest data) than in the first gested that economic activity was expanding at a half of the year. moderate rate. Growth of private domestic final Available indicators pointed to more moderate demand had slowed from its pace in the first half of growth in business fixed investment after the surge in the year, though it was still relatively robust, and capital spending during the first half of the year. reduced spending on U.S. exports and rising import Shipments of nondefense capital goods declined competition were exerting appreciable restraint on in July and August, retracing much of June's large overall activity, as was a slowing in inventory invest- increase, while sales of medium and heavy trucks ment. Reflecting the moderation in growth from the continued to increase at a rapid pace. Nonresidential first half of the year, total payroll employment was construction weakened in July, extending a pattern of trending up at a somewhat slower pace. Despite the sluggish building activity; construction of industrial pressures on labor resources associated with still- structures remained in a downtrend, and office buildtight labor markets, trends in wages and prices ing activity changed little on balance over June and remained stable. July. Growth in nonfarm payroll employment slowed Business inventory accumulation eased further in somewhat over the July-August period. The decelera- July after having slowed sharply in the second quartion reflected further job losses in the manufacturing ter, and inventory-sales ratios remained moderate. sector, notably in the apparel and electronic com- Stockbuilding in manufacturing was at a somewhat ponents industries on which the crisis in Asia was lower rate in July than in the second quarter, and the having a sizable adverse effect. Outside of manufac- stock-shipments ratio for the sector stayed a little turing, employment increases remained strong in above the low level that had prevailed over the past the service-producing industries, and even though year. At the wholesale level, a further decline in anecdotal reports continued to indicate shortages inventories reflected additional reductions in motor of skilled workers, further sizable job gains were vehicles; the inventory-shipments ratio remained in recorded in construction. The civilian unemployment the upper part of its narrow range for the past year. In rate stayed at 4.5 percent in August. the retail sector, a sharp drop in stocks at automotive Industrial output rebounded in August as produc- dealerships more than offset a rise in stocks of other tion at General Motors resumed following the settle- goods. The aggregate inventory-sales ratio for the ment of the labor strike. Outside the motor vehicle retail sector was at a relatively low level. sector, however, output had changed little on balance The nominal deficit on U.S. trade in goods and over recent months in association with the erosion in services narrowed slightly in July from its secondnet exports stemming from the turmoil in Asia and its quarter average, with the value of imports falling repercussions on a number of other U.S. trading part- more than the value of exports. Much of the decline ners; production of consumer goods edged down on in imports and exports involved trade in automotive balance in July and August, and the growth of output products with Canada and Mexico. Economic activity of business equipment slowed. The rise in industrial in the major foreign industrial countries other than production in August boosted the rate of utilization of Japan decelerated on average in the second quarter, manufacturing capacity, but the factory operating rate with a deterioration in net exports partially offsetting remained somewhat below the level of late last year. continued strength in domestic final demand. In Total retail sales were held down in July and Japan, activity contracted for a third consecutive August by a sharp contraction in spending for motor quarter; net exports made a large positive contri- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

42 Federal Reserve Bulletin • January 1999 bution as imports dropped sharply, but domestic rated firms increased sharply, and a number of large demand, most notably business fixed investment, fell banks tightened terms and standards for making busisteeply. ness loans to sizable firms. Credit conditions also Both the overall and the core CPI again rose mod- tightened in Europe, Asia, and Latin America. Share erately in August; a further increase in food prices prices in U.S. and foreign equity markets remained was offset by a sizable decrease in energy prices. For volatile during the intermeeting period, and major the twelve months ended in August, core consumer U.S. equity price indexes declined considerably furprices rose slightly more than they had in the year- ther on balance. earlier period. At the producer level, prices of fin- In foreign exchange markets, the trade-weighted ished goods dropped appreciably in August, largely value of the dollar depreciated substantially over the reflecting declines in the prices of finished foods and, intermeeting period in relation to other major currennotably, energy goods. Producer prices of finished cies. A spreading perception that the United States goods other than food and energy moved slightly was more vulnerable than either Europe or Japan to higher in the twelve months ended in August after an economic downturn in Latin America, increasing having edged down in the year-earlier period. Pro- expectations of monetary easing in the United States, ducer prices at earlier stages of production were and shifts into yen associated with the end of the under strong downward pressure; prices of intermedi- fiscal half-year in Japan and the unwinding of some ate materials fell during the year ended in August by investment positions financed in yen were factors that slightly more than they had risen in the year-earlier weighed on the dollar. By contrast, the dollar appreciperiod, and prices of crude materials plunged further ated slightly in terms of an index of currencies that in the twelve months ended in August. Average includes the developing countries of Latin America hourly earnings of production or nonsupervisory and Asia that are important trading partners of the workers continued to increase at a relatively moder- United States. ate pace in the July-August period, and for the twelve Growth of M2 and M3 picked up considerably in months ended in August they rose slightly more than August and apparently strengthened further in Sepin the year-earlier period. tember. The acceleration was the result of unusually At its meeting on August 18, 1998, the Committee large inflows to money market funds that in part adopted a directive that called for maintaining condi- reflected households' preference for relatively safe, tions in reserve markets that would be consistent with liquid placements for funds shifted out of equities the federal funds rate continuing to average around and lower-rated corporate debt. For the year through 5'/: percent. However, in light of mounting financial September, both aggregates recorded growth rates strains abroad, their potential implications for the well above the Committee's ranges for the year. U.S. economy, and less accommodative conditions in Expansion of total domestic nonfinancial debt had domestic financial markets, the Committee concluded moderated somewhat in recent months after having that the risks to the outlook were no longer tilted picked up earlier in the year. toward rising inflation but had become more bal- The staff forecast prepared for this meeting incoranced. Accordingly, the Committee adopted a direc- porated a considerably weaker assessment of undertive that did not include a presumption about the lying aggregate demand, owing to downward revilikely direction of any adjustment to policy during sions to growth abroad and to the less accommodative the intermeeting period. The reserve conditions asso- conditions that were evolving in U.S. financial ciated with this directive were expected to be consis- markets. The staff projected that the expansion of tent with moderate growth of M2 and M3 over com- economic activity would slow for a time to a pace ing months. appreciably below the estimated growth of the econo- Open market operations were directed throughout my's potential and then would pick up to a rate more the intermeeting period toward maintaining the in line with that potential. Damped expansion of existing degree of pressure on reserve positions, and foreign economic activity and the lagged effects of the federal funds rate remained close to its intended the earlier rise in the foreign exchange value of the level of 5'/2 percent. In an atmosphere of greatly dollar were expected to place considerable restraint increased volatility in financial asset values world- on the demand for U.S. exports for a period ahead wide and a reduced appetite for risk among many and to lead to further substitution of imports for investors, interest rates on U.S. Treasury securities, domestic products. Domestic production also would and to a much smaller extent on investment-grade be held back for a while by the efforts of firms to corporate debt, fell appreciably during the intermeet- bring inventories into better balance with the anticiing period; in contrast, yields on the bonds of lower- pated moderation in the trajectory of final sales. In Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 43 addition, private final demand would be restrained by further. These market developments strongly sugtighter lending terms and conditions as well as the gested, and anecdotal reports tended to confirm, the drop that had occurred in equity prices. Pressures on emergence of widespread perceptions of greater risks labor resources were likely to ease somewhat as the in a broad range of financial investment activities and expansion of economic activity slowed, but inflation of considerably greater reluctance to put capital at was projected to pick up gradually in association with risk. The members did not believe that the tightness a partial reversal of the decline in energy prices this in credit markets and strong demand for safety and year. liquidity were likely to lead to a "credit crunch," In the Committee's discussion of current and pro- though some members expressed the view that such spective economic conditions, members focused on an outcome could not be ruled out. At a time when developments that pointed to the potential for a sig- business balance sheets already indicated a signifinificant weakening in the growth of spending. They cant softening of cash flows owing to weaker profits, recognized that there were at present few statistical many business firms were experiencing increased indications that the economy was on a significantly difficulty and costs in their efforts to raise funds in slower growth track. Indeed,' the available data debt or equity markets or to borrow from lending suggested that consumer expenditures and business institutions; if these conditions were to persist, the investment retained considerable strength. At the sustainability of the current strength in business same time, however, investors' perceptions of risks capital expenditures would come into question. The and their aversion to taking on more risk had decline in stock market prices also appeared likely increased markedly in financial markets around the to damp the growth of consumer spending over world. That change in sentiment was exacerbating time, with added implications for business capital financial and economic problems in a number of expenditures. important trading partners of the United States. In Despite the emergence of decidedly less hospitable addition, it was generating lower equity prices and financial conditions, there were few indications in the tightening credit availability in U.S. financial mar- data available to the Committee of any weakening as kets. As a consequence, the downside risks to the yet in consumer and business spending. Consumer domestic expansion appeared to have risen substan- expenditures, though temporarily held back by shorttially in recent weeks. Though labor markets were ages of new motor vehicles stemming from the work expected to remain relatively tight for some time, stoppage at General Motors, had remained on a solid the members saw little prospect that inflation would uptrend, with overall growth in recent months appargather significant momentum in coming quarters. ently slipping only a little from a remarkably rapid Declining commodity and other import prices would pace in the first half of the year. Strong growth in jobs be restraining prices and inflation expectations for and incomes along with substantial further increases a while. Overall consumer prices might rise a little in stock market prices through mid-July had fostered more rapidly next year as the effects of a number a high level of consumer confidence and spending. of favorable factors, such as falling energy prices, Members commented that the more recent weakness diminished or reversed, but underlying inflation was in the stock market and the related decline in houseexpected to stay quite subdued as inflation expecta- hold net worth had removed an important support for tions remained damped and pressures in labor mar- the growth of consumer spending, but they noted that kets became less pronounced. recent surveys indicated only a slight deterioration in The intensification and further spread of turmoil in consumer sentiment and that the stimulus from earinternational financial markets, notably since the out- lier stock market gains probably would dissipate only break of a financial crisis in Russia in mid-August, gradually. Looking further ahead, consumer spending had spilled over into U.S. financial markets. Strong could be expected to expand at a pace that was more demands for safety and liquidity had driven down in line with the growth of household incomes than it yields on U.S. Treasury securities, but spreads of had been in recent years. private rates over Treasury rates had gapped higher. Growth in business investment spending, while Increases in risk spreads were especially large for apparently moderating from an extraordinary pace lower-grade borrowers and on bonds below invest- during the first half of the year, likewise seemed to ment grade, whose rates had increased considerably have been little affected to date by the tightening in since mid-August. In addition, many banks had tight- credit conditions and the increased aversion to riskened their credit standards and terms. Prices in U.S. taking. Data on shipments of capital equipment equity markets, which had weakened appreciably continued to display a clear uptrend, and members before the crisis in Russia, had declined substantially reported very strong construction activity in many Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

44 Federal Reserve Bulletin • January 1999 parts of the country. Declining relative prices and already were being adversely affected by weaker rapid technological advances were likely to generate export markets and increased competition from appreciable further growth in spending for computer lower-priced imports. Moreover, the intensification and office equipment over the projection horizon. of turmoil in international financial markets since the Moreover, new orders for capital equipment did not Russian devaluation and debt moratorium had led suggest any general weakening, though such orders to tighter financial conditions in key U.S. trading had declined dramatically in the steel industry under partners—especially in the Americas—a developthe weight of intense foreign competition. Even so, ment that was likely to weaken growth in those the members anticipated that the pronounced increase markets and demand for U.S. products. Of potentially in investor and lender perceptions of risk would greater importance for the domestic economic outresult in considerable moderation in the growth of look, however, was the spread of international finanoverall business investment, especially in light of cial unsettlement to U.S. financial markets and the concurrent expectations of reduced gains in sales and attendant deterioration in business and investor confiprofits and evidence of some diminution in both dence. It was clear that the contagious effects of internal and external sources of financing. Reports international economic and financial turmoil had from nearly every Federal Reserve District suggested markedly increased the downside threat to the domesthat executives had become considerably more con- tic expansion. cerned about business prospects. In a number of In their comments about the outlook for inflation, cases they already had seen a substantial downturn members referred to the persistence of very tight in their exports or a surge in competing imports at labor markets across the nation and to indications of prices they found difficult to match. In other cases escalating increases in labor compensation in a numthey were anticipating such developments or were ber of areas. At the same time, price inflation generreacting to the general sense of unease and uncer- ally had remained subdued, with little evidence of tainty evident in financial markets. Forthcoming data acceleration. As had been true for an extended period, on capital spending, including new orders and con- competitive pressures were widely reported to be tracts, were likely to point to a weaker uptrend in preventing employers from passing through rising business fixed investment. How much weaker was a labor costs to consumer prices. Looking ahead, memmajor uncertainty in the economic outlook and a key bers cited a variety of factors bearing on the prosto determining the extent to which financial market pects for inflation that on the whole suggested that turmoil was likely to affect the real economy. the risks of an inflationary uptrend had receded. Very favorable underlying factors, including a Favorable factors in the outlook for prices included strong job market and declining mortgage rates, had the lingering effects of the dollar's earlier appreciahelped to sustain homebuilding activity at an elevated tion, ample industrial capacity, generally declining level. The large further advance in stock market commodity and other import prices, and an apparprices earlier in the year also appeared to have been a ently more rapid trend of productivity gains. Over positive factor in the strong performance of the hous- time, some slowing in economic growth and less ing market. While anecdotal reports suggested that intense pressures on labor resources would hold down softening was confined to only a few areas, the increases in labor costs. Developments that might delayed effects of the drop in stock market prices and tend to offset these positive factors, at least in part, forecasts of slower employment and income growth included a possible turnaround in energy prices after suggested some moderation in housing activity at sizable declines over the past year and an upturn some point. Even so, the continued affordability of in the costs of worker benefits, notably for medical new homes for many households was likely to sustain expenses. A few members also observed that the housing demand at a relatively high albeit diminished rapid growth of key monetary aggregates, including level, and homebuilding activity would be bolstered M2, over a period of several quarters was a worrifor a time as backlogs created by shortages of skilled some element in the outlook for inflation, though the construction workers in many areas were worked off. most recent surge in M2 probably was induced in Net exports, while subject to a great deal of uncer- large measure by a flight to quality and liquidity. tainty, were seen as likely to continue to restrain In their discussion of policy for the intermeeting demand and production to a substantial extent over period ahead, all the members endorsed a proposal coming quarters. Members cited examples from calling for a slight easing in reserve markets to proacross the country of business firms, notably in the duce a decline of [A percentage point in the federal manufacturing sector but also in energy, agriculture, funds rate to an average of about 5lA percent. In their forest products, and some other industries, that view, such an action was desirable to cushion the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 45 likely adverse consequences on future domestic eco- that unanticipated developments were likely in any nomic activity of the global financial turmoil that had event to provide the principal basis for future policy weakened foreign economies and of the tighter con- actions. They suggested that the Committee would ditions in financial markets in the United States that undoubtedly confer by telephone should such develhad resulted in part from that turmoil. At a time of opments materialize during the intermeeting period, abnormally high volatility and very substantial uncer- and the symmetry or asymmetry of the directive tainty, it was impossible to predict how financial would have little bearing on whatever policy decision conditions in the United States would evolve. In might be reached. the view of many members, equity prices and risk At the conclusion of the Committee's discussion, spreads in U.S. financial markets previously had all the members supported a directive that called for embodied an overly optimistic assessment of busi- conditions in reserve markets that would be consisness prospects, and they saw some correction in these tent with a slight decrease in the federal funds rate to markets as a positive development. Moreover, they an average of about 514 percent. All the members expected markets to become much more settled once also indicated that they could accept a change in the the initial adjustments to new risk assessments had directive to include a bias toward easing. Accordbeen made. On balance, however, credit conditions ingly, in the context of the Committee's long-run were likely to remain tighter and equity prices lower objectives for price stability and sustainable ecothan earlier, and in the context of continued damped nomic growth, and giving careful consideration to inflation, monetary policy had the room to adjust to economic, financial, and monetary developments, the these new circumstances. In any event, an easing Committee decided that a slightly higher federal policy action at this point could provide added insur- funds rate might be acceptable or a somewhat lower ance against the risk of a further worsening in finan- federal funds rate would be acceptable during the cial conditions and a related curtailment in the avail- intermeeting period. The reserve conditions contemability of credit to many borrowers. plated at this meeting were expected to be consistent The members agreed that the decrease in the fed- with some moderation in the growth of M2 and M3 eral funds rate should be limited to 25 basis points. over the months ahead. Several emphasized in this regard that although the Federal Reserve Bank of New York was authorized risk of rising inflation might have receded, it was still and directed, until instructed otherwise by the Compresent, especially in light of the persistence to date mittee, to execute transactions in the System Account of very tight labor markets and relatively robust in accordance with the following domestic policy economic growth. In these circumstances, while an directive: easing move was warranted to provide some insurance against undesirably tight domestic financial con- The information reviewed at this meeting suggests that ditions, many members saw the need for a cautious the economy has been growing at a moderate rate, paced policy action. A more sizable policy move at this by brisk, albeit slowing, increases in spending by businesses and households, while expansion in overall ecopoint might convey an exaggerated impression of the nomic activity has continued to be restrained by devel- Committee's current thinking regarding the extent of opments abroad. Nonfarm payroll employment grew downside risks in the economy. somewhat more slowly over July and August, mostly The members were divided over whether to retain reflecting job losses in the manufacturing sector; the civilian unemployment rate was unchanged at 4.5 percent in the current symmetrical directive or to adopt an August. Industrial production has changed little on balance asymmetrical directive that would be tilted toward over recent months. Total retail sales over July and August ease. A small majority favored moving to asymmetry were held down by a sharp contraction in spending for on the grounds that it seemed more consistent with motor vehicles. Residential sales and construction have the increased downside risks to the economy that remained quite strong in recent months. Available indicators point to continued growth in business capital spending, they believed would exist even after the contembut at a more moderate pace than in the first half of the plated policy action and that it would underscore the year. Business inventory accumulation slowed further in Committee's readiness to respond promptly to con- July. The nominal deficit on U.S. trade in goods and ditions that might threaten the sustainability of the services narrowed slightly in July from its second-quarter average. Trends in wages and prices have remained stable expansion. Other members expressed a preference for in recent months. a symmetric directive but indicated that they could Most interest rates have fallen appreciably since the accept a directive that was tilted toward ease. In their meeting on August 18, though yields on the bonds of opinion, the uncertainties relating to the direction of lower-rated firms have increased and a number of large the next policy move were sufficiently great on both banks have tightened terms and standards for making busisides to justify a neutral directive. Some commented ness loans. Broadly similar developments have occurred in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

46 Federal Reserve Bulletin • January 1999 major foreign markets. Share prices in U.S. and global this meeting but agreed that further review of some of equity markets have remained volatile and major indexes these issues would be appropriate. have declined considerably further on balance over the intermeeting period. In foreign exchange markets, the trade-weighted value of the dollar declined substantially over the intermeeting period in relation to other major FINANCIAL PROBLEMS OF A LARGE HEDGE currencies: it was up slightly in terms of an index of the FUND currencies of the developing countries of Latin America and Asia that are important trading partners of the United The Committee discussed the limited role of the States. Federal Reserve Bank of New York in facilitating a Growth of M2 and M3 strengthened considerably in August and appeared to have picked up further in Septem- private-sector resolution of the severe financial probber, partly reflecting shifts of funds by households out of lems encountered in the portfolio managed by Longinvestments in equities and lower-rated corporate debt. For Term Capital Management L.P. The size and nature the year through September, both aggregates rose at rates of the positions of this fund were such that their well above the Committee's ranges for the year. Expansion sudden liquidation in already unsettled financial marof total domestic nonfinancial debt has moderated somewhat in recent months after a pickup earlier in the year. kets could well have induced further financial dislo- The Federal Open Market Committee seeks monetary cations around the world that could have impaired the and financial conditions that will foster price stability and economies of many nations, including that of the promote sustainable growth in output. In furtherance of United States. Against this background, the Federal these objectives, the Committee reaffirmed at its meeting Reserve Bank of New York had brought together key on June 30-July 1 the ranges it had established in February for growth of M2 and M3 of 1 to 5 percent and 2 to interested parties with the aim of increasing the prob- 6 percent respectively, measured from the fourth quarter of ability of an orderly private-sector solution to the 1997 to the fourth quarter of 1998. The range for growth of hedge fund's difficulties. total domestic nonfinancial debt was maintained at 3 to It was agreed that the next meeting of the Commit- 7 percent for the year. For 1999, the Committee agreed on tee would be held on Tuesday, November 17, 1998. a tentative basis to set the same ranges for growth of the monetary aggregates and debt, measured from the fourth The meeting on September 29 adjourned at quarter of 1998 to the fourth quarter of 1999. The behavior 2:40 p.m. of the monetary aggregates will continue to be evaluated in the light of progress toward price level stability, movements in their velocities, and developments in the economy and financial markets. CONFERENCE CALL In the implementation of policy for the immediate future, the Committee seeks conditions in reserve markets consis- In a telephone conference held on October 15, 1998, tent with decreasing the federal funds rate to an average of the Committee members discussed recent economic around 5'A percent. In the context of the Committee's and financial developments and their implications for long-run objectives for price stability and sustainable economic growth, and giving careful consideration to eco- monetary policy. Risk aversion in financial markets nomic, financial, and monetary developments, a slightly had increased further since the Committee's meeting higher federal funds rate might or a somewhat lower fed- in September, raising volatility and risk spreads even eral funds rate would be acceptable in the intermeeting more, eroding market liquidity, and constraining borperiod. The contemplated reserve conditions are expected rowing and lending in a number of sectors of the to be consistent with some moderation in the growth in M2 and M3 over coming months. financial markets. Although indications of any softening in the pace of the economic expansion across the Votes for this action: Messrs. Greenspan, McDonough, country remained sparse, the widespread signs of Ferguson, Gramlich, Hoenig, Jordan, Kelley, Meyer, deteriorating business confidence and evidence of Ms. Minehan, Mr. Poole, and Ms. Rivlin. Votes against less accommodative domestic financial conditions this action: None. suggested that the downside risks to the expansion had continued to mount. Against this background, a consensus emerged in RELEASE OF INFORMATION ABOUT FOMC favor of a 'A percentage point reduction in the federal MEETINGS funds rate that would accompany a reduction in the discount rate that the Board of Governors was At this meeting, the Committee reviewed its current expected to approve at a meeting following this telepractices relating to its policy announcements, meet- phone conference. Some members were concerned ing minutes, and directive wording. This discussion that a policy move so soon after the late September was part of an ongoing appraisal of the Committee's action might be misread as indicative of a degree of disclosure policies. The Committee took no action at concern about prospective developments in financial Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 47 markets or the economic outlook that did not repre- sion, the Chairman indicated that he would instruct sent the Committee's thinking. However, the mem- the Federal Reserve Bank of New York to lower the bers generally concluded that the risk of adverse intended federal funds rate by 25 basis points, consismarket reactions was worth taking and that the easing tent with the Committee's directive issued at the actions under consideration were more likely to help meeting on September 29, 1998. settle volatile financial markets and cushion the effects of more restrictive financial conditions on the Donald L. Kohn ongoing expansion. At the conclusion of this discus- Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

49 Legal Developments FINAL RULE—AMENDMENT TO REGULATION A reserve requirement of zero percent. This action is required by section 19(b)(ll)(B) of the Federal Reserve Act, and The Board of Governors is amending 12 C.F.R. Part 201, the adjustment is known as the reserveable liabilities exits Regulation A (Extensions of Credit by Federal Reserve emption adjustment. The Board is also increasing the de- Banks; Change in Discount Rate), to reflect its approval of posit cutoff levels that are used in conjunction with the a decrease in the basic discount rate at each Federal Re- reserveable liabilities exemption to determine the freserve Bank. The Board acted on requests submitted by the quency of deposit reporting from $78.9 million to Boards of Directors of the twelve Federal Reserve Banks. $81.9 million for nonexempt depository institutions and The amendments to 12 C.F.R. Part 201 were effective on from $50.7 million to $52.6 million for exempt institutions. November 17, 1998. The rate changes for adjustment credit (Nonexempt institutions are those with total reserveable were effective on the dates specified in 12 C.F.R. 201.51. liabilities exceeding the amount exempted from reserve requirements ($4.9 million) while exempt institutions are Part 201—Extensions of Credit by Federal Reserve those with total reserveable liabilities not exceeding the Banks (Regulation A) amount exempted from reserve requirements.) Thus, beginning in September 1999, nonexempt institutions with total 1. The authority citation for Part 201 continues to read as deposits of $81.9 million or more will be required to report follows: weekly while nonexempt institutions with total deposits less than $81.9 million may report quarterly, in both cases Authority: 12 U.S.C. 343 et seq., 347a, 347b, 347c, 347d, on form FR 2900. Similarly, exempt institutions with total 348 et seq., 357, 374, 374a and 461. deposits of $52.6 million or more will be required to report quarterly on form FR 2910q while exempt institutions with 2. Section 201.51 is revised to read as follows: total deposits less than $52.6 million may report annually Section 201.51 Adjustment credit for depository on form FR 2910a. institutions. Effective December 1. 1998, 12 C.F.R. Part 204 is amended as follows: The rates for adjustment credit provided to depository institutions under section 201.3(a) are: Part 204—Reserve Requirements of Depository Institutions (Regulation D) Federal Reserve Bank Rate Effective Boston 4.5 November 18. 1998 1. The authority citation for Part 204 continues to read as New York 4.5 November 17. 1998 Philadelphia 4.5 November 17, 1998 follows: Cleveland 4.5 November 19, 1998 Richmond 4.5 November 18, 1998 Authority: 12 U.S.C. 248(a), 248(c), 371a, 461, 601, 611, Atlanta 4.5 November 18, 1998 and 3 105. Chicago 4.5 November 19, 1998 St. Louis 4.5 November 19. 1998 Minneapolis 4.5 November 19, 1998 Kansas City 4.5 November 18, 1998 2. Section 204.9 is revised to read as follows: Dallas 4.5 November 17, 1998 San Francisco 4.5 November 17, 1998 Section 204.9 Reserve requirement ratios. FINAL RULE—AMENDMENT TO REGULATION D (a) Reserve percentages. The following reserve ratios are The Board of Governors is amending 12 C.F.R. Part 204, prescribed for all depository institutions. Edge and Agreeits Regulation D (Reserve Requirements of Depository ment corporations, and United States branches and agen- Institutions), to decrease the amount of transaction ac- cies of foreign banks: counts subject to a reserve requirement ratio of three (b) Exemption from reserve requirements. Each depository percent, as required by section 19(b)(2)(C) of the Federal institution, Edge or agreement corporation, and U.S. branch Reserve Act, from $47.8 million to $46.5 million of net or agency of a foreign bank is subject to a zero percent transaction accounts. This adjustment is known as the low reserve requirement on an amount of its transaction acreserve tranche adjustment. The Board is increasing from counts subject to the low reserve tranche in paragraph (a) $4.7 million to $4.9 million the amount of reserveable of this section not in excess of $4.9 million determined in liabilities of each depository institution that is subject to a accordance with section 204.3(a)(3). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

50 Federal Reserve Bulletin • January 1999 sections 1 l(i) and (k) of the Federal Reserve Act (12 U.S.C. Category Reserve requirements' 248(i) and (k)). Specifically, the Board is revising and Net transaction accounts: expanding the delegation of authority to the Director of $0 to $46.5 million 3 percent of amount Division of Consumer and Community Affairs to include: over $46.5 million $1,395,000 plus 10 percent of issuing interpretations under the Fair Credit Reporting Act, amount over $46.5 million adjusting the dollar amount to determine coverage under Nonpersonal time deposits 0 percent the Home Ownership and Equity Protection Act, adjusting Eurocurrency liabilities 0 percent the depository institution exemption threshold under the 1. Before deducting the adjustment to be made by the paragraph (b) of this Home Mortgage Disclosure Act, making certain determinasection. tions under the Community Reinvestment Act regulations, and holding public hearings on financial service issues in keeping with congressional mandates. FINAL RULE—AMENDMENT TO REGULATION Y Effective December 28, 1998, 12 C.F.R. Part 265 is amended as follows: The Board of Governors is amending 12 C.F.R. Part 225, Subpart G of its Regulation Y (Appraisal Standards for Federally Related Transactions), which exempts from the Part 265—Rules Regarding Delegation of Authority Board's appraisal requirements transactions involving the underwriting or dealing of mortgage-backed securities. This amendment permits bank holding company subsidiar- 1. The authority citation for Part 265 continues to read as ies engaged in underwriting and dealing in securities (so- follows: called section 20 subsidiaries) to underwrite and deal in Authority: 12 U.S.C. 248(i) and (k). mortgage-backed securities without demonstrating that the loans underlying the securities are supported by appraisals 2. Section 265.9 is amended by revising paragraphs (a) that meet the Board's appraisal requirements. introductory text, (a)(l), (c)(l), (c)(4), and (c)(5), and Effective December 28, 1998, 12 C.F.R. Part 225 is adding new paragraphs (a)(8) and (d) through (g). The amended as follows: revisions and additions read as follows: Part 225—Bank Holding Companies and Change in Bank Control (Regulation Y) * * * ** 1. The authority citation for Part 225 continues to read as Section 265.9 Functions delegated to the Director follows: of Division of Consumer and Community Affairs. Authority: 12 U.S.C. 1817(j)(13), 1818, 1828o, 1831i, 1831p-L 1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, (a) Issuing examination manuals, forms, and other materi- 3331-3351,3907, and 3909. als. To issue examination or inspection manuals; report, agreement, and examination forms; examination proce- 2. In Subpart G, section 225.63 is amended by removing dures, guidelines, instructions, and other similar materithe word "or" at the end of paragraph (a)(ll), by als pursuant to: section 11 (a) of the Federal Reserve redesignating paragraph (a)(12) as paragraph (a)(13), Act (12 U.S.C. 248(a)); sections 108(b). 621(c), 704(b), and by adding a new paragraph (a)(12) to read as 814(c), and 917(b) of the Consumer Credit Protection follows: Act (15 U.S.C. 1607(b), 1681s(b), 1691c(b), 16921(c) and I693o(b)); section 3O5(c) of the Home Mortgage Section 225.63 Disclosure Act (12 U.S.C. 2804(c)); section 18(f)(3) of the Federal Trade Commission Act (15 U.S.C. Appraisals required; transactions requiring a State 57a(f|(3)); section 8O8(c) of the Civil Rights Act of certified or licensed appraiser. 1968 (42 U.S.C. 3608(c)); section 270(b) of the Truth in (*\\ ^* ^ ^ Savings Act (12 U.S.C. 4309); and section 5 of the (12) The transaction involves underwriting or deal- Bank Holding Company Act of 1956 (12 U.S.C. ing in mortgage-backed securities; or 1844(c)). The foregoing manuals, forms, and other materials are for use within the Federal Reserve System in the administration of enforcement responsibilities in connection with: FINAL RULE—AMENDMENT TO RULES REGARDING (1) Sections 1-200 and 501-921 of the Consumer DELEGATION OF AUTHORITY Credit Protection Act (15 U.S.C. 1601-1693r), in regard to the Truth in Lending Act, the Consumer The Board of Governors is amending 12 C.F.R. Part 265, Leasing Act, the Equal Credit Opportunity Act, the its Rules Regarding Delegation of Authority, pursuant to Electronic Fund Transfer Act, the Fair Credit Re- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 51 porting Act and the Fair Debt Collection Practices ORDERS ISSUED UNDER BANK HOLDING COMPANY Act; ACT * * * ** Orders Issued Under Section 3 of the Bank Holding (8) Sections 261-274 of the Truth in Savings Act Company Act (12 U.S.C. 4301-4313). CAB Holding, LLC Wilmington, Delaware (c) Determining inconsistencies between state and federal laws. * * * Order Approving Formation of a Bank Holding (1) Sections 111, 171 (a) and I86(a) of the Truth in Company Lending Act (15 U.S.C. 1610(a), 1666j(a), 1667e(a)) and section 226.28 of Regulation Z CAB Holding, LLC ("CAB") has requested the Board's (12 C.F.R. Part 226) and section 213.7 of Regula- approval under section 3(a)(l) of the Bank Holding Comtion M (12C.F.R. Part 213); pany Act ("BHC Act") (12 U.S.C. § 1842(a)(l)) to become a bank holding company by acquiring all the voting shares of The Chinese American Bank, New York, New (4) Section 3O6(a) of the Home Mortgage Disclosure York ("Bank"). Act (12 U.S.C. 2805(a)) and section 203.3 of Reg- Notice of the application, affording interested persons an ulation C (12 C.F.R. Part 203); and opportunity to submit comments, has been published (5) Section 273 of the Truth in Savings Act (12 U.S.C. (63 Federal Register 12,813 (1998)). The time for filing 4312) and section 230.1 of Regulation DD comments has expired, and the Board has considered the (12 C.F.R. Part 230). application and all comments received in light of the factors set forth in section 3 of the BHC Act. (d) Interpreting the Fair Credit Reporting Act. To issue CAB is a newly formed nonoperating corporation that interpretations pursuant to section 621(e) of the Fair would become a bank holding company by the acquisition Credit Reporting Act (15 U.S.C. 1681s(e)); of Bank. Bank is the 122d largest commercial banking (e) Annual adjustments. To adjust as required by law: organization in New York, with deposits of $188 million, (1) The amount specified in section 103(aa)(l)(B)(ii) representing less than 1 percent of total deposits in comof the Truth in Lending Act and section mercial banking organizations in the state.1 Based on all 226.32(a)(l)(ii) of Regulation Z (12 C.F.R. Part the facts of record, the Board has concluded that consum- 226), relating to mortgages bearing fees above a mation of the proposal would not have a significantly certain amount in accord with section IO3(aa)(3) of adverse effect on competition or on the concentration of that act (15 U.S.C. 1602(aa)); and banking resources in any relevant banking market and that (2) The amount specified in section 309(b)( 1) of the competitive consideraiions are consistent with approval. Home Mortgage Disclosure Act (12 U.S.C. Based on all the facts of record, including confidential 2808(b)(l)) and section 203.3(a)(l)(ii) of Regulasupervisory information and other information concerning tion C (12 C.F.R. Part 203) relating to the asset Bank and the sole shareholder of CAB, the Board conthreshold above which a depository institution must cludes that considerations relating to the financial and collect and report data. managerial resources and future prospects of CAB and (f) Community Reinvestment Act determinations. To make Bank, the convenience and needs of the communities to be determinations, pursuant to section 804 of the Commu- served, and other supervisory factors that the Board is nity Reinvestment Act (12 U.S.C. 2903), approving or required to consider under section 3 of the BHC Act are disapproving: consistent with approval of the proposal. In addition, the (1) Strategic plans and any amendments thereto pursu- Board has received commitments that ensure the Board's ant to section 228.27(g) and (h) of Regulation BB access to information on the operations and activities of (12 C.F.R. Part 228); and CAB and its affiliates, in order to permit the Board to (2) Requests for designation as a wholesale or limited determine and enforce compliance with the BHC Act and purpose bank or the revocation of such designation, other federal banking laws. pursuant to section 228.25(b) of Regulation BB Based on the foregoing and all the facts of record, the (12 C.F.R. Part 228). Board has determined that the application should be, and (g) Public hearings. To conduct hearings or other proceed- hereby is, approved. The Board's approval is expressly ings required by law, concerning consumer law or conditioned on compliance with all the commitments made other matters within the responsibilities of the Division by CAB, Bank, and CAB's sole shareholder in connection of Consumer and Community Affairs, in consultation with the application. For purposes of this action, the comwith other interested divisions of the Board where appropriate. 1. Deposit and market data are as of June 30, 1997. CFBanc Holdings, Inc. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

52 Federal Reserve Bulletin • January 1999 mitments and conditions relied on by the Board in reaching Notice of the applications, affording interested persons this decision are deemed to be conditions imposed in an opportunity to submit comments, has been published writing by the Board in connection with its findings and (63 Federal Register 29,996 (1998)). The time for filing decision and, as such, may be enforced in proceedings comments has expired, and the Board has considered the under applicable law. applications and all comments received in light of the The proposal shall not be consummated before the fif- factors set forth in section 3 of the BHC Act. teenth calendar day after the effective date of this order, or Holdings and Corporation are nonoperating corporations later than three months after the effective date of this order, formed for the purpose of acquiring control of Bank, a unless such period is extended for good cause by the Board de novo institution.3 The Board previously has noted that or by the Federal Reserve Bank of New York, acting the establishment of a de novo bank enhances competition pursuant to delegated authority. in the relevant banking market and is a positive consider- By order of the Board of Governors, effective Novem- ation in an application under section 3 of the BHC Act.4 ber 30, 1998. Accordingly, the Board concludes that consummation of the proposal would not have a significantly adverse effect Voting for this action: Chairman Greenspan. Vice Chair Rivlin, and on competition or on the concentration of banking re- Governors Kelley, Meyer. Ferguson, and Gramlich. sources in any relevant banking market and that competitive considerations are consistent with approval. In light of ROBERT DEV. FRIERSON all the facts of record, the Board also concludes that the Associate Secretary of the Board financial and managerial resources and future prospects of Holdings, Corporation, and Bank, and the other supervi- CFBanc Holdings, Inc. sory factors that the Board is required to consider under Washington, D.C. section 3 of the BHC Act are consistent with approval of the proposal. CFBanc Corporation Bank intends to operate with a community development Washington, D.C. focus and to seek to increase the availability of credit, capital, and financial services in low- and moderate-income Order Approving Formation of Bank Holding Companies neighborhoods and to low- and moderate-income individuand Acquisition of a Bank als in the District of Columbia. Bank intends to serve the identified credit and banking needs of low-and moderate- CFBanc Holdings, Inc. ("Holdings") and CFBanc Corpoincome areas in the District of Columbia by offering a ration ("Corporation") have requested the Board's aprange of commercial, real estate, and consumer loans, as proval under section 3(a)(l) of the Bank Holding Company well as checking, savings, and other traditional deposit Act ("BHC Act") (12U.S.C. § 1842(a)(l)) to become products. In light of Bank's objectives and all other facts of bank holding companies by acquiring control of more than 25 percent of the voting shares of City First Bank of D.C, Washington, D.C. ("Bank"), a de novo national bank that will operate with a community development focus.1 Corpo- 3. The Federal National Mortgage Association ("Fannie Mae") proposes to acquire up to 4.9 percent of the voting shares and up to ration would acquire all of the voting shares of Bank, and 9.9 percent of the total equity of Corporation. Section 18(s) of the Holdings, a nonstock, nonprofit corporation organized under Federal Deposit Insurance Act ("FDI Act") prohibits depository the laws of the District of Columbia, would acquire approxi- institutions from being an affiliate of, sponsored by, or accepting mately 48 percent of the voting shares of Corporation.2 financial support directly or indirectly from Fannie Mae or any other Government-sponsored enterprise. 12U.S.C. § 1828(s)(l). Section 18(s)(3), however, permits a Government-sponsored enterprise to provide financial assistance to a depository institution as permitted by 1. Bank would engage primarily in lending and other activities the statutes governing the enterprise. See id. at § I828(s)(3). In this designed to promote the welfare of low- and moderate-income neigh- case. Fannie Mae has not sponsored and would not be an affiliate of borhoods and individuals in the District of Columbia. Bank. Fannie Mae also asserts that its purchase of Corporation stock is 2. Georgetown University and the National Community Investment permissible under section 18(s)(3) of the FDI Act because the pro- Fund ("NCIF"), a community development fund sponsored by Shore- posed investment is authorized under, and consistent with, the purbank Corporation, Chicago, Illinois ("Shorebank"). propose to make poses of the Fannie Mae Charter Act. See I2U.S.C. §§ 1716, investments in Corporation. Georgetown University. NCIF. and Shore- I723a(a); 62 Federal Register 68.060 (1997). Fannie Mae's purchase bank have made a number of commitments, including commitments of a noncontrolling interest in Corporation would increase the rethat the Board has relied on in previous cases, to limit the ability of sources of Bank available for residential mortgage financing and. thus, these companies to exercise a controlling influence over Corporation appears consistent with the purposes of the Charter Act. See id. at or Bank. Based on these commitments, the fact that Holdings (which § 1716. The Board notes, moreover, that Bank intends to focus its is a company independent of the other investors in Corporation) will lending efforts on low- and moderate-income areas, and that Federal control nearly 50 percent of the voting shares of Corporation, the law encourages Fannie Mae to assist primary lenders to make housing purpose and nature of the activities of Bank, and all the other facts of credit available in areas with concentrations of low-income and minorrecord, the Board concludes that the facts do not warrant a conclusion ity families. See id. at § 4565(a). In light of all the facts of record, and at this time that Georgetown, NCIF. or Shorebank would control after consulting with the Federal Deposit Insurance Corporation, the Corporation or Bank for purposes of the BHC Act. The Board ex- Board concludes that Fannie Mae's proposed investment in Corporapressly retains its authority to initiate a control proceeding if the facts tion is permitted under section 13(s)(3) of the FDI Act. presented at a later date indicate that any such entity in fact controls 4. See Wilson Bank Holding Company. 82 Federal Reserve Bulletin Corporation or Bank for purposes of the BHC Act. 568(1996). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 53 record, the Board concludes that convenience and needs $831.8 million in deposits, representing 4.4 percent of state are consistent with approval of the proposal. deposits. On consummation of the proposal, and account- Based on the foregoing and all the facts of record, the ing for the proposed divestitures, Applicant would be the Board has determined that the applications should be, and fourth largest depository institution in West Virginia, conhereby are, approved. The Board's approval is expressly trolling approximately $1.65 billion in deposits in the state, conditioned on compliance by all relevant parties with the representing approximately 8.7 percent of state deposits. commitments made in connection with the applications. For purposes of this action, the commitments and condi- Competitive Considerations tions relied on by the Board in reaching this decision are deemed to be conditions imposed in writing by the Board The BHC Act prohibits the Board from approving an in connection with its findings and decision, and as such, application under section 3 of the BHC Act if the proposal may be enforced in proceedings under applicable law. would result in a monopoly or would be in furtherance of The transaction shall not be consummated before the any attempt to monopolize the business of banking. The fifteenth calendar day following the effective date of this BHC Act also prohibits the Board from approving a proorder, or later than three months following the effective posed combination that would substantially lessen compedate of this order, unless such periods are extended for tition or tend to create a monopoly in any relevant banking good cause by the Board or by the Federal Reserve Bank of market, unless the Board finds that the anticompetitive Richmond, acting pursuant to delegated authority. effects of the proposal are clearly outweighed in the public By order of the Board of Governors, effective Novem- interest by the probable effect of the proposal in meeting ber 9, 1998. the convenience and needs of the community to be served.2 Applicant and Horizon Bancorp compete directly in four Voting for this action: Vice Chair Rivlin and Governors Kelley, banking markets in West Virginia: Beckley, Charleston, Meyer, Ferguson, and Gramlich. Absent and not voting: Chairman Greenbrier and Huntington.3 The Board has carefully re- Greenspan. viewed the competitive effects of the proposal in these banking markets in light of all the facts of record, including ROBERT DEV. FRIERSON the number of competitors that would remain in the mar- Associate Secretary of the Board kets, the characteristics of the markets, and the projected increase in the concentration of total deposits in depository City Holding Company institutions in the markets ("market deposits")4 as mea- Charleston, West Virginia sured by the Herfindahl-Hirshman Index ("HHI") under the Department of Justice Merger Guidelines ("DOJ Order Approving the Acquisition of a Bank Holding Guidelines").5 Consummation of the proposal without di- Company vestitures would be consistent with the DOJ Guidelines and prior Board decisions in the Huntington and Charles- City Holding Company ("Applicant"), a bank holding ton, banking markets.6 company within the meaning of the Bank Holding Com- To mitigate the potential anticompetitive effects of the pany Act ("BHC Act"), has requested the Board's approposal in the Greenbrier banking market, Applicant has proval under section 3 of the BHC Act (12 U.S.C. § 1842) to acquire Horizon Bancorp, Inc., Beckley, West Virginia ("Horizon Bancorp"), and its wholly owned subsidiary banks, Bank of Raleigh, Beckley; First National Bank in 2. 12 U.S.C. § I842(c). 3. The banking markets are described in Appendix A. Marlinton, Marlinton; Greenbrier Valley National Bank, 4. Market share data are based on calculations that include the Lewisburg; National Bank of Summers, Hinton; and The deposits of thrift institutions at 50 percent. The Board previously has Twentieth Street Bank, Huntington, all in West Virginia. indicated that thrift institutions have become, or have the potential to Notice of the proposal, affording interested persons an become, significant competitors of commercial banks. See. e.g., Midwest Financial Group, 75 Federal Reserve Bulletin 386 (1989); opportunity to submit comments, has been published National City Corporation, 70 Federal Reserve Bulletin 743 (1984). (63 Federal Register 54,712 (1998)). The time for filing Thus, the Board has regularly included thrift deposits in the calculacomments has expired, and the Board has considered the tion of market share on a 50-percent weighted basis. See, e.g.. First proposal and all comments received in light of the factors Hawaiian Inc.. 11 Federal Reserve Bulletin 52 (1991). set forth in section 3 of the BHC Act. 5. Under DOJ Guidelines. 49 Federal Register 26,823 (1984), a market in which the post-merger HHI is more than 1800 is considered Applicant is the sixth largest depository institution in highly concentrated. The Department of Justice has informed the West Virginia, controlling approximately $916.9 million in Board that a bank merger or acquisition generally will not be chaldeposits, representing approximately 4.8 percent of total lenged (in the absence of other factors indicating anticompetitive deposits in depository institutions in the state ("state de- effects) unless the post-merger HHI is at least 1800 and the merger increases the HHI by more than 200 points. The Justice Department posits").1 Horizon Bancorp is the seventh largest deposihas stated that the higher than normal HHI thresholds for screening tory institution in West Virginia, controlling approximately bank mergers for anticompetitive effects implicitly recognize the competitive effects of limited-purpose lenders and other nondepository financial institutions. ]. State and market data are as of June 30. 1997, and are updated for 6. Market data for these banking markets after consummation of the merger activity as of October 23, 1998. proposal are described in Appendix B. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

54 Federal Reserve Bulletin • January 1999 committed to divest one branch that controls approxi- comparable counties in West Virginia. The entry of a mately $37.8 million in deposits in the market.7 With the commercial bank de novo in 1995 also appears to confirm proposed divestitures, the concentration levels in the the attractiveness of the Beckley banking market. Greenbrier banking market as measured by the HHI would The proposed divestiture of approximately 4.6 percent of be consistent with the DOJ Guidelines after consummation market deposits to an out-of-market commercial banking of the proposal. The HHI would increase by approximately organization would create another market entrant, and the 88 points to not more than 2529, and five competitors number of depository institutions competing in the market would remain in the Greenbrier banking market. would remain unchanged at nine competitors. These com- Applicant is the fifth largest commercial banking organi- petitors include three large national and regional banking zation in the Beckley banking market, controlling deposits organizations that each have significant market shares. of $109.8 million, representing 8.8 percent of market de- The Department of Justice has conducted a detailed posits. Horizon Bancorp is the largest in the market, con- review of the proposal and has advised the Board that, in trolling $361.1 million of deposits, representing 29 percent light of the proposed divestitures, consummation of the of total market deposits. proposal would not likely have a significantly adverse Applicant has committed to divest one branch that con- effect on competition in any relevant banking market. The trols approximately $57 million in deposits and that repre- Office of the Comptroller of the Currency, the Federal sents approximately 4.6 percent of the market deposits. On Deposit Insurance Corporation and the West Virginia Comconsummation of the proposal and divestiture, Applicant missioner of Banking also have been afforded an opportuwould be the largest depository institution in the market, nity to comment and have not objected to consummation of controlling $413.9 million in deposits, representing approx- the proposal. imately 33.3 percent of market deposits. The post-merger After carefully reviewing all the facts of record and for HHI would increase by not more than 208 points to not the reasons discussed in this order and appendices, the more than 2132. Board concludes that consummation of the proposal would Consummation of the transaction with the proposed di- not likely result in any significantly adverse effects on vestiture would exceed the DOJ Guidelines, in the Beckley competition or on the concentration of banking markets in banking market. As the Board has indicated in previous the Beckley, Charleston, Greenbrier and Huntington bankcases, in a market in which the competitive effects of a ing markets where Applicant and Horizon Bancorp comproposal exceed the DOJ Guidelines, the Board will con- pete or in any other relevant banking market. Accordingly, sider whether other factors tend to mitigate the competitive based on all of the facts of record and subject to compleeffects of the proposal. The number and strength of factors tion of the proposed divestitures, the Board has determined necessary to mitigate competitive effects depend on the that the competitive factor is consistent with approval of level of market concentration and size of the increase in the proposal. market concentration.8 The Beckley banking market has characteristics that make it attractive for entry when compared to similar Other Factors Under the BHC Act counties in West Virginia.'' For example, from 1994 to 1997, the increase in population in the Beckley banking The BHC Act also requires the Board, in acting on an market was three times larger than the increase in popula- application, to consider the financial and managerial retion in comparable counties. In addition, the average num- sources and future prospects of the companies and banks ber of residents per branch and amount of deposits per involved in a proposal, the convenience and needs of the branch in the banking market exceeded those statistics for community to be served, and certain other supervisory factors.10 The Board has carefully considered the financial and 7. With respect to each divestiture. Applicant has committed to execute a sales agreement for the proposed divestiture with a new managerial resources and future prospects of Applicant and market entrant prior to consummation of the proposal, and to com- Horizon Bancorp, and their respective subsidiary banks, plete the divestiture within 180 days of consummation. Applicant also and other supervisory factors in light of all the facts of has committed that, in the event it is unsuccessful in completing the record. As part of this consideration, the Board has redivestiture within 180 days of consummation, it will transfer the viewed relevant reports of examination and other superviunsold branch to an independent trustee that is acceptable to the Board and will instruct the trustee to sell the branch promptly to one or more sory information prepared by the Reserve Banks and other alternative purchasers acceptable to the Board. See BankAmerica Corporation, 78 Federal Reseire Bulletin 338 (1992); United New Mexico Financial Corporation. 11 Federal Reserve Bulletin 484 10. A commenter has asserted that First National Bank in Marlinton (1991). In the Beckley banking market. Applicant has committed that ("Bank") is the subject of several lawsuits as a result of its business the purchaser of the divested branch of a one-branch bank would be relationships with local public agencies. There have been no adjudicagiven the option of retaining the name of that bank. tions of wrongdoing by Bank in these proceedings, and each matter is 8. See, e.g.. First Union Corporation, 84 Federal Reserve Bulletin before a forum that can provide adequate remedies if the allegations of 489 (1998): NationsBank Corporation. 84 Federal Reserve Bulletin wrongdoing can be sustained. Commenter also alleges, without pro- 129(1998). viding any supporting information, that Bank is under investigation 9. Beckley is not a Metropolitan Statistical Area ("MSA"). Accord- for the misuse of federal and state grants. In reviewing this case, the ingly, the market characteristics of the Beckley banking market were Board has contacted and considered the views of federal banking compared with other non-MSA counties in West Virginia. agencies and the Department of Justice. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 55 federal agencies. The Board notes that the bank holding Appendix A companies and their subsidiary banks currently are well capitalized and are expected to remain so after consumma- The Beckley, West Virginia, banking market is defined as tion of the proposal. the Beckley Ranally Metro Area ("RMA") and includes The Board also has considered other aspects of the the town of Whitesville in Boone County, the remainder of financial condition and resources of the two organizations, Raleigh County, Summers County, and the portion of the structure of the proposed transaction, and the manage- Fayette County that excludes the towns of Montgomery rial resources of each of the entities and the combined and Smithers. organization. Based on these and other facts of record, the The Charleston, West Virginia, banking market is de- Board concludes that considerations relating to the finan- fined as the Charleston, West Virginia, RMA and includes cial and managerial resources and future prospects of Ap- the remainders of Kanawha and Putman Counties, and the plicant, Horizon Bancorp, and their respective subsidiaries towns of Montgomery and Smithers in Fayette County. are consistent with approval of the proposal, as are the The Greenbrier, West Virginia, banking market is deother supervisory factors that the Board must consider fined as Greenbrier County, West Virginia. under section 3 of the BHC Act. The Huntington banking market is defined as Hunting- The Board has carefully considered the effect of the ton, West Virginia-Kentucky-Ohio RMA and the remainproposed acquisition on the convenience and needs of the der of Boyd County, Kentucky; Lawrence County, Ohio; community to be served in light of all the facts of record. and Cabell and Wayne Counties, West Virginia. All of Applicant's and Horizon's subsidiary banks have received "outstanding" or "satisfactory" ratings from their Appendix B appropriate federal supervisors at the most recent examinations of their performance under the Community Reinvest- In the Charleston, West Virginia, banking market applicant ment Act ("CRA") (12 U.S.C. § 2901 etseq.). Based on all would control 13.8 percent of market deposits and would the facts of record, including the CRA performance records remain the second largest depository institution in the of the subsidiary banks of Applicant and Horizon Bancorp, market after consummation of the proposal. The HHI the Board concludes that convenience and needs consider- would increase by 34 points to 1841. ations are consistent with approval of the proposal. In the Huntington, West Virginia, banking market applicant would control 9.3 percent of the market deposits and would become the second largest depository institution in the market after consummation of the proposal. The HHI Conclusion would increase by 25 points to 636. Based on the foregoing, and in light of all the facts of Peoples Heritage Financial Group, Inc. record, the Board has determined that the application Portland, Maine should be, and hereby is, approved. Approval of the application is specifically conditioned on compliance by Appli- Order Approving Acquisition of a Bank Holding cant with all the commitments made in connection with the Company proposal and with the conditions stated or referred to in this order, including Applicant's divestiture commitments. Peoples Heritage Financial Group, Inc., Portland, Maine For purposes of this transaction, the commitments and ("Peoples"), a bank holding company within the meaning conditions referred to in this order shall be deemed to be of the Bank Holding Company Act ("BHC Act"), and its conditions imposed in writing by the Board in connection wholly owned subsidiary, Peoples Heritage Merger Corp., with its findings and decision and, as such, may be en- Portland, Maine ("Peoples Merger"), have requested the forced in proceedings under applicable law. Board's approval under section 3 of the BHC Act The acquisition shall not be consummated before the (12 U.S.C. § 1842) to merge with SIS Bancorp, Inc., fifteenth calendar day after the effective date of this order, Springfield, Massachusetts ("SIS"), and to acquire the and the proposal shall not be consummated later than three subsidiary banks of SIS, Springfield Institution for Savmonths after the effective date of this order, unless such ings, Springfield, Massachusetts ("SIS Bank"), and Glasperiod is extended for good cause by the Board or by the tonbury Bank & Trust Company, Glastonbury, Connecticut Federal Reserve Bank of Richmond, acting pursuant to ("Glastonbury Bank").1 delegated authority. Notice of the proposal, affording interested persons an By order of the Board of Governors, effective Novem- opportunity to submit comments, has been published ber 30, 1998. (63 Federal Register 54,140 (1998)). The time for filing comments has expired, and the Board has considered the Voting for this action: Chairman Greenspan. Vice Chair Rivlin, and Governors Kelley, Meyer, Ferguson, and Gramlich. 1. Peoples also has requested Board approval to hold and exercise options to acquire up to 19.9 percent of the voting shares of SIS, if ROBERT DEV. FRIERSON certain events occur. The options would not be exercised if the merger Associate Secretary of the Board is consummated. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

56 Federal Reserve Bulletin • January 1999 proposal and all comments received in light of the factors The BHC Act also requires the Board, in acting on an set forth in section 3 of the BHC Act. application, to consider the financial and managerial re- Peoples, with total consolidated assets of approximately sources and future prospects of the companies and banks $9.8 billion, operates depository institutions in Maine, New involved, and other supervisory factors. The Board has Hampshire, and Massachusetts.2 Peoples is the tenth larg- reviewed these factors in light of the record, including est depository institution in Massachusetts, controlling de- supervisory reports of examination assessing the financial posits of approximately $1 billion in the state, representing and managerial resources of the organizations and financial less than 1 percent of total deposits in insured depository information provided by Peoples. Based on all the facts of institutions in the state ("state deposits'"). SIS, with total record, the Board concludes that the financial and manageconsolidated assets of approximately $1.8 billion, operates rial resources and future prospects of Peoples, SIS, and depository institutions in Massachusetts and Connecticut. their respective subsidiary banks are consistent with ap- SIS is the ninth largest depository institution in Massachu- proval, as are other supervisory factors the Board must setts, controlling deposits of approximately $1.1 billion in consider under section 3 of the BHC Act. that state, representing less than 1 percent of state deposits. On consummation of the proposal, Peoples would be the Convenience and Needs Considerations eighth largest depository organization in Massachusetts, controlling deposits of $2.1 billion, representing 1.8 per- In acting on a proposal under section 3 of the BHC Act, the cent of state deposits. Board is required to consider the effect of the proposal on the convenience and needs of the community to be served. Interstate Analysis The Board has carefully reviewed the effect of the proposal on the convenience and needs of the communities to be Section 3(d) of the BHC Act allows the Board to approve served in light of all the facts of record, including coman application by a bank holding company to acquire ments submitted on the proposal.6 control of a bank located in a state other than the home The Board has long held that consideration of the convestate of the bank holding company if certain conditions are nience and needs factor includes a review of the records of met.3 For purposes of the BHC Act, the home state of the relevant depository institutions under the Community Peoples is Maine, and SIS controls banks in Massachusetts Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). As and Connecticut.4 All the conditions for an interstate acqui- provided in the CRA, the Board has evaluated this factor in sition enumerated in section 3(d) are met in this case.5 In light of examinations by the primary federal supervisors of view of all the facts of record, the Board is permitted to the CRA performance records of the relevant institutions. approve the proposal under section 3(d) of the BHC Act. An institution's most recent CRA performance evaluation is a particularly important consideration in the applications Competitive, Financial and Managerial Considerations process because it represents a detailed on-site evaluation of the institution's overall record of performance under the Peoples and SIS do not compete in any banking market. CRA by its primary federal supervisor.7 All the insured Based on all the facts of record, the Board concludes that depository institutions controlled by Peoples received "outconsummation of the proposal would not result in a mo- standing" or "satisfactory" CRA performance ratings in nopoly or have a significantly adverse effect on competi- their most recent CRA examination by their primary fedtion in any relevant banking market. eral supervisor: Family Bank, FSB, Haverhill, Massachusetts ("Family FSB"), received an "outstanding" rating from the Office of Thrift Supervision ("OTS"), as of July 28, 1997; Peoples Heritage Savings Bank, Portland, 2. Asset and deposit data are as of June 30, 1998. unless otherwise Maine, received an "outstanding" rating from the Federal noted. Deposit Insurance Corporation ("FDIC"), as of April 8, 3. See 12U.S.C. § 1842(d). 4. A bank holding company's home state is that state in which the 1996; and Bank of New Hampshire received a "satisfactooperation of the bank holding company's banking subsidiaries were ry" rating from the FDIC, as of January 17, 1995. principally conducted on July 1, 1966, or the date on which the company became a bank holding company, whichever is later. 12U.S.C. § 1841(o)(4)(C). 5. See 12U.S.C. §§ 1842(d)(l)(A) and (B) and 1842(d)(2)(A) 6. The Board received a comment letter signed by several commuand (B). Peoples is adequately capitalized and adequately managed, as nity groups ("commenters") which expressed concern that the acquidefined in the BHC Act, and the subsidiary banks of SIS have been in sition of SIS by Peoples would adversely affect the positive impact existence and operated for the minimum periods of time necessary to SIS has had on the Springfield, Massachusetts, community. Commentsatisfy age requirements established by applicable state law. ers favorably noted some current programs of Peoples, but expressed See Mass. Gen. Laws Ann. ch. I67A, § 2 (West 1998) (three years); concern about the record of Peoples in meeting the residential lending Conn. Gen. Stat. Ann. § 36a-412 (West 1998) (five years). Peoples needs of low- and moderate-income and minority borrowers. also would not exceed applicable state law deposit limitations as 7. The Statement of the Federal Financial Supervisory Agencies calculated under state law. On consummation of the proposal. Peoples Regarding the Community Reinvestment Act provides that a CRA would control less than 10 percent of the total amount of deposits in examination is an important and often controlling factor in the considinsured depository institutions in the United States. All other require- eration of an institution's CRA record and that reports of these ments of section 3(d) of the BHC Act also would be met on consumexaminations will be given great weight in the applications process. mation of the proposal. 54 Federal Register 13,742 and 13,745 (1989). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 57 In reviewing this case, the Board has paid particular government agencies such as the Massachusetts Housing attention to the record of performance of Family FSB in Finance Authority ("MHFA"), the Federal Housing Adhelping to meet the convenience and needs of the commu- ministration ("FHA"), and the Department of Veterans nity because Peoples proposes to merge SIS Bank into Affairs ("VA"). Peoples states that the majority of the Family FSB.8 In its most recent CRA examination of mortgage loans originated in 1997 by Family FSB were to Family FSB, examiners noted that Family FSB offered a borrowers earning less than the median income of the full range of residential, commercial, and consumer loans. assessment area and 36 percent of mortgage loans were to Examiners commented favorably on the institution's no- borrowers earning less than 80 percent of the median fee checking accounts, telephone banking services, and an income. electronic banking card program for social security and Examiners noted that Family FSB made almost 500 public assistance income distribution. Examiners also noted loans, totaling more than $84 million, to small businesses that Family FSB's services were readily accessible and in its assessment area from January 1, 1996, to July 31, tailored to the convenience of all segments of its assess- 1997. Examiners noted that these loans represented more ment area. Examiners stated that all of the institution's than 60 percent of Family FSB's commercial loans and branches offered automated teller machines ("ATMs") and more than 90 percent of the institution's small business 16 of the institution's 21 full-service retail offices offered loans. Moreover, examiners stated that Family FSB made extended hours at drive-through facilities. Peoples also 80 small business loans, totaling more than $12 million, in indicates that it maintains full-service branches operated by LMI census tracts. Peoples states that, in cooperation with students at local high schools to provide business training the North Quabbin Community Advisory Board, Family opportunities for the students. FSB made loans totaling more than $250,000 pursuant to a Examiners stated that, according to data reported for $1 million commitment to a small business loan pool since 1995 pursuant to the Home Mortgage Disclosure Act the pool was established in June 1998. Peoples also states (12 U.S.C. § 2801 et seq.) ("HMDA"), Family FSB origi- that Family FSB has been designated a "Preferred Lender" nated a substantially higher percentage of residential loans by the Small Business Administration. to low- and moderate-income ("LMI") borrowers than the Examiners stated that, from January 1, 1996, to July 31, aggregate average percentage for all HMDA lenders in the 1997, Family FSB made 28 loans, totaling more than area. Based on 1995 HMDA data, Family FSB made more $5 million, to organizations in its assessment area that than 400 residential loans, totaling more than $25 million, supported affordable housing, economic and community to LMI borrowers. Examiners particularly noted that the development, and neighborhood stabilization. Examiners institution met many low-income lending needs through also noted that, of these loans, almost 40 percent by numspecial credit programs with flexible debt-to-income ratios, ber and more than 30 percent by dollar amount were made down payment assistance, government guarantees, and in LMI census tracts. Examiners favorably commented on mortgage insurance. Examiners stated that Family FSB the more than $2 million in investments in community significantly enhanced efforts to promote home ownership development organizations made by Family FSB during for low-income borrowers through the institution's Com- the examination period, including investments in lowmunity Outreach Program and its participation in first-time income housing limited partnerships, small business loan home buyer and down payment assistance programs of- funds, and programs for housing rehabilitation. Peoples fered by community groups, government agencies, and states that, in 1996 and 1997, Family FSB made grants and secondary market sources.9 Examiners also stated that donations of more than $200,000 to organizations such as Family FSB's residential loan originations were substan- The United Way, Merrimack Valley Housing Partnership, tially concentrated in its assessment area from January 1, Worcester County Food Bank, Worcester East Side CDC, 1995, to July 31, 1997. Examiners noted that Family FSB and the North County Land Trust. Examiners also noted participated in affordable housing programs sponsored by that the institution's management and officers contributed financial expertise to a significant number of community organizations and programs, including affordable housing development and rehabilitation corporations, credit and 8. Immediately after consummation of the merger of SIS into Peoples Merger, Peoples anticipates that SIS Bank would merge with home ownership counseling agencies, job training and and into Family FSB. The merger of SIS Bank into Family FSB is placement services for low-income individuals, and finansubject to the prior approval of the OTS under the Bank Merger Act. cial intermediaries that lend to small businesses in LMI 9. Peoples states that, as part of its Community Outreach Program, areas. Family FSB offers mortgages with special terms for LMI borrowers, including an adjustable rate mortgage with discounted pricing based SIS Bank received an "outstanding" rating from the on the borrower's income level compared with the median income of FDIC at its most recent CRA examination, as of Septemthe area, with the most favorable pricing reserved for borrowers ber 22, 1997.10 Glastonbury Bank received a "satisfactoearning less than 50 percent of the area's median income level: permitting up to 2 percent of the required 5 percent down payment to come from a gift, grant, or Family FSB unsecured loan with no interest for applicants earning less than 60 percent of the area's median income; and flexible requirements for debt-to-income ratios. 10. For purposes of CRA, the assessment area of SIS Bank consists Peoples also states that more than $6 million in mortgage loans have of the Springfield, Massachusetts. Metropolitan Statistical Area been made through its Community Outreach Program since the pro- ("MSA") and some contiguous towns in the same census tracts as gram began in late 1994. towns located in the Springfield MSA. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

