Federal Reserve Bulletin, 1999-03

Volume 85 • Number 3 D March 1999 I 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 147 MONETARY POLICY REPORT TO THE 187 STATEMENTS TO THE CONGRESS CONGRESS Alan Greenspan, Chairman, Board of Gover- The U.S. economy performed impressively again nors, in assessing the economic outlook testifies in 1998. Output expanded rapidly, the unem- that it has been the ability of our flexible and ployment rate fell to the lowest level since 1970, innovative businesses and workforce that has and inflation remained subdued. Monetary pol- enabled the United States to take full advantage icy during the year balanced two major risks to of emerging technologies to produce greater the expansion. On the one hand, with the domes- growth and higher asset values. Further, Chairtic economy displaying considerable momen- man Greenspan states that policy has facilitated tum and labor markets tight, there was concern this process by containing inflation and by proabout the possible emergence of imbalances that moting competitiveness through deregulation would lead to higher inflation and would even- and an open global trading system. Our task tually put the sustainability of the expansion at going forward—at the Federal Reserve as well risk. On the other hand, troubles in many foreign as in the Congress and Administration—is to economies and the resulting financial turmoil at sustain and strengthen these policies, which in home and abroad seemed at times to raise the turn have sustained and strengthened our now risk of an excessive weakening of aggregate record peacetime economic expansion. (Testidemand. The members of the Board of Gover- mony before the House Committee on Ways and nors and the Federal Reserve Bank presidents Means, January 20, 1999.) expect the economy to expand moderately, on 190 Chairman Greenspan addresses one of our most average, in 1999. With labor market tightness pressing public policy challenges—social expected to persist and oil and import prices security—and testifies that the system as a whole unlikely to be as weak as they were in 1998, is still significantly underfunded, at least accordinflation is expected to move up somewhat but ing to the intermediate projections of the Oldto remain low by the standards of the past three Age and Survivors Insurance actuaries. He states decades. further that proper fiscal planning requires that consequences of mistakes in all directions be 178 TREASURY AND FEDERAL RESERVE evaluated. If we move now to shore up the FOREIGN EXCHANGE OPERATIONS social security program or replace it, in part or in whole, with a private system and subse- During the fourth quarter of 1998, the dollar quently find that we had been too pessimistic in depreciated 17.4 percent against the Japanese our projections, the costs to our society would yen and was virtually unchanged against the be few. If we assume more optimistic scenarios German mark. The U.S. monetary authorities did and they prove wrong, the imbalances could not intervene in the foreign exchange markets become overwhelming, and finding a solution during the quarter. would be even more divisive than today's problem. (Testimony before the Senate Committee 184 INDUSTRIAL PRODUCTION AND CAPACITY on the Budget, January 28, 1999) UTILIZATION FOR JANUARY 1999 Industrial production was unchanged in January, 193 ANNOUNCEMENTS at 132.5 percent of its 1992 average. Manufac- Appointments of new members and a new turing output increased 0.1 percent, and utility chair and vice chair of the Consumer Advisory output increased 0.2 percent, but production at Council. mines decreased 1.8 percent. Overall capacity utilization in January slipped 0.3 percentage Issuance of supervisory guidance on certain elepoint, to 80.5 percent, 1 Vi percentage points ments of counterparty credit risk-management below its 1967-98 average. systems. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Availability of preliminary figures on operating AI FINANCIAL AND BUSINESS STATISTICS income of the Federal Reserve Banks. These tables reflect data available as of Enforcement actions. January 27, 1999. 197 MINUTES OF THE FEDERAL OPEN MARKET A3 GUIDE TO TABULAR PRESENTATION COMMITTEE MEETING HELD ON A4 Domestic Financial Statistics DECEMBER 22, 1998 A42 Domestic Nonfinancial Statistics At its meeting on December 22, 1998, the Com- A50 International Statistics mittee adopted a directive that called for conditions in reserve markets that were consistent A63 GUIDE TO STATISTICAL RELEASES AND with an unchanged federal funds rate of 4-V4 per- SPECIAL TABLES cent and did not contain any bias with respect to the direction of possible adjustments to policy A64 INDEX TO STATISTICAL TABLES during the intermeeting period. At this meeting, the Committee resolved to A66 BOARD OF GOVERNORS AND STAFF take advantage of an available, but unused policy, originally stated in early 1995, of releasing, A68 FEDERAL OPEN MARKET COMMITTEE AND on an infrequent basis, a statement immediately STAFF; ADVISORY COUNCILS after some of its meetings at which the stance of monetary policy has not been changed. The A70 FEDERAL RESERVE BOARD PUBLICATIONS Committee will release such a statement when it wishes to communicate to the public a major A72 MAPS OF THE FEDERAL RESERVE SYSTEM shift in its views about the balance of risks or the likely direction of future policy. Such A74 FEDERAL RESERVE BANKS, BRANCHES, announcements would not be made after every AND OFFICES change in the symmetry of the directive. 205 LEGAL DEVELOPMENTS Various bank holding company, bank service corporation, and bank merger orders; and pending cases. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

PUBLICATIONS COMMITTEE Lynn S. Fox, Chair • S. David Frost L Karen H. Johnson i- Donald L. Kohn • J. Virgil Mattingly, Jr. C Michael J. Prell !Z Dolores S. Smith H Richard Spillenkothen The Federal Reserve Bulletin is issued monthly under the direction of the staff' publications committee. This committee is responsible for opinions expressed except in official statements and signed articles. It is assisted by the Economic Editing Section headed by S. Ellen Dykes, the Multimedia Technologies Center under the direction of Christine S. Griffith, and Publications Services supervised by Linda C. Kyles. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress Report submitted to the Congress on February 23, The Russian crisis in mid-August precipitated a 1999, pursuant to the Full Employment and Balanced period of unusual volatility in world financial mar- Growth Act of 1978 kets. The losses incurred in Russia and in other emerging market economies heightened investors' and lenders' concerns about other potential problems MONETARY POLICY AND THE and led them to become substantially more cautious ECONOMIC OUTLOOK about taking on risk. The resulting effects on U.S. In 1998, the U.S. economy again performed impres- financial markets included a substantial widening of sively. Output expanded rapidly, the unemployment risk spreads on debt instruments, a jump in measures rate fell to the lowest level since 1970, and inflation of market uncertainty and volatility, a drop in equity remained subdued. Transitory factors, most recently prices, and a reduction in the liquidity of many marfalling prices for imports and commodities, espe- kets. To cushion the U.S. economy from the effects of cially oil, have helped to produce the favorable out- these financial strains, and potentially to help reduce comes of recent years, but technological advances the strains as well, the Federal Reserve eased moneand increased efficiency, likely reflecting in part tary policy on three occasions in the fall. Global heightened global competition and changes in busi- financial market stresses lessened somewhat after ness practices, suggest that some of the improvement mid-autumn, reflecting, in part, these policy steps as will be more lasting. well as interest rate cuts in other industrial countries Sound fiscal and monetary policies have contrib- and international efforts to provide support to uted importantly to the good economic results: Bud- troubled emerging market economies. Although some getary restraint at the federal level has bolstered U.S. financial flows were disrupted for a time, most national saving and permitted the Federal Reserve to firms and households remained able to obtain suffimaintain lower interest rates than would otherwise cient credit, and the turbulence did not appear to have been possible. This policy mix and sustained constrain spending to a significant degree. More progress toward price stability have fostered clearer recently, some markets were unsettled by the devaluprice signals, more efficient resource use, robust busi- ation and subsequent floating of the Brazilian real in ness investment, and sizable advances in the produc- mid-January, and the problems in Brazil continue to tivity of labor and in the real wages of workers. The pose risks to global markets. Thus far, however, more rapid expansion of productive potential has, in market reaction outside Brazil to that country's diffiturn, helped to keep inflation low even as aggregate culties has been relatively muted. demand has been surging and as labor markets have The foreign exchange value of the dollar rose tightened. substantially against the currencies of the major for- This past year, economic troubles abroad posed a eign industrial countries over the first eight months of significant threat to the performance of the economy. 1998, but subsequently it fell sharply, ending the year Foreign economic growth slowed markedly, on aver- down a little on net. The appreciation of the dollar in age, as conditions in many countries deteriorated. the first half of the year carried it to an eight-year The recession in Japan deepened, and several emerg- high against the Japanese yen. In June, this strength ing market economies in Asia, which had started to against the yen prompted the first U.S. foreign weaken in the wake of the financial crises of 1997, exchange intervention operation in nearly three years, contracted sharply. A worsening economic situation an action that appeared to slow the dollar's rise in Russia last summer led to a devaluation of the against the yen over the following days and weeks. ruble and a moratorium by that country on a substan- Later in the summer, concerns about the possible tial portion of its debt payments. As the year pro- impact on the U.S. economy of increasing difficulties gressed, conditions in Latin America also weakened. in Latin America began to weigh on the dollar's Although some of the troubled foreign economies are exchange value against major foreign currencies. showing signs of improvement, others either are not After peaking in mid-August, it fell sharply over the yet in recovery or are still contracting. course of several weeks, reversing by mid-October Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

148 Federal Reserve Bulletin L: March 1999 the appreciation that had occurred earlier in the year. lower-rated borrowers. All told, household and busi- The depreciation during this period was particularly ness outlays rose even more rapidly than in 1997, and sharp against the yen. The reasons for this decline that acceleration kept the growth of real GDP strong against the yen are not clear, but repayment of yen- even as net exports were slumping. denominated loans by international investors and Deteriorating economic conditions abroad, coupled decisions by Japanese investors to repatriate their with the strength of the dollar over the first eight assets in light of increased volatility in global mar- months of the year, helped to hold down inflation in kets seem to have contributed. The exchange value the United States by trimming the prices of oil and of the dollar fluctuated moderately against the major other imports. These declines reduced both the prices currencies over the rest of the year, and after declin- paid by consumers and the costs of production in ing somewhat early in 1999, it has rebounded many lines of business, and the competition from strongly in recent weeks, as incoming data have abroad kept businesses from raising prices as much suggested continued strength of economic activity in as they might have otherwise. As the result of a the United States. Since the end of 1998, the dollar reduced rate of price inflation, workers enjoyed a has appreciated about 7 percent against the yen, larger rise in real purchasing power even as increases partly reflecting further monetary easing in Japan. At in nominal hourly compensation picked up only the turn of the year, the launch of the third stage of slightly on average. Because of increased gains in European Economic and Monetary Union fixed the productivity, corporations in the aggregate were able eleven participating countries' conversion rates and to absorb the larger real pay increases without suffercreated a new common currency, the euro. The dollar ing a serious diminution of profitability. has appreciated more than 5 percent against the euro, in part because of signs that growth has slowed recently in some euro-area economies. Monetary Policy, Financial Markets, With the U.S. economy expanding rapidly, the and the Economy over 1998 and Early 1999 economies of many U.S. trading partners struggling, and the foreign exchange value of the dollar having Monetary policy in 1998 needed to balance two major risen over 1997 and the first part of 1998, the U.S. risks to the economic expansion. On the one hand, trade deficit widened considerably last year. Some with the domestic economy displaying considerable domestic industries were especially affected. by momentum and labor markets tight, the Federal Open reductions in foreign demand or by increased com- Market Committee (FOMC) was concerned about the petition from imports. For example, a wide range of possible emergence of imbalances that would lead to commodity producers, notably those in agriculture, higher inflation and thereby, eventually, put the susoil, and metals, experienced sharp price declines. tainability of the expansion at risk. On the other hand, Parts of the manufacturing sector also suffered troubles in many foreign economies and resulting adverse consequences from the shocks from abroad. financial turmoil both abroad and at home seemed, at Overall, real net exports deteriorated sharply, as times, to raise the risk of an excessive weakening of exports stagnated and imports continued to surge. aggregate demand. The deterioration was particularly marked in the Over the first seven months of the year, neither of first half of the year; the second half brought a these potential tendencies was sufficiently dominant further, more modest, net widening of the external to prompt a policy action by the FOMC. Although deficit. the incoming data gave no evidence of a sustained Meanwhile, domestic spending continued to slowing of output growth, the Committee members advance rapidly. Household expenditures were bol- believed that the pace of expansion likely would stered by gains in real income and a further rise moderate as businesses began to slow the rapid rates in wealth, while a low cost of capital and optimism at which they had been adding to their stocks of about future profitability spurred businesses to invest inventories and other investment goods, and as heavily in new capital equipment. Although securi- households trimmed the large advances in their ties markets were disrupted in late summer and early spending on consumer durables and homes. Relafall, credit generally remained available from alterna- tively firm real interest rates, buoyed by a high real tive sources. Once the strains on securities markets federal funds rate resulting from the decline in the had eased, businesses and households generally had level of expected inflation, were thought likely to ready access to credit and other sources of finance on help restrain the growth of spending by businesses relatively favorable terms, although spreads in some and households. Another check on growth was markets remained quite elevated, especially for expected to come from the effects on imports and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 149 So lee led interest rates Thirty-year Treasury five-Year TVeasurv ThretJ-mcinth Treasury — 4 Intended fedenil funds r;ile I I 2/5 3/25 5/20 7/2 8/11 11/12 12/16 2/4 5/19 7/1 8/18 9/29 10/1511/17 12/22 20 1997 1998 1999 NOIK The data are daily. Vertical lines indicate the days on which the tal axis arc those on which either the FOMC held a scheduled meeting or a Federal Reserve announced a monetary policy action. The dates on the horizon- policy action was announced. Last observations are for Febraary 19. 1999. exports of the economic difficulties in emerging mar- difficulties had been weighing on U.S. asset markets: ket economies in Asia and elsewhere. Indeed, produc- Stock prices had fallen sharply in late July and into tion in the manufacturing sector slowed substantially August as investors became concerned about the in the first half of the year, and capacity utilization outlook for profits, and risk spreads in debt markets dropped noticeably. Moreover, inflation remained had widened, albeit from very low levels. Taking subdued, and a pickup was not expected in the near- account of these circumstances, the Committee again to-intermediate term because of declining oil prices, left monetary policy unchanged at the August meetand because of economic weakness abroad and the ing, but it shifted to a symmetric directive, reflecting appreciation of the dollar, which were expected to its perception that the risks to the economic outlook, trim the prices of imported goods and to increase at prevailing short-term rates, had become roughly price competition for many U.S. producers. None- balanced. theless, with labor markets already quite taut and Over subsequent weeks, conditions in financial aggregate demand growing rapidly—a combination markets and the economic outlook in many foreign that often has signaled the impending buildup of countries deteriorated further, increasing the dangers inflationary pressures—the Committee, at its meet- to the U.S. expansion. With investors around the ings from March through July, judged conditions to world apparently reevaluating the risks associated be such that, if a policy action were to be taken in the with various credits and seemingly becoming less period immediately ahead, it more likely would be a willing or able to bear such risks, asset demands tightening than an easing; its directives to the shifted toward safer and more liquid instruments. Account Manager of the Domestic Trading Desk at These shifts caused a sharp fall in yields on Treasury the Federal Reserve Bank of New York noted that securities. Spreads of yields on private debt securities asymmetry. over those on comparable Treasury instruments By the time of the August FOMC meeting, how- widened considerably further, and issuance slowed ever, the situation was changing. Although tight labor sharply. Measures of market volatility increased, markets and rapid output growth continued to pose and liquidity in many financial markets was curtailed. a risk of higher inflation, the damping influence of Equity prices continued to slide lower, with most foreign economic developments on the U.S. economy broad indexes falling back by early September to seemed likely to increase. The contraction in the near their levels at the start of the year. Reflecting the emerging market economies in Asia appeared to be weaker and more uncertain economic outlook, some deeper than had been anticipated, and the economic banks boosted interest rate spreads and fees on new situation in Japan had deteriorated. Financial markets loans to businesses and tightened their underwriting in some foreign economies also had experienced standards. greater turmoil, and, the day before the Committee Against this backdrop, at its September meeting met, Russia was forced to devalue the ruble. These the FOMC looked beyond incoming data suggesting Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

150 Federal Reserve Bulletin • March 1999 that the economy was continuing to expand at a bringing the total reduction during the autumn to robust pace, and it lowered the intended level of the % percentage point. The Board of Governors also federal funds rate lA percentage point. The Commit- approved a second lA percentage point cut in the tee noted that the rate cut would cushion the effects discount rate. The Committee believed that, with this on prospective U.S. economic growth of increasing policy action, financial conditions could reasonably weakness in foreign economies and of less accommo- be expected to be consistent with fostering sustained dative conditions in domestic financial markets. The economic expansion while keeping inflationary presdirective adopted at the meeting suggested a bias sures subdued. The action provided some insurance toward further easing over the intermeeting period. In against an unexpectedly severe weakening of the the days following the policy move, disturbances in expansion, and the Committee therefore established a financial markets worsened. Movements in the prices symmetrical directive. By the time of the December of securities were exacerbated by a deterioration meeting, the situation in financial markets had in market liquidity, as some securities dealers cut changed little, on balance, and the Committee back on their market-making activities, and by the decided that no further change in rates was desirable expected unwinding of positions by hedge funds and and that the directive should remain symmetrical. other leveraged investors. In early October, Treasury Some measures of financial volatility eased further yields briefly tumbled to their lowest levels in many in the new year, although risk spreads on corporate years, reflecting efforts by investors to exchange bonds remained at quite high levels. Yields on Treaother instruments for riskless and liquid Treasury sury securities were about flat, on balance, in Janusecurities. ary, as the effect of stronger-than-expected economic Although some measures of market turbulence had growth appeared to be about offset by data suggesting begun to ease a bit by mid-October, financial markets that inflation remained quiescent and perhaps also by remained extremely volatile and risk spreads were the effects of some safe-haven flows prompted by very wide. On October 15, consistent with the direc- the deteriorating situation in Brazil. Over the same tive from the September meeting, the intended fed- period, stock prices surged higher, led by computer eral funds rate was trimmed another lA percentage and other technology shares, and most stock price point, to 5 percent. This policy move, which occurred indexes posted new highs. By the time of the Febbetween FOMC meetings, came at the initiative ruary 2-3 meeting, financial markets were easily of Chairman Greenspan and followed a conference accommodating robust demands for credit, and ecocall with Committee members. At the same time, nomic activity seemed to have more momentum than the Board of Governors approved a VA percent- many had anticipated. However, the foreign sector age point reduction in the discount rate. These continued to pose a threat to U.S. growth going actions were taken to buffer the domestic economy forward, inflation showed no signs of picking up from the impact of the less accommodative condi- despite the rapid pace of growth and the very tight tions in domestic financial markets, in part by con- labor market, and some slowing of economic growth tributing to some stabilization of the global financial remained a likely prospect. In these circumstances, situation. the FOMC concluded that it was prudent to wait for Following the October policy move, strains in further information, and it left policy unchanged. domestic financial markets diminished considerably. As safe-haven demands for Treasury securities ebbed, Treasury yields generally trended higher, and mea- Economic Projections for 1999 sures of financial market volatility and illiquidity eased. Nonetheless, risk spreads remained very wide, By and large, the members of the Board of Governors and liquidity in many markets continued to be lim- and the Federal Reserve Bank presidents, all ited. Moreover, although pressures on some emerging of whom participate in the deliberations of the market economies had receded a bit, partly reflecting FOMC, expect the economy to expand moderately, concerted international efforts to provide assistance on average, in 1999. The central tendency of the to Brazil, the foreign economic outlook remained FOMC participants' forecasts of real GDP growth uncertain. With downside risks still substantial, and from the fourth quarter of 1998 to the fourth quarter in light of the cumulative effect since August of the of 1999 is 2'/2 percent to 3 percent. The anticipated tightening in many sectors of the credit markets and expansion is expected to create enough new jobs to the weakening of economic activity abroad, the keep the civilian unemployment rate near its recent FOMC reduced the intended federal funds rate a average, in a range of 4!/4 percent to 4'/2 percent. further lA percentage point at its November meeting, With tightness of the labor market expected to persist Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 151 I. Economic projections for 1999 posted in recent years would contribute to some Percem moderation in spending growth, especially by households. Government spending, which accounts for Federal Reserve governors and Reserve Bank presidents about one-sixth of domestic demand, seems likely to Indicator Administration Central expand at a moderate pace overall. Along with the Range tendency numerous other uncertainties that attend the outlook, Change, fourth quarter an additional uncertainty is present this year because to fourth quarter' Nominal GDP 3%_5 4-41/2 4.0 of the approach of the year 2000 and the associated Real GDP2 2-3'/: 2J/2-3 2.0 Y2K problem. Consumer price index •* .. VA-2V; 2-2'/: 2.3 Growth abroad is expected to remain sluggish, on Average level, fourth quarter balance, in 1999, limiting the prospects for exports. Civilian unemployment rate 4'/i~43/i 4'/4-4'/3 4.9 At the same time, growth of the U.S. economy probably will continue to generate fairly brisk increases in 1. Change from average for fourth quarter of 1998 to average for fourth quarter of 1999. imports. In total, real net exports of goods and ser- 2. Chain-weighted. vices seem likely to fall further in the coming year, 3. All urban consumers. although several factors—the decline in the dollar from its peak of last summer, the expected slowand oil and import prices unlikely to be as weak in ing of income growth in the United States, and the 1999 as they were in 1998, inflation is expected to possibility of a slight pickup in economic growth move up somewhat from the rate of this past year but abroad—provide a basis for thinking that this year's to remain low by the standards of the past three drop in net exports might not be as large as that of decades: The central tendency of the FOMC partici- 1998. pants' CPI inflation forecasts for 1999 is 2 percent to The future course of inflation will depend in part 2'/2 percent. The Federal Reserve officials' inflation on what happens to the prices of oil and other forecasts are closely aligned with that of the Admin- imports, and restraint from those sources seems istration, and their forecasts of real GDP and unem- unlikely to be as great as it was in 1998. The drop in ployment depict a somewhat stronger real economy the price of oil this past year left it toward the lower than the Administration is projecting. end of its range of the past couple of decades and Present circumstances suggest that domestic has thereby reduced the incentives for exploration, demand could continue to rise briskly for a while drilling, and production. Futures markets have been longer. Consumer spending continues to be driven showing a gradual rise in the price of oil going by strong gains in employment, increases in real forward. Prices of nonoil imports changed little in the incomes, and rising levels of wealth. Those same fourth quarter of last year after having fallen sharply factors, together with low mortgage interest rates, are in previous quarters. Indicators of the pressures keeping housing activity robust. Businesses are still on domestic resources provided mixed signals over investing heavily in new capital, especially comput- the past year. In manufacturing, capacity utilization ers and other high-tech equipment. Households and declined considerably, to a level below its long run businesses appear willing to take on more debt in average, reflecting slower production growth and sizsupport of spending; although spreads on corporate able additions to the stock of capital. However, labor debt remain elevated, rate levels are perceived to be markets remained very taut, and with the economy attractive for most borrowers, and restraint on access apparently carrying substantial momentum into this to finance is not much in evidence. year, data on costs and prices will need to be moni- As the year progresses, however, gains in domes- tored carefully for signs that a rising inflation pattic spending should begin to moderate. Spending tern might start to take hold. In that regard, the increases for housing, consumer durables, and busi- FOMC will continue to rely not only on the CPI but ness equipment have been exceptionally large for a also on a variety of other price measures to gauge while now, substantially raising the rate of growth in the economy's inflation performance in the period the amounts of these goods owned by businesses and ahead. households; some moderation in outlays seems likely, lest these holdings become disproportionate to underlying trends in income and output. The outlook for Money and Debt Ranges for 1999 spending continues to be obscured to some degree by uncertainties about the course of equity prices; a At its most recent meeting, the FOMC reaffirmed the failure of these prices to match the outsized gains 1999 monetary growth ranges that were chosen on a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

152 Federal Reserve Bulletin • March 1999 2. Ranges tor growth of monetary and debt aggrcgates tors to redirect savings flows away from equities after Perceni several years of outsized gains in stock market wealth. With equity wealth still elevated and the Aggregate 1997 1998 1999 yield curve likely to remain flat, M2 velocity could M2 1-5 1-5 1-5 continue to fall this year. However, the pace of M3 2-6 2-6 2-6 Debt 3-7 3-7 3-7 decline should slow as some households respond to the easing of concerns about financial market volatil- NOTE. Change from average for fourth quarter of preceding year to average for fourth quarter of year indicated. ity by reversing a portion of the shift toward M2 assets that occurred last fall. Indeed, this effect may provisional basis last July: 1 percent to 5 perceni for already be visible, as M2 growth, while still robust, M2, and 2 percent to 6 percent for M3. As has been has slowed considerably early this year. If velocity the case for some time, the FOMC intends these does fall, given the Committee's expectations for money growth ranges to be benchmarks for growth nominal income growth, M2 could again exceed its under conditions of price stability, sustainable real price-stability benchmark range. economic growth, and historical velocity relation- M3 expanded 11 percent last year, and its velocity ships rather than ranges that encompass the expected fell 5!/4 percent, the largest drop in many years. The growth of money over the coming year or that serve rapid growth in this aggregate owed in large part to as guides to policy. a substantial rise in institutional money funds. These Given continued uncertainty about movements in funds have been expanding rapidly in recent years as the velocities of M2 and M3 (the ratios of nominal nonfinancial firms increasingly employ them to pro- GDP to the aggregates), the Committee would have vide cash management services. Investments in these little confidence that money growth within any par- funds provide businesses with greater liquidity than ticular range selected for the year would be associ- direct holdings of money market instruments, and by ated with the economic performance it expected or substituting for such direct holdings, they boost M3. desired. Nonetheless, the Committee believes that, M3 was also buoyed last year by a large advance despite the apparent large shift in velocity behavior in in the managed liabilities banks used to fund rapid the early 1990s, money growth has some value as an growth in bank credit. In part, the growth in bank economic indicator. Indeed, some FOMC members credit reflected demand by borrowers shifting from have expressed the concern that the unusually rapid the securities markets, and with these markets again growth in the money and debt aggregates in 1998 receptive to new issues, bank credit growth this might have reflected monetary conditions that were year is expected to slow to a pace more in line with too accommodative and would ultimately lead to an broader debt aggregates However, institutional increase in inflation pressures. The Committee will money funds are likely to continue their robust gains, continue to monitor the monetary aggregates as well contributing to a further diminution in M3 velocity as a wide variety of other economic and financial data and, possibly, to growth of this aggregate above its to inform its policy deliberations. price-stability range. Last year, M2 increased 8'/2 percent, and with Domestic nonfinancial debt grew 6'A percent in nominal GDP rising 5 percent, M2 velocity decreased 1998, somewhat above the middle of the 3 percent to 3 percent. This drop in velocity was considerably 7 percent growth range the Committee established larger than would have been expected on the basis of last February. This robust growth reflected large rises historical relationships and the modest decline in the in the debt of businesses and households owing opportunity cost of M2 (measured as the difference to substantial advances in spending as well as debtbetween the interest rate on Treasury bills and the financed mergers and acquisitions. However, the weighted average rate available on M2 assets). The increase in private-sector debt was partly offset by fall in velocity in part reflected an increased demand the first annual decline in federal debt in almost thirty for the safe and liquid assets in M2 as investors years. As with the monetary aggregates, the Commitresponded to the heightened volatility in financial tee left the range for debt growth unchanged for markets in the second half of the year. Other factors 1999. After an aberrant period in the 1980s during that may have contributed include lower long-term which debt growth greatly exceeded growth of nomiinterest rates and a very flat yield curve, which might nal GDP, debt growth over the past decade has have suggested to households that they would be returned to its historical pattern of about matchgiving up very little in earnings by parking savings in ing growth of nominal GDP, and the Committee short-term assets in M2. In addition, M2 may have members expect debt to fall within its range this been boosted by a desire on the part of some inves- year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 153 ECONOMIC AND FINANCIAL DEVELOPMENTS Change in real GDP IN 1998 AND EARLY 1999 The U.S. economy continued to display great vigor in 1998, despite a sharp slowing of growth in foreign economies and an unsettled world financial environment. According to the Commerce Department's advance estimate, real GDP increased a little more than 4 percent over the four quarters of the year. The economic difficulties facing many of our trading partners and the strength of the dollar through much of the year led to sluggishness in real exports of goods and services. However, the drag on the economy from that source was more than offset by exceptional I _L _L _L strength in the real expenditures of households and 1991 1992 1993 1994 1995 J996 1997 tWB businesses, which were powered by strong real NOTE. In this chart and in subsequent charts that show the components of income growth, large gains in the value of household real GDP, changes are measured to the final quarter of the period indicated, from the final quarter of the preceding period. Last data point is from the advance wealth, ready access to finance during most of the GDP report for I998:Q4. year, and widespread optimism regarding the future of the economy. Although turmoil in financial marhourly pay gave another appreciable boost to the kets seemed to threaten the economy for a time in growth of real labor income. At the same time, the late summer and early autumn, that threat later wealth of households recorded another year of subreceded, in part because of the steps taken by the stantial increase, bolstered in large part by the contin- Federal Reserve to prevent the tightening of credit ued rise in equity prices. Although not all balance markets from impairing the expansion of activity. sheet data for the end of 1998 are available, house- The final quarter of the year brought brisk expansion hold net worth at that point appears to have been up of employment and income, and the limited indiabout 10 percent from the level at the end of 1997. cators of activity in early 1999 have been strong, on The cumulative gain in household wealth since 1994 balance. has amounted to nearly 50 percent. The increase in the general price level this past The rise in net worth probably accounts for much year was smaller than that in the previous year, which of the decline in the personal saving rate over the past had itself been among the smallest in decades. The few years, to an annual average of Vi percent in 1998. chain-type price index for GDP rose slightly less than Households tend to raise their saving from current 1 percent. The further slowing of price increases was income when they feel that wealth must be increased in large part a reflection of sluggish conditions in the to meet longer-run objectives, but they are willing to world economy, which brought declines in the prices reduce their saving from current income when they of a wide range of imported goods, including oil and feel that wealth already is at satisfactory levels. The other primary commodities. In the domestic economy, nominal hourly compensation of workers picked up only slightly despite the tightness of the labor Change in real income and consumption market, and much of the compensation increase was offset by gains in labor productivity. As a result, unit • Disposable personal i labor costs, the most important item in total business • Personal consumption expenditures costs, rose only modestly. The Household Sector Personal consumption expenditures increased more than 5 percent in real terms in 1998, the biggest gain in a decade and a half. Support for the large rise in spending came from a combination of circumstances that, on the whole, were exceptionally favorable to households. Strong gains in employment and real l»l 1992 1993 1994 1995 1996 1997 1998 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

154 Federal Reserve Bulletin • March 1999 Wealth and saving In the single-family sector, sales of new and existing homes surged, the former rising more than Percent Ratio 10 percent from the previous year's total and the latter more than 13 percent. Construction of single- 6.0 12 Wealth-to-income ratio1 family houses strengthened markedly. The number of these units started during the year was the largest 10 -=i \J\r\Mi jn A A-VW 5.0 since the late 1970s, and it exceeded the previous 8 -p. d »Mr" UP AL r * year's total by about 12 percent. In the fourth quarter, — 4.5 unusually mild weather permitted builders to main- 6 — v f r tain activity later into the season than they normally 4.0 4 — 7 71 would have and gave an added kick to housing Personal saving rale • 3.5 starts. Starts increased further in January of this year, 2 — despite harsher weather in some regions. I ! M 1 11 n 11111 i 1 f. 11 1 l\ In contrast to the strength in the single-family 1962 1968 1974 1980 1986 1992 1998 sector, the number of multifamily units started in 1. The raiio of nei worth of households to disposable personal income. 1998 was up only a little from the total for 1997. After bottoming out at a very low level early in the 1990s, construction of these units had been trending back up fairly briskly until this past year. But with low level of the saving rate in 1998 is not so remark- vacancy rates on multifamily rental units running a able when gauged against a wealth-to-income ratio touch higher this past year, builders and their credithat has been running in a range well above its tors may have become concerned about adding too longer-run historical average. many new units to the stock. Financing appeared All of the major categories of personal consump- generally to be in ample supply for projects that tion expenditures—durables, nondurables, and looked promising; during the period of financial turservices—recorded gains in 1998 that were the moil, the flow of credit was supported by substantial largest of the 1990s. Spending on durable goods rose purchases of multifamily mortgages and mortgagemore than 12 percent over the year. Within that backed securities by Freddie Mac and Fannie Mae. category, expenditures on home computers once Total outlays for residential investment increased again stood out, rising roughly 70 percent in real about 12'/2 percent in real terms during 1998, accordterms, a gain that reflected both increased nominal ing to the Commerce Department's initial tally. The outlays and a further substantial decline in computer large increase reflected not only the construction prices. Consumer outlays on motor vehicles also rose work undertaken on new residential units during the sharply, despite some temporary limitations on sup- year but also sizable advances in real outlays for ply from a midyear auto strike. Spending on most home improvements and in the volume of sales activother types of durable goods registered increases that ity being carried on by real estate brokers, which were well above the averages of the past decade or generated substantial gains in commissions. so. Because goods such as these are not consumed all at once—but, rather, add to stocks of durable goods that will be yielding services to consumers for a Change in real residential investment number of years—they embody a form of economic Percent, annual rate saving that is not captured in the normal measure of the saving rate in the national income accounts. The increases in income and net worth that led households to boost consumption expenditures also — 20 led them to invest heavily in additions to the stock of Ju; housing. Declines in mortgage interest rates weighed in as well, helping to maintain the affordability of housing even as house prices moved up somewhat faster than overall inflation. These developments brought the objective of owning a home within the reach of a greater number of households, and the home-ownership rate, which has been trending up J I. _ .1 1991 1992 1993 1994 1995 1996 1997 1998 this decade, rose to another new high in 1998. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 155 The robust growth in household expenditures in because of difficulties in the market for securities 1998 was accompanied by an expansion of household backed by such loans. debt that likely exceeded 8'/2 percent, a somewhat Despite the rapid increase in debt, measures of larger rise than in other recent years. Nonmortgage household financial stress were relatively stable last debt increased about 6 percent, about 2 percentage year, although some remained at high levels. The points above the previous year's pace but down con- delinquency rate on home mortgages has stayed quite siderably from the double-digit increases posted in low in recent years, while the delinquency rate on 1994 and 1995. Home mortgage debt is estimated to auto loans at domestic auto finance companies has have jumped more than 9 percent, its largest annual trended lower. The delinquency rate on credit card advance since 1990, boosted in part by the robust loans at banks fluctuated in a fairly narrow range in housing market. In addition, with mortgage rates 1997 and 1998, but it remained elevated after having reaching their lowest levels in many years, many posted a substantial rise over the previous two years. households refinanced existing mortgages, and some Personal bankruptcy filings have followed a broadly households likely took the opportunity presented by similar pattern: Annual growth has run at about 3 perrefinancing to increase the size of their mortgages, cent over the past year and a half, down from annual using the extra funds raised to finance current expen- increases of roughly 25 percent between mid-1995 ditures or to pay down other debts. and early 1997. The stability of these measures over The growth in household debt reflected both sup- the past couple of years likely owes in part to the ply and demand influences. With wealth rising faster earlier tightening of standards and terms on consumer than income over the year and with consumer con- loans. In addition, lower interest rates and longer loan fidence remaining at historically high levels, house- maturities, which resulted from the shift toward mortholds were willing to boost their indebtedness to gage finance, have helped to mitigate the effects finance increased spending. In addition, lenders gen- of increased borrowing on household debt-service erally remained accommodative toward all but the burdens. most marginal households, even after the turmoil in many financial markets in the fall. After a more general tightening of loan conditions in response to a The Business Sector rise in losses on such loans between mid-1995 and mid-1997, a smaller and declining fraction of banks Business fixed investment increased about 12'/2 pertightened consumer lending standards and terms last cent during 1998, with a 11 Vi percent rise in equipyear, according to Federal Reserve surveys. However, ment spending more than accounting for the overall the availability of high loan-to-value and subprime advance. The strength of the economy and optimism home equity loans likely was reduced in the fall about its longer-run prospects provided underpinnings for increased investment. Outlays were also bolstered by the efficiencies obtainable with new technologies, by the favorable prices at which many Delinquency rates on household loans types of capital equipment could be purchased, and, except during the period of financial market turmoil, by the ready availability and low cost of finance, either through borrowing or through the issuance of \^ Credit card accounts 5 equity shares. \al banks y Real expenditures on office and computing equip- 03 ment, after having risen at an average rate of roughly 4 30 percent in real terms from 1991 through 1997, Auto loans at domestic shifted into even higher gear in 1998, climbing about auto finance companies \ — 3 65 percent. The outsized increase likely owed in part to the efforts of some businesses to put new computer ^ — ^ -^ Q4 2 systems in place before the end of the millennium, in Mortgages hopes of circumventing potential difficulties arising Q3 ' ' ^^ N— from the Y2K problem. But, beyond that, investment | 1 1 i 1 1 i | t i ; 1988 1990 1992 1994 1996 199S in computers is being driven by the same factors that have been at work throughout the expansion— NOTE. The data are quarterly. Daia on credit-card delinquencies are from bank Call Reports; data on auto loan delinquencies are from [he Big Three namely, the introduction of machines that offer automakers; data on mortgage delinquencies are from the Mortgage Bankers greater computing power at increasingly attractive Association. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