58 Federal Reserve Bulletin • January 1999 ry" rating from the FDIC at its most recent CRA examina- ples also states that no branch closings or consolidations tion, as of August 26, 1996. Examiners noted that, based are anticipated in connection with the proposed merger. on 1995 HMDA data, SIS Bank was the market leader in The Board has carefully considered the lending records its assessment area with 8.7 percent by number and of Family FSB and SIS Bank in light of comments on the 11 percent by dollar amount of the HMDA loans reported 1996 and 1997 data reported by the institutions pursuant to in the assessment area. Examiners also noted that, based on the HMDA. The data for 1996 and 1997 generally show 1996 HDMA data, SIS Bank made almost 50 HMDA that Family FSB and SIS Bank have assisted in meeting the loans, totaling more than $2.7 million, in LMI census tracts credit needs of the communities they served with respect to and 250 HMDA loans, totaling more than $14 million, to HMDA-related loans, including the credit needs of minor- LMI borrowers. Examiners stated that, during 1996, SIS ity and LMI borrowers and borrowers in LMI census tracts. Bank made more than 80 home equity loans, totaling more The Board has carefully considered the data in light of than $2 million, in LMI census tracts and more than other information, including examination reports that pro- 470 home equity loans, totaling more than $12 million, to vide an on-site evaluation of the compliance by Family LMI borrowers. Examiners commented favorably on the FSB and SIS Bank with the fair lending laws and the innovative and flexible lending programs offered by SIS overall lending and community development activities of Bank, many of which were focused on first-time home the banks. The examinations revealed no evidence of probuyers in LMI areas. Examiners noted that, in 1996, SIS hibited or illegal credit practices at Family FSB and SIS Bank made approximately $1.5 million in mortgage loans Bank, and the institutions were in compliance with the under its Soft Seconds Program which provides LMI bor- substantive provisions of antidiscrimination laws and regurowers with two mortgages; the second mortgage is subsi- lations, including the Equal Credit Opportunity Act, the dized with public funds and provides for significantly Fair Housing Act, and the HMDA. Peoples states that reduced payments during the first nine years of the loan. Family FSB conducts annual CRA and fair lending training Examiners also stated that, during 1996, SIS Bank made for all employees. 38 mortgage loans, totaling more than $2.7 million, under a The Board has carefully considered all the facts of program sponsored by the MHFA to assist first-time home record, including the comments received, responses to buyers that includes a 30-year fixed rate mortgage at below those comments, and the CRA performance record of market interest rates with low down payment requirements Family FSB and SIS Bank, including relevant reports of and flexible underwriting guidelines. Examiners also noted examination and other supervisory information. Based on a that, in 1996, SIS Bank made 21 mortgage loans, totaling review of the entire record and for the reasons discussed more than $2 million, in a VA mortgage program that above, the Board concludes that convenience and needs provides 100 percent financing to eligible veterans. considerations, including the CRA records of performance Examiners stated that, in 1996, SIS Bank made more of the institutions involved, are consistent with approval of than 260 commercial loans, totaling more than $ 10 million, the proposal. in amounts equal to or less than $100,000, representing Conclusion more than 60 percent by number of the commercial loans made by SIS Bank during the period. Examiners also noted Based on all the facts of record, and for the reasons that 65 percent of commercial loans made by SIS Bank discussed above, the Board has determined that the applicawith original balances of $1 million or less during the tion should be, and hereby is, approved. The Board's period were originated to businesses with gross annual decision is specifically conditioned on compliance with all revenues of $1 million or less. the commitments made in the application. The commit- Examiners stated that the number and distribution of SIS ments relied on in reaching this decision shall be deemed Bank's branches provided reasonable access to the bank's to be conditions imposed in writing by the Board in conservices by everyone living in the bank's assessment area. nection with its findings and decision and, as such, may be Examiners noted that most of the bank's branches offered enforced in proceedings under applicable law. extended operating hours. Examiners stated that SIS Bank The acquisition of SIS may not be consummated before employed numerous bilingual individuals who could pro- the fifteenth calendar day after the effective date of this vide translation services. Examiners also noted that SIS order, and the proposal may not be consummated later than Bank offered several free deposit products, such as basic three months after the effective date of this order, unless checking, statement savings, and unlimited usage of propri- such period is extended for good cause by the Board or by etary and nonproprietary ATMs. the Federal Reserve Bank of Boston, acting pursuant to Peoples states that, after consummation of the proposed delegated authority. merger, the combined organization would continue to offer By order of the Board of Governors, effective Novemmany of the consumer products and services offered by ber 4, 1998. SIS, including a checking account with no minimum bal- Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and ance, no monthly service charges, and no transaction lim- Governors Kelley, Ferguson, and Gramlich. Absent and not voting: its; home equity loan and credit lines; relationship check- Governor Meyer. ing packages, which provide enhanced deposit rates and reduced fee structures; certificates of deposit with flexible ROBERT DEV. FRIERSON interest rate terms; and telephone banking services. Peo- Associate Secretary of the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 59 Popular, Inc. $20 billion and total consolidated deposits of approxi- Hato Rey, Puerto Rico mately $12 billion.4 Banco Popular, with total consolidated assets of approximately $16 billion, is the largest commer- Banco Popular de Puerto Rico cial banking organization in Puerto Rico, controlling total Hato Rey, Puerto Rico consolidated deposits of approximately $8 billion, representing approximately 35 percent of total deposits in Puerto Popular Transition Bank Rico.5 Banco Popular has approximately 200 branches in Hato Rey, Puerto Rico Puerto Rico, as well as branches in the U.S. Virgin Islands and the British Virgin Islands. Banco Popular's U.S. bank- Banco Popular, New York ing operations include branches in New York State and an New York, New York agency in Chicago, Illinois (the "Chicago Agency"). In addition to Banco Popular, Popular controls nine insured Order Approving the Acquisition of Banks, Merger of depository institutions in California, Florida, Illinois, Banks, Establishment of Branches and an Agency, and New Jersey, and Texas. Membership in the Federal Reserve System As part of the reorganization, Popular proposes to merge certain of its current U.S. banking operations into a single Popular, Inc., Hato Rey, Puerto Rico ("Popular"), a bank state-chartered bank, Banco Popular, New York ("Banco holding company within the meaning of the Bank Holding Popular-New York"). Popular also proposes to transfer Company Act ("BHC Act"), and its subsidiaries propose Banco Popular's current operations in Puerto Rico, the U.S. to reorganize their holdings in a manner that requires the Virgin Islands and the British Virgin Islands, and a pro- Board's approval under section 3 of the BHC Act posed state-licensed branch in New York, New York (the (12 U.S.C. § 1842) and section I8(c) of the Federal Deposit "New NY Branch"), and the Chicago Agency (collective- Insurance Act (12 U.S.C. § 1828(c)) ("Bank Merger Act"). ly, the "Purchased Operations"), to New Banco Popular. As part of this proposal. Popular would reorganize its Both Banco Popular-New York and New Banco Popular banking operations under two de novo banks, one orga- have requested approval to become members of the Fednized under the laws of Puerto Rico and the other orga- eral Reserve System.6 nized under the laws of New York, that propose to become members of the Federal Reserve System pursuant to sec- Interstate Analysis tions 9 and 19(h) of the Federal Reserve Act ("FRA") (12 U.S.C. §§ 321 and 466). The Puerto Rican de novo Under the proposal, Banco Popular-New York would operbank. Popular Transition Bank, Hato Rey, Puerto Rico ate branches in its home state of New York and in Califor- ("New Banco Popular"), also proposes to operate a branch nia, Florida, Illinois, and New Jersey at locations where the and agency in the United States pursuant to section 7(d) of bank's predecessors currently operate branches.7 Under the International Banking Act ("IBA") (12 U.S.C. section 9 of the FRA and section 44 of the Federal Deposit § 3IO5(d)),' and to establish three agreement corporations Insurance Act ("FDI Act"), a state member bank may pursuant to section 25 of the FRA.2 acquire and operate branches outside the bank's home state Notice of the proposal, affording interested persons an provided certain conditions are met.8 None of the home opportunity to submit comments, has been published (63 Federal Register 52,273 (1998)).3 As required by the Bank Merger Act, reports on the competitive effects of the 4. Asset and deposit data are as of June 30, 1998. unless otherwise merger were requested from the U.S. Attorney General, the noted. In September 1998, Popular received approval under the BHC Office of the Comptroller of the Currency ("OCC"), and Act to acquire First State Bank of Southern California, Sante Fe the Federal Deposit Insurance Corporation. The time for Springs, California, and Bronson-Gore Bancorp, and thereby acquire its subsidiary banks, Bronson-Gore Bank, Prospect Heights, Illinois; riling comments has expired, and the Board has considered Irving Bank, Chicago, Illinois; and Water Tower Bank, Chicago, the applications and notices and all comments received in Illinois. Popular consummated these acquisitions on October 31. 1998. light of the factors set forth in the Bank Merger Act, the 5. Banco Popular deposit data and ranking are as of June 30, 1997. BHC Act, the FRA, and the IBA. 6. New Banco Popular proposes to continue to operate branches in Puerto Rico at locations where Banco Popular currently operates Popular, the top-tier parent holding company of Banco branches. Popular de Puerto Rico. Hato Rey, Puerto Rico ("Banco 7. The following insured depository institutions would be merged Popular"), has total consolidated assets of approximately into Banco Popular-New York: Banco Popular, N.A. (California). City of Commerce, California; First State Bank of Southern California. Santa Fe Springs, California; Banco Popular, N.A. (Florida). Sanford. Florida; Banco Popular, Illinois, Irving Bank, and Water Tower Bank, 1. For purposes of the application under the IBA, New Banco all of Chicago, Illinois; and Bronson-Gore Bank, Prospect Heights, Popular is considered a "foreign bank" as defined in section l(b)(7) Illinois. In addition, Popular proposes to merge Banco Popular, F.S.B., of the IBA. See 12 U.S.C. §3101(7). Newark, New Jersey ("BP-FSB"), into Banco Popular-New York 2. The applications filed with the Board in connection with the through a series of steps that require approval under section 5(d)(3) of proposed reorganization are listed in the Appendix. the FDI Act (12 U.S.C. § 1815(d)(3)). All the factors under section 5(d)(3) of the FDI Act are met in this proposal. 3. Notices of the various applications submitted in connection with the proposal were also published in newspapers of general circulation 8. See 12 U.S.C. §§ 321 and 1831u. Section 9 of the FRA governs in the relevant communities. the locations where a bank that is or becomes a state member bank Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

60 Federal Reserve Bulletin • January 1999 states of the depository institutions involved in the pro- nies and their subsidiaries are consistent with approval, as posed depository institution mergers have enacted laws are the other supervisory factors the Board must consider that prohibit the proposed mergers.9 In addition, the Board under the FRA, the Bank Merger Act and section 3 of the has determined that each bank involved in the proposal BHC Act. would be adequately capitalized and adequately managed In considering the convenience and needs factor, the on consummation of the transaction, and that all other Board reviewed the records of the relevant depository applicable conditions of section 9 of the FRA and section institutions under the Community Reinvestment Act 44 of the FDI Act are met by this proposal.10 Popular has ("CRA").13 As provided in the CRA, the Board has evalunotified the relevant state authorities in New York, Califor- ated this factor in light of examinations by the primary nia, Florida, Illinois, and New Jersey of its proposal to federal supervisors of the relevant institutions. All the consolidate banking operations and provided a copy of its insured depository institutions controlled by Popular re- Bank Merger Act application to all the relevant state agen- ceived "outstanding" or "satisfactory" CRA performance cies. Representatives from all the states involved in the ratings in their most recent CRA examinations by their proposal have indicated that this transaction would comply primary federal supervisors. Based on a review of the with their state laws on interstate bank mergers. In light of entire record, the Board concludes that convenience and the foregoing, it appears that the proposal complies with needs considerations, including the CRA performance the interstate banking requirements of section 9 of the FRA records of the institutions involved, are consistent with and section 44 of the FDI Act.'' approval of the proposal. Under section 5(a)(7) of the IBA, a foreign bank, with The Board also considered the competitive effects of the the approval of the Board, may establish an agency outside proposal as required by the Bank Merger Act and section 3 its home state, provided the establishment and operation of of the BHC Act. Based on all the facts of record, including the agency is expressly permitted by the state in which the the fact that this transaction is a corporate reorganization, agency is to be established.12 For purposes of the IBA, the Board concludes that consummation of the proposal New Banco Popular's home state would be New York, and would not have a significantly adverse effect on competi- New Banco Popular proposes to operate the Chicago tion or on the concentration of banking resources in any Agency as an agency of the bank. After a review of sec- relevant banking market. Accordingly, the Board contion 5 of the IBA and the relevant state law of Illinois, the cludes that competitive considerations are consistent with Board has determined that New Banco Popular may oper- approval. ate the Chicago Agency at this location, subject to the In addition, the Board has considered the factors it is condition that New Banco Popular also receive the ap- required to evaluate under the IBA for New Banco Popular proval of the OCC. to operate the Chicago Agency and the New NY Branch. New Banco Popular would engage directly in the business Other Factors of banking outside the United States through its banking operations in Puerto Rico and elsewhere. Popular has pro- In reviewing this proposal under the FRA, the Bank Merger vided the Board with the information necessary to assess Act and section 3 of the BHC Act, the Board has consid- the application through submissions that address the releered the financial and managerial resources and future vant issues. In addition, New Banco Popular would be prospects of the companies and banks involved, the conve- subject to comprehensive consolidated supervision by the nience and needs of the communities to be served, and appropriate federal and Puerto Rican bank supervisory certain supervisory factors. The Board has reviewed these agencies. The Board also has determined that the other factors in light of the facts of record, including supervisory standards required by the IBA are met in this case and that reports of examination assessing the financial and manage- all factors under section 25 of the FRA are consistent with rial resources of the organizations and financial informa- approval. tion provided by Popular. The Board notes that the resulting institutions would be well-capitalized on Conclusion consummation of the proposal. Based on all the facts of record, the Board concludes that the financial and manage- Based on the foregoing, including the commitments made rial resources and future prospects of the holding compa- to the Board by Popular and its subsidiaries in connection with these applications and notices, and in light of all the facts of record, the Board has determined that these applimay establish and operate branches. That section incorporates the cations and notices should be, and hereby are, approved. restrictions contained in section 44 of the FDI Act. Section 44 also The Board's approval is specifically conditioned on comgoverns branches that may be acquired by any state member bank in pliance by the applicants with all commitments made in an interstate merger transaction. 9. See Cal. Fin. Code § 3824 (West 1998); Fla. Stat. Ann. connection with these applications and notices and the § 658.2953 (West 1998); 205 111. Comp. Stat. Ann. 5/21.1 (West conditions discussed in this order. 1998); and N.J. Stat. Ann. § 17:9A-133.1 (West 1998). \0.See 12U.S.C. § 1831u(b). 11. All the conditions for an interstate acquisition enumerated in section 3(d) of the BHC Act also would be met in this case. 12. See 12U.S.C. § 31O3(a)(7) 13. 12U.S.C. § 2901 etseq. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 61 The acquisition and merger of Popular's subsidiary (12) Merger of Banco Popular, N.A. (Florida) with and banks shall not be consummated before the fifteenth calen- into Banco Popular-New York under the Bank dar day following the effective date of this order or later Merger Act (12 U.S.C. § 1828(c)). than three months following the effective date of this order, (13) Merger of First State Bank of Southern California unless such period is extended for good cause by the Board with and into Banco Popular-New York under the or by the Federal Reserve Bank of New York, acting Bank Merger Act (12 U.S.C. § 1828(c)). pursuant to delegated authority. (14) Merger of Bronson-Gore Bank with and into Banco By order of the Board of Governors, effective Novem- Popular-New York under the Bank Merger Act ber 16, 1998. (12 U.S.C. § 1828(c)). (15) Merger of Irving Bank with and into Banco Popular- Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and New York under the Bank Merger Act (12 U.S.C. Governors Kelley, Meyer, Ferguson, and Gramlich. § 1828(c)). ROBERT DEV. FRIERSON (16) Establishment of branches at the locations of the Associate Secretary of the Board predecessor institutions of New Banco Popular and Banco Popular-New York under section 9 of the Appendix Federal Reserve Act (12 U.S.C. § 321). Applications and Notices Submitted to the Board in (17) Merger of Water Tower Bank with and into Banco connection with the Reorganization of Popular, Inc. Popular-New York under the Bank Merger Act (12 U.S.C. § 1828(c)). (1) Membership of New Banco Popular in the Federal (18) Establishment by New Banco Popular of an agency Reserve System under section 19(h) of the Federal in Chicago, Illinois, under section 7(d) of the Interna- Reserve Act (12 U.S.C. § 466). tional Banking Act (12 U.S.C. § 3105(d)). (2) Membership of Banco Popular-New York in the Fed- (19) Establishment by New Banco Popular of a branch in eral Reserve System under section 9 of the Federal New York, New York, under section 7(d) of the Reserve Act (12 U.S.C. § 321). International Banking Act (12 U.S.C. § 3105(d)). (3) Acquisition by Popular and its intermediate holding (20) Redemption of capital stock and reduction of capital companies of control of Banco Popular-New York of Banco Popular under sections 9(6) and 9(11) of under section 3(a)(3) of the Bank Holding Company the Federal Reserve Act (12 U.S.C. §§ 324 and 329), Act (12 U.S.C. § 1842(a)(3)). resulting from a distribution to Popular consisting of (4) Acquisition by Popular and its intermediate holding all the outstanding shares of common stock of New companies of control of New Banco Popular under Banco Popular. section 3(a)(3) of the Bank Holding Company Act (21) Reduction of capital of Banco Popular-New York, (12 U.S.C. § 1842(a)(3)). under sections 9(6) and 9(11) of the Federal Reserve (5) Retention of ownership by Popular and its intermedi- Act (12 U.S.C. §§ 324 and 329), resulting from a ate holding companies, under section 3(a)(3) of the dividend to Popular North America, Inc., consisting Bank Holding Company Act, of Banco Popular, of all the outstanding shares of common stock of F.S.B., after its conversion from a federal savings Equity One, Inc. association to a national banking association (22) Acquisition by New Banco Popular of all the out- (12 U.S.C. § 1842(a)(3)). standing shares of Popular Leasing & Rental, Inc., (6) Acquisition by Banco Popular North America, Inc. of Popular Mortgage, Inc., and Popular Finance, Inc. as control of Banco Popular, N.A. (Texas) under section agreement corporations under section 211.4(f) of 3(a)(3) of the Bank Holding Company Act Regulation K (12 C.F.R. 211.4(f». (12 U.S.C. § 1842(a)(3)). (23) Establishment by Banco Popular-New York of an (7) Acquisition by New Banco Popular of the Purchased international banking facility under 12 C.F.R. Operations from Banco Popular under the Bank 204.8(a)(l). Merger Act (12 U.S.C. § 1828(c)). (24) Establishment by New Banco Popular of its first two (8) Merger of Banco Popular (with only New York oper- branches in foreign countries, under section 25 of the ations) with and into Banco Popular-New York under Federal Reserve Act (12 U.S.C. § 601) and section the Bank Merger Act (12 U.S.C. § 1828(c)). 211.3(a)(l) of Regulation K (12 C.F.R. 211.3(a)(l)). (9) Merger of Banco Popular, F.S.B. (after its conversion to a national banking association) with and into Susquehanna Bancshares, Inc. Banco Popular-New York under the Bank Merger Lititz, Pennsylvania Act (12 U.S.C. § 1828(c)). (10) Merger of Banco Popular, Illinois, with and into Order Approving Acquisition of a Bank Holding Banco Popular-New York under the Bank Merger Company Act (12 U.S.C. § 1828(c)). (11) Merger of Banco Popular, N.A. (California) with and Susquehanna Bancshares, Inc. ("Susquehanna"), a bank into Banco Popular-New York under the Bank holding company within the meaning of the Bank Holding Merger Act (12 U.S.C. § 1828(c)). Company Act ("BHC Act") (12 U.S.C. § 1842(a)(3)), has Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

62 Federal Reserve Bulletin • January 1999 requested the Board's approval under section 3 of the BHC to be served in light of all the facts of record. As part of Act to acquire Cardinal Bancorp, Inc. ("Cardinal"), and that review, the Board has considered a comment from a thereby acquire Cardinal's subsidiary bank, First American community group, New Jersey Citizen Action ("NJCA"), National Bank of Pennsylvania ("FA Bank"), both of concerning the performance of Susquehanna's subsidiary, Everett, Pennsylvania. Equity National Bank, Atco, New Jersey ("Equity Bank"), Notice of the proposal, affording interested persons an under the Community Reinvestment Act ("CRA").2 NJCA opportunity to submit comments, has been published alleges that Susquehanna has not demonstrated its commit- (63 Federal Register 38,335 (1998)). The time for filing ment to the credit needs of southern New Jersey and has comments has expired, and the Board has considered the failed to develop products to meet the community credit proposal and all comments received in light of the factors needs.3 NJCA further alleges that, based on data filed set forth in section 3 of the BHC Act. under the Home Mortgage Disclosure Act ("HMDA"),4 Susquehanna operates subsidiary banks in Pennsylvania, Equity Bank has an inadequate record of lending to low- Maryland, and New Jersey. Susquehanna is the tenth larg- and moderate-income ("LMI") census tracts and to Afriest depository institution in Pennsylvania, controlling can Americans. approximately $1.5 billion in deposits, representing ap- The Board has long held that consideration of the conveproximately 1.1 percent of total deposits in depository nience and needs factor includes a review of the records of institutions in the state ("state deposits").1 Cardinal is the the relevant depository institutions under the CRA. As 112th largest depository institution in Pennsylvania, con- provided in the CRA, the Board has evaluated the convetrolling approximately $111.9 million in deposits, repre- nience and needs factor in light of examinations of the senting less than 1 percent of state deposits. On consumma- CRA performance records of the relevant institutions by tion of the proposal, Susquehanna would become the ninth their primary federal supervisors. An institution's most largest depository institution in the state, controlling depos- recent CRA performance evaluation is a particularly imporits of $1.6 billion, representing approximately 1.2 percent tant consideration in the application process, because it of state deposits. represents a detailed, on-site evaluation of the institution's overall record of performance under the CRA by its pri- Competitive, Financial and Managerial Considerations mary federal supervisor. Susquehanna's largest insured depository institution sub- Susquehanna and Cardinal do not compete in any banking sidiary, which accounts for approximately 26.8 percent of market. Based on all the facts of record, the Board con- the company's consolidated assets, received an "outstandcludes that consummation of the proposal would not have a ing" rating from its primary federal supervisor, the Office significant adverse effect on competition or on the concen- of Thrift Supervision, at its most recent examination for tration of banking resources in any relevant banking mar- performance under CRA, as of July 20, 1998. Equity Bank, ket. which was acquired by Susquehanna on February 28, 1997, The Board also has considered the financial and manage- and represents approximately 6 percent of the total assets rial resources and future prospects of Susquehanna, Cardi- of Susquehanna, received a "satisfactory" rating at its nal, and their respective subsidiaries in light of all the facts most recent evaluation for CRA performance in 1996. Two of record, including supervisory reports of examination of Susquehanna's other banks received "outstanding" ratassessing the financial and managerial resources of the ings from their primary federal supervisor at their most organizations and financial information provided by Sus- recent evaluations for CRA performance, and all of Susquehanna. The Board notes that Susquehanna and its sub- quehanna's other subsidiary banks received "satisfactory" sidiaries are well capitalized and are expected to remain so ratings at their most recent evaluations for CRA perforafter consummation of the proposal. The Board also has mance. FA Bank, which is the bank Susquehanna proposes considered other aspects of the financial condition and to acquire, received a "satisfactory" rating from the Office resources of the two organizations and the structure of the of the Comptroller of the Currency at its last performance proposed transaction. Based on all the facts of record, the examination. Board concludes that considerations related to the financial The records of examination of the subsidiary banks of and managerial resources and the future prospects of Sus- Susquehanna and Cardinal indicate that the examiners quehanna, Cardinal, and their respective subsidiary banks, found no evidence of prohibited discrimination or other are consistent with approval, as are the other supervisory factors the Board is required to consider under section 3 of the BHC Act. 2. 12U.S.C. §2901 etseq. 3. NJCA also argues that Susquehanna has failed to meet with community groups to discuss the needs of the communities that Convenience and Needs Considerations Equity Bank serves. The Board previously has noted that, although communication by depository institutions with community groups The Board also has carefully considered the effect of the provides a valuable method of assessing and determining how best to proposal on the convenience and needs of the communities meet the credit needs of a community, neither the CRA nor the CRA regulations of the federal supervisory agencies require depository institutions to enter into agreements with any organization. See Fifth Third Bancorp, 80 Federal Reserve Bulletin 838 (1994). 1. All banking data are as of June 30, 1998. 4. 12U.S.C. §2801 etseq. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 63 illegal credit practices and found no violations of fair the percentage of Equity Bank's loans made in LMI census lending laws in any of Susquehanna's subsidiary banks. tracts increased from 1996 to 1997, and increased again Susquehanna's lead commercial subsidiary bank, Farmers through August 1998. Equity Bank also recently estab- First Bank, Lititz, Pennsylvania ("FFB"), has increased its lished an advisory board to help identify the credit needs of residential mortgage loans to LMI borrowers in recent the community. years. Many of these loans were originated in conjunction The Board has considered carefully the entire record in with the Lancaster Housing Opportunity Program, which its review of the convenience and needs factor under the offers a home buyer program with flexible underwriting BHC Act. Based on all the facts of record, including standards. FFB also offers Veterans Administration and NJCA's submission, Susquehanna's response, and the rele- Federal Housing Administration loans. In addition, FFB vant reports of examination, the Board concludes that has originated more indirect automobile loans to LMI considerations relating to convenience and needs, includborrowers than to any other income group. FFB also partici- ing the CRA performance records of the relevant institupates in the Habitat for Humanity program and other tions, are consistent with approval. The Board expects that housing projects through the Housing Development Corpo- Susquehanna will continue to implement its three-year plan ration in Lancaster County. at Equity Bank and to take the steps necessary to incorpo- Susquehanna's other subsidiary banks have implemented rate programs at Equity Bank that will help meet the credit several programs to address the credit needs of LMI com- needs of its community. The Board's action in this case is munities, such as a Community Homebuyers Program, conditioned on the full implementation of these programs which provides reduced fee loans to borrowers. Some of by Susquehanna and Equity Bank. In addition, to permit the banks also have a special small loan program and lines the Board to assess the effectiveness of Equity Bank's of credit for home renters. The banks also are participating eiforts, the Board's action on this proposal is conditioned lenders in affordable housing programs throughout on the requirement that Susquehanna report to the Federal Pennsylvania. Reserve System, on a semi-annual basis during the two- The Board previously reviewed the outreach programs year period after consummation, its progress toward imof Susquehanna's subsidiary banks in connection with its proving Equity Bank's lending in LMI areas and to LMI acquisition of Equity Bank and found that Susquehanna individuals. had policies and programs in place to ascertain the credit needs of its community.5 The Board's 1997 Order noted Conclusion that Susquehanna proposed to implement a three-year lending program at Equity Bank to expand the type of loans Based on the foregoing, and in light of all the facts of available in its community. record, the Board has determined that the application Equity Bank is primarily a small business lender,6 and should be, and hereby is, approved.7 The Board's approval the three-year CRA plan was designed to increase Equity is specifically conditioned on compliance by Susquehanna Bank's affordable home mortgage lending, home improve- with the conditions described in this order and with all the ment lending, community development lending, and to commitments made in connection with the application. For increase its small business lending to its community. Since the purpose of this action, the commitments and conditions its acquisition by Susquehanna, Equity Bank has increased relied on by the Board in reaching its decision are deemed lending in all these categories, resulting in increases in the to be conditions imposed in writing by the Board in conpercentage of Equity Bank's loan originations to LMI nection with its findings and decision and, as such, may be areas and individuals, and an overall increase in the per- enforced in proceedings under applicable law. centage of lending within Equity Bank's assessment area. In 1997 and 1998, Equity Bank extended more than $687,000 in loans to first-time LMI home purchases and 7. NJCA also requested that the Board hold a public meeting or $263,000 in home improvement loans to qualified LMI hearing on the proposal. Section 3(b) of the BHC Act does not require the Board to hold a public hearing on an application unless the borrowers. The bank also has commitments for $550,000 appropriate supervisory authority for the bank to be acquired makes a in revolving credit for the construction of affordable hous- timely written recommendation of denial. The Board has not received ing and for $178,000 for a commercial mortgage for a such a recommendation from the appropriate supervisory authorities. family services agency. Overall, data provided by Equity Under its rules, the Board also may, in its discretion, hold a public meeting or hearing on an application to acquire a bank if a meeting or Bank shows that Equity Bank's lending to LMI census hearing is necessary or appropriate to clarify factual issues related to tracts improved from 1996 to 1997, and continued to the application and to provide an opportunity for testimony, if approincrease in 1998. Data on small business loans indicate that priate. 12C.F.R. 225.16(e). The Board has carefully considered NJCA's request in light of all the facts of record. In the Board's view. NJCA has had ample opportunity to submit its views, and did submitted written comments that have been carefully considered by the 5. See Susquehanna Bancshares, Inc., 83 Federal Reserve Bulletin Board in acting on the proposal. NJCA's request fails to demonstrate 317 (1997) ("1997 Order"). why its written comments do not adequately present its evidence and 6. According to Equity Bank's last examination, as of December 31, fails to identify disputed issues of fact that are material to the Board's 1995, approximately 42 percent of the bank's loan portfolio consisted decision that would be clarified by a public meeting or hearing. For of small business loans in amounts of less than $1 million. Small these reasons, and based on all the facts of record, the Board has business loans constituted 45.7 percent of the dollar volume of Equity determined that a public meeting or hearing is not required or war- Bank's loans through August 31. 1998. ranted in this case. Accordingly, the request is denied. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

64 Federal Reserve Bulletin • January 1999 The acquisition of Cardinal shall not be consummated supervisory reports of examination assessing the financial before the fifteenth calendar day after the effective date of and managerial resources of the organizations, discussions this order, or later than three months after the effective date with other federal financial supervisory agencies, and conof this order, unless such period is extended for good cause fidential information provided by Valley View. The Board by the Board or the Federal Reserve Bank of Philadelphia, notes that Valley View management has adequate proceacting pursuant to delegated authority. dures in place to address the limited risks associated with By order of the Board of Governors, effective Novem- the current activities of the holding company and its subber 23, 1998. sidiary banks. The Board further notes that the proposal represents a relatively small acquisition by Valley View, that Valley View would not incur or assume any debt in Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Ferguson, and Gramlich. Absent and not voting: connection with the proposal, and that Valley View would Governor Meyer. remain well capitalized on consummation of the proposal. Based on the specific facts of record in this case, the Board ROBERT DEV. FRIERSON concludes that the financial and managerial resources of Associate Secretary of the Board Valley View, Paola, and their respective subsidiary banks and other supervisory factors are consistent with approval Valley View Bancshares, Inc. of the proposal. Overland Park, Kansas In considering the convenience and needs factor, the Board has reviewed the records of the relevant depository Order Approving Application to Acquire a Bank Holding institutions under the Community Reinvestment Act Company ("CRA").2 As provided in the CRA, the Board has evaluated this factor in light of examinations of the CRA perfor- Valley View Bancshares, Inc. ("Valley View"), a bank mance records of the relevant institutions by the Federal holding company within the meaning of the Bank Holding Deposit Insurance Corporation ("FDIC"), the institutions' Company Act ("BHC Act"), has requested the Board's appropriate federal banking supervisor. All the insured approval under section 3 of the BHC Act (12 U.S.C. depository institutions controlled by Valley View received § 1842) to acquire Paola-Citizens Bancshares, Inc. "satisfactory" CRA performance ratings at their most re- ("Paola"), and thereby acquire control of its subsidiary cent CRA examinations by the FDIC. Citizens Bank rebank, Citizens State Bank ("Citizens Bank"), both of ceived an "outstanding" CRA performance rating at its Paola, Kansas. most recent CRA examination by the FDIC. Based on all Notice of the proposal, affording interested persons an the facts of record, the Board concludes that convenience opportunity to submit comments, has been published and needs considerations, including the CRA performance (63 Federal Register 53,672 (1998)). The time for filing records of the relevant institutions, are consistent with comments has expired, and the Board has considered the approval of the proposal. proposal and all comments received in light of the factors As required under the BHC Act, the Board also has set forth in section 3 of the BHC Act. considered the competitive effects of the proposal. Valley Valley View, with total consolidated assets of approxi- View and Paola do not compete with each other in any mately $1.7 billion, operates four subsidiary banks in Kanrelevant banking market. Based on all the facts of record, sas and one subsidiary bank in Missouri.1 Valley View is the Board concludes that the proposal would not have a the sixth largest commercial banking organization in significantly adverse effect on competition or on the con- Kansas, controlling approximately $1.4 billion in deposits, centration of banking resources in any relevant banking representing approximately 3.5 percent of total deposits in market. Accordingly, the Board concludes that competitive commercial banking organizations in the state ("state deconsiderations are consistent with approval. posits"). Paola is the 167th largest commercial banking organization in Kansas, controlling approximately $37 mil- Conclusion lion in deposits, representing less than 1 percent of state deposits. On consummation of the proposal, Valley View would remain the sixth largest commercial banking organi- Based on all the facts of record, the Board has determined zation in Kansas, controlling deposits of approximately that this application should be, and hereby is, approved.3 $1.4 billion, representing approximately 3.6 percent of The Board's approval is specifically conditioned on comstate deposits. In reviewing the proposal under the BHC Act, the Board 2. 12 U.S.C. §2901 etseq. has considered the financial and managerial resources and 3. A former shareholder of Paola has requested that the Board, as future prospects of the companies and banks involved, the part of its review of the proposal, monitor a private undertaking by convenience and needs of the communities to be served, Paola's management to compensate former shareholders from the proceeds of the proposal. The limited jurisdiction of the Board to and certain supervisory factors. The Board has reviewed review applications under the specific statutory factors in the BHC these factors in light of the facts of record, including Act does not authorize the Board to consider matters relating to general corporate governance, such as shareholder relations and the adequacy of shareholder compensation. See Western Bancshares, Inc. 1. State asset and deposit data are as of June 30, 1998. v. Board of Governors, 480 F.2d 749 (10th Cir. 1973). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 65 pliance by Valley View with all the commitments made in broad range of nonbanking activities. After consummation connection with this proposal. The commitments and con- of this proposal, EquiServe would offer shareholder serditions relied on by the Board in reaching its decision are vices nationwide. These shareholder services would indeemed to be conditions imposed in writing by the Board clude maintenance of records of shareholders in publicly in connection with its findings and decisions and, as such, traded companies and related services, such as acting as may be enforced in proceedings under applicable law. dividend disbursement and reinvestment agent, registrar, The proposed acquisition shall not be consummated transfer agent, redemption agent, rights agent, exchange before the fifteenth calendar day after the effective date of agent, tender agent, and reorganization agent; proxy mailthis order, or later than three months after the effective date ing and tabulation; and annual and interim report distribuof this order, unless such period is extended by the Board tion. or by the Federal Reserve Bank of Kansas City, acting The Board previously has determined by regulation that pursuant to delegated authority. the performance of functions or activities, such as share- By order of the Board of Governors, effective Novem- holder servicing, that may be performed by a trust comber 30, 1998. pany is closely related to banking and permissible for bank holding companies under section 4(c)(8) of the BHC Act.3 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Bank One has committed to conduct these activities sub- Governors Kelley, Meyer, Ferguson, and Gramlich. ject to the limitations set forth in Regulation Y. In order to approve the proposal, the Board also must find that the ROBERT DEV. FRIERSON performance of the proposed activities by Bank One "can Associate Secretary of the Board reasonably be expected to produce benefits to the public ... that outweigh possible adverse effects, such as undue con- Orders Issued Under Section 4 of the Bank Holding centration of resources, decreased or unfair competition, Company Act conflicts of interests, or unsound banking practices."4 As a part of its evaluation of these factors, the Board Bank One Corporation considers the financial condition and managerial resources Chicago, Illinois of the notificant and its subsidiaries and the effect the transaction would have on such resources.5 On the basis of Order Approving Investment in a Company that all the facts of record, including relevant reports of exami- Performs Trust Company Activities nation and consultation with other relevant federal and state supervisory agencies, the Board has concluded that Bank One Corporation ("Bank One"), a bank holding financial and managerial considerations are consistent with company within the meaning of the Bank Holding Com- approval of the notice. pany Act ("BHC Act"), has requested the Board's ap- The Board also has carefully considered the competitive proval under section 4(c)(8) of the BHC Act (12 U.S.C. effects of the proposed joint venture. Both FCTC and § 1843(c)(8)) and section 225.24 of the Board's Regula- Boston EquiServe currently engage in the activities to be tion Y (12C.F.R. 225.24) to acquire 50 percent of the conducted by the joint venture, EquiServe. On consummavoting interests in EquiServe Limited Partnership ("Equition of this proposal, EquiServe would become the largest Serve"), a Delaware limited partnership,1 and thereby pershareholder servicing operation in the United States, servform functions or activities that may be performed by a ing approximately 1400 companies. trust company.2 The Board notes that the market for shareholder services Notice of the proposal, affording interested persons an is a national market, which is currently moderately concenopportunity to submit comments, has been published trated.6 FCTC is the second largest shareholder servicing (63 Federal Register 23,044 (1998)). The time for filing operation in the United States, managing approximately comments has expired, and the Board has considered the 12.1 million shareholder accounts, representing approxiproposal and all comments received in light of the factors mately 17.2 percent of total accounts in the United States. set forth in section 4 of the BHC Act. Boston EquiServe is the third largest shareholder servicing Bank One, with total consolidated assets of approxioperation in the United States, managing approximately mately $231.7 billion, is the fifth largest commercial bank- 11.5 million shareholder accounts, representing approxiing organization in the United States. Bank One controls mately 16.3 percent of total accounts in the United States. subsidiary banks that operate in 14 states, and engages in a On consummation of this proposal, EquiServe would be- 1. Bank One would acquire an interest in EquiServe in exchange for 3. See 12 C.F.R. 225.28(b)(5). contributing to the joint venture substantially all the assets of the 4. See 12 U.S.C. § 1843(c)(8). shareholder services business conducted by its wholly owned subsid- 5. See 12 C.F.R. 225.26. iary, First Chicago Trust Company of New York ("FCTC"). 6. Approximately 115 firms in the United States provide share- 2. The remaining voting interests in EquiServe are held by holder services commercially to companies issuing equity. These Boston EquiServe Limited Partnership, Canton, Massachusetts ("Bos- commercial shareholder services providers compete throughout the ton EquiServe"), a joint venture between BankBoston, N.A. and United States, and the Board previously has determined that the Boston Financial Data Services, Inc. ("BFDS"). BFDS is owned by geographic market for this industry is national in scope. See Chemical State Street Corporation and DST Systems, Inc. ("DST"). Banking Corporation, 82 Federal Reserve Bulletin 239, 270 (1996). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

66 Federal Reserve Bulletin • January 1999 come the largest shareholder servicing operation in the proved. This determination is subject to all the conditions United States, managing approximately 23.6 million ac- set forth in the Board's Regulation Y, including those in counts, representing approximately 33.5 percent of total sections 225.7 and 225.25(c) (12C.F.R. 225.7 and accounts in the United States. 225.25(c)) and to the Board's authority to require modifica- The structure of the market for shareholder services tion or termination of the activities of a bank holding mitigates the adverse effects of this proposal. Many compa- company or any of its subsidiaries as the Board finds nies choose to be self-providers of shareholder services.7 necessary to assure compliance with, or to prevent evasion Thus, the market indexes tend to overstate the relative of, the provisions and purposes of the BHC Act and the market share controlled by specialized providers, such as Board's regulations and orders issued thereunder. The Boston EquiServe and FCTC. Moreover, the decision by Board's approval of the proposal is specifically condiseveral large companies that currently are self-providers to tioned on compliance with all the commitments made in outsource the function could significantly change the mar- connection with this notice. The commitments, representaket share of a successful bidder for that business.8 In tions and conditions relied on in reaching this decision addition, there are numerous potential entrants into this shall be deemed to be conditions imposed in writing by the market. Currently, more than 200 firms specialize in pro- Board in connection with its findings and decision and, as viding shareholder services to groups of affiliated invest- such, may be enforced in proceedings under applicable ment companies. Although only a few firms provide share- law. holder services to industrial or financial companies and to This transaction shall not be consummated later than investment company groups, many of the activities and three months after the effective date of this order unless organizational features of the types of firms that provide such period is extended for good cause by the Board or by shareholder services to investment company groups are the Federal Reserve Bank of Chicago, acting pursuant to similar to those activities of firms providing these services delegated authority. to industrial or financial companies. The investment com- By order of the Board of Governors, effective Novempany shareholder servicers appear to be fully capable of ber 16, 1998. entering the commercial services industry with little difficulty. Many investment company shareholder servicers Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and possess the technology, workforce, and experience that Governors Kelley, Meyer, Ferguson, and Gramlich. would enable them to manage the volume of transactions currently processed by commercial providers. Based on ROBERT DEV. FRIERSON these and other facts of record, the Board concludes that Associate Secretary of the Board consummation of the proposed transaction would not have a significantly adverse effect on competition in any rele- PNC Bank Corp. vant market. Pittsburgh, Pennsylvania The Board concludes that the proposed transaction would increase the ability of EquiServe to serve the needs of its customers and would allow the joint venture to Order Approving Notice to Engage in Underwriting and Dealing in All Types of Debt and Equity Securities on a provide existing and new customers with a broader range Limited Basis of products and services at lower costs. The Board also expects that combining the expertise and technology of FCTC and Boston EquiServe would enable EquiServe to PNC Bank Corp. ("PNC"), a bank holding company become a more effective competitor in the market. within the meaning of the Bank Holding Company Act Based on the foregoing and all the other facts of record, ("BHC Act"), has requested the Board's approval under including the commitments and representations made by section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8» Bank One, the Board has determined that the performance and section 225.24 of the Board's Regulation Y (12 C.F.R. of the proposed activity by the joint venture can reasonably 225.24) to expand the activities of its section 20 subsidiary, be expected to produce benefits to the public that would PNC Capital Markets, Inc., Pittsburgh, Pennsylvania outweigh any possible adverse effects under the proper ("Company"), to include underwriting and dealing in, to a incident to banking standard of section 4(c)(8) of the BHC limited extent, all types of debt and equity securities except Act. ownership interests in open-end investment companies. On the basis of all the facts of record, the Board has PNC seeks approval for Company to conduct the proposed determined that the notice should be, and hereby is, ap- underwriting and dealing activities worldwide. Notice of the proposal, affording interested persons an opportunity to submit comments, has been published 7. The Board's analysis omits self-providers from the competitive (63 Federal Register 50,914 (1998)). The time for filing analysis. comments has expired, and the Board has considered the 8. As of December 31, 1997, an estimated 425 firms were providing notice and all comments received in light of the factors set their own shareholder servicing. These firms included some of the forth in section 4(c)(8) of the BHC Act. largest companies in the United States. The ability and willingness of PNC, with total consolidated assets of approximately many firms to provide their own shareholder servicing has contributed to strong price competition in the industry. $75.9 billion, is the 14th largest banking organization in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 67 the United States.1 PNC's subsidiary depository institu- PNC has committed that Company will conduct its untions operate in nine states, and PNC engages through derwriting and dealing activities using the methods and other subsidiaries in a broad range of permissible nonbank- procedures and subject to the prudential limitations estabing activities. Company currently engages in limited under- lished by the Board in the Section 20 Orders. PNC also has writing and dealing in certain types of bank-ineligible committed that Company will conduct its bank-ineligible securities2 as permitted under section 20 of the Glass- securities underwriting and dealing activities subject to the Steagall Act (12U.S.C. § 377).3 Company is, and will Board's revenue restriction. As a condition of this order, continue to be, registered as a broker-dealer with the Secu- PNC is required to conduct its bank-ineligible securities rities and Exchange Commission ("SEC") under the Secu- activities subject to the revenue restriction and Operating rities Exchange Act of 1934 (15 U.S.C. § 78a et seq.) and is Standards established for section 20 subsidiaries.6 a member of the National Association of Securities Dealers, Inc. ("NASD"). Company, therefore, is subject to the Other Considerations record-keeping and reporting obligations, fiduciary standards, and other requirements of the Securities Exchange In order to approve this notice, the Board also must deter- Act of 1934, the SEC, and the NASD. mine that performance of the proposed activities is a proper incident to banking, that is, the proposed activities "can Underwriting and Dealing in Bank-Ineligible Securities reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or The Board has determined that, subject to the framework gains in efficiency, that outweigh possible adverse effects, of prudential limitations established in previous decisions such as undue concentration of resources, decreased or to address the potential for conflicts of interests, unsound unfair competition, conflicts of interests, or unsound bankbanking practices, or other adverse effects, underwriting ing practices."7 The Board expects that consummation of and dealing in bank-ineligible securities is so closely re- the proposal would provide added convenience to PNC's lated to banking as to be a proper incident thereto within customers, lead to improved methods of meeting customthe meaning of section 4(c)(8) of the BHC Act.4 The Board ers' financing needs, increase the level of competition also has determined that underwriting and dealing in bank- among existing providers of these services, and improve ineligible securities is consistent with section 20 of the the operating efficiency of Company. Glass-Steagall Act (12 U.S.C. § 377), provided that the As part of its review of the statutory factors, the Board company engaged in the activity derives no more than considers the financial and managerial resources of the 25 percent of its gross revenues from underwriting and notificant and its subsidiaries and the effect the transaction dealing in bank-ineligible securities.5 would have on such resources.8 In considering the financial resources of the notificant, the Board has reviewed the capitalization of PNC and Company in accordance with the 1. Asset and ranking data are as of June 30, 1998. standards set forth in the Section 20 Orders and finds the 2. As used in this order, "bank-ineligible securities'" refers to all capitalization of each to be consistent with approval. This types of debt and equity securities that a bank may not underwrite or determination is based on all the facts of record, including deal in directly under section 16 of the Glass-Steagall Act (12 U.S.C. § 24(7)). PNC's projections of the volume of Company's underwrit- 3. Company has authority to underwrite and deal in, to a limited ing and dealing activities in bank-ineligible securities. extent, certain municipal revenue bonds, 1-4 family mortgage-related The Board also has reviewed the managerial resources securities, commercial paper, and consumer-receivable-related securities. See PNC Financial Corp., 73 Federal Reserve Bulletin 742 of each of the entities involved in this proposal in light of (1987), and PNC Financial Corp., 75 Federal Reserve Bulletin 396 examination reports and other supervisory information. (1989). Company also is authorized to engage in a variety of other PNC requested that the Board perform a debt-only infranonbanking activities. structure review of Company and stated that it later would 4. See J.P. Morgan & Co. Inc., et at, 75 Federal Resen'e Bulletin request that the Board perform an equity infrastructure 192 (1989), aff'd sub nom. Securities Industry Ass'n v. Board of Governors of the Federal Reserve System, 900 F.2d 360 (D.C. Cir. review of Company. In connection with the proposal, the 1990); Citicorp, 73 Federal Reserve Bulletin 473 (1987), aff'd sub Federal Reserve Bank of Cleveland ("Reserve Bank") has nom. Securities Industry Ass 'n v. Board of Governors of the Federal reviewed the policies and procedures of Company for Reserve System, 839 F.2d 47 (2d Cir.), cert, denied, 486 U.S. 1059 (1988), as modified by Review of Restrictions on Director, Officer and Employee Interlocks, Cross-Marketing Activities, and the Purchase and Sale of Financial Assets Between a Section 20 Subsidiary and an Securities, 61 Federal Register 48,953 (1996); and Revenue Limit on Affiliated Bank or Thrift, 61 Federal Register 57,679 (1996); Amend- Bank-Ineligible Activities of Subsidiaries of Bank Holding Companies ments to Restrictions in the Board's Section 20 Orders, 62 Federal Engaged in Underwriting and Dealing in Securities, 61 Federal Register 45,295 (1997); and Clarification to the Board's Section 20 Register 68,750 (1996) (collectively, "Modification Orders"). Orders, 63 Federal Register 14,803 (1998) (collectively, "Section 20 6. 12C.F.R. 225.200. Company may provide services that are Orders"). necessary incidents to the proposed underwriting and dealing activi- 5. See Section 20 Orders. Compliance with the revenue limitation ties. Unless Company receives specific approval under section 4(c)(8) shall be calculated in accordance with the method stated in the Section of the BHC Act to conduct the activities independently, any revenues 20 Orders, as modified by the Order Approving Modifications to the from the incidental activities must be treated as ineligible revenues Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989); subject to the Board's revenue limitation. 10 Percent Revenue Limit on Bank-Ineligible Activities of Subsidiaries 7. 12 U.S.C. § 1843(c)(8). of Bank Holding Companies Engaged in Underwriting and Dealing in 8. See 12 C.F.R. 225.26. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

68 Federal Reserve Bulletin • January 1999 underwriting and dealing in all types of debt securities, underwriting and dealing activities, subject to the other including Company's operational and managerial infra- conditions of this order, the Section 20 Orders, and the structure, computer, audit, and accounting systems and Modification Orders. internal risk management procedures and controls. The The Board's determination also is subject to all the terms Board has determined on the basis of the infrastructure and conditions set forth in Regulation Y, including those in review that Company has established policies and proce- sections 225.7 and 225.25(c) (12 C.F.R. 225.7 and dures to ensure compliance with this order and the Sec- 225.25(c)), and to the Board's authority to require modifition 20 Orders for underwriting and dealing in debt securi- cation or termination of the activities of a bank holding ties. As discussed below, a satisfactory infrastructure re- company or any of its subsidiaries as the Board finds view of Company related to underwriting and dealing in all necessary to ensure compliance with, or to prevent evasion types of equity securities must be completed before Com- of, the provisions and purposes of the BHC Act and the pany may engage in these activities. On the basis of the Board's regulations and orders issued thereunder. The Reserve Bank's review of Company's debt underwriting Board's decision is specifically conditioned on compliance and dealing policies and procedures and all other facts of with all the commitments made in connection with this record, including the commitments provided in this case notice, including the commitments discussed in this order and the proposed managerial and risk management systems and the conditions set forth in this order and the Board of Company, and subject to the completion of a satisfactory regulations and orders noted above. The commitments and infrastructure review of Company related to underwriting conditions are deemed to be conditions imposed in writing and dealing in all types of equity securities, the Board has by the Board in connection with its findings and decision concluded that financial and managerial considerations are and, as such, may be enforced in proceedings under appliconsistent with approval of the notice. cable law. Based on all the facts of record, the Board has deter- This proposal shall not be consummated later than three mined that performance of the proposed activities by PNC, months after the effective date of this order, unless such under the framework established in this and prior deci- period is extended for good cause by the Board or the sions, can reasonably be expected to produce public bene- Reserve Bank, acting pursuant to delegated authority. fits that outweigh any adverse effects of the proposal. By order of the Board of Governors, effective Novem- Accordingly, the Board has determined that the perfor- ber 16, 1998. mance of the proposed activities by PNC is a proper incident to banking for purposes of section 4(c)(8) of the Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and BHC Act. Governors Kelley, Meyer, Ferguson, and Gramlich. Conclusion ROBERT DEV. FRIERSON Associate Secretary of the Board On the basis of all the facts of record, the Board has determined that the notice should be, and hereby is, approved, subject to all the terms and conditions described in this order. The Board's approval of the proposal extends ORDERS ISSUED UNDER INTERNATIONAL BANKING only to activities conducted within the limitations of this ACT order, including the Board's reservation of authority to establish additional limitations to ensure that Company's Credit Suisse activities are consistent with safety and soundness, avoid- Zurich, Switzerland ance of conflicts of interests, and other relevant considerations under the BHC Act. Underwriting and dealing in Order Approving Establishment of Representative Offices any manner other than as approved in this order is not within the scope of the Board's approval and is not autho- Credit Suisse, Zurich, Switzerland, a foreign bank within rized for Company. the meaning of the International Banking Act ("IBA") has Company may commence underwriting and dealing in applied under section 10(a) of the IBA (12U.S.C. all types of debt securities immediately. The Board's ap- § 3107(a)) to establish representative offices in Miami, proval of the proposed underwriting and dealing in all Florida; New York, New York; and Houston, Texas. The types of equity securities, however, is conditioned on a Foreign Bank Supervision Enhancement Act of 1991 future determination by the Board that Company has estab- ("FBSEA"), which amended the IBA, provides that a lished policies and procedures for equity underwriting and foreign bank must obtain the approval of the Board to dealing to ensure compliance with the requirements of this establish a representative office in the United States. order, the Section 20 Orders, and the Modification Orders, Notice of the application, affording interested persons including Company's operational and managerial infra- an opportunity to submit comments, was published on structure, computer, audit, and accounting systems and March 14, 1997, in a newspaper of general circulation in internal risk management procedures and controls. After Houston {Houston Chronicle), Miami {Miami Herald), and notification by the Board that this condition has been New York {New York Times). The time for filing comments satisfied, Company may commence the proposed equity has expired, and all comments have been considered. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 69 Credit Suisse, with total consolidated assets of approxi- additional standards as set forth in the IBA and Regulamately $89 billion,1 is part of the second largest banking tion K (12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)). group in Switzerland, and it engages in a wide range of As noted above, Credit Suisse engages directly in the banking activities worldwide directly and through subsid- business of banking outside of the United States. Credit iaries. Credit Suisse Group, Zurich, Switzerland, a holding Suisse also has provided the Board with the information company that engages through subsidiaries in financial and necessary to assess the application through submissions nonfinancial activities worldwide, owns 99.9 percent of the that address the relevant issues. With respect to supervision shares of Credit Suisse. No single shareholder owns by home country authorities, the Board previously has 10 percent or more of the shares of Credit Suisse Group. determined, in connection with applications involving other In the United States, Credit Suisse Group operates, banks in Switzerland, that those banks were subject to through Credit Suisse First Boston ("CSFB"), Zurich, home country supervision on a consolidated basis.4 Credit Switzerland, branches in New York, New York, and Los Suisse is supervised by the SFBC on substantially the same Angeles, California; and representative offices in San Fran- terms and conditions as those other banks. Based on all the cisco, California; Chicago, Illinois; and Houston, Texas.2 facts of record, the Board has determined that Credit Suisse Credit Suisse and CSFB also engage in activities in the is subject to comprehensive supervision and regulation on United States through several nonbanking subsidiaries. a consolidated basis by its home country supervisor. Credit Suisse proposes to establish the offices primarily The Board also has taken into account the additional to act as liaison with private banking clients, solicit private standards set forth in section 7 of the IBA and Regulabanking business, and provide information and advice on tion K (12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)). economic conditions and investment opportunities in Swit- In this regard, the SFBC has no objection to the establishzerland. The Houston office would report directly to the ment of the proposed representative offices. Miami office; the Miami and New York offices would With respect to the financial and managerial resources of report directly to Credit Suisse's head office in Switzer- Credit Suisse, taking into consideration Credit Suisse's land. No funds would be received or disbursed at or record of operations in its home country, its overall finanthrough the representative offices. cial resources, and its standing with its home country In acting on an application to establish a representative supervisors, the Board has also determined that financial office, the IBA and Regulation K provide that the Board and managerial factors are consistent with approval of the shall take into account whether the foreign bank engages proposed representative offices. Credit Suisse appears to directly in the business of banking outside of the United have the experience and capacity to support the proposed States, and has furnished to the Board the information it representative offices and has established controls and proneeds to assess the application adequately. The Board also cedures for the proposed representative offices to ensure shall take into account whether the foreign bank and any compliance with U.S. law. foreign bank parent is subject to comprehensive supervi- With respect to access to information about Credit Susion or regulation on a consolidated basis by its home isse's operations, the Board has reviewed the restrictions country supervisor (12U.S.C. § 3107(a)(2); 12C.F.R. on disclosure in relevant jurisdictions in which Credit 211.24(d)(2)).3 The Board also may take into account Suisse operates and has communicated with relevant government authorities regarding access to information. Credit Suisse and Credit Suisse Group have committed to make available to the Board such information on the operations of Credit Suisse and any of its affiliates that the Board 1. Asset data are as of June 30, 1998. deems necessary to determine and enforce compliance with 2. CSFB also operates an agency and representative office in Miami. the IBA, the Bank Holding Company Act of 1956, as Those offices would be closed on the establishment of the Miami amended, and other applicable federal law. To the extent office of Credit Suisse. that the provision of such information may be prohibited 3. In assessing this standard, the Board considers, among other by law, Credit Suisse and Credit Suisse Group have comfactors, the extent to which the home country supervisors: (i) Ensure that the bank has adequate procedures for monitor- mitted to cooperate with the Board to obtain any necessary ing and controlling its activities worldwide; consents or waivers that might be required from third (ii) Obtain information on the condition of the bank and its parties for disclosure of such information. In addition, subsidiaries and offices through regular examination resubject to certain conditions, the SFBC may share informaports, audit reports, or otherwise; tion on Bank's operations with other supervisors, including (iii) Obtain information on the dealings with and relationship between the bank and its affiliates, both foreign and domestic; (iv) Receive from the bank financial reports that are consolidated on a worldwide basis, or comparable information that permits analysis of the bank's financial condition on 4. See Coutts & Co.. AG, 79 Federal Reserve Bulletin 636 (1993); a worldwide consolidated basis; Union Bank of Switzerland, 82 Federal Reserve Bulletin 370 (1996); (v) Evaluate prudential standards, such as capital adequacy Swiss Bank Corporation, 82 Federal Reserve Bulletin 690 (1996), and and risk asset exposure, on a worldwide basis. These are 83 Federal Reserve Bulletin 214 (1997); UBS AG/Union Bank of indicia of comprehensive, consolidated supervision. Switzerland, 84 Federal Reserve Bulletin 684 (1998). Credit Suisse No single factor is essential, and other elements may inform the Group, although not a bank, is also subject to consolidated supervision Board's determination. by the Swiss Federal Banking Commission ("SFBC"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

70 Federal Reserve Bulletin • January 1999 the Board. In light of these commitments and other facts of connection with this application, and with the conditions in record, and subject to the condition described below, the this order.5 The commitments and conditions referred to Board concludes that Credit Suisse has provided adequate above are conditions imposed in writing by the Board in assurances of access to any necessary information the connection with its decision and may be enforced in pro- Board may request. ceedings under 12 U.S.C. § 1818 against Credit Suisse and On the basis of all the facts of record, and subject to the its affiliates. commitments made by Credit Suisse and Credit Suisse By order of the Board of Governors, effective Novem- Group, as well as the terms and conditions set forth in this ber 23, 1998. order, the Board has determined that Credit Suisse's appli- Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and cation to establish the representative offices should be, and Governors Kelley, Ferguson, and Gramlich. Absent and not voting: hereby is, approved. Should any restrictions on access to Governor Meyer. information on the operations or activities of Credit Suisse ROBERT DEV. FRIERSON and its affiliates subsequently interfere with the Board's Associate Secretary of the Board ability to obtain information to determine and enforce compliance by Credit Suisse or its affiliates with applicable federal statutes, the Board may require termination of any 5. The Board's authority to approve the establishment of the proof Credit Suisse's or its affiliates' direct or indirect activi- posed representative offices parallels the continuing authority of the States of Florida, New York, and Texas to license offices of a foreign ties in the United States. Approval of this application also bank. The Board's approval of this application does not supplant the is specifically conditioned on compliance by Credit Suisse authority of those states to license the proposed offices of Credit Suisse in and Credit Suisse Group with the commitments made in accordance with any terms or conditions that they may impose. INDEX OF ORDERS ISSUED OR ACTIONS TAKEN BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (JULY 1, 1998-SEPTEMBER 30, 1998) Bulletin Volume Applicant Merged or Acquired Bank or Activity Date of Approval and Page Bane One Corporation, First Chicago NBD Corporation, September 14, 1998 84,961 Columbus, Ohio Chicago, Illinois BankBoston Corporation, BancAmerica Robertson Stephens, August 24, 1998 84,849 Boston, Massachusetts San Francisco, California The Bank of East Asia, Ltd., To establish a representative office in August 3, 1998 84,886 Hong Kong Special Administrative Flushing, New York Region, People's Republic of China Commerce Bancorp, Inc., Commerce Capital Markets, Inc., July 13, 1998 84,798 Cherry Hill, New Jersey Philadelphia, Pennsylvania Cooperatieve Centrale Raiffeisen- Weiss, Peck & Greer, L.L.C., August 3, 1998 84,852 Boerenleenbank B.A., Rabobank New York, New York Nederland Utrecht, The Netherlands First American Corporation, The Middle Tennessee Bank, August 17, 1998 84,845 Nashville, Tennessee Columbia, Tennessee First Mariner Bancorp, Glen Burnie Bancorp, September 28, 1998 84,956 Baltimore, Maryland Glen Burnie, Maryland The Bank of Glen Burnie, Glen Burnie, Maryland First National Bank Group, Inc., Nueces National Bank, September 8, 1998 84,959 Edinburg, Texas Corpus Christi, Texas NationsBank Corporation, BankAmerica Corporation, August 17, 1998 84,858 Charlotte, North Carolina San Francisco, California NationsBank (DE) Corporation, Bank of America National Trust and Charlotte, North Carolina Savings Association, San Francisco, California Bank of America, FSB, Portland, Oregon Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 71 Index of Orders Issued—Continued Bulletin Volume Applicant Merged or Acquired Bank or Activity Date of Approval and Page Norwest Corporation, Star Bancshares, Inc., August 12, 1998 84,847 Minneapolis, Minnesota Austin, Texas Star Bancshares of Nevada, Inc., Carson City, Nevada First State Bank, Austin, Texas Royal Bank of Canada, New Security First Network Bank, August 3, 1998 84,855 Montreal, Quebec, Canada Miami, Florida Travelers Group, Inc., Citicorp, September 23, 1998 84,985 New York, New York New York, New York WestStar Bank, Superior Federal Bank, F.S.B., August 3, 1998 84,884 Bartlesville, Oklahoma Fort Smith, Arkansas APPLICATIONS APPROVED UNDER BANK HOLDING COMPANY ACT By the Secretary of the Board Recent applications have been approved by the Secretary of the Board as listed below. Copies are available upon request to the Freedom of Information Office, Office of the Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Section 3 Applicant(s) Bank(s) Effective Date Centura Banks, Inc., Scotland Bancorp, Inc., November 5, 1998 Rocky Mount, North Carolina Laurinburg, North Carolina Scotland Savings Bank, SSB, Laurinburg, North Carolina Wells Fargo & Company, Franklin Bancshares. Inc., November 5, 1998 San Francisco, California Franklin, Texas The First National Bank of Franklin, Franklin, Texas Section 4 Applicant(s) Bank(s) Effective Date State Street Corporation, ADP Financial Information Services, Inc., November 6, 1998 Boston, Massachusetts Jersey City, New Jersey Bridge Information Systems, Inc., Wilco International Limited, St. Louis, Missouri London, England United Bancorporation, Information Network Services, Inc., November 16, 1998 Billings, Montana Billings, Montana Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