156 Federal Reserve Bulletin Q March 1999 Change in real business fixed investment past year. Although some of the more speculative construction plans may have been shelved because of Percsrnt, diiiiu^i a tightening of the terms and standards on loans, • Structures partly in reaction to the financial turmoil, most build- • Producers" durable equipment ers appear to have been able to eventually obtain 20 financing. Despite the sluggishness of spending on structures this past year, the level of investment remained high enough to generate continued moderate growth in the real stock of structures. Business inventories increased about 4Vi percent in real terms this past year after having risen more than 5 percent during 1997. Stocks grew at a 7 percent annual rate in the first quarter, appreciably faster than final sales, but inventory growth over the 1992 1994 i996 remainder of the year was considerably slower than in the first quarter. At year-end, stocks in most nonfarm industries were at levels that did not seem likely prices and that provide businesses new and more to cause firms to restrain production going forward. efficient ways of organizing their operations. Price Inventories of vehicles may even have been a little on declines this past year were especially large, as the the lean side, as a result of both a strike that held cost reductions associated with technical change were down assemblies through the middle part of 1998 and augmented by heightened international competition exceptionally strong demand, which prevented the in the markets for semiconductors and other com- rebuilding of stocks later in the year. By contrast, puter components and by price cutting to work down inventories at year-end appear to have been excessive the stocks of some assembled products. in a few nonfarm industries that have been hurt by Investment in communications equipment— the sluggish world economy. Stocks of farm comanother high-tech category that is an increasingly modities also appeared to be excessive, having been important part of total equipment outlays—rose about boosted further this past year by large harvests and l8'/2 percent in J998. After having traced out an sluggish export demand. erratic pattern of ups and downs through the latter The economic profits of U.S. corporations—that is, part of the 1980s and the early 1990s, real outlays book profits adjusted so that inventories and fixed on this type of equipment began to record sustained capital are valued at their current replacement cost— large annual increases in 1994, and the advance last rose further, on net, over the first three quarters of year was one of the largest. Spending on other types 1998 but at a much slower pace than in most other of equipment displayed varying degrees of strength years of the current expansion. Companies' earnings across different sectors but recorded a sizable gain from operations in the rest of the world fell back a overall. Investment in transportation equipment was bit, as did the profits of private financial corporations strong across the board, spurred by the need to move greater volumes of goods or to carry more passengers Change in nonfarm business inventories in an expanding economy. Spending on industrial machinery advanced about 4[A percent after larger gains in most previous years of the expansion, a pattern that mirrored a slowing of output growth in the industrial sector. Business investment in nonresidential structures, — 4 which accounts for slightly more than 20 percent of total business fixed investment, was down slightly in 1998, according to the advance estimate. Sharply divergent trends were evident within the sector, ranging from considerable strength in the construction of office buildings to marked weakness in the construction of industrial buildings. The waxing and waning of industry-specific construction cycles appears to be I I I ] I I 1 1 the main explanation for the diverse outcomes of this 1992- I §94 1996 19SB Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 157 Before-tax profits as a share of GDP tion activity. Indeed, mergers and acquisitions, share repurchases, and foreign purchases of U.S. firms last year overwhelmed the high level of both initial and Nonfinancial torpormimis seasoned public equity issues, and net equity retirements likely exceeded $250 billion. The disruptions in the financial markets in late summer and early fall appear to have had little effect on total business borrowing but caused a substantial temporary shift in the sources of credit. With investors favoring high credit quality and liquidity, yields on lower-rated corporate bonds rose despite declining Treasury rates; the spread of yields on junk bonds over those on comparable Treasury securities roughly I I I doubled between mid-summer and mid-autumn 1977 1980 1983 1986 1989 1992 1995 before falling back somewhat as conditions in finan- NOTE. Profits from domestic operations, with inventory valuation and capital cial markets eased. The spread of rates on lower-tier consumption adjustments, divided by gross domestic product of nonfinancial commercial paper over those on higher-quality paper corporate sector. rose substantially during the fall but had retraced the rise by the early part of this year. from domestic operations. The profits of nonfinancial Reflecting these adverse market conditions, noncorporations from domestic operations increased at financial corporate bond issuance fell sharply in an annual rate of about 1% percent. Although the August and remained low through mid-October, with volume of output of the nonfinancial companies con- issuance of junk bonds virtually halted for a time. tinued to rise rapidly, profits per unit of output were Commercial paper issuance rose sharply in August squeezed a bit by companies' difficulties in raising and September, as some firms apparently decided to prices in step with costs in a competitive market delay bond issues, turning temporarily to the comenvironment. mercial paper market instead. Bond issuance picked With profits expanding more slowly and invest- up again in late October, however, and issuance in ment spending still on the upswing, businesses' November was robust. Reflecting this rebound, comexternal funding needs increased substantially last mercial paper outstanding fell back in the fourth year. Aggregate borrowing by the nonfinancial busi- quarter. More recently, bond issuance has remained ness sector is estimated to have expanded 9Vi percent healthy, while borrowing in the commercial paper from the end of 1997 to the end of 1998, the largest market has picked up. increase in ten years. The rise reflected growth in all During the period when financial markets were major types of business debt. Business borrowing strained, some borrowers substituted bank loans—in was also boosted by substantial merger and acquisi- some cases under credit lines priced before the mar- Gross corporate bond issuance Bullions of doll.it> High yield Investment grade _ n NOTF. Excludes unrated issues and issuer said abroad, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

158 Federal Reserve Bulletin • March 1999 kets became volatile—for other sources of credit, and Federal receipts and expenditures business loans at banks expanded very rapidly for a Percent ohiimiitBtl at)P time before tailing off late in the year. Federal Reserve surveys indicate that banks responded to the turmoil in financial markets by tightening standards and terms on new loans and credit lines, especially 24 loans to larger customers and those to finance commercial real estate ventures. The tightening reflected the less favorable or more uncertain economic out- — 21 look as well as a reduced tolerance for risk on the part of some banks. Bank lending standards and terms appear to have tightened only a little further Tilts! receipts ^*«^. since the fall, however, and business loans at banks have expanded a bit since the end of December. I t i <_ i J _I_I_L_I_I J _J_.J a J -i. i 1 Despite the rapid growth in debt and the relatively 1982 1986 1990 1994 19.98 small gain in profits last year, the financial condition NOTE. Data on receipts and expenditures are from the unified budget and are for the fiscal year ended in September. of nonfinancial businesses remained strong. Interest rates for many businesses fell, on balance, over the course of the year, and bond yields for investment- October, business failures remained at the low end of grade firms reached their lowest level in many years. the range seen over the past decade. Reflecting these low borrowing costs, the aggregate debt-service burden for nonfinancial corporations, measured as the ratio of net interest payments to cash The Government Sector flow, remained about 9l/z percent, near its low of 9 percent in 1997 and less than half the peak level The federal government recorded a surplus in the reached in 1989. The delinquency rate for banks' unified budget this past fiscal year for the first time in commercial and industrial loans also remained near nearly three decades. The surplus, amounting to the trough reached in late 1997, while that for com- $69 billion, was equal to about 3A percent of GDP, a mercial real estate loans fell a bit further from the huge turnabout from the deficits of the early 1990s, already very low level posted in 1997. Although which in some years were more than 4l/2 per- Moody's Investors Service downgraded more non- cent of GDP. The swing from deficit to surfinancial firms than it upgraded over the second half plus over the past few years is partly the result of the year, the downgraded firms were smaller on of fiscal policies aimed at lowering the deficit and average, and so the debt of those upgraded about partly the result of the strength of the economy and equaled the debt of those downgraded. Through the stock market. Excluding net interest payments— a charge stemming from past deficits—the government recorded a surplus of more than $300 billion Net interest payiBt'/its of nonfinancial corporations in fiscal 1998. relative to cash jtow The improvement in the government's saving position has permitted national saving—the combined gross saving of households, businesses, and governments—to move up about 3 percentage points from its low of a few years ago, even though personal — 22 saving has fallen sharply. In turn, that increase in national saving has helped facilitate the boom in investment spending—in contrast to the experience of the 1980s and early 1990s, when persistent large budget deficits tended to reduce national saving, boost interest rates higher than they otherwise would have been, and thereby crowd out private capital 10 formation. Federal receipts in the unified budget in fiscal year 1978 1983 1988 1.993 1998 were up 9 percent from the previous fiscal year, NOTE. The data are quarterly. with much of the gain coming from personal income Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 159 Nuiional saving boosted to some degree by new budget authority for a variety of functions, including defense, embassy Percent of GDP security, disaster relief, preparation for Y2K, and aid to agriculture; this authority was created in emergency legislation that provided an exception to statutory spending restrictions. Real federal outlays for consumption and investment, the part of federal spending that is counted in GDP, increased 1 percent, on net, from the final quarter of calendar year 1997 to the final quarter of 16 1998. A reduction in real defense outlays over that period was more than offset by a jump in the nondefense category. J 1 L_! I L J I i L With the budget balance shifting from deficit to 1986 1990 1W4 1998 surplus, the stock of publicly held federal debt NOIL. National saving includes the gros.s saving of households, businesses, declined last year for the first time since 1969 and fell and governments. further as a share of GDP. From the end of 1997 to the end of 1998, U.S. government debt fell Vh pertaxes, which rose more than 12 percent for a second cent, as the government reduced the outstanding consecutive year. These receipts have been rising stock of both bills and coupon securities. Despite the faster than personal income in recent years, for sev- reduction in its debt, the federal government contineral reasons: Tax rates at the high end of the income ued substantial gross borrowing to fund the retirescale were raised by legislation that was passed ment of maturing securities. However, with the need in 1993 to help reduce the deficit; more taxpayers for funds trimmed substantially, the Treasury changed have moved into higher tax brackets as income has its auction schedules, discontinuing the three-year increased; and large increases in asset values have note auctions and moving to quarterly, rather than raised tax receipts from capital gains. Social insur- monthly, auctions of five-year notes. By reducing the ance tax receipts, the second most important source number of coupon security issues, the Treasury is of federal revenue, increased 6 percent in fiscal 1998, able to boost the size of each, thereby contributing to just a touch faster than the increase in fiscal 1997 and their liquidity. The decrease in the total volume of roughly in step with the growth of wages and sala- coupon securities is intended to boost the size of bill ries. Receipts from the taxes on corporate profits, offerings over time, helping liquidity in that market which account for just over 10 percent of federal and also allowing, as the Treasury prefers, for balrevenues, rose less rapidly than in other recent years, anced issuance across the yield curve. The Treasury restrained by the slower growth of corporate profits. also announced in October that all future bill and In the first three months of fiscal 1999, net receipts coupon security auctions would employ the singlefrom corporate taxes dipped below year-earlier lev- price format that had already been adopted for the els, but gains in individual income taxes and payroll taxes kept total federal receipts on a rising trajectory. Unified outlays increased 3]A percent in fiscal 1998 K'ILTU( i:t)\ onuiiiiin dohi held by Ihc1 public after having risen 2Vi percent in the preceding fiscal Percent of GDP year. Net interest payments and nominal expenditures for defense fell slightly in the latest fiscal year, and Annual outlays for income security and Medicare rose only a - 60 little. Social security expenditures increased moderately but somewhat less than in other recent years. By contrast, the growth of Medicaid payments picked up to about 6 percent after having increased less than 4 percent in each of the preceding two years; however, even the 1998 rise was not large compared with those of many earlier years when both medical costs and Medicaid caseloads were increasing rapidly and rates of federal reimbursement to the states were being raised. Federal spending in fiscal 1999 will be 1956 1962 1968 1974 1980 1986 1992 1998 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

160 Federal Reserve Bulletin l"1 March 1999 two-year and five-year note auctions and for auctions refunding activity last year was the result of lower of inflation-indexed securities. The Treasury judged borrowing costs. Although yields on tax-exempt that the single-price format had reduced servicing municipal securities did not decline nearly as much costs and resulted in broader market participation. as those on comparable Treasury securities, they The Treasury continued to auction inflation- nonetheless reached their lowest levels in many years. indexed securities in substantial volume last year in In addition, rating agencies upgraded about five times an effort to build up this part of the Treasury market. as many state and local government issues last year Fn April, the Treasury issued its first thirty-year as they downgraded, trimming borrowing costs furindexed bond, and in September it announced a regu- ther for the upgraded entities. lar schedule of ten- and thirty-year indexed security auctions. The Treasury also began offering inflationindexed savings bonds in September. The External Sector State and local governments recorded further increases in their budgetary surpluses in 1998, both Trade and the Current Account in absolute terms and as a share of GDP. Revenue from the taxes on individuals' incomes has been U.S. external balances deteriorated further in 1998, growing very rapidly, keeping total receipts on a largely because of the disparity between the rapid solid upward course. At the same time, the growth growth of the U.S. economy and the sluggish growth of transfer payments, which had threatened to over- of the economies of many of our trading partners. whelm state and local budgets earlier in the decade, The nominal trade deficit for goods and services was has slowed substantially in recent years. Growth of $169 billion, considerably larger than the $110 bilother types of spending has been trending up moder- lion deficit in 1997. For the first three quarters of the ately, on balance. The 1998 rise in real expenditures year, the current account deficit averaged $220 bilfor consumption and investment amounted to about lion at an annual rate, substantially larger than the 2'A percent, according to the initial estimate: annual 1997 deficit of $155 billion. The large current gains have been in the range of 2 percent to 2-'/t per- account deficits of recent years have been funded cent in each of the past seven years. with increased net foreign saving in the United States. As a result, U.S. gross domestic investment has Despite rising surpluses, state and local governexceeded the level that could have been financed by ment debt increased an estimated 7 percent in 1998, a gross national saving alone, but at the cost of a rise in pickup of about 2 percentage points from growth net U.S. external indebtedness. in 1997. Somewhat more than half of the long-term borrowing by state and local governments last year The increase in the current account deficit last year reflected new borrowing to fund current and antici- was due to a decline in net exports of goods and pated capital spending on utilities, transportation, services as well as a further weakening of net investeducation, and other capital projects. The combina- ment income from abroad. Until 1997, net investment tion of budget surpluses and relatively heavy borrow- income had helped to offset persistent trade deficits. ing likely reflected a number of factors. First, some of But as the U.S. net external debt has risen in recent these governments may have spent the newly raised funds on capital projects while at the same time building up surpluses in "'rainy day funds'' for later U.S. current account use. Second, because state and local governments Biliions of dadarc, annual mi under some circumstances are allowed to hold funds raised in the markets for as long as five years before spending them, some of the money raised last year may not have been spent. Finally, there was a substantial volume of "advance refunding" last year. In an advance refunding, the borrower issues new bonds before existing higher-rate bonds can be called, in anticipation of calling the old bonds on the date that option becomes available. While this sort of refinancing temporarily boosts total debt, it allows the state or local government to lock in the lower rate even if municipal bond yields subsequently rise over the I I I . 1 I I I 1 I period before the call date. The high level of advance- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 161 years, net investment income has become increas- rise in 1997. Declines during the first three quarters ingly negative, moving from a $14 billion surplus in (especially in machinery exports) were offset by a 1996 to a $5 billion deficit in 1997 and a deficit rebound in the fourth quarter, which was led by averaging $15 billion at an annual rate over the first increases in exports of automotive products. The three quarters of 1998. Net income from portfolio price competitiveness of U.S. products decreased, investment became increasingly negative during that reflecting the appreciation of the dollar through midperiod as the net portfolio liability position of the August. In addition, economic activity abroad weak- United States grew larger. In addition, net income ened sharply; total average foreign growth (weighted from direct investment slowed last year because by shares of U.S. exports) plunged from 4 percent in slower foreign economic growth lowered U.S. earn- 1997 to an estimated Vi percent in 1998. Moderate ings on investment abroad, the appreciation of the expansion of exports to Europe, Canada, and Mexico dollar reduced the value of U.S. earnings, and buoy- was about offset by a decline in exports associated ant U.S. growth boosted foreigners' earnings on direct with deep recessions in Japan and the emerging Asian investment in the United States. economies (particularly in the first half of the year) The rise in the trade deficit reflected an increase of and in South America (in the second half of the about 10 percent in real imports of goods and ser- year). vices during 1998, according to the advance estimates from the Commerce Department. The expan- Capital Flows sion was fueled by robust growth of U.S. domestic demand and by continued declines in import prices, The financial difficulties in a number of emerging which stemmed in part from the strength of the dollar market economies had several noticeable effects on through mid-August and in part from the effects of U.S. international capital flows in 1998. Financial recessions abroad. Of the major trade categories, turmoil put strains on official reserves in many increases in imports were sharpest for finished goods, emerging market economies. Foreign official assets especially capital equipment and automotive prod- in the United States fell $43 billion in the first three ucts. The quantity of imported oil rose appreciably as quarters of the year. This decline, which began in the demand increased in response to the strength of U.S. fourth quarter of 1997, has been largest for develeconomic activity and lower oil prices, while domes- oping countries, as many of them drew down their tic production declined slightly. The price of imported foreign exchange reserves in response to exchange oil fell about $6.50 per barrel over the four quarters rate pressures. OPEC nations' foreign official of the year. World oil prices fell in response to reserves also shrank in the first three quarters of reduced demand associated with the economic slow- 1998, as oil revenues dropped. Preliminary data indidown in many foreign nations and with unusually cate that foreign official assets in the United States, warm weather in the Northern Hemisphere as well as especially those of industrial countries, rebounded in to an increase in supply from Iraq. the fourth quarter. Real exports of goods and services grew about Private capital flows also were affected by the 1 percent, on net, in 1998 after posting a 10 percent global turmoil. On a global basis, capital flows to emerging market economies fell substantially in the first half of 1998 and then dropped precipitously in Change in real imports and exports of goods and services late summer and early fall in the wake of the Russian crisis. During the first half of the year, U.S. residents Psreeiu, Q4 lo QA acquired more than $40 billion of foreign securities. Net purchases virtually stopped in July, and in the 12 August-October period U.S. residents, on net, sold about $40 billion worth of foreign securities. Preliminary data indicate a resumption of net U.S. purchases in the final two months of 1998. Foreign net purchases of U.S. securities, which were substantial in the first half of the year, fell off markedly in the July-October period, but preliminary data suggest a significant recovery in November and December. Thus, there is some evidence that the contraction in 1 I I gross capital flows seen in late summer and early fall 1992 1994 1996 1998 waned somewhat in the fourth quarter. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

162 Federal Reserve Bulletin D March 1999 Balance of payments data available through the Change in output per hour first three quarters of J998 show that total private Pcrtent. Q4 lo Q4 foreign purchases of U.S. securities amounted to $194 billion, somewhat below the level in the first three quarters of 1997. Private foreign purchases of U.S. Treasury securities were only $22 billion in the first three quarters, compared with $147 billion for all of 1997. Private foreigners' purchases of other U.S. securities shifted away from equities and toward bonds, relative to 1997. U.S. purchases of foreign securities slowed markedly from their 1997 pace, totaling only $27 billion for the first three quarters of 1998 compared with $89 billion for all of the preceding year. The contraction in private portfolio capital I 1 I I I ! I 1 I flows, though large, was overshadowed by huge direct investment capital flows, which resulted in part Noif:. Nonfarm business sector. from a number of very large cross-border mergers. The $72 billion in foreign direct investment into the United States in the first three quarters, together with lion. Manufacturers reduced employment over the several large mergers that occurred in the fourth year, but in other parts of the economy the demand quarter, are certain to bring the total for last year well for labor continued to rise rapidly. The construction above the record-high $93 billion posted in 1997. industry boosted employment about 6 percent over Merger activity also buoyed U.S. direct investment the year, and both the services industries and the abroad: The pace of such investment in the first three finance, insurance, and real estate sector posted quarters suggests that the annual total will be near the increases of more than 3'/2 percent. Stores selling record-high $122 billion recorded in 1997. building materials and home furnishings expanded employment rapidly, as did firms involved in computer services, communications, and managerial ser- The Labor Market vices. In the first month of 1999, nonfarm payrolls increased an additional 245,000. The rapid growth of output in 1998 was associated Output per hour in the nonfarm business sector with both increased hiring and continued healthy rose 2'/2 percent in 1998 after having increased about growth in labor productivity. The number of jobs on \3A percent, on average, over the two previous years. nonfarm payrolls rose about 2l/t percent from the end By comparison, the average rate of rise during the of 1997 to the end of 1998, a net increase of 2.8 mil- 1980s and the first half of the 1990s was just over 1 percent per year. Because productivity often picks up to a pace above its long-run trend when economic growth accelerates, the results of the past three years njii* in pavioll L?ni|iloyincn[ might well be overstating the rate of efficiency gain that can be maintained in coming years. However, Thousand* uf jobv im>n[hl\ reasons for thinking that the trend might have picked Tolal nonfarm up to some degree are becoming more compelling in view of the incoming data. The 1998 gain in output — -too per hour was particularly impressive in this regard, in part because it came at a time when many businesses • l l l l l lf were diverting resources to correct the Y2K problem, — 200 a move that likely imposed a bit of drag on growth of output per hour. Higher rates of capital formation are raising the growth of capital per worker, and workers are likely becoming more skilled in employing the new technologies. Businesses not only are increasing I I I I I I ) I I | , I their capital inputs but also are continuing to imple- 1990 1992 1994 1996 1998 ment changes to their organizational structures and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 163 operating procedures that might enhance efficiency Change in employment co^t index and bolster profit margins. Pgrcenl. Dec. 10 Dec. The rising demand for labor continued to strain supply in 1998. The civilian labor force rose just a Hourly compensation touch more than 1 percent from the fourth quarter of 1997 to the fourth quarter of 1998, and with the number of persons holding jobs rising somewhat faster than the labor force, the civilian unemployment rate fell still further. The unemployment rate was 4.3 percent at the end of ] 998; the average for the full year—4.5 percent—was the lowest of any year in almost three decades. In January of this year, the size of the labor force rose rapidly, but so did employment, and the unemployment rate remained at J 4.3 percent. The percentage of the working age popu- 1990 1992 1994 1996 1998 lation that is outside the labor force and is interested NOTE. Private industry, excluding farm and household workers. in obtaining work but not actively seeking it edged down further this past year and has been in the lowest range since the collection of these data began in hourly compensation of workers in private nonfarm 1970. With the supply of labor as tight as it is, industries rose V/i percent in nominal terms during businesses are reaching further into the pool of indi- 1998, a touch more than in 1997 and Vi percentage viduals who do not have a history of strong attach- point more than in 1996. Taking the consumer price ment to the labor force; persons who are attempt- index as the measure of price change, this increase in ing to move from welfare to work are among the nominal hourly compensation translated into a 2 perbeneficiaries. cent increase in real hourly pay, one of the largest on Workers have realized large increases in real wages record in a series that goes back to the start of the and real hourly compensation over the past couple of 1980s; the gain was bigger still if the chain-type price years. The increases have come partly through faster index for personal consumption expenditures is used gains in nominal pay than in the mid-1990s but also as the measure of consumer prices. Moreover, the though reductions in the rate of price increase, which employment cost index does not capture some of the have been enhancing the real purchasing power of forms of compensation that employers have been nominal earnings, perhaps to a greater degree than using to attract and retain workers—for example, workers might have anticipated. According to the stock options and signing bonuses. Labor Department's employment cost index, the Because of the rapid growth in labor productivity, unit labor costs have been rising much less rapidly than hourly compensation in recent years. The Civilian unemployment rate increase in unit labor costs in the nonfarm business sector was only 1 Vi percent in 1998. Businesses were unable to raise prices sufficiently to recoup even this small increase in costs, however. Labor gained a greater share of the income generated from production, and the profit share, though still high, fell back a little from its 1997 peak. — 6 Prices Jan. — 4 The broader measures of aggregate price change showed inflation continuing to slow in 1998. The consumer price index moved up 1 Vi percent over the 1990 1992 1994 1996 1098 four quarters of the year after having increased nearly NOTE. The break in data al January 1994 marks ihe introduction of a 2 percent in 1997. A steep decline in energy prices in redesigned survey; data from that point on are not directly comparable with the CPI more than offset a small acceleration in the . those of earlier periods. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

164 Federal Reserve Bulletin • March 1999 Change in consumer prices 3. Alternative measures of price change Percent \ssn Pj-ii* rtifeHSurt .-1.9SJ8 fatfl-wtii'lii i-5 fexfciuUtaJs hmi iiii Snfeigy -.. -, -. • . --2Z 2.4" Glass abtiiBRiic pr«aa6t. .>........,,...•. J.'7 J.3 .5 US "tkttallilig fe&Uattd VHSfgs 1.6 1>2 NOTE. Changes are based on quarterly averages and are measured to ihe fourth quarter of the year indicated from the fourth quarter of Ihe previous year. commodity prices in sluggish world markets helped 1990 1992 1994 19% 1998 reduce domestic production costs to some degree. NOTE. Consumer price index for ail urban consumers. In manufacturing, one of the sectors most heavily affected by the softness in demand from abroad, the rate of plant capacity utilization fell noticeably over prices of other goods and services. Only part of the the year—even as the unemployment rate continued deceleration in the total CPI was attributable to tech- to decline. The divergence of these two key measures nical changes in data collection and aggregation.1 of resource use—the capacity utilization rate and the Measures of aggregate price change from the unemployment rate—is unusual: They typically have national income and product accounts, which draw exhibited similar patterns of change over the course heavily on data from the CPI but also use data from of the business cycle. Because the unemployment other sources, showed a somewhat more pronounced rate applies to the entire economy, it presumably deceleration of prices in 1998. The chain-type price should be a better indicator of the degree of pressure index for personal consumption expenditures, the on resources in general. At present, however, slack in measure of consumer prices in the national accounts, the goods-producing sector—a reflection of the sizrose VA percent after increasing 1 Vi percent in 1997. able additions to capacity in this country and excess The chain-type price index for gross domestic capacity abroad—seemingly has enforced a discipurchases—the broadest measure of prices paid by pline of competitive price and cost control that has U.S. households, businesses, and governments— affected the economy more generally. increased only V2 percent in 1998 after moving up Prices this past year tended to be weakest in the 11/4 percent over the previous year. The rise in the sectors most closely linked to the external economy. chain-type price index for gross domestic product of The price of oil fell almost 40 percent from Decemslightly less than 1 percent was down from an ber 1997 to December 1998. This drop triggered increase of PA percent in 1997. steep declines in the prices of petroleum products Developments in the external sector helped to purchased directly by households. The retail price of bring about the favorable inflation outcome of 1998. motor fuel fell about 15 percent over the four quarters Consumers benefited directly from lower prices of of the year, and the price of home heating fuel also finished goods purchased from abroad. Lower prices plunged. With the prices of natural gas and electricity for imports probably also held down the prices also falling, the CPI for energy was down about charged by domestic producers, not only because 9 percent over the year after having slipped 1 percent businesses were concerned about losing market share in 1997. to foreign competitors but also because declines in Large declines in the prices of internationally traded commodities other than oil pulled down the prices of many domestically produced primary inputs. 1. Since the end of 1994. the Bureau of Labor Statistics has taken a The producer price index for crude materials other number of steps to make the consumer price index a more accurate than energy, which reflects the prices charged by price measure. The agency also introduced new weights into the CPI domestic producers of these goods, fell more than at the start of 1998. In total, these changes probably reduced the 1998 rise in the CPI by slightly less than Vi percentage point, relative to the 10 percent over the year. However, because these increase that would have been reported using the methodologies and non-oil commodities account for a small share of weights in existence at the end of 1994. Without the changes that took total production costs, the effect of their decline on effect in 1998, the deceleration in the CPI last year probably would have been about half as large as was reported. inflation was much less visible further down the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 165 chain of production. Intermediate materials prices U.S. Financial Markets excluding food and energy fell about 1 Vi percent over the four quarters of the year, and the prices of U.S. interest rates fluctuated in fairly narrow ranges finished goods excluding food and energy rose about over the first half of 1998, and most equity price 1 Vi percent. The latter index was boosted, in part, by indexes posted substantial gains. However, after the an unusually large hike in tobacco prices that fol- devaluation of the Russian ruble in August and subselowed the settlement last fall of states' litigation quent difficulties in other emerging market econoagainst the tobacco companies. In the food sector as mies, investors appeared to reassess the risks and well, the effects of declining commodity prices uncertainties facing the U.S. economy and concluded became less visible further down the production that more cautious postures were in order. That sentichain; the PPI for finished foods was about ment was reinforced by the prospect of an unwinding unchanged, on net, over the year, and price increases of positions by some highly leveraged investors. The at the retail level, though small, were somewhat resulting shift toward safe, liquid investments led to a larger than those of the preceding year. substantial widening of risk spreads on debt instru- Consumer prices excluding those of food and ments and to volatile changes in the prices of many energy—the core CPI—continued to rise in 1998, but assets. Financial market volatility and many risk not very rapidly. As measured by the CPI, these spreads returned to more normal levels later in the prices increased nearly 2'/> percent from the final year and early this year, as lower interest rates and quarter of 1997 to the final quarter of 1998, a shade robust economic data seemed to reassure market parmore than in 1997. The chain-type price index for ticipants that the economy would remain sound, even personal consumption expenditures excluding food in the face of additional adverse shocks from abroad. and energy—the core PCE price index—decelerated However, lenders remained more cautious than they a bit further, rising at roughly half the pace of the had been in the first part of last year, especially in the core CPI. Methodological differences between the case of riskier credits. two measures are numerous; some of the technical problems that have plagued the CPI are less pronounced in the PCE price measure, but the latter also Interest Rates depends partly on imputations of prices for which observations are not available. Both measures, how- Over the first half of 1998, short-term Treasury rates ever, seemed to suggest that the underlying trend of moved in a narrow range, anchored by unchanged consumer price inflation remained low. A similar monetary policy, while yields on intermediate- and message came from surveys of consumers, which long-term Treasury securities varied in response to showed expectations of future price increases easing the market's shifting assessment of the likely impact a bit further in 1998—although, as in other recent of foreign economic difficulties on the U.S. economy. years, the expected increases remained somewhat In late 1997 and into 1998, spreading financial crises higher than actual price increases. in Asia were associated with declines in U.S. interest rates, as investors anticipated that weakness abroad would constrain U.S. economic growth and cushion Change in consumer prices excluding food and energy the impact of tight U.S. labor markets on inflation. However, interest rates moved back up later in the «*M*. Q4 ID Q4 first quarter of 1998, as the U.S. economy continued to expand at a healthy pace, fueled by hefty gains in domestic demand. After a couple of months of small — 6 changes, Treasury rates fell in May and June, when concerns about foreign economies, particularly in Asia, once again led some observers to expect weaker — 4 growth in the United States and may also have boosted the demand for safe Treasury securities relative to other instruments. Treasury rates changed little, on net, in the early summer, but they slipped lower in August, reflecting increased concern about the Japanese economy and l'WO 1992 W94 1998 financial problems in Russia. The default by Russia on some government debt obligations and the devalu- NOTE. Consumer price index for all urban consumers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

166 Federal Reserve Bulletin • March 1999 I ivusiiry l;iilv Spreads of eitrporali: bond uoli!\ inor TrL":isurv scciiri.lv vidils Peaent i I i i i i i i i i J FMAMJ J A S ON DJ F M A M J J A S O N DJ F 1997 1998 1999 J F M A NOTE. Last observations are for February 19, 1999. NOTE. The data are daily. The spread of high-yield bonds compares the yield on the Merrill Lynch Master II index with that on a seven-year Treasury; the ation of the ruble in mid-August not only resulted in other two spreads compare yields on the appropriate'Merrill Lynch indexes with that on a ten-year Treasury. Last observations are for February 19. 1999. sizable losses for some investors but also undermined confidence in other emerging market economies. The currencies of many of these economies came under increased sharply. As a result, spreads of private rates substantial pressure, and the market value of the over Treasury rates rose substantially, reaching levels international debt obligations of some countries not seen for many years, and issuance of corporate declined sharply. U.S. investors shared in the result- securities dropped sharply. ing losses, and U.S. economic growth and the profits The desire of investors to limit risk-taking as marof U.S. companies were perceived to be vulnerable. kets became troubled in the late summer showed up In these circumstances, many investors, both here clearly in mutual fund flows. High-yield bond funds, and abroad, appeared to reassess the riskiness of which had posted net inflows of more than $1 billion various counterparties and investments and to each month from May to July, saw a $3.4 billion become less willing to bear risk. The resulting shift outflow in August and inflows of less than $400 milof demand toward safety and liquidity led to declines lion in September and October before rebounding of 40 to 75 basis points in Treasury coupon yields sharply in November. By contrast, inflows to governbetween mid-August and mid-September. In contrast, ment bond funds jumped from less than $1 billion in yields on higher-quality private securities fell much July to more than $2 billion a month in August and less, and those on issues of lower-rated firms September. Equity mutual funds posted net outflows totaling nearly $12 billion in August, the first monthly outflow since 1990, and inflows over the rest Selected Treasury rales, quarterly data of the year were well below those earlier in the year. In part, the foreign difficulties were transmitted to U.S. markets by losses incurred by leveraged investors—including banks, brokerage houses, and 16 hedge funds—as the prospects for distress sales of riskier assets by such investors weighed on market Thirty-year .-> sentiment, depressing prices. Many of these entities Treasury did reduce the scale of their operations and trim their risk exposures, responding to pressures from more cautious counterparties. As a result, liquidity in many markets declined sharply, with bid-asked spreads widening and large transactions becoming more difficult to complete. Even in the market for Treasury I 1 securities, investors showed an increased preference 1963 L968 1:973 1978 1983 1988 1993 1998 for the liquidity offered by the most recent issues at NOTE, The twenty-year Treasury bond rate is shown until the first issuance of the thirty-year Treasury bond in February 1977. each maturity, and the yields on these more actively Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 167 traded "on-the-run" securities fell noticeably relative counterparties to undertake reviews of the practices to those available on "off-the-run" issues, the ones those firms employed in managing their risks. These that had been outstanding longer. reviews have suggested significant weaknesses in the Conditions in U.S. financial markets deteriorated risk-management practices of many firms in their further following revelations in mid-September of dealings with LTCM and—albeit to a lesser the magnitude of the positions and the extent of degree—in their dealings with other highly leveraged the losses of a major hedge fund, Long-Term Capital entities. Few counterparties seem to have had a com- Management. LTCM indicated that it sought high plete understanding of LTCM's risk profile, and their rates of return primarily by identifying small discrep- credit decisions were heavily influenced by the firm's ancies in the prices of different instruments relative reputation and strong past performance. Moreover, to historical norms and then taking highly leveraged LTCM's counterparties did not impose sufficiently positions in those instruments in the expectation that tight limits on their exposures to LTCM, in part market prices would revert to such norms over time. because they relied on collateral agreements requir- In pursuing its strategy, LTCM took very large posi- ing frequent marking to market to limit the risk of tions, some of which were in relatively small and their exposures. While these agreements generally illiquid markets. provided for collateral with a value sufficient to cover LTCM was quite successful between 1995 and current credit exposures, they did not deal adequately 1997, but the shocks hitting world financial markets with the potential for future increases in exposures last August generated substantial losses for the firm. from changes in market values. This shortcoming Losses mounted in September, and before new inves- was especially important in dealings with a firm like tors could be found, the firm encountered difficulties LTCM, which had such large positions in illiquid meeting liquidity demands arising from its collateral markets that its liquidation would likely have moved agreements with its creditors and counterparties. With prices sharply against its creditors. In such cases, world financial markets already suffering from creditors need to take further steps to limit their heightened risk aversion and illiquidity, officials of potential future exposures, which might include rethe Federal Reserve Bank of New York judged that quiring additional collateral or simply scaling back the precipitous unwinding of LTCM's portfolio that their activity with such firms. would follow the firm's default would significantly The private-sector agreement to recapitalize LTCM add to market problems, would distort market prices, allowed its positions to be reduced in an orderly and could impose large losses, not just on LTCM's manner over time, rather than in an abrupt fire sale. creditors and counterparties, but also on other market Nonetheless, the actual and anticipated unwinding of participants not directly involved with LTCM. LTCM's portfolio, as well as actual and anticipated In an effort to avoid these difficulties, the Federal sales by other similarly placed leveraged investors, Reserve Bank of New York contacted the major likely contributed materially to the tremendous volacreditors and counterparties of LTCM to see if an tility of financial markets in early October. Market alternative to forcing LTCM into bankruptcy could be found. At the same time, Reserve Bank officials informed some of their colleagues at the Federal Implied voh Reserve Board, the Treasury, and other financial regulators of their activities. Subsequent discussions among LTCM's creditors and counterparties led to an agreement by the private-sector parties to provide an additional $3'/2 billion of capital to LTCM in return for a 90 percent equity stake in the firm. Because of the potential for firms such as LTCM to have a large influence on U.S. financial markets, Treasury Secretary Robert Rubin asked the President's Working Group on Financial Markets to study the economic and regulatory implications of the operations of firms like LTCM and their relationships with their creditors. In addition, the extraordinary J F M A MJ J A S O N DJ F degree of leverage with which LTCM was able to 1998 1999 operate has led the federal agencies responsible for NOTE. The data are daily. Implied volatilities are calculated from options the prudential oversight of the fund's creditors and prices. Last observations are for February 19, 1999. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