72 Federal Reserve Bulletin • January 1999 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 AmBank Holdings, Inc., American Bank and Trust Company, Chicago October 29, 1998 Davenport, Iowa Davenport, Iowa Amundson Family Limited Robinson Bank Holding Company, Minneapolis November 4, 1998 Partnership, Robinson, North Dakota Sioux Falls, South Dakota Security State Bank of Robinson, Beulah Bancorporation, Inc., Robinson, North Dakota Sioux Falls, South Dakota Applachian Bancshares, Inc., First National Bank of Union County, Atlanta November 4, 1998 Ellijay, Georgia Blairsville, Georgia Area Bancshares Corporation, Peoples Bancorp of Winchester, Inc., St. Louis October 29, 1998 Owensboro, Kentucky Winchester, Kentucky Peoples Commercial Bank, Winchester, Kentucky Arvest Bank Group. Inc., TRH Bank Group, Inc., St. Louis October 29, 1998 Bentonville, Arkansas Norman, Oklahoma Astra Financial Corporation, Mitchell County Bank, Kansas City November 9, 1998 Prairie Village, Kansas Simpson, Kansas First Missouri Bancshares, Inc., Brookfield, Missouri First Missouri National Bank, Brookfield, Missouri Bancorp of Okolona, Inc., Bank of Okolona, St. Louis November 17, 1998 Okolona, Mississippi Okolona, Mississippi Banknorth Group, Inc., Evergreen Bancorp, Inc., Boston October 22, 1998 Burlington, Vermont Glens Falls, New York Evergreen Bank, N.A., Glens Falls, New York Belvedere Capital Partners, Inc., Downey Bancorp, San Francisco October 22, 1998 San Francisco, California Downey, California California Community Financial Downey National Bank, Institutions Fund Limited Downey, California Partnership, The Bank of Orange County, San Francisco, California Fountain Valley, California California Financial Bancorp, Newport Beach, California Bluestem Bank Holding Company, Thomson Holdings, Inc., Minneapolis November 6, 1998 L.L.C., Centerville, South Dakota Sioux Falls, South Dakota Bugbee Family Limited Partnership, Quinter Insurance Service, Inc., Kansas City October 22, 1998 Leawood, Kansas Quinter, Kansas Central South Bancorporation, Inc. Peoples Savings Bank, Chicago November 3, 1998 Indianola, Iowa Indianola, Iowa Chaparral Bancshares, Inc., Van Alstyne Financial Corporation, Dallas November 4, 1998 Richardson, Texas Van Alstyne, Texas Chaparral Bancshares of Delaware, Inc., Dover, Delaware Citizens Bancorporation of New State Bank of La Salle, Minneapolis November 17, 1998 Ulm, Inc., La Salle, Minnesota New Ulm, Minnesota Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 73 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Columbia Bancorp, Valley Community Bancorp, San Francisco November 12, 1998 The Dalles, Oregon McMinnville, Oregon Valley Community Bank, McMinnville, Oregon Community Bancshares, Inc., Community Bancshares, Inc., Kansas City November 12, 1998 Employee Stock Ownership Plan Neosho, Missouri and Trust, Neosho, Missouri Community Bancshares Corp., Fort Des Moines Community Bank, Chicago October 29, 1998 Indianola, Iowa Des Moines, Iowa Community Shores Bank Community Shores Bank, Chicago November 5, 1998 Corporation, Roosevelt Park, Michigan Roosevelt Park, Michigan Community Spirit Bancshares, Inc., Community Spirit Bank - Mississippi, Atlanta November 12, 1998 Belmont, Mississippi Belmont, Mississippi East West Bancorp, East-West Bank, San Francisco November 12, 1998 San Marino, California San Marino, California First Bank Corp, Sebastian Bankshares, Inc., St. Louis November 4, 1998 Fort Smith, Arkansas Barling, Arkansas River Valley Bank and Trust, Lavaca, Arkansas First Commonwealth Financial Southwest National Corporation, Cleveland November 2, 1998 Corporation. Greensburg, Pennsylvania Indiana, Pennsylvania First York Ban Corp, Sutton Agency, Inc., Kansas City November 4, 1998 York, Nebraska Sutton, Nebraska Albion National Management Company, Inc., Albion, Nebraska First Community Bancorp, Inc., Froid Bankshares, Inc.. Minneapolis November 16, 1998 Glasgow, Montana Froid, Montana First State Bank of Froid, Froid, Montana First Community Bancorp, Inc., First Community Bank of Palm Beach Atlanta November 12, 1998 Pahokee, Florida County, Pahokee, Florida First National Bancshares, Inc. First National Bancshares, Inc., Kansas City November 17, 1998 ESOP and 401(k) Trusts, Goodland, Kansas Goodland, Kansas First Washington Bancshares, Inc., Whatcom State Bancorp, San Francisco October 22, 1998 Walla Walla, Washington Bellingham, Washington Whatcom State Bank, Ferndale, Washington Greene County Bancorp, MHC, Greene County Savings Bank, New York October 29, 1998 Catskill, New York Catskill, New York Greene County Bancorp, Inc., Catskill, New York High Point Financial Services, Inc.. Kent Bancshares, Inc., Chicago November 2, 1998 Forreston, Illinois Kent, Illinois Kent Bank, Kent, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

74 Federal Reserve Bulletin • January 1999 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Machias Bancorp, MHC, Machias Savings Bank, Boston November 2, 1998 Machias, Maine Machias, Maine Machias Bancorp, Inc., Machias, Maine Mid-Atlantic Community United Community Bankshares, Inc.. Richmond October 29, 1998 BankGroup, Inc., Franklin, Virginia Gloucester, Virginia The Bank of Sussex and Surry, Wakefield, Virginia The Bank of Franklin, Franklin, Virginia Mt. Sterling Bancorp, Inc., Mt. Sterling Bancshares, Inc., St. Louis November 5, 1998 Mt. Sterling, Illinois Mt. Sterling, Illinois Farmers State Bank & Trust Company, Mt. Sterling, Illinois OGS Investments, Inc., Florida Citizens Bank, Atlanta October 29, 1998 Tallahassee, Florida Ocala, Florida Oneida Financial, MHC, The Oneida Savings Bank, New York October 29, 1998 Oneida, New York Oneida, New York Oneida Financial Corp., Oneida, New York Palmer Bancshares, Inc., Kasson State Bank, Minneapolis November 18, 1998 Kasson, Minnesota Kasson, Minnesota Pleasants County Bankshares, Inc., The Pleasants County Bank, Richmond November 5, 1998 St. Marys, West Virginia St. Marys, West Virginia Regions Financial Corporation, Meigs County Bancshares, Inc., Atlanta November 3, 1998 Birmingham, Alabama Decatur, Tennessee Meigs County Bank, Decatur, Tennessee Saint James Bancorporation, Inc., Lutcher, Louisiana Saint James Bank and Trust Company, Lutcher, Louisiana Bullsboro Bancshares, Inc., Newnan, Georgia The Bank of Newnan, Newnan. Georgia VB&T Bancshares Corp., Valdosta, Georgia Valdosta Bank and Trust, Valdosta, Georgia Ridgewood Financial MHC, Ridgewood Savings Bank of New New York November 16, 1998 Ridgewood, New Jersey Jersey, Ridgewood Financial, Inc., Ridgewood, New Jersey Ridgewood, New Jersey Santa Barbara Bancorp, Pacific Capital Bancorp, San Francisco November 3, 1998 Santa Barbara, California Salinas, California First National Bank of Central California, Salinas, California South Valley National Bank, Morgan Hill, California Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 75 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Security Bank Holding Company Oregon State Bank, San Francisco November 12, 1998 Employee Stock Ownership Plan, Corvallis, Oregon Coos Bay, Oregon Security Bank Holding Company, Coos Bay, Oregon Southern Bancorp, Inc., Southern National Bank, Atlanta November 3, 1998 Marietta, Georgia Marietta, Georgia St. Charles Financial Corporation, Commerce Bancorp, Inc., Chicago November 2, 1998 Oak Brook, Illinois Berkeley, Illinois National Bank of Commerce, Berkeley, Illinois Synovus Financial Corp., Georgia Bank and Trust Company, Atlanta October 29, 1998 Columbus, Georgia Calhoun, Georgia TB&C Bancshares, Inc., Columbus, Georgia Terry and Kathy Barrett Family Quinter Insurance Service, Inc., Kansas City November 5, 1998 Limited Partnership, Quinter, Kansas Frisco, Colorado Town & Country Bancshares, Inc., Oklahoma State Bank, Kansas City November 2, 1998 Guthrie, Oklahoma Guthrie, Oklahoma Valley National Bancorp, Vista Bancorp, Inc., New York October 29, 1998 Wayne. New Jersey Phillipsburg, New Jersey The Weatherford Foundation of Red Community Spirit Bancshares, Inc., Atlanta November 12, 1998 Bay, AL, Inc., Belmont, Mississippi Red Bay, Alabama Community Spirit Bank - Mississippi, Independent Bancshares, Inc., Belmont, Mississippi Red Bay, Alabama Western Reserve Bancorp, Inc., Western Reserve Bank, Cleveland October 23, 1998 Medina, Ohio Medina, Ohio Section 4 Applicant! s) Nonbanking Activity/Company Reserve Bank Effective Date The Bank of New York Company, Patricof & Co. Capital Corp., New York October 20, 1998 Inc., New York, New York New York, New York Bank of New York Capital Markets, Inc., New York, New York First Frederick Financial To place cash dispensing machines in Richmond October 23, 1998 Corporation, locations owned or leased by Frederick. Maryland unaffiliated third parties and thereby engage in data processing activities BB&T Corporation, Scott & Stringfellow Financial, Inc., Richmond November 16, 1998 Winston-Salem, North Carolina Richmond, Virginia Scott & Stringfellow, Inc., Richmond, Virginia Britton & Koontz Capital InterBank Systems, Inc., Atlanta October 22, 1998 Corporation, Natchez, Mississippi Natchez, Mississippi Community Financial Group, Inc., American Growth Finance, Inc., Atlanta November 16, 1998 Nashville, Tennessee Dallas, Texas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

76 Federal Reserve Bulletin• January 1999 Section 4—Continued Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Community National Bank Community Advisory Services, Inc., Atlanta October 28, 1998 Corporation. Venice, Florida Venice, Florida Community Financial Centers, Inc., Venice, Florida Community Investment Centers Inc., Venice, Florida Dresdner Bank AG, Caywood-Scholl Capital Management, New York October 19, 1998 Frankfurt, Germany San Diego, California Dresdner RCM Gobal Investors LLC, San Francisco, California Gold Bane Corporation, Inc., The Trust Company, Kansas City November 10, 1998 Leawood, Kansas St. Joseph, Missouri Machias Bancorp, MHC, M&M Consulting, LLC, Boston November 2, 1998 Machias, Maine Bangor, Maine Machias Bancorp, Inc., Machias, Maine MSB Leasing, Inc., Machias, Maine Mutual Bancorp of the Berkshires, Lenox Savings Bank, Boston October 26, 1998 Inc., Lenox, Massachusetts Pittsfield, Massachusetts Trust Company of the Berkshires, N.A., United Financial Group, Inc. Pittsfield, Massachusetts Pittsfield, Massachusetts National Australia Bank Ltd., National Australia Capital Markets, Chicago November 6, 1998 Melbourne, Australia LLC, New York, New York Patriot Bank Corp., Keystone Financial Leasing Philadelphia November 5, 1998 Pottstown, Pennsylvania Corporation, Exton, Pennsylvania Tampa State Bankshares, Inc., Tampa Townhomes, L.L.C., Kansas City October 22, 1998 Tampa, Kansas Tampa, Kansas Warwick Community Bancorp, Inc.. GSB Financial Corporation, New York November 12, 1998 Warwick, New York Goshen, New York Goshen Savings Bank, Goshen, New York Sections 3 and 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Associated Banc-Corp, Citizens Bankshares, Inc., Chicago October 23, 1998 Green Bay, Wisconsin Shawano, Wisconsin Citizens Bank, National Association, Shawano, Wisconsin Wisconsin Finance Corporation, Shawano, Wisconsin Citizens Financial Services, Inc., Shawano, Wisconsin Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 11 APPLICATIONS APPROVED UNDER BANK MERGER ACT By the Secretary of the Board Recent applications have been approved by the Secretary of the Board as listed below. Copies are available upon request to the Freedom of Information Office, Office of the Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Applicant(s) Bank(s) Effective Date Centura Bank, Scotland Savings Bank, SSB, November 5, 1998 Laurinburg, North Carolina Laurinburg, North Carolina 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 The Citizens Banking Company, Century National Bank and Trust of Cleveland October 27, 1998 Salineville, Ohio Rochester, Rochester, Pennsylvania Peoples Bank and Trust Company Winfield Banking Company, St. Louis October 28, 1998 of Lincoln County, Winfield, Missouri Troy, Missouri The Pleasants County Bank, Pleasants County Interim Bank, Richmond November 5, 1998 St. Marys, West Virginia St. Marys, West Virginia Republic Security Bank, Household Bank, F.S.B., Atlanta October 28, 1998 West Palm Beach, Florida Wood Dale, Illinois Republic Security Bank, Northside Bank of Tampa, Atlanta November 9, 1998 West Palm Beach, Florida Tampa, Florida Southwest Georgia Bank, Farmers and Merchants Bank, Atlanta November 9, 1998 Moultrie, Georgia Monticello, Florida PENDING CASES INVOLVING THE BOARD OF GOVERNORS This list of pending cases does not include suits against the Jones v. Board of Governors, No. 98-30138 (5th Cir., filed Federal Reserve Banks in which the Board of Governors is not October 1, 1998). Appeal of district court dismissal of named a party. complaint alleging violations of the Fair Housing Act. Cunningham v. Board of Governors, No. 98-1459 (D.C. Cir., Attorneys Against American Apartheid v. Board of Governors, filed September 30, 1998). Petition for review of a Board No. 98-1483 (D.C. Cir., filed October 21, 1998). Petition order dated September 23, 1998, conditionally approving for review of denial of reconsideration of a Board order the applications of Travelers Group, Inc., New York, New dated August 17, 1998, approving the merger of York, to become a bank holding company by acquiring NationsBank Corporation, Charlotte, North Carolina, and Citicorp, New York, New York, and its bank and nonbank BankAmerica. Corporation, San Francisco, California. subsidiaries. On November 12, 1998, the Board filed a motion to dismiss the petition. Independent Bankers Association of America v. Board of Governors, No. 98-1482 (D.C. Cir., filed October 21, 1998). Wasserman v. Board of Governors, No. 98-CIV-6017 Petition for review of a Board order dated September 23, (S.D.N.Y., filed August 24, 1998). Complaint alleging 1998, conditionally approving the applications of Travelers wrongful failure to investigate activities of a bank. On Group, Inc., New York, New York, to become a bank September 14, 1998, the Board filed its motion to dismiss holding company by acquiring Citicorp, New York, New the complaint, and on October 14 the court dismissed the York, and its bank and nonbank subsidiaries. action on plaintiff's withdrawal of the complaint. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

78 Federal Reserve Bulletin • January 1999 Pharaon v. Board of Governors, No. 98-103 (U.S. Supreme Towe v. Board of Governors, No. 97-71143 (9th Cir., filed Court, filed July 15, 1998). Petition for writ of certiorari September 15, 1997). Petition for review of a Board order seeking review of the decision of the Court of Appeals for dated August 18, 1997, prohibiting Edward Towe and the District of Columbia Circuit affirming the Board's order Thomas E. Towe from further participation in the banking dated January 31, 1997, imposing civil money penalties and industry. an order of prohibition for violations of the Bank Holding In re: Subpoena Duces Tecum Served on the Office of the Company Act. On October 19, 1998, the Supreme Court Comptroller of the Currency, No. 97-5229 (D.C. Cir., filed denied the writ. September 12, 1997). Appeal of district court order denying Clarkson v. Greenspan, No.98-5349 (D.C. Cir., filed July 29, motion to compel production of pre-decisional supervisory 1998). Appeal of district court order granting Board's modocuments and testimony sought in connection with an tion for summary judgment in a Freedom of Information action by Bank of New England Corporation's trustee in Act case. On September 14, 1998, the Board filed a motion bankruptcy against the Federal Deposit Insurance Corporafor summary affirmance of the district court dismissal. tion. On June 26, 1998, the court of appeals reversed and Board of Governors v. Carrasco, No. 98 Civ. 3474 (LAK) remanded the case to the district court. On August 10, 1998, (S.D.N.Y., filed May 15, 1998). Action to freeze assets of the Board filed a petition for rehearing and suggestion for individual pending administrative adjudication of civil rehearing in bane. On October 6, 1998, the court amended money penalty assessment by the Board. On May 26, 1998, its opinion and denied the petition. the court issued a preliminary injunction restraining the Bettersworth v. Board of Governors, No. 97-CA-624 transfer or disposition of the individual's assets and appoint- (W.D. Tex., filed August 21, 1997). Privacy Act case. ing the Federal Reserve Bank of New York as receiver for those assets. Board of Governors v. Pharaon, No. 98-6101 (2d Cir., filed May 4, 1998). Appeal of partial denial of Board's motion for summary judgment in action to freeze assets of individual pending administrative adjudication of civil money pen- FINAL ENFORCEMENT DECISION ISSUED BY THE alty assessment by the Board. On May 22, 1998, the appel- BOARD OF GOVERNORS lee filed a cross-appeal from the partial final judgment. Research Triangle Institute v. Board of Governors, No. 97- In the Matter of a Notice to Prohibit Further 1719 (U.S. Supreme Court, filed April 28, 1998). Petition Participation Against for writ of certiorari to review dismissal by the United James J. Redemann States Court of Appeals for the Fourth Circuit of a contract Former Director of Evergreen Bank, N.A. claim against the Board. On October 5, 1998, the Supreme Court denied the writ. Evergreen Bank, N.A. Fenili v. Davidson, No. C-98-01568-CW (N.D. California, Poy Sippi, Wisconsin filed April 17, 1998). Tort and constitutional claim arising out of return of a check. On June 5, 1998, the Board filed its Docket No. AA-EC-98-09 motion to dismiss. Logan v. Greenspan, No. l:98CV00049 (D.D.C., filed January 9, 1998). Employment discrimination complaint. Final Decision Goldman v. Department of the Treasury, No. 1-97-CV-3798 (N.D. Ga., filed December 23, 1997). Declaratory judgment This is an administrative proceeding pursuant to the Fedaction challenging Federal Reserve notes as lawful money. eral Deposit Insurance Act ("FDI Act") in which the On March 2, 1998, the Board filed a motion to dismiss the Office of the Comptroller of the Currency of the United action. States of America ("OCC") seeks to prohibit the Respon- Kerr v. Department of the Treasury, No. CV-S-97-01877dent, James J. Redemann ("Redemann"), from further DWH (S.D. Nev., filed December 22, 1997). Challenge to participation in the affairs of any financial institution beincome taxation and Federal Reserve notes. On Septemcause of his conduct as an officer of Evergreen Bank, N.A., ber 3, 1998, a motion to dismiss was filed on behalf of all Poy Sippi, Wisconsin (the "Bank"). Under the FDI Act, federal defendants. the OCC may initiate a prohibition proceeding against a Allen v. Indiana Western Mortgage Corp., No. 97-7744 RJK former employee of a national bank, but the Board must (CD. Cal, filed November 12, 1997). Customer dispute make the final determination whether to issue an order of with a bank. On March 23, 1998, the district court dis- prohibition. missed the action. Upon review of the administrative record, the Board Artis v. Greenspan, No. 97-5235 (D.C. Cir., filed Septem- issues this Final Decision adopting the Recommended Deber 19, 1997). Appeal of district court order dismissing cision ("Recommended Decision") of Administrative Law employment discrimination class action. On October 20, Judge Walter Alprin (the "ALJ"), and orders the issuance 1998, the court of appeals affirmed the dismissal. of the attached Order of Prohibition. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 79 I. Statement of the Case extension to answer to Notice to July 7, 1998. Shortly before his answer was due, Redemann filed a "Notice of Default," expressly denying the allegations but indicating A. Statutory and Regulatory Framework that he chose "not to contest this action because he accepts the consequences of a final order entering the relief that the Under the FDI Act and the Board's regulations, the ALJ is [Notice] seeks . .. ." Enforcement Counsel then moved for responsible for conducting proceedings on a notice of entry of an order of default, and the ALJ issued his Recomcharges. 12 U.S.C. § 1818(e)(4). The ALJ issues a recom- mended Decision recommending issuance of an order of mended decision that is referred to the deciding agency prohibition. together with any exceptions to those recommendations filed by the parties. The Board makes the final findings of II. Discussion fact, conclusions of law, and determination whether to issue an order of prohibition in the case of prohibition Because Redemann's default prevents him from contesting orders sought by the OCC. Id.; 12 C.F.R. 263.40. the allegations in the Notice, the Board may take those The FDI Act sets forth the substantive basis upon which allegations as established. According to the Notice, Redea federal banking agency may issue against a bank official mann engaged in a scheme in which he obtained cashier's or employee an order of prohibition from further participa- checks drawn on the Bank and booked as capitalized tion in banking. In order to issue such an order, the Board expenditures of the Bank. A portion of the funds were paid must make each of three findings: over to the Bank's president and his wife, causing actual or (1) that the respondent engaged in identified mis- potential loss to the Bank. conduct, including an unsafe or unsound prac- These actions meet all of the requirements of an order of tice or a breach of fiduciary duty; prohibition. Redemann's action in directing Bank funds to (2) that the conduct had a specified effect, including the Bank president personally was both an unsafe or unfinancial loss to the institution or gain to the sound banking practice and a breach of his fiduciary duty. respondent; and As a result, the Bank "has suffered or will probably suffer (3) that the respondent's conduct involved either financial loss," 12 U.S.C. § 1818(e)(l)(B)(i). Finally, Redepersonal dishonesty or a willful or continuing mann's action evidenced personal dishonesty in that he disregard for the safety or soundness of the arranged for the checks to be recorded as legitimate Bank institution. 12 U.S.C. § 1818(e)(l)(A)-(C). expenses while transferring a portion of the funds to the An enforcement proceeding is initiated by the filing of a Bank president. Redemann's action also constituted a willnotice of charges which is served on the respondent. Under ful or continuing disregard for the Bank's safety or soundthe OCC's and the Board's regulations, the respondent ness, as such action, if continued, could threaten the Bank's must file an answer within 20 days of service of the notice. safety or soundness. 12 C.F.R. 19.19(a) and 263.19(a). Failure to file an answer In sum, all elements necessary for the issuance of a constitutes a waiver of the respondent's right to contest the prohibition order are presented in this case. allegations in the notice, and a final order may be entered unless good cause is shown for failure to file a timely Conclusion answer. 12 C.F.R. 19.19(c)(l) and 263.19(c)(l). For these reasons, the Board orders the issuance of the attached Order of Prohibition. B. Procedural History By Order of the Board of Governors, this 30th day of November, 1998. On May 7, 1998, the OCC initiated a Notice of Removal Board of Governors of the and Notice of Charges (the "Notice") against Redemann. Federal Reserve System The Notice alleged that Redemann engaged in an unsafe and unsound banking practice while employed at the Bank. JENNIFER J. JOHNSON Specifically, the Notice alleged that while a Director of the Secretary of the Board Bank, Redemann engaged in a scheme to obtain Bank funds for the benefit of the Bank's president and vicepresident, who are husband and wife. As a result of the Order of Prohibition scheme, the Bank suffered actual or potential loss. The scheme was carried out by means of money orders issued WHEREAS, pursuant to section 8(e) of the Federal Deto Redemann, recorded as capitalized expenditures for the posit Insurance Act, as amended, (the "Act") (12 U.S.C. Bank. Some of the proceeds of the money orders, however, § 1818(e)), the Board of Governors of the Federal Reserve were used for payments for the benefit of the Bank presi- System ("the Board") is of the opinion, for the reasons set dent. forth in the accompanying Final Decision, that a final The Notice was personally served on Redemann on Order of Prohibition should issue against JAMES J. REDE- May 8, 1998. Through counsel, Redemann obtained an MANN ("Redemann"); Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

80 Federal Reserve Bulletin • January 1999 NOW, THEREFORE, IT IS HEREBY ORDERED, pur- This Order shall become effective at the expiration of suant to section 8(e) of the Federal Deposit Insurance Act, thirty days after service is made. as amended (12 U.S.C. § 1818(e)), that: By Order of the Board of Governors, this 30th day of 1. In the absence of prior written approval by the November, 1998. Board, and by any other Federal financial institution regulatory agency where necessary pur- Board of Governors of the suant to section 8(e)(7)(B) of the Act Federal Reserve System (12 U.S.C. § 1818(e)(7)(B)), Redemann is hereby prohibited: JENNIFER J. JOHNSON (a) From participating in the conduct of the Secretary of the Board affairs of any bank holding company, any insured depository institution or any other institution specified in subsection 8(e)(7)(A) of the Act (12 U.S.C. § 1818(e)(7)(A)); FINAL ENFORCEMENT ORDERS ISSUED BY THE (b) From soliciting, procuring, transferring, BOARD OF GOVERNORS attempting to transfer, voting or attempt- Frontier Bank of Laramie County ing to vote any proxy, consent, or authori- Cheyenne, Wyoming zation with respect to any voting rights in any institution described in subsection 8(e)(7)(A) of the Act (12 U.S.C. The Federal Reserve Board announced on November 17, § 1818(e)(7)(A)); 1998, the issuance of a Cease and Desist Order against the (c) From violating any voting agreement pre- Frontier Bank of Laramie County, Cheyenne, Wyoming. viously approved by the appropriate Federal banking agency; or (d) From voting for a director, or from serv- William Shilstone ing or acting as an institution-affiliated New York, New York party as defined in section 3(u) of the Act, (12 U.S.C. § 1813(u)), such as an officer, director, or employee. The Federal Reserve Board announced on November 17, 2. This Order, and each provision hereof, is and 1998, the issuance of a Cease and Desist Order against shall remain fully effective and enforceable un- William Shilstone, a former institution-affiliated party of til expressly stayed, modified, terminated or the New York branch of Societe Generale, New York, suspended in writing by the Board. New York. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Al Financial and Business Statistics A3 GUIDE TO TABULAR PRESENTATION Federal Finance—Continued A27 Gross public debt of U.S. Treasury- DOMESTIC FINANCIAL STATISTICS Types and ownership A28 U.S. government securities Money Stock and Bank Credit dealers—Transactions A4 Reserves, money stock, liquid assets, and debt A29 U.S. government securities dealers— measures Positions and financing A5 Reserves of depository institutions and Reserve Bank A30 Federal and federally sponsored credit credit agencies—Debt outstanding A6 Reserves and borrowings—Depository institutions Securities Markets and Corporate Finance Policy Instruments A31 New security issues—Tax-exempt state and local governments and corporations A7 Federal Reserve Bank interest rates A32 Open-end investment companies—Net sales A8 Reserve requirements of depository institutions and assets A9 Federal Reserve open market transactions A32 Corporate profits and their distribution A32 Domestic finance companies—Assets and Federal Reserve Banks liabilities A3 3 Domestic finance companies—Owned and managed A10 Condition and Federal Reserve note statements receivables All Maturity distribution of loan and security holding Real Estate Monetary and Credit Aggregates A34 Mortgage markets—New homes A12 Aggregate reserves of depository institutions A35 Mortgage debt outstanding and monetary base A13 Money stock, liquid assets, and debt measures Consumer Credit A36 Total outstanding Commercial Banking Institutions— A36 Terms Assets and Liabilities A15 All commercial banks in the United States Flow of Funds A16 Domestically chartered commercial banks A17 Large domestically chartered commercial banks A37 Funds raised in U.S. credit markets A19 Small domestically chartered commercial banks A39 Summary of financial transactions A20 Foreign-related institutions A40 Summary of credit market debt outstanding A41 Summary of financial assets and liabilities Financial Markets A22 Commercial paper and bankers dollar DOMESTIC NONFINANCIAL STATISTICS acceptances outstanding A22 Prime rate charged by banks on short-term Selected Measures business loans A42 Nonfinancial business activity A23 Interest rates—Money and capital markets A42 Labor force, employment, and unemployment A24 Stock market—Selected statistics A43 Output, capacity, and capacity utilization A44 Industrial production—Indexes and gross value Federal Finance A46 Housing and construction A25 Federal fiscal and financing operations A47 Consumer and producer prices A26 U.S. budget receipts and outlays A48 Gross domestic product and income A27 Federal debt subject to statutory limitation A49 Personal income and saving Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A2 Federal Reserve Bulletin • January 1999 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 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 SPECIAL TABLES A52 Liabilities to, and claims on, foreigners A53 Liabilities to foreigners SPECIAL TABLES A55 Banks' own claims on foreigners A56 Banks' own and domestic customers' claims on A64 Pro Forma Balance Sheet and Income Statements foreigners for Priced Services Operations A56 Banks' own claims on unaffiliated foreigners A57 Claims on foreign countries—Combined A66 INDEX TO STATISTICAL TABLES domestic offices and foreign branches 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 P Preliminary HUD Department of Housing and Urban r Revised (Notation appears on column heading Development when about half of the figures in that column IMF International Monetary Fund are changed.) IO Interest only * Amounts insignificant in terms of the last decimal IPCs Individuals, partnerships, and corporations place shown in the table (for example, less than IRA Individual retirement account 500,000 when the smallest unit given is millions) MMDA Money market deposit account 0 Calculated to be zero MSA Metropolitan statistical area Cell not applicable NOW Negotiable order of withdrawal ATS Automatic transfer service OCD Other checkable deposit BIF Bank insurance fund OPEC Organization of Petroleum Exporting Countries CD Certificate of deposit OTS Office of Thrift Supervision CMO Collateralized mortgage obligation PMI Private mortgage insurance CRA Community Reinvestment Act of 1977 PO Principal only FFB Federal Financing Bank REIT Real estate investment trust FHA Federal Housing Administration REMIC Real estate mortgage investment conduit FHLBB Federal Home Loan Bank Board RP Repurchase agreement FHLMC Federal Home Loan Mortgage Corporation RTC Resolution Trust Corporation 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 Department of Veterans Affairs G-7 Group of Seven VA 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. Minus signs are used to indicate (1) a decrease, (2) a negative "State and local government" also includes municipalities, figure, or (3) an outflow. special districts, and other political subdivisions. "U.S. government securities" may include guaranteed issues of U.S. government agencies (the flow of funds figures also Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A4 Domestic Financial Statistics • January 1999 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted' 1997 Monetary or credit aggregate Q4 Ql Q2 Q3 June Julyr Aug. Sept. Oct. Reserves of depository institutions" 1 Total -2.8 -1.9 -3.8 -7.4 -5.3 4.9 -11.0' -5.2 2 Required -5.6 -1.8 -2.5 -9.0 -18.1 1.0 -16.1 -2.5 3 Nonborrowed -.6 -4.3 -8.4' -7.9 15.5 4.6 -10.5 -3.2 4 Monetary base3 6.9 4.1 6.9 6.2 5.0 8.9 11.5 9.3 Concepts of money, liquid assets, and debt* 5 Ml .9 3.0 .2 -2.5' -3.6 -3.0 -3.1' 3.6' 7.1 6 M2 7.0 8.0 7.5 6.7 5.3 4.9 8.5' 14.8' 12.3 7 M3 10.0 11.0 10.3 7.1' 6.8 1.5 11.8' 14.5' 13.6 8 L 9.2 12.9' 8.0 -3.5 7.2 -.3 9.6' -67.5 n.a. 9 Debt 6.0 6.2 6.2 5.9 5.8' 6.2 5.8' 5.6 Nontransai'tlon components 10 InM25 9.3 9.8 10.1 9.9' 8.4 7.6 12.5' 18.6' 14.0 11 In M3 only6 19.5 20.3 18.8 8.2' 10.9 -8.3 21.4' 13.7' 17.3 Time and savings deposits Commercial banks 12 Savings, including MMDAs 16.3 13.6 14.3 13.8' 10.9 17.0 15.2' 18.7' 14.5 13 Small time7 4.5 1.5 -1.0 .8' -1.0 .2 5.6 I.7r 1.7 14 Large time89 9.9 19.5 18.0 -2.4 16.8 -29.8 11.7' -2.7' 1.8 Thrift institutions 15 Savings, including MMDAs 1.4 7.6 11.6 6.9 3.6 8.5 2.7 7.5' 11.6 16 Small time7 -3.1 -.4 -5.6 -5.0' -1.1 -5.3 -12.4' 1.1 .7 17 Large time 5.4 14.4 -4.0 13.9 -9.6 -8.3 2.8 6.9 Money market mutual funds 18 Retail 15.1 19.3 21.7 21.8 20.8 5.5 33.1 48.3 31.5 19 Institution-only 22.0 18.9 36.5 21.6 28.7 -5.3 36.5 38.4 60.9 Repurchase agreements and Eurodollars 20 Repurchase agreements10 39.5 34.1 14.5 10.3 -32.6 17.9 32.5 32.1 -20.3 21 Eurodollars10 24.3 7.6 -7.7 11.7' 13.9 18.9 8.4' -31.01 12.9 Debt components 22 Federal .4 .0 -1.4 -1.5 -.9 -.9 -3.3 23 Nonfederal 7.9 8.3 8.6' 8.3 8.0' 8.4 8.0 8.4 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 1. 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 I), 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 nonfamn commercial banks other than those owed to depository institutions, the U.S. government, and noncorporate businesses, and farms). Nonfederal debt consists of mortgages, lax-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 S100,000), 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 M1. 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 S 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 Uniled Kingdom and Canada. Excludes Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Money Stock and Bank Credit A5 1.11 RESERVES OF DEPOSITORY INSTITUTIONS AND RESERVE BANK CREDIT' Millions of dollars Average of Average of daily figures for week ending on date indicated daily figures 1998 Aug. Sept. Oct. Sept. 16 Sept. 23 Sept. 30 Oct. 7 Oct. 14 Oct. 21 Oct. 28 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 481,257 486,639 489,496 486,799 486,081 487,907' 488,458 488,624 490,836 488,188 U.S. government securities2 2 Bought outright—System account3 441,902 444,223 447,493 442,785 444,810 446,239 446,736 447,673 447,289 447,209 3 Held under repurchase agreements 3,072 6,303 3,235 8,038 5,675 5,441 3,740 2,672 4,096 2.025 Federal agency obligations 4 Bought outright 469 417 394 403 403 403 403 400 388 5 Held under repurchase agreements 3,013 1,923 3,425 1,729 1.521 1,170 2,811 3,077 4,415 3,457 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 27 56 27 II 138 315 31 4 13 8 Seasonal credit 247 177 104 167 174 172 132 110 99 91 9 Extended credit 0 0 0 0 0 0 0 0 0 0 10 Float 414 622 186 530 678 796' 286 543 -178 281 11 Other Federal Reserve assets 32,113 32,918 34,572 33,120 32,808 33,549 34,036 34,117 34,723 34,724 12 Gold stock 11,045 11,045 11,043 11,045 11,045 11,045 11,044 11,044 11,044 11,040 13 Special drawing rights certificate account 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 14 Treasury currency outstanding 25,950' 25,990' 26,033 25,989' 25,992' 25,995' 26,009 26,023 26,037 26,051 ABSORBING RESERVE FUNDS 15 Currency in circulation 487,952' 492,822' 496,396 493,832' 492,430' 492,794' 493,934 497,334 497,191 496,617 16 Treasury cash holdings 120 93 91 92 94 93 92 92 92 90 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 5,130 6,296 5,407 5,869 7,144 6,989 5,779 5,480 5,322 5,326 18 Foreign 167 176 224 175 165 201 194 321 209 206 19 Service-related balances and adjustments . . 6,979 6,907' 6,949 6,827 6,946 6,992' 6,959 7,055 6,953 6,866 20 Other 347 360 414 358 370 353 423 417 408 424 21 Other Federal Reserve liabilities and capital . 16,922 17,160 17,347 16,998 17,168 17,206 17,681 17,078 17,218 17,188 22 Reserve balances with Federal Reserve Banks4 9,836 9,061' 8,945 8,881 8,002 9,519' 9,649 7,114 9,725 7,761 End-of-month figures Wednesday figures Aug. Sept. Sept. 16 Sept. 23 Sept. 30 Oct. 7 Oct. 14 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 487,877 496,371' 494,902 486,641 491,427 496,371' 489.458 491,277 492,306 489,075 U.S. government securities 2 Bought outright—System account3 442,135 446.047 450,179 442,835 445,804 446,047 447,457 447,687 448,032 447,966 3 Held under repurchase agreements 7,942 12.135 4,286 9,106 8,630 12,135 4,538 2,045 4,115 2,279 Federal agency obligations 4 Bought outright 451 403 388 403 403 403 403 388 388 388 5 Held under repurchase agreements 3,566 2,099 3,538 795 2,075 2,099 2,840 4,570 5,488 3,440 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 66 896 1 31 9 896 3 101 0 8 Seasonal credit 226 159 68 173 177 159 128 109 94 83 9 Extended credit 0 0 0 0 0 0 0 0 0 0 10 Float 973 -1,230" -314 142 836 -1,230' -40 2,140 -266 116 11 Other Federal Reserve assets 32,518 35,862 36,756 33,157 33,495 35,862 34,131 34,238 34,455 34,802 12 Gold stock 11,046 11,044 11,041 11,045 11,045 11,044 11,044 11,044 11,044 11,041 13 Special drawing rights certificate account 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 14 Treasury currency outstanding 25,984' 25,995' 26,065 25,989' 25,992' 25,995' 26,009 26,023 26,037 26,051 ABSORBING RESERVE FUNDS 15 Currency in circulation 488,645' 494,244' 497,402 494,005' 493,359' 494,244' 495,888 498,474 497,594 498,039 16 Treasury cash holdings 94 92 87 94 93 92 92 92 91 87 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 6,704 4,952 4,440 6,265 7,508 4,952 5,291 4,895 4,842 6,382 18 Foreign 162 347 154 163 166 347 196 189 177 213 19 Service-related balances and adjustments . . 6,870 6,992' 6,864 6,827 6,946 6,992' 6,959 7,055 6,953 6,866 20 Other 332 349 380 357 388 349 427 397 398 467 21 Other Federal Reserve liabilities and capital . 17,420 17,654 18.241 16,734 16,952 17,654 16,898 16,878 17,025 16.927 22 Reserve balances with Federal Reserve Banks4 13,881 17,981' 13,639 8,430 12,253 17,981' 9,960 9,564 11,506 6.385 1. Amounts of cash held as reserves are shown in table 1.12, line 2. 3. Includes compensation thai 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 Financial Statistics • January 1999 1.12 RESERVES AND BORROWINGS Depository Institutions' Millions of dollars Prorated monthly averages of biweekly averages Reserve classification 1995 1996 1997 1998 Dec. Dec. Dec. Apr. May June July Aug. Sept.' Oct. 1 Reserve balances with Reserve Banks 20.440 13,395 10,673 11,053 9,646 9,668 9.646 9,682 9,284 9,033 2 Total vault cash3 42,281 44,525 44,707 41,215 41,482 42,635 42,035 42,121 42,579 43,348 3 Applied vault cash4 37,460 37,848 37,206 35,423 35.159 35,427 34,954 35,025 34,909 35,089 4 Surplus vault cash5 4,821 6,678 7,500 5,792 6,323 7,208 7,081 7,095 7,670 8,258 5 Total reserves6 57,900 51,242 47,880 46,475 44,805 45,095 44,600 44,707 44,193 44,122 6 Required reserves 56,622 49,819 46,196 45,131 43,655 43,475 43,235 43,194 42,509 42,543 7 Excess reserve balances at Reserve Banks7 1,278 1,423 1,683 1,345 1,150 1,620 1,365 1,513 1,684 1,579 8 Total borrowings at Reserve Banks" 257 155 324 72 153 251 258 271 251 174 9 Seasonal borrowings 40 68 79 41 94 159 215 242 178 107 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 1998 July 1 July 15 July 29 Aug. 12 Aug. 26 Sept. 9 Sept. 23 Oct. 7 Oct. 21 Nov. 4 1 Reserve balances with Reserve Banks2 9,969 10,225 8,933 10,428 8.800 10,363 8,439 9,588 8,400 9,531 2 Total vault cash 41,919 42,101 41,984 41,984 42,355 41,793 42,900 42,948 44,084 42,598 3 Applied vault cash4 35,060 35,102 34,770 35,157 35,024 34,712 35,039 34,905 35,321 34,895 4 Surplus vault cash5 6,859 6,999 7,214 6,827 7,330 7,081 7,862 8,043 8,763 7,703 5 Total reserves6 45,029 45,326 43,703 45,585 43,824 45,075 43,477 44,493 43,720 44,426 6 Required reserves 43.232 43,999 42,341 44,147 42,392 43,153 42,093 42,514 42,520 42,597 7 Excess reserve balances at Reserve Banks 1,797 1,327 1,362 1,437 1,431 1,922 1,384 1,978 1,200 1,829 8 Total borrowings at Reserve Banks8 285 198 314 271 280 247 190 379 122 103 9 Seasonal borrowings 184 196 233 241 255 209 171 152 105 79 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 arid adjustments to compensate for float and (line 3). includes other off-balance-sheet L'as-of' adjustments. 7. Tolal 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 lenns and conditions estabto satisfy reserve requirements. The maintenance period for weekly reporters ends sixteen lished for the extended credit program to help depository instirulions 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 credit Extended credit" Federal Reserve Bank On On On 12/4/98 12/4/98 12/4/98 Effective date Boston 11/18/98 New York 11/17/98 Philadelphia.. 11/17/98 Cleveland 11/19/98 Richmond.... 11/18/98 Atlanta 11/18/98 Chicago 11/19/98 St. Louis 11/19/98 Minneapolis.. 11/19/98 Kansas City .. 11/18/98 Dallas 11/17/98 San Francisco. 11/17/98 4.95 Range of rates for adjustment credit in recent years4 Range (or F.R. Bank Range (or F.R. Bank Range (or F.R. Bank Effective date level)—All of level)—All of Effective date level)—All of F.R. Banks N.Y. F.R. Banks N.Y. F.R. Banks N.Y. In effect Dec. 31, 1977 1981—Nov. 2 . 13-14 13 1988—Aug. 9 . 6-6.5 6.5 6 . 13 13 11 . 6.5 6.5 1978—Jan. 9 6-6.5 6.5 Dec. 4 . 12 12 20 6.5 6.5 1989—Feb. 24 6.5-7 May 11 6.5-7 7 1982—July 20 . 11.5-12 11.5 27 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 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 20 10.5 10.5 17. 8.5 8.5 24 3.5 3.5 Sept. 19 10.5-11 II 21 II II 1984—Apr. 9 . 8.5-9 9 1992—July 2 .... 3-3.5 3 Oct. 8 11-12 12 13. 9 9 7 .... 3 3 10 12 12 Nov. 21 . 8.5-9 8.5 26 . 8.5 8.5 1994—May 17 3-3.5 3.5 1980—Feb. 15 12-13 13 Dec. 24 . 18 .... 3.5 3.5 19 13 13 Aug. 16 . . . . 3.5^t 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 II 23. 6.5 6.5 Nov. 17 12 12 July 11 . 6 6 1996—Jan. 31 5.00-5.25 5.00 Dec. 5 12-13 13 Aug1: 5.5-6 5.5 Feb. 5 5.00 5.00 8 13 13 2 5.5 5.5 1981—May 5 13-14 14 1998—Oct. 15 .. 4.75-5.00 4.75 14 14 1987—Sept. 4 . 5.5-6 6 Oct. 16 .. 4.75 4.75 11 . 6 6 1998—Nov. 17 4.50-4.75 4.50 Nov. 19 4.50 4.50 In effect Dec. 4, 1998 4.50 4.50 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 Financial Statistics • January 1999 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS' Requirement Type of deposit Percentage of deposits Effective date Net transaction accounts 1 $0 million-$47.8 million3 3 12/31/98 2 More than $47.8 million 10 12/31/98 3 Nonpersonal time deposits5 0 12/27/90 4 Eurocurrency liabilities6 0 12/27/90 1. Required reserves must be held in the form of deposits with Federal Reserve Banks succeeding calendar year by 80 percent of the percentage increase in the total reservable or vault cash. Nonmember institutions may maintain reserve balances with a Federal liabilities of all depository institutions, measured on an annual basis as of June 30. No Reserve Bank indirectly, on a pass-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 December 31, 1998, for depository institutions that report include commercial banks, mutual savings banks, savings and loan associations, credit weekly, and with the period beginning January 14, 1999, for institutions that report quarterly, unions, agencies and branches of foreign banks, and Edge Act corporations. the exemption was raised from $4.7 million to $4.9 million. 2. Transaction accounts include all deposits against which the account holder is permitted 4. The reserve requirement was reduced from 12 percent to 10 percent on to make withdrawals by negotiable or transferable instruments, payment orders of with- Apr. 2, 1992, for institutions that report weekly, and on Apr. 16, 1992, for institutions that drawal, or telephone or preauthorized transfers for the purpose of making payments to third report quarterly. persons or others. However, accounts subject to the rules that permit no more than six 5- For institutions that report weekly, the reserve requirement on nonpersonal time deposits preauthorized, automatic, or other transfers per month (of which no more than three may be with an original maturity of less than 1 x/i years was reduced from 3 percent to 1 l/i percent for by check, draft, debil 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 [/z 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 '/£ as of June 30 of each year. Effective with the reserve maintenance period beginning years or more has been zero since Oct. 6, 1983. December 31, J998, for depository institutions that report weekly, and with the period 6. The reserve requirement on Eurocurrency liabilities was reduced from 3 percent to zero beginning January 14, 1999, for institutions that report quarterly, the amount was decreased in the same manner and on the same dates as the reserve requirement on nonpersonal time from $47.8 million to $46.5 million. deposits with an original maturity of less than 1 Vi years (see note 5). Under the Garn-St Germain Depository Institutions Act of 1982, the Board adjusts the amount of reservable liabilities subject to a zero percent reserve requirement each year for the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A9 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS1 Millions of dollars 1998 Type of transaction and maturity Apr. May July Sept. U.S. TREASURY SECURITIES2 Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 10,932 9,901 9,147 0 3,550 0 0 0 0 0 2 Gross sales 0 0 0 0 0 0 0 0 0 0 3 Exchanges 405,296 426,928 436,257 34,025 46,802 35,190 32,830 40,312 34,607 33,140 4 For new bills 405,296 426,928 435,907 34,025 46,802 35,190 32,830 40,312 34,607 33,140 5 Redemptions 900 0 0 0 0 0 0 0 0 0 Others within one year 6 Gross purchases 390 524 5,549 1,501 1,369 0 0 0 986 1,038 7 Gross sales 0 0 0 0 0 0 0 0 0 0 8 Maturity shifts 43,574 30,512 41,716 1,964 4,369 6,951 1,520 2,638 6,367 2,301 9 Exchanges -35,407 -41,394 -27,499 -5,736 -2,601 -4,990 -5,084 -2,242 -8,964 -2,242 10 Redemptions 1,776 2,015 1,996 0 286 0 0 1,311 0 0 One to five years 11 Gross purchases 5,366 3,898 19,680 2,262 2,993 0 0 0 535 3,989 12 Gross sales 0 0 0 0 0 0 0 0 0 0 13 Maturity shifts -34,646 -25,022 -37,987 -1,964 -4,369 -6,620 -1,520 -2,638 -2,168 -2,301 14 Exchanges 26,387 31,459 20,274 5,736 2,201 2,270 5,084 1,842 5,828 2,242 Five to ten years 15 Gross purchases 1,432 1,116 3,849 283 495 0 0 0 303 351 16 Gross sales 0 0 0 0 0 0 0 0 0 0 17 Maturity shifts -3,093 -5,469 -1,954 0 0 -331 0 0 -3,411 0 18 Exchanges 7,220 6,666 5,215 0 0 2,720 0 0 1,364 0 More than ten years 19 Gross purchases 2,529 1,655 5,897 743 0 0 0 0 1,769 0 20 Gross sales 0 0 0 0 0 0 0 0 0 0 21 Maturity shifts -2,253 -20 -1,775 0 0 0 0 0 -789 0 22 Exchanges 1,800 3,270 2,360 0 400 0 0 400 1,772 0 All maturities 23 Gross purchases 20,649 17,094 44,122 4.789 8,407 0 0 0 3,593 5,377 24 Gross sales 0 0 0 0 0 0 0 0 0 0 25 Redemptions 2,676 2,015 1,996 0 286 0 0 1,311 0 0 Matched transactions 26 Gross purchases 2,197,736 3,092,399 3,577,954 364,307 354,756 367,934 369,358 373,285 346,245 380,594 27 Gross sales 2,202,030 3,094,769 3,580,274 364,537 354,741 368,281 370,569 371,142 348,318 382,063 Repurchase agreements 28 Gross purchases 331,694 457,568 810,485 40,211 59,548 7,722 57,098 52,116 39,078 63,924 29 Gross sales 328,497 450,359 809,268 37,010 50,663 20,456 41,414 63,531 38,402 59,731 30 Net change in U.S. Treasury securities 16,875 19,919 41,022 7,760 -13,081 14,473 -10,584 2,196 8,101 FEDERAL AGENCY OBLIGATIONS Outright transactions 31 Gross purchases 0 0 0 0 0 0 0 32 Gross sales 0 0 0 0 0 0 0 33 Redemptions 1,003 409 1,540 50 74 25 48 Repurchase agreements 34 Gross purchases 36,851 75,354 160,409 17,685 13,547 1,575 14,548 11,236 33,431 18,486 35 Gross sales 36,776 74,842 159,369 18,342 13,042 3,300 12,913 12,341 30,625 19,953 36 Net change in federal agency obligations -928 103 -500 -707 431 -1,725 1,610 -1,105 2,731 -1.515 37 Total net change in System Open Market Account 15,948 20,021 40,522 7,053 17,452 -14.806 16,083 -11,689 4,927 6,586 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 Financial Statistics • January 1999 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements' Millions of dollars Wednesday End of month Sept. 30 Oct. 14 Oct. 21 Oct. 28 Aug. 31 Sept. 30 Oct. 31 Consolidated condition statement 1 Gold certificate account 11,044 11,044 11.044 11,044 11,041 11,046 11,044 11,041 2 Special drawing rights certificate account 9,200 9,200 9.200 9,200 9,200 9,200 9,200 9,200 3 Coin 417 409 411 413 458 423 417 426 Loans 4 To depository institutions 1,055 130 210 95 84 293 1,055 69 5 Other 0 0 0 0 0 0 0 0 6 Acceptances held under repurchase agreements 0 0 0 0 0 0 0 0 Federal agency obligations 7 Bought outright 403 403 388 388 388 451 403 388 8 Held under repurchase agreements 2,099 2,840 4,570 5,488 3,440 3,566 2,099 3,538 9 Total US. Treasury securities 458,182 451,995 449,732 452,147 450,245 450,077 458,182 454,465 10 Bought outright2 446,047 447,457 447,687 448,032 447,966 442,135 446,047 450,179 11 Bills 195,864 196,216 196,445 197,387 196.578 197,334 195,864 197,450 12 Notes 184,186 184,187 184,188 183,591 184,333 178,826 184,186 185,033 13 Bonds 65,996 67,054 67,054 67,055 67,055 65,975 65,996 67,696 14 Held under repurchase agreements 12,135 4,538 2,045 4,115 2,279 7,942 12,135 4,286 15 Total loans and securities 461,738 455^68 454,899 458,117 454,157 454,386 461,738 458,460 16 Items in process of collection. 6,454 8,040 11,600 6,965 6,398 2,465 6.454 4,702 17 Bank premises 1,295 1,296 1,296 1,296 1.295 1.293 1,295 1,293 Other assets 18 Denominated in foreign currencies3 18,448 18,458 18,467 18,477 18,486 17,601 18,448 19,573 19 Allother4 15,880 14.451 14,532 14,701 15,114 13.671 15.880 15,976 20 Total assets 524,476 518,266 521,449 520,213 516,148 510,087 524,476 520,672 LIABILITIES 21 Federal Reserve notes 468.759 470.380 472,955 472,061 472.533 463,179 468.759 471,851 22 Total deposits 31353 23,865 21,861 24,190 20,448 27,520 31,353 25,568 23 Depository institutions 25,706 17,950 16,380 18.773 13,385 20,321 25,706 20,592 24 U.S. Treasury—General account 4,952 5,291 4,895 4,842 6.382 6,704 4,952 4,440 25 Foreign—Official accounts 347 196 189 177 213 162 347 154 26 Other 349 427 397 467 332 349 380 27 Deferred credit items 6,711 7,123 9,755 6,937 6,240 1,968 6,711 5,012 28 Other liabilities and accrued dividends5 4,637 4,506 4.451 4,588 4,477 4,750 4.637 4,518 29 Total liabilities 511,460 505,874 509,022 507,776 503,697 497,417 511,460 506,948 CAPITAL ACCOUNTS 30 Capital paid in 5,910 5,914 5,915 5,916 5,919 5,866 5,910 5,920 31 Surplus 5,220 5,220 5,220 5.220 5,220 5,220 5,220 5,220 32 Other capital accounts. 1,886 1,257 1,292 1.300 1,311 1,583 1,886 2,583 33 Total liabilities and capital accounts 524,476 518,266 521,449 520,213 516,148 510,087 524,476 520,672 MEMO 34 Marketable U.S. Treasury securities held in custody for foreign and international accounts 569,016 571,910 571.910 576,334 573,571 564.692 576,466 Federal Reserve note statement 35 Federal Reserve notes outstanding (issued to Banks) . 580,575 583,371 585,227 586,916 587,780 574,813 580,575 588,229 36 LESS: Held by Federal Reserve Banks 111,817 112,991 112,272 114,855 115,247 111,635 111,817 116,378 37 Federal Reserve notes, net 468,759 470,380 472,955 472,061 472,533 463,179 468,759 471,851 Collateral held against notes, net 38 Gold certificate account 11,044 11,044 11,044 11,044 11,041 11,046 11,044 11,041 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 448.515 450,137 452,711 451,817 452,292 442,932 448,515 451,610 42 Total collateral 468,759 470,380 472,955 472,061 472,533 463,179 468,759 471,851 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 A11 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holding Millions of dollars Wednesday Type of holding and maturity Sept. 30 Oct. 14 Oct. 21 Oct. 28 Aug. 31 Sept. 30 Oct. 30 1 Total loans 1,055 130 95 293 233 2 Within fifteen days' 973 26 113 76 176 155 51 82 104 97 8 117 78 18 3 Sixteen days to ninety days 458,182 451,995 449,732 452,147 450,245 442,135 458,182 454,465 4 Total US. Treasury securities2 20,310 13.238 17.052 13.874 12,666 15.104 20.310 8.752 5 Within fifteen days' 90,644 93,791 93,953 94,188 92,901 92,231 90,644 100,244 6 Sixteen days to ninety days 145.875 142,555 136.315 141,674 142,266 145,997 145,875 141,715 7 Ninety-one days to one year 105,789 105,789 105.789 105,383 105.384 101,535 105.789 106,109 8 One year to five years 41,628 41,628 41,629 42,033 42,033 41,276 41.628 42,034 9 Five years to ten years 53,936 54,994 54,994 54,994 54,994 53,935 53,936 55,611 ] 0 More than ten years 11 Total federal agency obligations 2,502 3,243 4,958 5,876 3,828 4,017 2,502 3,926 12 Within fifteen days' 2,099 2,840 4,570 5,488 3,440 3,614 2,099 3,538 13 Sixteen days to ninety days 50 50 50 50 50 5 50 52 14 Ninety-one days to one year 75 85 85 85 85 120 75 93 15 One year to five years 93 83 68 68 58 93 93 58 16 Five years to ten years 185 185 185 185 185 185 185 185 17 More than ten years 0 0 0 0 n.a. n.a. 0 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. ^Ration-indexed securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A12 Domestic Financial Statistics • January 1999 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, average:* of daily figures 1994 1995 1996 1997 Dec. Dec. Dec. Dec. Apr. May July Aug. Sept. Seasonally adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS 1 Total reserves3 59.41 56.40 50.08 46.67 46.05 45.96 45.59 45.39 44.81 45.00 44.59 44.39 2 Nonborrowed reserves4 59.20 56.14 49.93 46.35 46.00 45.89 45.44 45.14 44.56 44.73 44.33' 44.22 3 Nonborrowed reserves plus extended credit5 59.20 56.14 49.93 46.35 46.00 45.89 45.44 45.14 44.56 44.73 44.33' 44.22 4 Required reserves 58.24 55.12 48.66 44.99 44.73 44.61 44.44 43.77 43.45 43.48 42.90 42.81 5 Monetary base 418.12 434.17 452.38 480.15 485.86 487.20 489.10 491.63 493.70' 497.37' 502.16' 506.06 Not seasonally adjusted 6 Total reserves7 61.13 58.02 51.52 47.97 45.54 46.53 44.87 45.17 44.69 44.81 44.31 44.25 7 Nonborrowed reserves 60.92 57.76 51.37 47.65 45.50 46.45 44.71 44.92 44.43 44.54 44.06 44.08 8 Nonborrowed reserves plus extended credit5 60.92 57.76 51.37 47.65 45.50 46.45 44.71 44.92 44.43 44.54 44.06 44.08 9 Required reserves8 59.96 56.74 50.10 46.29 44.23 45.18 43.72 43.55 43.32 43.30 42.63 42.67 10 Monetary base9 422.51 439.03 456.72 485.11 484.00 487.36 488.28 491.18 495.35' 497.56' 501.04' 504.55 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS1 11 Total reserves" 61.34 57.90 51.24 47.88 45.51 46.48 44.81 45.10 44.60 44.71 44.19' 44.12 12 Nonborrowed reserves 61.13 57.64 51.09 47.56 45.47 46.40 44.65 44.84 44.34 44.44 43.94 43.95 13 NonboiTowed reserves plus extended credit5 61.13 57.64 51.09 47.56 45.47 46.40 44.65 44.84 44.34 44.44 43.94 43.95 14 Required reserves 60.17 56.62 49.82 46.20 44.19 45.13 43.66 43.48 43.24 43.19 42.51 42.54 15 Monetary base 427.25 444.45 463.49 491.92 490.96 494.11 494.95 497.93 502.2O1 504.46' 507.85' 511.40 16 Excess reserves13 1.17 1.28 1.42 1.68 1.31 1.35 1.15 1.62 1.37 1.51 1.68' 1.58 17 Borrowings from the Federal Reserve .21 .26 .16 .32 .04 .07 .15 .25 .26 .27 .25 .17 1. Latest monthly and biweekly figures are available from the Board's H.3 (502) weekly 8. To adjust required reserves for discontinuities that are due to regulatory changes in statistical release. Historical data starting in 1959 and estimates of the effect on required reserve requirements, a multiplicative procedure is used to estimate what required reserves reserves of changes in reserve requirements are available from the Money and Reserves would have been in past periods had current reserve requirements been in effect. Break- Projections Section, Division of Monetary Affairs, Board of Governors of the Federal Reserve adjusted required reserves include required reserves against transactions deposits and nonper- System, Washington, DC 20551. sonal time and savings deposits (but not reservable nondeposit liabilities). 2. Figures reflect adjustments for discontinuities, or "breaks," associated with regulatory 9. The break-adjusted monetary base equals (1) break-adjusted total reserves (line 6), plus changes in reserve requirements. (See also table 1.10.) (2) the (unadjusted) currency component of the money stock, plus (3) (for all quarterly 3. Seasonally adjusted, break-adjusted total reserves equal seasonally adjusted, break- reporters on the "Report of Transaction Accounts, Other Deposits and Vault Cash" and for all adjusted required reserves (line 4) plus excess reserves (line 16). those weekly reporters whose vault cash exceeds their required reserves) the break-adjusted 4. Seasonally adjusted, break-adjusted nonborrowed reserves equal seasonally adjusted, difference between current vault cash and the amount applied to satisfy current reserve break-adjusted total reserves (line 1) less total borrowings of depository institutions from the requirements. Federal Reserve (line 17). 10. Reflects actual reserve requirements, including those on nondeposit liabilities, with no 5. Extended credit consists of borrowing at the discount window under the terms and adjustments to eliminate the effects of discontinuities associated with regulatory changes in conditions established for the extended credit program to help depository institutions deal reserve requirements. with sustained liquidity pressures. Because there is not the same need to repay such 11. Reserve balances with Federal Reserve Banks plus vault cash used to satisfy reserve borrowing promptly as with traditional short-term adjustment credit, the money market effect requirements. of extended credit is similar to that of nonborrowed reserves. 12. The monetary base, not break-adjusted and not seasonally adjusted, consists of (1) total 6. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally reserves (line 11), plus (2) required clearing balances and adjustments to compensate for float adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted currency at Federal Reserve Banks, plus (3) the currency component of the money stock, plus (4) (for component of the money stock, plus (3) (for all quarterly reporters on the "Report of all quarterly reporters on the "Report of Transaction Accounts, Other Deposits and Vault Transaction Accounts, Other Deposits and Vault Cash" and for all those weekly reporters Cash" and for all those weekly reporters whose vault cash exceeds their required reserves) the whose vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted difference between current vault cash and the amount applied to satisfy current reserve difference between current vault cash and the amount applied to satisfy current reserve requirements. Since the introduction of contemporaneous reserve requirements in February requirements. 1984, currency and vault cash figures have been measured over the computation periods 7. Break-adjusted total reserves equal break-adjusted required reserves (line 9) plus excess ending on Mondays. reserves (line 16). 13. Unadjusted total reserves (line 11) less unadjusted required reserves (line 14). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary and Credit Aggregates A13 1.21 MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES1 Billions of dollars, averages of daily figures 1998' 1994 1995 1996 1997 Dec. Dec. Dec. Dec. July Aug. Sept. Oct. Seasonally adjusted Measures 1 Ml 1,150.7 1,128.7 1,082.8 1,076.0 1,071.8 1,069.0 1,072.2 1,078.5 2 M2 3,503.0 3,651.2 3,826.1 4,046.4 4,213.2 4,243.2 4,295.6 4,339.6 3 M3 4,333.6 4,595.6 4,931.1 5,376.8 5,653.0 5,708.7 5,777.7 5,843.2 4 L 5.315.8 5,702.3 6,083.6 6,611.3 6,926.3 6,981.5 6,588.6 n.a. 5 Debt 12,999.5 13,697.6 14,425.2 15,167.4' 15.714.3 15,790.9 15,864.3 n.a. Ml components 6 Currency 354.3 372.4 394.9 425.5 441.3 443.8 449.6 453.4 7 Travelers checks4 8.5 8.9 8.6 8.2 7.7 7.8 7.9 8.0 8 Demand deposits 384.0 391.0 403.6 397.1 378.0 374.2 373.6 374.1 9 Other checkable deposits6 403.9 356.4 275.9 245.2 244.8 243.2 241.2 243.1 Nontransaction components 10 In M27 2,352.3 2,522.6 2,743.2 2,970.4 3,141.4 3,174.2 3,223.4 3,261.1 U In M3 only8 830.6 944.4 1.105.0 1.330.4 1,439.8 1,465.5 1,482.2 1,503.6 Commercial banks 12 Savings deposits, including MMDAs 752.6 775.0 904.8 1,020.9 1,103.8 1,117,8 1,135.2 1,148.9 13 Small time deposits 503.2 575.8 594.5 625.7 623.6 626.5 627.4 628.3 14 Large time deposits10" " 298.7 345.4 413.2 487.5 522.7 527.8 526.6 527.4 Thrift institutions 15 Savings deposits, including MMDAs 397.3 359.7 366.9 376.6 399.2 400.1 402.6 406.5 16 Small time deposits 314.2 357.2 354.3 343.9 337.4 333.9 334.2 334.4 17 Large time deposits 64.7 74.2 78.0 85.4 86.8 86.2 86.4 86.9 Money market mutual funds 18 Retail 385.0 454.9 522.8 603.2 677.4 696.1 724.1 743.1 19 Institution-only 203.1 253.9 310.3 376.2 430.2 443.3 457.5 480.7 Repurchase agreements and Eurodollars 20 Repurchase agreements 183.3 182.4 194.2 236.1 258.1 265.1 272.2 267.6 21 Eurodollars12 80.8 88.6 109.2 145.3 142.1 143.1 139.4 140.9 Debt components 22 Federal debt 3,492.4 3,638.9 3,780.6 3,798.4 3,772.9 3,770.3 3,760.0 n.a. 23 Nonfederal debt 9,507.0 10,058.7 10,644.7 ll^.O1 11,941.4 12,020.6 12,104.3 n.a. Not seasonally adjusted Measures2 24 Ml 1,174.4 1,152.4 1,104.9 1,097.6 1,072.8 1,067.7 1,068.9 1.074.7 25 M2 3,523.4 3,672.0 3,845.4 4,065.3 4,213.7 4,247.6 4,286.9 4.325.5 26 M3 4,353.2 4,615.2 4,948.9 5,394.0 5,644.9 5,709.8 5,762.1 5,834.2 27 L 5,344.6 5,732.8 6,111.6 6,636.7 6,911.6 6,983.1 6,574.0 n.a. 28 Debt 13,002.0 13,699.1 14,425.5 15,166.9' 15,666.0 15,746.0 15,828.1 n.a. Ml components 29 Currency3 357.5 376.2 397.9 429.0 442.7 444.3 448.3 452.5 30 Travelers checks 8.1 8.5 8.3 7.9 8.2 8.2 8.1 8.1 31 Demand deposits5 400.3 407.2 419.9 413.0 378.8 374.2 372.6 372.8 32 Other checkable deposits 408.6 360.5 278.8 247.7 243.1 241.0 239.9 241.3 Nontransaction components 33 In M27 2,349.0 2,519.6 2,740.5 2,967.8 3,141.0 3,179.9 3,217.9 3,250.8 34 In M3 only8 829.7 943.2 1,103.5 1,328.6 1,431.2 1,462.2 1,475.3 1,508.7 Commercial banks 35 Savings deposits, including MMDAs . . 751.7 774.1 903.3 1,019.0 1,106.3 1,120.1 1,133.5 1,144.7 36 Small time deposits9 501.5 573.8 592.7 624.1 624.3 626.6 627.0 628.3 37 Large time deposits10' " 298.9 345.8 413.6 488.0 521.8 528.0 529.0 535.5 Thrift institutions 38 Savings deposits, including MMDAs . 396.8 359.2 366.4 375.9 400.1 400.9 402.0 405.0 39 Small time deposits9 313.2 355.9 353.2 3*3.0 337.8 333.9 333.9 334.4 40 Large time deposits 64.8 74.3 78.1 85.4 86.7 86.2 86.8 88.3 Money market mutual funds 41 Retail 385.9 456.4 524 8 605.8 672.6 698.4 721.6 738.4 42 Insiitution-only 204.6 255.8 312.7 378.9 425.3 441.1 451.3 475.4 Repurchase agreements and Eurodollars 43 Repurchase agreements 179.6 178.0 188.8 229.4 258.4 265.6 270.2 270.1 44 Eurodollars12 81.8 89.4 110.3 146.9 139.0 141.4 137.9 139.5 Debt componrnis 45 Federal debt 3,499.0 3,645.9 3,787.9 3,805.8 3,740.8 3,749.6 3,743.4 n.a. 46 Nonfederal debt 9.503.1 10,053.1 10,637.6 11,361.1' 11,925.2 11,996.4 12,084.7 n.a. Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Financial Statistics • January 1999 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 US. 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 organizaiions, nonfinancia) corporate and nonfami commercial banks other than those owed to depository institutions, the U.S. government, and noncorporate businesses, and farms). Nonfederal debl consisls 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, discontinuilies in the data have been smoolhed into the series) and credit union share draft accounts, and demzind 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 US. 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 nonbanV 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 deposils (including MMDAs), (2) small lime deposits, and (3) retail M3: M2 plus (I) 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 US. term) of US. 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 deposils. 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

Commercial Banking Institutions—Assets and Liabilities A15 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1 A. All commercial banks Billion? of dollars Monthly averages Wednesday figures 1998r 1998 Apr. May June July Aug. Sept. Oct. 7 Oct. 28 Seasonally adjusted Assets 1 Bank credit 4,031.3 4,222.1 4,250.2 4,260.9 4,276.7 4,338.5 4,394.4 4,490.5 4,463.0 4,473.0 4.503.5 4,513.6 2 Securities in bank credit 1,043.7 1,109.9 1,126.1 1,120.4 1,128.6 1,154.0 1,173.7 1,218.3 1.204.7 1,203.8 1.232.5 1,230.0 3 U.S. government securities . .. 731.5 764.9 772.0 755.7 759.7 769.9 765.6 773.0 758.8 766.9 mi 783.6 4 Other securities 312.2 345.0 354.0 364.7 368.9 384.1 408.0 445.3 445.8 436.9 454.9 446.5 5 Loans and leases in bank credit2 2,987.5 3,112.2 3,124.1 3,140.5 3,148.1 3,184.5 3,220.7 3,272.2 3,258.3 3,269.2 3,271.0 3,283.6 6 Commercial and industrial . . . 841.4 869.8 883.2 896.7 901.5 910.0 921.8 943.1 931.5 939.9 948.0 950.3 7 Real estate 1,219.5 1,273.5 1,271.4 1,267.8 1.269.6 1,278.8 1,280.1 1,285.9 1,284.1 1,281.7 1,281.3 1.2901 8 Revolving home equity . . 95.9 98.4 97.8 97.5 97.2 97.1 97.5 96.9 95.9 95.9 97.2 97.2 9 Other 1,123.6 1,175.1 1,173.6 1,170.4 1,172.4 1,181.7 1,182.6 1,189.0 1,188.2 1.184.8 1,184.1 1,192.9 10 Consumer 507.9 506.1 506.0 502.0 494.3 493.3 496.5 495.9 496.0 494.0 496.5 496.4 11 Security3 104.3 117.8 123.0 130.1 132.3 139.0 144.4 159.5 161.6 160.5 159.5 157.3 12 Other loans and leases 314.4 345.0 340.5 343.8 350.4 363.3 377.9 387.9 385.1 393.2 385.7 389.5 13 Interbank loans 195.2 214.6 202.7 218.1 214.4 209.0 222.8 226.2 223.2 216.7 230.7 234.9 14 Cash assets" 261.5 268.8 251.0 251.3 244.2 252.5 253.4 243.8 241.2 249.2 247.5 238.7 15 Other assets5 290.3 308.5 312.5 312.4 308.4 310.7 315.2 310.5 310.9 310.3 311.4 307.8 16 Total assets* 4,721.7 4^>5&5 4.9S&8 4,9853 4.986.4 5^053.7 5,1283 5,213.4 5,180.6 5,191.5 5,235.4 5,237.1 Liabilities 17 Deposits 3,065.7 3,211.9 3,205.4 3,223.0 3,197.1 3,228.8 3,250.1 3,274.1 3,253.8 3,283.9 3,269.6 3.278.9 18 Transaction 685.5 696.5 687.4 682.7 666.8 667.6 677.1 668.2 648.9 674.1 670.1 683.8 19 Nontransaction 2,380.2 2,515.4 2,518.1 2,540.3 2,530.3 2,561.2 2,573.0 2,605.9 2,604.9 2,609.9 2,599.6 2,595.1 20 Large time 620.2 674.5 674.9 685.1 667.3 679.2 684.3 697.0 692.0 695.0 699.7 699.6 21 Other 1,760.0 1,840.8 1,843.2 1,855.2 1,863.0 1,882.0 1,888.7 1,908.9 1,912.9 1,914.8 1,899.8 1,895.5 22 Borrowings 799.9 870.8 861.9 857.8 857.4 861.4 889.7 939.6 920.5 921.4 949.4 957.4 23 From banks in the U.S 293.2 305.8 282.1 287.9 289.6 293.5 303.2 318.5 314.5 317.5 321.4 320.8 24 From others 506.7 565.0 579.8 569.9 567.8 567.9 586.5 621.1 606.0 603.9 628.1 636.6 25 Net due to related foreign offices . 189.4 179.8 174.4 170.6 186.1 201.2 200.1 2211 211.2 211.0 231.0 235.6 26 Other liabilities 269.6 295.4 299.3 308.3 317.1 325.4 335.0 355.5 362.4 360.3 362.1 344.5 27 Total liabilities 4557.9 4^41.0 4^59.7 4557.7 4,616.7 4^75.0 4,7923 4,747.9 4,776.7 4.812.2 4^163 28 Residual (assets less liabilities)7 398.6 417.8 425.7 428.7 436.9 453.5 421.1 432.7 414.7 423.2 420.8 Not seasonally adjusted Assets 29 Bank credit 4,036.1 4,227.1 4,245.2 4,262.4 4.270.6 4,324.9 4,381.3 4 494.1 4,460.6 4.477.9 4,501.3 4,517.4 30 Securities in bank credit 1.041.9 1,121.1 1.130.8 1,123.4 1.123.0 1,145.5 1.161.6 1,214.6 1,197.5 1,199.3 1,225.1 1,229.2 31 U.S. government securities 730.1 773.3 776.7 758.2 755.8 765.1 760.5 770.4 754 2 762.4 775.0 782.6 32 Other securities 3)1.8 347.8 354.1 365.2 367.2 380.4 401.1 444.2 443.3 436.8 450.1 446.7 33 Loans and leases in bank credit2 .. 2.994.2 3,106.0 3.114.4 3,139.0 3,147.7 3,179.4 3,219.7 3,279.4 3,263.1 3,278.6 3,276.2 3,288.1 34 Commercial and industrial 839.3 877.4 888.7 899.4 901.1 904.0 916.3 941.1 930.1 936.9 945.0 947.8 35 Real estate 1,225.7 1267.0 1,265.1 1,265.4 1,271.7 1,282.4 1,285.1 1,292.6 1,291.0 1,289.2 1,287.3 1,295.9 36 Revolving home equity 96.7 97.5 97.5 97.2 97.2 97.3 98.2 97.7 96.7 97.7 97.9 98.0 37 Other 1,129.0 1.169.5 1,167.7 1.168.3 1,174.5 1,185.1 1,186.9 1,194.9 1.194.3 1,191.5 1,189.4 1,197.8 38 Consumer 509.8 501.1 500.7 499.2 492.4 495.0 499.3 497.7 496.9 495.3 498.6 499.1 39 Security' 104.4 119.2 122.5 130.0 130.1 134.4 141.0 160.0 159.4 162.1 160.3 157.4 40 Other loans and leases 315.0 341.4 337.3 344.9 352.4 363.7 378.1 388.1 385.6 395.1 385.0 387.9 41 Interbank loans 191.2 217.3 198.3 214.8 208.0 2019 217.2 222.3 221.8 214.1 222.0 227.0 42 Cash assets4 265.5 264.2 246.6 246.3 239.8 240.1 251.3 247.6 239.6 272.2 242.1 238.2 43 Other assets5 289.5 306.9 311.9 310.9 309.7 312.7 316.4 309.7 311.4 311.0 307.9 305.7 44 Total assets' 4,725.9 4.944.6 4^76.9 4^>70.7 5,0223 5,108.6 5,215.9 5,175.4 5,217.5 5,215.6 5,230.5 Liabilities 45 Deposits 3,068.6 3,211.3 3.188.9 3,215.0 3,189.6 3,218.6 3,254.3 3,277.8 3,270.7 3,308.2 3,253.3 3,261.3 46 Transaction 681.8 701.6 675.5 677.7 661.9 654.2 672.4 664.1 647.7 688.8 650.6 668.3 47 Nontransaction 2,386.8 2,509.7 2,513.4 2,537.3 2,527.7 2,564.4 2,581.9 2.613.7 2,623.0 2,6194 2,602.7 2,593.0 48 Large time 624.0 669.0 675.2 682.8 664.0 678.2 686.0 701.0 696.2 697.3 702.8 705.2 49 Other 1,762.8 1,840.6 1,838.3 1,854.6 1,863.6 1,886.2 1,895.9 1,912.7 1.926.7 1,922.1 1,899.9 1,887.8 50 Borrowings 796.0 870.3 867.5 867.5 861.9 854.4 893.2 935.8 910.8 917.0 946.3 958.4 51 From banks in the U.S 289.7 305.0 283.3 290.8 289.8 289.5 302.0 314.5 309.0 313.1 317.2 317.8 52 From others 506.3 565.3 584.2 576.7 572.1 564.9 591.1 621.4 601.8 603.8 629.1 640.7 53 Net due to related foreign offices 187.0 178.9 183.0 176.5 188.2 201.6 200.2 220.0 203.9 208.6 228.4 237.5 54 Other liabilities 269.4 294.6 298.8 307.5 316.4 325.4 334.8 355.2 361.5 359.8 361.7 344.9 55 Total liabilities 4321.0 435S.1 4.566.6 4356.1 4,600.0 4,682.4 4,788* 4,746.9 4,793.6 4,789.7 4^02.1 56 Residual (assets less liabilities)7 404.9 403.1 410.3 414.6 422.2 426.2 427.1 428.5 423.9 425.9 428.4 MEMO 57 Revaluation gains on off-balance-sheet items8 79.7 83.9 85.9 92.8 92.8 95.7 109.5 133.0 143.2 135.4 134.8 125.2 58 Revaluation losses on off-balancesheet items* 81.3 84.5 85.0 90.8 90.6 96.5 110.3 131.0 140.6 133.6 132.6 123.4 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Financial Statistics • January 1999 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 1997 1998" 1998 Oct. Apr. May June July Aug. Sept. Oct. Oct. 7 Oct. 14 Oct. 21 Oct. 28 Seasonally adjusted Assets 1 Bank credit 3,493.2' 3,664.1 3,686.1 3,693.7 3,704.3 3,748.4 3,788.2 3,858.6 3,826 0 3,847.4 3,868.2 3,881.3 2 Securities in bank credit 868.6 915.6 928.9 921.2 928.6 943.1 960.2 994.8 978.3 986.6 1,005.5 1,007.3 3 U.S. government securities 650.7 675,8 682.9 668.3 669.5 677.0 684.8 694.5 679.9 690.8 700.0 703.3 4 Other securities 217.9 239,9 246.0 252.9 259.1 266.1 275.4 300.4 298.4 295.8 305.5 304.0 5 Loans and leases in bank credit2 2,624.6' 2,748.5 2.757.2 2,772.5 2,775.7 2,8053 2,828.0 2,863.8 2.847.7 2,860.7 2,862.6 2,874.1 6 Commercial and industrial 618.9' 656.8 671.5 683.9 685.6 693.1 700.5 714.7 705.6 712.7 717.5 720.7 7 Real estate 1,192.1' 1,248.5 1,247.0 1,243.7 1,245.7 1,255.1 1.256.8 1,262.9 1,260.3 1,259.0 1,258.7 1,267.0 8 Revolving home equity 95.9 98.4 97.8 97.5 97.2 97.1 97.5 96.9 95.9 96.9 97.2 97.2 9 Other 1,096.2' 1.150.1 1,149.2 1,146.2 1,148.5 1,158.0 1,159.3 1,166.0 1,164.4 1,162.1 1,161.5 1,169.8 10 Consumer 507.9 506.1 506.0 502.0 494.3 493.3 496.5 495.9 496.0 494.0 496.5 496.4 11 Security3 57.3 63.6 61.8 67.5 69.8 73.5 75.3 87.9 86.7 88.1 89.3 86.8 12 Other loans and leases 248.4' 273.5 270.8 275.4 2803 290.2 298.8 302.4 299.1 307.0 300.7 303.2 13 Interbank loans 174.7 192 0 180.9 194 2 192.4 186.5 191.7 196.8 192.9 188.2 199.5 206.4 14 Cash assets4 227.1 233.2 216.3 216.0 209.0 218.5 219.1 208.0 205.1 212.8 210.4 204.4 15 Other assets5 246.6 272.3 278.4 278.3 274.2 275.0 2773 271.0 270.4 269.4 272.5 269.4 16 Total assets6 4,085.4' 4304.5 43043 4325.0 4322.8 4371.7 4,419.3 4,477.0 4,437.0 4,460.2 4,493.0 4,504.1 Liabilities 17 Deposits 2,798.0' 2,917.8 2,910.2 2,920.3 2,899.8 2,922.6 2.935.3 2,953.7 2.927.5 2,962.2 2.949.2 2,963.0 18 Transaction 675.0' 684.2 675.8 671.6 653.4 655.8 6623 653.6 634.6 658.2 655.2 670.0 19 Nontransaction 2,123.0 2,233.6 2,234.3 2,248.8 2,246.4 2,266.8 2,273.0 2,300.1 2.292.9 2,304.0 2,294.0 2,293.0 20 Large time 366.1 394.5 391.7 393.2 384.5 384.0 382.9 395.1 386.9 391.6 396.9 401.3 21 Other 1,756.8 1,839.1 1,842.7 1,855.6 1,861.9 1,882.8 1,890.1 1,905.0 1,906.0 1,9123 1,897.0 1,891.7 22 Borrowings 644.1' 704.8 698.5 690.7 687.5 691.4 705.4 745.4 730.7 725.8 754.1 761.2 23 From banks in the US 259.4' 279.2 259.7 258.3 262.8 269.5 270.7 282.6 282,4 282.7 282.0 282.7 24 From others 384.7 425.6 438.8 432.4 424.7 422.0 434,8 462.8 448 2 443.1 472.1 478.5 25 Net due to related foreign offices .... 70.9 77,4 73.3 73.4 793 92.8 105,0 117.7 101.6 113.7 124.6 130.0 26 Other liabilities 177.9 210,2 211.9 218.1 224.0 226.6 230.5 241.7 246.2 242.6 242.1 239.7 27 Total liabilities 3,691.0' 3,910.2 3,893.8 3,902.5 3,890.6 3,933.5 3,976.3 4,058.4 4,005.9 4,0443 4,070.0 4,093.8 28 Residual (assets less liabilities)7 394.4 394.3 410.6 422.6 432.2 438.2 443.0 418.5 431.1 416.0 423.0 410.2 Not seasonally adjusted Assets 29 Bank credit 3,498.3' 3,668.9 3.679.5 3,692.1 3,695.4 3,732.4 3,780.3 3,862.8 3,827.5 3.851.0 3.867.2 3.885.2 30 Securities in bank credit 866.0 924.8 929.7 921.0 920.2 930.4 951.5 990.8 974.1 979.8 997.9 1,005.1 31 U.S. government securities 648.8 685.5 687.0 670.7 666.0 671.4 679.8 691.4 676.0 686.1 696.5 701.3 32 Other securities 217.3 239.3 242.7 250.3 254.3 259.0 271.7 299.5 298.1 293.7 301.4 303.8 33 Loans and leases in bank credit2 .... 2,632.3' 2,744.1 2,749.8 2,771.1 2,775.2 2,802.0 2,828.8 2,872.0 2,853.4 2,871.1 2,869.3 2,880.1 34 Commercial and industrial 617.1" 6643 677.6 686.7 685.5 688.2 696.1 712.8 704.3 7103 715.1 718.0 35 Real estate 1,198.0" 1,242.2 1,240.9 1,241.5 1,248.0 1,258.8 1,261.7 1,269.3 1,266.9 1.2663 1,264.5 1,272.5 36 Revolving home equity 96.7 97,5 97.5 97.2 97.2 97.3 98.2 97.7 96.7 97.7 97.9 98.0 37 Other 1,101.3' 1,144,7 1,143.4 1,144.3 1,150.8 1,161.5 1.163.5 1,171.6 1,170.2 1,168.6 1,166.5 1,174.5 38 Consumer 509.8 501,1 500.7 499.2 492.4 495.0 4993 497.7 496.9 495.3 498.6 499.1 39 Security3 57.4 65 7 61.9 67 7 68.2 69 8 72.2 88 3 84 3 89 1 90.2 87 2 40 Other loans and leases 250.0' 270^8 268.7 276.1 281.1 2903 299.5 303.9 30l'i 3io!i 301.0 3033 41 Interbank loans 170.7 194.7 176.5 190.9 186.0 179.4 186.0 192.9 191.5 185.6 190.8 198.5 42 Cash assets4 230.8 230.3 212.2 210.0 204.7 206.1 216.9 211.6 203.9 235.7 204.7 203.1 43 Other assets5 246.8 272.7 277.4 277.5 275.9 276.1 278.5 271.2 271.8 271.1 270.1 268.4 44 Total assets6 4,090.5' 4309.7 4,288.4 4313.4 4304.8 4336.9 4,404.4 4,480.9 4,437.0 4,485.8 4,475.3 4,497.8 Liabilities 45 Deposits 2 801 2' 29189 2 890 9 29106 2,894.1 2,913.7 2.937.9 2,958.0 2.943.6 2,988.0 2,934.2 2 945.1 46 Transaction 671.3' 689.8 664.3 666.6 648.4 642.4 656.9 649.6 633.6 672.8 635.8 '654.4 47 Nontransaction 2,129.8 2,229 2 2 226 7 2,244 0 2.245.7 2,271.2 2.280.9 2,308.4 2 309 9 2,315.2 2,298.4 2,290.8 48 Large time 369.1 3903 389^9 390.8 383.4 '386.4 386.4 398.5 '390.4 394.4 400.0 404.8 49 Other 1,760.7' 1,838.9 1,836.7 1,853.2 1,8623 1,884.9 1.894.6 1,909.9 1,919,5 1.920.8 1.898.4 1,886.0 50 Borrowings 640.2' 704 2 704.1 700 4 692.0 684.5 708.9 741.7 721.0 721.4 751.0 762.2 51 From banks in the U.S 255.9' 278.4 260.9 261.2 263.0 265.5 269.5 278.6 276.9 2783 277.9 279.6 52 From others 384.3 425.9 443.2 439.2 429.0 419.0 439.4 463.1 444 1 443.1 473.1 482.6 53 Net due to related foreign offices 69.3 78.0 80.9 80.1 84.9 96.7 106.7 115.5 98.6 111.4 123.6 128.7 54 Other liabilities 177.9 210.2 211.9 218.1 224.0 226.6 230.5 241.7 246.2 242.6 242.1 239.7 55 Total liabilities 3,688.6' 3,911.3 3,887.8 3,909.2 3,895.0 3,921.5 3,984.0 4,056.8 4,009.3 4,063.3 4,050.8 4,075.7 56 Residual (assets less liabilities)7 401.8 398,4 400.6 404.2 409.8 415.5 420.3 424.1 427.7 422.5 424.5 422.1 MEMO 57 Revaluation gains on off-balance-sheet items8 37.9 43.9 45.6 50.5 51.0 51.9 61.5 78.2 84.1 80.6 77.2 74.8 58 Revaluation losses on off-balancesheet items8 41.0 45.3 46.3 50.1 50.4 54.2 65.0 79.9 85.0 81.7 79.0 77.3 59 Mortgage-backed securities9 265.6 295.6 298.0 291.2 294.4 301.9 314.0 336.9 322.6 334.1 340.9 345.2 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities 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 Account 1997 1998' 1998 Oct.' Apr. May June July Aug. Sept. Oct. Oct. 7 Oct. 14 Oct. 21 Oct. 28 Seasonally adjusted Assets 1 Bank credit 2.114.2 2,236.3 2,248.6 2.246.3 2.246.1 2.276.8 2,307.6 2,362.1 2.332.8 2,355.2 2 371.7 2,381.5 2 Securities in bank credil 469.0 513.4 522.3 514.2 516.3 527.0 541.8 567.0 552.2 560.2 577.1 578.3 3 U.S. government securities 333.9 361.9 365.3 351.6 350.1 356.1 362.7 366.9 353.4 364.2 372.6 374.3 4 Trading account .. 25.0 225 23.3 234 20.4 2).3 22.0 20.9 20.5 191 21.9 20.5 5 Investment account 308.9 339.4 342.1 328.2 329.7 33J.8 340.7 345.9 332.9 345.1 350.7 353.8 6 Other securities 135 1 1515 157.0 1627 166.1 170.9 179.1 200.1 198.8 1960 204.5 204.0 7 Trading account 63,3 70.6 75.6 79.5 81.1 83.1 89.3 108.6 109.1 105.8 113.5 110.4 8 Investment account 71.8 80.9 814 83.2 85.0 87 7 898 91.6 897 90.2 910 93.6 9 State and local government . 22.3 23.0 22.8 22.2 22.4 22.6 23.2 23.9 23.3 23.8 24.0 24.3 10 Other 495 580 58.6 609 62 6 65.] 66.6 67.7 66.4 664 67.0 694 ] I Loans and leases in bank credit- .. . 1,645.2 1,722.8 1,726.3 1,732.1 1,729.8 1,749.7 1,765.9 1,795.1 1,780.6 1,794.9 1.794.7 1,803.3 12 Commercial and industrial 441.8 471.7 484.0 494.3 494.5 498.9 504.0 516J 507.3 514.6 519.7 521.7 13 Bankers acceptances 1.3 1.2 1.3 1.2 1.3 1,3 1.3 1.2 1.3 1.3 1.3 1.3 14 Other 440.5 470.4 482.7 493.1 493.2 497.6 502.7 515.1 507.9 515.1 520.2 522.2 15 Real estate 665.3 689.6 685.5 675 9 672.3 674 5 6725 673.7 672.4 6720 669.8 676.0 16 Revolving home equity 67.6 69.4 68.7 68.1 67.6 67.5 67.8 67.2 66.4 67.4 67.5 67.5 17 Other 597.7 620.2 616.8 607.8 604.7 607.0 604.7 606.5 606.0 604.6 602.4 608.5 [8 Consumer 303.5 302.2 301.3 297.7 292.2 293.0 296.0 296.0 296.2 295.0 295.9 296.2 19 Security3 52.3 57.4 55.9 61.4 63.6 67.1 68.7 81.1 79.8 81.3 82.7 80.2 20 Federal funds sold to and repurchase agreements with broker-dealers 35.4 39.8 37.6 42.8 44.8 47.9 50.1 63.2 61.8 62.8 64.8 62.9 21 Other 16.9 17.6 18.3 18.6 18.7 19.2 18.6 17.9 18.0 18.4 17.9 17.3 22 State and local government ... 12.0 11.2 11.2 11.0 10.9 11.0 11.1 11.2 112 11.2 11.0 11.0 23 Agricultural 9.5 9.9 9.8 9.8 9.7 9.7 9.7 9.7 9.7 9.8 9.7 9.7 24 Federal funds sold lo and repurchase agreements with others 9.2 7.3 5.7 5.5 8.7 9.8 12.1 12.6 12.5 13.1 11.7 13.4 25 All other loans 72.5 82.8 80.0 82.9 82.9 88.0 92.5 93.4 91.0 97,3 93.2 93.4 26 Lease-financing receivables 79.1 90.8 92.8 93.6 95.0 97.6 99.2 101.0 100.4 100.7 101.1 101.6 27 Interbank loans 120.6 128.3 116.4 126.2 121.7 113.8 115.5 120.6 118.2 111.9 123.3 129.7 28 Federal funds sold to and repurchase agreements with commercial banks 80.0 76.7 65.6 75.0 68.2 60.8 62.4 71.6 65.1 65.0 75.4 81.4 29 Other 40.6 51.7 50.8 51.2 53.6 52.9 53.1 49.0 53.0 46.8 47.9 48.3 30 Cash assets4 158.9 166.6 1493 148.2 142.8 150.1 1501 139.6 138.0 143 8 141.7 135.6 31 Other assets5 188.1 210.0 214.8 211.6 208.9 208.0 207.6 199.4 198.5 199.3 199.6 197.7 12 Total assets6 2^447 2.703.6 2^913 2.6*4.8 2,682.0 2,711.7 2,743.7 2,784.1 2,749.9 2,7725 2J9&8 2^07.0 Liabilities 33 Deposits 1,562.5 1,637.8 1,621.7 1,618.6 1.594.6 1,602.2 1,602.5 1,613.4 1,594.1 1.623.8 1.608.7 1,618.8 34 Transaction , 3844 393.3 385.1 379.0 363,9 365.6 369.2 362.9 350.9 370.1 361.9 372.1 35 Nontransaction 1,178.1 134.5 1,236.6 1,239.6 1.230.7 1,236.6 1,233.3 1250.5 1,243.1 I.Z53.7 1.246.8 1,246.7 36 Large time 204.6 222.8 218.1 219.5 213.2 212.0 206.9 217.8 209.9 215.5 219.8 222.9 37 Other 973.5 1,021.7 1,018.5 1,020.1 1,017.5 1,024.6 1,026.4 1,032.7 1,033.2 1,038.2 1.027.0 1,023.8 38 Borrowings 494.2 547.1 538.4 529.0 522.8 527.7 540.3 573.6 559.9 554.4 582.2 588.9 39 From banks in the US 189.6 210.0 190.0 187.6 189.2 196.1 196.9 205.8 205.7 204.6 205.5 206.6 40 From others .... 3046 337.1 3484 341.5 '33.5 331.6 343.4 367.9 354.2 349.8 376.8 382.3 41 Nel due lo related foreign offices 65.8 73.9 69.4 69.5 75.6 89.1 101.3 113.0 96.7 109.0 119.8 125.6 42 Other liabilities 150.9 179.8 181.7 188.2 194.2 196.2 199.8 210.0 214.4 211.2 210.4 208.1 43 Total liabilities 2^73.4 2AS8.7 2,411.2 2,4053 2387.2 2415.2 2444.0 2^10.1 2,465.1 2,4983 2jsn.i 24414 44 Residual (assets less liabilities)7 .... 271.3 264.9 280.0 289.5 294.8 296.6 299.8 274.0 284.9 274.2 277.7 265.6 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Financial Statistics • January 1999 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued C. Large domestically chartered commercial banks—Continued Monthly averages Wednesdly figures Account 1997 1998' 1998 Oct.' Apr. May June July Aug. Sept. Oct. Oct. 7 Oct. 14 Oct. 21 Oct. 28 Not seasonally adjusted Assets 45 Bank credit 2,119.2 2235.4 2,234.8 2,240.0 239.1 2,261.3 2.297.6 2,366.5 2,337.3 2,358.2 2,370.2 2.384.2 46 Securities in bank credit 469.2 517.1 518.9 510.9 509.2 515.4 533.7 566.0 551.4 556.1 572.5 578.8 47 U.S. government securities 334.1 366.6 366.1 351.3 347.9 351.3 358.0 366.0 352.0 361.4 371.2 374.5 48 Trading account 26.1 22.7 22.5 22.5 19.9 21.2 21.9 21.9 21.2 20.0 23.1 21.3 49 Investment account 308.0 343.9 343.6 328.8 328.0 330.2 336.1 344.1 330.8 341.5 348.0 353.1 50 Mortgage-backed securities . . 202.0 224.9 224.7 216.1 217.5 224.2 234.8 253.4 240.8 252.1 257.2 261.0 51 Other 106.1 119.0 118.9 112.7 110.5 105.9 101.3 90.7 90.0 89.4 90.9 92.1 52 One year or less 27.6 32.0 30.5 30.6 29.4 28.0 26.8 25.2 24.8 25.7 25.0 25.4 53 One to five years 54.4 52.1 50.7 47.5 50.3 47.2 42.7 35.9 36.8 35.9 35.6 35.9 54 More than five years . .. 24.0 34.9 37.7 34.7 30.8 30.7 31.9 29.5 28.5 27.8 30.3 30.9 55 Other securities 135.1 150.5 152.8 159.6 161.3 164.0 175.7 200.0 199.4 194.6 201.3 204.3 56 Trading account 63.0 70.2 72.1 76.7 77.0 76.8 86.3 108.2 109.1 104.4 110.2 110.7 57 Investment account 720 80.3 807 82.9 84.3 87.2 89.4 91.8 90.3 90.2 91.1 93.6 58 State and local government .. 22.4 22.9 22.7 22.4 22.3 22.7 23.2 24.0 23.4 23.8 24.2 24.4 59 Other 49.7 57.3 58.0 60.6 62.1 64.6 66.2 67.8 66.8 66.4 66.9 69.2 60 Loans and leases in bank credit2 . . 1,650.0 1,718.3 1.715.9 1,729.1 1,729.9 1.745.9 1,763.8 1,800.5 1,785.8 1,802.1 1,797.7 1,805.4 61 Commercial and industrial 441.4 476.7 487.6 495.4 494.6 495.5 501.1 516.1 508.0 513.9 518.7 520.6 62 Bankers acceptances 1.4 1.2 1.2 1.2 1.2 1.3 1.3 1.3 1.3 1.3 1.3 1.3 63 Other 440.0 475.6 486.4 494.2 493.3 494.2 499.8 514.8 506.7 512.6 517.4 519.3 64 Real estate 668.9 683.7 Sill 673.0 674.6 677.8 675.8 677.7 678.0 676.5 672.9 678.5 65 Revolving home equity 68.2 68.4 68.2 67.8 67.8 67.8 68.4 67.8 67.1 68.0 68.1 68.1 66 Other 367.8 380.6 376.0 374.1 375.5 377.8 374.0 376.1 376.8 376.6 371.1 375.5 67 Commercial 232.9 234.7 233.4 231.1 231.3 232.2 233.5 233.8 234.1 231.9 233.7 234.9 68 Consumer 304.5 298.2 297.3 296.4 292.0 294.6 298.0 296.9 297.2 295.7 296.8 297.3 69 Security1 . 52.4 59.5 56.0 61.5 62.0 63.4 65.6 81.5 77.5 82.3 83.5 80.6 70 Federal funds sold to and repurchase agreements with broker-dealers .... 35.6 41.7 37.6 42.5 43.8 45.0 47.5 63.6 60.5 64.0 65.5 62.7 71 Other 16.8 17.8 184 19.0 18.2 184 18.1 17.8 17.0 18.3 18.0 17.9 72 State and local government .... 111 11.1 11.0 10.9 11.1 11.2 11.3 11.3 11.3 11.1 11.1 73 Agricultural 9.7 9.5 9.7 9.9 10.1 10.1 10.0 9.9 10.0 10.0 9.8 9.8 74 Federal funds sold to and repurchase agreements with others 92 7.3 5.7 5.5 87 9.8 12.1 12.6 12.5 13 1 11.7 13.4 75 All other loans 73.0 81.8 78.8 83.1 82.6 87.3 92.0 93.9 91.3 99.1 92.8 93.2 76 Lease-financing receivables .... 78 8 90.5 92.2 93.2 94.6 96.4 98.1 100.6 100.2 100.2 100.4 100.9 77 Interbank loans 117.4 129.0 115.7 126.7 120.7 111.2 114.3 117.7 114.9 110.2 118.0 126.7 78 Federal funds sold to and repurchase agreements with commercial banks 77.0 77.8 65.2 75.4 67.4 59.0 61.9 68.9 62.4 62.9 70.2 78.9 79 Other 40.4 51.2 50.5 51.3 53.2 52.2 52.4 48.8 52.5 47.2 47.8 47.8 80 Cash assets4 162.7 1642 145 3 143.1 1391 140.0 148.6 143.2 137.0 162.3 138.5 136.4 81 Other assets5 188.1 210X) 214.8 211.6 208.9 208.0 207.6 199.4 198.5 199.3 199.6 197.7 82 Total assets6 24503 2,7013 2^73.1 2*83.7 2*703 2*83.2 2,730.6 2,789.2 2,750.0 2,7923 2,788* 2*074 Uabililirs 83 Deposits 1,567.6 1,630.6 1.602.0 1,612.2 1,594.6 1,599.8 1,608.6 1,619.7 1,608.4 1,645.5 1,601.9 1,610.6 84 Transaction 382.3 395.3 375.7 375.6 361.7 356.4 366.1 360.7 348.8 381.5 349.6 363.5 85 Nontransaction 1.185.2 1,235.3 1,226.3 1,236.7 1,232.9 1,243.4 1,242.5 1,259.0 1,259.5 1,264.0 1,252.3 1,247.1 86 Large time 207.6 218.6 216.4 217.1 212.1 214.4 210.4 221.2 213.4 218.2 222.9 226.4 87 Other 977.6 1,016.8 1,010.0 1 019.5 1,020.8 1,029.0 1,032.1 1,037.8 1,046.1 1,045.7 1,029.5 1,020.8 88 Borrowings 489.9 548.4 543.6 538.3 527.3 519.5 540.5 569.4 551.5 550.1 577.9 587.0 89 From banks in the U.S 186.5 209.5 190.5 190.0 189.3 191.4 194.7 202.2 201.6 201.0 201.5 202.9 90 From nonbanks in the U.S 303.4 338.9 353.1 348.4 338.0 328.0 345.7 367.1 349.9 349.0 376.4 384.2 91 Net due to related foreign offices . .. 64.1 74.5 77.1 76.2 81.2 92.9 103.0 110.9 93.8 106.7 118.8 124.3 92 Other liabilities 150.9 179.8 181.7 188.2 194.2 196.2 199.8 210.0 214.4 211.2 210.4 208.1 93 Total liabilities . 2^724 24333 24044 2415.0 23973 24084 245L8 2409.9 2468.0 24134 2409.0 2430.1 94 Residual (assets less liabilities)7 277.8 267.9 268.7 268.7 273.0 274.8 278.8 279.3 281.9 278.9 279.8 277.4 MEMO 95 Revaluation gains on off-balancesheet items8 37.9 43.9 45.6 50.5 51.0 51.9 61.5 78.2 84.1 80.6 77,2 74.8 96 Revaluation losses on off-balancesheet items8 41.0 45.3 46.3 50.1 50.4 54.2 65.0 79.9 85.0 81.7 79.0 77.3 97 Mortgage-backed securities5 220.2 245.1 245.9 238.0 240.6 247.3 258.0 277.9 264.9 275.9 281.2 285.5 98 Pass-through securities 150.0 165.4 164.8 156.9 157.0 160.3 166.3 188.4 174.7 186.4 192.0 197.2 99 CMOs, REMICs, and other mortgage-backed securities . . 70.2 79.7 81.1 81.0 83.6 86.9 S>1.7 89.5 90.3 89.5 89.2 88.3 100 Net unrealized gains (losses) on available-for-sale securities1 . . . 2.4 3.0 2.8 3.2 3.5 3.1 3.8 4.5 4.9 4.6 4.5 4.5 101 Offshore credit to U.S. residents" . .. 14.2 35.5 36.0 36.1 35.3 35.6 36.8 38.5 37.8 38.1 38.9 38.8 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 Apr. May June July Aug. Sept. Seasonally adjusted Assets 1 Bank credit 1,379.0 1,427.9 1,437.6 1,447.4 1,458.2 1,471.7 1,480.6 1,496.6 1,493.2 1,492.2 1,496.4 1,499.8 2 Securities in bank credit 399.6 402.2 406.6 407.0 412.4 416.1 418.5 427.8 426.1 426.4 428.5 429.0 3 U.S. government securities .. 316.8 313.8 317.6 316.8 319.4 320.9 322.1 327.6 326.5 326.6 327.5 329.0 4 Other securities 82.7 88.4 89.0 90.2 93.0 95.2 96.4 100.2 99.6 99.8 101.0 100.0 5 Loans and leases in bank credit2 979.5 1,025.7 1,031.0 1,040.4 1,045.8 1,055.5 1,062.1 1.068.7 1,067.1 1,065.8 1,067.9 1,070.8 6 Commercial and industrial . . 177.1 185.2 187.5 189.6 191.1 194.2 196.5 198.4 198.3 198.2 197.8 199.0 7 Real estate 526.8 558.9 561.6 567.8 573.4 580.6 584.3 589.2 587.8 587.0 588.8 591.0 8 Revolving home equity 28.3 29.0 29.1 29.4 29.6 29.6 29.7 29.7 29.5 29.5 29.7 29.7 9 Other 498.5 529.9 532.5 538.4 543.8 551.0 554.6 559.4 558.4 557.6 559.1 561.2 10 Consumer 204.4 203.9 204.7 204.4 202.1 200.3 200.5 199.9 199.8 199.0 200.6 200.2 11 Security' 5.0 6.2 5.9 6.1 6.2 6.4 6.6 6.8 6.9 6.8 6.6 6.6 12 Other loans and leases 66.1 71.5 71.3 72.5 73.0 74.0 74.2 74.5 74.3 74.8 74.1 74.1 13 Interbank loans 54.1 63.6 64.5 68.0 70.7 72.7 76.1 76.2 74.7 76.4 76.2 76.7 14 Cash assets4 68.2 66.6 67.0 67.8 66.3 68.3 69.0 68.5 67.2 69.0 68.8 68.8 15 Other assets5 58.5 62.4 63.6 66.6 65.3 67.0 69.7 71.6 71.8 70.1 72.8 71.7 16 Total assets6 1,540.7 1.600.9 1,613.1 1,630.2 1,640.7 1,659.9 1,675.5 1,692.9 1,687.1 1,687.8 1,6943 1,697.0 Liabilities 17 Deposits 1,235.5 1,280.0 1,288.5 1,301.7 1.305.2 1,320.4 1,332.8 1,340.3 1,333.4 1,338.4 1,340.5 1,344.1 18 Transaction 290.6 290.9 290.7 292.6 289.5 290.2 293.1 290.7 283.7 288.1 293.3 297.9 19 Nontransaction 944.9 989.1 997.7 1,009.2 1,015.7 1,030.2 1,039.7 1,049.6 1,049.7 1,050.3 1,047.2 1,046.3 20 Large time 161.5 171.7 173.6 173.7 171.3 172.0 176.0 177.3 177.0 176.1 177.1 178.4 21 Other 783.4 817.4 824.2 835.5 844.4 858.2 863.7 872.3 872.7 874.2 870.1 867.8 22 Borrowings 149.9 157.7 160.1 161.6 164.7 163.7 165.1 171.7 170.8 171.4 171.9 172.3 23 From banks in the U.S 69.8 69.2 69.7 70.7 73.6 73.3 73.7 76.9 76.7 78.1 76.5 76.1 24 From others 80.1 88.5 90.4 90.9 91.2 90.4 91.4 94.9 94.1 93.4 95.3 96.2 25 Net due to related foreign offices 5.2 3.5 3.8 3.9 3.7 3.7 37 4.7 4.9 4.7 4.8 4.4 26 Other liabilities 27.0 30.3 30.2 29.9 29.8 30.5 30.7 31.7 31.8 31.4 31.7 31.6 27 Total liabilities 1,417.6 1,471.5 148Z5 1,4*7.1 1,5323 13484 1.540.8 1,545.9 1,548.9 13524 28 Residual (assets less liabilities)7 . 123.1 129.4 130.5 133.1 143.2 144.5 146.2 141.8 145.4 144.6 Not seasonally adjusted Assets 29 Bank credit 1,379.1 1,433.6 1,444.6 1,452.2 1,456.3 1,471.2 1,482.7 1,496.4 1,490.2 1,492.7 1,497.0 1J01.0 30 Securities in bank credit 396.8 407.7 410.8 410.1 411.0 415.1 417.7 424.9 422.6 423.7 425.5 426.3 31 U.S. government securities . 314.7 318.9 320.9 319.5 318.1 320.1 321.7 325.4 323.9 324.7 325.3 326.9 32 Other securities 82.2 88.8 89.9 90.7 92.9 95.0 96.0 99.5 98.7 99.1 100.2 99.4 33 Loans and leases in bank credit2 982.3 1,025.8 1.033.9 1,042.1 1,045.2 1,056.1 1,065.0 1,071.5 1,067.6 1,069.0 1,071.5 1,074.6 34 Commercial and industrial . 175.6 187.6 190.1 191.3 190.9 192.7 195.1 196.8 196.3 196.4 196.3 197.4 35 Real estate 529.1 558.5 563.2 568.4 573.5 581.0 586.0 591.6 588.9 589.8 591.6 594.0 36 Revolving home equity . 28.5 29.1 29.2 29.3 29.4 29.5 29.8 29.9 29.6 29.6 29.9 29.9 37 Other 500.6 529.4 534.0 539.1 544.0 551.5 556.1 561.7 559.3 560.1 561.7 564.1 38 Consumer 205.3 202.9 203.4 202.8 200.4 200.4 201.4 200.8 199.6 199.6 201.9 201.8 39 Security' 5.0 6.2 5.9 6.1 6.2 6.4 6.6 6.8 6.9 6.8 6.6 6.6 40 Other loans and leases 67.2 70.6 71.3 73.4 74.3 75.6 76.0 75.6 75.9 76,3 75.1 74.8 41 Interbank loans 53.3 65.7 60.8 64.2 65.3 68.2 71.7 75.1 76.6 75.4 72.9 71.9 42 Cash assets4 68.2 66.0 66.9 66.9 65.6 66.1 68.3 68.4 66.8 73.4 66.2 66.8 43 Other assets5 58.7 62.7 62.7 65.9 67.0 68.1 70.9 71.7 73.3 71.8 70.4 70.7 44 Total assets'1 1,540.1 1,608.4 1,615.4 1,629.6 1,6343 1,653.8 1,673.8 1,691.7 1,687.0 1,6933 1,6863 14903 Liabilities 45 Deposits 1,233.6 1,288.3 1,288.9 1,298.4 1,299.5 1,313.9 1,329.3 1,338.3 1,335.2 1,342.5 1,332.2 1,334.5 46 Transaction 289.0 294.5 288.6 291.0 286.7 286.0 290.8 288.9 284.8 291.3 286.1 290.9 47 Nontransaction 944.6 993.8 1,000.3 1,007.4 1,012.8 1,027.9 1,038.5 1,049.4 1,050.4 1,051.2 1,046.1 1,043.6 48 Large time 161.5 171.7 173.6 173.7 171.3 172.0 176.0 177.3 177.0 176.1 177.1 178.4 49 Other 783.1 822.1 826.8 833.7 841.5 855.9 862.4 872.1 873.4 875.1 869.0 865.2 50 Borrowings 150.3 155.9 160.5 162.0 164.8 165.0 168.5 172.3 169.5 171.3 173.1 175.1 51 From banks in the U.S 69.4 68.9 70.4 71.2 73.7 74.1 74.8 76.3 75,3 77.2 76.4 76.7 52 From others 80.9 87.0 90.0 90.8 91.0 90.9 93.7 95.9 94.2 94.1 96.7 98.4 53 Net due to related foreign offices 5.2 3.5 3.8 3.9 3.7 3.7 3.7 4.7 4.9 47 4.8 4.4 54 Other liabilities 27.0 30.3 30.2 29.9 29.8 30.5 31.7 31.8 31.4 31.7 30.7 31.6 55 Total liabilities 1.416.1 1,478.0 1.483.4 1,4942 1,497.8 1,513.1 1,546.9 1,5413 1341.8 1,5312 1345.7 56 Residual (assets less liabilities)7 124.0 130.5 132.0 135.5 136.7 140.7 145.7 143.6 144.6 141.6 144.6 MEMO 57 Mortgage-backed securities9 45.4 50.4 52.1 53.2 59.0 57.7 58.2 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Financial Statistics • January 1999 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued E. Foreign-related institutions Billions of dollars Monthly averages Wednesday figures 1998 1998 Oct. Apr. Ma/ June' July Aug. Sepl.' Oct. Oct. 7 Oct. 14 Oct. 28 Seasonally adjusted Assets 1 Bank credit 538.1' 557^ 564.0 567.2 572.5' 590.0* 606.2 631.9 637.0 625.7 635.4 632.3 2 Securities in bank credit 175.2' 194.2' 197.1 199.1 200.0* 210.9' 213.4 223.5 226.4 217.2 227.0 222.8 3 U.S. government securities .. 80.9 89.2 89.1 87.4 90.2 92.9 80.8 78.6 78.9 76.1 77.6 80.2 4 Other securities 94.3' 105.1' 108.0 111.8 109.8' 117.9* 132.6 144.9 147.5 141.1 149.4 142.5 5 Loans and leases in bank credit- 362.91 363.7' 366.9 368.0 372.51 379.2' 392.8 408.4 410.6 408.5 408.3 409.5 6 Commercial and industrial .. 222.5 213.0" 211.7 212.9 215.^ 216.91 221.2 228.4 225.9 227.2 230.6 229.6 7 Real estate 27.5 25.0 24.4 24.2 23.9 23.7 23.4 23.0 23.9 22.7 22.6 23.1 8 Security3 47.01 54.2' 61.2 62.5 6Z.6' 65.5' 69.1 71.6 74.9 72.4 70.1 70.5 9 Other loans and leases 66.0 71.5' 69.7 68.5 70.1' 73.1' 79.1 85.5 86.0 86.2 85.0 86.3 10 Interbank loans 20.5 22.6 21.8 23.9 22.0 22.5 31.2 29.5 30.3 28.5 31.2 28.5 11 Cash assets4 34.4 35.6 34.8 35.3 35.2 34.0 34.3 35.8 36.1 36.4 37.1 34.2 12 Other assets5 43.7 36.2 34.1 34.1 34.2 35.8 37.9 39.5 40.5 40.9 39.0 38.3 13 Total assets6 6364' 65ir 6545 660-3 6A3.6' 6810' 7093 7364 743.6 731.2 7424 733.1 Liabilities 14 Deposits 267.7 294.0 295.3 302.6 297.2 306.2 314.8 320.4 326.3 321.7 320.4 315.9 15 Transaction 10.4 12.3 11.5 11.1 13.4 11.8 14.8 14.6 14.3 15.8 14.8 13.9 16 Nontransaclion 257.2 281.8 283.7 291.6 283.9 294.4 300.0 305.8 312.0 305.9 305.6 302.1 17 Borrowings 155.8 1660 163.4 167.1 169.9 169.9 184.3 194.2 189.8 195.6 195.3 196.3 18 From banks in the US 33.8 26.6 22.4 M.6 26.8 24.0 32.6 35.9 32.1 34.9 39.3 38.2 19 From others 122.0 139.4 141.0 137JS 143.1 145.9 151.7 158.3 157.7 160.7 156.0 158.1 20 Net due to related foreign offices ... 118.5 102.4' 101.1 97.2 106.8 108.3 95.1 105.5 109.6 97.3 106.4 105.6 21 Other liabilities 91.r 85.2' 87.4 90.2 93.1' 104.5 113.8 116.3 117.8 120.0 104.7 22 Total liabilities itn.r 647.2 657.2 667.1' 683.2 698.7 7319 741.9 7314 7412 7215 23 Residual (assets less liabilities)7 . 2.7 4.3' 7.3 -3.5' -1.2' 10.5 0.2 Not seasonally adjusted Assets 24 Bank credit 537.8' 558.1' 565.7 570.2 575.2' 592.4' 601.1 631.2 633.1 627.0 634.2 632.2 25 Securities in bank credit nssr 196.2' 201.1 202.3 202./ 215.1' 210.2 223.8 223.4 219.5 227.2 224.1 2 2 2 6 7 8 U.S T In . r v a g e d o s i v t n m e g r e n a n m c t c e a o n c u t c n o s t e u c n u t rities 6 8 1 7 1 4 . . . 0 3 3 6 8 1 9 7 8 . . . 3 8 5 2 6 8 8 0 9 . . . 9 7 8 6 8 1 8 7 8 . . . 5 4 9 8 2 6 4 4 9 . . . 9 9 8 9 3 63 3 0 . . . 1 7 7 8 2 6 0 0 0 . . . 2 8 6 7 6 1 9 2 6 . . . 1 9 2 7 6 1 2 8 5 . . . 6 2 6 7 6 1 0 6 5 . . . 6 3 7 7 6 1 2 8 6 . . . 2 5 3 6 8 1 4 1 6 . . . 9 2 3 29 Other securities 94.5' 108.5' 111.4 114.9 112.9* 121.4' 129.4 144.7 145.2 143.2 148.7 142.9 30 Trading account 57.2' 64 9* 66.7 70.3 70.2' 75.3' 83.2 92.9 95.5 93.1 96.6 88.8 31 Investment account 37.3 43.6 44.7 44.6 42.7 46.1' 46.1 51.8 49.7 50.0 52.1 54.1 32 Loans and leases in bank credit2 . . . 361.9 361.9 364.6 367.9 372.5' 377.4' 390.9 407.4 409.6 407.5 406.9 408.1 33 Commercial and industrial 222.2 213.1 211.1 212.8 215.71 215.8' 220.1 228.3 225.8 226.6 229.9 229.9 34 Real estate 27.7 24.7 24.3 24.0 23.6 23.6 23.3 23.3 24.1 22.9 22.9 23.4 35 Security3 47.0* 53.5' 60.6 62.4 61.91 64.6' 68.8 71.7 75.1 72.9 70.1 70.2 36 Other loans and leases 65.0 70.61 68.6 68.8 71.3' 73.4' 78.6 84.2 84.6 85.0 84.0 84.6 37 Interbank loans 20.5 22.6 21.8 23.9 22.0 22.5 31.2 29.5 30.3 28.5 31.2 28.5 38 Cash assets4 34.6 33.9 34.4 36.3 35.1 34.0* 34.4 36.1 35.7 36.6 37.4 35.0 39 Other assets5 42.7 34.2 34.5 33.4 33.8 36.6 37.9 38.6 39.5 39.9 37.8 37.3 40 Total assets6 6354' 648V 6563 663.5 665.8' 6853' 7042 735.0 7384 731.6 7403 7318 Liabilities 41 Deposits 267.5 292.3 298.0 304.4 295.4 304.9 316.4 319.9 327.1 320.2 319.2 316.2 42 Transaction 10.5 11.8 11.2 11.1 13.5 11.8 15.4 14.6 14.1 16.0 14.9 14.0 43 Nontransaction 257.0 280.5 286.8 293.3 282.0 293.2 300.9 305.3 313.0 304.2 304.3 302.2 44 Borrowings 155.8 166.0 163.4 167.1 169.9 169.9 184.3 194.2 189.8 195.6 195.3 196.3 45 From banks in the U.S 33.8 26.6 22.4 29.6 26.8 24.0 32.6 35.9 32.1 34.9 39.3 38.2 46 From others 122.0 139.4 141.0 137.5 143.1 145.9 151.7 158.3 157.7 160.7 156.0 158.1 47 Net due to related foreign offices 117.7 101.0 102.1 96.4 103.3 105.0 93.5 104.5 105.3 97.2 104.8 108.8 48 Other liabilities 91.4' 84.5' 86.9 89.4 92.4' 98.7 104.2 113.5 115.3 117.2 119.6 105.2 49 Total liabilities 6324' 643JC 6504 6574 661# 6984 7310 737.6 7303 738J) 726.4 50 Residual (assets less liabilities)' 5.7 6.1 4.8' 6.8' 5.9 0.8 1.4 6.4 MEMO 51 Revaluation gains on off-balance-sheet items8 41.8' 40.C 40.3 42.3 41.8' 43.8 48.0 54.8 59.1 54.7 57.6 50.4 52 Revaluation losses on off-balancesheet items8 40.3' 39.1' 38.7 40.7 40.3' 42.3' 45.3 51.1 55.6 51.9 53.6 46.0 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities 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 die 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 Stales, all of which are included in "Interbank loans." domestically chartered banks have been included in table 1.26, parts C and D. Data are both 3. Consists of reverse RPs with brokers and dealers and loans to purchase and carry merger-adjusted and break-adjusted. In addition, data from large weekly reporting U.S. securities. branches and agencies of foreign banks have been replaced by balance sheet estimates of all 4. Includes vault cash, cash items in process of collection, balances due from depository foreign-related institutions and are included in table 1.26, part E. These data are break- institutions, and balances due from Federal Reserve Banks. adjusted. 5. Excludes the due-from position with related foreign offices, which is included in "Net The not-seasonally-adjusted data for all tables now contain additional balance sheet items, due to related foreign offices." which were available as of October 2, 1996. 6. Excludes unearned income, reserves for losses on loans and leases, and reserves for 1. Covers the following types of institutions in the fifty states and the District of transfer risk. Loans are reported gross of these items. Columbia: domestically chartered commercial banks that submit a weekly report of condition 7. This balancing item is not intended as a measure of equity capital for use in capital (large domestic); other domestically chartered commercial banks (small domestic); branches adequacy analysis. On a seasonally adjusted basis this item reflects any differences in the and agencies of foreign banks, and Edge Act and agreement corporations (foreign-related seasonal patterns estimated for total assets and total liabilities. institutions). Excludes International Banking Facilities. Data are Wednesday values or pro 8. Fair value of derivative contracts (interest rate, foreign exchange rate, other commodity and rata averages of Wednesday values. Large domestic banks constitute a universe; data for equity contracts) in a gain/loss position, as determined under FASB Interpretation No. 39. small domestic banks and foreign-related institutions are estimates based on weekly samples 9. Includes mortgage-backed securities issued by U.S. government agencies, U.S. and on quarter-end condition reports. Data are adjusted for breaks caused by reclassifications government-sponsored enterprises, and private entities. of assets and liabilities. 10. Difference between fair value and historical cost for securities classified as available- The data for large and small domestic banks presented on pp. A17-19 are adjusted to for-sale under FASB Statement No. 115. Data are reported net of tax effects. Data shown are remove the estimated 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 Financial Statistics • January 1999 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING A. Commercial Paper Millions of dollars, seasonally adjusted, end of period Year ending December 1998 Item D 19 e 9 c 3 . D 19 e 9 c 4 . D 19 e 9 c 5 . 1 D 9 e 9 c 6 . D 19 e 9 c 7 . Apr. May June July Aug. Sept. 1 All issuers 555,075 595,382 674,904 775,371 966,699 1,041,681 1,053,995 1,091,554 1,102,307 1,119,816 1,152,337 Financial companies' 2 Dealer-placed paper2, total 218,947 223,038 275,815 361,147 513.307 558,817 569,065 597,193 616.382 606,355 639,571 3 Directly placed paper1, total 180,389 207,701 210,829 229,662 252.536 275,415 274,469 276,476 266,022 281,927 271,526 4 Nonfinancial companies4 155,739 164,643 188,260 184,563 200,857 207,449 210,460 217,885 219,904 231.534 241,239 1. Institutions engaged primarily in commercial, savings, and mortgage banking; sales, 3. As reported by financial companies that place their paper direcily with investors. personal, and mortgage financing; factoring, finance leasing, and other business lending; 4. Includes public utilities and firms engaged primarily in such activities as communicainsurance underwriting; and other investment activities. tions, construction, manufacturing, mining, wholesale and retail trade, transportation, and 2. Includes all financial-company paper sold by dealers in the open market. services. B. Bankers Dollar Acceptances1 Millions of dollars, not seasonally adjusted, year ending September2 Item 1995 1996 1997 1998 1 Total amount of reporting banks1 acceptances in existence 29,242 25,832 25,774 14,363 2 Amount of other banks" eligible acceptances held by reporting banks 1,249 709 736 523 3 Amount of own eligible acceptances held by reporting banks (included in item 1) 10,516 7,770 6,862 4,884 4 Amount of eligible acceptances representing goods stored in, or shipped between, foreign countries (included in item 1) 11,373 9,361 10,467 5,414 1. Includes eligible, dollar-denominated blinkers acceptances legally payable in the United 2. Data on bankers dollar acceptances are gathered from approximately 65 institutions; States. Eligible acceptances are those that are eligible for discount by Federal Reserve Banks; includes U.S. chartered commerical banks (domestic and foreign offices), U.S. branches and that is, those acceptances that meet the criteria of Paragraph 7 of Section 13 of the Federal agencies of foreign banks, and Edge and agreement corporations. The reporting group is Reserve Act (12 U.S.C. §372). revised every year. 1.33 PRIME RATE CHARGED BY BANKS Short-Term Business Loans1 Percent per year Average Average Average Date of change Rate Period rate Period rate Period rate 1995—Jan. 1 8.50 1995 8.83 1996—Jan 8.50 1997 Jan 8.25 Feb. 1 9.00 1996 8.27 Feb 8.25 Feb 8.25 July 7 8.75 1997 8.44 Mar. 8.25 Mar 8.30 Dec. 20 8.50 Apr. 8.25 Apr » 8.50 1995—Jan 8.50 May 8.25 May 8.50 1996—Feb. 1 8.25 Feb 9.00 June 8.25 June 8.50 Mar. 9.00 July 8.25 July 8.50 1997—Mar. 26 8.50 Apr 9.00 Aug 8.25 Aug 8.50 May 9.00 Sept 8.25 Sept 8.50 1998—Sept. 30 8.25 June 9.00 Oct 8.25 Oct 8.50 Oct. 16 8.00 July 8.80 Nov 8.25 Nov 8.50 Nov. 18 7.75 Aug 8.75 Dec 8.25 Dec 8.50 Sept 8.75 Oct 8.75 1998—Jan 8.50 Nov 8.75 Feb 8.50 Dec 8.65 Mar 8.50 Apr 8.50 May 8.50 June 8.50 July 8.50 Aug 8.50 Sept 8.49 8.12 Nov 7.89 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 n«:w 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 1998 1998, weekending Item 1995 1996 1997 July Aug. Sept. Oct. Oct. 2 Oct. 9 Oct. 16 Oct. 23 Oct. 30 MONEY MARKET INSTRUMENTS 1 Federal funds123 5.83 5.30 5.46 5.54 5.55 5.51 5.07 5.58 5.22 5.14 4.87 4.95 5 21 5 02 5 00 5 00 5 00 5 00 4 86 5 00 5 00 5 00 4 75 4 75 Commercial paper356 Nonfinancial 3 I-month n.a. n.a. 5.57 5.51 5.50 5.44 5.14 5.23 5.25 5.22 5.03 5.05 n.a. n.a. 5.57 5.50 5.50 5.37 5.08 5.16 5.17 5.12 5.02 4.99 5 56 5 48 5 48 5 31 5 04 5 11 5 11 5 09 4 98 4 98 Financial n.a. n.a. 5.59 5.52 5.51 5.45 5.18 5.23 5.28 5.25 5.09 5.09 n.a. n.a. 5.59 5.51 5.51 5.38 5.12 5.16 5.19 5.17 5.06 5.03 5 60 5 50 5 50 5 "P 5 09 5 11 5 18 5 12 5 03 504 Commercial paper (historical )3'S'7 5.93 5.43 5.54 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 10 3-month 5.93 5.41 5.58 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5 93 5 42 5 62 Finance paper, directly placed (historical) 3-5'8 12 1-month .... 5.81 5.31 5.44 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 13 3-month 5.78 5.29 5.48 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5 68 5 21 5 48 Bankers acceptances^59 15 3-month 5.81 5.31 5.54 5.50 5.49 5.38 5.12 5.19 5.20 5.17 5.03 5.07 5 80 531 5 57 5 46 5 46 5 27 4 88 5 02 5 03 4 94 4 73 4 79 Certificates of deposit, secondary market*'10 5.87 5.35 5.54 5.57 5.56 5.49 5.24 5.29 5.34 5.30 5.15 5.17 18 3-month 5.92 5.39 5.62 5.59 5.58 5.41 5.21 5.22 5.29 5.26 5.14 5.16 19 6-month 5 98 5 47 5 73 5 65 5 61 5 33 499 5 09 5 08 5 04 4 89 4.91 20 Eurodollar deposits. 3-month3" 5.93 5.38 5.61 5.57 5.56 5.39 5.17 5.20 5.23 5.23 5.09 5.13 US. Treasury bills Secondary markei 21 3-month 5.49 5.01 5.06 4.96 4.90 4.61 3.96 4.26 3.96 3.84 3.85 4.12 5.56 5.08 5.18 5.03 4.95 4.63 4.05 4.33 4.10 3.99 3.94 4.11 23 1-year. 5.60 5.22 5.32 5.08 4.94 4.50 3.95 4.22 4.01 3.96 3.84 3.93 Auction high3512 24 3-month 5.51 5.02 5.07 4.96 4.94 4.74 4.08 4.43 4.16 3.91 3.85 4.07 5.59 5.09 5.18 5.03 4.97 4.75 4.15 4.46 4.19 4.09 3.87 4.16 26 1-year 5 69 5 23 5 36 5 10 5 00 451 4 06 406 U.S. TREASURY NOTES AND BONDS Constant maturities*3 27 1-year 5.94 5.52 5.63 5.36 5.21 4.71 4.12 4.41 4.18 4.14 4.01 4.10 28 2-year 6.15 5.84 5.99 5.46 5.27 4.67 4.09 4.31 4.11 4.05 4.07 4.10 29 3-year 6.25 5.99 6.10 5.47 5.24 4.62 4.18 4.26 4.18 4.22 4.15 4.20 30 5-year 6.38 6.18 6.22 5.46 5.27 4.62 4.18 4.24 4.18 4.22 4.17 4.22 31 7-year 6.50 6.34 6.33 5.52 5.36 4.76 4.46 4.38 4.41 4.57 4.49 4.47 32 10-year 6.57 6.44 6.35 5.46 5.34 4.81 4.53 4.46 4.41 4.58 4.59 4.63 33 20-year 6.95 6.83 6.69 5.78 5.66 5.38 5.30 5.19 5.16 5.39 5.42 5.35 34 30-year 6 88 671 6 61 5 68 5 54 5 20 5 01 5 00 4 88 5 02 5 08 5 12 Composite 35 More than 10 years (long-term) 6.93 6.80 6.67 5.76 5.64 5.34 5.24 5.15 5.10 5.32 5.34 5.29 STATE AND LOCAL NOTES AND BONDS Moodv's series14 36 Aaa ". . 5.80 5.52 5.32 5.01 5.01 4.84 4.76 4.70 4.60 4.82 4.84 4.85 37 Baa 6.10 5.79 5.50 5.12 5.15 5.11 5.10 5.05 5.05 5.10 5.15 5.17 5 95 5 76 5 52 5 14 5 10 4 99 4 93 4 82 4 88 4 96 4.99 5.00 CORPORATE BONDS 39 Seasoned issues, all industries 7.83 7.66 7.54 6.84 6.83 6.75 6.77 6.62 6.65 6.85 6.87 6.85 Rating group 40 Aaa 7.59 7.37 7.27 6.55 6.52 6.40 6.37 6.25 6.25 6.45 6.47 6.44 41 Aa ... 7.72 7.55 7.48 6.78 6.77 6.68 6.70 6.54 6.58 6.78 6.79 6.76 42 A 7.83 7.69 7.54 6.89 6.89 6.82 6.85 6.70 6.73 6.92 6.94 6.93 43 Baa 8.20 8.05 7.87 7.15 7.14 7.09 7.18 7.01 7.05 7.25 7.28 7.26 MEMO Dividend-price ratio*"1 44 Common slocks 2.56 2.19 1.77 1.39 1.48 1.59 1.59 1.60 1.68 1.64 1.52 1.53 1. The daily effective federal funds rate is a weighted average of rates on trades through 11. Bid rates for Eurodollar deposits collected around 9:30 a.m. Eastern time. Data are for New York brokers. indication purposes only. 2. Weekly figures are averages of seven calendar days ending on Wednesday of the 12. Auction date for daily data; weekly and monthly averages computed on an issue-date current week; monthly figures include each calendar day in the month. basis. On or after October 28, 1998, data are stop yields from uniform-price auctions. Before 3. Annualized using a 360-day year or bank interest. that, they are weighted average yields from multiple-price auctions. 