168 Federal Reserve Bulletin LI March 1999 expectations of asset price volatility going forward, on December 2, when that maturity crossed year-end, as reflected in options prices, rose sharply, as bid- and then reversed the rise late in the month. asked spreads and the premium for on-the-run securi- By shortly after year-end, some measures of marties widened. Long-term Treasury yields briefly ket stress had eased considerably from their levels dipped to their lowest levels in more than thirty in the fall, although markets remained somewhat years, in part because of large demand shifts resulting illiquid relative to historical norms, and risk spreads from concerns about the safety and liquidity of pri- on corporate bonds stayed quite elevated. Nonethevate and emerging market securities. Spreads of rates less, with Treasury yields very low, corporate bond on corporate bonds over those on comparable Trea- rates were apparently perceived as advantageous, sury securities rose considerably, and issuance of and—following a lull around year-end—many corpocorporate bonds, especially by lower-rated firms, rate borrowers brought new issues to market. The remained very low. devaluation and subsequent floating of the Brazilian By mid-October, however, market conditions had real in mid-January had a relatively small effect on stopped deteriorating, and they began to improve U.S. financial markets. More recently, intermediatesomewhat in the days and weeks following the cut in and long-term Treasury rates have increased, as inthe federal funds rate on October 15, between Federal coming data have continued to show the economy Open Market Committee meetings. Internationally expanding briskly, and investors have come to becoordinated efforts to help Brazil cope with its finan- lieve that no further easing of Federal Reserve policy cial difficulties, culminating in the announcement of is likely. an IMF-led support package in mid-November, contributed to the easing of market strains. In the Treasury market, bid-asked spreads narrowed a bit and Equity Prices the premium for on-the-run issues declined. With the earlier flight to quality and liquidity unwinding, Trea- Most equity indexes rose strongly, on balance, in sury rates backed up considerably. Corporate bond 1998, with the Nasdaq Composite Index up nearly spreads reversed a part of their earlier rise, and 40 percent, the S&P 500 Composite Index rising investment-grade bond issuance rebounded sharply. more than 25 percent, and the Dow Jones Industrial In the high-yield bond market, investors appeared to Average and the NYSE Composite Index advancing be more hesitant, especially for all but the best- more than 15 percent. Small capitalization stocks known issuers.tand the volume of junk bond issuance underperformed those of larger firms, with the Ruspicked up less. In the commercial paper market, sell 2000 Index off 3 percent over the year. The yields on higher-quality paper declined; yields on variation in stock prices over the course of the year lower-quality paper remained elevated, however, and was extremely wide. Prices increased substantially some lower-tier firms reportedly drew on their bank over the first few months of 1998, as concerns eased lines for funding, giving a further boost to bank that Asian economic problems could lead to a slowbusiness lending, which had begun to pick up during down in the United States and to a consequent decline the summer. Market conditions improved a bit further immedi- Major stock price indexes ately after the Federal Reserve's November rate cut, but some measures of market stress rose again in late link*(January 2. I*>K= [{«)) November and in December. In part, this deterioration reflected widespread warnings of lower-than- Nasdaq expected corporate profits, a weakening economic 150 outlook for Europe, and renewed concerns about the situation in Brazil. In addition, with risk a greater- 1.10 than-usual concern, some market participants were likely less willing to hold lower-rated securities over — HO year-end, when they would have to be reported in annual financial statements. As a result, liquidity in some markets appeared to be curtailed, and price movements were exaggerated. These effects were particularly noticeable in the commercial paper mar- J FMAMJ JA.SONDJ FMAMJ J A S O N DJ F ket: The spread between rates on top-tier and lower- 1997 1998 1999 tier thirty-day paper jumped almost 40 basis points Nort. The data arc daily. Las! observations are for February 19. 1999. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary' Policy Report to the Congress I69 in profits. The major indexes declined, on balance, Equity valuation and long-term real interest rate over the following couple of months before rising sharply, in some cases to new records, in late June and early July, on increasing confidence about the outlook for earnings. The main exception was the Russell 2000; small capitalization stocks fell more substantially in the spring, and their rise in July was relatively muted. Rising concerns about the outlook for Japan and other Asian economies, as well as the deepening financial problems in Russia, caused stock prices to retrace their July gains by early August. After Russia devalued the ruble and defaulted on some debts in mid-August, prices fell further, reflecting the general .1 j turbulence in global financial markets. By the end of I9S0 1983 I9S6 1989 JS92 J985 1958 the month, most equity indexes had fallen back to NOTE. The data are monlhly. The earnings—price ratio is based on the I/B/E/S roughly their levels at the start of the year. Commer- International, Inc., consensus estimate of earnings over the coming twelve months. The real interest rate is the yield on the ten-year Treasury note Icvs the cial bank and investment bank stocks fell particularly ten-year inflation expectations from the Federal Reserve Bank of Philadelphia Survey of Professional Forecasters. sharply, as investors became concerned about the effect on these institutions' profits of emerging market difficulties and of substantial declines in the val- Philadelphia Federal Reserve Bank's survey of proues of some assets. Equity prices rose for a time in fessional forecasters, real yields fell appreciably September but then fell back by early October before between late 1997 and early 1999. (The yield on rebounding as market dislocations eased and interest ten-year inflation-indexed Treasury securities acturates on many private obligations fell. By December, ally rose somewhat last year. However, the increase most major indexes were back near their July highs, may have reflected the securities' lack of liquidity although the Russell 2000 remained below its earlier and the substantial rise in the premium investors were peak. willing to pay for liquidity.) Since mid-1998, the real In late December, and into the new year, stock interest rate has declined somewhat more than the prices continued to advance, with several indexes forward earnings yield on stocks, and the spread reaching new highs in January. The devaluation of between the two consequently increased a bit, perthe Brazilian real caused some firms' shares to drop haps reflecting the greater sense of risk in financial as investors reevaluated prospective earnings from markets. Nonetheless, the spread has remained quite Latin American operations, but all the major stock small relative to historical norms: Investors may indexes posted gains in January; the Nasdaq be anticipating rapid long-term earnings growth— advanced nearly 15 percent over the month, driven consistent with the expectations of securities by large advances in the stock prices of high- analysts—and they may still be satisfied with a lower technology firms, especially those related to the Inter- risk premium for holding stocks than they have net. More recently, however, stock prices fell back, as demanded historically. interest rates rose and some investors apparently concluded that prices had risen too far, given the outlook for earnings. Debt and the Monetary Aggregates The increase in equity prices last year and early this year, coupled with the slowing of earnings Debt and Depository Intermediation growth, left many valuation measures beyond their historical ranges. After ticking higher in the late From the fourth quarter of 1997 to the fourth quarter summer and early autumn, the ratio of consensus of 1998, the total debt of the U.S. household, governestimates of earnings over the coming twelve months ment, and nonfinancial business sectors increased to prices in the S&P 500 later fell back, dropping about 6VA percent, in the top half of its 3 percent to to a new low in January. In part, the decline in this 7 percent range and considerably faster than nominal measure over the past year likely reflected lower real GDP. Buoyed by strong spending on durable goods, long-term bond yields. For example, as measured by housing, and business investment, as well as by the difference between the ten-year nominal Treasury merger and acquisition activity that substituted debt yield and inflation expectations reported in the for equity, nonfederal debt expanded about 9 percent Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

170 Federal Reserve Bulletin • March 1999 Domestic nonrinancial debt: Annual range and acLual level M2: Annual range and actual level Trillions of delta Trinmrivof;<rdllafs 7=3. Cfee. -- 4.4 4.3 — 4.2 *— 4.1 4.0 O N D J F M A MJ J A S ON DJ O N D J F M A MJ J A S O N DJ 1997 1998 1999 1997 1998 1999 last year, more than 2 percentage points faster than in range was the result of faster growth in nominal 1997. By contrast, federal debt declined 1 lA percent, spending than would likely be consistent with susfollowing a rise of VA percent the previous year. tained price stability. In addition, the velocity of M2 Credit market instruments on the books of deposi- (defined as the ratio of nominal GDP to M2) fell tory institutions rose at a somewhat slower pace than 3 percent. Some of the decline resulted from the did the debt aggregate, posting a 5% percent rise in decrease in short-term market interest rates last 1998, about half a percentage point less than in 1997. year—as usual, rates on deposits fell more slowly Growth in depository credit picked up in the second than market rates, reducing the opportunity cost of half of the year, as the turbulence in financial markets holding M2 (defined as the difference between the apparently led many firms to substitute bank loans for rate on Treasury bills and the average return on M2 funds raised in the markets. Banks also added con- assets). siderably to their holdings of securities in the third However, the bulk of the decline cannot be and fourth quarters, in part reflecting the attractive explained on the basis of the historical relationship spreads available on non-Treasury debt instruments. between the velocity of M2 and this measure of its Financial firms also appeared to turn to banks for opportunity cost. Three factors not captured in that funding when the financial markets were volatile, and relationship likely contributed to the drop in velocity. U.S. banks substantially expanded their lending to First, households seem to have allocated an increased financial firms through repurchase agreements and loans to purchase and carry securities. As a result, growth of total bank credit, adjusted to remove the M2 velocity and the opportunity cost of holding M2 effects of mark-to-market accounting rules, acceler- Ratio .stale Percentage poims, ratio scale ated to 10'/2 percent on a fourth-quarter to fourthquarter basis, the largest annual increase in more than a decade. The Monetary Aggregates The broad monetary aggregates expanded very rap- 1.8 idly last year. From the fourth quarter of 1997 to the fourth quarter of 1998, M2 increased 8'/2 percent, 1.7 placing it well above the upper bound of its 1 percent to 5 percent range. However, as the FOMC noted last February, this range was intended as a benchmark for ! I 1 \ I i_l_L money growth under conditions of stable prices, real 1978 1983 1988 1993 1998 economic growth near trend, and historical velocity NOTL^. The data are quarterly. M2 opportunity cost is the two-quaner moving average of the Ihree-monlh Treasury bill rate less the weighted-average rate paid relationships. Part of the excess of M2 above its on M2 components. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 171 M3: Annual range and actual level being reversed, growth in the broad monetary aggregates, while still brisk, has slowed appreciably early Trillions of dollars this year. Dec. M3 expanded even faster than M2 in 1998, posting an 11 percent rise on a fourth-quarter to fourthquarter basis. Last year's growth was the fastest since 1981 and left the aggregate well above the top end of its 2 percent to 6 percent growth range. As with M2, however, the FOMC established the M3 range as a benchmark for growth under conditions of stable prices, sustainable output growth, and the historical behavior of velocity. The rapid growth of M3 in part simply reflected the rise in M2. In addition, the non-M2 components of M3 increased 18'/2 percent over the year, following an even larger advance in O N P J F M A MJ J A S ON D J 1997. The substantial rise in these components last 1997 1998 1999 year was partly the result of the funding of the robust growth in bank credit with managed liabilities, many share of savings flows to monetary assets rather than of which are in M3. However, M3 growth was equities following several years of outsized gains in boosted to an even greater extent by flows into stock market wealth. Second, some evidence sug- institution-only money funds, which have been gests that in the 1990s the demand for M2 assets has expanding rapidly in recent years as they have become more sensitive to longer-term interest rates increased their share of the corporate cash manageand to the slope of the yield curve, and so the decline ment business. Because investments in these funds in long-term Treasury yields last year, and the conse- substitute for business holdings of short-term assets quent flattening of the yield curve, may have that are not in M3, their rise has generated an increase increased the relative attractiveness of M2 assets. in M3 growth. In addition, institution-only funds Finally, a critical source of the especially rapid M2 pay rates that tend to lag movements in market rates, expansion in the fourth quarter likely was an and so their relative attractiveness was temporarily increased demand for safe, liquid assets as investors enhanced—and their growth rate boosted—by responded to the heightened volatility in financial declines in short-term market interest rates late last markets. With some of these safe-haven flows likely year. 4, Growth of money and debt Percent Domestic Period Ml M2 M3 nonfinancial debt Annual' 1988 42 56 6.4 9.1 1989 .6 5.2 4.1 7.5 1990 4.2 4.2 1.9 6.7 1991 8 0 3 1 1.2 4 5 1992 14.3 1.8 .6 4.5 1993 ... . . .. 10.6 1 3 1.0 4.9 1994 - 25 6 1.7 4.9 1995 -1 6 39 6 1 54 1996 -4.5 4.6 6.8 5.3 J997 -1,2 5S 8.8 5.0 1998 1.8 8.5 11.0 6.3 Quarters {atmiitil mti') - 1998:1 ' 32 7.6 10.3 6.2 -> 1 0 7-S 10.1 6.1 -20 69 8.6 6,0 4 . 5.0 11.0 13.2 6.4 NOTE. Ml consists of currency, travelers checks, demand deposits, and other standing credit market debt of the U.S. government, state and local governcheckable deposits. M2 consists of Ml plus savings deposits (including money ments, households and nonprofit organizations, nonfinancial businesses, and market deposit accounts), small-denomination time deposits, and balances in farms. retail money market funds. M3 consists of M2 plus large-denomination time 1. From average for fourth quarter of preceding year to average for fourth deposits, balances in institutional money market funds, RP liabilities (overnight quarter of year indicated. and term), and Eurodollars (overnight and term). Debt consists of the out- 2. From average for preceding quarter to average for quarter indicated. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

172 Federal Reserve Bulletin J March 1999 Ml increased PA percent over the four quarters of administrative measures and financial penalties. 1998, its first annual increase since 1994. Currency Thus, as required operating balances decline toward expanded at an 8/4 percent pace, its largest rise since the minimum level needed to clear banks' trans- 1994. The increase apparently reflected continued actions, banks are less and less able to respond to strong foreign shipments, though at a slower pace fluctuations in the federal funds rate by lending funds than in 1997, and a sharp acceleration in domestic when the rate is high and borrowing when the rate is demand. Deposits in Ml declined further in 1998, low. As a result, when required operating balances reflecting the continued introduction of retail are low, the federal funds rate is likely to rise further "sweep" programs. Growth of Ml deposits has been than it otherwise would when demands for reserves depressed for a number of years by these programs, are unexpectedly strong or supplies weak; conversely, which shift—or "sweep"—balances from household the federal funds rate is likely to fall more in the transactions accounts, which are subject to reserve event of weaker-than-expected demand or strongerrequirements, into savings accounts, which are not. than-expected supply. One way to ease this difficulty Because the funds are shifted back to transactions would be to pay interest on required reserve balances, accounts when needed, depositors' access to their which would reduce banks' incentives to expend funds is not affected by these programs. However, resources on sweeps and other efforts to minimize banks benefit from the reduction in holdings of these balances. required reserves, which do not pay interest. Over Despite the low level of required operating bal- 1998, sweep programs for demand deposit accounts ances, the federal funds rate did not become noticebecame more popular, contributing to a 4lA percent ably more volatile over the spring and summer of decline in such balances. By contrast, new sweep 1998. In part, this result reflected more frequent programs for other checkable deposits, which had overnight open market operations by the Federal driven double-digit declines in such deposits over the Reserve to better match the daily demand for and previous three years, were less important in 1998, supply of reserves. Also, banks likely improved the and, with nominal spending strong and interest management of their accounts at the Federal Reserve rates lower, other checkable deposits were about Banks. Moreover, large banks apparently increased unchanged on the year. their willingness to borrow at the discount window. As a result of the introduction of retail sweep The Federal Reserve's decision to return to lagged accounts, the average level of required reserve bal- reserve accounting at the end of July also likely ances (balances that must be held at Reserve Banks contributed to reduced volatility in the federal funds to meet reserve requirements) has trended lower over market by enhancing somewhat the ability of both the past few years. The decline has been associated banks and the Federal Reserve to forecast reserve with an increase in banks' required clearing balances, demand. which are balances that banks agree in advance to In the latter part of 1998 and into 1999, however, hold at their Federal Reserve Bank in order to facili- the federal funds rate was more volatile. The increase tate the clearing of their payments. Unlike required may have owed partly to further reductions in reserve balances, banks earn credits on their required clearing balances that can be applied to the use of Effective federal funds rale less target rate Federal Reserve priced services. Despite the increase in required clearing balances, required operating bal- Ptrcchiagc peiuu ances, which are the sum of required reserve balances and required clearing balances, have declined over the past few years and in late 1998 reached their lowest level in several decades. The decline in required operating balances has generated concerns about a possible increase in the volatility of the federal funds rate. Because a bank's required level of operating balances must be met only on average over a two-week maintenance period, banks are free to allocate their reserve holdings across — 0.5 the days of a maintenance period in order to mini- ! i i 1 mize their reserve costs. However, banks must also j F M A •M: J J A 5 0 N D J F manage their reserves in order to avoid overdrafts, 199% 1999 which the Federal Reserve discourages through NOTE. Data are daily. Last observation is for February 19, 1999. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress I 73 required operating balances resulting from new The Asian crisis contributed to a deepening recession sweep programs, but other factors were probably in Japan last year, and as the year progressed, growth more important, at least for a time. Market partici- in several other major foreign industrial economies pants were scrutinizing borrowing banks more slowed as well. closely, and in some cases lenders pared or more At the beginning of 1998, many Asian currencies tightly administered their counterparty credit limits, were declining or were under pressure. The Indoneor shifted more of their placements from term to sian rupiah dropped sharply in January, amid wideovernight maturities. The heightened attention to spread rioting and talk of a coup, and fell again in credit quality also made banks less willing to borrow May and June, as the deepening recession prompted at the discount window, because they were concerned more social unrest and ultimately the ouster of that other market participants might detect their bor- President Suharto. Some of the rupiah's losses were rowing and interpret it as a sign of financial weak- reversed in the second half of the year, following the ness. As a result, many banks that were net takers of relatively orderly transition of power to President funds in short-term markets attempted to lock in their Habibie. Tighter Indonesian monetary policy, which funding earlier in the morning. On net, these forces pushed short-term interest rates as high as 70 percent boosted the demand for reserves and put upward by July, contributed to the rupiah's recovery. On pressure on the federal funds rate early in the day. To balance, between December 1997 and December buffer the effect of these changes on volatility in the 1998, the rupiah depreciated more than 35 percent federal funds market, the Federal Reserve increased against the dollar. the supply of reserves and, at times, responded to the In contrast, the Thai baht and Korean won, which level of the federal funds rate early in the day when had declined sharply in 1997, gained more than deciding on the need for market operations. Because 20 percent against the dollar over the course of 1998. demand had shifted to earlier in the day, however, the Policy reforms and stable political environments federal funds rate often fell appreciably below its helped boost these currencies. Between these target level by the end of the day. extremes, the currencies of the Philippines, Malaysia, At its November meeting, the FOMC amended the Singapore, and Taiwan fluctuated in a narrower Authorization for Domestic Open Market Operations range and ended the period little changed against the to extend the permitted maturity of System repur- dollar. In September, Malaysia imposed capital and chase agreements from fifteen to sixty days. Over the exchange controls, fixing the ringgit's exchange rate remainder of 1998, the Domestic Trading Desk made against the dollar. The Hong Kong dollar came under use of this new authority on three occasions, arrang- pressure at times during the year, but its peg to the ing System repurchase agreements with maturities of U.S. dollar remained intact, although at the cost of thirty to forty-five days to meet anticipated seasonal interest rates that were at times considerably elereserve demands over year-end. While the Desk had vated. Short-term interest rates in Asian economies in the past purchased inflation-indexed securities other than Indonesia declined in 1998, and as some when rolling over holdings of maturing nominal secu- stability returned to Indonesian markets near the end rities, it undertook its first outright open market pur- of the year, short-term rates in that nation began to chase devoted solely to inflation-indexed Treasury retreat from their highs. securities in 1998, thereby according those securities As the year progressed, the financial storm moved the same status in open market operations as other from Asia to Russia. At first the Russian central bank Treasury securities. was able to defend the ruble's peg to the dollar with interest rate increases and sporadic intervention. By midyear, however, the government's failure to reach International Developments a new assistance agreement with the International Monetary Fund, reported shortfalls in tax revenues, In 1998, developments in international financial mar- and the disruption of rail travel by striking coal kets continued to be dominated by the unfolding miners protesting late wage payments brought to crises in emerging markets that had begun in Thai- the fore the deep structural and political problems land in 1997. Financial market turbulence spread to faced by Russia. In addition, declining oil prices were other emerging markets around the globe, spilling lowering government revenues and worsening the over from Korea, Indonesia, Malaysia, Singapore, the current account. As a result of these difficulties, the Philippines, and Hong Kong in late 1997 and in the ruble came under renewed pressure, forcing Russian first part of 1998 to Russia in the summer, and to interest rates sharply higher, and Russian equity Latin America, particularly Brazil, shortly thereafter. prices fell abruptly. A disbursement of $4.8 billion Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

174 Federal Reserve Bulletin • March 1999 from the IMF in July was quickly spent to keep the pressure again in early January after the state of currency near its level of 6.2 rubles per dollar, but the Minas Gerais threatened not to pay its debt to the lack of progress on fiscal reform put the next IMF federal government. On January 13, the real was tranche in doubt. devalued 8 percent, and two days later it was allowed On August 17, Russia announced a devaluation of to float. Since the end of 1998, the real has deprecithe ruble and a moratorium on servicing official short- ated nearly 38 percent against the dollar, and capital term debt. Subsequently, the ruble depreciated more flight from Brazil has likely persisted. The collapse than 70 percent against the dollar, the government of the real exerted some downward pressure on the imposed conditions on most of its foreign and domes- currencies of other Latin American countries. Thus tic debt that implied substantial losses for creditors, far, however, contagion has been more limited than it and many Russian financial institutions became was after the Russian devaluation; unlike Russia, insolvent. The events in Russia precipitated a global Brazil has continued to meet debt service obligations, increase in financial market turbulence, including a and investors apparently had an opportunity to adjust pullback of credit to highly leveraged investors and a positions in advance of the devaluation and have widening of credit spreads in emerging market econo- drawn a distinction between Brazil's problems and mies and in many industrial countries, which did not those of other economies. abate until after central banks in a number of indus- The fallout from the financial crises that hit several trial countries eased policy in the fall. Asian emerging market economies in late 1997 trig- Latin American financial markets were only mod- gered a further decline in output in the region in early erately disrupted by the Asian and Russian prob- 1998. In the countries most heavily affected— lems during the first half of 1998. The reaction to the Thailand, Korea, Malaysia, and Indonesia—output Russian default, however, was swift and strong, and dropped at double-digit annual rates in the first half the prices of Latin American assets fell precipitously. of the year, as credit disruptions, widespread failures The spreads between yields on Latin American Brady in the financial and corporate sectors, and a resulting bonds and comparable U.S. Treasuries widened con- high degree of economic uncertainty depressed activsiderably (with increases ranging from 900 basis ity severely. Output in Hong Kong also dropped in points in Argentina to 1500 basis points in Brazil) early 1998, as interest rates rose sharply amid presand peaked in early September before retracing part sure on its currency peg. Later in the year, with of the rise. Latin American equity prices plunged, financial conditions in most of the Asian crisis counending the year down 25 percent or more. Several tries stabilizing somewhat, output started to bottom currencies came under pressure, despite sharp out. increases in short-term interest rates. The Mexican The Asian crisis had a relatively moderate effect on peso, which was also weakened by the effects of China, although it may have encouraged authorities falling oil prices, depreciated 18 percent against the in that country to move ahead more quickly with dollar over the year. The Colombian peso and the various financial sector reforms. Financial tensions Ecuadorian sucre were devalued, but Argentina's cur- mounted early this year as foreign investors have rency board arrangement survived. reacted with concern to the failure of the Guangdong Brazil's central bank defended the real's crawling International Trust and Investment Corporation. peg until mid-January 1999 but is estimated to have Chinese growth remained fairly strong throughout used more than half of the $75 billion in foreign 1998, despite a dramatic slowdown in the growth of exchange reserves it had amassed as of last April. exports. Anticipation of the IMF-led financial assistance pack- Inflation in the Asian developing economies rose age for Brazil helped spur a partial recovery in Latin only moderately on average in 1998, as the inflation- American asset markets in late September and Octo- ary effects of currency depreciations in the region ber. The details of the $41.5 billion loan package were largely offset by the deflationary influence were announced in November, but after the package of very weak domestic activity. The current account was approved by the IMF in early December, Brazil's balances of the Asian crisis countries swung into Congress rejected a part of the government's fiscal substantial surplus last year, reflecting a sharp drop in austerity plan, sparking renewed financial turmoil. In imports resulting from the falloff in domestic demand mid-December, $9.3 billion of the loan package was as well as improvement in the countries' competitive disbursed, but as the year ended, the continuing positions associated with the substantial depreciapressure from investors seeking to take funds out of tions of their currencies in late 1997 and early 1998. Brazil put the long-run viability of the crawling In Russia, economic activity declined last year as exchange rate peg in doubt. The real came under interest rates were pushed up in an attempt to fend off Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 175 pressure on the ruble. After the August debt morato- Nominal dollar exchange rate indexes rium and ruble devaluation, output dropped sharply, Incle*. March 1933= 100 ending the year down about 10 percent from its year-earlier level. The ruble collapse triggered a surge in inflation to a triple-digit annual rate during the — 120 latter part of the year. In Latin America, the pace of economic activity — 110 slowed only moderately in the first half of 1998, as the spillover from the Asian financial turbulence was —• 100 limited. The Russian financial crisis in August, in — 90 contrast, had a strong impact on real activity in Latin America, particularly Brazil and Argentina, where Major currencies — 80 interest rates moved sharply higher in response to exchange rate pressures. Output in both countries is estimated to have declined in the second half of the 1994 1995 1996 1997 1998 year at annual rates of about 5 percent. Activity in NOTE. The data are monthly. Indexes are trade-weighted averages of the Mexico and Venezuela was also depressed by lower exchange value of the dollar against major currencies and against the currencies of a broad group of important U.S. trading partners. Last observations are for the oil export revenues. Inflation rates in Latin American first three weeks of February 1999. countries were little changed in 1998 and ranged from 1 percent in Argentina and 3 percent in Brazil to 31 percent in Venezuela. result of concerns about the effects of the Asian crisis on the already-weak Japanese economy and further The dollar's value, measured on a trade-weighted signs of deepening recession and persistent banking basis against the currencies of a broad group of system problems in that country. It reached a level important U.S. trading partners, rose almost 7 percent of almost 147 yen per dollar in mid-June, prompting during the first eight months of 1998, but it then fell, coordinated intervention by U.S. and Japanese auby December reaching a level about 2 percent above thorities in foreign exchange markets that helped to its year-earlier level. (When adjusted for changes in contain further downward pressure on the yen. The U.S. and foreign consumer price levels, the real value dollar resumed its appreciation against the yen, albeit of the dollar in December 1998 was about 1 percent at a slower pace, in July and early August. below its level in December 1997.) Before the Rus- The turning point in the dollar-yen rate came after sian default, the dollar was supported by the robust the Russian collapse, amid the global flight from risk pace of U.S. economic activity, which at times generthat caused liquidity to dry up in the markets for ated expectations that monetary policy would be many assets. During the first week of October, the tightened and which contrasted with weakening ecodollar dropped nearly 14 percent against the yen in nomic activity abroad, especially in Japan. Occasionextremely illiquid trading conditions. Although funally, however, the positive influence of the strong economy was countered by worries about growing U.S. external deficits. From August through October, U.S. exchange rate with Japan in the aftermath of the Russian financial meltdown, concerns that increased difficulties in Latin America (Yen/S) might affect the U.S. economy disproportionately, as well as expectations of lower U.S. interest rates, weighed on the value of the dollar, and it fell sharply. The broad index of the dollar's exchange value eased a bit further during the fourth quarter of the year. So far in 1999, the dollar has gained nearly 3 percent in terms of the broad index. Against the currencies of the major foreign industrial countries, the dollar declined 2 percent in nominal terms over 1998, on balance, reversing some of its 10 percent appreciation the preceding year. Among these currencies, the dollar's value fluctuated 1994 1995 1996 1997 [998 1999 most widely against the Japanese yen. The dollar rose NOTE. The data are monthly. Last observation is for the first three weeks of against the yen during the first half of the year as a February 1999. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

176 Federal Reserve Bulletin • March 1999 damental factors in Japan, such as progress on bank l.'.S. dollar exchange rule attains! ihe restated German mark reform, fiscal stimulus, and the widening trade sur- Liud I IIL' eun.t plus may have helped boost the yen against the dollar, market commentary at the time focused on reports that some international investors were buying large amounts of yen. These large purchases report- .10 edly were needed to unwind positions in which investors had used yen loans to finance a variety of speculative investments. On balance, the dollar depreciated almost 10 percent against the yen in 1998, reversing most of its net gain during 1997. It depreciated fur- .30 ther against the yen in early 1999, hitting a two-year low on January 11, but it then rebounded somewhat I.4D amid reports of intervention purchases of dollars by the Bank of Japan. More recently, the Bank of Japan has eased monetary policy further, and the dollar has 1994 1995 1996 IW7 1998 1999 strengthened against the yen. So far this year, the N'oo. l"he data arc monthly. Restated German mark is [he dollar/mark exchange rule rescaled by the official conversion factor between the mark and dollar has gained about 7 percent against the yen. the euro. 1.95583. through December 1998. Euro exchange rate as of January Japanese economic activity contracted in 1998, as 1999. Last observation is for the first three weeks of February 1999. the country remained in its most protracted recession of the postwar era. Business and residential invest- expected economic data in the United States, conment plunged, and private consumption stagnated. trasted with weaker-than-expected data in the euro more than offsetting positive contributions from gov- area. ernment spending and net exports. Core consumer In the eleven European countries whose currencies prices declined slightly, while wholesale prices fell are now fixed against the euro, output growth slowed almost 4'/2 percent. In April, the Japanese govern- moderately over the course of 1998, as net exports ment announced a large fiscal stimulus package. Dur- weakened and business sentiment worsened. Uneming the final two months of the year, the government ployment rates came down slightly, but the average announced another set of fiscal measures slated for of these rates remained in the double-digit range. implementation during 1999, which included perma- Consumer price inflation continued to slow, helped nent personal and corporate income tax cuts, various by lower oil prices. In December, the harmonized incentives for investment, and further increases in CPI for the eleven countries stood 3/4 percent above public expenditures. its year-earlier level, meeting the European Cen- Against the German mark, the dollar depreciated tral Bank's primary objective of inflation below about 6 percent, on net, during 1998. Late in the year 2 percent. the dollar moved up against the mark, as evidence of Between December 1997 and December 1998, the a European growth slowdown raised expectations of average value of the dollar changed little against the easier monetary conditions in Europe. In the event, British pound but rose 8 percent against the Canadian monetary policy was eased sooner than market par- dollar. Weakness in primary commodity prices, ticipants had expected, with a coordinated European including oil, likely depressed the value of the Canainterest rate cut coming in early December. dian dollar. The Bank of Canada raised official rates A major event at the turn of the year was the birth in January 1998 and again in August, in response of the euro, which marked the beginning of Stage to currency market pressures. The Bank of England Three of European Economic and Monetary' Union raised official rates in June 1998 to counter inflation (EMU). On December 31, the rates locking the euro pressures. Tighter monetary conditions in both counwith the eleven legacy currencies were determined; tries, as well as a decline in net exports associated based on these rates, the value of the euro at the with global difficulties, contributed to a slowing of moment of its creation was $1.16675. Trading in the output growth in the second half of the year. The euro opened on January 4, with the first trades reflect- deceleration was sharper in the United Kingdom than ing a significant premium for the euro over its initial in Canada. U.K. inflation eased slightly to near its value. As the first week of trading progressed, target rate, while Canadian inflation remained near however, the initial euphoria wore off, and so far the bottom of its target range. In response to weaker this year the dollar has strengthened more than 5 per- economic activity as well as to the expected effects of cent against the euro, partly reflecting better-than- the global financial turmoil, both the Bank of Canada Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 177 U.S. and foreign interest rates December 1997 and December 1998, ten-year interest rates fell 180 basis points in the United Kingdom and 150 basis points in Germany. The ten-year rate Three-month fell only 30 basis points in Japan, on balance, declining about 90 basis points over the first ten months of the year but backing up in November and December. Market participants attributed the increase to concerns that the demand for bonds would be insufficient to meet the surge in debt issuance associated with the latest fiscal stimulus package. Share prices on European stock exchanges posted another round of strong advances last year, with price indexes rising 8 percent in the United Kingdom, about 15 percent in Germany, nearly 29 percent in France, and 41 percent in Italy. In contrast, Japanese Ten-year equity prices fell more than 9 percent in 1998, and — 10 Canadian share prices decreased 4 percent. After a considerable run-up earlier in the year, share prices United Stales around the globe fell sharply in August and September, but they rebounded in subsequent months as the — 6 Federal Reserve and central banks in many other industrial countries eased monetary policy. — 4 On November 17, the FOMC voted unanimously to reauthorize Federal Reserve participation in the North American Framework Agreement (NAFA), established in 1994, and in the associated bilateral 1992 1993 1994 1995 1996 1997 1998 (999 reciprocal currency swap arrangements with the Bank NOTE. The dala are monthly. Lasi observations are for the first three weeks of Canada and the Bank of Mexico. On December 7, of February 1999. the Secretary of the Treasury authorized renewal of the Treasury's participation in the NAFA and of the and the Bank of England have lowered official inter- associated Exchange Stabilization Agreement with est rates since September. Mexico. Other bilateral swap arrangements with the The general trend toward easier monetary condi- Federal Reserve—those with the Bank for Internations was reflected in declines in short-term interest tional Settlements, the Bank of Japan, and many rates in almost all the G-10 countries during the year. European central banks—were allowed to lapse in Interest rates in the euro area converged to relatively light of their disuse over the past fifteen years and in low German levels in anticipation of the launch of the presence of other well-established arrangements the third stage of EMU. Yields on ten-year govern- for international monetary cooperation. The swap ment bonds in the major foreign industrial countries arrangement between the Treasury's Exchange Stabideclined significantly over the course of the year, as lization Fund and the German Bundesbank was also economic activity slowed, inflation continued to mod- allowed to lapse. • erate, and investors sought safer assets. Between Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

178 Treasury and Federal Reserve Foreign Exchange Operations This quarterly report describes U.S. Treasury and ies by monetary officials. Others noted that the System foreign exchange operations for the period exchange rate's rebound occurred only after the marfrom October through December 1998. It was pre- ket achieved a reasonable degree of confidence that sented by Peter R. Fisher, Executive Vice President, no official intervention had taken place. Still, many Federal Reserve Bank of New York, and Manager, market participants noted persistent interest in selling System Open Market Account. Jason J. Bonanca was dollars in the range around ¥120, largely because of primarily responsible for preparation of the report. concerns that levels above this range would spark a During the fourth quarter of 1998, the dollar depreciated 17.4 percent against the Japanese yen and 1. Spot exchange rate of the dollar against the Japanese yen and volatility implied by one-month option prices, was virtually unchanged against the German mark. 1998:Q4 Against the yen, the dollar fell sharply, as long dollar positions in speculative accounts were unwound in an YL*H per dollar Percent per year effort to deleverage balance sheets and cover trading I Do! ar-yen implied volatility losses incurred in other markets. Later in the period, us \ R —&• 36 rising long-term interest rates in Japan relative to those in the United States helped to reverse a tempo- 130 ill — 30 rary dollar rebound. Against the mark, the dollar rose Ooliar-yen from early lows after relative interest rate expecta- 125 —1 \ /A tions shifted in favor of the dollar, but the dollar 120 —1\ / — 24 V, partially retraced its gains after U.S. equity prices JV retreated from record highs in November. The U.S. monetary authorities did not intervene in the foreign 115 — 1 1 ! exchange markets during the quarter. Oct Nov. Dec. 1998 NOTE. Data in this chart and those that follow are daily. SOURCES. J.P. Morgan. Bloomberg L.P. A SHARP DECLINE OF THE DOLLAR AGAINST THE YEN 2. Spot exchange rate of the dollar againsl the German mark At the outset of the quarter, market unease regarding and volatility implied by one-month option prices, global financial market instability was on the rise. I998:Q4 Although the dollar began the period at ¥136.50, it Malta fitT [Iwllaf Percent per year soon depreciated suddenly and sharply as hedge funds and other speculative accounts liquidated long 1.75 — Dollar-mark — 16 dollar positions in an effort to reduce risk, deleverage A 1.711 —/ \ balance sheets, and cover losses incurred in other markets. On October 7, the dollar-yen exchange rate 1.65 ^~ J\.\AJ fell 6.7 percent, from ¥133.90 to ¥120.55—the larg- A- — 12 1.60 — est percentage change in one day since 1974. Volatil- \ J — 10 ity in the exchange rate intensified during the follow- 1.55 — ing morning's New York trading session, with the — 8 1.50 — Dollar-mark impliedvolatility dollar falling to a low of ¥111.58 but then suddenly II " 1 II j rebounding to a high of ¥123.40. Many market Oct. Nov. Dec participants ascribed the doLlar's burst of strength to 1958 rumors of central bank intervention or market inquir- SOURCES. J.P. Morgan, Bloomberg L.P. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

179 fresh round of position unwinding. The rapidity and 4. Japanese suvernment benchmark bond yield, !998:Q4 magnitude of the price movements contributed to a decrease in direct interbank dealing, and bid-ask spreads quoted by some banks were several times wider than typical levels. ^ 2.0 In contrast, an increase in electronic trading activity served to concentrate available liquidity in a transparent pricing environment. This shift in market vol- — 11.5 ume to the electronically brokered medium may have influenced the price action during the dollar's depre- = 1.0 ciation. The transparency afforded by electronic brokering allowed dealers to observe prices at which actual trades were being executed. Thus, as the mar- Oct. Dec. ket digested new information, traders were not obligated to deal in order to discover current prices, Bloomberg L.P. reducing the need to shed undesired positions that might have been accumulated as a consequence of October 8, continued to trade between 15 percent and such dealing. As a result, price movements may have 23 percent. Meanwhile, risk reversals partly reflected been steeper but less erratic, given that individual a desire to protect against further downward moves market participants were more able to refrain from in the dollar, with the premium for dollar puts in transacting until rates reached levels they considered the one-month maturity reaching an all-time high of attractive. 3.6 percent on December 14. Through early November, the dollar traded in a Late in the period, movements of the dollar against less volatile manner, largely between ¥115 and the yen were increasingly influenced by events in ¥120. Despite the dollar's stabilization after the sud- Japan, as volatility in the Japanese government bond den decline, many market participants continued to (JGB) market increased markedly. On December 22, believe that leveraged investors were holding long the Trust Fund Bureau of the Japanese Ministry of dollar positions that they wished to unwind and that a Finance announced that it would significantly reduce significant possibility of a new round of heavy dollar its purchases of Japanese government securities. This selling remained. Option prices throughout the quarevent, juxtaposed with pre-existing market anxieties ter reflected this anxiety regarding investor posiregarding increased bond supply, helped the benchtioning. One-month implied volatility, while having mark JGB yield to rise from 0.77 percent to 2.01 persubsided from an all-time high of 40 percent on cent over the period. Over the quarter, the interest rate differential between ten-year JGBs and U.S. 3. One-iMont'h dollar- VL-TI UA ru vewuk. I WK-.Q4 Treasuries declined 102 basis points, to end at 263 basis points. Increasing concern over the growing Pi.-n.-fcm U.S. current account deficit placed some further pres- Dolkir ciite sure on the dollar. Finally, market participants noted at.pftoitiiufti that the yen derived some further support from expectations that the slump in Japanese economic growth might have reached its nadir. The dollar finished the quarter toward the bottom of its period range, at ¥112.80. SWINGS i-v ASSET PRICES BEFORE FEDERAL RESERVE F Get. Dec. At the outset of the period, global financial market NOTE. A risk reversal is an option position consisting of a written dollar put and a purchased dollar call that mature on the same dale and are equally conditions were tumultuous, with investors concerned out-of-lhe-money. The price of a risk reversal indicates whether the dollar call that turmoil in emerging markets was beginning to or the dollar put is more valuable. If the dollar call is at a premium, the market is willing to pay more to insure against the risk that the dollar will rise. If the dollar exercise increasing influence on the developed marput is at a premium, the market is willing to pay more to insure against the risk kets. Many market participants were disappointed that the dollar will fall. with the magnitude of the September 29 easing by SOURCE. J.P. Morgan Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

180 Federal Reserve Bulletin D March 1999 the Federal Reserve and believed that the Federal On October 15, the Federal Reserve announced a Reserve would not continue to ease aggressively in reduction of 25 basis points in the targeted federal the face of heightened market volatility. The con- funds rate, from 5.25 to 5.00 percent, noting "growcerns of market participants persisted after the meet- ing caution by lenders and unsettled conditions in ing of the Group of Seven (G-7) finance ministers financial markets more generally." The change in the and central bank governors on October 3-4, with target, which was the second easing by the Federal many observing that concrete policy measures to Reserve in about as many weeks, came sooner than confront the global financial turmoil had not yet many market participants had expected. Over the materialized. following weeks, many financial asset prices recov- With this deterioration in sentiment, asset prices ered from their lows. Sentiment was also boosted by reflected a mounting aversion to risk. European share speculation that international financial institutions prices fell sharply, with the DAX slipping to a 1998 and monetary authorities would provide more finanlow on October 8. Moreover, throughout the first two cial support to Brazil than had previously been weeks of the quarter, market participants became expected. Other policy developments around this time particularly concerned with the health of the financial also encouraged market recovery. On October 21, the sector, especially with respect to institutions believed U.S. Congress passed legislation funding the increase to have sizable exposures to hedge funds or to have in the U.S. quota in the International Monetary Fund incurred significant losses as a result of the volatility and the New Arrangements to Borrow. Further, on in financial assets. On October 7, the S&P Investment October 30, G-7 leaders, finance ministers, and cen- Bank and Brokerage Index dropped to a twenty-one- tral bank governors issued statements laying out an month low. Shortly thereafter, a trend of steepening immediate action plan to strengthen the international government yield curves emerged in both the United financial system and a broader agenda going for- States and Europe, as investors herded cash into ward. Nevertheless, the trend of market recovery was short-term government debt and as expectations for uneven throughout the rest of the quarter. Concern monetary easing as a response to the situation began over the Brazilian government's commitment to fisto emerge. Therefore, while flight-to-quality flows cal reform surfaced intermittently and led to bouts of had helped to push the thirty-year Treasury bond weakness in relatively risky financial assets. Declinyield to an all-time low of 4.72 percent on October 5, ing oil prices weighed on petroleum-related stocks two-year Treasury notes outperformed the thirty- and on currencies viewed as commodity sensitive. In year bond during the second week of October. By addition, sentiment toward emerging markets was October 13, the yield spread between thirty-year and adversely affected by renewed declines in commodity two-year Treasuries had increased from its period prices more broadly. By late November, the Comopen of 73 basis points to 98 basis points. Over the modities Research Bureau commodity price index first weeks of the period, spreads between some had reached a new historic low and continued to on-the-run and off-the-run Treasuries increased to trend weaker throughout the rest of the period. several times typical levels, suggesting a heightened On November 17, the Federal Open Market Cominvestor demand for liquidity. mittee (FOMC) announced a reduction of 25 basis points in the targeted federal funds rate, to 4.75 percent. In the statement issued with its decision, the 5. U.S. Treasury yields, 1998:Q4 Committee said that "although conditions in financial markets have settled down materially since mid- October, unusual strains remain." In the aftermath of this ease, many asset prices consolidated the trend of recovery begun earlier. In addition, the International Monetary Fund announced a $41.5 billion assistance package for Brazil on November 13. As part of this international financial support program, the U.S. Treasury announced that, through the Exchange Stabilization Fund, it would participate in a substitution 4.0 agreement to guarantee up to $5.0 billion of the $13.28 billion Bank for International Settlements Credit Facility for Brazil. Shortly thereafter, the aver- ODI, Dec. age Brady bond's stripped yield spread to Treasuries, as measured by the J. P. Morgan Emerging Markets SOURCE. Bloomberg L.P. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasuiy and Federal Reserve Foreign Exchange Operations 181 Bond Index, fell to a period low of 944 basis points. 7. Dow Jones industriul overage. l'JtJN:(J4 Toward the end of the quarter, trading in most instrulotto. October t-i&l ments grew increasingly thin, with many investors reluctant to establish new risk positions before the year's end. RELATIVELY SUBDUED DOLLAR TRADING ACAINST THE MARK — I ID Early in the quarter, the dollar traded in a relatively volatile fashion at the bottom of its 1998 range, between DM 1.61 and DM 1.66. During this period, — 100 the dollar was pressured by the increase in risk aversion in global financial markets and increasing expectations that the Federal Reserve was more likely to Oei. Nov. Dec. reduce interest rates than the Bundesbank. However, 1998 this trend began to reverse after the reduction in SOURCU. Bloomberg L.P. interest rates announced by the Federal Reserve on October 15. Following the announcement, many market participants began to anticipate that European newly established historic highs; profit warnings from interest rates were also likely to fall. These expecta- major U.S. corporations and year-end profit taking tions were supported by weak business sentiment contributed to this move in share prices. In addition, data from Germany as well as downward revisions to commentary from European monetary officials led to market forecasts for European growth. As a result, doubts regarding the likelihood of reductions in conexpectations for future interest rate differentials tinental interest rates, lending more support to the between the United States and Europe moved in the mark. The dollar's weakening trend ended shortly dollar's favor after the Federal Reserve's action, and after the December 3 announcement that the monethe implied yield spread between the March Euro- tary authorities of the eleven countries participating dollar and Euromark contracts rose. The dollar in the European Economic and Monetary Union had reached its quarter high of DM 1.7145 on Novem- reduced interest rates in a coordinated move. Toward ber 27. the end of the year, expectations for future interest Late in November, the dollar retraced some of rate spreads continued to move against the mark and these gains after U.S. equity prices retreated from helped to lift the dollar to levels near DM 1.68, where it finished the period. Implied yield spread botwcL . March 1999 Eurodollar and Euromark futures, 199H:Q4 TREASURY AND FEDERAL RESERVE FOREIGN EXCHANGE RESERVES The U.S. monetary authorities did not undertake any intervention operations during the quarter. At the end 180 of the quarter, the current values of the German mark and Japanese yen reserve holdings totaled $19.8 billion for the Federal Reserve System and $16.4 billion — 150 for the Exchange Stabilization Fund. The U.S. monetary authorities invest all of their foreign currency balances in a variety of instruments that yield market- — 120 related rates of return and have a high degree of liquidity and credit quality. A significant portion of these balances is invested in German and Japanese Oct. Nov. Dec. government securities held directly or under repur- 1998 chase agreement. As of December 31, outright hold- NOTE. Data are the Eurodollar implied yield minus the Euromark implied ings of government securities by the U.S. monetary yield. authorities totaled $7.6 billion. SOURCE. Bloomberg L.P. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

182 Federal Reserve Bulletin • March 1999 Japanese and German government securities held Because of the formation of the European Central under repurchase agreement are arranged either Bank and in light of fifteen years of disuse, the through transactions executed directly in the market bilateral swap arrangements of the Federal Reserve or through agreements with official institutions. Gov- with the Austrian National Bank, the National Bank ernment securities held under repurchase agreement of Belgium, the Bank of France, the German Bundesby the U.S. monetary authorities totaled $9.4 billion bank, the Bank of Italy, and the Netherlands Bank at the end of the quarter. Foreign currency reserves were jointly deemed no longer necessary in view of are also invested in deposits at the Bank for Interna- the well-established, present-day arrangements for tional Settlements and in facilities at other official international monetary cooperation. Accordingly, the institutions. respective parties to the arrangements mutually agreed to allow them to lapse. The swap arrangement between the Exchange Stabilization Fund and the RECIPROCAL CURRENCY ARRANGEMENTS German Bundesbank was also allowed to lapse. Similarly, it was jointly agreed to allow the bilateral swap On November 17 the FOMC voted unanimously to arrangements between the Federal Reserve and the reauthorize Federal Reserve participation in the North National Bank of Denmark, the Bank of England, the American Framework Agreement (NAFA), estab- Bank of Japan, the Bank of Norway, the Bank of lished in 1994, and the associated bilateral reciprocal Sweden, the Swiss National Bank, and the Bank for currency ("swap") arrangements with the Bank of International Settlements to lapse in light of their Canada and the Bank of Mexico. Likewise, the Secre- disuse and present-day arrangements for international tary of the Treasury authorized, on December 7, the monetary cooperation. • renewal of the Treasury's participation in the NAFA and of the associated Exchange Stabilization Agreement with Mexico. I. Foreign currency holdings of U.S. monetary authorities based on current exchange rates, 1998:Q4 Millions of dollars Quarterly changes in balances by source Balance, Balance, Hem Sept. 30, 1998 Net purchases Impact of Investment Currency Interest accrual Dec. 31, 1998 and salesJ sales2 income valuation (net) and other adjustments^ FEDERAL RESERVE Deutsdie marks 12,688.6 111.3 24.1 0 12.824.0 Japanese yon 3,663.8 5.0 1,178.1 0 •6,846.9 Total • 18.352.4 116,3 1,202.2 0 19.670.9 Interest receivables* 95.! -J2.3 82.8 Othai-cash flow from investi»ei>ts5 •14.8 14.8 Total 18,447.5 116.3 1,202.2 2.5 19,768.5 US. TREASURY EXCHANGE STABILIZATION FUKD Deutsche rnark& * 6423 4 0 0 •S8 7 123 0 6 494 4 8,, 106.0 0 0 7.4 1,686.0 0 9,799.4 Total * . . .. 14,529.4 0 0 66.1 1,698.3 0 16,293.8 -4.3 44.3 4S.6 Ofh&r-cSiSt! flow From investments' ... 21.4 21.4 T&lal 66.1 1,698.3 17.1 16,359.5 14,578.0 NOTE. Figures may not sum to totals because of rounding. 3. Foreign currency balances are marked to market monthly at month-end 1. Purchases and sales include foreign currency sales and purchases related lo exchange rates. official activity, swap drawings and repayments, and warehousing. 4. Interest receivables for the ESF are revalued at month-end exchange rates. 2. Calculated using marked-to-market exchange rates; represents the differ- Interest receivables for the Federal Reserve System are carried at average cost ence between the sale exchange rate and the most recent revaluation exchange of acquisition and are not marked to market until interest is paid. Interest rate. Realized profits and losses on sales of foreign currencies computed as (he receivables for the Federal Reserve system is net of unearned interest collected. difference between the historic cost-of-acquisition exchange rate and the sale 5. Cash flow differences from payment and collection of funds between exchange rale are shown in table 2. quarters. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 183 H. Not prnltls IT IDNSL'N ( I nn S. Ttvaswy l'unvrii:\ iirraii .s. LX-CL-IUIILT 31. 1W8 ;ind Fedcn.il Rrs.er\c turoi^n cxirhanyi: nperntinnv Millions of dollars biisoil Dii liis[Li['ii.'a1 v-'t^i-nl'-it quisiiion t'\ch:tiij:i.' rules. Amount of Outstanding. Institution f«cility Dec. 31. 1998 Millions of dollars Federal Reserve U.S. Treasury reciprocal currency Federal Exchange arrangement Period and ilem Reserve Stabilization Fund Bank of Canada 2.000 0 Bank of Mexico 3.000 0 Valuation profits and losses on outstanding assets and liabilities. Total 5,000 0 Sept. 30. 1998 Deuische marks 974.3 84.3 U.S. Treasury Japanese yen 51.7 80.0 Exchange Stabilization Fund currency arrang«menui Total 1,026.0 164.3 Bank of Mexico 3.000 0 Realized profits and losses from foreign currency sates, Total 3,000 0 Sept. 30. I998-Dei:'31. 199R Deutsche marks 0 0 Japanese yen 0 0 Tola) 0 I) Valuation profits and losses on outstanding assets and liabilities, Dec. 31. 1998 Deutsche marks 998.5 96.6 Japanese yen 1,229.8 1.766.0 Total 2,228.2 1,862.7 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

184 Industrial Production and Capacity Utilization for January 1999 Released for publication February 17 1998. Overall capacity utilization in January slipped 0.3 percentage point, to 80.5 percent, ] Vi percentage Industrial production was unchanged in January. points below its 1967-98 average. Manufacturing output increased 0.1 percent, and utility output increased 0.2 percent, but production at MARKET GROUPS mines decreased 1.8 percent. At 136.7 percent of its 1992 average, manufacturing production in January The output of durable consumer goods, which was 2.2 percent higher than it had been in January increased 0.3 percent, was lifted by an increase in Industrial production and capacity utilization Ratio scale, 1992= 100 Percent of capacity Industrialproduction Capacity utilization 130 - Manufacturing - 120 A/*\ Total industry - 85 y Total industry - - 110 f V * Manufacturing 100 \ V 1 1 i i i i 1 1 1 i I II 1990 1992 1994 1996 1998 1988 1990 1992 1994 1996 1998 Industrial production, market groups Ratio scale. 1992 = 100 RatIO scale,1992 =100 _ Consumer goods _ 135 _ Intermediate products - 135 Durable - 125 125 r : 115 - 115 Construction supplies fr\^j^ w — 105 105 Nondurable - 95 V/f^vP Business supplies -_ 95 y 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Ratio scale, 1992 = 100 Ratio scale, 1992 = 100 Equipment 175 Materials y^ 175 160 - 160 145 145 - Business - — — 130 ^—^_——130— Durable goods 115 115 100 •< Nondurable goods and energy 100 _ Defense andspace 85 85 1 1 1 1 1 1 1 1 i 1 1 1990 1992 1994 1996 1998 1990 1992 1994 1996 1998 All series are seasonally adjusted. Latest series, January. Capacity is an index of potential industrial production. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

185 Industrial production and capacity utilization, January 1999 Industrial production, index. 1992= 100 Percentage change Category 1998 1999 1998' 19991 Jan. 1998 to Oct. Nov.' Dec.' Jan.i' Oct.' Nov.' Dec.' Jan r Jan. 1999 Total 132.4 132.3 132.5 132.5 .4 -.1 .2 1.7 Previous estimate 132.6 132.5 132.8 .5 -.1 .2 Major market groups Products total2 124 9 124.5 124.7 124.6 .6 -.3 -.1 1.6 Consumer goods 115.2 115.1 115.4 115.4 .4 -.1 .3 .0 -.5 Business equipment 169 0 168.0 168.0 167 7 1.0 -.6 .0 -.1 7.3 Construction supplies 128.4 129.1 130.3 130.3 1.2 .5 1.0 .0 3.8 Materials 144.5 144.8 145.2 145.3 .1 .2 .3 .1 1.9 Major Industry groups Manufacturing 136.1 136.4 136.6 136.7 .7 .1 .1 2.2 Durable 161.2 161.0 161.4 161.6 1.0 -.1 .2 .1 5.1 Nondurable 110 9 111.6 111.6 111.6 .3 .7 .0 -.1 -1.3 Mining 102.0 101.4 100.3 98.5 -.4 -.5 -1.2 -1.8 -8.5 Utilities 116.5 111.4 114.1 114.3 -3.1 -4.4 2.4 4.2 Capacity utilization, percent MEMO Capacity, per centage 1998 1998 1999 change. Average. Lou, High. Jan. 1998 1967-98 1982 1988-89 Jan. Oct.1 Nov.' Dec.1 Jan.f Jan. to 1999 Total 82.1 71.1 85.4 83.0 81.3 80.9 80.8 80.5 4.9 Previous estimate 81.4 81.0 80.9 Manufacturing 81.1 69.0 85.7 82.2 80.3 80.1 79.9 79.6 5 5 Advanced processing 80.5 70.4 84.2 81.0 79.6 79.5 79.1 78.8 6.5 Primary processing . 82.4 66.2 88.9 85.2 82.4 82.3 82.4 82.1 2.8 Mining 87.5 80.3 88.0 90.0 84.7 84.2 83.1 81.6 .9 Utilities 87.4 75.9 92.6 87.2 92.0 87.9 90.0 90.1 .9 NOTE. Data seasonally adjusted or calculated Irom seasonally adjusted 2. Contains components in addition to those shown, monthly data. r Revised, 1. Change from preceding month. p Preliminary. automotive products. In contrast, the production of increased 0.5 percent mainly because of strength nondurable consumer goods excluding energy fell in the production of semiconductors and computer 0.3 percent and was down 2lA percent from its level a parts. However, the output of basic metals fell year ago, a drop reflecting, in part, softness for cloth- 0.6 percent, continuing the weakness that had begun ing and paper products. The output of consumer in early 1998. In addition, the output of consumer energy products, which has been volatile recently, durable parts, which rose rapidly late last year, has rose noticeably again in January. somewhat eased recently. The production of nondura- The production of business equipment edged down ble materials also edged down 0.2 percent, a move 0.1 percent. Declines in the output of industrial equip- mainly reflecting ongoing weakness in textiles and ment and transit equipment more than offset a gain chemicals. in information processing equipment. Some of the decrease in transit equipment reflects further reductions in commercial aircraft production, which INDUSTRY GROUPS peaked last fall after having climbed rapidly during the past few years. The output of construction sup- Manufacturing output edged up 0.1 percent, with a plies was flat, but at a high level, following strong small gain in the production of durable goods and a gains in the fourth quarter. The production of busi- slight pullback in the production of nondurable ness supplies increased 0.2 percent. goods. Within durable goods industries, changes The production of materials inched up 0.1 percent in production were mixed. Industries with large after having risen modestly in the preceding three increases in production included lumber, furniture, months. The production of durable goods materials and electrical machinery; industries showing cut- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

186 Federal Reserve Bulletin • March 1999 backs included primary metals, transportation equip- NOTICE ment (notably civilian aircraft), and miscellaneous manufactures. The production of nondurable goods The data in this release include preliminary estimates edged down 0.1 percent in January after having been of capacity growth for 1999. The capacity estimates flat in December. Losses in tobacco, apparel, and in next month's release will incorporate a small leather products more than offset gains in petroleum change in the method used to interpolate the annual and food products. Mining production fell again, estimates of capacity growth to the monthly frepulled down by a sharp drop-off in coal produc- quency. The current monthly capacity figures are tion and the continued contraction in oil and gas computed under the assumption that capacity growth extraction. is constant from the beginning to the end of a year The factory operating rate dropped 0.3 percentage but that growth rates may change abruptly between point, to 79.6 percent—more than Vh percentage the last months of one year and the first months of the points below the level of January 1998. The utiliza- next. The new procedure, which allows capacity tion rates for advanced-processing and primary- growth rates to change smoothly over time, will be processing industries slipped 0.3 percentage point. incorporated in the data beginning with October The utilization rate for mines fell 1.5 percentage 1998. • points, to a level about 6 percentage points below its long-term average. Temperatures remained relatively warm, and the operating rate for utilities, at about 90 percent, was little changed. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

187 Statements to the Congress Statement by Alan Greenspan, Chairman, Board of of record peacetime expansion to seek a deeper Governors of the Federal Reserve System, before the understanding of the forces that have produced it. I Committee on Ways and Means, U.S. House of Repre- want to take a few moments this morning to discuss sentatives, January 20, 1999 one key element behind our current prosperity—the rise in the value markets place on the capital assets of The American economy through year-end continued U.S. businesses. Lower inflation, greater competitiveto perform in an outstanding manner. Economic ness, and the flexibility and adaptability of our busigrowth remained solid, and financial markets, after nesses have enabled them to take advantage of a freezing up temporarily following the Russian de- rapid pace of technological change to make our capifault, are again channeling an ample flow of capital to tal stock more productive and profitable. I will argue businesses and households. Labor markets have that the process of recognizing this greater value has remained quite tight, but, to date, this has failed to produced capital gains in equity markets that have ignite the inflationary pressures that many had feared. lowered the cost of investment in new plant and To be sure, there is decided softness in a number of equipment and spurred consumption. But while asset manufacturing industries, as weakness in many for- values are very important to the economy and so eign economies has reduced demand for U.S. exports must be carefully monitored and assessed by the and intensified competition from imports. Moreover, Federal Reserve, they are not themselves a target of underutilized production capacity and pressure on monetary policy. We need to react to changes in domestic profit margins, especially among manufac- financial markets, as we did this fall, but our objecturers, are likely to rein in the rapid growth of new tive is the maximum sustainable growth of the U.S. capita] investment. With corporations already relying economy, not particular levels of asset prices. increasingly on borrowing to finance capital invest- As I have testified before the Congress many times, ment, any evidence of a marked slowing in corporate I believe, at root, that the remarkable generation of cash flow is likely to induce a relatively prompt capital gains of recent years has resulted from the review of capital budgets. dramatic fall in inflation expectations and associated The situation in Brazil and its potential for spilling risk premiums and broad advances in a wide variety over to reduce demand in other emerging market of technologies that produced critical synergies in the economies also constitute a possible source of down- 1990s. side risk for demand in the United States. So far, Capital investment, especially in high-tech equipmarkets seem to have reacted reasonably well to the ment, has accelerated dramatically since 1993, decisions by the Brazilian authorities to float their presumably reflecting a perception on the part of currency and redouble efforts at fiscal discipline. But businesses that the application of these emerging follow-through in reducing budget imbalances and in technological synergies would engender a significant containing the effects on inflation of the drop in value increase in rates of return on new investment. of the currency will be needed to bolster confidence Indeed, some calculations support that perception. and to limit the potential for contagion to the finan- They suggest that the rate of return on capital facilicial markets and economies of Brazil's important ties put in place during recent years has, in fact, trading partners, including the United States. moved up markedly. In part this may result from While there are risks going forward, to date domes- improved capital productivity—that is, the efficiency tic demand and hence employment and output in of the capital stock. In addition, we may be witnessthe United States certainly has remained vigorous. ing some payoffs from improved organizational and Though the pace of economic expansion is widely managerial efficiencies of U.S. businesses and from expected to moderate as 1999 unfolds, signs of an the greater education—in school and on the job— appreciable slowdown as yet remain scant. that U.S. workers have acquired to keep pace with But to assess the economic outlook properly, we the new technology. All these factors have been need to reach beyond the mere description of Ameri- reflected in an acceleration of labor productivity ca's sparkling economic performance of eight years growth. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

188 Federal Reserve Bulletin • March 1999 Parenthetically, improved productivity probably lower spending because the cash realized from the explains why the American economy has done so sale of the asset exceeds the tax, and in most cases well despite our oft-cited subnormal national saving the typical household presumably does not perceive rate. The profitability of investment here has attracted of this transaction as reducing available income or saving from abroad, an attraction that has enabled us financial resources. Together these two effects probto finance a current account deficit while maintaining ably account for an appreciable portion of the reduca strong dollar. Clearly, we use both domestic saving tion in the reported saving rate. and imported financial capital in a highly efficient But beyond these statistical issues, there is little manner, apparently more efficiently than many, if not doubt that capital gains have increased consumption most, other major industrial countries. relative to income from current production over While discussions of consumer spending often recent years. Economists have long recognized a continue to emphasize current income from labor and "wealth effect"—a tendency for consumption to rise capital as the prime sources of funds, during the by a fraction of the capital gains on existing assets 1990s, capital gains, which reflect the valuation of owned by households—though the magnitude of this expected future incomes, have taken on a more effect remains difficult to estimate accurately. We prominent role in driving our economy. have some evidence from recent years that all or most The steep uptrend in asset values of recent years of the decline in the saving rate is accounted for by has had important effects on virtually all areas of our the upper income quintile in which the capital gains economy but perhaps most significantly on house- have disproportionately accrued, which suggests that hold behavior. It can be seen most clearly in the the wealth effect has been real and significant. Thus, measured personal saving rate, which has declined all else equal, a flattening of stock prices would likely from almost 6 percent in 1992 to effectively zero slow the growth of spending, and a decline in equity today. values, especially a severe one, could lead to a con- Arguably, the average household does not perceive siderable weakening of consumer demand. that its saving has fallen off since 1992. In fact, the Some moderation in economic growth, however, net worth of the average household has increased might be required to sustain the expansion. Through nearly 50 percent since the end of 1992, well in the end of 1998, the economy continued to grow excess of the gains of the previous six years. House- more rapidly than can be currently accommodated on holds have been accumulating resources for retire- an ongoing basis, even with higher, technologyment or for a rainy day, despite very low measured driven productivity growth. Growth has continued to saving rates. shrink the pool of workers willing to work but with- The resolution of this seeming dilemma illustrates out jobs. While higher productivity has helped to the growing role of rising asset values in supporting keep labor cost increases in check, it cannot be personal consumption expenditures in recent years. It expected to do so indefinitely in ever-tighter labor also illustrates the importance when interpreting our markets. official statistics of taking account of how they deal Despite brisk demand and improved productivity with changes in asset values. growth, corporate profits have sagged over recent With regard first to the statistical issues, capital quarters. This is attributable in part to some acceleragains themselves are not counted as income, but tion in labor compensation, but other factors have some transactions resulting from capital gains reduce also been pressing, especially intensified competition disposable household income as we measure it, while and lower prices facing our exporters and those having no effect on consumption. As a consequence, industries competing with imports. In these circumas capital gains and these associated transactions stances, businesses will feel under considerable presmount, published saving rates are decreased. For sure to preserve profit margins should labor costs example, reported personal income is reduced when accelerate further, or should the falling prices of corporations cut back payments into defined-benefit commodity inputs, like oil, turn around. But to date, pension plans because of higher equity prices; businesses' evident pricing power has been scant. however, such reductions do not diminish antici- Either that would change and inflation could begin to pated retirement income and thus should not lower mount or, if costs could not be recouped, capital consumption. And reported disposable income is outlays might well be cut back. decreased when households pay taxes on capital gains The recent behavior of profits also underlines the realizations that would not have been so large in less unusual nature of the rebound in equity prices and the ebullient markets. However, capital gains tax pay- possibility that the recent performance of the equity ments also are highly unlikely to be associated with markets will have difficulty in being sustained. The Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 189 level of equity prices would appear to envision sub- followed by a steep decline. But many other forces stantially greater growth of profits than has been also drive our economy, and it is the performance of experienced of late. the entire economy that forms our objectives and Moreover, the impressive capital gains of recent shapes our actions. years would seem also to rest on a perception of Nonetheless, in the current state of financial marrelatively low risk in corporate ownership. Risk aver- kets, policymakers are going to have to be particusion and uncertainty rose sharply over the late sum- larly wary of actions that unnecessarily sow uncermer and fall of 1998 after the Russian default in tainties, undermine confidence, and interfere with the mid-August, as evidenced by widening spreads efficient allocation of capital on which our economic among yields on debt of differing credit qualities and prosperity and asset values rest. It is important not to liquidity. The rise in uncertainty increased the dis- undermine the highly sensitive ongoing process of counting of claims on future incomes, and that reallocation of capital from less to more productive reduced stock market prices even as the long-term uses. For productivity and standards of living to earnings growth expectations of security analysts grow, not only must capital raised in markets be continued to rise. As risk aversion subsided after allocated efficiently, but internal cash flow, including mid-October, stock prices returned to record levels. the depreciation charges from the existing capital Markets have doubtless stabilized significantly stock, must be continuously directed to their most after the turbulence of last fall, but they remain profitable uses. It is this continuous churning, this fragile, as the repercussions of the recent Brazilian so-called creative destruction, that has become so devaluation attest. Moreover, our chronic current essential to the effective deployment of advanced account deficit has widened significantly, in part technologies by this country over recent decades. In reflecting the strength of domestic demand that has this regard, drift toward protectionist trade policies, accompanied the further accumulation of capital which are always so difficult to reverse, is a much gains. The continued increase in our net external debt greater threat than is generally understood. and its growing servicing costs clearly are not sus- It is well known that erecting barriers to the free tainable indefinitely. flow of goods and services across national borders In light of the importance of financial markets in undermines the division of labor and standards of the economy, and of the volatility and vulnerability in living by impeding the adjustment of the capital stock financial asset prices more generally, policymakers to its most productive uses. Not so well understood, must continue to pay particular attention to these in my judgment, is the impact that fear of growing markets. The Federal Reserve's easing last fall protectionism would have on profit expectations, and responded to an abrupt stringency in financial mar- hence on the current values of capital assets. Proteckets and the effects that the consequent increased risk tionism was a threat to standards of living when aversion was likely to have on economic activity capital asset values were low relative to income. It going forward. We were particularly concerned about becomes particularly pernicious in an environment, higher costs and disrupted financing in debt markets, such as today's, when that is no longer the case. where much of consumption and investment is In sum, it has been the ability of our flexible and. funded. We were not attempting to prop up equity innovative businesses and workforce that has enabled prices, nor did we plan to continue to ease rates until the United States to take full advantage of emerging equity prices recovered, as some have erroneously technologies to produce greater growth and higher inferred. asset values. Policy has facilitated this process This has not been, and is not now, our policy or by containing inflation and by promoting competiintent. As I have discussed earlier, movements in tiveness through deregulation and an open global equity prices can play an important role in the econ- trading system. Our task going forward—at the omy, which the central bank must take into account. Federal Reserve as well as in the Congress and And we may question from time to time whether Administration—is to sustain and strengthen these asset prices may not embody a more optimistic out- policies, which in turn have sustained and strengthlook than seems reasonable, or what the conse- ened our now record peacetime economic expansion. quences might be of a further rise in those prices Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