4. Rate for the Federal Reserve Bank of New York. 13. Yields on actively traded issues adjusted to constant maturities. Source: U.S. Depart- 5. Quoted on a discount basis. ment of the Treasury. 6. Interest rates interpolated from data on certain commercial paper trades settled by the 14. General obligation bonds based on Thursday figures; Moody's Investors Service. Depository Trust Company. The trades represent sales of commercial paper by dealers or 15. State and local government genera] obligation bonds maturing in twenty years are used direct issuers to investors (that is, the offer side). See Board's Commercial Paper Web pages in compiling this index. The twenty-bond index has a rating roughly equivalent to Moodys' (http://www.federalreserve.gov/releases/cp) for more information. Al rating. Based on Thursday figures. 7. An average of offering rates on commercial paper for firms whose bond rating is AA or 16. Daily figures from Moody's Investors Service. Based on yields to maturity on selected the equivalent. Series ended August 29, 1997. long-term bonds. 8. An average of offering rates on paper directly placed by finance companies. Series 17. Standard & Poor's corporate series. Common stock ratio is based on the 500 stocks in ended August 29, 1997. the price index. Digitized fo9r. FReRprAesSenEtatRiv e closing yields for acceptances of the highest-rated money center banks. NOTE. Some of the data in this table also appear in the Board's H.15 (519) weekly and 10. An average of dealer offering rates on nationally traded certificates of deposit. G.13 (415) monthly statistical releases. For ordering address, see inside front cover. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 Domestic Financial Statistics • January 1999 1.36 STOCK MARKET Selected Statistics 1998 Indicator 1995 1996 1997 Feb. Mar. Apr. May June July Aug. Sept. Oct. Prices and trading volume (averages of daily figures)1 Common stock prices (indexes) 1 New York Stock Exchange (Dec. 31, 1965 = 50) 291.18 357.98 456.99 532.15 560.70 578.05 574.46 569.76 586.39 539.16 506.56 511.49 2 Industrial 367.40 453.57 574.97 660.91 693.13 711.89 712.39 731.01 718.54 665.66 629.51 636.62 3 Transportation 270.14 327.30 415.08 485.73 508.06 523.73 505.02 492.98 503.89 441.36 408.75 396.61 4 Utility 110.64 126.36 143.87 170.96 191.67 207.32 198.25 188.26 189.95 186.24 186.17 195.09 5 Finance 238.48 303.94 424.84 508.97 539.47 563.07 551.28 548.57 579.67 511.22 454.28 448.12 6 Standard & Poor's Corporation (1941-43 - I0)2 541.72 670.49 873.43 1,023.74 1,076.83 1,112.20 1,108.42 1,108.39 1,156.58 1,074.62 1,020.64 1,032.47 7 American Stock Exchange (Aug. 31, 1973 = 50)' 498.13 570.86 628.34 685.73 722.37 742.33 735.02 704.59 724.83 655.67 621.48 607.16 Volume of trading (thousands of shares) 8 New York Stock Exchange 345,729 409,740 523,254 610,958 619,366 647,110 569,239 605,576 639,744 712,710 790,238 808,816 9 American Slock Exchange 20,387 22.567 n.a. 26.808 28,943 29.544 27,004 25,447 26,473 32.721 33,331 31,946 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers4 76,680 97,400 126,090 135,590 140,340 140,240 143,600 147,700 154370 147,800 137,540 130,160 Free credit balances at brokers^ 11 Margin accounts6 16,250 22,540 31,410 27,450 27,430 28,160 26,200 29,840 31,820 38,460 41.970 43,500 12 Cash accounts 34,340 40,430 52,160 48,640 51,340 51,050 47,770 51,205 53,780 53,850 54,240 54.610 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 slocks 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 initialed in June 1984. address, see inside from 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 io the Securities Exchange Act of 1934, limit the amount of credit that can be used to to the group of stocks on which the index is based. The index is now based on 400 industrial purchase and carry "margin securities" (as defined in the regulations) when such credit is stocks (formerly 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and collateralized by securities. Margin requirements on securities are the difference between the 40 financial. market value (100 percent) and the maximum loan value of collateral as prescribed by the 3. On July 5, 1983, the American Stock Exchange rebased its index, effectively cutting Board. Regulation T was adopted effective Oct. 15, 1934; Regulation U, effective May 1, previous readings in half. 1936; Regulation G, effective Mar. 11, 1968; and Regulation X, effective Nov. 1, 1971. 4. Since July 1983, under the revised Regulation T, margin credit at broker-dealers has On Jan. 1, 1977, the Board of Governors for the first time established in Regulation T the included credit extended against stocks, convertible bands, stocks acquired through the initial margin required for writing options on securities, setting it at 30 percent of ihe current exercise of subscription rights, corporate bonds, and government securities. Separate report- market value of ihe stock underlying the option. On Sept. 30, 1985, the Board changed the ing of data for margin stocks, convertible bond:;, 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 Type of account or operation 1997 May July Sept. Oct. US. budget' 1 Receipts, tota] 1,351,830 1,453,062 1,579,292 95,278 187.860 119,723 111,741 180,936 119,974 2 On-budget 1,000,751 1,085,570 1,187,302 61,790 144,973 87,820 79,135 149,726 90,064 3 Off-budget 351,079 367,492 391,990 33,488 42,887 31,903 32,606 31,210 29.910 4 Outlays, total 1,515,729 1,560,512 1,601,235 134,057 136,754 143,807 122,907 142,725 152,436 5 On-budget 1,227,065 1,259,608 1,290,609 102,381 125,606 115,714 92,555 107,900 123,687 6 Off-budget 288,664 300,904 310,626 31,676 11,148 28,094 30,352 34,814 28,749 7 Surplus or deficit (-), total -163,899 -107,450 -21,943 -38,779 51,106 -24,084 -11,166 38,222 -32,462 8 On-budget -226,314 -174,038 -103,307 -40,591 19,367 -27,894 -13,420 41,826 -33,623 9 Off-budget 62,415 66,588 81,364 1,812 31,739 3,809 2,254 -3,604 1,161 Source of financing (total) 10 Borrowing from the public 171,288 129,712 38.171 -8,597 -12,618 -16,370 33,989 -46,413 15,330 11 Operating cash (decrease, or increase (—)). -2,007 -6,276 604 51,899 -36,144 36.210 -362 -2,451 2,661 12 Other2 -5,382 -15,986 -16,832 -4,523 -2.344 4,244 -22,461 10,642 14,471 MEMO 13 Treasury operating balance (level, end of period) 37,949 44,225 43,621 36,131 72,275 36,065 36,427 38,878 36,217 14 Federal Reserve Banks 8,620 7,700 7,692 5,693 18,140 4,648 6,704 4,952 4,440 15 Tax and loan accounts 29,329 36.525 35,930 30,438 54,135 31,417 29,722 33.926 31,776 1. Since 1990. off-budget items have been the social security trust funds (federal old-age net gain or loss for U.S. currency valuation adjustment; net gain or loss for IMF loansurvivors insurance and federal disability insurance) and the U.S. Postal Service. valuation adjustment; and profit on sale of gold. 2. Includes special drawing rights (SDRs); reserve position on the U.S. quota in the SOURCE. Monthly totals; U.S. Department of the Treasury, Monthly Treasury Statement of International Monetary Fund (IMF); loans to the IMF; other cash and monetary assets, Receipts and Outlays of the US. Government: fiscal year totals: U.S. Office of Management accrued interest payable to the public; allocations of SDRs; deposit funds; miscellaneous and Budget, Budget of the US. Government. liability (including checks outstanding) and asset accounts; seigniorage; increment on gold; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic Financial Statistics • January 1999 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS1 Millions of dollars Fiscal year Calendar year Source or type 1998 1998 Aug. Sept. RECEIPrs 1 All sources 1,579,292 1,721,421 707,552 845,527 773,812 922,632 111,741 180,936r 119,974 2 Individual income taxes, net 737,466 828,597 323,884 400,436 354,072 447,514 55,300 90,479 60,255 3 Withheld 580,207 646,483 279,988 292.252 306,865 316.309 51.881 53,342' 54,277 4 Nonwithheld 250,753 281,527 53,491 191,050 58.069 219.136 4,944 39,853 7,098 5 Refunds 93,560 99,476 9,604 82,926 10,869 87,989 1,525 2,729 1.120 Corporation income taxes 6 Gross receipts 204,493 213,270 95,364 106,451 104.659 109,353 2,952 38,928 6,547 7 Refunds 22,198 24,593 10,053 9,635 10,135 14,220 1,484 2,128 4,789 8 Social insurance taxes and contributions, r»et . 539,371 571,835 240,326 288,251 260,795 312,713 45,806 43,079 41,237 9 Employment taxes and contributions . .. . 506,751 540,016 227,777 268,357 247,794 293,520 41,973 42,540 39,690 ] 0 Unemployment insurance 28.202 27,484 10,302 17,709 10,724 17,080 3,502 206 1,142 11 Other net receipts3 4,418 4,335 2,245 2,184 2,280 2.112 331 333 405 L2 Excise taxes 56,924 57,669 27,016 28,084 31,133 29,922 3,181 2,961 9,630 13 Customs deposits 17,928 18,297 9,294 8,619 9,679 8.546 1,732 1,701 1,776 14 Estate and gift taxes 19,845 24,076 8,835 10,477 10,262 12,971 1.718 2,356 2,089 15 Miscellaneous receipts4 25,465 32,270 12.889 12,866 13,348 15,837 2,535 3,572 3,228 OUTLAYS 16 All types 1,601,235 1,651,383 800,177 797,418 824,370 815.886 122,907 142,725 152,436 17 National defense 270,473 270,407 139,402 132,698 140,873 129,351 18,502 24,748 25,730 18 International affairs 15,228 13,144 8,532 5,740 9,420 4,610 443 1,123 169 19 General science, space, and technology. 17,174 19,632 8,260 8,938 10,040 9,426 1,581 1,824 1,550 20 Energy 1,483 1,359 695 803 411 957 -113 892 -135 21 Natural resources and environment .... 21,369 21,897 10,307 9,628 11,106 10,051 1,855 2,115 1,859 22 Agriculture 9,032 14,306 11,037 1,465 10,590 2,387 1,656 2,780 3,287 23 Commerce and housing credit -14,624 907 -5,899 -7,575 -3,526 -2,483 -1,423 8,136' 1,078 24 Transportation 40.767 36,610 21,512 16,847 20,414 16,196 3,218 3,997 3,445 25 Community and regional development . 11,005 10,437 5,498 5,678 5,749 4.863 770 1,115 1,260 26 Education, training, employment, and social services 53,008 52,214 27,524 25,080 26,851 25,928 4,708 4,455 4,861 27 Health 123,843 131,015 61,595 61,809 63,552 65,053 10,704 11.293 12,572 28 Social security and Medicare 555,273 572,046 269.412 278,863 283,109 286.305 44,240 47,555 50.544 29 Income security 230,886 232,949 107,631 124,034 106,353 125,196 14.281 17.309 20,104 30 Veterans benefits and services 39,313 41,782 21,109 17,697 22,077 19,615 1,749 3,432 5,465 31 Administration of justice 20,197 22,612 9.583 10,670 10,212 11,287 2,012 1,675 1,899 32 General government 12,768 13,903 6.546 6,623 7,302 6,139 579 2,199 2,377 33 Net interest5 244,013 243,353 122,573 122.655 122,620 122,345 21,366 15,976 19,442 34 Undistributed offsetting receipts6.. -49,973 -47,194 -25,142 -24,235 -22,795 -21,340 -3,221 -7,909 -3,078 1. Functional details do not sum to total outlays for calendar year data because revisions to 4. Deposits of earnings by Federal Reserve Banks and other miscellaneous receipts. monthly totals have not been distributed among functions. Fiscal year total for receipts and 5. Includes interest received by trust funds. outlays do not correspond lo 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 retiirrement accounts. SOURCE. Fiscal year totals: U.S. Office of Management and Budget, Budget of the US. 3. Federal employee retirement contributions and civil service retirement and Government, Fiscal Year 1999; 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 All 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars, end of month 1996 1997 1998 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 1 Federal debt outstanding 5,260 5,357 5,415 5,410 5,446 5,536 5,573 5,578 5,556 2 Public debl securities 5,225 5,323 5.381 5,376 5,413 5,502 5.542 5,548 5,526 3 Held by public 3,778 3,826 3,874 3,805 3,815 3,847 3,872 3,790 n.a. 1 447 1 497 1 507 1 572 1 599 1 656 1 670 I 758 5 Agency securities 35 34 34 34 33 34 31 30 29 27 27 26 26 26 27 26 26 n.a. 7 Held by agencies 8 8 8 7 7 7 5 4 n.a. 8 Debt subject to statutory limit 5,137 5.237 5.294 5,290 5.328 5,417 5,457 5,460 5,440 5,137 5,237 5,294 5,290 5,328 5,416 5,456 5,460 5.439 10 Other debt1 0 0 0 0 0 0 0 0 0 MEMO 5,500 5,500 5,500 5,500 5.950 5,950 5,950 5,950 5,950 1. Consists of guaranteed debt of U.S. Treasury and other federal agencies, specified SOURCE. US. 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 1997 1998 Type and holder 1994 1995 1996 1997 Q4 Ql Q2 Q3 1 Total gross public debt 4,800.2 4,988.7 5,323.2 5,502.4 5,502.4 5,542.4 5,547.9 5,526.2 By type 2 Interest-bearing 4,769.2 4,964.4 5,317.2 5,494.9 5,494.9 5,535.3 5.540.2 5.518.7 3 Marketable 3,126.0 3,307.2 3,459.7 3,456.8 3,456.8 3,467.1 3,369.5 3,331.0 4 Bills ... 733.8 760.7 777.4 715.4 715.4 720.1 641.1 637.7 5 Notes 1,867.0 2,010.3 2,112.3 2,106.1 2,106.1 2,091.9 2,064.6 2,009.1 510.3 521.2 555.0 587.3 587.3 598.7 598.7 610.4 7 Inflation-indexed notes and bonds' n.a. n.a. n.a. 33.0 33.0 41.5 50.1 41.9 1,643.1 1,657.2 1,857.5 2,038.1 2,038.1 2,068.2 2,170.7 2,187.7 9 State and local government series 132.6 104.5 101.3 124.1 124.1 139.1 155.0 164.4 42.5 40.8 37.4 36.2 36.2 35.4 36.0 35.1 42.5 40 8 47 4 36 2 36.2 36 4 36.0 35.1 12 Public .0 .0 .0 .0 .0 .0 .0 .0 13 Savings bonds and notes 177.8 181.9 182.4 181.2 181.2 181.2 180.7 180.8 1,259.8 1.299.6 1.505.9 1.666.7 1,666.7 1,681.5 1,769.1 1,777.3 15 Non-imerest-bearing 31.0 24.3 6.0 7.5 7.5 7.2 7.7 7.5 By holders 16 U.S. Treasury and other federal agencies and trust funds 1,257.1 1,304.5 1,497.2 1,655.7 1,655.7 1,670.4 1,757.6 17 Federal Reserve Banks . .... 374.1 391.0 410.9 451.9 451.9 400.0 458.4 3 168 0 3 294 9 3411 2 3.393.4 3.393 4 3 430.7 3,330 6 290.4 278.7 261.8 269.8 269.8 279.2 275.0 20 Money market funds 67.6 71.5 91.6 88.9 88.9 84.8 82.9 240.1 241.5 214.1 224.9 224.9 225.5 228.0 22 Other companies 224.5 228.8 258.5 265.0 265.0 268.1 267.2 na. 541.0 469.6 482.5 493.0 493.0 442.4 441.0 Individuals 180.5 185.0 187.0 186.5 186.5 186.3 186.0 150.7 162.7 169.6 168.4 168.4 165.8 165.0 26 Foreign and international 688.7 862.2 1,135.6 1,278.0 1,278.0 1.240.2 1,247.4 27 Other miscellaneous investors79 784.6 794.9 610.5 418.8 418.8 538.4 438.0 1. The U.S. Treasury first issued inflation-indexed securities during the first quarter of 7. In March 1996, in a redefinition of series, fully defeased debt backed by nonmarketable 1997. federal securities was removed from "Other miscellaneous investors" and added to "State and 2. Includes (not shown separately) securities issued to the Rural Electrification Administra- local treasuries." The data shown here have been revised accordingly. tion, depository bonds, retirement plan bonds, and individual retirement bonds. 8. Consists of investments of foreign balances and international accounts in the United 3. Nonmarketable series denominated in dollars, and series denominated in foreign cur- States. rency held by foreigners 9. Includes savings and loan associations, nonprofit institutions, credit unions, mutual 4. Held almost entirely by U.S. Treasury and other federal agencies and trust funds. savings banks, corporate pension trust funds, dealers and brokers, certain U.S. Treasury 5. Data for Federal Reserve Banks and U.S. government agencies and trust funds are actual deposit accounts, and federally sponsored agencies. holdings; data for other groups are Treasury estimates. SOURCE. U.S. Treasury Department, data by type of security, Monthly Statement of the 6. Includes state and local pension funds. Public Debt of the United Stales; data by holder, Treasury Bulletin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic Financial Statistics • January 1999 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions1 Millions of dollars, daily averages 1998 1998, week ending July Aug. Sept, Sept. 2 Sept. 9 Sept. 16 Sept. 23 Sept. 30 Oct. 28 OUTRIGHT TRANSACTIONS2 By type of security 1 U.S. Treasury bills 25,889 32,286 35,694 51,929 35,909 35,896 28,238 Coupon securities, by maturity 2 Five years or less 82,094 137,256' 141,855' 187,521' 120,894' 151,592 141,650 130,825 143,434 151,181 114,620 124,634 3 More than five years 59,741 77,455' 85,071' 105,015' 74,135' 85,936 84,597 85,452 118,793 105,846 84,090 77,072 4 Inflation-indexed 1,657 Federal agency 1,205 717' 1,173' 862' 1,212' 817 1,140 2,373 1,269 1,631 949 5 Discount notes 45.984 Coupon securities, by maturity 35,439 37,530 46,151' 42,747 39,628 48,277 50,771 53,568 52,068 44,117 35,723 6 One year or less 1,544 7 More than one year, but less than 1,325 1,095 1,127' 905 517 1,378 1,036 551 484 521 1,260 or equal to five years .... 4,908 5.078 4,466 8 More than five years 2,892 4,118 4,853 5,058 6,093 2,569 2,817 4,003 4,308 3,584 6,699 5,164 9 Mortgage-backed 2,700 3,583 2,911 77,327 2,561 103,767 82,526 2,769 5,025 6,617 3,610 3,304 61,434 72,609 89,908' 111,619' 71,093 108.039 128,064 79,636 73,179 By type of counterparty With interdealer broker 10 U.S. Treasury 92,782 135,577 146,046 185,792 130,450 156.360 143,203 135.153 168,025 162,670 132,907 129,516 11 Federal agency 1,904 3,012 3,186 4,094 2,696 2.768 3,556 3,264 3,447 3,866 4,178 2,960 12 Mortgage-backed 19,316 22,350 30,665 25,054 31,866 37,391 29,255 26,631 35.696 38,483 28,725 26,810 With other 13 U.S. Treasury 76,148 112,136' 117,747' 159.536' 101,70C 122,973 115,623 110,769 129,272 131,521 95,673 96,236 14 Federal agency 40,451 43,314 51,856 49,524 46,102 52,406 53,382 55,315 60,004 58,886 50,769 42,490 15 Mortgage-backed 42,118 50,258 59,243' 52,272 79,753' 66,375 53,271 44,462 72,343 89,581 50,912 46,369 FUTURES TRANSACTIONS3 By type of deliverable security 16 U.S. Treasury bills 54 Coupon securities, by maturity 17 Five years or less 1,764 5,907 4,378 10,680 3,498 5.087 3,506 2,724 3,238 4,181 2,969 2,932 18 More than five years 11,813 18,177 20,105 30,063 16,714 22,287 20,808 15,948 25,518 23,107 16,867 15,132 19 Inflation-indexed Federal agency 0 0 0 0 0 0 0 0 0 0 0 20 Discount notes Coupon securities, by maturity 0 0 0 0 0 0 0 0 0 0 0 21 One year or less 22 More than one year, but less than 0 0 0 0 0 0 0 0 0 0 0 or equal to five years 0 0 0 0 0 0 0 0 0 0 0 23 More than five years 0 0 0 0 0 0 0 0 0 0 0 24 Mortgage-backed 0 0 0 0 0 0 0 0 0 0 0 OPTIONS TRANSACTIONS4 By type of underlying security 25 U.S. Treasury bills Coupon securities, by maturity 26 Five years or less 1,856 1,790 1,984' 2,263 1,723 2,691 1,407 1,950 2,139 3,083 1,006 1,067 27 More than five years 5,124 6,496 6,152' 5,986 6,421 6,440 5,485 6,383 9,520 10,416 8,843 4,910 28 Inflation-indexed 0 0 Federal agency 0 0 0 0 0 0 0 0 0 0 29 Discount notes Coupon securities, by maturity 0 0 0 0 0 0 0 0 0 0 30 One year or less 31 More than one year, but less than 0 0 0 0 0 0 0 0 0 0 or equal to five years 0 0 0 0 0 0 n.a. 32 More than five years 0 0 0 0 0 0 0 0 0 0 0 0 33 Mortgage-backed 0 793 745 0 815 786 348 0 0 1,005 387 533 623 1,050 925 1,531 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 to be 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 an; 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 ijian 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 mortgagebacked agency securities include purchases and sales for which delivery is scheduled in thirty business days or less. Stripped securities are reported at market value by maturity of coupon or corpus. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A29 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Millions of dollars 1998, week ending July Aug. Sept. Sept. 2 Sept. 9 Sept. 16 Sept. 23 Sept. 30 Oct. 7 Oct. 14 Oct. 2 NET OUTRIGHT POSITIONS3 B\ type of security 1 U.S. Treasury bills 1,766 4,845 -896 -2,612 -13,643 -6,447 -7,089 Coupon securities, by maturity 2 Five years or less -16,440 -18,708 -5,360 -4,625 -7.456 -6,121 -7,093 -981 851 -4,303 1.875 3 More than five years -17,653 -11,060 -2,004 -820 597 -3,598 -2,644 -2,708 4,129 5,759 7,872 4 Inflation-indexed 2,671 1,786 3,442 2,895 2,397 Federal agency 2,305 1,554 1,883 1,536 1.327 1,403 5 Discount notes 19,296 17,042 25,268 19,174 12,984 Coupon securilies, by maturity 16,408 17,211 19,191 20,889 17.117 11,696 6 One year or less 2,782 3,355 1,692 1,923 1,872 7 More than one year, but less than 2,756 2,668 3,211 2,961 2.653 1,649 or equal to five years 7,435 4.801 3.37B 5,033 5,992 3,678 4,140 4,447 6,601 8 More than five years 10,759 5,821 6,913 7,280 6,512 6,371 4,906 7,320 7,996 7,630 6.904 9 Mortgage-backed 64,705 8,784 58,415 58,637 62,539 66,404 7,344 48,856 57,363 49.939 52,229 61,657 55,797 NET FUTURES POSITIONS4 By type of deliverable security 10 U.S. Treasury bills 1,144 1,474 1,617 Coupon securities, by maturity 11 Five years or less -4,346 -4,879 -8,716 -5,851 -6,506 -10,554 -9,681 -8,941 -7,958 -10,275 -9,776 12 More than five years -26,100 -32,741 -25.612 -30,879 -29,025 -26,815 -23.089 -22,013 -25,637 -23,512 -23,713 13 Inflation-indexed Federal agency 0 0 0 0 0 0 0 0 0 0 0 14 Discount notes Coupon securities, by maturity 0 0 0 0 0 0 0 0 0 0 0 15 One year or less 16 More than one year, but less thai 0 0 0 0 0 0 0 0 0 0 0 or equal to five years .... 0 0 0 0 0 0 0 0 0 0 0 17 More than five years 0 0 0 0 0 0 0 0 0 0 0 18 Mortgage-backed 0 0 0 0 0 0 0 0 0 0 0 NET OPTIONS POSITIONS B\ t\pe of deliverable security 19 U.S.'Treasury bills Coupon securities, by maturity 20 Five years or less -1,050 -827 -1,153 -957 -1,878 -911 267 -2,147 -1,125 -1,377 -1.560 21 More than five years -3,065 -2,842 -2,553 -2,815 -3,497 -1,015 -2,398 -3,227 -6,126 -3,371 -3,080 22 Inflation-indexed 0 n.a. Federal agency 0 0 0 0 0 0 0 0 23 Discount notes 0 0 Coupon securities, by maturity 0 0 0 0 0 0 0 0 24 One year or less 0 0 25 More than one year, but less th 0 0 0 0 0 0 0 0 or equal to five years n.a. n.a. n.a. n.a. n.a. 0 26 More than five years n.a. n.il. n.a. n.a. n.a. n.a. n.a. n.a. 27 Mortgage-backed 2,332 1,954 1,629 1,222 1,692 1,706 2,517 1,477 4,126 3.670 Financing5 Reverse repurchase agreements 28 Overnight and continuing 320,143 333,413 316,256 345,156 305,452 309.408 336,627 305,281 312,432 294,925 279.853 29 Term 895,133 829,365 784,437 765,937 778.038 798,530 820,842 745,625 840.221 828.127 852,680 Securities borrowed 30 Overnight and continuing 218,172 221,150 229,685 226,495 223,820 231,670 232,824 231,337 244.842 241,930 234,178 31 Term 95,894 95.383 99,774 95,375 99.144 103,598 101.204 96,405 112.224 109,744 108,871 Securities received as pledge 32 Overnight and continuing 3,140 2,770 3,152 2,641 3,120 3,413 3,470 2,752 2,805 2,772 2,886 33 Term n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Repurchase agreements 34 Overnight and continuing 720,678 735,478 718,744 758,591 726,556 747,092 735,625 654,319 715.752 694,273 669,662 35 Term 799,633 728.531 704,430 664,056 675,410 718,248 746,038 689,560 764.886 762,433 785,555 Securities loaned 36 Overnight and continuing 10,999 12,518 11,057 10,495 10,932 10,016 10,007 13,432 8,473 8,511 6.495 37 Term 3,623 3,830 4,119 3,803 3,936 3.897 4,925 4,121 4,186 3,673 Securities pledged 38 Overnight and continuing 54,477 49,094 52,222 47,376 46,482 52,344 55.635 55,811 57,482 52,978 49,743 39 Term 6,425 5,612 5,624 5,732 5.794 5,560 5,878 5,231 5,063 4,797 5,412 Collateralized loans 40 Total 16,787 21,580 14,140 18,238 13,879 14,678 16,520 10,311 24,276 19,091 23,000 1. Data for positions and financing are obtained from reports submitted to the Federal securities are included when the time to delivery is more than five business days. Forward Reserve Bank of New York by the U.S. government securities dealers on its published list of contracts for mortgage-backed agency securities are included when the time to delivery is primary dealers. Weekly figures are close-of-business Wednesday data. Positions for calendar more than thirty business days. days of the report week are assumed to be constant. Monthly averages are based on the 4. Futures positions reflect standardized agreements arranged on an exchange. All futures number of calendar days in the month. positions are included regardless of time to delivery. 2. Securities positions are reported at market value. 5. Overnight financing refers to agreements made on one business day that mature on the 3. Net outright positions include immediate and forward positions. Net immediate posi- next business day; continuing contracts are agreements that remain in effect for more than one tions include securities purchased or sold (other than mortgage-backed agency securities) that business day but have no specific maturity and can be terminated without advance notice by have been delivered or are scheduled to be delivered in five business days or less and either party; term agreements have a fixed maturity of more Ihan one business day. Financing "when-issued" securities that settle on the issue date of offering. Net immediate positions for data are reported in terms of actual funds paid or received, including accrued interest mortgage-backed agency securities include securities purchased or sold that have been NOTE, "n.a." indicates that data are not published because of insufficient activity. delivered or are scheduled to be delivered in thirty business days or less. Forward positions reflect agreements made in the over-the-counter market that specify delayed delivery. Forward contracts for U.S. Treasury securities and federal agency debt Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic Financial Statistics • January 1999 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period Agency Apr. May July Aug. 1 Federal and federally sponsored agencies 738,928 844,611 925,823 1,022,609 1,048,661 1,044,575 1,061,253 n.a. 2 Federal agencies 39,186 37,347 29,380 27.792 27,104 26.995 26,817 26,990 26.668 3 Defense Department' 6 6 6 6 6 6 6 6 6 4 Export-Import Bank • 3.455 2,050 1,447 552 542 542 1,295 n.a. 5 Federal Housing Administration4 116 97 84 102 102 108 144 155 6 Government National Mortgage Association certificates of participation5 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 7 Postal Service6 8.073 5,765 n.a. n.a. n.a. n.a. n.a. n.a. 8 Tennessee Valley Authority 27.536 29,429 27.853 27,786 27,098 26,989 26,811 26,984 26,507 9 United States Railway Association n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 10 Federally sponsored agencies7 699.742 807.264 896,443 994,817 1,021,557 1,017,580 1,034,436 1,090,715 1,103,596 I 1 Federal Home Loan Banks 205,817 243 194 263,404 313,919 323,208 322,155 328,514 328,009 334,494 12 Federal Home Loan Mortgage Corporation 93,279 119.961 156,980 169.200 200,800 204.751 200.314 208,800 213,800 13 Federal National Mortgage Association 257,230 299,174 331,270 369,774 395,977 399,489 406.162 415.229 423,188 14 Farm Credit Banks8 53,175 57,379 60,053 63,517 62,799 63,744 64,717 64.528 57,910 15 Student Loan Marketing Association9 50,335 47,529 44,763 37,717 36,256 35,952 33,231 33,270 33,350 16 Financing Corporation 8,170 8,170 8,170 8,170 8.170 8,170 8,170 8,170 8,170 17 Farm Credit Financial Assistance ^Corporation11 1.261 1,261 1.261 1,261 1,261 1,261 1.261 1,261 1,261 18 Resolution Funding Corporation1' 29,996 29.996 29.996 29.996 29.996 29,996 29,996 29.996 29,996 MEMO 19 Federal Financing Bank debt13 103,817 78,681 58,172 49,090 44,893 44,223 136,892 42,610 42,396 20 L E e x n p d o i r n t- g I m to p f o e r d t e B ra a l n k a 3 n d . ' federally sponsored agencies 3,449 2,044 1,431 552 1,295 t 21 Postal Service6 8,073 5,765 n.a. n.a. n.a. 22 Student Loan Marketing Association n.a. n.a. n.a. n.a. n.a. 23 Tennessee Valley Authority 3,200 3,200 n.a. 24 United States Railway Association* n.a. n.a. n.a. Other lending'" 25 Farmers Home Administration 33,719 21,015 18,325 13.530 12,380 11,955 13,530 10,900 9,756 26 Rural Electrification Administration 17,392 17,144 16,702 14.898 14,203 14,207 14,819 14,126 14,284 27 Other 37,984 29,513 21,714 20.110 17,768 17,519 107,248 17,584 18,356 1. Consists of mortgages assumed by the Defense Department between 1957 and 1963 10. The Financing Corporation, established in August 1987 to recapitalize the Federal under family housing and homeowners assislance programs. Savings and Loan Insurance Corporation, undertook its first borrowing in October 1987. 2. Includes participation certificates reclas:sified as debt beginning Oct. 1, 1976. 11. The Farm Credit Financial Assistance Corporation, established in January 1988 to 3. On-budget since Sept. 30, 1976. provide assistance to the Farm Credit System, undertook its first borrowing in July 1988. 4. Consists of debentures issued in payment of Federal Housing Administration insurance 12. The Resolution Funding Corporation, established by the Financial Institutions Reform, claims. Once issued, these securities may be sold privately on the securities market. Recovery, and Enforcement Act of 1989, undertook its first borrowing in October 1989. 5. Certificates of participation issued before fiscal year 1969 by the Government National 13. The FFB, which began operations in 1974, is authorized to purchase or sell obligations Mortgage Association acting as trustee for the Farmers Home Administration, the Department issued, sold, or guaranteed by other federal agencies. Because FFB incurs debt solely for the of Health, Education, and Welfare, the Department of Housing and Urban Development, the purpose of lending to other agencies, its debt is not included in the main portion of the table to Small Business Administration, and the Veterans Administration. avoid double counting. 6. Off-budget. 14. Includes FFB purchases of agency assets and guaranteed loans; the latter are loans 7. Includes outstanding noncontingent liabilities: notes, bonds, and debentures. Includes guaranteed by numerous agencies, with the amounts guaranteed by any one agency generally Federal Agricultural Mortgage Corporation, therefore details do not sum to total. Some data being small. The Farmers Home Administration entry consists exclusively of agency assets, are estimated whereas the Rural Electrification Administration entry consists of both agency assets and 8. Excludes borrowing by the Farm Credit Financial Assistance Corporation, which is guaranteed loans. shown on line 17. 9. Before late 1982, the association obtained financing through the Federal Financing Bank (FFB). Borrowing excludes that obtained from the FFB, which is shown on line 22. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Markets and Corporate Finance A31 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars Type of issue or issuer, or use Apr. May July Aug. Sept. 1 All issues, new and refunding1 145,657 171,222 214,694 27,859 20,271 22,862 29,665 22,599 20,344 17,526 19,528 By type of issue 2 General obligation . . 56.980 60,409 69,934 9.597 8,154 4,827 10,135 6,515 5,812 5,619 6,791 3 Revenue 88,677 110.813 134,989 18.261 12,117 18,035 19,530 16,084 14,532 11,907 12,737 By type of issuer 4 State 14.665 13.651 18,237 2,375 3,548 1,146 2,809 1,972 1,483 1,280 1,865 5 Special district or statutory authority 93.500 113,228 134,919 19,629 12,504 16,865 18,099 16,244 14,233 12,490 12,924 6 Municipality, county, or township 37,492 44,343 70,558 5,859 4,219 4,851 7,220 5,673 4,628 3,756 4,739 7 Issues for new capital 102,390 112,298 135,519 15,134 12,616 15,281 19,341 15,895 11,258 9,106 12,736 By use of proceeds 8 Education 23,964 26,851 31,860 4,297 4.080 2,819 4,911 2,733 2,435 2,041 2.605 9 Transportalion 11,890 12,324 13,951 771 1.089 1,043 2,962 3,677 1,982 918 1.598 10 Utilities and conservation 9,618 9,791 12,219 1,866 749 5,971 2.368 795 1,179 831 2,785 11 Social welfare 19,566 24,583 27,794 3,104 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 12 Industrial aid 6,581 6,287 6,667 1.236 678 576 563 1,002 709 315 471 13 Other purposes 30,771 32,462 35,095 3.860 3,255 2.482 5,279 4,674 2,764 2,726 3,359 1. Par amounts of long-term issues based on date of sale. SOURCE. Securities Data Company beginning January 1990; Investment Dealer's 2. Includes school districts. Digest before then. 1.46 NEW SECURITY ISSUES U.S. Corporations Millions of dollars 1998 Type of issue, offering, 1995 1996 1997 or issuer Feb. Mar. Apr. May June July Aug.' Sept. 1 All issues' 673,571 75,961 115,694 83,646 84,449 109,687r 2 Bonds2 572,998 n.a n.a. 64,996 97,323 71,929 70,313 93,243r n.a. n.a. n.a. By type of offering 3 Public, domestic 408,707 465,489 537,880 50,453 81,778 55,452 56,965 78.280 54,266 45,745 70,322 4 Private placement, domestic3 87,492 n.a. n.a. 7,600 7,600 7,600 7,600 7,600 n.a. n.a. n.a. 5 Sold abroad 76,799 83,433 103,188 6,943 7,946 8.878 5,748 7.363 6,267 3,800 2,618 By industry group 6 Nonfinancial 156,763 n.a. n.a. 19,733 24.901 24.585 20.456 24,444' n.a. n.a. n.a. 7 Financial 416,235 429,157 510,953 45.263 72,422 47,345 49,857 68,799' 43,313 36,746 63.876 8 Stocks2 105 323 122 006 117 880 11,182 19 271 12 470 14 700 17,111 9 772 3,725 4,640 By type of offering 9 Public 73,223 122,006 117,880 11,182 19,271 12,470 14,700 17,111 9,772 3,725 4,640 10 Private placement1 32,100 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. By industry group 11 Nonfinancial 52,707 80,460 60,386 5,737 10,756 5.551 9.271 10,248 6.390 2,560 2,266 12 Financial 20,516 41,546 57,494 5.445 8.515 6,919 5,429 6,863 3,382 1,165 2.374 1, Figures represent gross proceeds of issues maturing in more than one year; they are the 2, Monthly data cover only public offerings. principal amount or number of units calculated by multiplying by the offering price. Figures 3, Monthly data are not available. exclude secondary offerings, employee stock plans, investment companies other than closed- SOURCE. Beginning July 1993, Securities Data Company and the Board of Governors of end, intracorporate transactions, and Yankee bonds. Stock data include ownership securities the Federal Reserve System. issued by limited partnerships. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A3 2 Domestic Financial Statistics • January 1999 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Assets1 Millions of dollars 1998 Mar. Apr. May June July Aug. Sept.' Oct. 1 Sales of own shares2 934,595 1,190,900 128,348 128,828 113,593 122,288 134,801 111,587 118,478 116,150 2 Redemptions of own shares 702,711 918,728 97,248 97,087 84,421 97,899 107,368 118.812 107,049 109,438 3 Nel sales5 231,885 272,172 31,100 31.741 29,172 24,389 27.433 -7,225 11,429 6,712 4 Assets4 2,624,463 3,409,315 3,S43,971 3,909,932 3,882,061 3.986,952 3,957,093 3.479,401 3,625,841 3,804,731 5 Cash5 138,559 174,154 174,058 170,045 171,425 199,135 195,966 194.435 211.253 210.481 6 Other 2,485,904 3.235,161 3,669.913 3,739,887 3,710,636 3,787,817 3,761,127 3,284,967 3,414.588 3,594,249 1. Data include stock, hybrid, and bond mutual funds and exclude money market mutual 4. Market value at end of period, less current liabilities. funds. 5. Includes all U.S. Treasury securities and other short-term debi securities. 2. Excludes reinvestment of net income dividends and capital gains distributions and share SOURCE. Investment Company Institute. Data based on reports of membership, which issue of conversions from one fund to another in the same group. comprises substantially all open-end investment companies registered with the Securities and 3. Excludes sales and redemptions resulting from transfers of shares into or out of money Exchange Commission. Data reflect underwritings of newly formed companies after their market mutual funds within the same fund family. initial offering of securities. 1.48 CORPORATE PROFITS AND THEIR DISTRIBUTION Billions of dollars; quarterly data at seasonally adjusted annual rates 1996 1997 1998 Account 1995 1996 1997 Q4 Ql Q2 Q3 Q4 Ql Q2 Q3 1 Profits with inventory valuation and capital consumption adjustment 672.4 750.4 817.9 762.0 794.3 815.5 840.9 820.8 829.2 820.6 823.9 2 Profits before taxes 635.6 680.2 734.4 685.7 712.4 729.8 758.9 736.4 719.1 723.5 717.0 3 Profits-lax liability 211.0 226.1 246.1 224.2 238.8 241.9 254.2 249.3 219.9 241.6 243.8 4 Profits after taxes 424.6 454.1 488.3 461.5 473.6 487.8 504.7 487.1 479.2 481.8 473.2 205.3 261.9 275.1 273.6 274.1 274.7 275.1 276.4 277.3 278.1 279.0 6 Undistributed profits 219.3 192.3 213.2 187.9 199.5 213.2 229.5 210.6 201.8 203.7 194.3 -22.6 -1.2 6.9 3.0 8.1 10.3 4.8 4.3 25.3 7.8 12.1 8 Capital consumption adjustment 59.4 71.4 76.6 73.3 73.8 75.5 77.2 80.1 84.9 89.4 94.9 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 1996 1997 1998 Account 1994 1995 1996 Q4 Ql 02 Q3 Q4 Ql Q2' ASSETS 1 Accounts receivable, gross2 543.7 607.0 637.1 637.1 648.0 651.6 660.5 663.3 667.2 676.0 201.9 233.0 244.9 244 9 249.4 255.1 254.5 256.8 251.7 251.3 3 Business 274.9 301.6 309.5 309.5 315.2 311.7 3195 318.5 325.9 134.9 4 Real estate 66.9 72.4 82.7 82.7 83.4 84.8 86.4 87.9 R9.6 89.9 5 LESS: Reserves for unearned income 52.9 60.7 55.6 55.6 51.3 57.2 54.6 52.7 52.1 53.2 11 3 12 8 13 1 13 1 12 8 13 3 127 13 0 13 1 11 2 479.5 533.5 568.3 568.3 583.9 581.2 593.1 597.6 601.9 609.6 8 All other 216.8 250.9 290.0 290.0 289.6 306.8 289.1 312.4 329.7 340.1 9 Total assets 696 1 784 4 858 3 858 3 873 4 887.9 882 3 910 0 931 6 9497 LIABILITIES AND CAPITAL 10 Bank loans . ... 14.8 15.3 19.7 19.7 18.4 18.8 20.4 24.1 22.0 22.3 171 6 168 6 177 6 177 6 185 3 193 7 189 6 201 5 211 7 225 9 Debt 41.8 51.1 60.3 60.3 61.0 60.0 61.6 64.7 64.6 60.0 247.4 300.0 332.5 332.5 324.6 345.3 322.8 328.8 338.2 348.7 14 All other liabilities 146.2 163.6 174.7 174.7 189.2 171.4 190.1 189.6 193.1 188.9 74 6 85 9 93 5 93 5 94 9 98 7 97 9 101 3 102 1 103 9 16 Total liabilities and capital «9(U 784.4 858.3 858.3 873.4 887.9 882.3 910.0 931.6 949.7 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 Receivables1 Billions of dollars, amounts outstanding 1998 Type of credit 1995 1996 1997 Apr. May June July Aug. Sept. Seasonally adjusted 1Total 682.4 761.9 809.8 825.3 833.0 831.3 840.6 846.4r SSI.4 1 283.1 307.7 327.7 328.9 330.2 332.5 336.6 339.1' 341.8 3 Real estate 72.4 111.9 121.1 121.9 124.2 120.9 125.2 128.1 128.8 4 326.8 342.4 361.0 374.5 378.6 377.9 378.7 379.2 380.7 Not seasonally adjusted 5Total 689.5 769.7 818.1 825.3 832.2 836.0 835.2 842.6r 847.8 6 Consumer 285.8 310.6 130 9 326.7 329.4 335.4 338.5 140 5' 342.8 7 81.1 86.7 87.0 90.6 89.6 89.9 91.7 95.1 96.2 8 Motor vehicle leases 80.8 92.5 96.8 95.9 95.9 97.0 97.3 96.9 94.9 9 Revolving" 28.5 32.5 38.6 30.4 30.5 29.9 29.6 30.2 297 10 Other3 ... 42 6 33.2 34 4 114 31.5 34 4 15 0 14.7 14.6 Securitized assets4 II 34 8 36.8 44.3 42.8 45.7 49.3 50.2 49.2 51.8 12 Motor vehicle leases 3.5 8.7 10.8 10.4 10.8 10.9 10.8 10.7 13 Revolving n.a. 0.0 0.0 5.3 5.3 5.3 5.3 5.3 53 14 Other 14 7 20 1 19 0 18 1 18 1 18 6 185 182 188 IS Real estate 72.4 111.9 121.1 121.9 124.2 120.9 125.2 128.1 I288 16 One- to four-family n.a. 52.1 59.0 62.4 65.2 62.3 65.9 68.6 68.4 17 Other 10 5 28 9 28 1 28.1 27.5 28 5 28.7 30.1 Securitized real estate assets4 18 One- to four-family n.a. 28.9 33.0 .11.2 30.7 30.9 30.6 30.7 30.2 19 Other 0.4 0.2 0.2 0.2 0.1 0.1 0.1 0.1 20 Business 331.2 147.2 366.1 376.7 378.6 379.7 371.5 374.0 376.2 21 Motor vehicles 66.5 67.1 6.1.5 68.2 69.1 68.4 61.1 62.5 65.5 22 Retail loans 21.8 25.1 25.6 28.3 29.3 29.2 29.2 29.6 30.0 •>1 16 6 110 27 7 29 5 29 5 28 2 21 0 22.0 24.2 24 Leases 8.0 9.0 10.2 10.4 10.4 11.0 10.9 10.9 25 8.0 9.0 10.2 207.8 209.3 212.8 212.8 212.0 210.8 26 Loans 8.0 9.0 10.2 51.2 51.3 52.7 51.6 51.8 47.9 V 80 9.0 10.2 156.7 158.0 160.2 161.2 160.2 162.9 28 Other business receivables 8.0 9.0 10.2 54.0 54.3 53.7 54.5 57.0 58.9 Securilized assets4 29 Motor vehicles 8.0 9.0 10.2 31.6 31.0 29.1 26.1 25.9 24.5 30 Retail loans 8.0 9.0 10.2 1.9 1.9 2.3 2.2 2.1 2.0 31 8.0 9.0 10.2 29.6 29.2 26.7 24.1 23.8 22.5 32 Leases 8.0 9.0 10.2 0.0 0.0 0.0 0.0 0.0 0.0 31 8.0 9.0 10.2 10.3 10.2 10.5 11.5 11.4 34 Loans 8.0 9.0 10.2 4.1 4.0 4.1 5.1 4.9 4.9 35 Leases 8.0 9.0 10.2 6.2 6.2 6.4 6.4 6.4 6.4 36 Other business receivables6 8.0 9.0 10.2 4.7 4.7 5.3 5.4 5.2 5.3 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 I996 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 reclassitication 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, floor 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 I. 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 Financial Statistics • January 1999 1.53 MORTGAGE MARKETS Mortgages on New Homes Millions of dollars except as noted 1998 Apr May June July Aug. Sept. Oct. Terms and yields in primary and secondary markets PRIMARY MARKETS Terms 175.8 182.4 180.1 189.5 195.6 193.7 208.7 191.5 192.7 201.4 134.5 139.2 140.3 147.1 150.2 151.0 160.1 150.4 150.8 155.8 78.6 78.2 80.4 80.4 79.1 81.0 78.7 81.3 80.9 79.8 27.7 27.2 28.2 28.4 28.3 28.3 28.5 28.6 28.7 28.6 5 Fees and charges (percent of loan amount)2 1.21 1.21 1.02 0.87 0.85 0.85 0.90 0.87 0.85 0.86 Yield (percent per year) 6 Contract rate1 7.65 7.56 7.57 7.05 7.05 7.03 6.99 6.95 6.85 6.72 7 Effective rate'- 7.85 111 7.73 7.19 7.18 7.16 7.13 7.09 6.98 6.85 8.05 8.03 7.76 7.20 7.11 7.08 7.05 6.86 6.64 6.86 SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (Section 203)5 8.18 8.19 7.89 7.37 7.07 7.07 7.05 7.03 6.53 7.07 10 GNMA securities6 7.57 7.48 7.26 6.63 6.63 6.54 6.48 6.42 6.05 6.10 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 253,511 287,052 316,678 333,571 343,922 349,249 359,827 366,890 375,665 386,452 12 FHA/VA insured 28,762 30,592 31,925 32,734 32,771 32,896 33,036 32,929 32,903 32,814 13 Conventional 224,749 256,460 284,753 300,837 311,151 316,353 326,791 333,961 342,762 353,638 14 Mortgage transactions purchased (during period) 56,598 68,618 70,465 14,668 17,423 11,916 17,326 14,316 15,681 18,967 Mortgage commitments (during period) 15 Issued7 56,092 65,859 69.965 17,556 10,612 16.921 13,217 17.016 16,282 30,551 16 To sell8 360 130 1,298 0 0 0 419 233 249 393 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period^ 17 Total 107,424 137,755 164,421 189,471 192,603 196,634 202,582 206,856 216,521' 231,458 18 FHA/VA insured 267 220 177 162 158 422 456 489 569' 575 107,157 137,535 164,244 189,309 192,445 196,212 202,126 206,367 215,952' 230,833 Mortgage transactions (during periods 20 Purchases 98,470 125,103 117,401 25,132 23,743 22.394 22,605 21,507 25.366' 20,629 21 Sales 85,877 119.702 114,258 24,479 23,338 21,133 22,263 20,634 24,294 19,472 22 Mortgage commitments contracted (during period)9 118,659 128,995 120,089 24,468 26,100 20,008 23,528 24,694 23,375 25,024 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 die Federal Housing Administration or guaranteed by the Department of Veterans Affairs. seller) to obtain a loan. 7. Does not include standby commitments issued, but includes standby commitments 3. Average effective interest rate on loans closed for purchase of newly built homes, converted. assuming prepayment at the end of ten years. 