190 Federal Reserve Bulletin • March 1999 Statement by Alan Greenspan, Chairman, Board of have to be raised by about 2.2 percent of taxable Governors of the Federal Reserve System, before the payroll; to be fully funded in perpetuity, that is, to Committee on the Budget, U.S. Senate, January 28, ensure that taxes and interest income will always be 1999 sufficient to pay benefits, social security taxes would have to be raised much more—perhaps between As you requested in your letter of invitation, today I about 4 percent and 5 percent of taxable payroll. will be addressing one of our nation's most pressing This issue of funding underscores the critical elepublic policy challenges: social security. ments in the forthcoming debate on social security The dramatic increase in the ratio of retirees to reform because it focuses on the core of any retireworkers that is projected, as the baby boomers move ment system, private or public. Simply put, enough to retirement and enjoy ever-greater longevity, makes resources must be set aside over a lifetime of work to our current pay-as-you-go social security system un- fund retirement consumption. At the most rudimensustainable. Furthermore, the broad support for social tary level, one could envision households saving by security appears destined to fade as the implications actually storing goods purchased during their workof its current form of financing become increasingly ing years for consumption during retirement. Even apparent. To date, with the ratio of retirees to workers better, the resources that would have otherwise gone having been relatively low, workers have not consid- into the stored goods could be diverted to the proered it a burden to share the goods and services they duction of new capital assets, which would, cumuproduce with retirees. The rising birth rate after latively, over a working lifetime, produce an even World War II, which, in due course, lowered the ratio greater quantity of goods and services to be conof retirees to workers, helped make the social secu- sumed in retirement. rity program exceptionally popular, even among those In this light, increasing our national saving is critipaying the taxes to support it. cal. The President's approach to social security Indeed, workers perceived it to be a good invest- reform supports a large unified budget surplus. This ment for their own retirement. For those born before is a major step in the right direction in that it World War II, the annuity value of benefits on retire- would ensure that the current rise in government's ment far exceeded the cumulative sum at the time of positive contribution to national saving is sustained. retirement of contributions by the worker and his or The large surpluses projected over the next fifteen her employer, plus interest. For example, the implicit years, if they actually materialize, can significantly real rate of return has been strikingly high for those reduce the fiscal pressures created by our changing born in 1920—on average, near 6 percent. The real demographics. interest rate on U.S. Treasury bonds, by comparison, To maximize the benefits of this increased saving, has generally been less than 3 percent. it is crucial that the saving is put to its best use. For But births flattened after the baby boom, and life productivity and standards of living to grow, finanexpectancy beyond age sixty-five continued to rise. cial capital raised in markets or generated from inter- Consequently, the ratio of the number of workers nal cash flow from existing plant and equipment must contributing to social security to the number of bene- be continuously directed by firms to its most profitficiaries has declined to the point that maintaining able uses—namely new physical capital facilities perthe annuity value of benefits on retirement at a level ceived as the most efficient in serving consumers' well in excess of accumulated contributions has multiple preferences. It is this continuous churning, become increasingly unlikely. Those born in 1960, this so-called creative destruction, that has become so for example, are currently calculated to receive a real essential to the effective deployment of advanced rate of return, on average, of less than 2 percent on technologies by this country over recent decades. their cumulative contributions. Indeed, even these Indeed, improved productivity of capital probably low rates of return for more recent cohorts likely are explains much of why the American economy has being overestimated because they are based on cur- done so well despite our comparatively low national rent law taxes and benefits. In all likelihood, these saving rate. In addition, the profitability of investtaxes will have to be raised, or benefits cut, given that ment in the United States has attracted saving from the system as a whole is still significantly under- abroad, which has facilitated the expansion and funded, at least according to the intermediate projec- modernization of our capital stock. Clearly, we use tions of the Old-Age and Survivors Insurance (OASI) both domestic saving and imported financial capital actuaries. For the present value of current law bene- in a highly efficient manner, apparently more effifits over the next seventy-five years to be fully funded ciently than many, if not most, other major industrial through contributions, social security taxes would countries. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 191 Looking forward, the effective application of our This issue is of particular concern when the pencapital to its most highly valued use is going to sion plan provides a defined benefit. Under these become, if anything, more important, as we strive to circumstances, the beneficiaries' returns are governincrease the resources available to provide for the ment guaranteed, and hence they have no incentive to retirement of the baby boomers without, in the future, monitor the performance of their invested funds. In significantly reducing the consumption of workers. sum, because I do not believe that it is politically Investing a portion of the social security trust fund feasible to insulate such huge funds from governmenassets in equities, as the Administration and others tal influence, investing social security trust fund have proposed, would arguably put at risk the effi- assets in equities compromises the efficient allocation ciency of our capital markets and thus, our economy. of our capital—which, as the past few years have Even with Herculean efforts, I doubt if it would be demonstrated, is so essential to raising our standards feasible to insulate, over the long run, the trust funds of living. from political pressures—direct and indirect—to allo- This risk might be worth taking if having the social cate capital to less than its most productive use. security trust fund invest in equities provided real The experience of public pension funds seems to benefits to households. But this is not likely to be the bear this out. Although relevant comparisons to pri- case on average. Having the trust fund invest in vate plans are difficult to construct, there is evidence private securities most likely will increase its rate that the average rate of return on state and local of return, although perhaps not on a properly riskpension funds tends to be lower than the return adjusted basis. But, as I have argued previously realized on comparable private pension funds, other before this committee, unless new savings are created pooled investments, and market indexes. Of course, a in the process, the corporate securities that displace significant part of this disparity would be eliminated Treasury securities in the social security trust funds if these returns were adjusted for risk because public must be exactly offset by the mirror image displacepension plans are often invested more conservatively ment of corporate securities by government securities than private plans. But there is evidence that returns in private portfolios, probably largely in private funds are lower even after accounting for differences in the held for retirement. This swap is essentially a zero portfolio allocation between stocks and bonds. For sum game. To a first approximation, aggregate retireexample, it has been shown that state pension plans ment resources—from both social security and prithat are required to direct a portion of their invest- vate funds—do not change. ments in-state and those that make "economically The crucial retirement funding issues center on targeted investments" experience lower returns as a how to increase the amount of saving and how to result. Similarly, there is evidence that suggests that allocate resources between active workers and retirthe greater the proportion of trustees who are political ees. It may turn out that the additional new resource appointees, the lower the rate of return. A lower requirements, whether mandated savings or addirisk-adjusted rate of return on financial assets is tional taxes, to fully fund current benefit levels will almost invariably an indication of lower rates of prove too burdensome, particularly once future Medireturn on the real underlying assets on which they are care benefits are accounted for. If so, the level of a claim. retirement benefits, funded through social security or Some have argued that the federal government has private retirement accounts, that is affordable in our already shown itself capable of investing in equities economy will remain an important issue. There have without political interference, and I have no doubt been extensive discussions of potential changes, such that the investments of the $60 billion federal thrift as extending the age of full retirement benefit entitleplan and the $6 billion Federal Reserve retirement ment, altering the benefit calculation bend points, and plan have been made independently. Moreover, the adjusting annual cost-of-living escalation to a more federal thrift plan has not been an attraction because accurate measure. Considerations such as these it is a defined contribution plan and therefore effec- should not be taken off the table. tively self-policed by individual contributors. These While a sharp rise in the number of retirees in plans do not reach the asset size threshold to engage about ten years seems almost a certainty, the financial the political establishment—but that would not be the and economic state of the American economy in the case for a multitrillion dollar social security trust early twenty-first century is not. We cannot confifund. A trust fund invested in U.S. Treasury securities dently project large surpluses in our unified budget does not appear to be available for politically sup- over the next fifteen years, given the inherent uncerported private projects. A fund that can own equity tainties of budget forecasting. How can we ignore the would. fact that virtually all forecasts of the budget balance Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

192 Federal Reserve Bulletin • March 1999 have been wide* of the mark in recent years? For pect, the social security system is not in as much example, as recently as February 1997, the Office of jeopardy as it currently appears. But proper fiscal Management and Budget projected a deficit for fiscal planning requires that consequences of mistakes in year 1998 of $121 billion—a $191 billion error. The all directions be evaluated. If we move now to shore Congressional Budget Office and others made similar up the social security program, or replace it, in part or errors. Likewise, in 1983, we confidently projected a in whole, with a private system, and subsequently solvent social security trust fund through 2057. Our find that we had been too pessimistic in our projeclatest estimate with few changes in the program is tions, the costs to our society would be few. If we 2032. assume more optimistic scenarios and they prove It is possible, as some maintain, that the OASI wrong, the imbalances could become overwhelming, actuaries are too conservative and that productivity and finding a solution would be even more divisive growth could be far greater than is anticipated in their than today's problem. • "intermediate" estimate. If that is, in fact, our pros- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

193 Announcements APPOINTMENTS OF NEW MEMBERS AND A NEW professor of urban policy and education and chairperson of the program in social policy and human development at CHAIR AND VICE CHAIR OF THE CONSUMER Northwestern University. He has authored a book Families ADVISORY COUNCIL in Distress: Public, Private, and Civic Responsibilities and published more than thirty-five articles on economic devel- The Federal Reserve Board on January 5, 1999, opment, social issues, and public policy in various professional journals. Mr. Bush is the Board Chair for the Finannamed ten new members to its Consumer Advisory cial Markets Center and on the Board of Directors of the Council for three-year terms and designated a new National Community Reinvestment Coalition. He is also chair and vice chair of the council for 1999. co-chair of the Steering Committee of the Chicago Federal The council, which consists of thirty members, Reserve Bank's Mortgage Credit Partnership Project and advises the Board on the exercise of its responsibili- the Advisory Board of the Reserve Bank's Assessing the Midwest Economy Project. ties under the Consumer Credit Protection Act and on other matters in the area of consumer financial services. The council meets three times a year in John C. Gamboa Executive Director. The Greenlining Institute Washington, DC. Yvonne S. Sparks, President of the San Francisco, California Community Investment Department for NationsBank Community Investments Group in St. Louis, Mis- John C. Gamboa, the Executive Director of the Greenlining Institute, has managerial experience in academia and in souri, was designated chair. Her term runs through the private and nonprofit sectors. He was Executive Direc- December 1999. Dwight Golann, a professor of law tor of the Latino Issues Forum; Communications Manager, at Suffolk University Law School in Boston, Massa- University of California at Berkeley; Executive Director chusetts, was designated vice chair. His term on the of Project Participar, a citizenship program; and Marketing council ends in December 2000. and Advertising Manager at Pacific Bell. As Executive Director for the Greenlining Institute. Mr. Gamboa focuses The ten new members are the following: on public policy issues that promote economic development in urban and low-income areas and on developing minority youth into future community leaders. He has been Lauren Anderson active in combating redlining and in providing a voice for Executive Director, Neighborhood Housing Service the poor and underserved in insurance, banking, utilities, New Orleans, Louisiana and telecommunications issues. Ms. Anderson is the Executive Director of the Neighborhood Housing Services of New Orleans, a nonprofit housing corporation that has the reputation of doing highly Rose M. Garcia creative and innovative projects. Ms. Anderson was previ- Executive Director. El Paso Collaborative for Community ously a project manager for the Department of Housing and Economic Development and Economic Development for Jersey City, a staff attor- El Paso. Texas ney for the American Civil Liberties Union, and an associ- Ms. Garcia is the Executive Director of the El Paso Colate with a law firm representing nonprofit and affordable laborative for Community and Economic Development, housing developers. She has served on the Board of Direcan umbrella organization that provides funding, technical tors of the Metropolitan Area Committee, the New Orleans assistance, and training to twenty community development Neighborhood Development Collaborative, and the Fedorganizations. She also serves as chairperson of the Texas eral Home Loan Bank of Dallas. Association of Community Development Organizations, as a board member of Services for Seniors, as an executive board member and officer of the National Farmworker Malcolm M. Bush Housing Project Directors Association, and as a member President, The Woodstock Institute of Concilio Campesino del Sudoeste. For twenty years Chicago, Illinois Ms. Garcia has been a leader in the development of afford- Mr. Bush is President of The Woodstock Institute, a non- able housing in Texas and New Mexico, in both rural and profit organization that engages in applied research, public metropolitan communities, and has extensive hands-on education, and technical assistance to increase investment experience in affordable housing development. Ms. Garcia and promote economic development in low- to moderate- presently serves on the Board of Directors of Waterworks. income and minority communities. Before joining Wood- Inc., a program of the Pew Charitable Trust to finance stock in 1992, Mr. Bush served as assistant professor of innovative water/sewer projects in colonias along the social policy at the University of Chicago and as assistant U.S.-Mexico border. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

194 Federal Reserve Bulletin • March 1999 Vincent Giblin Marta Ramos General Vice President, International Union Vice President and CRA Officer, Banco Popular of Operating Engineers de Puerto Rico West Caldwell, New Jersey San Juan, Puerto Rico Mr. Giblin is the Chief Executive Officer of Local 68 of Ms. Ramos is the Vice President and CRA officer for the International Union of Operating Engineers in West Banco Popular de Puerto Rico, the main subsidiary of Caldwell, New Jersey. This union has 5,000 members Popular, Inc., a bank holding company with $22.9 billion with jurisdiction throughout the entire State of New Jersey. in assets. Besides serving Puerto Rico with the largest In addition, Mr. Giblin serves as Chairman of the Board branch network, Popular, Inc. has banking branches in of Horizon Blue Cross and Blue Shield of New Jersey. California, Florida, Illinois, New Jersey, New York, Texas, He is also the General Vice President of the Inter- the U.S. Virgin Islands, and the British Virgin Islands. national Union of Operating Engineers, an interna- Ms. Ramos was the founder and past president of the tional body with jurisdiction over 400.000 members Compliance and CRA Committees of the Puerto Rico throughout North America. Mr. Giblin is President of Bankers Association; served as an advisor to the Concilio the Northeastern States Conference of Operating Engi- de Corporaciones en Desarrollo Comunitario, an umbrella neers, which covers the East Coast from Maine to Pitts- organization of community development corporations in burgh to Delaware. Previously, Mr. Giblin was a Com- Puerto Rico; a member of the planning committee and missioner of the New Jersey Economic Development advisory board of the Puerto Rico Community Foundation Authority and also served as Chairman of the New Jersey Consortium; a founding member of the Puerto Rico Hous- Casino Reinvestment and Development Authority. Dur- ing Network, a nonprofit organization created to support ing that time, he actively sought favorable government housing initiatives in Puerto Rico; a founding member of financing to facilitate the expansion of public housing Habitat for Humanity of Puerto Rico; and a member of the construction. Private Industry Council of the Municipality of San Juan. Gary Washington Senior Vice President and CRA Officer, ABN AMRO Willie Jones North America, Inc. Regional Director, Community Builders, Inc. Chicago, Illinois Boston, Massachusetts Mr. Washington is Senior Vice President and CRA officer Mr. Jones is the Deputy Director of The Community Buildof ABN AMRO North America, Inc., a Dutch-owned bank ers, Inc. He has spearheaded the company's efforts to with $115 billion in U.S. assets. He directs and oversees secure new HOPE VI engagements nationally. Before the community reinvestment activity of all ABN AMRO going to Community Builders, Inc., Mr. Jones was an banking units in the United States. Mr. Washington works assistant to the Dean at the College of Engineering at closely with affordable housing organizations and small Northeastern University, responsible for recruitment and businesses. His work contributed to the formation of the retention of minority students in the technical degree LaSalle Community Development Corporation, which proprograms. He is also Vice Chair of the Massachusetts vides debt and equity for community development projects. Community and Banking Council. Mr. Jones has received Mr. Washington currently serves on the board of directors numerous community achievement awards and has been of several organizations, such as the Chicago Equity Fund on the Board of Directors of the Greater Roxbury Neighand the Jane Addams Hull House. He has been named a borhood Authority. He has also taught a graduate course, fellow by Leadership Greater Chicago and served as found- "Real Estate Development and Finance," at Tufts Univering chair of the CRA subcommittee for the Chicago Clearsity in the Urban and Environmental Policy Program, as inghouse Association. well as "Project Management" at the Massachusetts Institute of Technology Department of Urban Studies and Planning in the Professional Development Institute. Robert L. Wynn II Financial Education Officer, Department of Financial Institutions Madison, Wisconsin Anne Li Mr. Wynn is the Financial Education Officer for the Wis- Executive Director, New Jersey Community Loan Fund consin Department of Financial Institutions. Before his Trenton, New Jersey current post, Mr. Wynn was the Director of the Bureau of Ms. Li is Executive Director of the New Jersey Commu- Minority Business Development for the Wisconsin Departnity Loan Fund. The Fund is a nonprofit community devel- ment of Commerce. He was responsible for directing the opment financial institution that seeks to increase the flow bureau's business development initiatives to foster small of capital to build economic self-sufficiency for lower- business ownership. Under his leadership, the bureau proincome people and communities throughout New Jersey. vided an early planning grant to a start-up community Ms. Li was appointed by the Governor to the New Jersey development bank owned by three African-American Redevelopment Authority and to the Community Financial women in Milwaukee. Mr. Wynn worked to develop the Services Advisory Board of the New Jersey State Depart- Minority Business Development Fund, which provides ment of Banking and is also a member of the Commu- direct loans for working capital, machinery and equipment, nity Advisory Council to the Federal Home Loan Bank of land and building acquisition, and general expansion. He New York. also established the Milwaukee Economic Education Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 195 Partnership, which includes a "Youth Enterprise Acad- ISSUANCE OF SUPERVISORY GUIDANCE ON emy" and a teacher-training component, and founded the CERTAIN ELEMENTS OF COUNTERPARTY South Central Wisconsin Council of the National Associa- CREDIT RISK-MANAGEMENT SYSTEMS tion of Investors. The Federal Reserve on February 1, 1999, announced Council members whose terms continue through the issuance of supervisory guidance providing super- 1999 and 2000 are the following: visors and bankers information on certain elements Wayne-Kent A. Bradshaw, President and Chief Execu- of counterparty credit risk-management systems that tive Officer, Family Savings Bank, FSB, Los Angeles, may need special review and enhancement. California (1999) The guidance is being issued to address potential weaknesses in current risk-management systems Janet C. Koehler, Senior Manager of Electronic Comidentified by losses stemming from recent market merce, AT&T Universal Card Services, Jacksonville, Florida (1999) turbulence and various supervisory reviews of bank management systems for counterparty credit risk. Carol Parry, Executive Vice President, Chase Manhattan The guidance reiterates and expands on fundamen- Bank, New York, New York (1999) tal principles of counterparty credit risk management that are covered in existing supervisory materials Philip Price, Jr.. Executive Director, The Philadelphia Plan, Philadelphia, Pennsylvania (1999) of the Federal Reserve and other regulators and in established industry standards, including the Federal Marilyn Ross, Executive Director, Holy Name Housing Reserve's supervisory manual entitled Trading and Corporation. Omaha, Nebraska (1999) Capital Markets Activities. The guidance instructs supervisory staff to con- Gail Small, Executive Director, Native Action, Lame Deer, Montana (1999) tinue and, when appropriate, strengthen their efforts in evaluating whether banking institutions accom- Walter J. Boyer, President, United Central Bank, Gar- plish the following: land, Texas (2000) • Devote sufficient resources and adequate atten- Jeremy Eisler, Director of Litigation, South Mississippi Legal Services Corp., Biloxi, Mississippi (2000) tion to the management of the risks involved in growing, highly profitable or potentially high-risk Robert F. Elliott, Vice Chairman, Household Interna- activities and product lines tional, Prospect Heights, Illinois (2000) • Have internal audit and independent riskmanagement functions that adequately focus on Karla Irvine, Executive Director, Housing Opportunities Made Equal of Greater Cincinnati. Inc., Cincinnati, Ohio growth, profitability, and risk criteria in targeting (2000) their reviews • Achieve an appropriate balance among all ele- Gwenn Kyzer, Vice President, Target Marketing Service ments of credit risk management, including both Experian, Inc., Allen, Texas (2000) qualitative and quantitative assessments of counter- John C. Lamb, Senior Staff Counsel, Department of party creditworthiness; measurement and evaluation Consumer Affairs, Sacramento, California (2000) of both on- and off-balance-sheet exposures, including potential future exposure; adequate stress testing; Martha W. Miller, President, Choice Federal Credit reliance on collateral and other credit enhancements; Union, Greensboro, North Carolina (2000) and the monitoring of exposures against meaningful Daniel W. Morton, Vice President and Senior Counsel, limits Huntington National Bank, Columbus, Ohio (2000) • Employ policies that are sufficiently calibrated to the risk profiles of particular types of counterparties Charlotte Newton. Consumer Advisor, Springfield, Virand instruments to ensure adequate credit risk assessginia (2000) ment, exposure measurement, limit setting, and use David L. Ramp, Attorney, Legal Aid Society of Minne- of credit enhancements apolis, Minneapolis, Minnesota (2000) • Ensure that actual business practices conform to stated policies and their intent Robert G. Schwemm, Professor of Law, University of • Move in a timely fashion to enhance their mea- Kentucky, Lexington. Kentucky (2000) surement of counterparty credit risk exposures, David J. Shirk, Senior Vice President, Frontier Invest- including the refinement of potential future exposure ment Company, Eugene, Oregon (2000) measures and the establishment of stress-testing Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

196 Federal Reserve Bulletin • March 1999 methodologies that better incorporate the interaction rates. Statutory dividends to member banks were of market and credit risks. $343 million. Under the policy established by the Board of Gov- To adequately evaluate these conditions, supervi- ernors at the end of 1964, all net income after the sors are advised to ensure that they conduct sufficient statutory dividend to member banks and the amount and targeted transaction testing on those activities, necessary to equate surplus to paid-in capital is transbusiness lines, and products that are experienc- ferred to the U.S. Treasury. ing significant growth, above-normal profitability, or large potential future exposures. The supervisory guidance material is available on the Federal ENFORCEMENT ACTIONS Reserve's web site: (http://www.federalreserve.gov). The Federal Reserve Board on January 21, 1999, announced the joint issuance with the Office of the PRELIMINARY FIGURES AVAILABLE ON Comptroller of the Currency (OCC) of a consent OPERATING INCOME OF THE FEDERAL order of prohibition against Bob L. Sellers, a former RESERVE BANKS officer, director, and shareholder of First National Summit Bankshares, Crested Butte, Colorado, a Preliminary figures released on January 7. 1999, indiformer bank holding company, and a former officer cate that operating income of the Federal Reserve and director of First National Summit Bank, Crested Banks amounted to $28,147 billion during 1998. Butte, Colorado, a former national bank. The Board Net income before payment of dividends, additions also announced on January 21, 1999, the issuance of to surplus, and payments to the Treasury totaled a consent order of assessment of civil money penalty $27,623 billion. About $26,549 billion of this net against Mr. Sellers. income was distributed to the U.S. Treasury during Mr. Sellers, without admitting to any allegations, 1998. consented to the issuance of the order in connection The income of the Federal Reserve System is with his alleged acquisition of more than 25 percent derived primarily from interest earned on U.S. govof the outstanding voting shares of First National ernment securities that the Federal Reserve has Summit Bankshares in 1994 without prior approval acquired through open market operations. Income from the Board and his alleged misrepresentations from the provision of financial services amounted to and omissions of fact in connection with regulatory $817.1 million. filings to the Board and the OCC. Operating expenses of the twelve Reserve Banks The order prohibits Mr. Sellers from participating and their branches totaled $1,785 billion. In addition, in the conduct of the affairs of any financial instituearnings credits in the amount of $347.5 million were tion and requires that he pay a civil money penalty of granted to depository institutions under the Monetary $100,000. Control Act of 1980. Assessments to Reserve Banks for Board expenditures totaled $178 million, and the The Federal Reserve Board on January 26, 1999, cost of currency amounted to $408.5 million. announced the issuance of an order of removal and Net additions to income amounted to $1,915 bilprohibition against John H. Ahn, a former director lion, resulting primarily from unrealized gains and institution-affiliated party of the Hanmi Bank, on assets denominated in foreign currencies that Los Angeles, California. • were revalued to reflect current market exchange Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

197 Minutes of the Federal Open Market Committee Meeting Held on December 22, 1998 A meeting of the Federal Open Market Committee Messrs. Madigan and Slifman, Associate Directors, was held in the offices of the Board of Governors of Divisions of Monetary Affairs and Research and Statistics respectively, Board of Governors the Federal Reserve System in Washington, D.C., on Tuesday, December 22, 1998, at 9:00 a.m. Mr. Reinhart, Deputy Associate Director, Division of Monetary Affairs, Board of Governors Present: Mr. Greenspan, Chairman Ms. Low, Open Market Secretariat Assistant, Mr. McDonough, Vice Chairman Division of Monetary Affairs, Board of Mr. Ferguson Governors Mr. Gramlich Mr. Hoenig Mr. Jordan Ms. Pianalto, First Vice President, Federal Reserve Mr. Kelley Bank of Cleveland Mr. Meyer Ms. Minehan Messrs. Beebe, Eisenbeis, Goodfriend. Hunter, Lang, Mr. Poole and Rolnick, Senior Vice Presidents, Federal Ms. Rivlin Reserve Banks of San Francisco, Atlanta, Richmond, Chicago, Philadelphia, and Messrs. Boehne, McTeer, Moskow, and Stern, Minneapolis respectively Alternate Members of the Federal Open Market Committee Mr. Gavin and Ms. Perelmuter, Vice Presidents, Federal Reserve Banks of St. Louis and Messrs. Broaddus, Guynn, and Parry, Presidents of New York respectively the Federal Reserve Banks of Richmond, Atlanta, and San Francisco respectively Mr. Duca, Assistant Vice President, Federal Reserve Bank of Dallas Mr. Kohn, Secretary and Economist Mr. Bernard, Deputy Secretary By unanimous vote, the minutes of the meeting of Ms. Fox, Assistant Secretary the Federal Open Market Committee held on Novem- Mr. Gillum, Assistant Secretary Mr. Mattingly, General Counsel ber 17, 1998, were approved. Mr. Baxter, Deputy General Counsel The Manager of the System Open Market Account Mr. Prell, Economist reported on recent developments in foreign exchange markets. There were no open market operations in Ms. Browne, Messrs. Cecchetti, Hakkio, Lindsey, foreign currencies for the System's account in the Simpson, Sniderman, and Stockton, period since the previous meeting, and thus no vote Associate Economists was required of the Committee. Mr. Fisher, Manager, System Open Market Account By unanimous vote the Committee amended the Authorization for Foreign Currency Operations to Mr. Winn, Assistant to the Board, Office of Board add the euro to the list of foreign currencies in which Members, Board of Governors the Federal Reserve Bank of New York is authorized to conduct open market operations. The Desk's hold- Ms. Johnson, Director, Division of International ings of German marks will automatically be con- Finance, Board of Governors verted to euros when that currency is introduced on January 1, 1999. Messrs. Alexander and Hooper, Deputy Directors, Division of International Finance, Board of The Manager also reported on developments in Governors domestic financial markets and on System open mar- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

198 Federal Reserve Bulletin • March 1999 ket transactions in government securities and federal able level, though noticeably below the peak reached agency obligations during the period November 17, earlier in the year. 1998, through December 21, 1998. By unanimous The residential housing sector continued to surge, vote, the Committee ratified these transactions. as single-family housing starts registered another The Committee then turned to the economic and strong advance in November and sales of new homes financial outlook and the implementation of mone- remained at a very high level. Unseasonably favortary policy over the intermeeting period ahead. A able weather over much of the country evidently summary of the economic and financial information contributed to that performance. Nonetheless, the low available at the time of the meeting and of the Com- level of mortgage rates and a record high in an index mittee's discussion is provided below, followed by of consumer assessments of homebuying conditions the domestic policy directive that was approved by in November suggested that strength in single-family the Committee and issued to the Federal Reserve housing might continue for a time. Multifamily hous- Bank of New York. ing starts in October and November were slightly The information reviewed at this meeting sug- above the average for earlier in the year, and permits gested that the economy had continued to expand at a for new projects had been rising recently. brisk pace in recent months. Domestic final demand Business fixed investment appeared to have rehad remained robust, and production and employ- bounded from a small decrease in the third quarter ment had recorded further solid gains. Trends in that had been associated in part with a strike-related various measures of wages and prices had been mixed drop in business purchases of motor vehicles and in recent months. persisting weakness in nonresidential construction. Nonfarm payroll employment rose strongly in Shipments of office and computing equipment rose November after having recorded reduced increases in sharply in October after having declined for two September and October. Job gains were widespread months, and a sizable backlog of orders for communiin November; hiring in the services industries cations equipment suggested that the downturn in remained brisk, construction payrolls surged further, shipments in October after a September surge would and retail employment rebounded after a lackluster be shortlived. In addition, outlays for heavy trucks rise in October. In sharp contrast to the general job reached record levels and expenditures for aircraft picture, employment in manufacturing continued to were well maintained. In the nonresidential sector, drop. The civilian unemployment rate fell to 4.4 per- building activity remained soft in October. Office cent in November. construction picked up further in response to falling Total industrial production declined somewhat in vacancy rates and rising rental costs, but other build- November in association with a weather-related drop ing activity continued sluggish, and available data on in utilities output and persisting weakness in mining new contracts pointed to persisting weakness. activity. Manufacturing output was unchanged in Business inventory accumulation slowed apprecia- November after a considerable increase in October. bly in October after a sizable rise in the third quarter. Production in high-tech industries recorded large In manufacturing, however, the pace of stockbuilding gains over the October-November period, the output picked up in October from a slow rate in the third of construction supplies climbed rapidly, and con- quarter, and the stock-shipments ratio remained in sumer goods manufacture expanded briskly. How- the upper portion of its narrow range over the past ever, production of motor vehicles and parts was year. In the wholesale sector, inventories declined unchanged on balance over the two months and mate- somewhat in October following a large increase in rials output continued to decline, with the iron and the third quarter; much of the reduction was in farm steel industry registering particularly large decreases. products. The inventory-sales ratio for the wholesale The utilization of manufacturing capacity dropped sector was still at the top of its range over the past over the October-November period to its lowest level year. Retail inventory accumulation in October was in more than five years. near the modest pace of the third quarter, and the Strength in consumer spending persisted in Octo- inventory-sales ratio was slightly below its range ber and November, with retail sales rising sharply over the preceding twelve months. in both months. Increases in sales of motor vehicles The nominal deficit on U.S. trade in goods and and other durable goods were particularly large, but services in October was little changed from its Sepexpenditures for nondurable goods also recorded siz- tember level but was slightly smaller than its average able advances. Supported by continuing gains in dis- for the third quarter. The value of exports was up posable income and the rebound in the stock market, considerably in October from its third-quarter averconsumer confidence remained at a relatively favor- age; the largest gains were in machinery, agricultural Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 199 products, and industrial supplies. The value of consistent with some moderation in the growth of M2 imports also rose in October. The rise in imports and M3 over the months ahead. was spread across all major trade categories, with Open market operations immediately after the the largest increases being in capital goods and oil. meeting were directed toward implementing the The limited information available for the fourth quar- desired slight easing in the degree of pressure on ter suggested that the Japanese economy remained reserve positions, and through the remainder of the mired in recession and that the pace of economic intermeeting period the Manager sought to maintain growth in most of the other major industrial coun- that easier stance. The federal funds rate remained tries was slowing. Activity in most of the Asian very close to its intended lower level on average, and developing economies remained depressed, though most other short-term market rates registered small there were signs that activity in some was nearing a mixed changes. Longer-term Treasury rates declined trough and that growth in China and Taiwan had somewhat in response to a weaker outlook for foreign picked up somewhat. In contrast, economic condi- economic activity and the potential damping effect of tions in most Latin American economies had wors- lower commodity prices on inflation. Share prices in ened considerably in recent months. U.S. equity markets remained volatile but posted Consumer price inflation remained subdued in substantial increases on balance over the intermeet- November, with both the overall index and the index ing period. excluding food and energy items rising at the same In foreign exchange markets, the trade-weighted relatively low rates as in October. For the twelve value of the dollar fell slightly over the intermeeting months ended in November, the increase in core period in relation to other major currencies and also consumer prices was a little larger than in the pre- in terms of an index of the currencies of other counvious twelve-month period, reflecting slightly bigger tries that are important trading partners of the United advances in the prices of both commodities and States. Concerns about the vulnerability of U.S. marservices. A similar pattern was evident in pro- kets to financial difficulties in Brazil and uncertainty ducer prices of finished goods other than food and generated by the impeachment proceedings were said energy; core producer prices continued to rise at a to weigh on the dollar at times. The dollar's larger low rate in November, and the increase in these decline against the Japanese yen than against the prices in the twelve months ended in November German mark and other European currencies may was somewhat larger than in the previous twelve- have stemmed from a disparity in interest rate movemonth period. In contrast, prices for crude and ments in those countries; long-term interest rates rose intermediate materials continued their downward in Japan, partly in anticipation of heightened financtrend in both the October-November period and ing requirements associated with further fiscal stimthe twelve months ended in November. Growth in ulus, while European interest rates fell in response average hourly earnings of production or nonsuper- to cuts in official interest rates and weaker-thanvisory workers had slowed over recent months to a expected economic data. Financial conditions affectmodest rate in October and November. While the ing emerging market economies continued to deceleration in hourly earnings was relatively wide- improve for a time after the Committee eased monespread across industries, and most pronounced in tary policy at its November 17 meeting, but that trend manufacturing, wages continued to accelerate in the was subsequently reversed after Brazil's legislature services industries and in finance, insurance, and real decided to reject a key fiscal reform measure. estate. M2 and M3 had continued to expand rapidly in At its meeting on November 17, 1998, the Com- recent months, although incoming data indicated that mittee adopted a directive that called for implement- growth was slowing somewhat in December. The ing conditions in reserve markets that were consistent continued strength of M2 in November reflected the with a one-quarter percentage point decrease in the reduction in its opportunity cost as a result of recent federal funds rate to an average of around A3A per- easings of monetary policy, greater growth of liquid cent. The Committee also decided that moving to a deposits in association with heavy mortgage refinancsymmetric directive would be appropriate, given that ing activity, and brisk demand for U.S. currency both further easing likely would not be needed over the at home and abroad. M3 growth was bolstered by months ahead unless unexpected developments were further large flows into institution-only money marto point toward a more substantial weakening in the ket funds and additional RP financing in association growth of economic activity or to less inflation than with hefty acquisitions of securities by banks. For the was currently anticipated. The reserve conditions year through November, both aggregates rose at rates associated with this directive were expected to be well above the Committee's annual ranges. Total Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

200 Federal Reserve Bulletin • March 1999 domestic nonfinancial debt had expanded in recent represent a major source of downside risk; the economonths at a pace somewhat above the middle of mies of several industrial countries seemed to be its range. Continued paydowns of debt by the fed- weakening and the outlook for several key emerging eral government were more than offset by appre- market economies remained in doubt, with a further ciable growth of private demands for credit to finance loss of confidence and contagion from the latter a strong spending on durable goods, housing, and busi- continuing threat. With regard to the outlook for ness investment, as well as merger and acquisition inflation, members reported that labor markets were activity. extraordinarily tight across the nation, but they saw The staff forecast prepared for this meeting pointed only limited evidence of accelerating wage increases to considerable slowing in the expansion of economic and little or no evidence of rising inflation in broad activity in the year ahead to a pace somewhat below measures of prices. Several commented, however, the estimated growth of the economy's potential. that the risks of inflation appeared to be tilted to the However, the expansion was expected to pick up upside, given the continuing strength of the domestic later to a rate more in line with that potential. Sub- expansion and accommodative financial conditions. dued expansion of foreign economic activity and In their review of developments in various parts of the lagged effects of the earlier rise in the foreign the country and major industries, members referred to exchange value of the dollar were expected to place widespread evidence of high levels and strong growth continuing, albeit diminishing, restraint on the of overall domestic production and demand, but also demand for U.S. exports for some period ahead and to the continued retarding effects of the foreign trade to lead to further substitution of imports for domestic sector on agriculture and manufacturing and extracproducts. In addition, growth in private final demand tive industries. Growth in consumer spending was would be restrained to some extent by the tighter expected to moderate over coming quarters from a terms and conditions that were now being imposed very robust pace. Factors contributing to this assessby many types of lenders, by the anticipated waning ment included expectations of somewhat slower of positive wealth effects stemming from earlier large growth in employment and incomes and the prospect increases in equity prices, and by the buildup of that increases in financial wealth would moderate or stocks of consumer durables, housing units, and busi- even end at some point. Members also referred to the ness capital goods. Pressures on labor resources were possibility that the very low saving rate would tend to likely to ease slightly as the expansion of economic limit increases in consumer spending, but they noted activity moderated, but inflation was projected to rise that high levels of consumer confidence and wealth noticeably over the year ahead, largely in association along with low interest rates should help to sustain at with a partial reversal of the decline in energy prices least moderate growth in coming quarters. this year. Forecasts of business investment spending pointed In the Committee's discussion of current and pro- to appreciable deceleration in the year ahead after spective economic conditions, members commented very rapid increases in recent years. Among the facthat moderate growth at a pace close to the econo- tors cited in support of a slowing uptrend were the my's potential remained a reasonable expectation for anticipated slower growth in overall demand and the year ahead. The members recognized, however, the large cumulative buildup of business capital that that such a projection was subject to an unusually had resulted in comparatively subdued pressures on wide range of uncertainty in both directions. On the capacity. Forecasts of reduced growth in business upside, they emphasized the marked resilience and expenditures tended to be supported by anecdotal persisting strength of private domestic demand, reports that many business firms were planning to which had kept the economy expanding at a faster trim their capital outlays during the year ahead. Perpace than most had anticipated. In addition, members haps the slower growth in corporate earnings, which commented that domestic financial conditions, had been evident since earlier in the year, and reduced including the rebound in stock market prices, cur- cash flows were beginning to exert some restraint on rently were supportive of further expansion in aggre- business capital spending. Some members observed, gate demand, and in that regard several noted the however, that there was little evidence thus far of any continued rapid growth of the broad monetary aggre- deceleration in business equipment expenditures and gates. Still, domestic financial markets remained that the persistence of tight labor markets should unusually sensitive and subject to relatively pro- continue to encourage relatively rapid growth in nounced adjustments to unanticipated developments labor-saving business capital. that could have substantial effects on confidence and Housing activity had displayed a great deal of economic activity. The external sector continued to strength in recent months according to both anecdotal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 201 and statistical reports at this meeting. Comparatively outpace the growth of potential. Some members warm weather had extended the building season in also referred to the potential inflationary effects over several areas, while rising incomes and low interest time of the continuation of quite rapid monetary rates had continued to stimulate housing demand. growth. On balance, however, the members generally Some retrenchment in housing activity from cur- believed that prospective trends in overall economic rently high levels seemed likely over coming quar- activity and the persistence of strong competitive ters, given the recent large additions to the stock of pressures in most markets, including the effects of housing units and some anticipated deceleration in foreign competition, were likely in the context of the growth of jobs and incomes. now firmly embedded expectations of low inflation to Members viewed the foreign sector as likely to moderate any tendency for price inflation to accelerexert a smaller negative effect on domestic growth in ate over the year ahead. the year ahead. This view was based on the expec- In the Committee's discussion of policy for the tation of some stabilization or improvement in for- intermeeting period, all the members agreed on the eign financial markets and economies. In addition, desirability of maintaining an unchanged policy the foreign exchange value of the dollar had been stance. The System's policy easing actions since late declining in recent months, and the effects of its September had helped to stabilize a dangerously earlier appreciation on the trade balance would be eroding financial situation, and current financial conwaning. However, they recognized that net exports ditions as well as underlying economic trends sugcould turn out to be substantially more negative than gested that needed policy adjustments had been comthe modal forecast, given the persistence of very pleted. For now at least, monetary policy appeared fragile financial and economic conditions in several to be consistent with the Committee's objectives of large emerging economies, continued weakness in fostering sustained low inflation and high employthe Japanese economy, and questions about the pro- ment. Accordingly, the Committee had entered a spective strength of economic activity in other indus- period where vigilance was called for but where trial nations. As recent experience had demonstrated, the direction and timing of the next policy move were a crisis in one or a group of important financial uncertain. markets and economies could spread rapidly around As already noted, Committee members saw risks the world. on both sides of their forecasts. Persistently strong The outlook for inflation remained favorable, demand and increasingly supportive conditions in though some members referred to a number of upside debt and equity markets suggested the possibility of risks going forward. For now. however, there were rising inflation pressures. But greater disturbances few signs of rising price inflation despite widespread abroad, especially if they were to be transmitted to indications of very tight labor markets, including domestic financial markets, could exert considerable reports of further tightening in some areas. Indeed, restraint on the domestic economy. Fortunately, with the most recent wage and price data were encour- low inflation, if not price stability, increasingly emaging. Increases in core measures of prices were bedded in expectations, the Committee would have limited, and sizable declines in oil and commodity time to react to potential inflationary pressures. In the prices should help to moderate inflation going for- event of downward shocks to the expansion, prompt ward, in part by holding down inflation expectations. action to ease policy would be needed, but such Looking beyond the nearer term, current forecasts shocks could not be anticipated at this point. Against suggested that moderating growth in overall eco- this background, all the members indicated that they nomic activity would tend to limit pressures on were in favor of retaining the symmetry in the existresources and foster relatively subdued price inflation ing directive. in the context of robust productivity growth and Before its vote on policy at this meeting, the Comample industrial capacity. Members who viewed the mittee discussed the wording of the operating pararisks as tilted mainly to the upside commented that graph of the directive, building on progress made the effects of the anticipated reversal of a number of toward a consensus at previous meetings. Attention factors—including the declines in oil and commodity focused in part on proposed new wording to describe prices and restrained increases in health care costs— the possibility of intermeeting actions. There were that had tended to hold down overall inflation might minor differences about specific wording, but no turn out to be more pronounced than was currently strongly held opinions, and all the members agreed forecast. Moreover, underlying cost and price pres- that the new wording preferred by a majority of the sures might emerge more rapidly under such circum- members represented an improvement over the tradistances, especially if overall demand continued to tional language in that it would communicate more Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

202 Federal Reserve Bulletin • March 1999 clearly and succinctly the substance of the Com- of other countries that are important trading partners of the mittee's policy decisions. The Committee also dis- United States. M2 and M3 have posted very large increases in recent cussed deleting the last sentence in the operating months. For the year through November, both aggregates paragraph relating to the outlook for the growth of rose at rates well above the Committee's annual ranges. money; another paragraph in the directive would Total domestic nonfinancial debt has expanded in recent continue to report the long-run ranges for such months at a pace somewhat above the middle of its range. growth that the Federal Reserve Act requires the The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and Committee to establish. With regard to the proposed promote sustainable growth in output. In furtherance of deletion, some felt it was desirable for the central these objectives, the Committee reaffirmed at its meeting bank to retain a reference to money in the operating on June 30-July 1 the ranges it had established in February paragraph; more members supported the deletion for growth of M2 and M3 of 1 to 5 percent and 2 to on the ground that, as had been explained to the 6 percent respectively, measured from the fourth quarter of 1997 to the fourth quarter of 1998. The range for growth Congress, money growth had not had any special of total domestic nonfinancial debt was maintained at 3 to significance for some time in the formulation of 7 percent for the year. For 1999, the Committee agreed on monetary policy owing to often unexplained and a tentative basis to set the same ranges for growth of the unexpected changes in velocity. The rewording of the monetary aggregates and debt, measured from the fourth sentence on symmetry and the deletion of the sen- quarter of 1998 to the fourth quarter of 1999. The behavior of the monetary aggregates will continue to be evaluated in tence on money were not intended to imply any the light of progress toward price level stability, movechange in policy or the Committee's approach to ments in their velocities, and developments in the economy policy or its decisionmaking. and financial markets. At the conclusion of the Committee's discussion, To promote the Committee's long-run objectives of price all the members supported a reworded directive that stability and sustainable economic growth, the Committee in the immediate future seeks conditions in reserve markets called for maintaining conditions in reserve markets consistent with maintaining the federal funds rate at an that were consistent with an unchanged federal funds average of around 4% percent. In view of the evidence rate of about 4% percent and did not contain any bias currently available, the Committee believes that prospecwith respect to the direction of possible adjustments tive developments are equally likely to warrant an increase or a decrease in the federal funds rate operating objective to policy during the intermeeting period. during the intermeeting period. The Committee then voted to authorize and direct the Federal Reserve Bank of New York, until it was Votes for this action: Messrs. Greenspan, McDonough, instructed otherwise, to execute transactions in the Ferguson, Gramlich, Hoenig, Jordan, Kelley, Meyer, System Account in accordance with the following Ms. Minehan, Mr. Poole, and Ms. Rivlin. Votes against domestic policy directive: this action: None. The information reviewed at this meeting suggests that the economy has continued to expand at a brisk pace in DISCLOSURE POLICY recent months. Growth in nonfarm payroll employment was strong in November, after more moderate gains in The members also discussed various issues relating September and October, and the civilian unemployment rate fell to 4.4 percent. Total industrial production declined to the timing and manner of releasing information somewhat in November, but manufacturing output was about the Committee's policy decisions. A range of stable and up considerably from the third-quarter pace. views was expressed, as at earlier meetings, on the Business inventory accumulation slowed appreciably in desirability of releasing a statement routinely not October after a sizable rise in the third quarter. The nominal deficit on U.S. trade in goods and services narrowed only after those meetings at which there was a change slightly in October from its third-quarter average. Total in the stance of policy but also after meetings where retail sales rose sharply in October and November, and the Committee altered its view of the direction of housing starts were strong as well. Available indicators possible policy actions during the intermeeting point to a considerable pickup in business capital spending period. Members who favored more announcements after a lull in the third quarter. Trends in various measures of wages and prices have been mixed in recent months. believed that such disclosure, by providing more Most short-term interest rates have changed little on information on the Committee's views of the risks in balance since the meeting on November 17, but longer- the economic outlook, generally would allow finanterm rates have declined somewhat. Share prices in equity cial market prices to reflect more accurately the likely markets have remained volatile and have posted sizable future stance of monetary policy. However, other gains on balance over the intermeeting period. In foreign members were concerned that such announcements exchange markets, the trade-weighted value of the dollar has declined slightly over the period in relation to other often would provoke market reactions. As a consemajor currencies and in terms of an index of the currencies quence, the Committee would become less willing to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 203 change the symmetry in the directive, and a policy try of the directive but only when it seemed imporof immediate release might therefore have adverse tant for the public to be aware of an important shift in repercussions on the Committee's decisionmaking. the members' views. On the basis of experience with Nonetheless, the members decided to implement the such announcements, the Committee would evaluate previously stated policy of releasing, on an infre- later whether further changes in its approach to disquent basis, an announcement immediately after cer- closures would be desirable. tain FOMC meetings when the stance of monetary It was agreed that the next meeting of the Commitpolicy remained unchanged. Specifically, the Com- tee would be held on Tuesday-Wednesday, Februmittee would do so on those occasions when it ary 2-3, 1999. wanted to communicate to the public a major shift The meeting adjourned at 12:55 p.m. in its views about the balance of risks or the likely direction of future policy. Such announcements Donald L. Kohn would not be made after every change in the symme- Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

204 Federal Reserve Bulletin • March 1999 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

205 Legal Developments ORDERS ISSUED UNDER BANK HOLDING COMPANY institution in Illinois, controlling deposits of $3.6 billion, ACT representing approximately 1.7 percent of total deposits in depository institutions in the state. Orders Issued Under Section 3 of the Bank Holding Company Act Interstate Analysis Union Planters Corporation Section 3(d) of the BHC Act allows the Board to approve Memphis, Tennessee an application by a bank holding company to acquire control of a bank located in a state other than the home Union Planters Holding Corporation state of such bank holding company if certain conditions Memphis, Tennessee are met.4 For purposes of the BHC Act, the home state of Union Planters is Tennessee and Union Planters proposes Order Approving Acquisition of a Bank Holding to acquire control of a bank in Illinois. All of the condi- Company tions for an interstate acquisition enumerated in section 3(d) are met in this case.5 In light of all the facts of Union Planters Corporation and Union Planters Holding record, the Board is permitted to approve the proposal Corporation (collectively, "Union Planters"), bank holding under section 3(d) of the BHC Act. companies within the meaning of the Bank Holding Company Act ("BHC Act"), have requested the Board's ap- Competitive Considerations proval under section 3 of the BHC Act (12 U.S.C. § 1842) to acquire all of the voting shares of First Mutual Bancorp, The BHC Act prohibits the Board from approving an Inc. ("First Mutual") and thereby acquire its wholly owned application under section 3 if the proposal would result in a subsidiary, First Mutual Bank, S.B. ("Savings Bank"), monopoly or would be in furtherance of any attempt to both in Decatur, Illinois.1 Notice of the proposal, affording monopolize the business of banking.6 The BHC Act also interested persons an opportunity to submit comments, has prohibits the Board from approving a proposal that would been published (63 Federal Register 65,209 (1998)).2 The substantially lessen competition or tend to create a monoptime for filing comments has expired, and the Board has oly in any relevant market, unless the Board finds that the considered the proposal and all comments received in light anticompetitive effects of the proposed transaction are of the factors set forth in section 3 of the BHC Act. Union clearly outweighed in the public interest by the probable Planters operates bank and thrift subsidiaries in Alabama, effects of the transaction in meeting the convenience and Arkansas, Florida, Illinois, Indiana, Iowa, Kentucky, Loui- needs of the community to be served.7 Union Planters and siana, Mississippi, Missouri, Tennessee, and Texas. Union First Mutual each compete in the Decatur and Lincoln Planters controls the 11th largest depository institution in banking markets, both in Illinois.8 The Board has carefully Illinois, controlling deposits of $3.3 billion, representing approximately 1.6 percent of total deposits in depository institutions in the state.3 First Mutual is the 80th largest 4. 12U.S.C.§ 1842(d). A bank holding company's home state is the state in which the operations of the bank holding company's banking depository institution in Illinois, controlling approximately subsidiaries were principally conducted on July 1, 1966, or the date on $334.2 million in deposits, representing less than 1 percent which the company became a bank holding company, whichever is of total deposits in depository institutions in the state. On later. 5. 12 U.S.C. §§ 1842(d)(l)(A) & (B) and 1842(d)(2)(A) & (B). consummation of the proposal, the banks controlled by Union Planters meets the capital and managerial requirements estab- Union Planters would represent the tenth largest depository lished by applicable law. On consummation of the proposal, Union Planters and its affiliates would control less than 10 percent of the total amount of deposits of insured depository institutions in the United 1. Savings Bank is a state-chartered savings bank that has elected States, and less than 30 percent of the total amount of deposits in not to be supervised by the Office of Thrift Supervision as a savings Illinois. See 111. Comp. Stat. Ann. 10-3.09(a) (West 1998). In addition, association and. accordingly, is a bank for purposes of the BHC Act. Savings Bank has been in existence and operated continuously for 2. Union Planters also has requested the Board's approval to hold more than five years. See 111. Comp. Stat. Ann. 10—3.071 (i) (West and exercise an option to acquire up to 19.9 percent of First Mutual's 1998). All other requirements of section 3(d) of the BHC Act also would be met on consummation of the proposal. voting shares. The option would expire on consummation of the proposal. 6. 12 U.S.C. § 1842(c)(l)(A). 3. In this context, depository institutions include commercial banks, 7. 12 U.S.C. § 1842(c)(l)(B). savings banks, and savings associations. Asset and ranking data are as 8. The Decatur banking market is approximated by Macon County; of June 30, 1997. Dora, Lovington, Marrow Bone, Sullivan, and Jonathan Creek town- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

206 Federal Reserve Bulletin • March 1999 reviewed the competitive effects of the proposal in these petitors, in addition to Union Planters, would remain in the markets in light of all the facts of record, including the market after consummation of the proposal. This repreprojected increase in the concentration of total deposits in sents a large number of competitors relative to the size of depository institutions in the market ("market deposits"),9 the market.12 Of these 11 competitors, five would each as measured by the Herfindahl-Hirschman Index ("HHI") control more than 5 percent of market deposits, including under the Department of Justice Merger Guidelines ("DOJ one competitor that would control more than 9 percent of Guidelines"),10 and the number of competitors that would market deposits and one that would control approximately remain in the market. 28.5 percent of market deposits. Thus, a significant number In the Lincoln banking market, the change in market of other institutions would have the market share and concentration, as measured by the HHI, would exceed the resources to compete effectively in the Lincoln banking guidelines applied by the Board and the Department of market and the number of competitors reduces the likeli- Justice. Union Planters is the second largest depository hood of successful anticompetitive collusion in the market. institution in the Lincoln banking market, controlling Union Planters and First Mutual also compete in the deposits of $94.3 million, representing approximately Decatur banking market. Consummation of the proposal 22.7 percent of market deposits. First Mutual is the eighth would be consistent with the DOJ Guidelines and prior largest depository institution in the market, controlling Board precedent in this banking market.13 As in other deposits of $32.3 million, representing approximately cases, the Board sought comments from the Department of 3.9 percent of market deposits when weighted at 50 per- Justice and the Federal Deposit Insurance Corporation cent. On consummation of the proposal, Union Planters ("FDIC") on the competitive effects of the proposal. The would become the largest depository institution in the Department of Justice has reviewed the proposal and admarket, controlling deposits of approximately $126.7 mil- vised the Board that consummation of the proposal would lion, representing approximately 29.3 percent of market not likely have a significantly adverse competitive effect in deposits. The HHI would increase by 246 points to 1918. the Lincoln or Decatur banking markets or in any other In evaluating the likely competitive effects of the pro- relevant market. The FDIC has been consulted and has not posed transaction, the Board has placed particular weight objected to consummation of the proposal. Based on these on the significant number of competitors that would remain and all other facts of record, and for the reasons discussed in the market relative to the market's size." Eleven corn- in this order, the Board concludes that consummation of the proposal is not likely to result in any significantly adverse effects on competition or the concentration of banking resources in the Lincoln or Decatur banking marships in Moultrie County; Moweaqua, Penn. Flat Branch, Pickaway, kets or in any other relevant banking market. Todds Point, Ridge, and Okaw townships in Shelby County; and Willow Branch and Cerro Gordo townships in Piatt County, all in Illinois. The Lincoln banking market consists of Logan County, Illi- Financial, Managerial, and Other Considerations nois, excluding Corwin township. 9. Market share data used to analyze the competitive effects of the The BHC Act also requires the Board to consider the proposal are as of June 30, 1997, and are based on calculations in which the deposits of thrift institutions are included at 50 percent. The financial and managerial resources and future prospects of Board previously has indicated that thrift institutions have become, or the companies and banks involved in the proposal, the have the potential to become, significant competitors of commercial convenience and needs of the communities to be served, banks. See Midwest Financial Group, 75 Federal Reserve Bulletin and certain supervisory factors. The Board has reviewed 386 (1989); National City Corporation, 70 Federal Reserve Bulletin 386 (1984). Thus, the Board has regularly included thrift deposits in these factors in light of all the facts of record, including the calculation of market share on a 50-percent weighted basis. See, supervisory reports of examination assessing the financial e.g.. First Hawaiian, Inc., 11 Federal Reserve Bulletin 52 (1991). In and managerial resources of the organizations. Based on all light of the existing restrictions on the lending activities of Illinoisthe facts of record, the Board concludes that the financial chartered savings banks, the Board has weighted the current market and managerial resources and future prospects of Union share of Savings Bank at 50 percent. See 111. Comp. Stat. Ann. 1009 (West 1998). Because the deposits of Savings Bank would be acquired Planters, First Mutual, and their respective subsidiary deby a commercial banking organization, Savings Bank's deposits are included at 100 percent in the calculation of pro forma market shares. See Norwest Corporation, 78 Federal Reserve Bulletin 452 (1992); depend on the level of concentration and the size of the increase in First Banks, Inc., 76 Federal Reserve Bulletin 669 (1990). market concentration. See NationsBank Corporation, 84 Federal Re- 10. See 49 Federal Register 26,823 (June 29, 1984). Under the DOJ serve Bulletin 129(1998). Guidelines, a market in which the post-merger HHI is above 1800 is 12. The Lincoln banking market has total deposits of approximately considered highly concentrated. The Department of Justice has in- $431 million. The number of competitors remaining in the Lincoln formed the Board that a bank merger or acquisition generally will not banking market after consummation would be 25 percent greater than be challenged (in the absence of other factors indicating anticompeti- the average number of competitors in the other 8 banking markets in tive effects) unless the post-merger HHI is at least 1800 and the Illinois that have between $350 million and $500 million in total merger increases the HHI by more than 200 points. The Department market deposits. of Justice has stated that the higher than normal HHI thresholds for 13. On consummation of the proposal, Union Planters would bescreening bank mergers for anticompetitive eflfects implicitly recog- come the largest depository institution in the Decatur banking market, nize the competitive effects of limited-purpose lenders and other controlling deposits of $369 million, representing approximately non-depository financial entities. 22 percent of market deposits. The HHI would increase by 201 points 1 I. The Board previously has stated that the number and strength of to 1289, and 22 other depository institutions would remain in the factors necessary to mitigate the competitive effects of a proposal market. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 207 pository institutions are consistent with approval, as are the Francisco. First Security would thereby engage in the other supervisory factors the Board must consider under following nonbanking activities: section 3 of the BHC Act. Considerations related to the (1) Extending credit and servicing loans, in accorconvenience and needs of the communities to be served dance with section 225.28(b)(l) of Regulation Y also are consistent with approval of the proposal. (12 C.F.R. 225.28(b)(l)); (2) Engaging in activities related to extending credit, Conclusion in accordance with section 225.28(b)(2) of Regulation Y (12 C.F.R. 225.28(b)(2)); Based on the foregoing, and in light of all the facts of (3) Providing financial and investment advisory serrecord, the Board has determined that the applications vices, in accordance with section 225.28(b)(6) of should be, and hereby are, approved. The Board's approval Regulation Y (12 C.F.R. 225.28(b)(6)); is specifically conditioned on compliance by Union Plant- (4) Providing securities brokerage, riskless principal, ers with all of the commitments made in connection with and private placement services, in accordance the application. These commitments are deemed to be with section 225.28(b)(7)(i), (ii), and (iii) of Regconditions imposed in writing by the Board in connection ulation Y (12 C.F.R. 225.28(b)(7)(i), (ii), and with its findings and decision and, as such, may be en- (iii)); forced in proceedings under applicable law. The proposed (5) Underwriting and dealing in government obligaacquisition of First Mutual shall not be consummated be- tions and money market instruments in which fore the fifteenth calendar day after the effective date of state member banks may underwrite and deal this order, or later than three months after the effective date under 12 U.S.C. §§ 335 and 24(7) ("bankof this order, unless such period is extended for good cause eligible securities"), and engaging in investing by the Board or by the Federal Reserve Bank of St. Louis, and trading activities, in accordance with section acting pursuant to delegated authority. 225.28(b)(8)(i) and (ii) of Regulation Y By order of the Board of Governors, effective Janu- (12 C.F.R. 225.28(b)(8)(i) and (ii)); ary 11, 1999. (6) Engaging in insurance agency activities, in accordance with section 4(c)(8)(G) of the BHC Act This action was taken pursuant to the Board's Rules Regarding and section 225.28(b)(ll)(vii) of Regulation Y Delegation of Authority (12C.F.R. 265.4(b)(l)) by a committee of (12 C.F.R. 225.28(b)(l l)(vii));2 Board members. Voting for this action: Vice Chair Rivlin and Gover- (7) Underwriting and dealing in, to a limited extent, nors Kelley and Ferguson. Absent and not voting: Chairman Greenspan and Governors Meyer and Gramlich. all types of debt and equity securities other than interests in open-end investment companies ROBERT DEV. FRIERSON ("bank-ineligible securities"); and Associate Secretary of the Board (8) Acting as the general partner of private investment limited partnerships that invest in assets in Orders Issued Under Section 4 of the Bank Holding which a bank holding company is permitted to Company Act invest. First Security Corporation Notice of the proposal, affording interested persons an Salt Lake City, Utah opportunity to submit comments, has been published (63 Federal Register 67,692 (1998)). The time for filing Order Approving Notice to Engage in Underwriting and comments has expired, and the Board has considered the Dealing in All Types of Debt and Equity Securities on a notice and all comments received in light of the factors set Limited Basis forth in section 4(c)(8) of the BHC Act. First Security, with total consolidated assets of approxi- First Security Corporation ("First Security"), a bank hold- mately $19.4 billion, is the 44th largest banking organizaing company within the meaning of the Bank Holding tion in the United States.3 First Security operates subsid- Company Act ("BHC Act"), has requested the Board's iary banks with branches in Utah, California, Nevada, New approval under section 4(c)(8) of the BHC Act Mexico, Idaho, Oregon, and Wyoming, and engages (12 U.S.C. § 1843(c)(8)) and section 225.24 of the Board's through other subsidiaries in a broad range of permissible Regulation Y (12 C.F.R. 225.24) to acquire Van Kasper & nonbanking activities. Company, with total consolidated Company, San Francisco, California ("Com- assets of $22.1 million, engages directly and indirectly in a pany"), and thereby acquire control of Company's wholly broad range of securities underwriting and dealing, securiowned subsidiaries1 and a 24.5-percent voting interest in Redwood Securities Group, Inc. ("Redwood"), also of San 2. First Security is authorized to engage in insurance agency activities under section 4(c)(8)(G) of the BHC Act, which authorizes those bank holding companies that engaged with Board approval in insurance agency activities prior to 1971 to engage in insurance agency 1. Company's principal wholly owned subsidiaries are Van Kasper activities. Advisers, Inc., Van Kasper Capital, and Van Kasper Ventures. 3. Asset and ranking data are as of June 30, 1998. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

208 Federal Reserve Bulletin • March 1999 ties brokerage, investment advisory, and other activities. ineligible securities is consistent with section 20 of the Redwood, with total consolidated assets of $946 thousand, Glass-Steagall Act (12 U.S.C. § 377), provided that the underwrites and deals in limited types of securities, includ- company engaged in the activity derives no more than ing municipal and government agency securities, and pro- 25 percent of its gross revenues from underwriting and vides securities brokerage services.4 dealing in bank-ineligible securities.8 After consummation of the proposal, Company would be First Security has committed that Company and Redrenamed First Security Van Kasper. First Security antici- wood each will conduct its underwriting and dealing activpates merging its existing section 20 subsidiary, First Secu- ities using the methods and procedures and subject to the rity Capital Markets, Inc., Salt Lake City, Utah prudential limitations established by the Board in the Sec- ("FSCMI"), with and into Company in May 1999, with tion 20 Orders. First Security also has committed that Company surviving the merger.5 Company would continue Company and Redwood each will conduct its bankto own 24.5 percent of the voting shares of and control ineligible securities underwriting and dealing activities Redwood after these transactions.6 Company and Redwood subject to the Board's revenue restriction.9 As a condition are, and after consummation of the proposal will continue of this order, First Security is required to conduct the to be, registered as broker-dealers with the Securities and bank-ineligible securities activities of Company and Red- Exchange Commission ("SEC") under the Securities Ex- wood subject to the revenue restrictions and Operating change Act of 1934 (15 U.S.C. § 78a et seq.) and members Standards established for section 20 subsidiaries ("Operatof the National Association of Securities Dealers, Inc. ing Standards").10 ("NASD"). Accordingly, Company and Redwood are, and will continue to be, subject to the record-keeping and reporting obligations, fiduciary standards, and other requirements of the Securities Exchange Act of 1934, the Orders, 63 Federal Register 14,803 (1998) (collectively, "Section 20 SEC, and the NASD. Orders"). 8. Compliance with the revenue limitation shall be calculated in Underwriting and Dealing in Bank-Ineligible Securities accordance with the method stated in the Section 20 Orders, as modified by the Order Approving Modifications to the Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989); 10 Percent Revenue The Board has determined that, subject to the framework Limit on Bank-Ineligible Activities of Subsidiaries of Bank Holding of prudential limitations established in previous decisions Companies Engaged in Underwriting and Dealing in Securities, 61 to address the potential for conflicts of interests, unsound Federal Register 48,953 (1996); and Revenue Limit on Bank-Ineligible Activities of Subsidiaries of Bank Holding Companies Engaged in banking practices, or other adverse effects, underwriting Underwriting and Dealing in Securities, 61 Federal Register 68,750 and dealing in bank-ineligible securities is so closely re- (1996) (collectively, "Modification Orders"). In light of the fact that lated to banking as to be a proper incident thereto within First Security proposes to acquire Company and Redwood as going the meaning of section 4(c)(8) of the BHC Act.7 The Board concerns, the Board concludes that allowing Company and Redwood each to calculate compliance with the revenue limitation on an annualalso has determined that underwriting and dealing in bankized basis during the first year after consummation, and thereafter on a rolling quarterly average basis, would be consistent with the Section 20 Orders. See U.S. Bancorp, 84 Federal Reserve Bulletin 483 (1998); Dauphin Deposit Corporation, 11 Federal Reserve Bulletin 4. Company currently holds certain investments in securities that 672(1991). exceed the levels permissible for bank holding companies. First Security has committed to conform, within two years of consummation of 9. As noted above, First Security intends to merge FSCMI with and the proposal, all investments held by Company and its subsidiaries to into Company in May 1999. Until that merger occurs, First Security the requirements of section 4 of the BHC Act and the Board's will operate Company and FSCMI as separate corporate entities and regulations and interpretations thereunder. FSCMI and Company will be independently subject to the 25-percent 5. FSCMI currently underwrites and deals in, to a limited extent, revenue limitation on underwriting and dealing in bank-ineligible certain types of bank-ineligible securities and engages in other permis- securities. In addition, because Redwood will remain at all times a sible nonbanking activities. See, Letter dated December 18, 1997, separate corporate entity. Redwood also will be independently subject from Jennifer J. Johnson, Deputy Secretary of the Board, to David R. to the 25-percent revenue limitation. See Citicorp, 73 Federal Reserve Wilson. Bulletin 473, 486 n.45 (1987), aff'd sub nom. Securities Industry 6. First Security has committed, among other things, that Redwood Ass'n v. Board of Governors of the Federal Reserve System, 839 F.2d will be treated as an affiliate of First Security's subsidiary banks for 47 (2d Cir.), cert, denied, 486 U.S. 1059 (1988). The Board concludes, purposes of sections 23A and 23B of the Federal Reserve Act and as a based on all the aspects of this proposal, including the fact that subsidiary of First Security within the meaning of the BHC Act. See Company is significantly larger than FSCMI and will survive the SR Letter No. 96-39 (APP) (December 26, 1996). merger with FSCMI, the management structure of the proposed 7. See J.P. Morgan & Co. Inc., et al, 75 Federal Reserve Bulletin merged company, and the activities of the merging companies and the 192 (1989), aff'd sub nom. Securities Industry Ass'n v. Board of proposed merged company, that the merger of FSCMI and Company Governors of the Federal Reserve System, 900 F.2d 360 (D.C. Cir. would not disqualify Company from calculating compliance with the 1990); Citicorp, 73 Federal Reserve Bulletin 473 (1987), aff'd sub revenue test in conformance with the annualized treatment described nom. Securities Industry Ass 'n v. Board of Governors of the Federal in this order. See KeyCorp, 84 Federal Reserve Bulletin 1075 (1998). Reserve System, 839 F.2d 47 (2d Cir.), cert, denied, 486 U.S. 1059 10. 12C.F.R. 225.200. Company and Redwood each may provide (1988), as modified by Review of Restrictions on Director, Officer and services that are necessary incidents to the proposed underwriting and Employee Interlocks, Cross-Marketing Activities, and the Purchase dealing activities. Unless Company or Redwood receives specific and Sale of Financial Assets Between a Section 20 Subsidiary and an approval under section 4(c)(8) of the BHC Act to conduct the inciden- Affiliated Bank or Thrift, 61 Federal Register 57,679 (1996); Amend- tal activities independently, any revenues from such activities must be ments to Restrictions in the Board's Section 20 Orders, 62 Federal treated as ineligible revenues subject to the Board's revenue limita- Register 45,295 (1997); and Clarification to the Board's Section 20 tion. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 209 Other Activities Approved by Regulation or Order and internal risk management procedures and controls. The Board also has considered the ability of First Security to The Board previously has determined that credit and credit- monitor Redwood's activities and compliance with this related activities; financial and investment advisory activi- order and the Section 20 Orders. First Security has stated ties; securities brokerage, riskless principal, and private that Company has the ability to monitor Redwood's finanplacement activities; bank-eligible securities underwriting cial condition and securities transactions on a daily basis. and dealing; investing and trading activities; and certain A senior officer of Company serves as a director on Redinsurance agency activities are closely related to banking wood's three-member board of directors, and Company's within the meaning of section 4(c)(8) of the BHC Act.11 In controller also serves as Redwood's controller.15 In addiaddition, the Board previously has determined by order tion, Redwood operates on Company's premises in space that private investment limited partnership activities are leased from Company, and Company provides accounting permissible for bank holding companies when conducted and administrative support for Redwood's securities activwithin certain limits.12 First Security has committed that it ities. On the basis of the Reserve Bank's review and all will conform the activities of Company and Redwood to other facts of record, including the commitments provided the requirements of, and will conduct the activities of in this case, the proposed managerial and risk management Company and Redwood in accordance with the limitations systems of Company and Redwood, the relationships beset forth in, Regulation Y and the Board's orders and tween Company and Redwood, and the limited nature of interpretations relating to each of the activities. Redwood's activities, the Board has concluded that financial and managerial considerations are consistent with ap- Other Considerations proval of the notice. The Board has carefully considered the competitive ef- In order to approve this notice, the Board also must deter- fects of the proposal. First Security has stated that FSCMI, mine that performance of the proposed activities is a proper Company, and Redwood offer largely complementary serincident to banking; that is, that the proposed activities vices with few significant overlaps. To the extent that "can reasonably be expected to produce benefits to the Company or Redwood offers different types of products public, such as greater convenience, increased competition, and services than FSCMI, the proposed acquisition would or gains in efficiency, that outweigh possible adverse ef- result in no loss of competition. In those markets where the fects, such as undue concentration of resources, decreased product offerings of First Security's nonbanking subsidiaror unfair competition, conflicts of interests, or unsound ies overlap with the product offerings of Company or banking practices."13 As part of its review of these factors, Redwood, such as securities brokerage, investment advithe Board considers the financial and managerial resources sory, and insurance agency activities, there are numerous of the notificant and its subsidiaries and the effect the existing and potential competitors. Consummation of the transaction would have on such resources.14 proposal, therefore, would have a de minimis effect on In considering the financial resources of the notificant, competition in the markets for these services, and the the Board has reviewed the capitalization of, and funding Board has concluded that the proposal would not have arrangements among, First Security, Company, and Red- significantly adverse competitive effects in any relevant wood in accordance with the standards set forth in the market. Section 20 Orders and has found the capitalization and the The Board also expects that consummation of the profunding arrangements of each to be consistent with ap- posal would provide added convenience to the customers proval. This determination is based on all the facts of of First Security and Company. First Security has indicated record, including First Security's projections of the volume that consummation of the proposal would expand the range of the bank-ineligible underwriting and dealing activities of products and services available to its customers and of Company and Redwood. those of Company. In addition, there are public benefits to The Board also has reviewed the managerial resources be derived from permitting capital markets to operate so of each of the entities involved in this proposal in light of that bank holding companies can make potentially profitexamination reports and other supervisory information. In able investments in nonbanking companies and from perconnection with the proposal, the Federal Reserve Bank of mitting banking organizations to allocate their resources in San Francisco ("Reserve Bank") has reviewed the policies and procedures of Company and Redwood to ensure compliance with this order and the Section 20 Orders, including Company's and Redwood's operational and managerial 15. Company's controller also is designated as Redwood's financial infrastructure; computer, audit, and accounting systems; and operations principal for NASD purposes and, as such, is responsible for preparing and ensuring the accuracy of all financial reports submitted by Redwood to the SEC and NASD; supervising all individ- 11. See 12C.F.R. 225.28(b)(l), (2), (6), (7)(i), (ii), and (iii), (8)(i) uals who assist in the preparation of such reports, individuals who and(ii), and (ll)(vii). maintain Redwood's books and records, and individuals who are 12. See Dresdner BankAG, 84 Federal Reserve Bulletin 361 (1998); involved in the administration of Redwood's back office operations; Meridian Bancorp, Inc., 80 Federal Reserve Bulletin 736 (1994). and ensuring Redwood's compliance with all financial responsibility 13. 12U.S.C. § 1843(c)(8). rules promulgated pursuant to the Securities Exchange Act of 1934. 14. See 12 C.F.R. 225.26. See NASD Rule 1022(b). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