8. Includes participation loans as well as whole loans. 4. Average contract rate on new commitments for conventional first mortgages; from U.S. 9. Includes conventional and government-underwritten loans. The Federal Home Loan Department of Housing and Urban Development (HUD). Based on transactions on the first Mortgage Corporation's mortgage commitments and mortgage transactions include activity day of the subsequent month. under mortgage securities swap programs, whereas the corresponding data for FNMA 5. Average gross yield on thirty-year, minimum-downpayment first mortgages insured exclude swap activity. by the Federal Housing Administration (FHA) for immediate delivery in the private secondary market. Based on transactions on first day of subsequent month. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Real Estate A35 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period Type of holder and property Q2 Q3 Q4 Ql Q2P All holders 433,545 4,604,609 4,930,487 5,062,766 5,180,917 5,279,333 5,380,907 5,505,783 By type of property 2 One- to four-family residences 3,355,868 3,530,400 3.761,560 3,860,763 3.956,815 4,029.268 4,102,830 4,195,738 3 Mullifamily residences 271.823 281,788 300,665 305,963 308.418 314.590 320,237 326,527 4 Nanfarm, nonresidential 682,883 707.861 781,129 807,361 825,923 845.058 866,414 890,538 5 Farm 82,971 84,561 87,134 88,680 89,760 90,417 91,425 92,980 By type of holder 6 Major financial institutions 1,819,806 1,894,420 1.979,114 2,033,599 2,068,002 2,086,721 2,119,279 2,124.259 7 Commercial banks' 1,012,711 1,090,189 1,145,389 1,196,461 1,227,131 1,244,108 1,270,032 1,280,732 8 One- to four-family 615,861 669,434 698,508 733,694 752,323 762,531 779.927 784,929 9 Mullifamily 39,346 43,837 46,675 49,116 49,166 50,642 51,790 52,175 10 Nonfarm. nonresidential 334,953 353.088 375,322 387,588 398,841 403,957 410,859 415,311 11 Farm 22,551 23,830 24,883 26,063 26,801 26,978 27,456 28,316 12 Savings institutions 596,191 596,763 628,335 629,062 631,444 631.822 637,012 629,882 13 One- to four-family 477,626 482.353 513,712 516,521 519,564 520.672 527,036 520.276 14 Multifamily 64,343 61,987 61,570 60,070 60,348 59.543 59,074 58,704 15 Nonfarm, nonresidential 53,933 52,135 52,723 52,132 51,187 51,252 50,532 50,519 16 Farm 289 288 331 338 346 354 369 383 17 Life insurance companies 210,904 207,468 205,390 208,077 209,426 210,792 212,235 213.645 18 One- to four-family 7,018 7.316 6,772 6,842 7,080 7,186 7,321 7.488 19 Multifamily 23,902 23,435 23.197 23,499 23,615 23,755 23,902 24,038 20 Nonfarm, nonresidential 170,421 167,095 165,399 167,548 168,374 169,377 170,423 171,393 21 Farm 9.563 9,622 10,022 10,188 10,358 10,473 10.589 10.726 22 Federal and related agencies 315,580 306,774 300.935 292.966 291,410 292,581 293,499 294,547 23 Governmenl National Mortgage Association 6 7 7 8 One- to four-family . 6 2 7 7 8 Multifamily 0 0 0 0 0 0 0 0 Fanners Home Administration 41,781 41,791 41,596 41.400 41,332 41,195 40,972 40,921 One- to four-family 18,098 17,705 17,303 17,239 17,458 17,253 17,160 17,059 Multifamily 11,319 11,617 11,685 11,706 11,713 11,720 11,714 11,722 Nonfarm. nonresidential 5,670 6,248 6,841 7,135 7,246 7,370 7,369 7,497 Farm 6,694 6,221 5,768 5,321 4,916 4.852 4,729 4,644 Federal Housing and Veterans' Administrations 10,964 9,809 6,244 4,200 3,462 3.821 3.694 3,631 One- to four-family 4,753 5.180 3,524 2,299 1,437 1.767 1,641 1.610 Multifamily 6,211 4,629 2,719 1,900 2,025 2.054 2,053 2,021 Resolution Trust Corporation 10.428 1,864 0 0 0 0 0 0 One- to four-family 5,200 691 0 0 0 0 0 0 Multifamily 2,859 647 0 0 0 0 0 0 Nonfarm. nonresidential 2,369 525 0 0 0 0 0 0 Farm 0 0 0 0 0 0 0 0 Federal Deposit Insurance Corporation 7,821 4,303 2,431 1,816 1,476 724 786 564 One- lo four-family 1,049 492 365 272 221 109 118 85 Mullifamily 1,595 428 413 309 251 123 134 96 Nonfarm, nonresidential 5,177 3,383 1,653 1,235 1,004 492 534 384 Farm 0 0 0 0 0 0 0 0 Federal National Mortgage Association 174,312 176,824 174,556 170,386 168,458 167,722 166,670 167,202 One- to four-family 158,766 161,665 160,751 157,729 156,363 156,245 155,876 156.769 Multifamily 15,546 15,159 13,805 12,657 12,095 11,477 10,794 10,433 Federal Land Banks 28,555 28,428 29,602 29,963 30,346 30,657 31,005 31,352 One- to four-family 1,671 1,673 1,742 1.763 1,786 1.804 1,824 1,845 Farm 26,885 26,755 27,860 28,200 28,560 28.853 29,181 29,507 Federal Home Loan Mortgage Corporation 41,712 43,753 46,504 45.194 46.329 48.454 50,364 50,869 One- to four-family 38,882 39,901 41,758 40,092 40,953 42,629 44,440 44,597 Multifamily 2,830 3,852 4,746 5,102 5,376 5,825 5,924 6.272 1,730,004 1,863,210 2,064,882 2,145,995 2,202,549 2,272,999 2,330,674 2,442,603 450,934 472,283 506,340 520,938 529,867 536,810 533,011 537,586 55 One- to four-family 441,198 461,438 494,158 507,618 516,217 523,156 519,152 523.243 56 Multifamily 9.736 10,845 12.182 13.320 13,650 13.654 13,859 14,343 57 Federal Home Loan Mortgage Corporation 490,851 515,051 554.260 567,187 569,920 579,385 583.144 609,791 58 One- to four-family 487,725 512,238 551,513 564,445 567,340 576,846 580.715 607.469 59 Multifamily 3,126 2,813 2,747 2,742 2,580 2,539 2,429 2,322 60 Federal National Mortgage Association 530,343 582,959 650,780 673,931 690,919 709,582 730,832 761,359 61 One- to four-family 520,763 569,724 633,210 654,826 670,677 687,981 708,125 737,631 62 Multifamily 9.580 13,235 17,570 19,105 20,242 21.601 22,707 23,728 63 Farmers Home Administration 19 11 3 2 2 2 2 2 6 6 7 6 6 6 6 8 9 0 4 5 6 7 Pri O O M N F v a a n o n u r t e n e m l e - t - f i a f m l t r a o o o m m r f . f i t o l o g y n u u a o r r - g - n f f e a r a e m m c s o i i i d l n l y y e d n ui ti t a s l 2 2 0 5 8 7 , . 5 8 0 5 3 0 9 7 0 7 2 2 9 2 2 7 , , 9 8 0 0 0 4 5 6 0 2 3 6 5 1 3 , , 9 4 0 9 0 0 0 3 0 9 2 3 7 8 9 3 , , 4 9 5 3 0 0 0 0 7 4 2 1 9 1 9 , , 8 4 4 0 1 0 0 0 2 0 4 3 4 1 7 8 , , 2 00 1 0 0 0 2 0 9 4 3 8 3 3 6 , , 6 8 8 2 0 0 0 2 5 4 5 36 3 4 3 , , 3 8 1 6 0 0 0 6 5 2 71 Multifamily 11,744 15,584 21,967 24,355 25,655 29.264 33,477 38,144 72 Nonfarm. nonresidential 37,613 49,522 69,633 80.132 86,786 99.955 113,384 131,405 Farm 0 0 0 0 0 0 0 0 73 Individuals and others7 528,155 540,206 585,556 590,206 618,955 627,033 637,4.55 644,375 74 One- to four-family 368,749 372,786 376,341 377,966 405,990 413.082 422,663 428,413 75 Multifamily 69,686 73.719 81.389 82,081 81,702 82,392 82,379 82.529 76 Nonfarm. nonresidential . . 72,738 75,859 109.558 111,591 112,486 112.655 113,312 114,031 77 Farm 16,983 17.841 18.268 18,567 18,777 18,904 19,100 19.402 1. Multifamily debt refers to loans on structures of five or more units. 6. Includes securitized home equity loans. 2. Includes loans held by nondeposit trust companies but not loans held by bank trust 7. Other holders include mortgage companies, real estate investment trusts, state and local departments. credit agencies, state and local retirement funds, noninsured pension funds, credit unions, and 3. Includes savings banks and savings and loan associations. finance companies. 4. FmHA-guaranteed securities sold to the Federal Financing Bank were reallocated from SOURCE. Based on data from various institutional and government sources. Separation of FmHA mortgage pools to FmHA mortgage holdings in 1986:Q4 because of accounting nonfarm mortgage debt by type of property, if not reported directly, and interpolations and changes by ihe 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 Financial Statistics • January 1999 1.55 CONSUMER CREDIT1 Millions of dollars, amounts outstanding, end of period 1998 Holder and type of credit 1995 1996 1997 Apr. May June July Aug. Sept. Seasonally adjusted 1 Total 1,095,711 1,181,913 1,233,099 1,251,864' 1,254,302' 1,263,683' 1,269,266' 1,273,725' 1.282.08S 364,209 392,321 413,369 421,213' 422,624' 425,510' 427,749' 431,499' 433,354 3 Revolving 443,183 499,486 531,140 541,834' 541,184' 545,339' 543.140' 545.258' 548,360 4 Other2 288.319 290,105 288,590 288,817' 290,495' 292,834' 298,377' 296.969' 300,374 Not seasonally adjusted 5 Total 1,122,828 1,211,590 1,264,103 1,241,238' 1,243,178' 1,256,897' 1,262,382' 1,273,941' 1,285,123 By major holder 6 Commercial banks 501,963 526.769 512,563 500.207 497.389 491,509 491,777 498,775 499,958 7 Finance companies 152,123 152.391 160.022 154,328 153.556 154.275 156,366 160,151 160,457 131,939 144,148 152.362 151,056' 152.218' 152,400' 153,735' 154,146' 155,666 9 Savings institutions 40,106 44.711 47,172 47,500 47,915 48.329 48,744 49,158 49,571 10 Nonfinancial business1 85,061 77,745 78,927 65,093' 65,227' 65,265' 65,481' 66,011' 65,601 11 Pools of securitized assets 211,636 265,826 313,057 323,054 326,873 345,119 346,279 345,700 353,870 By major type of credit5 12 Automobile 367,069 395.609 416,962 415.975' 418,244' 425,227' 429.350' 434,178' 437,340 151,437 157,047 155,254 151.278 151.677 150.877 153,203 155.508 155,970 14 Finance companies 81,073 86,690 87,015 90,564 89.569 89,948 91,741 95,257 96,183 15 Pools of securitized assets4 44,635 51,719 64,950 63,737 65,988 71,615 72,470 70,766 72,477 16 Revolving 464,134 522,860 555,858 535,602' 535,576' 539,572' 536,882' 542,095' 545,704 17 Commercial banks 210,298 228,615 219,826 209,171 207,318 200,901 197,646 200,424 198,946 18 Finance companies 28,460 32,493 38,608 30,398 30,495 29,893 29,605 30,155 29,691 19 Nonfinancial business^ 53,525 44.901 44,966 33.487 33,412 33,544 33,807 34,009 33,743 20 Pools of securitized assets4 147,934 188,712 221,465 233,668 235,347 245,635 246,031 247,422 253,366 21 Other 291,625 293,121 291,283 289,661' 289.358' 292.098' 296,150' 297,668' 302,079 140,228 141,107 137,483 139,758 138.394 139.731 140,928 142,843 145,042 23 Finance companies 42,590 33,208 34,399 33,366 33,492 34,434 35.020 34,739 34,583 24 Nonfinancial business3 31,536 32,844 33,961 31,606' 31,815' 31,721' 31,674' 32,002' 31,858 25 Pools of securitized assets 19,067 25,395 26,642 25,649 25,538 27,869 27,778 27,512 28,027 1. The Board's scries 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 Percenl per year except as noted 1998 Item 1995 1996 1997 Mar. Apr. May June July Aug. Sept. INTEREST RATES Commercial banks1 9.57 9.05 9.02 n.a. n.a. 8.69 n.a. n.a. 8.71 n.a. 2 24-month personal 13.94 13.54 13.90 n.a. n.a. 13.76 n.a. n.a. 13.45 n.a. Credit card plan 3 All accounts 15.90 15.63 15.77 n.a. n.a. 15.67 n.a. n.a. 15.83 n.a. 4 Accounts assessed interest 15.64 15.50 15.57 n.a. n.a. 15.62 n.a. n.a. 15.85 n.a. Auto finance companies 5 New car 11.19 9.84 7.12 5.94 6.20 6.07 6.02 6.25 6.00 5.92 6 Used car 14.48 13.53 13.27 12.79 12.76 12.73 12.63 12.51 12.68 12.65 OTHER TERMS1 Maturity (months) 1 New car 54.1 51.6 54.1 51.5 50.7 50.8 50.9 51.7 53.0 53.1 8 Used car 52 2 51 4 510 52 6 52 9 52 9 54 0 54 1 54 1 54 2 Loan-to-value ratio 9 New car 92 91 92 92 91 93 91 92 93 93 10 Used car 99 100 99 97 98 99 100 100 101 101 Amount financed (dollars) 16.210 16.987 18.077 18,932 18,922 18,793 18,878 19,084 19,068 19,028 12 Used car 11,590 12,182 12.281 12,431 12.716 12,607 12,698 12,733 12,407 12,731 I. 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 Transaction category or sector 1993 1996 Ql Q2 Q3 Q4 Ql Q2' Q3 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancia! sectors. 588.0 571.5' 700.4' 726.7' 769.6r 675.9r 617.7' 829.6 955.1r 922.1' 938.0 930.6 By sector and instrument 2 Federal government 256.1 155.9 144.4 145.0 23.1 64.9 -43.5 30.3 40.8 -30.0' -70.9 -136.5 3 Treasury securities 248.3 155.7 142.9 146.6 23.2 66.3 -43.8 31.2 39.0 -27.6' -69.4 -136.1 4 Budget agency securities and mortgages 7.8 .2 1.5 -1.6 -.1 -1.4 .2 -.9 1.7 -2.4 -1.4 -.4 5 Nonfederai 415.6' 555.9' 581.7' 746.4' 611.0' 661.2' 799.2' 914.3' 952.1' 1,008.9 1,067.0 By instrument 6 Commercial paper 10.0 21.4 18.1 -.9 13.7 7.2 20.3 14.5 12.8 53.9 6.6 88.4 7 Municipal securities and loans 74.8 -35.9 -48.2 2.6 71.4 34.1 59.6 88.9 103.2 116.7 100.1 84.1 8 Corporate bonds 75.2 23.3 73.3 72.5 90.7 79.4 86.1 122.9 74.4 157.2 160.8 88.0 9 Bank loans n.e.c 6.4 75.2 102.3 66.2 107.3' 140.7 118.1 31.6 138.7' 55.8' 157.3 142.6 10 Other loans and advances -18.9 34.0 67.2 33.8 68.7' 34.2 20.8' 78.0' 141.6' 83.2' 37.9 78.0 11 Mortgages 123.7 172.7' 204.3' 318.8' 342.1' 253.0' 296.7' 413.01 405.8 428.1' 481.2 497.8 12 Home 156.2 178.2' 173.9' 265.3' 268.3' 218.2' 211.4' 334.2' 309.3 324.1' 360.5 365.8 13 Multifamily residential -6.8 -1.3' 8.0' 12.7' 11.5' 4.1' 12.9' 6.6' 22.3 19.9 22.6 22.9 14 Commercial -26.7 -6.4' 20.8' 38.3' 59.1' 28.6' 68.4' 67.9r 71.6 80.0' 91.9 103.9 15 Farm 1.0 2.2 1.6 2.6 3.3 2.1 4.1 4.3 2.6 4.0 6.2 5.3 16 Consumer credit 60.7 124.9 138.9 88.8 52.5 62.5 59.5 50.3 37.8 57.3' 65.1 88.2 By borrowing sector 17 Household 207.8 311.0' 343.7' 370.3' 355.6' 334.9' 329.7' 362.9' 394.9' 437.2' 469.8 472.7 18 Nonfinancial business 57.9 150.9' 263.7' 218.2' 334.8' 259.2' 289.1' 363.8' 427.1' 420.6' 460.2 521.6 19 Corporate 52.1 143.3' 236.8' 171.4' 265.0' 206.4' 214.5' 291.5' 347.5' 331.4' 354.6 404.7 20 Nonfarm noncorporate 3.2 3.3 23.9 42.0' 63.5 47.8 68.6 66.8' 70.6' 81.4' 98.2 110.2 21 Farm 2.6 4.4 2.9 4.8 6.4 4.9 6.0 5.5 9.0 7.9 7.4 6.7 22 Slate and local government 66.2 -46.2 -51.5 -6.8 56.1 16.9 42.5 72.6 92.3 94.3 78.9 72.7 23 Foreign net borrowing in United States 69.8 -14.0 71.1 76.9 56.9 31.2 61.7 92.5 42.3 68.5' 86.6 -27.0 24 Commercial paper -9.6 -26.1 13.5 11.3 3.7 15.5 10.4 -11.6 .7 56.0 -24.8 6.9 25 Bonds 82.9 12.2 49.7 55.8 46.7 15.5 38.7 100.3 32.4 14.3 107.5 -34.8 26 Bank loans n.e.c .7 1.4 8.5 9.1 8.5 -.7 11.5 7.3 15.7 5.2' 8.4 3.5 27 Other loans and advances -4.2 -1.5 -.5 .8 -2.0 .9 1.2 -3.5 -6.5 -7.0 -4.4 -2.6 28 Total domestic plus foreign 657.8 557.5' 771.5' 803.6r 826.5' 707. lr 679.3' 922.1' 997.4r 990.6' 1,024.7 903.5 Financial sectors 29 Total net borrowing by financial sectors 294.4 468.4 456.4 556.2 644.3' 336.5 657.1r 595.5' 839.8' 1,012.9 By instrument 30 Federal government-related 165.3 287.5 204.1 231.5 212.8 286.2 161.0 298.1 227.3 413.4 561.6 31 Government-sponsored enterprise securitii 80.6 176.9 105.9 90.4 98.4 198.1 46.4 157.9 142.5 166.4 294.0 32 Mortgage pool securities 84.7 115.4 98.2 141.1 114.4 114.6 88.1 114.6 140.3 84.8 247.0 267.5 33 Loans from U.S. government .0 -4.8 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 34 Private 129.1 180.9 252.3 324 7 431.5' 230.9 370.9' 434.5' 612.5' 599.5 431.2 35 Open market papier . . -5.5 40.5 42.7 92.2 166.7 176.6 77.0 168.8 244 2 237.4 134.8 141.0 36 Corporate bonds 123.1 121.8 196.7 179.7 207.9' 61.7 229.4' 194.8' 345.8 315.5' 373.5 158.8 37 Bank loans n.e.c -14.4 -13.7 3.9 16.9 13.6 6.5 -6.0 23.2 30.7 18.9 7.2 41.1 38 Other loans and advances 22.4 22.6 3.4 27.9 35.6 -20.1 63.0 37.5 61.7 32.7 76.0 82.3 39 Mortgages 3.6 9.8 5.6 7.9 7.8 6.2 7.5 10.1 7.3 8.0 8.0 8.0 By borrowing sector 40 Commercial banking 13.4 20.1 22.5 13.0 46.1 14.4 76.4 32.5 61.0 83.5 80.0 78.2 41 Savings institutions 11.3 12.8 2.6 25.5 19.7 -16.8 31.9 22.3 41.7 10.6 31.2 63.7 42 Credit unions .2 .2 .1 .1 -.2 .2 .2 .3 .5 1.0 43 Life insurance companies .2 .3 -A 1.1 T .8 .1 .2 -.3 .0 -.6 1.6 44 Government-sponsored enterprises 80.6 172.1 105.9 90.4 98^4 -8.9 198.1 46.4 157.9 142.5 166.4 294.0 45 Federally related mortgage pools 84.7 115.4 98.2 141.1 114.4 114.6 88.1 114.6 140.3 84.8 247.0 267.5 46 Issuers of asset-backed securities (ABSs) . 83.6 72.9 141.1 153.6 204.4' 85.8 120.7' 226.2' 385.1' 254.4' 367.2 272.4 47 Finance companies -1.4 48.7 50.2 45.9 48.7 5.6 120.5 8.9 59.6 80.1 101.8 -13.6 48 Mortgage companies .0 -11.5 .4 12.4 -1.3 -.7 -12.2 3.6 4.2 5.2 -5.5 3.0 49 Real estate investment trusts (REITs) 3.4 13.7 5.7 11.0 24.8 15.1 19.8 32.0 32.1 36.3 33.9 27.4 50 Brokers and dealers 12.0 .5 -5.0 -2.0 8.1 -2.9 34.9 -6.9 7.0 -1.0 20.0 16.5 51 Funding corporations 6.3 23.1 34.9 64.1 80.7 129.7 -21.5 115.4 99.2 142.8 -28.6 -19.1 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Financial Statistics • January 1999 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS'—Continued Transaction category or sector 1996 Ql Q2 Q3 Q4 Ql Q2' Q3 52 Total net borrowing, all sectors 952.2 l,025.9r l,227.8r 1,359.8' l,470.7r 1,043.7' 1,336.4' l,517.6r 1,985.3' l,830.3r 2,037.6 1,896.3 53 Open market paper -5.1 35.7 74.3 102.6 184.1 199.3 107.7 171.7 257.7 347.3 116.6 236.2 54 U.S. government securities 421.4 448.1 348.5 376.5 235.9 170.6 242.6 191.3 338.9 197.3' 342.5 425.1 55 Municipal securities 74.8 -35.9 -48.2 2.6 71.4 34.1 59.6 88.9 103.2 116.7 100.1 84.1 56 Corporate and foreign bonds 281.2 157.3 319.6 308.0 345.4' 156.6 354.2' 418.1' 452.7' 487 0' 641.8 212.0 57 Bank loans n.e.c -7.2 62.9 114.7 92.1 129.3' 146.5 123.6 62.2 185.1' 79.9' 172.9 187.2 58 Other loans and advances -.8 50.3 70.2 62.5 102.2' 15.0 85.0' 112.01 196.8' 108.9' 109.4 157.6 59 Mortgages 127.3 182.5' 209.9' 326.8' 149.9' 259.2' 304.2' 423.1' 413.1 436.1' 489.2 505.8 60 Consumer credit 60.7 124.9 138.9 88.8 52.5 62.5 59.5 50.3 37.8 57.3' 65.1 Funds raised through mutual funds and corporate equities 61 Total net issues 429.7 125.2 143.9 234.2' 183.3' 171.7' 175.0' 240.8' 145.9' 209.4' 260.3 62 Corporate equities 137.7 24.6 -3.5 -3.4' -"81.8 -77.9' -75.1' -59.1' -115.1' -112.0' -123.4 -266.7 63 Nonfinancial corporations 21.3 -44.9 -58.3 -64.2 -114.4' -90.4 -100.0 -124.0 -143.3' -139.2' -128.7 -221.8 64 Foreign shares purchased by U.S. resident! 63.4 48.1 50.4 60.0 41.3 46.6 54.4 64.3 -.3 13.6 4.0 -33.1 65 Financial corporations 53.0 21.4 4.4 .8' -8.6' -34.1' -29.4' .5' 28.5' 13.6' 1.3 66 Mutual fund shares 292.0 100.6 147.4 237.6 265.1 249.6 250.1 299.9 261.0 321.4 383.7 1. Data in this table also appear in the Board's Z. 1 (780) quarterly statistical release, tables F.2 through F.4. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A39 1.58 SUMMARY OF FINANCIAL TRANSACTIONS' Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1997 1998' Transaction category or sector 1993 1994 1995 1996 1997 Ql Q2 Q3 Q4 Ql Q2 NET LENDING IN CREDIT MARKETS2 1 Total net lending in credit markets 952.2 1,227.8' 1,359.8' 1,470.7' 1,043.7' 1,336.4' 1,517.6' 1,985.3' 1,830.3 2,037.6 2 Domestic nonfederaJ nonfinancial sectors 41.6 238.0' -W7.W -10.7' -108.2' -253.6' -59.8' -160.3' 40.7' -232.0 433.9 3 Household 1.0 274.7' -11.5' -11.4' -125.4' -285.4' -75.5' -153.7' 12.9' -261.4 321.6 4 Nonfinancial corporate business 9.1 17.7 -8.8 20.0' 14.8' 58.8' -28.7' 31.7 -2.6' 33.8 -27.8 5 Nonfarm noncorporate business -1.1 .6 4.7 4.4 2.7 2.5 2.7 2.8 2.9 3.0 3.2 6 State and local governments 32.6 -55.0 -91.4 -23.7 -.3 -29.5 41.8 -41.0 27.5 -7.4 136.9 7 Federal government -18.4 -27.5 — 2 -7.7 4.9 1.7 5.7 3.3 9.0 15.5 12.8 8 Rest of the world 129.3 132.3 273.9 414.7 312.5' 330.6 308.6' 402.9' 208.01 237.4 317.5 9 Financial sectors 799.7 683.0 1,061.1' 963.5' 1,261.5' 964.9' 1,081.8' 1,271.7' 1,727.7' 1,809.4 1,273.4 10 Monetary authority 36.2 31.5 12.7 12.3 38.3 34.4 42.9 22.9 52.9 27.4 7.7 11 Commercial banking 142.2 163.4 265.9 187.5 324.3' 3)6.0 290.0 226.2 464.9' 292.9 136.1 12 U.S.-chartered banks 149.6 148.1 186.5 119.6 274.9 206.1 286.7 220.7 386.2 260.5 130.5 13 Foreign banking offices in United States .. -9.8 11.2 75.4 63.3 40.2 101.7 -3.6 4.6 58.2 11.6 18.1 14 Bank holding companies .0 .9 -.3 3.9 5.4 2.2 5.1 -5.0 19.4 15.3 -17.6 15 Banks in U.S.-affiliated areas 2.4 3.3 4.2 .7 3.7' 6.1 1.8 5.8 1.1' 5.5 5.1 16 Savings institutions -23.3 6.7 -7.6 19.9 -4.7 -5.3 23.8 -35.3 -2.0 10.1 -11.7 17 Credit unions 21.7 28.1 16.2 25.5 16.8 20.5 25.2 13.6 7.7 16.5 22.7 18 Bank personal trusts and estates 9.5 7.1 -8.3 -7.7 7.6 3.4 10.7 7.3 8.8 2.4 3.1 19 Life insurance companies 100.9 66.7 99.2 72.5 101.0 88.3 174.4 106.0 35.3 102.9 67.2 20 Oiher insurance companies 27.7 24.9 21.5 22.5 25.2 6.0 28.0 32.0 34.7 23.4 -1.5 21 Private pension funds 49.5 45.5 61.3 48.3 67.6 55.0 58.5 66.2 90.7 72.6 141.8 22 State and local government retirement funds .... 22.7 22.3 27.5 45.9 36.6 23.2 34.6 79.1 9.5 81.7 60.6 23 Money market mutual funds 20.4 30.0 86.5 88.8 87.5 58.2 26.1 121.5 144.2 172.0 200.1 24 Mutual funds 159.5 -7.1 52.5 48.9 80.9 63.9 90.0 108.0 61.8 143.6 152.6 25 Closed-end funds 20.0 -3.7 10.5 4.7' -3.4' -3.4' -3.4' -3.4' -3.4' -2.4 -2.4 26 Government-sponsored enterprises 87.8 117.8 84.7 92.0 95.0 44.9 119.9 55.8 159.2 166.0 143.4 27 Federally related mortgage pools 84.7 115.4 98.2 141.1 114.4 114.6 88.1 114.6 140.3 84.8 247.0 28 Asset-backed securities issuers (ABSs) 81.0 65.8 119.3 123.4 166.0' 62.3 105.9' 163.7' 332.2 195.3 336.1 29 Finance companies -20.9 48.3 49.9 18.4 21.9 39.8 .9 68.3 -21.3' 28.7 27.1 30 Mortgage companies .0 -24.0 -3.4 8.2 16.4 -1.3 -24.4 82.9 8.3 10.4 -11.0 31 Real estate investment trusts (REITs) .6 4.7 2.2 2.0 -2.0 -2.1 -2.1 -2.1 -1.7 -2.0 -2.0 32 Brokers and dealers 14.8 -44.2 90.1 -15.7 13.7 -14.5 -11.7 15.8 65.3 250.4 -188.6 33 Funding corporations -35.3 -16.2 -17.8' 25.2' 58.6' 60.9' 4.7' 28.7' 140.2' 132.6 -54.8 RELATION OF LIABILITIES TO FINANCIAL ASSETS 34 Net flows through credit markets 952.2 l,025.9r 1,227.8' 1,359.8' 1,470.7' 1,043.7' 1,336.4' 1,517.6' 1,985.3' 1,830.3 2,037.6 Other financial sources 35 Official foreign exchange .8 -5.8 8.8 -6.3 .7 -17.6 .4 2.4 17.5 1.0 8.1 36 Special drawing rights certificates .0 .0 2.2 -.5 -.5 -2.1 .0 .0 .0 .0 .0 37 Treasury currency .4 .7 .6 .1 .0 .4 .2 1.3 -1.9 .3 .2 38 Foreign deposits -18.5 52.9 35.3 85.9 107.4 186.7 23.9 116.1 103.0 -45.3 89.0 39 Net interbank transactions 50.5 89.8 9.9 -51.6 -19.4' -78.4 -57.0 -21.7' 79.6' -107.1 23.3 40 Checkable deposits and currency 117.3 -9.7 -12.7 15.8 41.5 81.8 50.6 -38.4 71.9 65.6 109.3 41 Small time and savings deposits -70.3 -39.9 96.6 97.2 97.1 151.5 34.0 47.0 155.9' 154.9 36.2 42 Large time deposits -23.5 19.6 65.6 114.0 122.5 56.3 174.7 188.4 70.7' 186.2 -16.5 43 Money market fund shares 20.2 43.3 142.3 145.8 157.6 157.6 98.9 226.2 147.8 248.0 186.4 44 Security repurchase agreements 71.3 78.2 110.4 40.0 115.2 32.7 218.9 111.2 98.1 242.8 -45.4 45 Corporate equities 137.7 24.6 -3.5 -3.4' -81.8' -77.9' -75.1' -59.1' -115.1' -112.0 -123.4 46 Mutual fund shares 292.0 100.6 147.4 237.6 265.1 249.6 250.1 299.9 261.0 321.4 383.7 47 Trade payables 52.2 94.0 101.5' 76.9' 9Z.C? 59.9' 48.8' 130.0' 153.2' 90.6 4.7 48 Security credit 61.4 -.1 26.7 52.4 110.1 110.4 127.5 90.6 111.9 168.9 -110.3 49 Life insurance reserves 36.0 34.5 44.9 43.6 52.9 49.8 62.5 62.8 36.6 47.3 36.8 50 Pension fund reserves 255.7' 246.2 233.2 230.8 296.8 256.6 318.9 326.9 284.8 253.8 280.6 51 Taxes payable 11.4 2.6 6.2 16.2 14.6' 21.7 14.1' 30.2' -7.6' 9.4 -6.7 52 Investment in bank personal trusts .9 17.8 4.0 -8.6 75.0 68.8 71.8 80.8 78.4 50.3 57.5 53 Noncorporate proprietors" equity 25.5 55.6 71.3' 49.3' 40.6' 49.6' 47.5' 48.2' 17.2' 36.5 9.9 54 Miscellaneous 340.0 252.4' 457.3' 451.4' 593.4' 787.2' 532.0' 636.7' 417.7' 1,220.1 422.0 55 Total financial sources 2,313.0' 2,083.2' 2,776.0' 2,946.5' 3,557.6' 3,188.3' 3,279.2' 3,797.0' 3,966.0' 4,663.0 3383.0 Liabilities not identified as assets ( —) 56 Treasury currency -.2 -.2 -.5 -.9 -.6 -.3 -.5 .7 -2.4 -.2 -.3 57 Foreign deposits -5.7 43.0 25.1 59.4 107.4 176.9 10.7' 93.8' 148.3 -94.7 145.1 58 Net interbank liabilities 4.2 -2.7 -3.1 -3.3 -19.9' 30.3 -26.7 -50.0 -33.0' 30.7 11.4 59 Security repurchase agreements 46.4 69.4 22.9 -.7 59.5' -107.3 185.3 -10.6' 170.5' 99.3 -107 3 60 Taxes payable 15.8 16.6 21.1 20.4 17.2' 19.3 29.3' 15.3' 5.2' 6.5 9 61 Miscellaneous -170.8 -150.0' -213.5' -82.0' -254.9' 26.9' -414.3' -94.8' -537.4' 92.5 -108.2 Floats not included in assets (-) 62 Federal government checkable deposits -1.5 -4.8 -6.0 .5 -2.7 -4.6 -8.3 10.0 -7.9 7.5 -41.7 63 Other checkable deposits -1.3 -2.8 -3.8 -4.0 -3.9 -3.3 -4.3 -3.0 -5.0 -4.0 -3.0 64 Trade credit -4.0 1.5 -11.7' -27.01 15.1' -8.7' -58.7' 48.C 79.7' 12.6 -97.1 65 Total identified to sectors as assets 2,430.0r 2,113.3' 2,945.3' 2,984.2' 3,640.4' 3,059.2' 3,566.7' 3,787.6' 4,148.1' 4,512.9 3,583.2 1. Data in this table also appear in the Board's Z.I (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. F.J 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 Financial Statistics • January 1999 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1 Billions of dollars, end of period 1998 Transaction category or sector 1994 Ql Q2 Q3 Q4 Q3 Nonnnancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors .... 13,013.7' 13,714.1' 14,440.8' 15,208.8' 14,608.2' 14,727.5' 14,931.5' 15,208.8' 15,440.4' 15,636.0' 15,865.1 By set lor and instrument 2 Federal government 3,492.3 3,636.7 3,781.8 3,804.9 3,829.8 3,760.6 3 771.2 3,804.9 3.830.8' 3,749.0 3,720.2 3 Treasury securities 3.465.6 3,608.5 3.755.1 3,778.3 3,803.5 3,734.3 3,745.1 3.778.3 3,804.8' 3.723.4 3,694.7 4 Budget agency securities and mortgages 26.7 28.2 26.6 26.5 26.3 26.3 26.1 26.5 25.9 25.6 25.5 5 Nonfederal 10,077.3' 10,659.0' 11,403.9' 10,778.4' 10,966.9' 11,160.2 11,403.9' 11,609.7' 11,887.1' 12,145.0 By instrument Commercial paper 139.2 157.4 156.4 168.6 168.7 179.3 176.6 168.6 193.1 202.5 216.9 Municipal securities and loans 1,341.7 1,293.5 1,296.0 1.367.5 1,305.1 1,326.8 1,340.2 1,367.5 1,397.1 1,429.3' 1,440.0 Corporate bonds 1.253.0 1,326.3 1,398.8 1,489.5 1,418.7 1,440.2 1,470.9 1,489.5 1,528.8 1,569.0 1,591.0 Bank loans n.e.c 759.9 862.1 928.3 1,035.6' 964.5 1,000.2 1,000.1 1.035.6' 1,051.6' 1.097.01 1,123.9 Other loans and advances 669.6 736.9 770.6 839.3' 784.4 788.5r 802.9' 839.3' 865.6' 873.8' 887.6 Mortgages 4,374.1' 4,578.4' 4,897.2' 5,239.3 4,950.6' 5,026.8' 5.142.7 5,239.3 5,337.4' 5,458.6' 5,596.9 Home 3,355.5' 3 529 4' 3 761 ff 4.029.3 3,805.7' 3,860.6' 3,956.8 4.029.3 4,101.3' 4,192.4' 4,297.6 Multifamily residential 265.6 273.6' 289.9' 301.4 290.9' 294.2 295.8 301.4 306.4 312.0 317.7 Commercial 670.0' 690.8' 759.1' 818.3 766.3' 783.4' 800.3' 818.3 838.3 861.2' 887.2 Farm 83.0 84.6 87.1 90.4 87.7 88.7 89.8 90.4 91.4 93.0 94.3 Consumer credit 983.9 1.122.8 1,211.6 1.264.1 1.186.4 1,205.0 1,226.7 1.264.1 1,236.1' 1,256.9' 1,288.7 By borrowing sector 17 Household 4,452.5' 4,801.1' 5,142.7' 5,500.9' 5.177.1' 5.268.6r 5 379.0' 5,500.9' 5,558.5' 5,683.7' 5,823.5 18 Nonnnancial business 3,947.3' 4,206.0' 4,452.9' 4,783.5' 4.532.3' 4.612.2' 4,685.7' 4,783.5' 4.906.9' 5,032.5' 5,142.7 19 Corporate 2,683.2' 2,915.1' 3,115.3' 3,376.1' 3.184.3' 3.241.9' 3,297.4' 3,376.1' 3,479.9' 3,575.5' 3,656.7 20 Nonfarm noncorporate 1,121.8 1,145.8 1,187.7' 1,251.2' 1.199.7' 1,216.8' 1,232.9' 1.251.2' 1,271.6' 1,296.1 1,323.0 21 Farm 142.2 145.1 149.9 156.3 148.3 153.4 155.4 156.3 155.4 160.9 163.0 22 State and local government 1.121.7 1,070.2 1,063.4 1,119.5 1.069.0 1,086.1 1,095.5 1,119.5 1,144.3 1,170.8' 1,178.8 23 Foreign credit market debt held in United States 370.8 441.9 518.8 569.6 524.3 539.2 557.7 569.6 584.1 606.6' 600.3 24 Commercial paper 42.7 56.2 67.5 65.1 69.3 71.3 64.3 65.1 76.7 71.4 74.0 25 Bonds 242.3 291.9 347.7 394.4 351.6 361.2 386.3 394.4 398.0 424.9' 416.2 26 Bank loans n.e.c 26.1 34.6 43.7 52.1 43.5 46.4 48.2 52.1 53.4' 55.5 56.4 27 Other loans and advances 59.8 59.3 60.0 58.0 59.9 60.3 58.9 58.0 55.9 54.8 53.8 28 Total credit market debt owed by nonnnancial sectors, domestic and foreign 13,384.5' 14,156.0' 14,959.6' 15,778.4' 15,132.5' 15,266.7' 15,489.2' 15,778.4' 16,024.5' 16,242.6' 16,465.5 Financial sectors 29 Total credit market debt owed by financial sectors 3,822.2 4,281.2 4,837.3 5,448.6' 4,916.5 5,084.9' 5,205.3' 5,448.6' 5,653.5' 5,911.5' 6,164.5 By instrument 30 Federal government-related 2,172.7 2,376.8 2,608.3 2,821.0 2.634.7 2,706.2 2,746.5 2,821.0 2,877.9 2,981.2 3,121.6 31 Government-sponsored enterprise securities 700.6 806.5 896.9 995.3 894.7 944.2 955.8 995.3 1,030.9 1,072.5 1,146.0 32 Mortgage pool securities 1.472.1 1,570.3 1,711.4 1,825.8 1,740.0 1,762.1 1,790.7 1,825.8 1,847.0 1,908.7 1,975.6 33 Loans from U.S. government .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 34 Private 1,649.5 1.904.4 2,229.1 2,627.5' 2,281.8 2,378.6' 2,458.8' 2,627.5' 2.775.6' 2,930.3' 3,042.9 35 Open market paper 441.6 486.9 579.1 745.7 623.0 642.5 684.7 745.7 804.9 838.9 874.2 36 Corporate bonds 1.008.8 1.205.4 1,385.1 1.560.0' 1,396.5 1,457.6' 1,478.1' 1,560.0' 1,634.7' 1,732.5' 1,777.3 37 Bank loans n.e.c 48.9 52.8 69.7 83.3 70.6 69.2 74.8 83.3 87.3 89.3 99.3 38 Other loans and advances 131.6 135.0 162.9 198.5 157.9 173.7 183.0 198.5 206.6 225.6 246.2 39 Mortgages 18.7 24.3 32.2 40.0 33.8 35.6 38.2 40.0 42.0 44.0 46.0 By borrowing sector 40 Commercial banks 94.5 102.6 113.6 140.6 115.3 125.7 130.0 140.6 148.7 159.6' 169.6 41 Bank holding companies 133.6 148.0 150.0 168.6 151.6 160.5 164.0 168.6 181.2 190.5' 20O.3 42 Savings institutions 112.4 115.0 140.5 160.3 136.3 144.3 149.8 160.3 162.9 170.7 186.6 43 Credit unions .5 .4 .4 .6 .4 .4 .5 .6 .7 .8 1.0 44 Life insurance companies .6 s 1.6 1.8 1.8 1.8 1.9 1.8 1.8 1.6 2.0 45 Government-sponsored enterprises 700.6 806.5 896.9 995.3 894.7 944.2 955.8 995.3 1,030.9 1,072.5 1,146.0 46 Federally related mortgage pools 1,472.1 1,570.3 1,711.4 1,825.8 1,740.0 1.762.1 1,790.7 1,825.8 1,847.0 1,908.7 1,975.6 47 Issuers of asset-backed securities (ABSs) 579.0 720.1 873.8 1,089.3' 889.9 917.9' 989.0' 1.089.3' 1.147.2' 1,236.7' 1,308.7 48 Brokers and dealers 34.3 29.3 27.3 35.3 26.6 35.3 33.6 35.3 35.1 40.1 44.2 49 Finance companies 433.7 483.9 529.8 554.5 528.4 557.8 532.7 554.5 571.9 596.9 589.5 50 Mortgage companies 18.7 19.1 31.5 30.3 31.4 28.3 29.2 30.3 31.6 30.2 30.9 51 Real estate investment trusts (RFJTs) 31.1 36.8 47.8 72.6 51.6 56.6 64.6 72.6 81.7 90.1 97.0 52 Funding corporations 211.0 248.6 312.7 373.8 348.6 350.0 363.4 373.8 412.9 413.0' 413.1 All sectors 53 Total credit market debt, domestic and foreign 17,206.8' 18,437.2r 19,797.0' 21,227.0 20,049.0' 20,351.5' 20,694.5 21,227.0 21,678.0' 22,154.1' 22,630.0 54 Open market paper 623.5 700.4 803.0 979.4 861.1 893.1 925.7 979.4 1,074.8 1,112.7 1.165.1 55 US. government securities 5.665.0 6,013.6 6,390.0 6,625.9 6,464.5 6,466.8 6,517.7 6,625.9 6,708.6' 6,730.2 6,841.8 56 Municipal securities 1,341.7 1,293.5 1,296.0 1,367.5 1,305.1 1,326.8 1,340.2 1,367.5 1,397.1 1.429.3' 1.440.0 57 Corporate and foreign bonds 2.504.0 2,823.6 3.131.7 3,444.0' 3,166.8 3,259.1' 3,335.3' 3,444.0' 3,561.5' 3,726.4' 3,784.5 58 Bank loans n.e.c 834.9 949.6 1,041.7 1,171.0' 1,078.6 1,115.8 1,123.1 1,171.0' 1,192.3' 1,241.8' 1,279.6 59 Other loans and advances 860.9 931.1 993.6 1,095.8' 1,002.3 1,022.5' 1,044.9' 1,095.8' 1,128.2' 1.154.3' 1,187.5 60 Mortgages 4,392.8' 4,602.7' 4,929.4' 5.279.3 4,984.3' 5,062.5' 5,180.9 5,279.3 5,379.4' 5.502.6' 5,642.9 61 Consumer credit 983.9 1,122.8 1,211.6 1,264.1 1,186.4 1,205.0 1,226.7 1,264.1 1,236.1' 1,256.9' 1,288.7 1. Data in this table also appear in the Board's Z. 1 (780) quarterly statistical release, tables L.2 through L.4. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A41 1.60 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES1 Billions of dollars except as noted, end of period 1998' Transaction category or sector 1994 Qi Q2 Q3 Q4 Ql Q2 Q3 CREDIT MARKET DEBT OUTSTANDING 1 Total credit market assets 17,206.8' 18,437.2' 19,797.0' 21,227.0 20,049.0' 20,351.5' 20,694.5 21227.0 21,678.0 22,154.1 22,630.0 2 Domestic nonfederal nonfinancial sectors 3,038.1" 2,890,0' 2.919.3' 2,761.1' 2,849.1' 2,798.0' 2,739.4' 2,761.1' 2,699.8 2,766.7 2,758.4 3 Household 1,981.4' 1,928.7' 1,966.7' 1,791.3' 1,909.6' 1,849.7' 1,793.7' 1,791.3' 1,744.4 1,778.2 1,739.5 4 Nonfinancial corporate business 289.2 280.4 291.0' 305.8' 286.8 281.4' 290.4' 305.8' 294.7 289.7 291.8 5 Nonfarm noncorporate business 37.6 42.3 46.7 49.4 47.4 48.0 48.7 49.4 50.2 51.0 51.8 6 State and local governments 729 9 638.6 614.8 614.5 605.4 618.9 606.6 614.5 610.5 647.8 675.3 7 Federal government 203.4 203.2 195.5 200.4 195.9 197.3 198.2 200.4 204.3 207.5 210.9 8 Rest of the world 1,216.0 1,5303 1,931.2 2,258.9' 2,019.4 2,095.0' 2,196.4' 2,258.9' 2.323.5 2,401.6 2,421.7 9 Financial sectors 12,749.2 13,813.7' 14,750.9' 16,006.6' 14.984.6' 15,261.2' 15,560.5' 16,006.6' 16,450.3 16.7783 17,239.0 10 Monetary authority 368.2 380.8 393.1 431.4 397.1 412.4 412.7 431.4 433.8 440.3 446.5 11 Commercial banking 3,2543 3,520.1 3,707.7 4,031.9' 3.775.7 3,856.8 3,912.9 4,031.9' 4,093.3 4,136.4 4.195.6 12 U.S.-chartered banks 2,869.6 3,056.1 3,175.8 3,450.7 3,218.1 3,295.2 3.351.9 3,450.7 3,505.1 3.543.6 3,616.2 13 Foreign banking offices in United States . . 337.1 412.6 475.8 516.1 499.5 501.8 501.0 516.1 517.9 525.6 510.0 14 Bank holding companies 18.4 18.0 22.0 27.4 225 23.8 22.5 27.4 31.2 26.8 283 15 Banks in U.S.-afnliated areas 29.2 33.4 34.1 37.8' 356 36.1 37.5 37.8' 39.2 40.4 41.1 16 Savings institutions 920.8 913.3 933.2 928.5 9319 937.8 929.0 928.5 931.0 928.1 937.8 17 Credit unions 246.8 263.0 288.5 305.3 291.2 299.9 303.9 305.3 306.7 315.1 320.7 18 Bank personal Irusts and estates 248.0 239.7 232.0 239.5 232.8 235.5 2373 239.5 240.1 240.9 241.4 19 Life insurance companies 1,482.6 1,581.8 1,654.3 1,755.2 1,680.2 1,724.1 1,750.4 1.755.2 1,784.8 1.801.9 1.8233 20 Other insurance companies 446.4 468.7 491.2 515.3 491.6 498.6 506.6 515.3 521.1 520.8 5183 21 Private pension funds 656.9 718.2 766.5 834.2 780.3 794.9 811.5 834.2 852.3 887.7 912.1 22 State and local government retirement funds 455.8 483.3 529.2 565.8 531.6 542.7 562.0 565.8 582.5 600.2 621.4 23 Money market mutual funds 459.0 545.5 634.3 721.9 659.0 656.5 678.7 721.9 775.0 815.9 869.9 24 Mutual funds 718.8 7713 820.2 901.1 838.5 861.3 890.4 901.1 939.3 977.6 1,007.0 25 Closed-end funds 86.0 96.4 101.1' 97.7' 100.3' 99.4' 98.5' 97.7' 97.1 96.5 95.9 26 Government-sponsored enterprises 663.3 748.0 813.6 908.6 824.3 854.8 868.7 908.6 949.5 985.9 1,048.1 27 Federally related mortgage pools 1,472.1 1,570.3 1,711.4 1,825.8 1,740.0 1,762.1 1,790.7 1,825.8 1,847.0 1,908.7 1,975.6 2S Asset-backed securities issuers (ABSs) 541.7 661.0 784.4 950.4' 794.6 818.9' 863.3' 950.4' 993.5 1,075.3 1,138.4 29 Finance companies 476.2 526.2 544.5 566.4 552.4 553.1 554.4 566.4 572.0 579.0 593.7 30 Mortgage companies 36.5 33.0 41.2 57.6 40.9 34.8 55.5 57.6 60.2 57.4 58.9 31 Real estate investment trusts (RElTsj 133 15.5 17.5 15.5 17.0 16.5 15.9 15.5 15.0 14.5 14.0 32 Brokers and dealers 93.3 183.4 167.7 181.4 164.1 161.2 165.1 181.4 244.0 196.9 227.8 33 Funding corporations 109.3 94.1' 119.3' 173 2' 141.1' 139.9' 142.9' 173.2' 212.0 199.2 192 7 RELATION OF LIABILITIES TO FINANCIAL ASSETS 34 Total credit market debt 17,206.8r 18,437.2' 19,797.0' 21,227.0 20,049.0' 20,351.5' 20,694.5 21,227.0 21,678.0 22,154.1 22,630.0 Other liabilities 35 Official foreign exchange 53.2 63.7 53.7 48.9 46.3 46.7 46.1 48.9 48.2 50.1 54.5 36 Special drawing rights certificates .. . 8.0 10.2 9.7 9.2 9.2 9.2 9.2 9.2 9.2 9.2 9.2 37 Treasury currency 17.6 18.2 18.3 18.3 18.4 18.4 18.7 18.3 18.4 18.4 18.8 38 Foreign deposits 373.9 418.8 516.1 619.4 562.8 568.8 597.8 619.4 608.1 630.4 649.6 39 Net interbank liabilities 280.1 290.7 240.8 219.7' 210.9 197.1 189.4' 219.7' 182.7 192.2 192.8 40 Checkable deposits and currency 1,242.0 1,229.3 1,245.1 1,286.6 1,220.0 1,265.3 1,234.2 1,286.6 1,259.4 1.321.0 1,282.8 41 Small time and savings deposits 2,183.2 2.279.7 2,377.0 2,427.1 2,432.3 2,438.8 2,474.1 2,525.2 2,530.8 2.553.4 42 Large time deposits 411.2 476.9 590.9 713.4 606.0 646.7 696.1 713.4 760.9 754.0 776.2 43 Money market fund shares 602.9 745.3 891.1 1,048.7 950.8 952.4 1,005.1 1,048.7 1,130.7 1,153.7 1,249.7 44 Security repurchase agreements 549.5 659.9 699.9 815.1 713.8 766.7 795.4 815.1 879.5 867.0 913.6 45 Mutual fund shares 1,477.3 1,852.8 2,342.4 2,989.4 2,410.6 2,717.5 2,973.6 2,989.4 3,340.2 3,439.0 3.1173 46 Security credit 279.0 305.7 358.1 468.2 380.0 414.8 4322 468.2 505.3 481.0 491 8 47 Life insurance reserves 5053 550.2 593.8 646.7 606.2 621.9 6376 646.7 658.6 667.8 674.3 48 Pension fund reserves 4,870.5 5,589.4' 6,315.4' 7.399.0' 6,402.3' 6,907.5' 7,290.6' 7,399.0' 7.957.6 8,052.7 7.528.6 49 Trade payables 1,140.6 1,242.2' 1,319.0' 1.417.0' 1.301.8' 1,319.8' 1,352.0' 1,417.0' 1.407.0 1,413.9 1,422.8 50 Taxes payable 101.4 107.6 123.8 138.4' 137.3 133.9' 143.2' 138.4' 149.4 140.4 150.8 51 Investment in bank personal trusts . . . 699.4 803.0 871.7 1,082.8 888.7 982.9 1,058.9 1,082.8 1.179.3 1,207.2 1.112.4 52 Miscellaneous 5,331.6' 5,705.9' 6,028.5' 6,504.4' 6,302.8' 6,276.1' 6,488.9' 6,504.4' 6.789.6 6.874.4 7,210.9 53 Total liabilities 37,333.7' 40,786.5' 44,392.1' 49,126.2' 4S.244.2' 46,629.6' 48,102.1' 49,126.2' 51,087.1 51,957.0 52,039.5 Financial assets not included in liabilities (+) 54 Gold and special drawing rights 21.1 22.1 21.4 21.1 20.9 21.1 21.0 21.1 21.2 21.0 21.2 55 Corporate equities 6.237.9 8331.3 10,062.4 12,776.0 10,063.5 11,627.0 12,649.4 12,776.0 14,397.6 14,556.1 12,758.4 56 Household equity in noncorporate business 3,380.4' 3.598.7" 3,806.7' 4,129.6' 3,903 4' 3,992.9' 4,059.6' 4,129.6' 4,140.2 4.169.2 4,151.0 Liabilities not identified as assets ( —) 57 Treasury currency -5.4 -5.8 -6.7 -7.3 -6.8 -6.9 -6.7 -73 -7 4 -7.4 -7.1 58 Foreign deposits 325.4 360.2 431.2 534.5 475.4 478.1' 501.5 534.5 510.8 547.1 558.1 59 Net interbank transactions -6.5 -9.0 -10.6 -32.2' -1.6 -8.1 -22.1 -32.2' -21.2 - 17.1 -15.5 60 Security repurchase agreements 67.8 90.7 90.0 149.5' 68.1 108.6 116.4' 149.5' 177.8 145.7 170.4 61 Taxes payable 48.8 62.4 76.9 91.5' 74.8 77.6' 88.0' 91.5' 87.3 91.6 97.9 62 Miscellaneous -1,039.2' -1.324.3' -1,698.4' -2,106.4' -1,576.9' -1,675.4' -1.656.8' -2,106.4' -2,017.5 -2,022.3 -1,990.9 Floats not included in assets (—) 63 Federal government checkable deposits 3.4 3.1 -1.6 -9.7 -6.8 -8.1 -10.4 -16.1 -12.0 64 Other checkable deposits 38.0 34.2 30.1 26.2 25 6 27.9 19.5 26.2 21.4 24.2 15.7 65 Trade credit -245.9 -257.6' -284.5' -280.5' -339.5' -366.6' -372.3' -280.5' -330.0 -365.9 -390.4 66 Total identified to sectors as assets 47,786.6' 53,784.7' 59,656.3' 67,685.8' 60,522.6' 63,642.1' 66,172.6' 67,685.8' 71,235.2 72,323.7 70,543.7 1. Data in this table also appear in the Board's Z. 1 (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. L. 1 and L.5. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • January 1999 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures Monthly data seasonally adjusted, and indexes 1992=100, except as noted 1996 Apr. May June July' Sept.' Oct. 1 Industrial production 131.3 131.9 130.6 130.5 132.5 132.0 132.0 Market groupings 2 Products, total 110.7 114.4 119.6 122.5 123.2 124.0 124.5 123.6 123.3 125.1 124.4 124.4 3 Final, total 111.5 115.5 121.1 124.2 125.3 126.2 126.6 125.5 124.7 127.0 126.1 126.4 4 Consumer goods 109.5 111.3 114.1 115.2 115.8 116.4 116.8 115.1 114.0 116.1 115.2 115.1 5 Equipment 114.9 122.7 133.9 140.3 142.4 143.6 144.2 144.1 143.9 146.5 145.8 146.6 6 Intermediate 108.1 110.9 115.2 117.1 116.9 117.3 118.2 118.0 119.1 119.1 118.9 118.4 7 Materials 120.4 127.8 138.2 142.5 142.7 143.1 143.6 141.8 141.9 144.5 144.5 144.4 Industry groupings 115.9 121.4 129.7 8 Manufacturing 82.7 81.4 82.0 81.8 81.6 81.7 81.6 80.2 9 Capacity utilization, manufacturing (percent) 122.1 130.9' 142.2' 148.O1 144.01 149.0' 149.0' 149.0' 150.0 148.0 140.0 136.0 10 Construction contracts^ 114.9 117.2 119.9 122.4 122.5 122.8 123.2 123.3 123.5 123.8 123.9 124.0 11 Nonagricultural employment, total4 98.3 99.0 100.3 102.6 102.4 102.7 102.5 102.6 101.9 102.4 102.2 102.1 12 Goods-producing, total 97.5 97.2 97.6 99.1 99.1 99.1 99.0 98.9 97.9 98.4 98.3 98.1 13 Manufacturing, total 99.0 98.4 98.9 1O0.6 100.5 100.4 100.1 99.9 98.4 99.1 99.2 98.9 14 Manufacturing, production workers 120.2 123.0 126.2 128.8 128.9 129.3 129.7 130.0 130.4 130.6 130.9 131.1 15 Service-producing 156.1 165.2 174.5 180.2 180.9 181.4 182.2 182.7 183.4 184.2 184.5 n.a. 16 Personal income, total 150.9 159.8 171.2 178.9 179.5 180.3 181.5 181.8 182.8 184.1 184.3 n.a. 17 Wages and salary disbursements 130.3 135.7 144.7 151.0 151.2 151.0 151.5 150.5 149.6 151.4 151.8 n.a. 18 Manufacturing 156.4 164.0 171.7 176.0 176.7 177.0 177.5 177.9 178.6 179.2 179.4 n.a. 19 Disposable personal income5 151.5 159.6 166.9 172.2 172.4 173.7 175.8 176.0 174.8 174.9 175.4 177.1 20 Retail sales5 Prices6 21 Consumer (1982-84=100) 152.4 156.9 160.5 161.9 162.2 162.5 162.8 163.0 163.2 163.4 163.6 164.0 22 Producer finished goods (1982= 100) 127.9 131.3 131.8 130.2 130.1 130.4 130.6 130.7' 130.9 130.6 130.6 131.4 1. Data in this table appear in the Board's G.17 (419) monthly statistical release. The data 3. Index of dollar value of total construction contracts, including residential, nonresidenare also available on the Board's web site, http://www.federalreserve.gov/releases/gl7. The tial, and heavy engineering, from McGraw-Hill Information Systems Company, F.W. Dodge latest historical revision of the industrial production index and the capacity utilization rates Division. was released in November 1998. The receni! annual revision is described in an article in the 4. Based on data from U.S. Department of Labor, Employment and Earnings. Series covers January 1999 issue of the Bulletin. For a description of the methods of estimating industrial employees only, excluding personnel in the armed forces. production and capacity utilization, see "Industrial Production and Capacity Utilization: 5. Based on data from U.S. Department of Commerce, Survey of Current Business. Historical Revision and Recent Developments," Federal Reserve Bulletin, vol. 83 (February 6. Based on data not seasonally adjusted. Seasonally adjusted data for changes in the price 1997), pp. 67-92, and the references cited therein. For details about the construction of indexes can be obtained from the U.S. Department of Labor, Bureau of Labor Statistics, individual industrial production series, see "Industrial Production: 1989 Developments and Monthly Labor Review. Historical Revision," Federal Reserve Bulletin, vol. 76 (April 1990), pp. 187-204. NOTE. Basic data (not indexes) for series mentioned in notes 4 and 5, and indexes for series 2. Ratio of index of production to index of capacity. Based on data from the Federal mentioned in notes 3 and 6, can also be found in the Survey of Current Business. Reserve, DRI McGraw-Hill, US. Department of Commerce, and other sources. 2.11 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT Thousands of persons; monthly data seasonally adjusted Category 1995 1996 1997 Mar. Apr. May July Sept.' HOUSEHOLD SURVEY DATA1 1 Civilian labor force2 132,304 133,943 126,297 137,242 137,364 137,447 137,296 137,415 138,075 137,976 Employment 2 Nonagricultural industries3 121,460 123,264 126,159 127,862 128,033 128,118 127,867 127,626 127,640 128,247 128,075 3 Agriculture 3,440 3,443 3.399 3,132 3,350 3,335 3,343 3,441 3,529 3,518 3,603 Unemployment 4 Number 7,404 7,236 6,739 6.529 5,859 5,910 6.237 6,230 6,247 6,310 6,299 5 Rate (percent of civilian labor force) 5.6 5.4 4.9 4.7 4.3 4.3 4.5 4.5 4.5 4.6 4.6 ESTABLISHMENT SURVEY DATA 6 Nonagricultural payroll employment4 117,191 119,523 122,257 124,914 125,234 125,562 125,751 125,869 126,191r 126,348 126,464 7 Manufacturing 18.524 18,457 18,538 1-8,829 18,827 18,805 18,780 18,594 18,693 18,683 18,631 8 Mining 581 574 573 587 582 579 578 571 571 570 565 9 Contract construction 5,160 5,400 5,627 5,860 5,930 5,917 5,946 5,970 5,989' 5,968 5,987 10 Transportation and public utilities 6,132 6,261 6,426 6,504 6,513 6,534 6,538 6,550 6,570' 6,572 6,591 11 Trade 27,565 28,108 28,788 29,042 29,133 29,238 29,269 29,374 29,383' 29,472 29,463 12 Finance 6,806 6,899 7,053 7,258 7,289 7,311 7,333 7,370 7,372 7,385 7,410 13 Service 33,117 34,377 35,597 37,106 37,196 37,350 37,494 37,614 37,691' 37,756 37,851 14 Government 19,305 19,447 19,655 19,728 19,764 19,828 19,813 19,826 19,922' 19,942 19,966 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 persons, household and unpaid family workers, and members of the armed forces. Data are adjusted to the March 1992 benchmark, and only seasonally adjusted data are available at this day; time. population figures. SOURCE. Based on data from U.S. Department of Labor, Employment and Earnings. 3. Includes self-employed, unpaid family, and domestic service workers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A43 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION' Seasonally adjusted 1997 1998' Q4' Ql Q2 Q3 Q4r Ql Q2 Q3 Q4r Ql Q2 Q3 Output (1992=100) Capacity (percent of 1992 output) Capacity utilization rate (percent) 1 Total industry .. 129.8 130.4 131.3 131.7 155.7 159.6 161.5 83.4 82.7 82.3 81.5 2 Manufacturing.. . 134.7 134.9 161.3 165.8 168.1 82.5 81.8 81.2 80.3 3 Primary processing 121.0 121.2 121.1 120.4 141.8 143.0 144.0 145.1 85.3 84.8 84.1 83.0 4 Advanced processing4 139.0 140.1 141.4 142.1 170.7 173.5 176.4 179.2 81.4 80.8 80.2 79.3 5 Durable goods 153.0 154.4 156.1 157.8 186.5 190.2 193.9 197.5 82.1 81.2 80.5 79.9 6 Lumber and products 114.5 115.6 116.4 117.9 140.8 142.0 143.0 143.9 81.3 81.4 81.4 81.9 7 Primary metals 128.5 128.2 125.3 122.5 139.7 140.8 142.0 143.2 92.0 91.0 88.3 85.5 8 Iron and steel 127.9 128.3 124.0 119.0 139.4 140.9 142.8 144.6 91.8 91.0 86.9 82.3 9 Nonferrous 129.1 128.0 127.0 126.7 139.8 140.4 140.8 141.3 92.3 91.2 90.1 89.7 10 Industrial machinery and equipment. 187.5 194.1 203.0 208.3 219.5 226.5 234.7 242.9 85.4 85.7 86.5 85.7 11 Electrical machinery 273.7 278.2 282.8 290.7 335.1 351.2 366.6 381.6 81.7 79.2 77.1 76.2 12 Motor vehicles and parts 147.5 140.8 135.3 136.8 181.4 182.8 183.9 184.9 81.3 77.0 73.6 74.0 13 Aerospace and miscellaneous transportation equipment 99.3 102.7 106.1 107.1 126.7 127.0 127.5 128.0 78.4 80.8 83.2 83.7 14 Nondurable goods 112.4 112.7 112.7 111.6 135.0 135.8 136.6 137.5 83.3 83.1 82.5 81.1 15 Textile mill products . .. 113.5 113.6 113.2 112.7 133.9 134.8 134.9 135.1 84.7 84.3 83.9 83.5 16 Paper and products 115.8 115.5 115.0 115.0 129.6 1306 131.6 132.5 89.3 88.5 87.4 86.8 17 Chemicals and products. 116.6 116.8 116.9 115.0 146.1 147.1 148.0 148.9 79.8 79.4 79.0 77.2 18 Plastics materials 128.2 127.3 127.5 131.3 138.2 139.4 140.7 141.9 92.8 91.3 90.6 91.7 19 Petroleum products 110.3 111.6 112.0 113.0 115.8 116.2 116.5 116.8 95.2 96.1 96.1 96.8 20 Mining .. 105.9 107.0 105.3 104.0 119.4 119.7 119.9 120.1 88.6 89.4 87.8 86.6 21 Utilities... 114.2 110.9 115.6 119.5 125.8 125.9 126.2 126.5 90.8 88.1 91.6 94.5 22 Electric . 115.1 112.8 118.3 121.6 123.5 123.5 123.8 124.0 93.2 91.3 95.6 98.0 Previous cycle Latest cycle" Hjgh High Low High Low Oct. May June July' Aug.' Sept. Oct.p Capacity utilization rate (percent)2 1 Total industry 72.6 87.3 71.1 85.4 78.1 83.4 82.6r 81.5r 81.1 82.0 81.4 81.1 2 Manufacturing 70.5 86.9 69.0 85.7 76.6 82.3 81.6' 80.2' 79.8 80.9 80.1 80.1 3 Primary processing3 91.2 68.2 88.1 66.2 88.9 77.7 85.2 84.3' 83.3' 83.4 83.3 82.4 82.1 4 Advanced processing4 87.2 71.8 86.7 70.4 84.2 76.1 81.3 80.7' 79.2' 78.5 80.1 79.4 79.4 5 Durable goods 68.9 87.7 63.9 84.6 73.1 82.0 81.1' 79.3' 78.6 81.0 80.0 80.1 6 Lumber and products 88.7 61.2 87.9 60.8 93.6 75.5 80.9 81.4' 81.5' 81.8 82.3 81.6 81.9 7 Primary metals 100.2 65.9 94.2 45.1 92.7 73.7 92.0 89.1' 85.8' 85.9 87.2 83.6 82.8 8 Iron and steel 105.8 66.6 95.8 37.0 95.2 71.8 92.3 87.9' 83.5' 83.5 85.2 78.1 76.7 9 Nonferrous 90.8 59.8 91.1 60.1 89.3 74.2 91.9 90.6' 88.6' 88.9 89.7 90.4 90.4 10 Industrial machinery and equipment 96.0 74.3 93.2 64.0 85.4 72.3 85.7 86.3' 86.6' 87.0 85.4 84.8 84.0 11 Electrical machinery 89.2 64.7 89.4 71.6 84.0 75.0 81.9 76.9' 76.8' 76.8 76.2 75.5 75.4 12 Motor vehicles and parts 93.4 51.3 95.0 45.5 89.1 55.9 80.1 78.3' 65.7' 58.3 83.4 80.2 81.3 13 Aerospace and miscellaneous transportation equipment . 78.4 67.6 81.9 66.6 87.3 79.2 78.1 83.4' 83.2' 83.8 84.0 83.2 84.7 14 Nondurable goods. 87.8 71.7 87.5 76.4 87.3 80.7 83.1 82.7' 81.8' 81.7 81.1 80.6 80.4 15 T"extile mill products 91.4 60.0 91.2 72.3 90.4 77.7 84.8 84.8' 83.0' 83.9 83.5 83.0 83.0 16 Paper and products 97.1 69.2 96.1 80.6 93.5 85.0 89.0 87.4' 87.1' 87.7 87.0 85.6 84.9 17 Chemicals and products 87.6 69.7 84.6 69.9 86.2 79.3 79.8 79.0' 78.3' 77.9 77.0 76.8 76.8 18 Plastics materials 102.0 50.6 90.9 63.4 97.0 74.8 91.7 90.5' 89.7' 91.6 92.9 90.7 90.8 19 Petroleum products 96.7 81.1 90.0 66.8 88.5 85.1 96.0 95.7' 95.7' 97.2 97.6 95.5 92.4 20 Mining 94.3 88.2 96.0 80.3 88.0 87.0 89.0 87.9' 87.3' 87.2 86.6 86.0 84.6 21 Utilities 96.2 82.9 89.1 75.9 92.6 83.4 92.3 91.3' 94.0' 93.7 94.3 95.6 92.0 22 Electric 99.0 82.7 88.2 78.9 95.0 87.1 95.0 96.0' 97.7' 96.7 97.7 99.7 95.5 1. Data in this table appear in the Board's G.17 (419) monthly statistical release. The data 3. Primary processing includes textiles: lumber; paper; industrial chemicals; synthetic are also available on the Board's web site, http://www.federalreserve.gov/releases/gl7. The materials; fertilizer materials; petroleum products; rubber and plastics; stone, clay, and glass; latest historical revision of the industrial production index and the capacity utilization rates primary metals; and fabricated metals. was released in November 1998. The recent annual revision is described in an article in the 4. Advanced processing includes foods; tobacco; apparel; furniture and fixtures; printing January 1999 issue of the Bulletin. For a description of the methods of estimating industrial and publishing; chemical products such as drugs and toiletries; agricultural chemicals, leather production and capacity utilization, see "Industrial Production and Capacity Utilization: and products; machinery; transportation equipment; instruments; and miscellaneous manufac- Histoncal Revision and Recent Developments." Federal Reserve Bulletin, vol. 83 (February tures. 1997), pp. 67-92, and the references cited therein. For details about the construction of 5. Monthly highs, 1978-80; monthly lows, 1982. individual industrial production series, see "Industrial Production: 1989 Developments and 6. Monthly highs, 1988-89; monthly lows, 1990-91. Histoncal Revision," Federal Reserve Bulletin, vol. 76 (April 1990), pp. 187-204. 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 • January 1999 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data seasonally adjusted 1992 1997' Group p po ro r- - 1 a 9 v 9 g 7 . tion Feb.' Mar.' Apr.' May' June' July' Aug.' Sept. Index (1992 - 100) MAJOR MARKETS 1 Total index 100.0 126.8 129.3 129.9 130.3 130.3 130.2 130.7 131.3 131.9 130.6 130.5 132.5 132.0 132.0 2 Products 60.5 119.6 121.5 122.2 122.3 122.6 122.5 123.2 124.0 124.5 123.6 123.3 125.1 124.4 124.4 3 Final products 46.3 121.1 123.1 124.1 124.0 124.5 124.2 125.3 126.2 126.6 125.5 124.7 127.0 126.1 126.4 4 Consumer goods, total 29.1 114.1 114.9 115.9 115.4 116.0 115.2 115.8 116.4 116.8 115.1 114.0 116.1 115.2 115.1 5 Durable consumer goods 6.1 129.6 131.0 135.1 133.3 135.1 134.5 135.9 136.9 138.3 130.7 124.6 140.0 137.5 139.7 6 Automotive products 2.6 129.1 132.0 138.4 134.5 133.0 131.5 132.7 134.6 136.8 121.7 107.3 141.7 135.8 140.3 7 Autos and trucks 1.7 135.7 141.1 149.1 144.1 141.0 138.6 138.9 141.3 143.5 118.2 92.8 151.4 143.4 150.3 8 Autos, consumer .9 114.9 114.4 119.4 113.1 115.1 104.8 106.5 107.4 108.4 93.8 75.8 124.4 128.3 119.9 9 Trucks, consumer .7 157.1 166.6 177.3 173.5 166.1 170.5 169.8 173.8 177.1 142.2 110.0 178.9 161.2 180.6 10 Auto parts and allied goods .9 118.5 118.0 122.1 119.8 120.5 120.3 122.7 123.7 126.0 125.4 125.6 127.6 124.7 125.8 11 Other 3.5 130.1 130.1 132.4 132.3 136.7 136.9 138.5 138.8 139.4 137.8 138.7 138.3 138.7 138.9 12 Appliances, televisions, and air conditioners 1.0 176.1 181.3 186.5 187.4 195.5 197.9 203.8 203.4 202.7 199.9 207.8 209.2 206.1 208.3 13 Carpeting and furniture .8 112.8 113.0 116.8 112.6 119.2 115.8 114.3 115.9 119.1 117.0 117.3 116.1 117.1 118.4 14 Miscellaneous home goods 1.6 114.2 112.2 112.4 114.1 115.6 116.8 118.3 118.2 117.9 117.1 115.9 115.3 116.5 115.4 15 Nondurable consumer goods 23.0 110.2 110.8 111.2 110.9 111.3 110.5 110.8 111.4 111.5 111.2 111.2 110.3 109.8 109.2 16 Foods and tobacco 10.3 108.2 107.8 109.2 108.4 110.4 1(0.1 109.1 110.2 110.8 108.5 108.5 107.8 107.1 107.6 17 Clothing 2.4 101.1 101.1 100.0 100.6 100.7 99.3 100.4 99.9 98.8 98.8 98.4 97.2 96.1 94.6 18 Chemical products 4.5 119.5 121.3 120.9 121.8 121.3 121.2 121.3 123.2 122.5 122.8 122.2 119.1 119.0 118.9 39 Paper products 2.9 108.0 108.2 110.8 109.5 109.2 107.7 106.3 106.2 105.7 105.3 106.3 106.6 106.3 106.3 20 Energy 2.9 111.6 115.6 112.0 112.5 109.1 106.5 113.2 111.5 112.5 118.2 118.4 119.4 118.8 114.0 21 Fuels .8 109.3 111.5 107.4 110.2 111.0 110.4 111.2 111.6 110.9 111.4 112.9 112.1 109.3 105.0 22 Residential utilities 2.1 112.3 117.1 113.9 113.2 107.6 104.0 113.7 111.0 112.9 121.2 120.7 122.7 123.2 118.1 23 Equipment 17.2 133.9 137.9 138.6 139.4 139.5 140.3 142.4 143.6 144.2 144.1 143.9 146.5 145.8 146.6 24 Business equipment 13.2 148.7 154.4 155.4 156.5 156.3 157.0 160.1 162.2 163.1 163.6 163.5 167.3 166.8 167.7 25 Information processing and related 5.4 181.6 190.3 191.8 194.5 195.3 199.2 202.3 206.0 209.2 210.3 211.8 214.0 215.6 217.6 26 Computer and office equipment 1.1 415.8 465.0 474.3 496.8 520.3 547.4 584.9 601.5 620.6 638.6 654.6 674.2 696.5 715.8 27 Industrial 4.0 136.1 138 6 138 0 139.8 138.4 136.6 139.4 139.4 138.1 142.9 144.2 142.8 139.6 139.2 28 Transit 2.5 116.7 123.7 127.0 125.6 126.0 126.8 130.3 133.6 135.5 128.2 121.9 142.5 139.5 141.7 29 Autos and trucks 1.2 124.0 127.7 133.4 127.4 126.2 120.9 121.6 123.4 125.1 108.6 91.7 136.9 131.0 129.6 30 Other 1.3 136.0 139.7 138.8 138.7 137.7 136.9 139.8 140.8 139.6 141.7 146.6 132.6 141.0 140.7 31 Defense and space equipment 3.3 76.2 75.8 75.7 75.8 76.2 76.3 75.9 75.9 76.0 75.8 76.1 76.5 75.7 76.7 32 Oil and gas well drilling .6 149.3 150.6 151.6 149.6 153.9 157.4 155.7 147.6 147.1 136.7 131.9 127.7 123.4 119.4 33 Manufactured homes 141.4 139.8 141.5 142.3 147.1 149.6 148.0 148.0 149.0 146.1 151.1 145.7 145.0 146.0 34 Intermediate products, total 14.2 115.2 116.5 116.3 117.0 117.0 117.1 116.9 117.3 118.2 118.0 119.1 119.1 118.9 118.4 35 Construction supplies 5.3 122.4 122.3 123.6 124.2 125.5 125.7 124.7 125.4 126.6 126.1 128.5 128.5 127.5 127.9 36 Business supplies 111.0 113.0 112.0 112.6 112.0 112.1 112.2 112.5 113.3 113.2 113.6 113.6 113.7 112.8 39.5 138.2 141.9 142.4 143.4 142.6 142.5 142.7 143.1 143.6 141.8 141.9 144.5 144.5 144.4 Durable goods materials.... 20.8 165.0 171.9 173.2 174.1 173.6 173.5 173.7 174.5 175.4 171.7 171.8 177.5 177.0 178.0 Durable consumer parts . . 4.0 143.1 146.1 147.0 150.0 143.1 144.2 143.7 144.4 147.9 131.9 129.7 149.6 147.5 149.2 Equipment parts 7.6 238.5 256.6 259.2 261.1 263.4 264.5 265.8 266.9 268.6 271.0 274.1 277.3 279.0 281.2 Other 9.2 127.2 129.6 130.5 130.0 130.7 129.7 129.7 130.3 129.6 128.3 128.1 128.6 128.0 128.2 Basic metal materials .. 3.1 121.9 124.0 125.8 123.5 126.1 125.9 123.7 123.5 123.0 120.1 120.2 122.4 118.4 117.6 Nondurable goods materials. 8.9 113.4 114.4 115.5 116.1 114.8 114.9 114.2 114.4 114.1 113.9 114.1 113.7 113.0 112.7 Textile materials 1.1 111.2 112.8 112.4 113.5 109.9 111.1 110.6 110.5 111.0 110.2 110.1 109.7 109.3 109.5 Paper materials 1.8 115.9 117.7 116.8 117.9 117.2 117.0 116.3 116.3 115.5 117.3 117.3 116.4 114.9 113.8 Chemical materials 3.9 114.4 116.1 116.9 117.6 117.2 116.5 115.6 116.2 115.6 114.8 114.6 114.3 113.6 113.4 Other 2.1 110.0 108.4 113.0 112.3 110.0 111.4 111.0 110.9 111.2 110.6 111.7 111.8 111.5 111.4 Energy materials 9.7 103.7 104.2 102.2 103.8 103.0 102.8 103.7 103.8 104.3 104.8 104.8 104.4 105.9 103.7 Primary energy 6.3 101.4 101.6 99.7 101.1 101.6 101.4 101.0 101.3 101.0 101.8 102.9 101.3 102.4 100.1 Converted fuel materials. . 3.3 108.0 109.2 107.1 109.1 105.8 105.6 109.0 108.6 110.8 110.7 108.6 110.4 112.5 110.7 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.1 126.6 129.2 129.6 130.2 130.2 130.2 130.7 131.3 131.8 131.2 131.6 132.2 131.9 131.8 52 Total excluding motor vehicles and parts 95.1 126.1 128.6 129.0 129.5 129.7 129.7 130.3 130.9 131.3 131.2 131.7 131.5 131.2 131.1 53 Total excluding computer and office equipment 98.2 123.8 126.0 126.6 126.9 126.7 126.4 126.7 127.3 127.7 126.4 126.2 128.1 127.5 127.4 54 Consumer goods excluding autos and tmcks 27.4 112.9 113.4 114.2 113.8 114.7 113.9 114.5 115.1 115.3 114.8 114.9 114.3 113.7 113.3 55 Consumer goods excluding energy 26.2 114.4 114.8 116.4 115.7 116.8 116.2 116.1 117.0 117.3 114.7 113.5 115.8 114.8 115.3 56 Business equipment excluding autos and trucks 12.0 157.5 157.9 159.9 159.7 161.1 164.6 166.7 167.4 170.0 171.8 170.7 170.8 57 Business equipment excluding computer and office equipment 12.1 134.4 138.5 139.2 139.7 138.8 138.7 140.8 142.3 142.6 142.7 142.2 145.4 144.4 144.9 58 Materials excluding energy 29.8 149.0 153.7 155.1 155.8 155.0 155.0 154.9 155.5 156.0 153.4 153.6 157.1 156.6 157.1 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A45 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1—Continued 1992 1997r Group c S o I d C e p p r o o r - - 1 a 9 v 9 g 7 . tion Nov. Dec. Jan.' Feb.r Mar.r Apr.1 May' June1 July' Aug.' Sepl. Oc(.p Index (1992 = 100) MAJOR INDUSTRIES 59 Total index 126.8 129.3 129.9 130.3 130.3 130.2 130.7 131.3 131.9 130.6 130.5 132.5 132.0 132.0 60 Manufacturing 85.4 129.7 132.2 133.3 133.7 133.8 133.7 134.1 134.9 135.4 133.7 133.6 135.9 135.3 135.7 61 Primary processing 26.5 119.1 120.3 121.1 121.5 121.6 121.1 121.0 121.5 121.4 120.2 120.7 120.8 119.8 119.7 62 Advanced processing 58.9 134.7 138.1 139.3 139.7 139.8 140.0 140.6 141.6 142.3 140.4 139.9 143.5 143.0 143.8 63 Durable goods 45.0 147.1 151.8 153.3 154.0 153.9 154.0 155.2 156.2 157.2 154.8 154.4 160.0 159.1 160.2 64 Lumber and products 24 2.0 114.2 113.5 114.8 115.0 115.2 116.2 115.3 116.1 116.4 116.7 117.5 118.5 117.7 118.4 65 Furniture and fixtures 25 1.4 117.7 118.6 119.7 120.4 119.4 118.6 121.5 121.0 120.6 122.0 120.8 119.7 121.6 122.9 66 Stone, clay, and glass products 32 2.1 122.3 123.0 123.7 125.0 124.6 124.0 124.5 124.0 124.5 123.5 125.4 126.7 126.9 127.1 67 Primary metals 33 3.1 125.3 128.2 129.3 127.8 129.2 128.1 127.1 127.5 126.5 122.1 122.6 124.8 120.0 119.2 68 Iron and steel 331,2 1.7 124.2 128.2 128.0 127.6 128.9 128.2 127.7 126.7 125.5 119.8 120.2 123.2 113.5 112.0 69 Raw steel 331PT .1 115.9 118.5 120.2 119.6 122.5 123.3 120.0 122 A 121.9 116.0 118.3 120.3 112.6 110.4 70 Nonferrous 333-6,9 1.4 126.7 128.2 130.9 128.1 129.7 128.0 126.4 128.4 127.6 124.9 125.4 126.7 127.9 127.9 71 Fabricated metal products. . 34 5.0 124.7 126.1 126.8 128.2 127.6 126.6 127.2 127.8 128.7 128.0 127.8 126.6 126.2 126.8 72 Industrial machinery and equipment 35 179.4 186.4 187.3 189.0 191.8 192.3 198.4 200.6 202.5 205.8 209.0 207.5 208.3 208.9 73 Computer and office equipment 357 1.8 423.7 472.0 481.3 502.2 526.3 552.6 589.6 605.4 623.9 641.4 657.0 676.3 698.4 717.7 74 Electrical machinery 36 7.3 253.4 269.8 274.9 276.5 277.7 278.5 278.2 280.8 282.0 285.5 289.4 290.7 291.8 295.0 75 Transportation equipment.. 37 9.5 117.1 121.7 123.8 124.1 121.3 121.5 122.3 123.3 125.2 114.2 108.2 130.6 127.5 129.7 76 Motor vehicles and parts 371 4.9 139.9 144.9 149.0 148.6 141.9 140.4 140.0 140.8 144.1 121.1 107.6 154.2 148.6 151.0 77 Autos and light trucks 371PT 2.6 127.8 131.9 139.2 134.1 132.0 128.2 128.8 130.9 132.7 110.1 86.9 141.9 136.4 140.2 78 Aerospace and miscellaneous transportation equipment 372-6,9 4.6 94.7 98.9 99.0 100.0 100.9 102.6 104.5 105.7 106.3 106.3 107.1 107.5 106.6 108.7 79 Instruments 38 5.4 110.3 112.5 111.8 112.0 111.5 112.5 112.8 113.0 113.8 112.4 112.6 113.4 113.7 114.0 80 Miscellaneous 39 1.3 119.1 119.0 118.5 119.9 119.7 119.9 120.0 120.1 119.1 118.5 118.5 117.7 117.4 116.6 81 Nondurable goods 40.4 111.3 112.0 112.6 112.7 113.1 112.8 112.4 113.0 113.0 112.0 112.1 111.5 111.2 82 Foods 9.4 108.0 107.5 109.1 109.0 110.5 109.9 109.7 110.3 110.7 109.2 109.0 108.2 107.9 108.7 83 Tobacco products 1.6 110.9 112.0 112.1 106.4 110.1 112.7 105.3 109.8 111.5 104.7 106.0 107.0 104.2 101.8 84 Textile mill products 1.8 112.2 113.1 114.1 113.1 115.0 113.2 112.6 113.3 114.5 112.0 113.2 112.8 112.2 112.2 85 Apparel products 2.2 102.8 102.7 101.8 102.3 102.5 101.1 101.6 101.0 100.4 100.5 100.1 98.8 97.6 96.7 86 Paper and products 3.6 114.4 115.0 116.1 116.2 115.7 115.9 115.0 115.2 115.0 114.9 115.9 115.3 113.7 113.1 87 Printing and publishing. . . . 6.7 105.2 106.4 107.1 107.0 106.4 106.4 105.4 105.5 105.6 105.5 105.4 105.1 105.5 105.4 88 Chemicals and products . . . 9.9 114.9 116.3 116.2 117.3 117.0 116.7 116.6 117.7 116.9 116.2 115.7 114.6 114.6 114.8 89 Petroleum products 1.4 109.8 III I 109.1 110.6 111.2 110.5 113.0 112.8 111.5 111.6 113.4 114.0 111.6 108.1 90 Rubber and plastic products 3.5 128.2 129.2 130.9 130.9 131.0 131.1 131.4 133.2 133.1 132.4 132.7 132.3 132.9 133.6 91 Leather and products .3 81.9 80.0 78.7 78.8 77.3 78.3 77.9 76.3 75.8 74.5 75.3 74.4 74.2 72.8 92 Mining 6.9 105.8 106.2 104.9 106.4 107.6 107.5 105.8 105.7 105.4 104.7 104.6 104.0 103.5 101.9 93 Metal .5 110.0 113.2 115.9 107.5 110.9 123.2 109.3 106.9 108.5 108.0 105.7 109.4 107.7 107.2 94 Coal 1.0 107.8 107.7 100.3 116.1 112.4 104.3 103.4 107.2 106.0 110.4 112.8 109.7 115.8 110.8 95 Oil and gas extraction 4.8 103.1 103.5 102.6 102.2 103.6 104.6 104.0 102.9 102.4 1O0.4 100.0 99.3 97.6 96.4 96 Stone and earth minerals .... .6 120.3 119.8 122.0 121.9 127.5 123.1 120.0 123.3 124.4 125.6 125.4 126.4 124.2 124.7 97 Utilities 7.7 112.8 116.1 113.6 113.1 109.8 109.0 114.0 112.8 115.2 118.7 118.3 119.3 120.9 116.6 98 Electric 491.493PT 6.2 113.2 117.4 114.1 113.8 111.4 111.2 115.7 115.2 118.9 121.0 119.8 121.2 123.7 118.5 99 Gas 492.493PT 1.6 111.2 110.2 111.0 109.9 102.2 99.3 106.3 102.0 98.3 108.4 111.7 110.5 108.2 107.6 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 80.5 129.1 131.5 132.4 132.8 133.4 133 4 133.8 134.6 134.9 134.5 135.1 134.9 134.5 134.9 101 Manufacturing excluding office and computing machines . . 83.6 126.3 128.4 129.4 129.7 129.6 1294 129.5 130.2 130.6 128.8 128.6 130.8 130.0 130.4 Gross value (billions of 1992 dollars, annual rates) MAJOR MARKETS 102 Products, total 2,001.9 2,406.1 2,440.1 2,456.3 2,455.0 2,462.9 2,456.2 2,474.5 2,489.8 2,498.5 2,470.3 2,454.6 2,525.7 2,504.0 2,504.2 103 Final 1,552.1 1,886.0 1,914.7 1,931.2 1,927.4 1,935.8 1,928.6 1,948.1 1,961.6 1,966.1 1,938.2 1,915.6 1,987.4 1,967.8 1,971.2 104 Consumer goods . . . 1,049.6 1,198.0 1,208.8 1,218.8 1,212.7 1,220.1 1,210.8 1,218.7 1,224.8 1,225.2 1,201.8 1,185.0 1,226.6 1,212.5 1,212.2 105 Equipment 502.5 687.3 708.3 714.8 717.3 718.2 720.6 732.5 739.9 744.2 740.1 734.3 764.9 759.5 763.5 106 Intermediate 449.9 521.1 525.9 526.0 528.2 528.0 528.3 527.6 529.7 533.6 532.6 538.4 539.6 537.3 534.4 I. Data in this table appear in the Board's G. 17 (419) monthly statistical release. The data Historical Revision and Recent Developments," Federal Reserve Bulletin, vol. 83 (February are also available on the Board's web site, http://www.federalreserve.gov/releases/gl7. The 1997), pp. 67-92. and the references cited therein. For details about the construction of latest historical revision of the industrial production index and the capacity utilization rates individual industrial production series, see "Industrial Production: 1989 Developments and was released in November 1998. The recent annual revision is described in an article in the Historical Revision," Federal Reserve Bulletin, vol. 76 (April 1990), pp. 187-204. January 1999 issue of the Bulletin. For a description of the methods of estimating industrial 2. Standard industrial classification. production and capacity utilization, see "Industrial Production and Capacity Utilization: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics • January 1999 2.14 HOUSING AND CONSTRUCTION Monthly figures at seasonally adjusted annual rates except as noted 1997 1998 Item 1995 1996 1997 Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept. Private residential real estate activity (thoisands of units except as noted) NEW UNITS 1 Permits authorized 1,333 1,426 1,442 1.467 1,553 1,635 1,569 1,517 1,543 1.517 1,581 1,618 1,544 2 One-family 997 1.070 1,056 1,094 1,142 1,176 1.136 1,145 1,152 1,128 1,173 1,180 1,164 3 Two-family or more 335 356 387 373 411 459 433 372 391 389 408 438 380 4 Started 1,354 1,477 1,474 1.540 1,545 1,616 1,585 1,546 1,538 1,620 1,704 1,621 1,579 5 One-family 1,076 1,161 1.134 1,130 1,225 1,263 1,239 1,237 1.224 1,269 1,300 1,261 1,248 6 Two-family or more 278 316 340 410 320 353 346 309 314 351 404 360 331 7 Under construction at end of period 776 820 834 872 888 907 911 911 917 930 937 942 949 8 One-family 554 584 570 580 593 609 616 619 627 639 643 647 650 9 Two-family or more 222 235 264 292 295 298 295 292 290 291 294 295 299 10 Completed 1,319 1,405 1.407 1,413 1.314 1,461 1,486 1.509 1.458 1.484 1,549 1,514 1,470 11 One-family 1,073 1,123 1.122 1,094 1,007 1,142 1,130 1.198 1,112 1.166 1,225 1,172 1,183 12 Two-family or more 247 283 285 319 307 319 356 311 346 318 324 342 287 13 Mobile homes shipped 341 361 354 353 362 377 374 370 374 362 380 368 369 Merchant builder activity in one-family units 14 Number sold 667 757 803 805 853 878 836 892 892 919 873 830 822 15 Number for sale at end of period1 374 326 287 282 281 281 285 286 287 287 285 286 292 Price of units sold {thousands of dollars)2 16 Median 13 V9 140.0 145.9 145.9 148.0 156.0 152.0 148.0 153.2 148.0 149.8 150.0 152.0 17 Average 158.7 166.4 175.8 175.8 178.6 181.6 178.9 176.7 183.5 175.9 178.4 182.0 180.6 EXISTING UNITS (one-family) 18 Number sold 3,812 4,087 4,215 4,370 4,370 4,770 4,890 4.770 4,830 4,740 4.910 4,730 4,680 Price of units sold (thousands vf dollars)1 19 Median 113.1 118.2 124.1 125.9 126.1 124.5 127.1 128.2 130.5 134.0 133.8 132.9 131.3 20 Average 139.1 145.5 154.2 157.5 156.8 153.9 157.2 159.7 162.3 169.2 168.4 165.9 163.2 Value of new construction (millions of dollars)' CONSTRUCTION 21 Total put in place 538,158 581,813 618,051 626,290 633,714 638,180 639,913 645,974 635,396 650,341 657,710 657,834 660,643 22 Private 408,012 444,743 470,969 478,363 487.807 490,896 494,333 500,078 496,495 503,592 510,650 511,655 511,730 23 Residential 231,191 255,570 265,536 273,020 278,956 282,496 286,045 289.666 288,003 291.907 299,196 299,471 302,725 24 Nonresidential 176,821 189,173 205,433 205,343 208.851 208,400 208,288 210.412 208,492 211.685 211,454 212,184 209,005 25 Industrial buildings . . . 32,535 32,563 31.417 29,794 31.055 30.936 31,474 31.457 29,642 30.067 28,588 31.020 28,092 26 Commercial buildings. 68.245 75,722 83,727 83,214 85.807 84,152 81981 86.064 86,321 88,480 87,999 85.590 84,815 27 Other buildings 27.084 30,637 37,382 39,275 37,694 39,151 37,812 39,168 37,678 37.334 37,436 37.470 38,079 28 Public utilities and other. 48,957 50.252 52,906 53.060 54,295 54.161 55.021 53.723 54,851 55,804 57,431 58.104 58,019 29 Public 130,147 137,070 147,082 147,927 145,907 147.284 145.580 145.896 138,901 146,749 147,060 146.180 148,913 30 Military 2,983 2.639 2,625 2,342 2,474 2.916 2,818 2,850 2,471 2,659 3,309 2,912 2,513 31 Highway 38,126 41,326 45,246 45,306 46,067 45,561 45,559 46,175 42,030 44,541 43,776 44,757 46,364 32 Conservation and development 6,371 5,926 5,628 6,422 5,281 6,305 5,488 4,985 5,146 5,989 5,445 5,370 6,040 33 Other 82,667 87.179 93,583 93,857 92,085 92,502 91,715 91,886 89,254 93,560 94.530 93.141 93,996 11.. NNoott aall aannnnuuaall rraatteess.. SOURCE. Bureau of the Census estimates for all series except (1) mobile homes, which are 2. Nott sseeaassoonnaallllyy aadjusted private, domestic shipments as reported by (he Manufactured Housing Institute and season- 33 Recent data oonn vvaalluuee ooff nneeww ccoonnssttrruuccttiioonn mmaayy nnoott bbee ssttrriiccttllyy ccoommppaarraabbllee wwiitthh ddaattaa ffoorr ally adjusted by the Census Bureau, and (2) sales and prices of existing units, which are previous periods beeccaauussee ooff cchhaannggeess bbyy tthhee BBuurreeaauu ooff tthhee CCeennssuuss iinn iittss eessttiimmaattiinngg tteecchhnniiqquueess. 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 C m ha o n n g th e s fr e o a m rli e 1 r 2 Change f ( r a o n m n u 3 al m ra o t n e t ) hs earlier Change from 1 month earlier level, Item 1997 1998' 1998 Oct 1997 1998 1998' Oct. Oct. Dec. Mar. June Sept. June July Aug. Sept. Oct. CONSUMER PRICES2 (1982-84-100) 1 All items 2.1 1.5 1.5 .2 2.5 1.5 .1 .2 .2 .0 .2 164.0 2 Food 1.8 2.4 1.5 1.3 3.0 2.0 .1 .2 .2 .0 .6 162.0 3 Energy items .9 -9.1 -7.7 -21.1 -1.9 -8.7 -.7 .0 -1.0 -1.3 .9 101.3 4 AH items less food and energy 2.3 2.3 2.4 2.4 2.6 2.3 .1 .2 .2 .2 174.7 .5 .8 .6 .8 1.1 1.1 .0 .1 .2 -.1 .0 143.8 6 Services 3.0 3.0 3.3 3.0 3.2 3.0 .2 .2 .3 .3 -> 192.3 PRODUCER PRICES (1982-100) 7 Finished goods -.3 -.7 -1.2 -3.0 .3 .3 -.2 .2 -.4 .3 .2 131.4 8 Consumer foods -1.1 .3 1.5 -1.8 .9 1.8 .1' .4 -.4 .4 .4 135.5 9 Consumer energy -1.9 -10.1 -5.7 -27.0 -1.1 -10.2 -1.2' -.3' -2.3 -.1 1.2 74.8 10 Other consumer goods .7 2.0 -.3 3.9 1.4 3.3 .0 .3 .0 .5 .0 148.9 -.3 -.4 -2.0 .0 -1.2 .9 -.1' .1 -.3 .4 .0 138.0 Intermediate materials 12 Excluding foods and feeds _ 2 -2.3 -.6 -4.4 -1.3 -1.9 -.3' -A' -.2 -.2 122.7 13 Excluding energy .4 -1.1 .0 -.9 -1.2 -1.5 -.1 .0 -.1 -.3 -.3 132.7 Crude materials 14 Foods -7.9 -6.1 4.1 -14.3 -.7 -22.6 .6' -3.4' -1.1 -1.9 4.0 103.4 12.2 -29.5 5.4 -53.5 -14.6 -15.2 -8.0' 2.8' -5.1 -1.7 1.9 65.4 16 Other 1.8 -13.7 -8.2 -13.6 -5.6 -18.3 -.4' -1.7' -2.0 -1.3 -2.7 133.7 1. Not seasonally adjusted. SOURCE. U.S. Department of Labor, Bureau of Labor Statistics. 2. Figures for consumer prices are for all urban consumers and reflect a rental-equivalence measure of homeownership. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • January 1999 2.16 GROSS DOMESTIC PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1996 Q3 04 Ql Q2 Q3 GROSS DOMESTIC PRODUCT 1 Total 7,269.6 7,661.6 8,110.9 8,254.5 8,384.2 8,440.6 8,526.5 By source 2 Personal consumption expenditures 4,953.9 5,215.7 5,493.7 5,540.3 5,593.2 5,676.5 5,773.7 5,843.0 3 Durable goods 611.0 643.3 673.0 681.2 682.2 705.1 720.1 715.5 4 Nondurable goods 1,473.6 1,539.2 1,600.6 1,611.3 1,613.2 1,633.1 1,655.2 1,670.7 5 Services 2,869.2 3,033.2 3,220.1 3,247.9 3,297.8 3,338.2 3,398.4 3,456.8 6 Gross private domestic investment 1,043.2 1,131.9 1,256.0 1,265.7 1,292.0 1,366.6 1,345.0 1,361.8 7 Fixed investment 1,012.5 1,099.8 1,188.6 1,211.1 1,220.1 1,271.1 1,305.8 1,303.0 8 Nonresidential 727.7 787.9 860.7 882.3 882.8 921.3 941.9 931.1 9 Structures 201.3 216.9 240.2 243.8 246.4 245.0 245.4 241.7 10 Producers' durable equipment 526.4 571.0 620.5 638.5 636.4 676.3 696.6 689.4 11 Residential structures 284.8 311.8 327.9 328.8 337.4 349.8 363.8 372.0 12 Change in business inventories 30.7 32.1 67.4 54.6 71.9 95.5 39.2 58.7 13 Nonfarm 40.1 24.5 63.1 47.3 66.9 90.5 31.5 51.7 14 Net exports of goods and services -83.9 -91.2 -93.4 -94.7 -98.8 -123.7 -159.3 -168.7 15 Exports 819.4 873.8 965.4 981.7 988.6 973.3 949.6 935.7 16 Imports 903.3 965.0 1,058.8 1,076.4 1,087.4 1,097.1 1,108.9 1.104.4 17 Government consumption expenditures and gross investment. 1,356.4 1,405.2 1,454.6 1,459.5 1,468.1 1,464.9 1,481.2 1,490.5 18 Federal 509.1 518.4 520.2 521.0 520.1 511.6 520.7 518.7 19 State and local 847.3 934.4 938.5 947.9 953.3 960.4 971.8 By major type of product 20 Final sales, total 7,238.9 7,629.5 8,043.5 8,116.2 8,182.6 8,288.7 8,401.3 8,467.8 21 Goods 2,644.9 2,780.3 2,911.2 2,944.3 2,948.7 3,005.8 3,025.3 3,024.3 22 Durable 1,143.4 1,228.8 1,310.1 1,337.1 1,334.3 1,376.9 1,380.8 1,365.9 23 Nondurable 1,501.5 1,551.6 1,601.0 1,607.2 1,614.4 1,628.8 1,644.4 1,658.4 24 Services 3,974.9 4,179.5 4,414.1 4,448.0 4,501.2 4,538.4 4,619.5 4,678.9 25 Structures 619.1 669.7 718.3 723.9 732.7 744.6 756.6 764.6 26 Change in business inventories 30.7 32.1 67.4 54.6 71.9 95.5 39.2 58.7 27 Durable goods 32.4 20.8 33.6 19.9 34.0 49.9 4.5 25.9 28 Nondurable goods -1.7 11.4 33.8 34.7 37.9 45.6 34.7 32.8 MEMO 6,761.7 6,994.8 7,269.8 7,311.2 7,364.6 7,464.7 7,498.6 7,559.5 29 Total GDP in chained 1992 dollars NATIONAL INCOME 5,923.7 6,256.0 6,646.5 6,704.8 6,767.9 6,875.0 6,945.5 30 Total 4,208.9 4,409.0 4,687.2 4,715.5 4,798.0 4,882.8 4,945.2 5,009.7 31 Compensation of employees 3,441.9 3,640.4 3,893.6 3,919.3 3,993.6 4,065.9 4,121.6 4,179.4 32 Wages and salaries 622.7 640.9 664.2 666.7 671.4 679.5 685.8 692.4 33 Government and government enterprises 2,819.2 2,999.5 3,229.4 3,252.6 3,322.2 3,386.4 3,435.8 3,487.0 34 Other 767.0 768.6 793.7 796.2 804.4 816.8 823.5 830.3 35 Supplement to wages and salaries 365.3 381.7 400.7 402.7 407.4 414.1 417.9 422.0 36 Employer contributions for social insurance 401.6 387.0 392.9 393.6 397.0 402.8 405.7 408.3 37 Other labor income 38 Proprietors' income1 488.1 527.7 551.2 556.5 558.0 564.2 571.7 574.9 39 Business and professional 465.6 488.8 515.8 520.2 526.6 536.8 544.0 550.7 40 Farm1 22.4 38.9 35.5 36.3 31.4 27.4 27.7 24.2 41 Rental income of persons2 133.7 150.2 158.2 158.6 158.8 158.3 161.0 163.6 42 Corporate profits1 672.4 750.4 817.9 840.9 820.8 829.2 820.6 43 Profits before tax3 635.6 680.2 734.4 758.9 736.4 719.1 723.5 44 Inventory valuation adjustment -22.6 -1.2 6.9 4.8 4.3 25.3 7.8 n.a. 45 Capital consumption adjustment 59.4 71.4 76.6 77.2 80.1 84.9 89.4 96.8 46 Net interest 420.6 418.6 432.0 433.3 432.4 440.5 447.1 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 Q3 Q4 Ql Q2 Q3 PERSONAL INCOME AND SAVING 1 Total personal income 6,072.1 6,425.2 6,784.0 6,820.9 6,904.9 7,003.9 7,081.9 7,155.6 2 Wage and salary disbursements 3,428.5 3.631.1 3,889.8 3,915.5 3,989.9 4,061.9 4,117.6 4,175.4 3 Commodity-producing industries 863.9 909.0 975.0 979.4 1,003.7 1,019.0 1,023.2 1.026.8 4 Manufacturing , 647.9 674.6 719.5 722.3 741.3 750.4 750.8 750.3 5 Distributive industries 782.9 823.3 879.8 886.3 904.5 918.9 932.2 946.0 6 Service industries 1,158.9 1,257.9 1,370.8 1.383.2 1,410.2 1,444.5 1,476.4 1,510.1 7 Government and government enterprises 622.7 640.9 664.2 666.7 671.4 679.5 685.8 692.4 8 Other labor income 401.6 387.0 392.9 393.6 397.0 402.8 405.7 408.3 9 Proprietors' income 488.1 527.7 551.2 556.5 558.0 564.2 571.7 574.9 10 Business and professional1 465.6 488.8 515.8 520.2 526.6 536.8 544.0 550.7 11 Farm' 22.4 38.9 35.5 36.3 31.4 27.4 27.7 24.2 12 Rental income of persons2 133.7 150.2 158.2 158.6 158.8 158.3 161.0 163.6 13 Dividends 192.8 248.2 260.3 260.4 261.3 261.6 262.1 263.0 14 Personal interest income 704.9 719.4 747.3 750.5 753.0 757.0 763.0 767.6 15 Transfer payments 1,015.9 1,068.0 1,110.4 1,114.0 1,120.5 1,139.0 1,145.8 1,152.2 16 Old-age survivors, disability, and health insurance benefits 585.0 588.7 507.8 538.0 565.9 568.3 572.2 581.6 17 LESS: Personal contributions for social insurance 345.1 349.4 293.6 306.3 326.2 328.2 333.6 340.9 18 EQUALS: Personal income 7.081.9 7,155.6 6,072.1 6,425.2 6,784.0 6,820.9 6,904.9 7,003.9 19 LESS: Personal tax and nontax payments 1.092.9 1,113.2 795.0 890.5 989.0 999.0 1,025.5 1,066.8 20 EQUALS: Disposable personal income 5,988.9 6,042.4 5,277.0 5,534.7 5,795.1 5,821.8 5,879.4 5,937.1 21 LESS: Personal outlays 5,963.3 6,036.4 5,097.2 5,376.2 5,674.1 5,723.3 5,781.2 5,864.0 22 EQUALS: Personal saving 25.6 5.9 179.8 158.5 121.0 98.5 73.0 MEMO Per capita (chained 1992 dollars) 23 Gross domestic product 25,690.5 26.335.7 27.136.2 27,260.4 27,398.2 27,718.8 27.783.0 27,946.2 24 Personal consumption expenditures 17,498.4 17,893.0 18.340.9 18,445.2 18,530.5 18,771.1 19.007.8 19,147.0 25 Disposable personal income 18,640.0 18.989.0 19.349.0 19,385.0 19,478.0 19,632.0 19,7190 19,799.0 26 Saving rate (percent) GROSS SAVING 27 Gross saving 1,187.4 1,274.5 1,406.3 1,427.0 1,428.0 1,482.5 1,448.5 n.a. 28 Gross private saving . . . 1.106.2 1,114.5 1,141.6 1,139.0 1,131.6 1,130.1 1,079.0 n.a. 29 Personal saving 179.8 158.5 1210 98.5 98.2 73.0 25.6 5.9 30 Undistributed corporate profits' 256.1 262.4 296.7 311.5 295.0 312.0 300.9 n.a. 31 Corporate inventory valuation adjustment -22.6 -1.2 6.9 4.8 4.3 25.3 7.8 n.a. Capital consumption allowances 32 Corporate 431.1 452.0 477 3 480.8 487.7 492.5 497.8 503.1 33 Noncorporate 225.9 232.3 242.8 244.4 247.0 248.6 250.7 253.6 34 Gross government saving 81.2 160.0 264.7 288.0 296.4 352.4 369.4 35 Federal -103.7 -39.6 49.5 70.0 72.3 128.7 143.9 36 Consumption of fixed capital 70.7 70.6 70.6 70.3 70.2 69.9 69.5 69.6 37 Current surplus or deficit (-), national accounts -174.4 -110.3 -21.1 -.3 2.2 58.8 74.4 n.a. 38 State and local 184.8 199.7 215.2 218.0 224.1 223.7 225 6 n.a. 39 Consumption of fixed capital . 73.2 77.1 81.1 81.4 82.7 83.5 84.3 85.2 40 Current surplus or deficit (-), national accounts 111.7 122.6 134.1 136.6 141.4 140.2 141.3 41 Gross investment 1,160.9 U42.3 1,350.5 1,361.9 1360.7 1.428.4 1,362.7 42 Gross private domestic investment 1,043.2 1.131.9 1,256.0 1,265.7 1,292.0 1,366.6 1,345.0 1,361.8 43 Gross government investment 218.4 229.7 235.4 237 3 236.5 237.4 232.5 238.9 44 Net foreign investment -100.6 -119.2 -140.9 -141.0 -167.8 -175.6 -214.8 n.a. 45 Statistical discrepancy -32.2 -85.7 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 • January 1999 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data seasonally adjusted except as noted1 hem credits or debits Q2 Q3 Q4 Ql Q2P 1 Balance on current account -115,254 -134,915 -155,215 -35,090 -38,094 -45,043 -46,735 -56,525 2 Merchandise trade balance2 -173,729 -191,337 -197,954 -49,096 -49,296 -49,839 -55,698 -64,831 3 Merchandise exports 575,845 611,983 679,325 169,240 172,302 174,284 171,469 164,666 4 Merchandise imports -749,574 -803,320 -877,279 -218,336 -221,598 -224,123 -227,167 -229,497 5 Military transactions, net 4,769 4,684 6,781 2,191 1,945 1,103 1,527 1,036 6 Other service transactions, net 69,069 78,079 80,967 20,390 20,246 20,277 19,164 19,842 7 Investment income, net 19,275 14,236 -5,318 460 -1,544 -4,247 -2,248 -3,238 8 U.S. government grants -11,170 -15,023 -12,090 -2,274 -2,362 -5,213 -2,266 -2,060 9 U.S. government pensions and other transfers -3,433 -4.442 -4,193 -1,055 -1,056 -1,069 -1,126 -1,130 10 Private remittances and other transfers -20,035 -21,112 -23,408 -5,706 -6,027 -6,055 -6,088 -6,144 11 Change in U.S. government assets other than official reserve assets, net (increase, -) -589 -708 174 -269 436 29 -496 12 Change in U.S. official reserve assets (increase, —) -9,742 6.668 -1,010 -236 -730 -4,524 -444 -1,945 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -808 370 -350 -133 -139 -150 -182 72 15 Reserve position in International Monetary Fund -2,466 -1,280 -3,575 54 -463 -4,221 -85 -1,031 16 Foreign currencies -6,468 7,578 2,915 -157 -128 -153 -177 -986 17 Change in U.S. private assets abroad (increase, -) -317,122 -374,761 -477,666 -86,101 -123,023 -118,946 -44,816 -95,049 18 Bank-reported claims3 -75,108 -91,555 -147,439 -26,625 -29,577 -27,539 3,074 -24,979 19 Nonbank-reported claims -45,286 -86,333 -120,403 -9,825 -24.791 -47,907 -6,596 20 U.S. purchases of foreign securities, nel -100,074 -115,801 -87,981 -23,263 -41,167 -8,030 -6,973 -23,446 21 U.S. direct investments abroad, net -96,654 -81,072 -121,843 -26,388 -27,488 -35,470 -34,321 -40,261 22 Change in foreign official assets in United States (increase, +) 109,768 127,344 15,817 -5,411 21,258 -26,979 11,324 -10,483 23 U.S. Treasury securities 68,977 115,671 -7,270 -11,689 6.686 -24,578 11,336 -20,317 24 Other U.S. government obligations 3.735 5.008 4,334 827 2,667 86 2,610 254 25 Other U.S. government liabilities4 -217 -362 -2,521 -523 -1,167 -244 -1,059 -422 26 Other U.S. liabilities reported by U.S. banks' 34,008 5,704 21,928 5,043 12,439 -3,250 -607 9,170 27 Other foreign official assets' 3,265 1,323 -654 931 633 1,007 -956 832 28 Change in foreign private assets in United States (increase, +) 355,681 436,013 717,624 155,184 160,180 247,470 84,205 173,908 29 U.S. bank-reported liabilities3 30,176 16,478 148,059 28,067 12,606 89,643 -50,497 40,888 30 U.S. nonbank-reported liabilities 59,637 39.404 107,779 5,274 26,275 47,390 32,707 31 Foreign private purchases of U.S. Treasury securities, net .... 99,548 154,996 146,710 42,614 35,432 35,301 -1,701 25,715 32 Foreign purchases of other U.S. securities, net 96,367 130,151 196,845 54,258 60,327 36,783 77,019 69.531 33 Foreign direct investments in United States, net 57,653 77,622 93,449 20,149 18,964 28,453 25,931 22,036 34 Allocation of special drawing rights 0 0 0 0 0 0 0 0 35 Discrepancy -22,742 -59,641 -99,724 -28,077 -20,027 -52,007 -3,146 -9,410 36 Due to seasonal adjustment 685 -10,018 3,528 6,217 1,562 37 Before seasonal adjustment -59,641 -99,724 -28.762 -10,009 -55,535 -9,363 -10,972 MEMO Changes in official assets 38 U.S. official reserve assets (increase, -) -9,742 6,668 -1.010 -236 -730 -4,524 -444 -1,945 39 Foreign official assets in United States, excluding line 25 (increase, +) 109,985 127.706 18.338 -4,888 22,425 -26,735 12,383 -10,061 40 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22) 4,239 14,911 10.822 1.970 3.031 -1,282 -968 -350 1. Seasonal factors are not calculated for lines 12-16, 18-20, 22-34, and 38^10. 4. Associated primarily with military sales contracts and other transactions arranged with 2. Data are on an international accounts basis. The data differ from the Census basis data, or through foreign official agencies. shown in table 3.11, for reasons of coverage and timing. Military exports are excluded from 5. Consists of investments in U.S. corporate stocks and in debt securities of private merchandise trade data and are included in line 5. corporations and state and local governments. 3. Reporting banks include all types of depository institutions as well as some brokers and SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current dealers. Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A51 3.11 U.S. FOREIGN TRADE1 Millions of dollars; monthly data seasonally adjusted 1998 Item 1995 1996 1997 Mar. Apr. May June July Aug. Sept.p 3 Goods and services, balance -101,857 -111,040 -113,684 -13,497 -14,148 -15,777 -13,639 -14,547 -15,899 -14,031 2 Merchandise -173.560 -191,170 -198,975 -20,503 -21,335 -22,578 -20,530 -21,029 -22,735 -20,596 3 Services 71,703 80,130 85,291 7.006 7.187 6.801 6,891 6,482 6,836 6,565 4 Goods and services, exports 794,610 848,833 931,370 79,058 77,515 76,399 76,375 75,101 75,426 77,125 5 Merchandise 575,871 612,069 678,150 57,217 55,335 54,719 54,767 53,825 53,862 55,873 218,739 236,764 253.220 21.841 22,180 21,680 21,608 21,276 21,564 21,252 7 Goods and services, imports -896,467 -959,873 -1.045,054 -92,555 -91,663 -92,176 -90,014 -89,648 -91,325 -91,156 -749,431 -803,239 -877,125 -77,720 -76,670 -77,297 -75,297 -74,854 -76,597 -76,469 9 Services -147.036 -156,634 -167,929 -14.835 -14,993 -14,879 -14,717 -14,794 -14,728 -14,687 1. Data show monthly values consistent with quarterly figures in the U.S. balance of SOURCE. FT900, U.S. Department of Commerce, Bureau of the Census and Bureau of payments accounts. Economic Analysis. 3.12 U.S. RESERVE ASSETS Millions of dollars, end of period 1998 Asset 1995 1996 1997 Mar. Apr. May June July Aug. Sept.p Oct.p 1 Total 85,832 75,090 69,954 69,354 70,328 70,723 71,161 72,264 73,544 75,66 79,186 2 Gold stock, including Exchange Stabilization Fund1 11,050 11,049 11,050 11,050 11,048 11,049 11,047 11,046 11,046 11,044 11,044 3 Special drawing rights2'3 11.037 10.312 10,027 10,108 10.188 10,296 10,001 9,586 9,891 10.106 10.379 4 Reserve position in International Monetary Fund 14,649 15,435 18,071 17,976 18,218 18,957 18,945 20,780 21,161 21,644 22,278 5 Foreign currencies4 49.096 38,294 30.809 30,220 30.874 30,421 31,168 30,852 31,446 32,882 35.485 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 1998 Asset 1995 1996 1997 Mar. Apr. May June July Aug. Sept.p Oct.p 1 Deposits 386 167 457 167 162 156 200 161 161 347 154 Held in custody 2 U.S. Treasury securities2 522,170 638.049 620,885 630,602 622,220 622,557 616,569 613,893 588,337 578,403 588,768 3 Earmarked gold" 11,702 11,197 10,763 10,664 10,651 10,641 10,617 10,586 10,510 10,457 10,403 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 • January 1999 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1998 Item 1996 1997 Mar. Apr. May June' July' Aug. Sept.tp 1 Total1 758,624 778,538 790,921 788,310 786,184 781,069 775,137 760,814 735,112 By type 2 Liabilities reported by banks in the United States 113,098 135,326 134,719 144,929 142,658 144,099 142,140 144,070 131,492 198,921 148,301 153,335 138,418 137,652 134,324 131,089 130,398 128,146 U.S. Treasury bonds and notes 379,497 423,456 429,642 430,804 431,702 428,216 428,685 411,765 401,461 5,968 5,994 6,110 6,149 6,189 6,229 6,269 6,311 6,350 6 U.S. securities other than U.S. Treasury securities 61,140 65,461 67,115 68,010 67,983 68,201 66,954 68,270 67,663 By area 7 Europe1 257,915 263,103 259,053 268,848 269,178 264,657 270.195 266,625 258,234 8 Canada 21,295 18.749 20,280 20,254 20,122 19,396 19.963 16,387 16,170 9 Latin America and Caribbean 80,623 97.616 98,028 101,191 101,792 100,849 100,826 98,405 79,779 10 Asia 385,484 382,423 397.283 382,027 379,188 378,113 367.687 363,902 365,681 11 Africa 7,379 10,118 11.440 11,281 10,574 11,555 11.904 11,501 11,721 12 Other countries 5,926 6,527 4,835 4,707 5,328 6,497 4,560 3,992 3,525 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 1997 1998 Item 1994 1995 1996 Sept. Dec. Mar. June 89,258 109,713 103,383 120,105 117,524 100,342 90,119 60,711 74,016 66,018 91,158 83,038 81,977 68,095 3 Deposits 19,661 22,696 22,467 32,154 28,661 27,934 27,213 41,050 51,320 43,551 59,004 54,377 54,043 40,882 5 Claims of banks' domestic customers2 10,878 6,145 10,978 10,090 8,191 7,926 7,354 I. 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