210 Federal Reserve Bulletin • March 1999 the manner they consider to be most efficient when such The Board's determination also is subject to all the terms investments and actions are consistent, as in this case, with and conditions set forth in Regulation Y, including those in the relevant considerations under the BHC Act. sections 225.7 and 225.25(c) (12 C.F.R. 225.7 and Based on all the facts of record, the Board has deter- 225.25(c)), and to the Board's authority to require modifimined that performance of the proposed activities by First cation or termination of the activities of a bank holding Security, under the framework established in this and prior company or any of its subsidiaries as the Board finds decisions, can reasonably be expected to produce public necessary to ensure compliance with, or to prevent evasion benefits that outweigh any reasonably expected adverse of, the provisions and purposes of the BHC Act and the effects of the proposal. Accordingly, the Board has deter- Board's regulations and orders issued thereunder. The mined that the performance of the proposed activities by Board's decision is specifically conditioned on compliance First Security is a proper incident to banking for purposes with all the commitments made in connection with this of section 4(c)(8) of the BHC Act. notice, including the commitments discussed in this order and the conditions set forth in this order and the Board regulations and orders noted above. The commitments and Conclusion conditions are deemed to be conditions imposed in writing by the Board in connection with its findings and decision, On the basis of all the facts of record, the Board has and, as such, may be enforced in proceedings under applidetermined that the notice should be, and hereby is, apcable law. proved, subject to all the terms and conditions described in This proposal shall not be consummated later than three this order and the Section 20 Orders, as modified by the months after the effective date of this order, unless such Modification Orders. The Board's approval of the proposal period is extended for good cause by the Board or the extends only to activities conducted within the limitations Reserve Bank, acting pursuant to delegated authority. of this order, including the Board's reservation of authority By order of the Board of Governors, effective Janto establish additional limitations to ensure that the activiuary 25, 1999. ties of Company and Redwood are consistent with safety and soundness, avoidance of conflicts of interests, and Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and other relevant considerations under the BHC Act. Under- Governors Kelley, Meyer, Ferguson, and Gramlich. writing and dealing in any manner other than as approved in this order is not within the scope of the Board's approval ROBERT DEV. FRIERSON and is not authorized for Company or Redwood. Associate Secretary of the Board 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 Old National Bancorp, Dulaney Bancorp, Inc., January 20, 1999 Evansville, Indiana Marshall, Illinois Dulaney National Bank, Marshall, Illinois Section 4 Applicant(s) Bank(s) Effective Date First Tennessee National Corporation, First Horizon, FSB, January 15, 1999 Memphis, Tennessee Bristol, Virginia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 211 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 Ace Gas, Inc., Junction City First National Company, Kansas City December 30, 1998 Deshler, Nebraska Junction City, Kansas Gibbon Exchange Company, First National Bank and Trust Gibbon, Nebraska Company, Junction City, Kansas Adbanc, Inc., Indianola Agency, Inc., Kansas City January 12, 1999 Ogallala, Nebraska Indianola, Nebraska Bank of Indianola, Indianola, Nebraska Altrust Financial Services, Inc.. Altrust Financial Services, Inc., Atlanta December 29, 1998 ESOP, Cullman, Alabama Cullman, Alabama Area Bancshares Corporation, Alliance Bank, St. Louis December 30, 1998 Owensboro, Kentucky Somerset, Kentucky Cardinal Bancshares, Inc., Lexington, Kentucky Bancorp of Rantoul, Inc., Rossville Bancorp, Inc., Chicago January 13, 1999 Rantoul, Illinois Rossville, Illinois The First National Bank of Rossville, Rossville, Illinois Barret Bancorp, Inc., Barretville Bank and Trust Company, St. Louis December 29, 1998 Barretville, Tennessee Barretville, Tennessee Somerville Bank and Trust Company, Somerville, Tennessee BCC Bancshares, Inc., Bank of Calhoun County, St. Louis January 21, 1999 Hardin, Illinois Hardin, Illinois Business Bank Corporation, Las Vegas Business Bank, San Francisco January 21, 1999 Las Vegas, Nevada Las Vegas, Nevada CBCC, Inc., Community Bank of Chester County, Philadelphia January 25, 1998 West Chester, Pennsylvania Exton, Pennsylvania Central Bancorp, Inc., Central Cooperative Bank, Boston December 30, 1998 Somerville, Massachusetts Somerville, Massachusetts Central Bancshares of Kansas City, ASB Bancshares, Inc., Kansas City January 21, 1999 Inc., Harrisonville, Missouri Kansas City, Missouri Citizens Bankshares Employee Citizens Bankshares, Inc., Kansas City January 14, 1999 Stock Ownership Plan and Trust, Farmington, New Mexico Farmington, New Mexico Citizens First Corporation, Citizens First Bank, Inc., St. Louis December 28, 1998 Bowling Green, Kentucky Bowling Green, Kentucky Community First Bancshares, Inc., Community First Bank, St. Louis January 7, 1999 Harrison, Arkansas Harrison, Arkansas Cornerstone Bancorp, Inc., Cornerstone Bank, New York January 27, 1999 Stamford, Connecticut Stamford, Connecticut Durant Bancorp, Inc., Security National Bancshares of Kansas City January 27, 1999 Durant, Oklahoma Sapulpa, Inc., Sapulpa, Oklahoma Cyrus Bancshares, Inc., State Bank of Cyrus, Minneapolis December 30, 1998 Cyrus, Minnesota Cyrus, Minnesota Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

212 Federal Reserve Bulletin • March 1999 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Eggemeyer Advisory Corp., UB&T Holding Company, San Francisco January 13, 1999 Rancho Santa Fe, California Abilene, Texas Castle Creek Capital, L.L.C., United Bank & Trust, Rancho Santa Fe, California Abilene, Texas Castle Creek Capital Partners Fund-I, L.P., Rancho Santa Fe, California First Commerce Bancshares, Inc., First Commerce Bancshares of Kansas City January 26, 1999 Lincoln, Nebraska Colorado, Inc., Colorado Springs, Colorado First Commerce Bancshares of First Commerce Bank of Colorado, Kansas City January 26, 1999 Colorado, Inc., N.A., Colorado Springs, Colorado Colorado Springs, Colorado First National Bank of Clovis National Bancshares, Inc., Dallas December 15, 1998 Employee Stock Ownership Trust, Clovis, New Mexico Clovis, New Mexico Fishback Financial Corporation, Pipestone Bancshares, Inc., Minneapolis December 24, 1998 Brookings, South Dakota Pipestone, Minnesota Founders Bancshares, Inc., Founders National Bank Skillman, Dallas January 14, 1999 Dallas, Texas Dallas, Texas Skillman Bancshares, Inc., Dover, Delaware Humboldt Bancorp, Capitol Valley Bank, San Francisco January 21, 1999 Eureka, California Roseville, California Marlborough Bancorp, Marlborough Cooperative Bank, Boston January 7, 1999 Marlborough, Massachusetts Marlborough, Massachusetts Mcllroy Family Limited Partnership, Community State Bank of Bowling St. Louis January 21, 1999 Bowling Green, Missouri Green, Bowling Green, Missouri Osceola Bancorporation, Inc., Chisago Bancorporation, Inc., Minneapolis January 6, 1999 Osceola, Wisconsin Chisago City, Minnesota Chisago State Bank, Chisago City, Minnesota Overton Financial Corporation, Longview Financial Corporation, Dallas December 15, 1998 Overton, Texas Longview, Texas Overton Delaware Corporation, Dover, Delaware P&C Investments, Inc., Peoples National Corporation, Chicago December 23, 1998 Muscatine, Iowa Columbus Junction, Iowa Community Bank, Muscatine, Iowa Peoples Bancorporation, Inc., Seneca National Bank, Richmond January 21, 1999 Easley, South Carolina Seneca, South Carolina People's Utah Bancorp, Bank of American Fork, San Francisco December 28, 1998 American Fork, Utah American Fork, Utah South Georgia Bank Holding South Georgia Banking Company, Atlanta January 19, 1999 Company, Omega, Georgia Omega, Georgia State National Bancshares, Inc., UB&T Holding Company, Dallas January 7, 1999 Lubbock, Texas Abilene, Texas United Bank & Trust, Abilene, Texas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 213 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Synergy Bancshares, Inc., Synergy Bank, Atlanta January 12, 1999 Houma, Louisiana Houma, Louisiana Tower Financial Corporation, Tower Bank & Trust Company, Chicago January 19, 1999 Fort Wayne, Indiana Fort Wayne, Indiana Union Planters Corporation, First & Farmers Bancshares, Inc., St. Louis January 12, 1999 Memphis, Tennessee Somerset, Kentucky Union Planters Holding Corporation, First & Farmers Bank of Somerset, Inc., Memphis, Tennessee Somerset, Kentucky Bank of Cumberland, Burkesville, Kentucky United Security Bancorporation, Bancwest Financial Corporation, San Francisco January 15, 1999 Spokane, Washington Walla Walla, Washington Bank of the West, Walla Walla, Washington WB&T Bancshares, Inc., Western Bank & Trust, Dallas January 21, 1999 Duncanville, Texas Duncanville, Texas WB&T Delaware Bancshares, Inc., Wilmington, Delaware Wells Fargo & Company, Mercantile Financial Enterprises, Inc., San Francisco January 27, 1999 San Francisco, California Brownsville, Texas Mercantile Bank, National Association, Brownsville, Texas Wells Fargo & Company, Riverton State Bank Holding Company, San Francisco January 19, 1999 San Francisco, California Riverton, Wyoming Riverton, State Bank, Riverton, Wyoming Dubois National Bank, Dubois, Wyoming Woodlands Bancorp, Inc., First Woodlands Bank, Dallas December 30, 1998 Homer, Louisiana Homer, Louisiana Section 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Cardinal Financial Corporation, Cardinal Wealth Services, Inc., Richmond January 8, 1999 Fairfax, Virginia Fairfax, Virginia Carolina First Corporation, Net.B@nk, Inc., Richmond January 13, 1999 Greenville, South Carolina Alpharetta, Georgia Net.B@nk, Alpharetta, Georgia Chambers Bancshares, Inc., Northwest Community Bancshares, Inc.. St. Louis January 14, 1999 Danville, Arkansas Fayetteville, Arkansas Community Investments, Inc., Community Bank, F.S.B., Elkins, Arkansas Fayetteville, Arkansas Fifth Third Bancorp, Enterprise Federal Bancorp, Inc., Cleveland January 22, 1999 Cincinnati, Ohio West Chester, Ohio Fifth Third Bank Cincinnati, Enterprise Federal Savings Bank, Cincinnati, Ohio West Chester, Ohio First Bank Shares of the South East, To engage in lending activities Atlanta December 31, 1999 Inc., Alma, Georgia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

214 Federal Reserve Bulletin • March 1999 Section 4—Continued Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date FJSB Bancshares, Northwest Financial Services, LLC Cleveland January 11, 1999 Ft. Jennings, Ohio Glandorf, Ohio Pandora Bancshares, Pandora, Ohio Diamond Bancshares, Antwerp, Ohio United Bancshares, Columbus Grove, Ohio Sherwood Bane Corp., Sherwood, Ohio Marshall & Ilsley Corporation, Moneyline Express, Inc., Chicago December 30, 1998 Milwaukee, Wisconsin Minneapolis, Minnesota M&I Data Services, Inc., Milwaukee, Wisconsin Mellon Bank Corporation, Mellon Financial Markets, Inc., Cleveland January 22, 1999 Pittsburgh, Pennsylvania Pittsburgh, Pennsylvania Royal Bank of Canada, Bull & Bear Securities, Inc., New York January 11, 1999 Montreal, Quebec, Canada New York, New York Skandinaviska Enskilda Banken, ABB Investment Management Corp., New York January 15, 1999 Stockholm, Sweden Stamford, Connecticut South Plains Financial, Inc., ARC Check Cashing, Inc., Dallas January 27, 1999 Lubbock, Texas Lubbock, Texas South Plains Delaware Financial Corporation, Dover, Delaware Union Bankshares Corporation, Union Bank & Trust Company, Richmond January 4, 1999 Bowling Green, Virginia Bowling Green, Virginia Mortgage Capital Investors, Springfield, Virginia U.S. Bancorp, Minneapolis, Libra Investments, Inc., Minneapolis December 24, 1998 Minnesota Los Angeles, California U.S. Trust Corporation, Radnor Capital Management, Inc., New York December 30, 1998 New York, New York Wayne, Pennsylvania Custodian Securities Inc., Wayne, Pennsylvania VIB Corporation, Bank of Stockdale, F.S.B., San Francisco December 23, 1998 El Centro, California Bakersfield, California Wells Fargo & Company, Century Business Credit Corp, San Francisco January 8, 1999 San Francisco, California New York, New York Wells Fargo & Company, SunStar Acceptance Corporation, San Francisco January 11, 1999 San Francisco, California Dallas, Texas Norwest Financial Services, Inc., Des Moines, Iowa Norwest Financial, Inc., Des Moines, Iowa Wells Fargo & Company, MidAmerican Home Services Mortgage, San Francisco January 22, 1999 San Francisco, California LLC, Norwest Mortgage, Inc., West Des Moines, Iowa Des Moines, Iowa Norwest Ventures, LLC Des Moines, Iowa Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 215 Sections 3 and 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Superior Financial Holding Commercial State Bancorporation, Minneapolis January 5, 1999 Corporation, Two Harbors, Minnesota Minneapolis, Minnesota Commercial State Bank of Two Harbors, Two Harbors, Minnesota Commercial State Insurance Agency, Inc., Two Harbors, Minnesota APPLICATIONS APPROVED UNDER BANK MERGER ACT By Federal Reserve Banks Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to the Reserve Banks. Applicant(s) Bank(s) Reserve Bank Effective Date Anadarko Bank and Trust Company, Anadarko Branch of BancFirst, Kansas City January 12, 1999 Anadarko, Oklahoma Oklahoma City, Oklahoma First American Bank and Trust Co., First American Bank, Kansas City January 21, 1999 Purcell, Oklahoma Maysville, Oklahoma First State Bank, Farmers State Bank, Chicago January 8, 1999 Brunsville, Iowa Merrill, Iowa Mobile County Bank, Union Planters Bank, N.A., Atlanta January 22, 1999 Grand Bay, Alabama Mobile, Alabama People First Bank, First State Bank, Kansas City January 4, 1999 Hennessey, Oklahoma Hobart, Oklahoma Southern California Bank, Pacific National Bank, San Francisco December 30, 1998 Newport Beach, California Newport Beach, California Union Bank & Trust Company, King George State Bank, Richmond January 28, 1999 Bowling Green, Virginia King George, Virginia U.S. Bank, First Western Bank, N.A., Philadelphia December 24, 1998 Johnstown, Pennsylvania New Castle, Pennsylvania PENDING CASES INVOLVING THE BOARD OF GOVERNORS This list of pending cases does not include suits against the review of denial of reconsideration of a Board order dated Federal Reser\'e Banks in which the Board of Governors is not August 17, 1998, approving the merger of NationsBank named a party. Corporation, Charlotte, North Carolina, and BankAmerica. Corporation, San Francisco, California. On December 7, Nelson v. Greenspan, No. l:99CV00215 (EGS) (D.D.C., filed 1998, the Board filed a motion to dismiss the petition. The January 28, 1999). Employment discrimination complaint. court of appeals granted the motion on January 19, 1999. Fraternal Order of Police v. Board of Governors, No. Independent Bankers Association of America v. Board of Govl:98CV03116 (D. D.C., filed December 22, 1998). Declaraernors, No. 98-1482 (D.C. Cir., filed October 21, 1998). tory judgment action challenging Board labor practices. Petition for review of a Board order dated September 23, Inner City Press/Community on the Move v. Board of Gover- 1998, conditionally approving the applications of Travelers nors, No. 98-9604 (2d Cir., filed December 3, 1998). Ap- Group, Inc., New York, New York, to become a bank peal of district court order dated October 6, 1998, granting holding company by acquiring Citicorp, New York, New summary judgment for the Board in a Freedom of Informa- York, and its bank and nonbank subsidiaries. tion Act case. Attorneys Against American Apartheid v. Board of Governors, Jones v. Board of Governors, No. 98-30138 (5th Cir, tiled No. 98-1483 (D.C. Cir., filed October 21, 1998). Petition for February 9, 1998). Appeal of district court dismissal of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