Bank-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 1995 1996 Mar. Apr. May July Aug. Sept.' By HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners 1,099,549 1,162,148 1,283,686 1,255,075 1,270,626 1,160,273 1,288,032' 1,306,488' 1,341,622 1,348,596 2 Banks' own liabilities 753,461 758,998 883,639 843,906 861,727 852,052 884,734' 896,972' 928,137 915,312 3 Demand deposits 24,448 27.034 32.104 32,588 32,107 31,201 36,246 30,928 33,038 33,556 4 Time deposits2 192,558 186,910 198.470 183,109 185,948 185,160 186,686' 188,056' 183,506 170,738 5 Other3 140,165 143,510 168.013 188,425 204,294 192.167 183,451 192,536 190,542 168,609 6 Own foreign offices4 396,290 401.544 485,052 439,784 439.378 443.524 478,351 485,452 521,051 542,409 7 Banks' custodial liabilities5 346,088 403,150 400,047 411,169 408,899 408,221 403.298' 409,516' 413,485 433,284 8 U.S. Treasury bills and certificates6 197,355 236,874 193.239 191,571 174,256 173,873 169,225 164,274 162,235 160,598 9 Other negotiable and readily transferable instruments7 52,200 72,011 93.641 96,364 111,398 107,797 112,598' 117.433' 123.378 142,169 10 Other 96,533 94,265 113,167 123,234 123,245 126,551 121,475 127.809 127.872 130.517 11 Nonmonetary international and regional organization: 11,039 13,972 11,690 15,246 14,894 14,186 14,103' 14.314' 15,188 15,199 12 Banks' own liabilities 10.347 13,355 11,486 14,925 14,478 13,559 13,441 12,188' 13,684 13,846 13 Demand deposits 21 29 16 98 365 229 226 19 59 408 14 Time deposits 4,656 5,784 5,466 5,957 6,646 7,029 6,784 6,354' 6,252 5,760 15 Other3 5,670 7,542 6,004 8,870 7,467 6,301 6,431 5,815 7,373 7,678 16 Banks' custodial liabilities5 692 617 204 321 416 627 662' 2,126' 1,504 1,353 17 U.S. Treasury bills and certificates6 350 352 69 247 344 359 338 349 490 435 18 Other negotiable and readily transferable instruments7 265 133 72 72 268 322' 1,777' 1,012 818 19 Other 1 0 2 2 0 0 2 0 2 100 20 Official institutions9 275,928 312.019 283.627 288,054 283,347 280,310 278,423' 273,229' 274,468 259,638 21 Banks' own liabilities 83,447 79,406 101.910 104,006 105,731 104,358 102,256 102,040 101,558 85,251 22 Demand deposits 2,098 1,511 2.314 2,051 2,532 2,052 2,582 3,560 3.456 3,607 23 Time deposits2 30,717 33,336 41,420 40.265 38,865 36,060 36,068 36,358 35,603 28.067 24 Other' 50.632 44,559 58,176 61,690 64,334 66,246 63,606 62,122 62,499 53.577 25 Banks' custodial liabilities5 192,481 232.613 181,717 184,048 177,616 175,952 176,167' 171,189' 172,910 174,387 26 U.S. Treasury bills and certificates6 168,534 198,921 148,301 153,335 138,418 137,652 134,324 131,089 130,398 128,146 27 Other negotiable and readily transferable instruments7 23,603 33,266 33,211 30,183 38,745 38.010 41,180' 39,792' 41,759 45.684 28 Other 344 426 205 530 453 290 663 308 753 557 29 Banks10 691,412 694,835 816,064 763,349 776,269 782,828 809,251' 825,245' 853,292 874,621 30 Banks' own liabilities 567,834 562.898 642,324 585,083 596,509 601,967 633.032 643,982 673,157 685,982 31 Unaffiliated foreign banks 171,544 161,354 157,272 145,299 157,131 158,443 154.681 158,530 152,106 143,573 32 Demand deposits 11,758 13,692 17.527 18,350 17,152 16,111 20,772 15,097 16,063 15,799 33 Time deposits2 103,471 89.765 83,433 70,060 72,703 74,018 75,231 78,252 74.151 67,644 34 Other3 56,315 57,897 56.312 56.889 67,276 68,314 58,678 65,181 61,892 60,130 35 Own foreign offices4 396,290 401,544 485,052 439,784 439,378 443,524 478.351 485,452 521,051 542,409 36 Banks' custodial liabilities5 123,578 131,937 173,740 178,266 179,760 180,861 176,219' 181,263' 180,135 188,639 37 U.S. Treasury bills and certificates6 15,872 23,106 31,915 28.499 26.650 26,920 25,337 22,929 20,696 21,563 38 Other negotiable and readily transferable instruments7 13,035 17,027 35,333 34,962 37,942 38,186 38,122' 39,203' 40,180 44,807 39 Other 94,671 91,804 106.492 114.805 115,168 115.755 112,760 119.131 119,259 122,269 40 Other foreigners 121.170 141,322 172,305 188.426 196,116 182.949 186,255' 193.700' 198,674 199,138 41 Banks' own liabilities 91,833 103,339 127,919 139,892 145,009 132,168 136,005' 138,762 139,738 130,233 42 Demand deposits 10,571 11,802 12,247 12,089 12,058 12,809 12,666 12,252 13.460 13,742 43 Time deposits 53,714 58,025 68,151 66,827 67,734 68,053 68,603' 67,092 67.500 69,267 44 Other3 27,548 33,512 47,521 60,976 65,217 51,306 54,736 59,418 58,778 47,224 45 Banks' custodial liabilities5 29,337 37,983 44,386 48,534 51,107 50.781 50,250 54,938' 58,936 68,905 46 U.S. Treasury bills and certificates6 12,599 14.495 12,954 9.490 8.844 8.942 9,226 9.907 10.651 10.454 47 Other negotiable and readily transferable instruments7 15,221 21,453 24,964 31,147 34,639 31,333 32,974 36,661' 40,427 50,860 48 Other 1.517 2,035 6,468 7,897 7,624 10,506 8,050 8,370 7,858 7,591 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 9,103 14,573 16,083 22,416 22,503 23.440 21,229 22,847 25,867 27,391 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 US 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 • January 1999 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States'—Continued Mar Apr May June July Aug. Sept 50 Total, all foreigners 1,099,549 1,162,148 1,283,686 1,255,075 1,270,626 1,260,273 1,288,032' 1,306.488' 1,341,622' 1,348,596 51 Foreign countries 1.088,510 1,148,176 1,271,996 1,239,829 1.255.7J2 1,246,087 1,273,929' 1,292.174' 1,326,434' 1.333,397 52 Europe 362.819 176.590 420,438 390,750 406,391 405.348 402,103' 431.783' 457,487' 450,599 53 Austria 3,537 5.128 2,717 2,375 2.957 3,012 2,268 2,602 2,671 3,137 54 Belgium and Luxembourg 24,792 24,084 41,007 33,244 38,530 35,518 35.454 31,845 35,086 33.936 55 Denmark 2,921 2,565 1,514 1.094 2,588 1,443 1.989 2.013 2,128 1.578 56 Finland 2.831 1,958 2,246 1.549 1,768 1,365 1.438 1,211 1,350 1.181 57 France 19.218 35,078 46.607 44.027 48,468 47,869 46.162 47,140 48,328 50,354 58 Germany 24,035 24.660 2.1.737 20,971 24,895 26,452 25.470 23.730 28,751 25.810 59 Greece 2.014 1,835 1.552 2.020 2,383 2,610 2,429 2,784 2,941 2,544 60 Italy 10.868 10,946 11.378 9.631 10,600 11,127 11,509 11,114 10,625 9.1R4 61 Netherlands 13.745 11,110 7.185 8,208 8,051 7,265 6,845 7,097 9.239 8,066 62 Norway 1.394 1,288 317 346 514 774 607 1,179 1,469 688 63 Portugal 2,761 3.562 2.262 1.426 2.279 2,160 2,334 2.823 2,424 2.292 64 Russia 7,948 7.623 7,968 6.466 5.381 1952 4.654 6,398 2,718 3.085 65 Spain 10,011 17,707 18,989 16.315 18.071 15,520 11,649 12.079 14,283 20,487 66 Sweden 3.246 1.623 1,628 1.967 1.785 2,197 1,148 2.198 1.769 3,285 67 Switzerland 43.625 44 538 39,172 35.463 32.341 33,893 39,071' 44,861 39,362 48,613 68 Turkey 4.124 6.738 4,054 4,154 4.340 4,467 4,894' 5,077' 4,317' 4,264 69 United Kingdom 139.183 153.420 181.904 174.198 172.829 178,185 176,703 196.859 219.147 204,843 70 Yugoslavia" 177 206 239 236 246 270 234 322 242 25.3 71 Other Europe and other former U.S.S.R.12 26,389 22,521 25,762 27.060 28,365 27,269 25.245r 28,451' 30.637' 26.999 72 Canada 30.468 38.920 28,341 27,121 27.398 26,021 28,864 29.526 27,844 28.566 73 Latin America and Caribbean . . . 440,213 467,529 536.365 529,446 552,896 550,714 568,228' 564,388' 557,071' 560,067 74 Argentina 12,235 13,877 20.199 18.S35 17,766 16,938 18.502' 21,010' 21,655' 18,384 75 Bahamas 94,991 88,895 112.217 109,041 112,510 114,222 116.435 115,309 113,543 122,806 76 Bermuda 4,897 5.527 6.911 8,273 6,657 7,142 7,769 7,216 7,332 7.920 77 Brazil 21.797 27.701 31.037 34.017 36,777 38,463 35.345' 34.292' 27.824 18.496 78 British West Indies 239.083 251.465 276.389 261.542 273.565 277,929 295,321 290,.142r 291.470' 298.530 79 Chile 2.826 2.915 4 072 3,975 4.330 4,230 4,356' 4.987' 4.726' 5,725 80 Colombia 3,659 3,256 3.652 4,200 4.212 4 183 4,805 4,023 4.102' 4,463 81 Cuba 8 21 66 55 57 59 63 63 62 62 82 Ecuador 1,314 1,767 2,078 1.814 1.737 1,783 1,616' 1,772' 1,608' 1,540 83 Guatemala 1.276 1.282 1,494 1,438 1.478 1.353 1,363 1,273 1.237' 1,241 84 Jamaica 481 628 450 431 449 438 522 519 550 541 85 Mexico 24.560 31.240 33,972 35.708 37,623 37.682 38.044 38,554 38,087 35,681 86 Netherlands Antilles 4,673 6.099 5.085 11,351 17.569 7.447 6,861 8.922 8.340 S.588 87 Panama 4,264 4,099 4,241 3,958 4.211 4.106 3.723 3,596 3,675' 3,826 88 Peru 974 834 893 878 878 964 925 984 900 843 89 Uruguay 1,836 1,890 2.382 2,228 2,097 1,991 1,982 2,097 2,091 2,277 90 Venezuela 11,808 17,363 21,601 21,474 20,696 21,600 20.442 19.492 20,125' 19,303 91 Other 7.531 8,670 9,626 10.228 10,284 9.984 10.154 9,937 9,744' 9,841 92 Asia . 240.595 249,083 269,299 275,173 251,423 244.779 254,412' 247,952' 266,485' 275.623 China 93 Mainland 33.750 30,438 18,252 20,701 20.122 20,209 21.558 18,919 18,506 18,523 94 Taiwan 11.714 15,995 11,760 1.1,619 13,776 12,648 11,619 11,333 11,290 12,080 95 Hong Kong 20.197 18.789 17,722 17,825 19.762 18,106 19,720 15,826 18.349 16.627 96 India 3.373 3,930 4,567 5,586 4,813 4,882 4.821 4,678 6,437 5.144 97 Indonesia 2.708 2,298 3,554 4,015 4,266 3,197 3.848 3,938 5.651' 5,470 98 Israel 4.041 6,051 6.281 7.589 7,348 6.251 6,095 5,969 5.296 5,984 99 Japan 109,193 117.316 143,401 137,700 113.283 111,621 118,669 123.167 131.376 142,757 100 Korea (South) 5,749 5.949 1.1,060 11,233 13,711 14.010 13.269 12.713 12.498 12.986 101 Philippines 3,092 ' 178 3.250 3,009 2,870 2,802 3,418 2,609 2,777 2,712 1 1 1 0 0 0 3 4 2 T M O h t i h a d e i d l r a le n d E astern oil-exporting countries' q3 1 1 1 8 2 5 . , , 9 5 2 1 8 7 7 2 9 1 1 1 0 7 6 . . . 9 7 2 1 4 8 2 2 5 2 1 5 6 4 , , . 5 9 0 0 9 5 1 2 9 2 1 8 9 6 . , , 6 0 2 7 0 1 6 3 7 2 1 6 7 7 , , . 4 9 0 4 9 2 9 5 8 2 1 6 8 5 . . . 8 8 2 7 7 9 9 6 6 3 1 0 7 3 . . , 4 1 8 1 4 29 8 8 ' 2 1 8 6 3 , , , 1 9 7 1 0 8 2 8 0 ' 3 1 1 7 4, , . 5 9 8 3 6 0 2 4 9 ' 3 1 6 0 6 . . , 6 1 5 0 6 7 1 4 5 105 Africa 7.641 8,116 10,347 11.385 11.160 10.965 10.735' 10,788' 10,562' 11.098 106 Egypt 2,136 2.012 1,663 1,449 1.236 1,460 1,523 1.319 1,459 1.616 107 Morocco 104 138 88 131 115 84 74 76 88 108 South Africa 739 458 2,158 2.547 2.556 2,465 2.642 2,446 2.428 2,658 109 Zaire 10 10 10 10 1 5 5 7 35 6 110 Oil-exporting countriesIJ 1.797 2.626 3,060 4.275 4.3.12 4,079 3.552 3 893 .1.684 1,727 111 Other 2.855 3,318 3.016 2.902 2.841 2,929' 3.049' 2.880' 3.003 112 Other 6.774 7.938 7.206 5.954 6,464 8,260 9,587 7.737 6.985 7.444 113 Australia . . 5,647 6.479 6.304 4,989 5.450 7,416 8,510 6.490 5,931 6.427 114 Other .... 1.127 1.459 902 965 1,014 844 1,077 1.247 1.054 1,017 115 Nonmonetary international and regional organizations 11,039 13.972 11,690 15,246 14.894 14.186 14,103' 14,314' 15,188' 15.199 116 International15 9,300 12,099 10,517 14,331 13.431 12,509 12,548 11,220' 12,825' 12.769 117 Latin American regional16 893 1,339 424 536 762 830 694' 750' 721' 800 118 Other regional17 846 534 749 .179 701 847 861 2,344 1,642 1.630 11. Since December 1992, has excluded Bosnia, Croatia, and Slovenia. 15. Principally the International Bank lor Reconstruction and Development. Excludes 12. Includes the Bank for International Seillements. Since December 1992. Im "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 (Truciat States). for International Settlements, which is included in "Other Europe." 14. Comprises Algeria, Gabon. Libya, and Nigeria. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Bank-Reported Data A55 3.18 BANKS' OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States' Payable in U.S. Dollars Millions of dollars, end of period 1998 Area or country 1995 Mar. Apr. May July Aug. Sept.p 1 Total, all foreigners 532,444 599,925 708,272 687,648 700,035 703,532 727,942r 740,236r 764.022 754,467 2 Foreign countries 530,513 597,321 705,809 684,700 696,742 701,140 725,027' 735,826' 759,632 749,125 3 Europe 132,150 165,769 199,880 205,528 207,154 208,567 223,277' 229,928 226.823 231,839 4 Austria 565 1,662 1,354 1,566 1,827 2.130 1,259 1,892 1.856 1,849 5 Belgium and Luxembourg 7,624 6,727 6,641 6.148 5.482 6.115 7,782 8,459 6.779 8,190 6 Denmark 403 492 895 968 1.286 1,198 933 1.374 1,059 7 Finland 1,055 971 1,233 1,686 1,018 931 1,146 1,032 1.161 1,073 8 France 15,0.13 15,246 16,239 18,206 17,383 16,276 15,474 14,421 17.314 16,783 9 Germany 9,263 8,472 12,676 13.047 16,931 15,301 15,751 11,327 12,029 15,210 10 Greece 469 568 402 503 442 428 364 450 530 373 11 Italy 5.370 6,457 6,230 6,601 6,938 6,533 6 435 6,345 8.617 6,514 12 Netherlands 5,346 7,117 6,141 6,618 5.851 3.980 5,763 5,642 4,321 4.802 13 Norway 665 808 555 850 662 736 680 553 1.110 629 14 Portugal 888 418 777 589 935 1.496 1,156 725 975 15 Russia 660 1.669 1,248 1,115 1,133 1.117 1.057 1,345 1.209 920 16 Spain 2,166 3,211 2,942 5,778 7,458 6,218 5.560 6.424 5.225 7 980 17 Sweden 2,080 1,739 1,854 2,798 2,975 3,181 3,069 4,553 4,456 4,319 18 Switzerland 7,474 19,798 28,846 31,306 25,069 29,317 34,970 49,359 49,258 55.797 19 Turkey 803 1,109 1,558 1,914 2.324 2,386 2,414 2,010 1,990 1,902 20 United Kingdom 67,784 85,234 103,143 97,588 101,772 102,889 109,755' 104.197 98,309 94.921 21 Yugoslavia: 147 115 52 61 59 19 53 79 53 53 22 Other Europe and other former U.S.S.R.3 .. . 4,355 3,956 7,009 8,259 7.927 8.228 9.659 9.551 10.507 8,490 23 Canada 20,874 26,436 27,176 29,827 25,785 24,961 32.703 36.007 41,402 41.127 24 Latin America and Caribbean 256,944 274,153 343.820 338,909 354,302 361,082 365,814' 359,277' 379,383 362,826 25 Argentina 6,439 7,400 8,924 8,726 8,540 8,207 8,518 8.421 8,724 8,777 26 Bahamas 58,818 71,871 89.379 77,585 82,711 78.083 77,595 78,770 77,875 75,925 27 Bermuda 5,741 4,129 8,782 8,997 9,462 8.890 9.452 10,622 9.629 10,604 28 Brazil 13,297 17,259 21,696 25,283 26,033 25.354 24,552 24,187 23.530 19.089 29 British West Indies 124,037 105,510 145,471 147.910 159,649 168,124 176.825 166,203 192.334 182,742 30 Chile 4.864 5,136 7,913 8,171 8,444 8,482 8,497 8,434 8,307 8.345 31 Colombia 4,550 6,247 6,945 6,783 6,772 7,208 7,102 6,914 6,905 6,816 32 Cuba 0 0 0 0 0 0 0 0 0 33 Ecuador 825 1,031 1,311 1,476 1,522 1,498 1,430 1.649 1,518 1,456 34 Guatemala 457 620 886 904 955 955 932 911 950 1.713 35 Jamaica 323 345 424 364 373 385 320 335 118 305 36 Mexico 18.024 18,425 19.518 20.680 20.913 21,2)5 20,371' 20.062' 20.078 20.666 37 Netherlands Antilles 9,229 25,209 17,838 17,618 14,073 17,352 14.294 16.278 12,939 10.294 38 Panama 3,008 2,786 4,364 4,108 4,422 4,393 4,233 4,308 4.157 4,237 39 Peru 1,829 2,720 3,491 3,538 3,644 3,792 3,965 4,009 4,061 3.826 40 Uruguay 466 589 629 920 773 807 959 1,154 1,055 954 41 Venezuela 1,661 1,702 2.129 2,169 2,194 2,381 2,495 2,436 2,649 2,640 42 Other 3,376 3,174 4.120 3,677 3.822 3.956 4,274 4,584 4,354 4.435 43 Asia 115,336 122.478 125.063 101.353 99,183 96,813 94,804 100,196 102,391 104,211 China 44 Mainland 1,023 1,401 1,579 2,762 2,921 2,934 1.989 1,679 2.701 1,363 45 Taiwan 1,713 1,894 921 740 939 723 835 595 661 1,031 46 Hong Kong 12.821 12,802 13,990 12,628 10,162 12,884 12,871 11,045 13,821 10,547 47 India 1.846 1,946 2.200 1,927 1,807 1,913 1,972 1,822 1.878 1,824 48 Indonesia 1.696 1,762 2,634 2,291 2.210 2.099 2,098 2,010 2.031 2.108 49 Israel 739 633 768 812 874 893 954 1,116 898 941 50 Japan 61.468 59,967 59,540 46.660 44,970 42,071 43,010 45,566 44.822 52,213 51 Korea (Souch) 13.975 18,901 18,162 11.520 10,852 11,936 11.001 12,863 11,508 9,831 52 Philippines 1,318 1,697 1,689 1,813 1,561 1,614 1,541 1.243 1,258 1,280 53 Thailand 2,612 2,679 2,259 2,144 1,971 1,906 1,889 1,820 1,883 2,128 54 Middle Eastern oil-exporting countries4 9.639 10,424 10,790 8,921 11,028 9,338 8,448 11,207 12,136 12,292 55 Other 6,486 8,372 10.531 9,135 9,888 8,502 8,196 9,230 8,792 8,651 56 Africa 2,742 2,776 3,530 3,567 3,337 3.693 2.484 3 497 1,262 1.012 57 Egypt 210 247 247 289 294 281 283 294 279 272 58 Morocco 514 524 511 518 483 490 430 471 426 190 59 South Africa 465 584 805 559 490 859 653 630 653 694 60 Zaire 1 0 0 0 0 0 0 0 0 0 61 Oil-exponing countries^ 552 420 1.212 1,364 1,194 1.078 308 1.331 1.046 770 62 Other 1,000 1.001 755 837 876 985 810 771 858 886 63 Other 2,467 5,709 6,340 5,516 6,981 6.024 5.945 6,921 6.371 6,110 64 Australia . 1,622 4,577 5,299 5.011 6,513 5.704 5.419 6,067 5.999 5,78.1 65 Other . . 845 1,132 1,041 505 468 320 506 854 372 327 66 Nonmonetary international and regional organizations6 2,604 2,463 2,948 3,293 2,392 4,390 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 (Trvicial States) 2. Since December 1992, has excluded Bosnia. Croatia, and Slovenia. 5. Comprises Algeria. Gabon, Libya, and Nigena. 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 • January 1999 3.19 BANKS' OWN AND DOMESTIC CUSTOMERS' CLAIMS ON FOREIGNERS Reported by Banks in the United States1 Payable in U.S. Dollars Millions of dollars, end of period 1998 Type of claim 1995 1996 1997 Mar. Apr. May June July' Aug. Sepl.p 1 Total 655,211 743,919 852,899 842,461 881,218r 532,444 599,925 708,272 687,648 700,035 703,532 727,942' 740.236 764,022 754,467 3 Foreign public borrowers 22,518 22,216 20,660 28,232 32,465 28.986 27,780' 35.634 29,757 26,397 4 Own foreign offices2 307,427 341,574 431,685 402,387 409,955 415,175 435,201 446,536 465,154 472,082 5 Unaffiliated foreign banks 101,595 113,682 109,224 107,794 104,622 105,501 107,525' 101,777 105,862 108,844 37,771 33,826 31,042 25,657 24,324 21,282 22,843 23,283 24,593 30,250 7 Other 63,824 79,856 78,182 82.137 80,298 84,219 84,682' 78,494 81,269 78,594 8 All other foreigners 100,904 122,453 146,703 149,235 152,993 153,870 157,436 156,289 163,249 147,144 9 Claims of banks' domestic customers'' 122,767 143,994 144,627 154,813 153,276 10 Deposits 58,519 77.657 73.110 85.406 86,408 11 Negotiable and readily transferable instruments 44,161 51,207 53,967 51,594 52,171 12 Outstanding collections and other claims 20,087 15,130 17,550 17,813 14,697 MEMO 13 Customer liability on acceptances 8,410 10,388 9,624 7,496 6,604 14 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United Stales5 30,717 39,661 34.046 31,958 31,633 32,172 25,287 32.347 28,860 28,345 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 1997 Maturity, by borrower and area" 1994 1995 1996 Sept. 1 Total 202.282 224,932 258,106 281,000 276,597 285,518 292,324 By borrower 2 Maturity of one year or less 170,411 178,857 211.859 217,981 205,859 214,822 211,029 3 Foreign public borrowers 15,435 14,995 15,411 20,123 12,069 16,952 17,023 4 All other foreigners 154,976 163,862 196,448 197.858 193,790 197,870 194,006 5 Maturity of more than one year 31,871 46,075 46,247 63,019 70,738 70.696 81,295 6 Foreign public borrowers 7,838 7,522 6.790 8,752 8.525 11.310 10,651 7 All other foreigners 24,033 38,553 39.457 54,267 62,213 59,386 70,644 By area Maturity of one year or less 8 Europe 56,381 55,622 55.690 69,204 58,294 69,245 73,787 9 Canada 6,690 6,751 8,339 8,460 9,917 9,304 8,766 10 Latin America and Caribbean 59,583 72,504 103,254 99.929 97,277 101,013 99,294 11 Asia 40,567 40,296 38,078 34.650 33,972 28,748 23,569 12 Africa 1,379 1,295 1,316 2,157 2,211 2,228 1,116 13 Allother1 5,811 2,389 5,182 3,581 4,188 4,284 4,497 Maturity of more than one year 14 Europe 4,358 4,995 6,965 11.202 13,240 15,118 15,606 15 Canada 3,505 2,751 2,645 3,842 2,512 2,752 2,573 16 Latin America and Caribbean 15,717 27,681 24,943 34,988 42,069 39,337 47,881 17 Asia 5,323 7,941 9,392 10,393 10,198 10.731 12.569 18 Africa 1,583 1.421 1.361 1,236 1,236 1,254 1,259 19 All other3 1,385 1,286 941 1,358 1,483 1,504 1,407 1. Reporting banks include all types of depository inslitutions as well as some brokers and 2. Maturity is time remaining until maturity. dealers. 3. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Bank-Reported Data A57 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. and Foreign Offices of U.S. Banks1 Billions of dollars, end of period 1996 Area or country Sept. Sept. 1 Total 499.5 551.9 612.8 586.2 645.3 647.5 678.8 711.0 725.9 739.2 2 G-10 countries and Switzerland 191.2 206.0 226.9 220.0 228.3 231.4 250.0 247.7 242.8 249.1 3 Belgium and Luxembourg 7.2 13.6 11.4 11.3 11.7 14.1 9.4 II 4 11.0 112 4 France 19.1 19.4 18.0 17.4 16.6 19.7 17.9 20.2 15.4 15.6 5 Germany 24.7 27.3 31.4 33.9 29.8 32.1 34.1 14.7 28.6 25.5 6 Italy 11.8 11.5 14.9 15.2 16.0 14.4 20.2 19.3 15.5 19.7 7 Netherlands 3.6 3.7 4.7 5.9 4.0 4.5 6.4 7.2 6.2 7.3 8 Sweden 2.7 2.7 2.7 3.0 2.6 3.4 3.6 4.1 3.3 4.8 9 Switzerland 5.1 6.7 6.3 6.3 5.3 6.0 5.4 4.8 7.2 5.6 10 United Kingdom 85.8 82.4 101.6 90.5 104.7 99.2 110.6 108.3 113.4 120.1 11 Canada 10.0 10.3 12.2 14.8 14.0 16.3 15.7 15.1 13.7 13.5 12 Japan 21.1 28.5 23.6 21.7 23.7 21.7 26.8 22.6 28.6 25.8 13 Other industrialized countries 45.7 50.2 55.5 62.1 65.7 66.4 71.7 73.8 64.5 74.3 14 Austria 1.1 .9 1.2 1.0 1.1 1 9 1.5 1.7 1.5 1.7 15 Denmark 1.3 2.6 3.3 1.7 1.5 1.7 2.8 3.7 2.4 2.0 16 Finland .9 .8 .6 .6 .8 .7 1.4 1.9 1.3 1.5 17 Greece 4.5 5.7 5.6 6.1 6.7 6.3 6.1 6.2 5.1 6.1 18 Norway 2.0 3.2 2.3 3.0 8.0 5.3 4.7 4.6 3.6 4.0 19 Portugal 1.2 1.3 1.6 1.4 .9 1.0 1.1 1.4 .9 .7 20 Spain 13.6 11.6 13.6 16.1 13.2 14.4 15.4 13.9 11.7 16.5 21 Turkey 1.6 1.9 2.3 2.8 2.7 2.8 3.4 4.4 4.5 4.9 22 Other Western Europe 3.2 4.7 3.4 4.8 4.7 6.3 5.5 6.1 8.2 9.9 23 South Africa 1.0 1.2 2.0 1.7 2.0 1.9 1.9 1.9 2.2 3.7 24 Australia 15.4 16.4 19.6 22.8 24.0 24.4 27.8 28.1 23.1 2.3.2 25 OPEC2 24.1 22.1 20.1 19.2 19.7 21.8 22.3 22.9 26.0 25.7 26 Ecuador .5 .7 .9 .9 1.1 1.1 .9 1.2 1.3 1.3 27 Venezuela 3.7 2.7 2.3 2.3 2.4 1.9 2.1 2.2 2.5 3.3 28 Indonesia 3.8 4.8 4.9 5.4 5.2 4.9 5.6 6.5 6.7 5.5 29 Middle Easl countries 15.3 13.3 11.5 10.2 10.7 13.2 12.5 14.4 14.3 30 African countries .9 .6 .5 .4 .4 .7 1.2 1.2 1.4 31 Non-OPEC developing countries 96.0 112.6 126.5 130.3 128.1 140.6 138.7 147.4 Latin America 32 Argentina 11.2 12.9 14.1 15.0 14.3 14.3 16.4 17.1 18.4 19.3 33 Brazil 8.4 13.7 21.7 17.8 20.7 22.0 27.3 26.1 28.6 32.4 34 Chile 6.1 6.8 6.7 6.6 7.0 6.8 7.6 8.0 8.7 9.0 35 Colombia 2.6 2.9 2.8 3.1 4.1 3.7 3.3 3.4 3.4 3.3 36 Mexico . 18.4 17.3 15.4 16.3 16.2 17.2 16.6 16.4 17.4 17.7 37 Peru .5 1.2 1.3 1.6 1.6 1.4 1.8 2.0 2.1 38 Other 2.7 3.0 3.0 3.3 3.4 3.4 3.6 4.1 4.0 Asia China 39 Mainland 1.1 1.8 2.9 2.6 2.5 2.7 3.6 4.3 3.2 4.2 40 Taiwan 9.2 9.4 9.8 10.4 10.3 10.5 10.6 9.7 90 11.7 41 India 4.2 4.4 4.2 3.8 4.3 4.9 5.3 4.9 4.9 5.0 42 Israel .4 .5 .6 .5 .5 .6 .8 1.0 .7 .7 43 Korea (South) 16.2 19.1 21.7 21 9 21.5 14.6 16.3 16.2 15.6 16.2 44 Malaysia 3.1 4.4 5.3 5.5 6.0 6.5 6.4 5.6 5.1 4.5 45 Philippines 3.3 4.1 4.7 5.4 5.8 6.0 7.0 5.7 5.7 5.0 46 Thailand 2.1 4.9 5.4 4.8 5.7 6.8 7.3 6.2 5.4 5.5 47 Other Asia 4.7 4.5 4.8 4.1 4.1 4.3 4.7 4.5 4.3 4.2 Africa 48 Egypt .4 .6 7 .9 1.1 .9 1.0 49 Morocco .7 .7 .7 .6 .7 .7 .6 50 Zaire .0 .0 .1 .0 .0 .0 .0 51 Other Africa' .9 1.0 .9 .9 .9 1.1 52 Eastern Europe 2.7 4.2 5.1 5.3 6.9 8.9 7.1 9.8 9.1 12.0 53 Russia4 .8 1.0 1.0 1.8 3.7 3.5 4.2 5.1 5.1 7.5 54 Other 1.9 3.2 4.1 3.5 3.2 5.4 2.9 4.7 4.0 4.6 55 Offshore banking centers 72.9 99.2 106.1 105.2 134.7 131.3 129.6 138.9 145.7 129.3 56 Bahamas 10.2 11.0 17.3 14.2 20.3 20.9 16.1 19.8 29.9 29.2 57 Bermuda 8.4 6.3 4.1 4.0 4.5 6.7 7.9 9.8 9.8 9.0 58 Cayman Islands and other British West Indies 21.4 32.4 26.1 32.0 37.2 32.8 35.1 45.7 43.4 24.9 59 Netherlands Antilles 1.6 10.3 13.2 11.7 26.1 19.9 158 21.7 14.6 14.0 60 Panama5 1.3 1.4 1.7 1.7 2.0 2.0 2.6 2.1 3.1 3.2 61 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 62 Hong Kong, China 20.0 25.0 27.6 26.0 27.9 30.8 35.2 27.2 32.2 33.8 63 Singapore 10.1 13.1 15.9 15.5 16.7 17.9 16.7 12.7 12.7 15.0 64 Other* .1 .1 .1 .1 .1 I .3 .1 .1 .1 65 Miscellaneous and unallocated7 66.9 57.6 72.7 50.0 59.6 59.6 57.6 80.8 99.1 101.3 1. The banking offices covered by these data include U.S. offices and foreign branches of 2. Organization of Petroleum Exporting Countries, shown individually, other members of U.S. banks, including U.S. banks that are subsidiaries of foreign banks. Offices not covered OPEC (Algeria, Gabon, Iran, Iraq, Kuwait. Libya. Nigeria, Qatar, Saudi Arabia, and United include U.S. agencies and branches of foreign banks. Beginning March 1994, the data include Arab Emirates); and Bahrain and Oman (not formally members of OPEC). large foreign subsidiaries of U.S. banks. The data also include other types of U.S. depository 3. Excludes Liberia. Beginning March 1994 includes Namibia. institutions as well as some types of brokers and dealers. To eliminate duplication, the data 4. As of December 1992, excludes other republics of the former Soviet Union. are adjusted to exclude the claims on foreign branches held by a U.S. office or another foreign 5. Includes Canal Zone. branch of the same banking institution. 6. Foreign branch claims only. These data are on a gross claims basis and do not necessarily reflect the ultimate country 7. Includes New Zealand, Liberia, and international and regional organizations. risk or exposure of U.S. banks. More complete data on the country risk exposure of U.S. banks are available in the quarterly Country Exposure Lending Survey published by the Federal Financial Institutions Examination Council. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A58 International Statistics • January 1999 3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States Millions of dollars, end of period Type of liability, and area or country Sepl. 1 Tola! 54,309 46,448 54,798 58,667 56,501 55,8»1 59,618 56,741 52,022 2 Payable In dollars 38,298 33,903 38,956 39,861 38,651 39,746 41,888 42,237 40,914 3 Payable in foreign currencies . . 16,011 12,545 15,842 18,806 17,850 16,145 17.730 14,504 11,108 By type 4 Financial liabilities 32,954 24,241 26,065 29,633 28,263 26,461 29,113 26,751 22,669 5 Payable in dollars 18,818 12.903 11,327 11,847 11,442 11,487 12,975 13,547 12,634 6 Payable in foreign currencies 14,136 11,338 14,738 17,786 16,821 14,974 16.138 13,204 10,035 7 Commercial liabilities 21,355 22,207 28,733 29.034 28,238 29.430 30.505 29,990 29.353 8 Trade payables 10,005 11.013 12,720 11,432 11,040 10.885 10,904 10,107 9,842 9 Advance receipts and other liabilities 11,350 11,194 16.013 17,602 17,198 18,545 19,601 19,883 19,511 10 Payable in dollars 19,480 21,000 27.629 28.014 27.209 28,259 28,913 28,690 28,280 11 Payable in foreign currencies 1,875 1,207 1,104 1.020 1,029 1,171 1,592 1,300 1,073 By area or country Financial liabilities 12 Europe 21,703 15.622 16,195 20,081 18,530 18,019 19,238 19,008 15,722 13 Belgium and Luxembourg 495 369 632 769 238 89 186 127 75 14 France 1,727 999 1,091 1,205 1,280 1,334 1,684 1,795 1,965 15 Germany 1,961 1.974 1.834 1,589 1.765 1,730 2,018 2,578 2,441 16 Netherlands 552 466 556 507 466 507 494 472 484 17 Switzerland 688 895 699 694 591 645 776 345 189 18 United Kingdom 15,543 10.138 10.177 13.863 12,968 12,165 12,318 11,846 8,463 19 Canada 629 652 1,401 602 1.616 651 2.392 1.045 539 20 Latin America and Caribbean 2,034 1,783 1,668 1,876 1.285 1,067 1,386 965 1.320 21 Bahamas 101 59 236 293 124 10 141 17 6 22 Bermuda 80 147 50 27 55 64 229 86 49 23 Brazil 207 57 78 75 97 52 143 91 76 24 British West Indies 998 86c 1,030 965 775 669 604 517 845 25 Mexico 0 12 17 16 15 76 26 51 26 Venezuela 5 1 1 1 1 1 1 27 Asia 8,403 5,988 6.423 6.370 6.248 6,239 5,394 5,024 4,408 28 Japan .. 7,314 5,436 5,869 5,794 5,668 5,725 5,085 4,767 3,869 29 Middle Eastern oil-exporting countries' 35 27 25 72 39 23 32 23 0 30 Africi 135 150 38 29 29 33 60 33 29 31 Oil-exporting countries2 123 122 0 0 0 0 0 0 0 32 All other' 675 Commercial liabilities 33 Europe 6,773 7,700 9,767 9,524 8,683 9,343 10.228 9,951 9.924 34 Belgium and Luxembourg 241 331 479 639 736 703 666 565 557 35 France 728 481 680 679 708 782 764 840 612 36 Germany 604 767 1,002 1.043 845 945 1,274 1,068 1,219 37 Netherlands 722 500 766 551 288 452 439 443 485 38 Switzerland 327 413 624 480 429 400 375 407 349 39 United Kingdom 2,444 3,568 4,303 4,158 3,818 3,829 4.086 4.041 3,743 40 Canada 1,037 1,040 1,090 1,068 1,136 1,150 1.175 1.347 1,511 41 Lann America and Caribbean 1,857 1.740 2,574 2,562 2.500 2,224 2.176 2,051 2,285 42 Bahamas 19 1 63 43 33 38 16 27 14 43 Bermuda 345 205 297 479 397 180 203 174 209 44 Brazil 161 98 196 200 225 233 220 249 246 45 British West Indies 23 56 14 14 26 23 12 5 27 46 Mexico 574 416 665 633 594 562 565 520 557 47 Venezuela 276 221 328 318 304 322 261 219 196 48 Asia 10,741 10,421 13,422 13,915 13.875 14.628 14,966 14,672 13,611 49 Japan 4,555 3,315 4,614 4,465 4,430 4,553 4,500 4,372 3,995 50 Middle Eastern oil-exporting countries' 1,576 1,912 2,168 2,495 2.420 2,984 3,111 3,138 3,194 51 Africa 428 619 1,040 1,037 941 929 874 833 921 52 Oil-exporting countries . . - 256 254 532 479 423 504 408 376 354 53 Other3... 687 840 1,103 1,156 1,086 1,136 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 Type of claim, and area or country Sept. Dec. Mar. Junep 57,888 52,509 63,542 68,266 70,760 70,077 72.837 64,020 2 Payable in dollars 53.805 48,711 58,630 62,126 62.082 64,144 62,173 65,359 58,463 3 Payable in foreign currencies 4,083 3,798 5,012 5,976 6.184 6.616 7.904 7,478 5,557 By type 4 Financial claims 33.897 27,398 35,268 40.547 40,717 42,059 38,908 42.134 33,120 5 Deposits 18.507 15,133 21,404 22.150 24.308 24,125 23,139 21.030 15,922 6 Payable in dollars 18,026 14.654 20,631 20,499 22.817 22,566 21,290 19.322 14.244 7 Payable in foreign currencies 481 479 773 1.651 1,491 1,559 1,849 1.708 1,678 8 Other financial claims 15,390 12,265 13,864 18,397 16,409 17,934 15,769 21.104 17,198 9 Payable in dollars 14,306 10,976 12,069 15.381 13,152 14,621 11,576 16,814 14,567 10 Payable in foreign currencies 1,084 1,289 1,795 3,016 3.257 3,313 4.193 4,290 2,631 11 Commercial claims 23,991 25,111 28.374 27.555 27,549 28,701 31,169 30.703 30,900 12 Trade receivables 21,158 22,998 25,751 24.801 24,858 25,110 27,536 26.888 26,817 i 3 Advance payments and other claims . 2,833 2,113 2.623 2,754 2,691 3,591 3,633 3,815 4,083 14 Payable in dollars 21,473 23,081 25,930 26,246 26,113 26,957 29,307 29,223 29,652 15 Payable in foreign currencies 2.518 2,030 2,444 1,309 1.436 1,744 1,862 1.480 1,248 By area or country Financial claims 1 6 Europe 7.936 7,609 9.282 13.076 12.904 15,862 16.948 16.020 14,047 17 Belgium and Luxembourg 86 193 185 119 203 360 406 378 518 18 France '. . 800 803 694 760 680 1.112 1,015 902 796 19 Germany 540 436 276 324 231 352 427 393 290 20 Netherlands 429 517 493 567 519 764 677 911 975 21 Switzerland 523 498 474 570 447 448 434 401 403 22 United Kingdom 4,649 4,303 6,119 9.837 9,814 11.254 12,286 11,122 9,595 23 Canada 3.5S1 2,851 3.445 4,917 6.422 4.279 .3.313 4,688 3,035 24 Latin America and Caribbean 19,536 14,500 19,577 19,742 18,725 19.176 15,54.3 18,207 12,775 25 Bahamas 2,424 1,965 1,452 1,894 2.064 2,442 2,459 1.316 1,310 26 Bermuda 27 81 140 157 188 190 108 66 48 27 Brazil 520 830 1,468 1.404 1,617 1,501 1,313 1.408 1,394 28 British Wesl Indies 15,228 10,393 15,182 15.176 13,553 12.957 10.311 13.551 8,153 29 Mexico 723 554 457 517 497 508 537 967 1,089 30 Venezuela 35 32 31 22 21 15 36 47 57 31 Asia 1.871 1,579 2,221 2.068 1.934 2,015 2,133 2,174 2.376 32 Japan 953 871 1.035 831 lib 999 823 791 886 33 Middle Eastern oil-exporting countries1 141 22 12 20 15 9 12 34 Africa 373 276 174 182 179 174 319 125 155 15 Oil-exporting countries 0 5 14 14 15 16 15 16 15 36 All other' 569 562 Commercial claims 37 Europe 9,540 9,824 10,443 9,863 9.603 10,486 12,120 12,854 12,935 38 Belgium and Luxembourg 21? 231 226 364 327 331 328 232 216 39 France T 1,881 1.830 1,644 1.514 1,377 1,642 1,796 1,939 1,955 40 Germany 1.027 1,070 1,337 1.364 1.229 1,395 1,614 1.670 1.757 41 Netherlands 311 452 562 582 613 573 597 534 492 42 Switzerland 557 520 642 418 389 381 554 476 418 43 United Kingdom 2,556 2,656 2,946 2.626 2,836 2,904 3,660 4,828 4,654 44 Canada 1,988 1.951 2,165 2.381 2,464 2,649 2,660 2.882 2,779 4? Latin America and Caribbean 4,117 5,276 5.067 5.241 5.028 5.750 5.481 6,082 46 Bahamas 9 30 35 40 29 22 27 1.3 12 47 Bermuda 234 272 275 159 197 128 244 238 359 48 Brazil 612 898 1,303 1.216 1.136 1,101 1,162 1.128 1,183 49 British West Indies 83 79 190 127 98 98 109 88 110 50 Mexico 1,243 993 1,128 1.102 1,140 1,219 1,392 1.302 1,462 51 Venezuela 348 285 357 330 451 418 576 441 585 52 Asia 6,982 7.312 8,376 8,348 8,460 8,576 8,713 7,638 7,367 53 Japan 2.655 1,870 2.003 2,065 2,079 2.048 1,976 1,713 1,757 54 Middle Eiastern oil-exporting countries' 708 974 971 1,078 1,014 987 1,107 987 1,127 55 Africa 454 654 746 718 618 764 680 657 56 Oil-exporting countries 67 87 166 100 81 207 119 116 57 Other' 1,006 1,198 1. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab 2. Comprises Algeria, Gabon, Libya, and Nigena. Emirates (Trucial Stales). 3. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A60 International Statistics D January 1999 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1998 1998 Transaction, and area or country J S an e . p — l. Mar. Apr. May July Aug. Sept.p U.S. corporate securities STOCKS 1 Foreign purchases 590,714 1,097,958 1,186,876 136,184 134,177 129,528 146,147 152,833 141,566 139,171 578,203 1,028,361 1.147,565 122,769 130,628 121,355 142,591 150,308 139,722 149,535 2 Foreign sales 12,511 69,597 39,311 13,415 3,549 8,173 3,556 2,525 1,844 -10,364 3 Net purchases, or sales (—) . ... 12,585 69,754 39,679 13,419 3,570 8,193 3.581 2,739 1,843 -10,321 4 Foreign countries 5,367 62,688 65,795 11,144 5,511 10,670 7,227 6,983 5,459 2,226 5 Europe -2,402 6,641 6,046 1.480 -260 650 1,734 199 988 -172 6 France 1,104 9,059 10,417 627 1,453 1,834 1,020 1,503 1,326 1,340 7 Germany 1,415 3,831 5,195 557 161 564 830 1,265 163 902 8 Netherlands 2,715 7,848 9.023 1.956 974 2,234 1,490 1,092 -277 -261 9 Switzerland 4,478 22,478 18,736 3.402 595 2,968 695 1,154 1,740 788 10 United Kingdom 2.226 -1,406 -3,072 566 55 -506 -1,600 -443 -276 -153 11 Canada 5,816 5,203 -8,025 2,110 -3,689 -1.333 1,798 -614 610 -11,735 1 1 2 3 M La i t d in d le A m Ea e s r t i 1 ca and Caribbean . -1,6 9 0 1 0 8 2,0 3 7 8 2 3 -14 - , 3 5 5 3 4 0 - - 1 2 7 0 0 2 1, 3 56 4 3 6 - - 6 2 1 34 1 -3,9 2 4 8 9 6 -2 - , 1 9 3 0 4 5 -4 - , 1 1 5 1 7 2 -6 1 8 4 4 6 14 Other Asia -372 4,787 -3,017 -1,422 555 -540 -306 214 469 15 Japan -85 472 784 83 128 275 204 -14 159 -98 16 Africa -57 342 -919 -112 -344 -385 -134 160 -23 17 Other countries 18 Nonmonetary international and -74 -214 -43 regional organizations .. BONDS2 393,953 610,116 654,469 70,079 76,452 65,495 74,100 73,772r 67,229' 102.374 19 Foreign purchases 268.487 415.958 516,206 50.208 52,225 52,584 53.167 62,213 58,678 92.746 20 Foreign sales 125,466 134,158 138,263 19,871 24,227 12,911 20,933 11,559' 8,551r 9.628 21 Net purchases, or sales (-) . . . 125,295 133,595 137,725 19,732 24,097 12,853 20,834 ll,636r 8,513' 9,578 22 Foreign countries 77,570 71,631 92,413 12,669 19,024 5,555 12,117 9,41 lr 5.513' 14,446 2.1 Europe 4 4 , , 4 43 60 9 3 2 , , 3 74 0 2 0 4 2 , . 0 5 6 3 8 2 7 2 2 4 7 9 1,72 3 7 3 -1 -1 3 7 3 6 3 6 0 7 2 4 8 5 1 1 2 2 1 3 3 3 9 2 9 6 2 4 24 France 2,107 3,576 1.944 364 523 532 344 108 32 275 25 Germany 1,170 187 4,693 358 772 794 404 234 100 1.005 26 Netherlands 60,509 54,134 68,826 9,833 14.346 4,585 8,696 5,411' 3.624' 11,965 27 Switzerland 4,486 6,264 5,041 400 363 628 607 640 439 441 28 United Kingdom 17,737 34,733 31,691 4,835 2,256 6,703 6,371 2.029 1,592 -2,948 29 Canada 1,679 2,155 1,685 522 69 109 162 171 -188 -58 3 3 3 3 3 0 1 2 3 4 O L M A a t f i h J r t d i i a e c n d p r a l a e A A n m E si e a a r s i t c ' a and Caribbean . 2 1 3 - 4 5 , , 7 6 1 6 2 6 7 3 4 2 3 1 9 6 1 , , , 3 0 8 9 5 0 1 9 5 7 1 6 6 3, , 3 5 2 2 2 7 9 3 7 6 6 1 - , 7 2 1 7 6 4 1 2 6 2 2 2 2, . 9 0 2 0 7 4 6 4 8 5 2 -1 - 4 3 - 0 6 5 1 6 0 1. 2 2 5 6 2 2 8 9 6 7 2 - -5 5 - 1 4 8 2 1 8 8 1 - 1 5 - - ,7 1 1 3 0 0 7 5 9 -1 - - . - 7 4 8 6 1 0 4 1 3 0 2 35 Other countries 36 Nonmonetary international and 538 139 130 58 38 regional organizations ... Foreign securities 37 Stocks, net purchases, or sales (-) -59,268 -40,942 4,305 -1,689 -137 -3,393 2.535 -3,516' 5,552 6,074 38 Foreign purchases 450,365 756,015 709,964 81,360 80,736 80,941 88,508 82,130' 74.358 89.467 39 Foreign sales 509,633 796,957 705.659 83,049 80,873 84,334 85,973 85,646' 68,806 83,393 40 Bonds, net purchases, or sales (-) -51,369 -48,171 -29,007 -4,559 -12,158 -1,882 -12,355 3,065 1.018 2,966 41 Foreign purchases 1,114,035 1,451,704 1.120,208 128.396 118,296 110,403 151.477 118,890 139,341 152,650 42 Foreign sales 132,955 130,454 112,285 163,832 115,825 138,323 149,684 1,165,404 1.499,875 1,149,215 43 Net purchases, or sales (—), of stocks and bonds -6,248 -12,295 -5,275 -451r 6,570 9,040 -110,637 -89,113 -24,702 44 Foreign countries -6,220 -12,331 -5,443 -9,794 -380r 6,587 9,041 -109,766 -88,921 -24,632 45 Europe -1,457 -2,035 -7,240 2.328' 1,211 5,755 46 Canada -57,139 -29,874 -5,196 -1,783 -475 -1,335 214 2,195 2,631 -1,158 47 Latin America and Caribbean -7.685 -3,085 2,061 618 -6,108 -1,092 -2.548 -4,864 -1,205 1.206 48 Asia -11,507 -25,258 -12,591 -7,902 -3,520 -779 516 -64 4,227 3.399 49 Japan -27,831 -25,123 -6,634 -7,118 1,265 -681 -38 -316 1,741 2.088 50 Africa -5,887 -10,001 -3,682 -152 -302 -79 -32 -269 -122 -163 51 Other countries -1,517 -3,293 -1,364 101 -469 -123 -704 294 -155 -4,087 -2.288 -908 52 Nonmonetary international and regional organizations -871 -70 -28 36 168 -26 -71 -17 -1 1. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, Kuwait, Oman, Qatar. 2. Includes state and local government securities and securities of U.S. government Saudi Arabia, and United Arab Emirates (Trucial States). agencies and corporations. Also includes issues of new debt securities sold abroad by US. 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 US. TREASURY BONDS AND NOTES Foreign Transactions' Millions of dollars; net purchases, or sales (-) during period Area or country Jan.— Apr. May July Aug. Sept.p Sept. 1 Total estimated . 232,241 184,171 16,061 -4,091 6,078 21,267 1,674 -3,578 -15,776 -4,984 2 Foreign counlries 234,083 183,688 15.277 -5,287 6,769 21,116 1,978 -3,631 -15,776 -4.975 3 Europe 118,781 144,921 21,025 -857 6,530 788 715 -5,903 -2,804 -2,457 4 Belgium and Luxembourg 1,429 3,427 1,744 704 -165 176 -513 215 667 104 5 Germany 17,980 22,471 -1,058 1,897 -829 -143 -1,181 82 -1,799 904 6 Netherlands -582 1,746 -4,845 -1,733 130 341 731 -265 -3,081 -579 7 Sweden 2,242 -465 126 400 -202 184 335 239 -152 -330 8 Switzerland 328 6,028 1,722 170 -483 44 -973 -827 -680 362 9 United Kingdom 65,658 98,253 20,523 -3,705 5,785 -2,720 -1,426 -5,769 8,019 2,585 10 Other Europe and former U.S.S.R. 31,726 13,461 2.813 1,410 2.294 2.906 3,742 422 -5,778 -5,503 Canada 2,331 -811 -2,432 -517 1.457 -223 -66 -569 -2,088 -691 12 Latin America and Caribbean 20.785 -2,554 -1.471 -8,383 -7.981 20.033 2.578 949 -5.940 -1,233 13 Venezuela -69 655 -509 -128 14 -339 693 450 -1,308 6 14 Other Latin America and Caribbean 8,439 -549 16,396 -11 -632 -335 3,513 2,305 3,914 2,982 15 Netherlands Antilles 12,415 -2,660 -17,358 -8,244 -7,363 20.707 -1,628 -1,806 -8,546 -4,221 16 Asia 89,735 39,567 1,645 3,522 7,966 1,455 -1,153 1,327 -3,856 -207 17 Japan 41,366 20,360 754 -168 6,301 1,582 -2,442 774 299 128 18 Africa 1,083 1,524 547 154 -18 13 145 -23 62 81 19 Other 1,368 1,041 -4.037 794 -1,185 -950 -241 588 -1,150 -468 20 Nonmonetary international and regional organizations -1,842 483 784 1.196 -691 151 -304 53 0 -9 21 International -1,390 621 -116 900 -715 136 -226 -135' -10 22 Latin American regional -779 170 203 10 -4 0 192 MEMO 23 Foreign countries 234,083 183,688 15,277 -5,287 6,769 21,116 1,978 -3,631 -15,776 -4.975 24 Official institutions 85,807 43,959 -21,995 6,133 1,162 898 -3,486 469 -16,920 -10.304 25 Other foreign 148,276 139,729 37,272 -11,420 5,607 20,218 5,464 -4,100 1,144 5,329 Oil-exporting countries 26 Middle East2 10.232 7,636 - 14,069 1,325 -380 951 -1.388 -2,578 -4,160 -5,837 T7 A A-!,.,.-' 1 -12 2 0 0 0 0 0 1 0 1. Official and pnvate 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 BANKS1 Percent per year, averages of daily figures Rate on Nov.30, 1998 Rate on Nov 30, 1998 Country Country Percent e M ffe o c n ti t v h e Percent e M ffe o c n ti t v h e Austria .... 2.5 Apr. 1996 Germany . 2.5 Apr. 1996 2.75 Oct. 1997 Italy 4.0 Oct. 1998 Canada 5.25 Nov. 1998 Japan . .. .5 Sept. 1995 Denmark ... 4.25 Sept. 1998 Netherlands 2.5 Apr. 1996 3.3 Ocl. 1997 Switzerland 1.0 Sept. 1996 1. Rates shown are mainly those at which the central bank either discounts or makes 2. Since February 1981. the rale has been that at which the Bank of France discounts advances against eligible commercial paper or government securities for commercial banks or Treasury bills for seven to ten days. brokers. For countries with more than one rate applicable to such discounts or advances, the rate shown is the one at which it is understood that the central bank transacts the largest proportion of its credit operations. 3.27 FOREIGN SHORT-TERM INTEREST RATES1 Percent per year, averages of daily figures 1998 Type or country 1995 1996 1997 May June July Aug. Sept. Oct. Nov. I Eurodollars 5.93 5.38 5.61 5.57 5.57 5.57 5.56 5.39 5.17 5.21 2 United Kingdom 6.63 5.99 6.81 7.37 7.61 7.67 7.61 7 35 7.11 6.84 7 14 4 49 3 59 5 09 5 10 5.10 5 35 5.66 5.43 5.42 4.43 3.21 3.24 3.55 3.49 3.46 3.42 3.40 3.50 3.56 2.94 1.92 1.58 1.52 1.81 1.98 1.68 1.43 1.20 1.44 6 Netherlands 4.30 2.91 3.25 3.53 3.51 3.46 3.43 3.33 3.28 3 48 6 43 381 3 35 3 50 3 47 3.44 3.44 3.43 3.45 3.49 8 Italy 10.43 8 79 6 86 4.98 4.99 4.75 4.78 4.86 4.40 3.82 9 Belgium 4.73 3.19 3.40 3.67 3.62 3.59 3.48 3.42 3.41 3.47 10 Japan 1.20 .58 .58 .56 .57 .67 .69 .45 .49 .52 1. Rates are for three-month interbank loans, with the following exceptions: Canada, finance company paper; Belgium, three-month Treasury bills; and Japan, CD rale. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A62 International Statistics • January 1999 3.28 FOREIGN EXCHANGE RATES AND INDEXES OF THE FOREIGN EXCHANGE VALUE OF THE U.S. DOLLAR1 Currency units per dollar except as noted 1998 Hem 1995 1996 1997 June July Aug. Sept. Oct. Nov.' Exchange Rates COUNTRY/CURRKNCY UNIT 1 Australia/dollar2 74.07 78.28 74.37 60.46 61.80 58.88 58.89 61.79 63.49 2 Austria/schilling 10.076 10.589 12.206 12.615 12.650 12.574 11.955 11.524 11.840 3 Belgium/franc 29.47 30.97 35.81 36.98 37.07 36.85 35.05 33.81 34.71 4 Brazil/real 0.9162 1.0051 1.0779 1.1543 1.1614 1.1717 1.1805 1.1889 1 1932 5 Canada/dollar 1.3725 1.3638 1.3849 1.4655 1.4869 1.5346 1.5218 1.5452 1.5404 6 China. P.R./yuan 8.3700 8.3389 8.3193 8.3100 8.3100 8.3100 8.3055 8.2778 8.2778 7 Denmark/krone 5.5999 5.8003 6.6092 6.8294 6.8499 6.8067 6.4717 6.2294 6.3960 8 Finland/markka 4.3763 4.5948 5.1956 5 4503 5.4653 5.4340 5.1734 4.9845 5.1163 9 France/franc 4.9864 5.1158 5.8393 6.0118 6.0280 5.9912 5.6969 5.4925 5.6422 10 German y/deutsche mark 1.4321 1.5049 1.7348 1.7928 1.7976 1.7869 1.6990 1.6381 1.6827 11 Greece/drachma 231.68 240.82 273.28 304.24 299.35 301.21 292.47 281.64 282.64 12 Hong Kong/dollar 7.7357 7.7345 7.7431 7.7471 7.7483 7.7494 7 7480 7.7483 7.7432 13 India/rupee 32.42 35.51 36.36 42.37 42.61 42.84 42.58 42.39 42.43 14 Ireland/pound2 160.35 159.95 151.63 140.51 139.88 140.37 147.24 152.21 147.77 15 Italy/lira 1,629.45 1.542.76 1,703.81 1.766.32 1.772.42 1,763.01 1,678.92 1,620.96 1,664.91 16 Japan/yen 93.96 108.78 121.06 140.33 140.79 144.68 134.48 121.05 120.29 17 Malaysia/ringgil 2.5073 2.5154 2.8173 4.0006 4.1591 4.2036 3.8050 3.8000 3.8000 18 Mexico/peso 6.447 7.600 7.918 8.920 8.899 9.371 10.219 10.159 9.969 19 Netherlands/guilder 1.6044 1.6863 1.9525 2.0208 2.0267 2.0148 1.9169 1.8479 1.8969 20 New Zealand/dollar 65.63 68.77 66.25 51.23 51.85 50.11 50.44 52.13 53.40 21 Norway/krone 6.3355 6.4594 7.0857 7.5785 7.6246 7.7248 7.5564 7.4294 7.4562 22 Portugal/cscudo 149.88 154.28 175 44 183.58 183.93 182.99 174.19 168.01 172.52 23 Singapore/dollar 1.4171 1.4100 1.4857 1.6941 1.7085 1.7571 1.7226 1.6378 1.6378 24 South Africa/rand 3.6284 4.3011 4.6072 5.3910 6.2285 6.3198 6.0966 5.7991 5.6511 25 South Korea/won 772.69 805.00 950.77 1,397 77 1,295.76 1,314.29 1.375.54 1,344.14 1,294.01 26 Spain/peseta 124.64 126.68 146.53 152.18 152.58 151.72 144.33 139.23 143.05 27 Sri Lanka/rupee 51.047 55.289 59.026 65.150 65.908 66.642 66.260 66.345 67.578 28 Sweden/krona 7.1406 6.7082 7.6446 7.9174 7 9942 8.1282 7.8816 7.8395 8.0140 29 Switzerland/franc 1.1812 1.2361 1.4514 1.4949 1.5136 1.4933 1.4000 1.3373 1.3852 30 Taiwan/dollar 26.496 27.468 28.775 34.553 34.387 34.731 34.646 33.121 32.603 31 Thailand/baht 24.921 25.359 31.072 42 332 41.300 41.720 40.402 38.118 36.527 32 United Kingdom/pound 157.85 156.07 163.76 165.04 164.37 163.42 168.23 169.44 166.11 33 Venezuela/bolivar 174.85 417.19 488.39 543.82 558.47 571.88 583.85 570.68 569.66 Indexes1 NOMINAL 34 G-10 (March 1973= 1(X))4 84.25 87.34 96.38' 100.90 101.38 101.80 97.17 93.69 95.46 35 Broad (January 1997= lOOr 92.52 97.41 104.47 117.87 118.17 120.14 118.85 115.46 115.34 36 Major currencies (March 1973= 100)6 81.39 85.23 91.85 98.68 99.31 100.96 96.99 93.46 94.23 37 Other important trading partners (January 1997-100)7 * .... 92.51 98.25 104.67 125.97 125.64 127.77 131.38 129.02 127.31 38 Broad (March 1973= 100)5 83.95 85.89 90.49 99.89 100.25 101.76 100.05 97.06 96.66 39 Major currencies (March 1973- 100)fc 80.78 85.83 93.20 100.42' 101.41 103.21 99.05 95.47' 96.27 40 Other important trading partners, (March 1973= 100)7 109.80 106.57 106.51 106.42 105.91 107.14 108.77 106.42 104.24 1. Averages of cenified noon buying rates in New York for cable transfers. Data in this average of U.S. bilateral import shares from and export shares to the issuing country and of a table also appear in the Board's G.5 (405) monthly statistical release. For ordering address, measure of the importance to U.S. exporters of that country's trade in third country markets. see inside front cover. 6. Weighted average of the foreign exchange value of the U.S. dollar against a subset of 2. Value in U.S. cents. broad index currencies that circulate widely outside the country of issue. The weight for each 3. For more information on the indexes of the toreign exchange value of the dollar, see currency is its broad index weight scaled so that the weights of the subset of currencies in the Federal Reserve Bulletin, vol. 84 (October 1998), pp. 811-18. index sum to one. 4. Weighted average of the foreign exchange value of the U.S. dollar against the currencies 7. Weighted average of the foreign exchange value of the U.S. dollar against a subset of of the other G-10 countries. The weight for each of the ten countries is the 1972-76 average broad index currencies that do not circulate widely outside the country of issue. The weight world trade of lhat country divided by the average world trade of all ten countries combined. for each currency is its broad index weight scaled so that the weights of the subset of Series revised as of August 1978 (see Federal Reserve Bulletin, vol. 64 (August 1978), currencies in the index sum to one. p. 700) 5. Weighted average of the foreign exchange value of the US. dollar against the currencies of a broad group of U.S. trading partners. The weight for each currency is computed as an 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 December 1998 A72 SPECIAL TABLES—Data Published Irregularly, with Latest Bulletin Reference Title and Date Issue Page Assets and liabilities of commercial banks September 30, 1997 February 1998 A64 December 31, 1997 May 1998 A64 March 31, 1998 August 1998 A64 June 30, 1998 November 1998 A64 Terms of lending at commercial banks November 1997 February 1998 A68 February 1998 May 1998 A66 May 1998 August 1998 A67 August 1998 November 1998 A66 and liabilities of U.S. branches and agencies of foreign banks September 30, 1997 February 1998 A72 December 31, 1997 May 1998 A70 March 31, 1998 August 1998 A72 June 30, 1998 November 1998 A72 Pro forma balance sheet and income statements for priced sen'ice operations March 31, 1998 July 1998 A64 June 30, 1998 October 1998 A64 September 30, 1998 January 1999 A64 Residential lending reported under the Home Mortgage Disclosure Act 1995 September 1996 A68 1996 September 1997 A68 1997 September 1998 A68 Disposition of applications for private mortgage insurance 1996 September 1997 A76 1997 September 1998 A72 Small loans to businesses and farms 1997 September 1998 A76 Community development lending reported under the Community Reinvestment Act 1997 .....' September 1998 A79 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 Special Tables • January 1999 4.31 PRO FORMA FINANCIAL STATEMENTS FOR FEDERAL RESERVE PRICED SERVICES A. Pro forma balance sheet Millions of dollars Item Sept. 30, 1998 Sept. 30, 1997 Short-term assets (Note 1) Imputed reserve requirement on clearing balances 655.7 646.3 5,901.3 5,816.7 68 8 66 2 4.5 2.9 17.1 28.7 4,169.0 5,238.6 Total short-term assets 10,816.4 11,799.4 Long-term assets (Note 2) 396.4 389.1 126.0 132.5 Leases and leasehold improvements 22.9 33.7 415.5 334.5 Total long-term assets 960.9 889.8 Total assets 11,777.3 12,689.1 Short-term liabilities Clearing balances and balances arising from early credit 6,146.8 6,974.7 Deferred-availability items 4,579.2 4,726.8 Short-term debt 90.4 97.8 108164 11,799.4 Long-term liabilities 0.0 .7 Long-term debt 190.9 187.8 Postretirement/postemployment benefits obligation 214.6 203.8 Total long-term liabilities 405.5 392.3 Total liabilities 11,221.9 12,191.6 Equity 555.5 497.5 Total liabilities and equity (Note 3) 11,777.3 12,689.1 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 $20.4 million in the third quarter balances must be held as vault cash or as nonearning balances maintained at a Reserve Bank; of 1998, $28.7 million in the second quarter of 1998, $ 16.2 million in the first quarter of 1998, thus, a portion of priced services clearing balances held with the Federal Reserve is shown as $15.8 million in the third quarter of 1997, $15.6 million in the second quarter of 1997, $15.6 required reserves on the asset side of the balance sheet. The remainder of clearing balances is million in the first quarter of 1997, and corresponding increases in this asset account. assumed to be invested in three-month Treasury bills, shown as investment in marketable securities. Receivables are (1) amounts due Che 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 ihe federal funds rate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Bank-Reported Data A65 4.31 PRO FORMA FINANCIAL STATEMENTS FOR FEDERAL RESERVE PRICED SERVICES B. Pro forma income statement Millions ot dollars Item Quarter ending Sept. 30, 1998 Quarter ending Sept. 30, 1997 Revenue from services provided to depository institutions (Note 4) 205.5 197.8 Operating expenses (Note 5) 167.0 166.6 Income from operations Inputed costs (Note 6) 38.4 31.1 Interest on float Interest on debt 1.8 2.8 4.3 4.4 Sales taxes 2.4 2.1 FDIC insurance 0.7 9.1 2.9 12.3 Income from operations after imputed costs 29.3 18.9 Other income and expenses (Note 7) Investment income on clearing balances 89.8 93.5 Earnings credits (85.6) 4.2 85.9 7.6 Income before income taxes 33.5 26.5 Inpuled income taxes (Note 8) 10.7 8.5 Net income 22.7 18.0 MEMO Targeted return on equity (Note 9) 17.1 13.5 Nine months ending Sept. 30, 1998 Nine months ending Sept. 30, 1997 Revenue from services provided to depository institutions {Note 4) 602.5 586.6 Operating expenses (Note 5) 483.9 494.8 Income from operations Imputed costs (Note 6) 118.6 91.9 Interest on float !).] 8.9 Interest on debt 12.8 13.1 Sales taxes 6.1 7.1 FDIC insurance 0.7 30.7 4.0 33.1 Income from operations after imputed costs 88.0 58.8 Other income and expenses (Note 7) Investment income on clearing balances 271.3 273.6 Earnings credits (251.2) 20.2 (251.6) 22.0 Income before income taxes 108.1 80.8 Imputed income taxes (Note 8) 34.7 25.9 Nel income 73.4 54.9 MEMO Targeted return on equity (Note 9) 49.9 40.5 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 third quarters of 1998 and 1997. 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 $.7 million per quarter in the first three quarters of 1998 and 1997. The Investment income on clearing balances represents the average coupon-equivalent yield on credit 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 ihe 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 EQUJTY private-sector firm are among the components of the PSAF (see note 3). The following lisl shows the daily average recovery of float by the Reserve Banks for the Represent the after-lax rale of return on equity that the Federal Reserve would have earned third quarter of 1998 and 1997 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 recover)' of automation consolidation costs of $4.0 million for the 1998 1997 third quarter of 1998, $4.1 million for the second quarter of 1998, $2.6 million for the first quarter of 1998, $2.0 million for the third quarter of 1997, $1.9 million for the second quarter Total float 386.2 480.8 of 1997, and $2.3 million for the first quarter of 1997. The Reserve Banks plan to recover Unrecovered float 19.7 39.1 these amounts, along with a finance charge, by the end of the year 2001. Float subject to recovery 366.5 441.7 Sources of float recovery Income on clearing balances 36.6 44.4 As-of adjustments 240.2 242.2 Direct charges 113.7 99.6 Per-itern fees (23.9) 55.5 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 Federal Reserve Bulletin • January 1999 Index to Statistical Tables References are to pages A3-A65 although the prefix "A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Federal credit agencies. 30 Assets and liabilities (See also Foreigners) Federal finance Commercial banks. 15-21 Debt subject to statutory limitation, and types and ownership Domestic finance companies, 32. 33 of gross debt, 27 Federal Reserve Banks, 10 Receipts and outlays, 25, 26 Foreign-related institutions, 20 Treasury financing of surplus, or deficit, 25 Automobiles Treasury operating balance, 25 Consumer credit, 36 Federal Financing Bank, 30 Production, 44, 45 Federal funds, 23, 25 Federal Home Loan Banks, 30 BANKERS acceptances, 5, 10, 22, 23 Federal Home Loan Mortgage Corporation, 30, 34, 35 Bankers balances, 15-21. (See also Foreigners) Federal Housing Administration, 30, 34, 35 Bonds (See also U.S. government securities) Federal Land Banks. 35 New issues, 31 Federal National Mortgage Association, 30, 34, 35 Rates, 23 Federal Reserve Banks Business activity, nonfinanciat, 42 Condition statement, 10 Business loans (See Commercial and industrial loans) Discount rates (See Interest rates) U.S. government securities held, 5, 10, 11, 27 CAPACITY utilization, 43 Federal Reserve credit, 5. 6, 10, 12 Capital accounts Federal Reserve notes, 10 Commercial banks, 15-21 Federal Reserve System Federal Reserve Banks, 10 Balance sheet for priced services, 64, 65 Central banks, discount rates, 61 Condition statement for priced services, 64, 65 Certificates of deposit, 23 Federally sponsored credit agencies, 30 Commercial and industrial loans Finance companies Commercial banks, 15-21 Assets and liabilities, 32 Weekly reporting banks, 17, 18 Business credit, 33 Commercial banks Loans, 36 Assets and liabilities, 15-21 Paper, 22, 23 Commercial and industrial loans, 15-21 Float, 5 Consumer loans held, by type and terms, 36 Flow of funds, 37-41 Real estate mortgages held, by holder and property, 35 Foreign currency operations, 10 Time and savings deposits, 4 Foreign deposits in U.S. banks, 5 Commercial paper, 22, 23, 32 Foreign exchange rates, 62 Condition statements (See Assets and liabilities) Foreign-related institutions, 20 Construction, 42, 46 Foreign trade, 51 Consumer credit, 36 Foreigners Consumer prices, 42 Claims on, 52, 55, 56, 57, 59 Consumption expenditures, 48, 49 Liabilities to, 51, 52, 53, 58, 60, 61 Corporations Profits and their distribution, 32 GOLD Security issues, 31, 61 Certificate account, 10 Cost of living (See Consumer prices) Stock, 5, 51 Credit unions, 36 Government National Mortgage Association, 30, 34. 35 Currency in circulation, 5, 13 Gross domestic product. 48, 49 Customer credit, stock market, 24 DEBT (See specific types of debt or securities) HOUSING, new and existing units, 46 Demand deposits, 15-21 Depository institutions INCOME and expenses, Federal Reserve System, 64, 65 Reserve requirements, 8 Income, personal and national, 42, 48, 49 Reserves and related items, 4, 5, 6, 12 Industrial production, 42, 44 Deposits (See also specific types) Insurance companies, 27, 35 Commercial banks, 4, 15-21 Interest rates Federal Reserve Banks, 5, 10 Bonds, 23 Discount rates at Reserve Banks and at foreign central banks and Consumer credit, 36 foreign countries (See Interest rates) Federal Reserve Banks, 7 Discounts and advances by Reserve Banks (See Loans) Foreign central banks and foreign countries, 61 Dividends, corporate, 32 Money and capital markets, 23 Mortgages, 34 EMPLOYMENT, 42 Prime rate. 22 Eurodollars, 23, 61 International capital transactions of United States, 50-61 International organizations, 52, 53, 55, 58, 59 FARM mortgage loans, 35 Inventories, 48 Federal agency obligations, 5, 9, 10, 11, 28, 29 Investment companies, issues and assets, 32 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A67 Investments (See also specific types) Retail credit and retail sales. 36. 42 Commercial banks, 4, 15-21 Federal Reserve Banks. 10. 11 SAVING Financial institutions, 35 Flow of funds, 37-41 National income accounts, 48 LABOR force. 42 Savings institutions. 35, 36, 37^41 Life insurance companies (See Insurance companies) Savings deposits (See Time and savings deposits) Loans (See also specific types) Securities {See also specific types) Commercial banks, 15-21 Federal and federally sponsored credit agencies, 30 Federal Reserve Banks, 5, 6, 7, 10. 11 Foreign transactions, 60 Federal Reserve System, 64, 65 New issues. 31 Financial institutions, 35 Prices, 24 Insured or guaranteed by United States. 34, 35 Special drawing rights, 5. 10. 50. 51 State and local governments MANUFACTURING Holdings of U.S. government securities. 27 Capacity utilization, 43 New security issues, 31 Production, 43. 45 Rates on securities. 23 Margin requirements, 24 Stock market, selected statistics. 24 Member banks {See also Depository institutions) Stocks (See also Securities) Reserve requirements, 8 New issues, 31 Mining production. 45 Prices, 24 Mobile homes shipped, 46 Student Loan Marketing Association, 30 Monetary and credit aggregates, 4, 12 Money and capital market rates, 23 TAX receipts, federal, 26 Money stock measures and components. 4. 13 Thrift institutions, 4. (See also Credit unions and Savings Mortgages (See Real estate loans) institutions) Mutual funds, 13, 32 Time and savings deposits, 4, 13, 15-21 Mutual savings banks (See Thrift institutions) Trade, foreign, 51 Treasury cash. Treasury currency, 5 NATIONAL defense outlays. 26 Treasury deposits, 5. 10.25 National income. 48 Treasury operating balance, 25 OPEN market transactions. 9 UNEMPLOYMENT, 42 U.S. government balances PERSONAL income, 49 Commercial bank holdings, 15-21 Prices Treasury deposits at Reserve Banks, 5. 10, 25 Consumer and producer, 42, 47 U.S. government securities Stock market, 24 Bank holdings, 15-21,27 Prime rate. 22 Dealer transactions, positions, and financing. 29 Producer prices, 42, 47 Federal Reserve Bank holdings, 5. 10. 11, 27 Production, 42. 44 Foreign and international holdings and Profits, corporate, 32 transactions, 10. 27. 61 Open market transactions, 9 REAL estate loans Outstanding, by type and holder. 27, 28 Banks, 15-21,35 Rates, 23 Terms, yields, and activity. 34 U.S. international transactions, 50-62 Type of holder and property mortgaged, 35 Utilities, production. 45 Reserve requirements, 8 Reserves VETERANS Administration, 34, 35 Commercial banks, 15-21 Depository institutions, 4, 5. 6, 12 WEEKLY reporting banks. 17, 18 Federal Reserve Banks, 10 Wholesale (producer) prices. 42. 47 U.S. reserve assets, 51 Residential mortgage loans. 34, 35 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 Federal Reserve Bulletin • J anuary 1999 Federal Reserve Board of Governors and Official Staff ALAN GREENSPAN, Chairman EDWARD W. KELLEY, JR. ALICE M. RIVLIN, Vice Chair LAURENCE H. MEYER OFFICE OF BOARD MEMBERS DIVISION OF INTERNATIONAL FINANCE LYNN S. FOX, Assistant to the Board KAREN H. JOHNSON, Director DONALD J. WINN, Assistant to the Board LEWIS S. ALEXANDER, Deputy Director THEODORE E. ALLISON, Assistant to the Board for Federal PETER HOOPER III, Deputy Director Reserve System Affairs DALE W. HENDERSON, Associate Director WINTHROP P. HAMBLEY, Special Assistant to the Board DAVID H. HOWARD, Senior Adviser BOB STAHLY MOORE, Special Assistant to the Board EDWIN M. TRUMAN, Senior Adviser DIANE E. WERNEKE, Special Assistant to the Board DONALD B. ADAMS, Assistant Director THOMAS A. CONNORS, 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 WILLIAM R. JONES, Associate Director KATHLEEN M. O'DAY, Associate 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 JENNIFER J. JOHNSON, Secretary DAVID S. JONES, Assistant Director ROBERT DEV. FRIERSON, Associate Secretary STEPHEN D. OLINER, Assistant Director BARBARA R. LOWREY, Associate Secretary and Ombudsman STEPHEN A. RHOADES, Assistant Director JANICE SHACK-MARQUEZ, Assistant Director CHARLES S. STRUCKMEYER. Assistant Director DIVISION OF BANKING SUPERVISION AND REGULATION ALICE PATRICIA WHITE, Assistant Director JOYCE K. ZICKLER, Assistant Director RICHARD SPILLENKOTHEN, Director GLENN B. CANNER, Senior Adviser STEPHEN C. SCHEMERING, Deputy Director JOHN J. MINGO, Senior Adviser HERBERT A. BIERN, Associate Director ROGER T. COLE, Associate Director DIVISION OF MONETARY AFFAIRS WILLIAM A. RYBACK, Associate Director GERALD A. EDWARDS, JR., Deputy Associate Director DONALD L. KOHN, Director STEPHEN M. HOFFMAN, JR., Deputy Associate Director DAVID E. LINDSEY, Deputy Director JAMES V. HOUPT, Deputy Associate Director BRIAN F. MADIGAN, Associate Director JACK P. JENNINGS, Deputy Associate Director RICHARD D. PORTER, Deputy Associate Director MICHAEL G. MARTINSON, Deputy Associate Director VINCENT R. REINHART, Deputy Associate Director SIDNEY M. SUSSAN, Deputy Associate Director WILLIAM C. WHITESELL, Assistant Director MOLLY S. WASSOM, Deputy Associate Director NORMAND R.V. BERNARD, Special Assistant to the Board HOWARD A. AMER, Assistant Director DIVISION OF CONSUMER NORAH M. BARGER, Assistant Director BETSY CROSS, Assistant Director AND COMMUNITY AFFAIRS RICHARD A. SMALL, Assistant Director DOLORES S. SMITH, Director WILLIAM SCHNEIDER, Project Director, GLENN E. LONEY, Deputy Director National Information Center SANDRA F. BRAUNSTEIN, Assistant Director MAUREEN P. ENGLISH, Assistant Director ADRIENNE D. HURT, Assistant Director IRENE SHAWN MCNULTY, Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A69 ROGER W. FERGUSON, JR. EDWARD M. GRAMLICH OFFICE OF DIVISION OF RESERVE BANK OPERATIONS STAFF DIRECTOR FOR MANAGEMENT AND PAYMENT SYSTEMS S. DAVID FROST, Staff Director CLYDE H. FARNSWORTH, JR., Director JOHN R. WEIS, Adviser DAVID L. ROBINSON, Deputy Director (Finance and Control) LOUISE L. ROSEMAN, Associate Director MANAGEMENT DIVISION PAUL W. BETTGE, Assistant Director JACK DENNIS, JR., Assistant Director S. DAVID FROST, Director STEPHEN J. CLARK, Associate Director, Finance Function EARL G. HAMILTON, Assistant Director DARRELL R. PAULEY, Associate Director, Human Resources JOSEPH H. HAYES, JR., Assistant Director Function JEFFREY C. MARQUARDT, Assistant Director SHEILA CLARK, EEO Programs Director MARSHA REIDHILL, Assistant Director DIVISION OF SUPPORT SERVICES OFFICE OF THE INSPECTOR GENERAL BARRY R. SNYDER, Inspector General ROBERT E. FRAZIER, Director DONALD L. ROBINSON, Assistant Inspector General GEORGE M. LOPEZ, Assistant Director DAVID L. WILLIAMS, Assistant Director DIVISION OF INFORMATION RESOURCES MANAGEMENT STEPHEN R. MALPHRUS, Director RICHARD C. STEVENS, Deputy Director MARIANNE M. EMERSON, Assistant Director MAUREEN HANNAN, 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 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Federal Reserve Bulletin • January 1999 Federal Open Market Committee and Advisoiy Councils FEDERAL OPEN MARKET COMMITTEE MEMBERS ALAN GREENSPAN, Chairman WILLIAM J. MCDONOUGH, Vice Chairman EDWARD G. BOEHNE EDWARD W. KELLEY, JR. MICHAEL H. MOSKOW ROGER W. FERGUSON, JR. LAURENCE H. MEYER GARY H. STERN EDWARD M. GRAMLICH ROBERT D. MCTEER, JR. ALICE M. RIVLIN ALTERNATE MEMBERS J. ALFRED BROADDUS, JR. JERRY L. JORDAN ROBERT T. PARRY JACK GUYNN STAFF DONALD L. KOHN, Secretary and Economist LYNN E. BROWNE, Associate Economist NORMAND R.V. BERNARD, Deputy Secretary STEPHEN G. CECCHETTI, Associate Economist LYNN S. FOX, Assistant Secretary CRAIG S. HAKKIO, Associate Economist GARY P. GILLUM, Assistant Secretary DAVID E. LINDSEY. Associate Economist J. VIRGIL MATTINGLY, JR., General Counsel MARK S. SNIDERMAN, Associate Economist THOMAS C. BAXTER, JR., Deputy General Counsel THOMAS D. SIMPSON, Associate Economist MICHAEL J. PRELL, Economist DAVID J. STOCKTON, Associate Economist PETER R. FISHER. Manager, System Open Market Account FEDERAL ADVISORY COUNCIL THOMAS H. JACOBSEN, President CHARLES T. DOYLE, Vice President WILLIAM M. CROZIER. JR.. First District NORMAN R. BOBINS, Seventh District DOUGLAS A. WARNER III, Second District THOMAS H. JACOBSEN, Eighth District WALTER E. DALLER. JR.. Third District RICHARD A. ZONA, Ninth District ROBERT W. GILLESPIE. Fourth District C. Q. CHANDLER, Tenth District KENNETH D. LEWIS. Fifth District CHARLES T. DOYLE, Eleventh District STEPHEN A. HANSEL, Sixth District VACANCY, Twelfth District JAMES ANNABLE, Co-Secretary WILLIAM J. KORSVIK, Co-Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A71 CONSUMER ADVISORY COUNCIL WILLIAM N. LUND, Augusta, Maine, Chairman YVONNE S. SPARKS, St. Louis, Missouri, Vice Chairman RICHARD S. AMADOR, LOS Angeles, California MARTHA W. MILLER, Greensboro, North Carolina WALTER J. BOYER, Garland, Texas DANIEL W. MORTON, Columbus, Ohio WAYNE-KENT A. BRADSHAW, LOS Angeles, California CHARLOTTE NEWTON, Springfield, Virginia JEREMY EISLER, Biloxi, Mississippi CAROL PARRY, New York, New York ROBERT F. ELLIOT, Prospect Heights, Illinois PHILIP PRICE, JR., Philadelphia, Pennsylvania HERIBERTO FLORES, Springfield, Massachusetts DAVID L. RAMP, Minneapolis, Minnesota DWIGHT GOLANN, Boston, Massachusetts MARILYN ROSS, Omaha, Nebraska MARVA H. HARRIS, Pittsburgh, Pennsylvania MARGOT SAUNDERS, Washington, D.C. KARLA IRVINE, Cincinnati, Ohio ROBERT G. SCHWEMM, Lexington, Kentucky FRANCINE C. JUSTA, New York, New York DAVID J. SHIRK, Eugene, Oregon JANET C. KOEHLER, Jacksonville, Florida GAIL SMALL. Lame Deer, Montana GWENN KYZER, Allen, Texas GREGORY D. SQUIRES, Milwaukee, Wisconsin JOHN C. LAMB, Sacramento, California GEORGE P. SURGEON, Chicago, Illinois ERROL T. LOUIS, Brooklyn, New York THEODORE J. WYSOCKI, JR., Chicago, Illinois THRIFT INSTITUTIONS ADVISORY COUNCIL CHARLES R. RINEHART, Santa Ana, California, President WILLIAM A. FITZGERALD, Omaha, Nebraska, Vice President GAROLD R. BASE, Piano, Texas F. WELLER MEYER, Falls Church, Virginia DAVID A. BOCHNOWSKI, Munster, Indiana EDWARD J. MOLNAR, Harleysville, Pennsylvania DAVID E. A. CARSON, Bridgeport, Connecticut GUY C. PINKERTON, Seattle, Washington RICHARD P. COUGHLIN, Stoneham, Massachusetts TERRY R. WEST, Jacksonville, Florida STEPHEN D. HAILER, Akron, Ohio FREDERICK WILLETTS, III, Wilmington, North Carolina Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A72 Federal Reserve Bulletin • January 1999 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.federalreserve.gov). When a charge is indicated, pay- and include additional air mail costs: ment should accompany request and be made payable to the Federal Reserve Regulatory Service, $250.00 per year. Board of Governors of the Federal Reserve System or may be Each Handbook, $90.00 per year. ordered via Mastercard, Visa, or American Express. Payment from FEDERAL RESERVE REGULATORY SERVICE FOR PERSONAL foreign residents should be drawn on a U.S. bank. COMPUTERS. CD-ROM; updated monthly. Standalone PC. $300 per year. Network, maximum 1 concurrent user. $300 per year. BOOKS AND MISCELLANEOUS PUBLICATIONS Network, maximum 10 concurrent users. $750 per year. THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNCTIONS. Network, maximum 50 concurrent users. $2,000 per year. 1994. 157 pp. Network, maximum 100 concurrent users. $3,000 per year. ANNUAL REPORT, 1997. Subscribers outside the United States should add $50 to cover ANNUAL REPORT: BUDGET REVIEW, 1998-99. additional airmail costs. FEDERAL RESERVE BULLETIN. Monthly. $25.00 per year or $2.50 THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A MULTIeach in the United States, its possessions, Canada, and COUNTRY MODEL, May 1984. 590 pp. $14.50 each. Mexico. Elsewhere, $35.00 per year or S3.00 each. INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. ANNUAL STATISTICAL DIGEST: period covered, release date, num- 440 pp. $9.00 each. ber of pages, and price. FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. 1981 October 1982 239 pp. $ 6.50 December 1986. 264 pp. $10.00 each. 1982 December 1983 266 pp. $ 7.50 FINANCIAL SECTORS IN OPEN ECONOMIES: EMPIRICAL ANALY- 1983 October 1984 264 pp. $11.50 SIS AND POLICY ISSUES. August 1990. 608 pp. $25.00 each. 1984 October 1985 254 pp. $12.50 RISK MEASUREMENT AND SYSTEMIC RISK: PROCEEDINGS OF A 1985 October 1986 231 pp. $15.00 JOINT CENTRAL BANK RESEARCH CONFERENCE. 1996. 1986 November 1987 288 pp. $15.00 578 pp. $25.00 each. 1987 October 1988 272 pp. $15.00 1988 November 1989 256 pp. $25.00 1980-89 March 1991 712 pp. $25.00 EDUCATION PAMPHLETS 1990 November 1991 185 pp. $25.00 Short pamphlets suitable for classroom use. Multiple copies are 1991 November 1992 215 pp. $25.00 available without charge. 1992 December 1993 215 pp. $25.00 1993 December 1994 281 pp. $25.00 1994 December 1995 190 pp. $25.00 Consumer Handbook on Adjustable Rate Mortgages 1990-95 November 1996 404 pp. $25.00 Consumer Handbook to Credit Protection Laws A Guide to Business Credit for Women, Minorities, and Small Businesses SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SERIES OF Series on the Structure of the Federal Reserve System CHARTS. Weekly. $30.00 per year or $.70 each in the United States, its possessions, Canada, and Mexico. Elsewhere, The Board of Governors of the Federal Reserve System The Federal Open Market Committee $35.00 per year or $.80 each. Federal Reserve Bank Board of Directors REGULATIONS OF THE BOARD OF GOVERNORS OF THE FEDERAL Federal Reserve Banks RESERVE SYSTEM. A Consumer's Guide to Mortgage Lock-Ins A Consumer's Guide to Mortgage Settlement Costs ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— A Consumer's Guide to Mortgage Refinancings Regulation Z) Vol. I (Regular Transactions). 1969. 100 pp. Home Mortgages: Understanding the Process and Your Right Vol. II (Irregular Transactions). 1969. 116 pp. Each volume $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 Sense of Savings monthly. (Requests must be prepaid.) SHOP: The Card You Pick Can Save You Money Consumer and Community Affairs Handbook. $75.00 per year. Welcome to the Federal Reserve Monetary Policy and Reserve Requirements Handbook. $75.00 When Your Home is on the Line: What You Should Know per year. About Home Equity Lines of Credit Securities Credit Transactions Handbook. $75.00 per year. Keys to Vehicle Leasing Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A73 STAFF STUDIES: Only Summaries Printed in the 165. THE DEMAND FOR TRADE CREDIT: AN INVESTIGATION OF BULLETIN MOTIVES FOR TRADE CREDIT USE BY SMALL BUSINESSES, by Gregory E. Elliehausen and John D. Wolken. September Studies and papers on economic and financial subjects that are of 1993. 18 pp. general interest. Requests to obtain single copies of the full text or to be added to the mailing list for the series may be sent to 166. THE ECONOMICS OF THE PRIVATE PLACEMENT MARKET, by Mark Carey, Stephen Prowse, John Rea, and Gregory Udell. Publications Services. January 1994. 111pp. 167. A SUMMARY OF MERGER PERFORMANCE STUDIES IN BANK- Staff Studies 1-157, 161, and 168-169 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 170. THE COST OF IMPLEMENTING CONSUMER FINANCIAL REGU- PRODUCTS, by Mark J. Warshawsky with the assistance of LATIONS: AN ANALYSIS OF EXPERIENCE WITH THE TRUTH Dietrich Earnhart. September 1989. 23 pp. IN SAVINGS ACT, by Gregory Elliehausen and Barbara R. 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUBSIDI- Lowrey, December 1997. 17 pp. ARIES OF BANK HOLDING COMPANIES, by Nellie Liang and 171. THE COST OF BANK REGULATION: A REVIEW OF THE EVI- Donald Savage. February 1990. 12 pp. DENCE, by Gregory Elliehausen, April 1998. 35 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 1990. 35 pp. REPRINTS OF SELECTED Bulletin ARTICLES 162. EVIDENCE ON THE SIZE OF BANKING MARKETS FROM MORT- Some Bulletin articles are reprinted. The articles listed below are GAGE LOAN RATES IN TWENTY CITIES, by Stephen A. those for which reprints are available. Beginning with the Janu- Rhoades. February 1992. 11 pp. ary 1997 issue, articles are available on the Board's World Wide 163. CLEARANCE AND SETTLEMENT IN U.S. SECURITIES MAR- Web site (http://www.federalreserve.gov) under Publications, KETS, by Patrick Parkinson, Adam Gilbert, Emily Gollob, Federal Reserve Bulletin articles. Lauren Hargraves, Richard Mead, Jeff Stehm, and Mary Ann Taylor. March 1992. 37 pp. Limit of ten copies 164. THE 1989-92 CREDIT CRUNCH FOR REAL ESTATE, by James T. Fergus and John L. Goodman, Jr. July 1993. FAMILY FINANCES IN THE U.S.: RECENT EVIDENCE FROM THE 20 pp. SURVEY OF CONSUMER FINANCES. January 1997. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 Federal Reserve Bulletin • January 1999 Maps of the Federal Reserve System !{".<• - MlNNKAlt'llS EWYORK DALLAS HAWAII LEGEND Both pages Facing page • Federal Reserve Bank city • Federal Reserve Branch city • Board of Governors of the Federal — Branch boundary Reserve System, Washington, D.C. NOTE The Federal Reserve officially identifies Districts by num- of Puerto Rico and the U.S. Virgin Islands; the San Franber and Reserve Bank city (shown on both pages) and by cisco Bank serves American Samoa, Guam, and the Comletter (shown on the facing page). monwealth of the Northern Mariana Islands. The Board of In the 12th District, the Seattle Branch serves Alaska, Governors revised the branch boundaries of the System and the San Francisco Bank serves Hawaii. most recently in February 1996. The System serves commonwealths and territories as follows: the New York Bank serves the Commonwealth Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A75 1-A 2-B 3-C 4-D 5-E MB Pittsburgh Baltimore MD NY \ f FA s NJ Vf , Buffalo Mi • Cincinnati • Charlotte DE""" MA / Jv KY BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 6-F 7-G 8-H • Nashvilk1 TNr- KY Ml Birminghairul _ II. ) IN • f , •• .,, Detroit! .• Louisville r,A MO LA .Kioksonville liis V\\ OrkMUs IN Little • Rock Ms Miami ATLANTA CHICAGO ST. LOUIS 9-1 MN • Helena Ml MINNEAPOLIS 10-J 12-L -»• Omaha* DL'IULT ALASKA Seattle • •- l.ilkima (ii US KANSAS CITY 11-K fJS Sak Lake City VT. l-.l Paso •Lus Angeles S.m Antonio HAWAII DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 Federal Reserve Bulletin • January 1999 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 William O. Taylor Paul M. Connolly NEW YORK* 10045 John C. Whitehead William J. McDonough Peter G. Peterson Vacancy Buffalo 14240 Bal Dixit Carl W. Turnipseed' PHILADELPHIA 19105 Joan Carter Edward G. Boehne Charisse R. Lillie 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. Jeremiah J. Sheehan Walter A. Varvel Baltimore 21203 Daniel R. Baker William J. Tignanelli1 Charlotte 28230 Joan H. Zimmerman DanM. Bechter1 ATLANTA 30303 John F. Wieland Jack Guynn Paula Lovell Patrick K. Barron James M. Mckee Birmingham 35283 V. Larkin Martin Fred R. Herr1 Jacksonville 32231 Marsha G. Rydberg James D. Hawkins1 Miami 33152 Mark T. Sodders James T. Curry III Nashville 37203 N. Whitney Johns Melvyn K. Purcell New Orleans 70161 R. Glenn Pumpelly Robert J. Musso CHICAGO* 60690 Lester H. McKeever, Jr. Michael H. Moskow Arthur C. Martinez William C. Conrad Detroit 48231 Florine Mark David R. Allardice' ST. LOUIS 63166 Susan S. Elliott William Poole Charles W. Mueller W. LeGrande Rives Little Rock 72203 To be announced Robert A. Hopkins Louisville 40232 To be announced Thomas A. Boone Memphis 38101 To be announced Martha L. Perine MINNEAPOLIS 55480 David A. Koch Gary H. Stern James J. Howard Colleen K. Strand Helena 59601 To be announced John D.Johnson KANSAS CITY 64198 Jo Marie Dancik Thomas M. Hoenig Terrence P. Dunn Richard K. Rasdall Denver 80217 Kathryn A. Paul Carl M. Gambs > Oklahoma City 73125 Larry W. Brummett Kelly J. Dubbert Omaha 68102 Gladys Styles Johnston Steven D. Evans DALLAS 75201 Roger R. Hemminghaus Robert D. McTeer, Jr. James A. Martin Helen E. Holcomb El Paso 79999 To be announced Sammie C. Clay Houston 77252 To be announced Robert Smith, III' San Antonio 78295 To be announced James L. Stall> SAN FRANCISCO 94120 Gary G. Michael Robert T. Parry Nelson C. Rising John F. Moore Los Angeles 90051 Lonnie Kane MarkL. Mullinix1 Portland 97208 Nancy Wilgenbusch Raymond H. Laurence1 SaltLakeCity 84125 Barbara L. Wilson Andrea P. Wolcott Seattle 98124 Richard R. Sonstelie Gordon R. G. Werkema2 'Additional offices of these Banks are located at 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