216 Federal Reserve Bulletin • March 1999 complaint alleging violations of the Fair Housing Act. On Kerr v. Department of the Treasury, No. CV-S-97-01877- November 19, 1998, the court dismissed the appeal. DWH (D. Nev., filed December 22, 1997). Challenge to Cunningham v. Board of Governors, No. 98-1459 (D.C. Cir.. income taxation and Federal Reserve notes. On Septemfiled September 30, 1998). Petition for review of a Board ber 3, 1998, a motion to dismiss was filed on behalf of all order dated September 23, 1998, conditionally approving federal defendants. the applications of Travelers Group, Inc., New York, New Towe v. Board of Governors, No. 97-71143 (9th Cir., filed York, to become a bank holding company by acquiring September 15, 1997). Petition for review of a Board order Citicorp, New York, New York, and its bank and nonbank dated August 18, 1997, prohibiting Edward Towe and subsidiaries. On December 4, 1998, the Court granted the Thomas E. Towe from further participation in the banking Board's motion to dismiss the petition. industry. Clarkson v. Greenspan, No.98-5349 (D.C. Cir., filed July 29, Bettersworth v. Board of Governors, No. 97-CA-624 (W.D. 1998). Appeal of district court order granting Board's mo- Tex., filed August 21, 1997). Privacy Act case. tion for summary judgment in a Freedom of Information Act case. On September 14, 1998, the Board filed a motion for summary affirmance of the district court dismissal. FINAL ENFORCEMENT ORDERS ISSUED BY THE Board of Governors v. Carrasco, No. 98 Civ. 3474 (LAK) BOARD OF GOVERNORS (S.D.N.Y., filed May 15, 1998). Action to freeze assets of individual pending administrative adjudication of civil John H. Ahn money penalty assessment by the Board. On May 26, 1998, Los Angeles, California the court issued a preliminary injunction restraining the transfer or disposition of the individual's assets and appoint- The Federal Reserve Board announced on January 26, ing the Federal Reserve Bank of New York as receiver for 1999, the issuance of an Order of Removal and Prohibition those assets. against John H. Ahn, a former director and institution- Board of Governors v. Pharaon, No. 98-6101 (2d Cir., filed affiliated party of the Hanmi Bank, Los Angeles, Califor- May 4, 1998). Appeal of partial denial of Board's motion nia. for summary judgment in action to freeze assets of individual pending administrative adjudication of civil money pen- Bob L. Sellers alty assessment by the Board. On May 22, 1998, the appel- Crested Butte, Colorado lee filed a cross-appeal from the partial final judgment. Fenili v. Davidson, No. C-98-01568-CW (N.D. California, The Federal Reserve Board announced on January 21, filed April 17, 1998). Tort and constitutional claim arising 1999, the joint issuance with the Office of the Comptroller out of return of a check. On June 5, 1998, the Board filed its of the Currency of a consent Order of Prohibition against motion to dismiss. Bob L. Sellers, a former officer, director and shareholder of Logan v. Greenspan, No. l:98CV00049 (D.D.C., filed Jan- First National Summit Bankshares, Crested Butte, Colouary 9, 1998). Employment discrimination complaint. rado, a former bank holding company, and a former officer Goldman v. Department of the Treasury, No. 1-97-CV-3798 and director of First National Summit Bank, Crested Butte, (N.D. Ga., filed December 23, 1997). Declaratory judgment Colorado, a former national bank. The Board also anaction challenging Federal Reserve notes as lawful money. nounced on January 21, 1999, the issuance of a consent On March 2, 1998, the Board filed a motion to dismiss the Order of Assessment of Civil Money Penalty against action. Mr. Sellers. 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 A33 Domestic finance companies—Owned and managed A10 Condition and Federal Reserve note statements receivables Al 1 Maturity distribution of loan and security holding Real Estate Monetary and Credit Aggregates A34 Mortgage markets—New homes A12 Aggregate reserves of depository institutions A3 5 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 • March 1999 INTERNATIONAL STATISTICS Reported by Nonbanking Business Enterprises in the United States Summary Statistics A58 Liabilities to unaffiliated foreigners A50 U.S. international transactions A59 Claims on unaffiliated foreigners A51 U.S. foreign trade A51 U.S. reserve assets Securities Holdings and Transactions A51 Foreign official assets held at Federal Reserve A60 Foreign transactions in securities Banks A61 Marketable U.S. Treasury bonds and A52 Selected U.S. liabilities to foreign official notes—Foreign transactions institutions Interest and Exchange Rates Reported by Banks in the United States A62 Foreign exchange rates A52 Liabilities to, and claims on, foreigners A53 Liabilities to foreigners A63 GUIDE TO STATISTICAL RELEASES AND A55 Banks' own claims on foreigners A56 Banks' own and domestic customers' claims on SPECIAL TABLES foreigners A56 Banks' own claims on unaffiliated foreigners A64 INDEX TO STATISTICAL TABLES A57 Claims on foreign countries—Combined domestic offices and foreign branches Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A3 Guide to Tabular Presentation SYMBOLS AND ABBREVIATIONS c Corrected G-10 Group of Ten e Estimated GNMA Government National Mortgage Association n.a. Not available GDP Gross domestic product 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 • March 1999 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted1 Monetary or credit aggregate Ql Q2 Q3 Q4 Aug. Sept.' Oct.' Reserves of depository institutions 1 Total -1.9 -3.8 -7.4 -1.6 4.9 -11.0 -5.4 5.0 9.1 2 Required -1.8 -2.5 -9.0 -2.3 1.0 -16.1 -2.5 3.8 10.4 3 NonborTOwed -.6 -4.3 -8.4 -.4 4.6 -10.5 -3.3 7.5 8.2 4 Monetary base3 6.9 4.1 6.9 9.8 8.9 11.6 9.4 9.1 9.5 Concepts of money, liquid assets, and debt 5 Ml 3.0 .2 -2.4r 5.7 -3.2' 3.7 7.3 10.0' 5.0 6 M2 8.0 7.4 6.5' 12.0 8.2' 14.5 12.6 10.7' 10.6 7 M3 11.0 10.2 7.4 14.2 12.7' 15.3 13.6 15.3' 11.7 8 Debt 6.2 6.1 6.1 n.a. 6.3' 5.9 6.8 7.2 Nontmnsaction components 9 In M25 9.7 9.9 9.6' 14.1 12.0' 18.1 14.3 10.9' 12.6 10 In M3 only6 20.41 18.8 10.2' 20.5 26.0' 17.5 16.4 28.3' 14.6 Time and savings deposits Commercial banks Savinggs,, including MMDAs 13.6 14.3 13.8 17.9 15.2 18.7 16.0 17.4 22.9 12 SSmmaallll ttiimmee7 1.5 -1.0 .4' 1.4 4.8' 1.2 1.3 2.7' -4.2 13 Largge time8 19.9' 18.1' -1.2' 3.5 15.1' -1.1 14.6' 4.3 Thhrriifft inistitiiutions 14 Savingg s, includingg MMDAs. 7.6 11.6 6.9 10.2 2.7 7.5 11.9 12.1 12.9 SSmmaallll ttiimmee77 -.4 -5.7' -6.7' -5.6 -15.7' -2.2 -1.1 -10.5' -6.6 Large time 14.4 -3.8' 5.4 -8.3 4.2 6.9 5.5' 16.5 Money market mutual funds 17 Retail 19.0 21.0 21.3 31.3 32.9 48.3 31.3 17.0 18.5 18 Institution-only 18.9 36.5 21.6 48.0 36.5 38.4 60.9 44.4 31.5 Repurchase agreements and Eurodollars 19 Repurchase agreements10 34.1 14.5 10.6 16.5 33.4 29.8 -20.3 46.2 24.2 20 Eurodollars'" 7.6 -7.7 27.8 14.4 40.1 8.9 27.3 6.3' -22.7 Debt components 21 Federal .0 -1.4 -1.5 n.a. -3.1 - 4 n.a. 22 Nonfederal 8.3 8.6 8.5 n.a. 8.5 9.8 9.6 n.a. 1. Unless otherwise noted, rates of change are calculated from average amounts outstand- depository institutions, and (4) Eurodollars (overnight and term) held by U.S. residents at ing during preceding month or quarter. foreign branches of U.S. banks worldwide and at all banking offices in the United Kingdom 2. Figures incorporate adjustments for discontinuities, or "breaks," associated with and Canada. Excludes amounts held by depository institutions, the U.S. government, money regulatory changes in reserve requirements. (See also table 1.20.) market funds, and foreign banks and official institutions. Seasonally adjusted M3 is calculated 3. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally by summing large time deposits, institutional money fund balances, RP liabilities, adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted cun-ency and Eurodollars, each seasonally adjusted separately, and adding this result to seasonally component of the money stock, plus (3) (for all quarterly reporters on the "Report of adjusted M2. Transaction Accounts, Other Deposits and Vault Cash" and for all weekly reporters whose Debt: The debt aggregate is the outstanding credit market debt of the domestic nonfinancial vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted difference sectors—the federal sector (U.S. government, not including government-sponsored enterbetween current vault cash and the amount applied to satisfy current reserve requirements. prises or federally related mortgage pools) and the nonfederal sectors (state and local 4. Composition of the money stock measures and debt is as follows: governments, households and nonprofit organizations, nonfinancial corporate and nonfarm Ml: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of noncorporate businesses, and farms). Nonfederal debt consists of mortgages, tax-exempt and depository institutions, (2) travelers checks of nonbank issuers, (3) demand deposits at all corporate bonds, consumer credit, bank loans, commercial paper, and other loans. The data, commercial banks other than those owed to depository institutions, the U.S. government, and which are derived from the Federal Reserve Board's flow of funds accounts, are breakforeign banks and official institutions, less cash items in the process of collection and Federal adjusted (that is, discontinuities in the data have been smoothed into the series) and Reserve float, and (4) other checkable deposits (OCDs), consisting of negotiable order of month-averaged (that is, the data have been derived by averaging adjacent month-end levels). withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, 5. Sum of (1) savings deposits (including MMDAs), (2) small time deposits, and (3) retail credit union share draft accounts, and demand deposits at thrift institutions. Seasonally money fund balances, each seasonally adjusted separately. adjusted Ml is computed by summing currency, travelers checks, demand deposits, and 6. Sum of (1) large time deposits, (2) institutional money fund balances, (3) RP liabilities OCDs, each seasonally adjusted separately. (overnight and term) issued by depository institutions, and (4) Eurodollars (overnight and M2: Ml plus (1) savings (including MMDAs), (2) small-denomination time deposits (time term) of U.S. addressees, each seasonally adjusted separately. deposits—including retail RPs—in amounts of less than $100,000), and (3) balances in retail 7. Small lime deposits—including retail RPs—are those issued in amounts of less than money market mutual funds. Excludes individual retirement accounts (IRAs) and Keogh $100,000. All IRA and Keogh account balances at commercial banks and thrift institutions balances at depository institutions and money market funds. Seasonally adjusted M2 is are subtracted from small time deposits. calculated by summing savings deposits, small-denomination time deposits, and retail money 8. Large time deposits are those issued in amounts of $ 100,000 or more, excluding those fund balances, each seasonally adjusted separately, and adding this result to seasonally booked at international banking facilities. adjusted Ml. 9. Large time deposits at commercial banks less those held by money market funds, M3: M2 plus (1) large-denomination time deposits (in amounts of $100,000 or more), (2) depository institutions, the U.S. government, and foreign banks and official institutions. balances in institutional money funds, (3) RP liabilities (overnight and term) issued by all 10. Includes both overnight and term. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Money Stock and Bank Credit A5 1.11 RESERVES OF DEPOSITORY INSTITUTIONS AND RESERVE BANK CREDIT1 Millions of dollars Average of Average of daily figures for week ending on date indicated daily figures 1998 Oct. Nov. 25 Dec. 2 Dec. 9 Dec. 16 Dec. 23 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 489,492 495,325 504,028 494,162' 495,999 503,105 504,233 510,960 U.S. government securities2 2 Bought outright—System account . .. 447,493 451,629 453,911 450,434 452,826 454,398 454,530 454,019 453,111 454,191 3 Held under repurchase agreements 3,235 3.391 7.685 4.084 3.004 5,714 3,509 6,909 8.098 11,000 Federal agency obligations 4 Bought outright 394 373 346 371 372 368 368 338 338 338 5 Held under repurchase agreements . . 3,425 3,864 5.371 4,215 2,691 5,291 3,245 6,380 5,767 5,570 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 86 48 90 72 84 34 2 25 345 8 Seasonal credit 104 35 15 33 23 16 12 13 16 20 9 Extended credit 0 0 0 0 0 0 0 0 0 0 10 Float 181 544 1.621 466 627' 706 757 575 1,749 3,392 11 Other Federal Reserve assets 34,572 35,440 34,988 35,536 34,534 34,911 33,577 34,846 35,147 36,103 12 Gold stock 11,043 11,041 11,041 11,042 11,041 11,040 11,041 11,041 11,041 11,043 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 26.111' 26,184' 26,245 26,183' 26,197' 26,211 26,225 26,239 26,253 26,267 ABSORBING RESERVE RINDS 15 Currency in circulation 496,474' 502,751' 510.744 502,653' 503,955' 507,004 506.784 507.797 511,471 516.798 16 Treasury cash holdings 91 92 89 100 87 84 85 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 5,407 5.135 5,923 4,801 5.026 5.304 5.035 6,324 5,434 7,195 18 Foreign 224 188 178 178 179 207 154 195 194 174 19 Service-related balances and adjustments ... 6,947 6,867 6,850 6,772 6,793 7,211 6,737 6,703 6,977 6,852 20 Other 414 403 322 410 389 363 346 290 231 235 21 Other Federal Reserve liabilities and capital . . 17,347 17,476 16,935 17,220 17,042 16,804 16,499 17,113 17,197 17,152 22 Reserve balances with Federal Reserve Banks 8,941 8,840 9.473 9,514 7,117' 10,897 6,813 11,076 9,137 8,979 End-of-jnonth figures Wednesday figures Dec. 2 Dec. 9 Dec. 16 Dec. 23 Dec. 30 SUPPLYING RESERVE FUNDS 1 Re U se .S rv . e g o B v a e n rn k m c e r n ed t it s e o c u u t r s i t t a i n es d 2 ing 504,546' 522,337 494,351 498,912 498,642 503,843 508,066 517,603 2 Bought outright—System account . .. 450,179 453,991 452,141 451,617 454,525 454.213 454,775 455,035 454,657 454,772 3 Held under repurchase agreements . .. 4,286 8,970 19.674 3,630 3,830 5,020 4,897 5,702 7,845 15.549 Federal agency obligations 4 Bought outright 388 368 338 373 368 368 368 338 338 338 5 Held under repurchase agreements .. . 3,538 6,172 10,702 4,263 4,662 2.967 3,486 7,181 5,742 7,388 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit I 1 15 126 6 145 21 1,642 8 Seasonal credit 68 15 16 24 19 13 II 14 21 27 9 Extended credit 0 0 0 0 0 0 0 0 0 0 10 Float -329 462' 1,738 456 523' 1,668 926 729 4,189 875 11 Other Federal Reserve assets 36.755 34,567 37,726 33,973 35,073 34.553 34,172 34,699 35,254 37,013 12 Gold stock 11,041 11.041 11,046 11,041 11.040 11,041 11,041 11,041 11,041 11,046 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 26,155' 26,211' 26.281 26,183' 26,197' 26.211 26.225 26.239 26,253 26.267 ABSORBING RESERVE FUNDS 15 Currency in circulation 497,493' 507,159' 517,496 503,466' 506,799' 507.759 507,954 509,933 515,758 518,347 16 Treasury cash holdings 87 99 99 100 87 84 85 85 Deposits, other than reserve balauces, with Federal Reserve Banks 17 Treasury 4,440 5,219 6.086 4,720 4,881 4,382 4.199 8,628 3,837 10.174 18 Foreign 154 211 167 214 252 171 155 170 175 166 19 Service-related balances and adjustments . .. 6,860 7,211 7,053 6,772 6,793 7,211 6,737 6,703 6,977 6,852 20 Other 380 337 1,605 406 356 360 327 263 175 164 21 Other Federal Reserve liabilities and capital . . 18,241 16,579 16,354 16,859 16,852 16,253 16,649 16,965 16,969 16,957 22 Reserve balances with Federal Reserve Banks 13,627 14.182' 20,017 8,240 9,532' 9,128 9,001 7,577 10.584 11,372 1. Amounts of cash held as reserves are shown in table 1.12, line 2. 3. Includes compensation that adjusts for the effects of inflation on the principal of 2. Includes securities loaned—fully guaranteed by U.S. government securities pledged inflation-indexed securities. with Federal Reserve Banks—and excludes securities sold and scheduled to be bought back 4. Excludes required clearing balances and adjustments to compensate for float. under matched sale-purchase transactions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A6 Domestic Financial Statistics • March 1999 1.12 RESERVES AND BORROWINGS Depository Institutions1 Millions of dollars Prorated monthly averages of biweekly averages Reserve classification 1996 1997 1998 1998 Dec. Dec. Dec. June July Aug. Sept. Oct. Nov. Dec. 1 Reserve balances with Reserve Banks 13,395 10,673 9,028 9,668 9,646 9,682 9,284 9,026 8,855 9,028 2 Total vault cash3 44,525 44,707 44,305 42,635 42,035 42,121 42,579 43,348 43,109 44,305 37,848 37,206 35,997 35,427 34,954 35,025 34,909 35,090 35,297' 35,997 4 Surplus vault cash5 6,678 7,500 8,308 7,208 7,081 7,095 7,670 8,258 7.812' 8,308 5 Total reserves6 51,242 47,880 45,024 45,095 44,600 44,707 44,193 44,115 44,152 45,024 6 Required reserves 49,819 46,196 43,432 43,475 43,235 43,194 42,509 42,544 42,527r 43,432 7 Excess reserve balances at Reserve Banks7 1,423 1,683 1,593 1,620 1,365 1,513 1,684 1,572 1,624 1,593 8 Total borrowings at Reserve Banks8 155 324 117 251 258 271 251 174 84 117 9 Seasonal borrowings 68 79 15 159 215 242 178 107 37 15 0 0 0 0 0 0 0 0 0 0 Biweekly averages of daily figures for two week periods ending on dates indicated 1998 1999 Sept. 9 Sept. 23 Oct. 7 Oct. 21 Nov. 4 Nov. 18 Dec. 2' Dec. 16 Dec. 30 Jan. 13 1 Reserve balances with Reserve Banks2 10,363 8,439 9,588 8,400 9,509 8,520 9,028 8,949 9.064 9,630 2 Total vault cash 41,793 42,900 42,948 44,084 42,598 43,080 43,313 43,230 45,470 45,023 3 Applied vault cash4 34,712 35,039 34,905 35,321 34,897 34,935 35,853 35,273 36,746 35,924 7,081 7,862 8,043 8,763 7,701 8,145 7,460 7,957 8,724 9,100 5 Total reserves6 45,075 43,477 44,493 43,720 44,405 43,455 44,880 44,222 45,810 45,554 43,153 42,093 42,514 42,520 42,599 41,913 43,221 42,917 43,990 43.247 7 Excess reserve balances at Reserve Banks7 1,922 1.384 1,978 1,200 1,806 1,542 1.659 1,304 1,820 2,306 8 Total borrowings at Reserve Banks8 247 190 379 122 103 82 79 26 195 370 209 171 152 105 79 40 20 13 18 9 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-adjusied or seasonally adjusted. 6. Reserve balances with Federal Reserve Banks (line 1) plus applied vault cash 2. Excludes required clearing balances and adjustments to compensate for float and (line ?). includes other off-balance-sheet "as-of' adjustments. 7. Total reserves (line 5) less required reserves (line 6). 3. Vault cash eligible to satisfy reserve requirements. It includes only vault cash held by 8. Also includes adjustment credit. those banks and thrifts that are not exempt from reserve requirements. Dates refer to the 9. Consists of borrowing at the discount window under the terms and conditions estabmaintenance periods in which the vault cash can be used to satisfy reserve requirements. lished for the extended credit program to help depository institutions deal with sustained 4. All vault cash held during the lagged computation period by "bound"' institutions (that liquidity pressures. Because there is not the same need to repay such borrowing promptly as is, those whose required reserves exceed their vault cash) plus the amount of vault cash with traditional short-term adjustment credit, the money market effect of extended credit is applied during, the maintenance period by "nonbound" institutions (that is, those whose vault similar to that of nonborrowed reserves. 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 A 7 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per year Current and previous levels Adjustment credit1 Seasonal credit2 Extended credit3 Federal Reserve Bank On Effective date Previous rate On Effective date Previous rate On Effective date Previous rate 2/12/99 2/12/99 2/12/99 4 50 11/18/98 4 75 4 SO 2/11 /99 4 75 510 2/11IV) 5?5 New York 11/17/98 i t Philadelphia 11/17/98 11/19/98 Richmond 11/18/98 Atlanta 11/18/98 Chicago 11/19/98 11/19/98 Minneapolis 11/19/98 Kansas City 11/18/98 Dallas 11/17/98 San Francisco 4.50 11/17/98 4.75 4.80 2/11/99 4.75 5.30 2/11/99 5.25 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 Effective date 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 ... II 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 . 3.5-1.5 3.5 20 10.5 10.5 17 ... 8.5 8.5 24 .. 3.5 3.5 Sept. 19 10.5-11 II 21 11 11 1984—Apr. 9 ... 8.5-9 9 1992—July 2 .. 3-3.5 3 Oct. 8 11-12 12 13 ... 9 9 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 .. 3.5^1 4 May 29 12-13 13 1985_May 20 .. . 7.5-8 7.5 18 .. 4 4 30 12 12 24 ... 7.5 7.5 Nov. 15 .. 4-4.75 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 5.25 5.25 Sept. 26 11 11 23 ... 6.5 6.5 Nov. 17 12 12 July 11 ... 6 6 1996—Jan. 31 .. 5.00-5.25 5.00 Dec. 5 12-13 13 Aug. 21... 5.5-6 5.5 Feb. 5 .. . 5.00 5.00 8 13 13 5.5 5.5 1981—May 5 13-14 14 1998—Oct. 15 . , . 4,75-5.00 4.75 14 14 1987—Sept. A ... 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 Feb. 12, 1999 .. 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 institulions 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 • March 1999 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS' Requirement Type of deposit Net transaction accounts 1 $0 miIlion-$46.5 million3. . 12/31/98 2 More than $46.5 million4 . . 12/31/98 3 Nonpersonal lime deposits5. 12/27/90 4 Eurocurrency liabilities6. . .. 12/27/90 1. Required reserves must be held in the form of deposits with Federal Reserve Banks succeeding calendar year by 80 percent of the percentage increase in the total reservable or vault cash. Nonmember institutions may maintain reserve balances with a Federal liabilities of all depository institutions, measured on an annual basis as of June 30. No Reserve Bank indirectly, on a pass-through basis, with certain approved institutions. For corresponding adjustment is made in the event of a decrease. The exemption applies only to previous reserve requirements, see earlier editions of the 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 '/2 years was reduced from 3 percent to 1VS percent for by check, draft, debit card, or similar order payable directly to third parties) are savings the maintenance period that began Dec. 13. 1990, and to zero for the maintenance period that deposits, not transaction accounts. began Dec. 27, 1990. For institutions that report quarterly, the reserve requirement on 3. The Monetary Control Act of 1980 requires that the amount of transaction accounts nonpersonal time deposits with an original maturity of less than 1 Vi years was reduced from 3 against which the 3 percent reserve requirement applies be modified annually by 80 percent of percent to zero on Jan. 17, 1991. the percentage change in transaction accounts held by all depository institutions, determined The reserve requirement on notipersonal time deposits with an original maturity of 1 Vi 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, 1998, 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 l/z 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 May June July Aug. Sept. Oct. Nov. U.S. TREASURY SECURITIES2 Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 10,932 9,901 9,147 0 0 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 35,190 32,830 40,312 34,607 33,140 40,712 34,957 4 For new bills 405,296 426,928 435,907 35,190 32,830 40,312 34,607 33,140 40,712 34,957 5 Redemptions 900 0 0 0 0 0 0 0 0 0 Others within one year 6 Gross purchases 390 524 5,549 0 0 0 986 1,038 741 662 7 Gross sales 0 0 0 0 0 0 0 0 0 0 8 Maturity shifts 43,574 30,512 41,716 6,951 1,520 2,638 6,367 2,301 2,423 5.444 9 Exchanges -35.407 -41,394 -27,499 -4.990 -5,084 -2,242 -8,964 -2.242 -400 -8.093 10 Redemptions 1.776 2,015 1,996 0 0 1,311 0 0 602 0 One to five years 11 Gross purchases 5,366 3,898 19,680 0 0 0 535 3,989 725 2,397 12 Gross sales 0 0 0 0 0 0 0 0 0 0 13 Maturity shifts -34,646 -25,022 -37,987 -6,620 -1,520 -2,638 -2,168 -2,301 -2,423 -4,574 14 Exchanges 26,387 31,459 20,274 2,270 5,084 1,842 5,828 2,242 0 6,013 Five to ten years 15 Gross purchases 1,432 1,116 3,849 0 0 0 303 351 0 862 16 Gross sales 0 0 0 0 0 0 0 0 0 0 17 Maturity shifts -3,093 -5,469 -1,954 -331 0 0 -3,411 0 0 718 18 Exchanges 7,220 6,666 5,215 2,720 0 0 1,364 0 400 1,135 More than ten years 19 Gross purchases 2,529 1,655 5.897 0 0 0 1.769 0 1,674 698 20 Gross sales 0 0 0 0 0 0 0 0 0 0 21 Maturity shifts -2.253 -20 -1,775 0 0 0 -789 0 0 - 1,589 22 Exchanges 1,800 3,270 2.360 0 0 400 1,772 0 0 945 All maturities 23 Gross purchases 20.649 17,094 44,122 0 0 0 3,593 5,377 3,140 4,619 24 Gross sales 0 0 0 0 0 0 0 0 0 0 25 Redemptions 2,676 2,015 1,996 0 0 1,311 0 0 602 0 Matched transactions 26 Gross purchases 2,197,736 3,092,399 3,577,954 367.934 369,358 373,285 346.245 380.594 402,581 358.438 27 Gross sales 2.202.030 3,094.769 3.580,274 368.281 370,569 371,142 348,318 382,063 400.995 359.256 Repurchase agreements 28 Gross purchases 331,694 457,568 810,485 7,722 57,098 52,116 39,078 63,924 40,823 23.884 29 Gross sales 328,497 450,359 809,268 20,456 41,414 63,531 38,402 59,731 48,672 19,200 30 Net change in U.S. Treasury securities 16,875 19,919 -13,081 14,473 -3,725 8,484 FEDERAL AGENCY OBLIGATIONS Outright transactions 31 Gross purchases 0 0 0 0 0 0 0 32 Gross sales 0 0 0 0 25 0 0 33 Redemptions 1.003 409 1,540 25 50 48 20 Repurchase agreements 34 Gross purchases 36.851 75,354 160,409 1,575 14,548 11,236 33,431 18,486 51,471 51,419 35 Gross sales 36,776 74,842 159,369 3,300 12,913 12,341 30,625 19,953 50.032 48,785 36 Net change in federal agency obligations -928 103 -500 -1,725 1,610 -1,105 2,731 -1,515 1.424 2.614 37 Total net change in System Open Market Account. 15,948 20,021 40,522 -14,806 16,083 -11,689 4,927 6,586 -2,301 11,098 1. Sales, redemptions, and negative tigures 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 • March 1999 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements1 Millions of dollars Wednesday End of month 1998 1998 Dec. 9 Dec. 16 Dec. 23 Dec. 30 Oct. 31 Nov. 30 Dec. 31 Consolidated condition statement ASSETS 1 Gold certificate account 11,041 11,041 11,041 11,041 11,046 11,041 11,041 11,046 2 Special drawing rights certificate account 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 3 Coin 377 385 399 392 360 426 391 358 Loans 4 To depository institutions 124 18 159 42 1,669 69 17 17 5 Other 0 0 0 0 0 0 0 0 6 Acceptances held under repurchase agreements 0 0 0 0 0 0 0 0 Federal agency obligations 1 Bought outright 368 368 338 338 338 368 338 8 Held under repurchase agreements 2.967 3,486 7,181 5,742 7,388 3,538 10,702 6,172 9 Total US. Treasury securities 459,233 459,672 460,737 462302 470^21 454,465 471,815 462,961 10 Bought outright2 454,213 454,775 455,035 454,657 454,772 450,179 452,141 11 Bills 196,853 197.413 197,671 197,291 197,404 197.450 453,991 194,772 12 Notes 187,888 187.890 187,891 187,893 187,895 185,033 196.631 187,895 13 Bonds 69,472 69,472 69,473 69,473 69,474 67,696 187,888 69,474 14 Held under repurchase agreements 5,020 4,897 5,702 7,845 15,549 4,286 69,472 19,674 8,970 15 Total loans and securities 462,691 463,544 468,415 468,623 479,716 458,460 469,517 482,872 16 Items in process of collection 9,257 8,373 8,751 11,532 8,895 4,702 2.899 6,933 17 Bank premises 1,294 1,295 1,296 1,297 1,297 1,293 1,294 1,300 Other assets 18 Denominated in foreign currencies3 18,945 18,954 18,963 18,971 18,980 19,573 18.943 19,767 19 All other4 14,384 14,138 14,534 15,228 16,829 15,976 14.456 16,625 20 Total assets 527,190 526,931 532,600 536,284 546,322 520,672 527,740 548,101 LIABILITIES 21 Federal Reserve notes 482,025 482,201 484,177 489,982 492,524 471,851 481,438 491,657 22 Total deposits 21,043 20,698 23,722 21,211 29,435 25,568 27,260 34,165 23 Depository institutions 16,130 16,018 14,662 17,024 18,931 20,592 21,493 26,306 24 U.S. Treasury—Genera] account 4,382 4,199 8,628 3,837 10,174 4,440 5,219 6.086 25 Foreign—Official accounts 171 155 170 175 166 154 211 167 26 Other 360 327 263 175 164 380 337 1,605 27 Deferred credit items 7,869 7,383 7,735 8,122 7,406 5,012 2,463 5,924 4,376 4,357 4,477 4,448 4.464 4.518 4,456 4,450 28 Other liabilities and accrued dividends5 515,314 514,639 520,112 523,763 533,829 506,948 515,617 536,197 29 Total liabilities CAPITAL ACCOUNTS 5,936 5,937 5,942 5,948 5,951 5.920 5,931 5,952 30 Capital paid in 5,209 5,220 5,220 5,220 5,246 5.220 5,205 5,952 31 Surplus 732 1,135 1,325 1,352 1,296 2,583 987 0 32 Other capital accounts 33 Total liabilities and capital accounts 527,190 526,931 532,600 536,284 546,322 520,672 527,740 548,101 MEMO 34 Marketable U.S. Treasury securities held in custody for foreign and international accounts 595,379 596,183 597,588 599,533 594,076 576,466 596,157 Federal Reserve note statement 35 Federal Reserve notes outstanding (issued to Banks) . 603,378 608,301 613,352 613,352 612,055 588,229 601,253 611,688 36 LESS: Held by Federal Reserve Banks 121,353 126,100 129,175 123,370 119,530 116,378 119,815 120,030 37 Federal Reserve notes, net 482,025 482,201 484,177 489.982 492,524 471,851 481.438 491,657 Collateral held against notes, net 38 Gold certificate account 11,041 11,041 11,041 11,041 11,046 11,041 11,041 11,046 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 461.785 461,960 463,937 469,741 472,278 451,610 461,197 471,412 42 Total collateral 482,025 482,201 484,177 489,982 492,524 471,851 481,438 491,657 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 All 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holding Millions of dollars Wednesday Type of holding and maturity 1998 1 Total loans 1,669 69 2 Within fifteen days1 44 157 1,668 51 4 6 2 1 18 12 3. Sixteen days to ninety days 459,233 456,440 457,505 457,995 465,814 454,465 462,961 467,308 4 Total U.S. Treasury securities2 13,380 15,130 12,481 14,480 23,470 8,752 16,007 16,325 5 Within fifteen days1 99,594 101,338 99,531 98,154 97,252 100,244 100,695 99,127 6 Sixteen days to ninety days 138.427 132,137 137,657 137,522 137,252 141,715 138,427 143,635 7 Ninety-one days to one year 107,348 107,349 107,349 107,349 107,350 106,109 107,348 107,730 8 One year to five years 44.818 44,818 44,820 44,820 44.822 42,034 44,817 44,822 9 Five years to ten years 55.667 55,667 55.667 55,667 55.668 55,611 55.666 55,668 10 More than ten years 11 Total federal agency obligations 3,335 1,226 4,891 2,727 4,373 3,926 6,540 7,687 12 Within fifteen days' 2,997 4,553 2,389 4,035 3,538 6.202 7,349 13 Sixteen days to ninety days 2 2 27 27 27 52 2 27 14 Ninety-one days to one year 100 100 75 75 75 93 100 75 15 One year to five years 51 51 61 61 61 58 51 61 16 Five years to ten years 185 185 175 175 175 185 185 175 17 More than ten years 0 0 0 0 0 0 0 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. inflation-indexed sec unties. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A12 Domestic Financial Statistics • March 1999 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 1995 1996 1997 1998 Dec. Dec. Dec. Dec. May July Aug. Sept. Seasonally adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS2 1 Total reserves3 56.40 50.08 46.67 44.91 45.59 45.39 44.81 45.00 44.59 44.39 44.57 44.91 2 Nonborrowed reserves 56.14 49.93 46.35 44.79 45.44 45 14 44.56 44.73 44.33 44.21 44.49 44.79 3 Nonborrowed reserves plus extended credit5 56.14 49.93 46.35 44.79 45.44 45.14 44.56 44.73 44.33 44.21 44.49 44.79 4 Required reserves 55.12 48.66 44.99 43.32 44.44 43.77 43.45 43.48 42.90 42.81 42.95 43.32 5 Monetary base6 434.17 452.38 480.15 513.95 489.10 491.63 493.70 497.38' 502.17' 506.08' 509.94' 513.95 Not seasonally adjusted 6 Total reserves 58.02 51.52 47.97 45.18 44.87 45.17 44.69 44.81 44.31 44.24 44.29 45.18 7 Nonborrowed reserves 57.76 51.37 47.65 45.06 44.71 44.92 44.43 44.54 44.06 44.07 44.21 45.06 8 Nonborrowed reserves plus extended credit1 57.76 51.37 47.65 45.06 44.71 44.92 44.43 44 54 44.06 44.07 44.21 45.06 9 Required reserves 56.74 50.10 46.29 43.59 43.72 43.55 43.32 43.30 42.63 42.67 42.67 43.59 10 Monetary base 439.03 456.72 485.11 518.36 488.28 491 18 495.35 497.56 501.05' 504.57' 510.24' 518.36 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS10 11 Total reserves11 57.90 51.24 47.88 45.02 44.81 45.10 44.60 44.71 44.19 44.12 44.15 45.02 12 Nonborrowed reserves 57.64 51.09 47.56 44.91 44.65 44.84 44.34 44.44 43.94 43.94 44.07 44.91 13 Nonborrowed reserves plus extended credit3 57.64 51.09 47.56 44.91 44.65 44.84 44.34 44.44 43.94 43.94 44.07 44.91 14 Required reserves 56.62 49.82 46.20 43.43 43.66 43.48 43.24 43.19 42.51 42.54 42.53 43.43 15 Monetary base 444.45 463.49 491.92 525.09 494.95 497.93 502.20 504.46' 507.86' 511.42' 517.01' 525.09 16 Excess reserves 1.28 1.42 1.6S 1.59 1.15 1.62 1.37 1.51 1.68 1.57 1.62 1.59 17 Borrowings from the Federal Reserve .26 .16 .32 .12 .15 25 .26 .27 .25 .17 .08 .12 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 adjusled. 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 terras 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 February 1984, currency and vault cash figures have been measured over requirements. the computation periods ending on Mondays. 7. Break-adjusted total reserves equal break-adjusted required reserves (line 9) plus excess 13. Unadjusted total reserves (line 11) less unadjusted required reserves (line 14). reserves (line 16). 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 1997 1998 Dec. Dec. Dec. Sept. Oct. Seasonally adjusted Measures 1 Ml 1,128.7 1,082.8 1,076.0 1,092.3 1,072.3 1,078.8 1,087.8 1,092.3 2 M2 3,651.2 3,826.1 4,046.4 4,412.3 4,289.9 4,334.8 4,373.6 4,412.3 3 M3 4,595.6 4,931.1 5,376.8 5,982.5 5,785.0 5,850.4 5,924.9 5,982.5 4 Debt 13,695.6 14,424.1 15,167.3 15,870.0 15,959.3 16,055.3 Ml components 5 Currency 372.4 394.9 425.5 460.1 449.6 453.4 456.8 460.1 6 Travelers checks4 8.9 8.6 8.2 8.3 7.9 8.1 8.2 8.3 7 Demand deposits5 391.0 403.6 397.1 376.7 373.7 374.2 376.3 376.7 8 Other checkable deposits6 356.4 275.9 245.2 247.2 241.2 243.1 246.5 247.2 Nontransaction components 9 In M27 2,522.6 2,743.2 2,970.4 3,320.1 3,217.6 3,256.0 3,285.7 3,320.1 10 In M3 only8 944.4 1,105.0 1,330.4 1,570.2 1,495.1 1,515.5 1,551.3 1,570.2 Commercial banks 11 Savings deposits, including MMDAs . . 775.0 904.8 1,020.9 1,189.3 1,135.2 1,150.3 1,167.0 1,189.3 12 Small time deposits9 575.8 594.5 625.7 626.4 626.5 627.2 628.6 626.4 13 Large time deposits10' " 345.4 413.2 487.5 535.9 529.7 527.6 534.0 535.9 Thrift institutions 14 Savings deposits, including MMDAs . . 359.7 366.9 376.6 415.1 402.6 406.6 410.7 415.1 15 Small time deposits 357.2 354.3 343.9 326.8 331.8 331.5 328.6 326.8 16 Large time deposits10 74.2 78.0 85.4 88.6 86.5 87.0 87.4 Money market mutual funds 17 Retail 454.9 522.8 603.2 762.4 721.5 740.3 750.8 762.4 18 Institution-only 253.9 310.3 376.2 511.6 457.5 480.7 498.5 511.6 Repurchase agreements and Eurodollars 19 Repurchase agreements 182.4 194.2 236.1 283.4 272.1 267.5 277.8 283.4 20 Eurodollars12 88.6 109.2 145.3 150.7 149.4 152.8 153.6 150.7 Debt components 21 Federal debt 3,638.9 3,780.6 3,798.4 3,760.0 3,750.3 3,748.9 n.a. 22 Nonfederal debt 10,056.7 10,643.5 11,368.9 12,110.0 12,209.0 12,306.4 n.a. Not seasonally adjusted Measures 23 Ml 1,152.4 1,104.9 1,097.6 1,113.4 1,069.0 1,075.1 1,092.7 1,113.4 24 M2 3,672.0 3,845.4 4,065.3 4,431.4 4,281.2 4,320.7 4,375.3 4,431.4 25 M3 4,615.2 4,948.9 5,394.0 6,000.4 5,769.3 5,841.2 5,929.6 6,000.4 26 Debt 13,697.0 14,424.4 15,166.8 n.a. 15,835.9 15,922.1 16,037.7 Ml components 27 Currency3 376.2 397.9 429.0 464.1 448.3 452.6 457.4 464.1 28 Travelers checks4 8.5 8.3 7.9 8.0 8.1 8.2 8.1 8.0 29 Demand deposits 407.2 419.9 413.0 391.8 372.7 373.0 381.2 391.8 30 Other checkable deposits6 360.5 278.8 247.7 249.6 239.9 241.3 246.0 249.6 Nontransaction components 31 InM27 2,519.6 2,740.5 2,967.8 3,318.0 3,212.1 3,245.6 3,282.6 3,318.0 32 In M3 only8 943.2 1,103.5 1,328.6 1,569.0 1,488.1 1,520.6 1,554.3 1,569.0 Commercial banks 3 3 3 4 5 3 S S L a m a v r a g in ll e ll gg t t s ii i m m d e e e pp d d o de e s sp p it o o s i , s s t i i i ts t n s s 9 c 9 10 luding MMDAs 7 5 3 7 7 4 4 3 5 . . 8 8 1 9 4 5 1 0 9 3 3 2. . . 7 6 3 1, 4 6 0 8 2 1 8 4 9 . . . 1 0 0 1, 6 5 1 3 2 8 6 5 7 . . . 4 0 0 1, 6 5 1 2 3 3 6 2 3 . . . 1 1 5 1, 6 5 1 3 2 4 5 7 6 . . . 6 2 1 1, 6 5 1 4 2 6 0 7 6 . . . 2 9 3 1, 6 5 1 3 2 8 6 5 7 . . . 4 0 0 Thrift institutions 36 Savings deposits, including MMDAs 359.2 366.4 375.9 414.3 402.0 405.2 410.4 414.3 37 Small time deposits 355.9 353.2 343.0 326.0 331.6 331.5 328.2 326.0 38 Large time deposits10 74.3 78.1 85.4 88.6 86.9 88.4 88.6 Money market mutual funds 39 Retail 456.4 524.8 605.8 765.7 719.0 735.6 749.9 765.7 40 Institution-only 255.8 312.7 378.9 515.7 451.3 475.4 497.3 515.7 Repurchase agreements and Eurodollars 41 Repurchase agreements 178.0 188.8 229.4 275.5 270.1 270.0 276.4 275.5 42 Eurodollars'2 89.4 110.3 146.9 152.8 147.7 151.2 152.0 152.8 Debt components 43 Federal debt .... 3,645.9 3,787.9 3,805.8 3,743.4 3,727.8 3,746.7 44 Nonfederal debt 10,051.1 10,636.5 11,361.1 12,092.5 12,194.3 12,291.1 Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Financial Statistics • March 1999 NOTES TO TABLE 1.21 1. Latest monthly and weekly figures are available from the Board's H.6 (508) weekly prises or federally related mortgage pools) and the nonfederal sectors (state and local statistical release. Historical data starting in 1959 are available from the Money and Reserves governments, households and nonprofit organizations, nonfinancial corporate and nonfarm Projections Section, Division of Monetary Affairs, Board of Governors of the Federal Reserve noncorporate businesses, and farms). Nonfederal debt consists of mortgages, tax-exempt and System, Washington, DC 20551. corporate bonds, consumer credit, bank loans, commercial paper, and other loans. The data, 2. Composition of the money stock measures and debt is as follows: which are derived from the Federal Reserve Board's flow of funds accounts, are break- Ml: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of adjusted (that is, discontinuities in the data have been smoothed into the series) and depository institutions, (2) travelers checks of nonbank issuers, (3) demand deposits at all month-averaged (that is, the data have been derived by averaging adjacent month-end levels). commercial banks other than those owed to depository institutions, the U.S. government, and 3. Currency outside the U.S. Treasury, Federal Reserve Banks, and vaults of depository foreign banks and official institutions, less cash items in the process of collection and Federal institutions. Reserve float, and (4) other checkable deposits (OCDs), consisting of negotiable order of 4. Outstanding amount of U.S. dollar-denominated travelers checks of nonbank issuers. withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, Travelers checks issued by depository institutions are included in demand deposits. credit union share draft accounts, and demand deposits at thrift institutions. Seasonally 5. Demand deposits at commercial banks and foreign-related institutions other than those adjusted Ml is computed by summing currency, travelers checks, demand deposits, and owed to depository institutions, the U.S. government, and foreign banks and official institu- OCDs, each seasonally adjusted separately. tions, less cash items in the process of collection and Federal Reserve float. M2: Ml plus (1) savings deposits (including MMDAs), (2) small-denomination time 6. Consists of NOW and ATS account balances at all depository institutions, credit union deposits (time deposits—including retail RPs—in amounts of less than $100,000), and (3) share draft account balances, and demand deposits at thrift institutions. balances in retail money market mutual funds. Excludes individual retirement accounts 7. Sum of (1) savings deposits (including MMDAs), (2) small time deposits, and (3) retail (IRAs) and Keogh balances at depository institutions and money market funds. Seasonally money fund balances. adjusted M2 is calculated by summing savings deposits, small-denomination time deposits, 8. Sum of (1) large time deposits, (2) institutional money fund balances, (3) RP liabilities and retail money fund balances, each seasonally adjusted separately, and adding this result to (overnight and term) issued by depository institutions, and (4) Eurodollars (overnight and seasonally adjusted Ml. term) of U.S. addressees. M3: M2 plus (1) large-denomination time deposits (in amounts of $100,000 or more) 9. Small time deposits—including retail RPs—are those issued in amounts of less than issued by all depository institutions, (2) balances in institutional money funds, (3) RP $100,000. All IRAs and Keogh accounts at commercial banks and thrift institutions are liabilities (overnight and term) issued by all depository institutions, and (4) Eurodollars subtracted from small time deposits. (overnight and term) held by U.S. residents at foreign branches of U.S. banks worldwide and 10. Large time deposits are those issued in amounts of $100,000 or more, excluding those at all banking offices in the United Kingdom and Canada. Excludes amounts held by booked at international banking facilities. depository institutions, the U.S. government, money market funds, and foreign banks and 11. Large time deposits at commercial banks less those held by money market funds, official institutions. Seasonally adjusted M3 is calculated by summing large time deposits, depository institutions, the U.S. government, and foreign banks and official institutions. institutional money fund balances, RP liabilities, and Eurodollars, each seasonally adjusted 12. Includes both overnight and term. separately, and adding this result to seasonally adjusted M2. Debt: The debt aggregate is the outstanding credit market debt of the domestic nonfinancial sectors—the federal sector (U.S. government, not including government-sponsored enter- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities A15 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1 A. All commercial banks Billions of dollars Monthly averages Wednesday figures July Aug. Sept. Oct. Nov. Dec. 23 Seasonally adjusted Assets 1 Bank credit 4,095.0' 4,263.7 4,280.5 4,341.6 4,398.9 4,488.8 4,529.7 4,552.1 4,565.3 4,562.5 4,549.0 4,538.6 2 Securities in bank credit 1,081.9 1,121.6 1,130.4 1,156.5 1,177.1 1,217.8 1,226.6 1,235.8 1.237.5 1,238.1 1,239.3 1,232.0 3 U.S. government securities 747.3 756.9 760.7 771.2 767.4 774.3 790.7 792.9 791.4 785.0 794.3 800.9 4 Other securities 334.6 364.7 369.8 385.3 409.7 443.5 435.9 443.0 446.1 453.1 445.0 431.1 5 Loans and leases in bank credit2 ... 3,013.1' 3,142.1 3,150.1 3,185.2 3,221.9 3,271.0 3,303.0 3,316.3 3,327.8 3,324.4 3,309.6 3,306.7 6 Commercial and industrial 853.9' 887.0 897.7 906.1 918.3 938.8 947.0 945.0 950.7 948.7 942.9 938.1 7 Real estate 1,230.7' 1,274.4 1271.6 1,280.9 1,283.2 1,287.6 1,309.7 1,323.9 1,331.0 1,319.9 1,319.3 1,325.4 8 Revolving home equity 97.7 97.8 97.5 97.6 97.9 97.0 97.4 97.4 97.6 97.8 97.3 97.1 9 Other 1,133.(7 1,176.7 1,174.1 1,183.3 1,185.3 1,190.6 1,212.3 1,226.5 1,233.5 1,222.1 1.222.0 1,228.3 10 Consumer 506.5 503.2 496.3 495.0 497.9 497.5 500.0 503.7 501.3 504.7 504.4 506.0 11 Security3 97.6 130.2 131.9 137.7 142.9 158.9 152.5 151.4 150.0 152.7 156.1 148.4 12 Other loans and leases 324.4' 347.3 352.5 365.3 379.6 388.2 393.9 392.3 394.8 398.4 386.9 388.7 13 Interbank loans 209.7 217.8 213.2 206.1 219.8 220.2 219.8 214.9 206.7 214.6 221.1 219.0 14 Cash assets4 262.9 250.4 243.5 251.6 253.3 243.1 249.7 249.5 260.4 241.3 259.4 237.2 15 Other assets5 296.0 312.5 312.7 318.1 323.3 323.1 327.0 329.0 323.4 332.3 331.3 329.0 16 Total assets6 4*06.9' 4,986.8 4^192.2 5.(160.2 5,137.9 5,2173 5,268.1 5,2873 5.297.9 5,292.7 5302^ 5,265.4 Liabilities 17 Deposits 3,112.1 3,222.4 3,191.2 3,221.7 3,244.2 3268.7 3,312.2 3,321.0 3,321.2 3,316.5 3,340.4 3,303.8 18 Transaction 688.1 682.7 664.7 665.3 675.0 666.1 666.0 665.2 649.3 652.6 692.2 673.6 19 Nontransaction 2,424.1 2,539.7 2,526.5 2,556.4 2,569.3 2,602.6 2,646.2 2,655.8 2.671.9 2,663.9 2,648.2 2,630.2 20 Large time 636.7 685.7 668.1 680.3 685.9 697.6 709.2 702.1 708.0 704.1 697.8 695.1 21 Other 1,787.3 1,854.0 1,858.3 1,876.0 1,883.3 1,905.0 1,936.9 1,953.7 1,963.9 1,959.8 1,950.3 1,935.0 22 Borrowings 819.2 858.4 857.7 859.9 888.8 936.4 974.8 984.7 992.2 990.0 976.9 985.0 23 From banks in the U.S 305.0 289.4 295.3 298.1 308.4 319.7 328.5 326.6 329.7 330.4 319.9 324.9 24 From others 514.2 569.0 562.5 561.8 580.4 616.7 646.3 658.1 662.4 659.6 657.0 660.1 25 Net due to related foreign offices \9A.9 170.7 187.6 203.8 202.7 226.1 218.4 217.2 227.7 214.4 213.3 216.3 26 Other liabilities 280.91 308.7 322.1 334.9 344.2 359.3 341.0 342.9 336.0 346.8 342.7 346.7 27 Total liabilities 4407.1' 4,560.2 4,558.6 4,6203 4,679.9 4,790.5 4*46.5 4,865.7 4*77.1 4*67.7 4*733 28 Residual (assets less liabilities)7 399.7' 426.5 433.7 439.9 457.9 426.8 421.6 421.5 420.8 425.0 429.2 Not seasonally adjusted Assets 29 Bank credit 4.104.91 4,265.0 4,274.4 4,328.1 4,385.8 4,492.3 4,538.0 4,562.9 4,562.7 4,572.0 4,555.7 4,565.9 30 Securities in bank credit 1,077.1' 1,124.5 1,124.8 1,147.9 1,164.9 1,214.1 1,226.2 1,231.0 1,235.1 1,231.3 1,227.9 1,230.3 31 U.S. government securities 745.2 759.4 756.8 766.3 762.3 771.7 791.9 791.4 794.5 785.3 790.2 794.4 32 Other securities 331.8 365.2 368.0 381.6 402.6 442.4 434.3 439.5 440.7 446.0 437.7 435.9 33 Loans and leases in bank credit2 ... 3,027.8' 3,140.5 3,149.7 3,180.2 3,220.9 3,278.2 3,311.8 3,331.9 3,327.6 3,340.6 3,327.8 3.335.6 34 Commercial and industrial 852.1' 889.7 897.3 900.1 912.9 936.7 945.5 942.9 941.8 944.6 943.0 942.6 35 Real estate 1,234.1 1,272.0 1,273.7 1,284.5 1,288.1 1,294.3 1,316.3 1,327.5 1,336.9 1,324.6 1,320.8 1,327.5 36 Revolving home equity 98.0 97.5 97.6 97.8 98.6 97.8 98.1 97.7 97.9 98.0 97.4 97.5 37 Other 1,136.1 1,174.5 1,176.1 1,186.7 1,189.5 1,196.5 1,218.2 1,229.8 1,239.0 1,226.5 1,223.4 1,230.0 38 Consumer 512.8 500.3 494.4 496.7 500.7 499.3 502.5 510.0 504.1 510.2 512.2 515.4 39 Security' 100.3 130.1 129.7 133.2 139.5 159.3 153.8 154.3 151.9 158.4 159.4 149.8 40 Other loans and leases 328.4 348.3 354.6 365.7 379.8 388.5 393.6 397.2 392.9 402.8 392.4 400.5 41 Interbank loans 219.1 214.4 206.8 199.0 214.2 216.2 226.3 224.8 217.7 228.4 225.7 227.7 42 Cash assets4 282.1 245.3 239.1 239.3 251.2 246.9 259.0 267.7 254.6 262.8 269.9 283.3 43 Other assets5 296.3 311.0 314.0 320.0 324.5 322.3 328.1 329.0 323.7 332.5 328.5 330.8 44 Total assets6 4*45.6' 4,978^ 4^76.6 5,028.9 5,117.9 5,219.8 5,293.2 5326.2 5300.5 5337.4 532U 5349.6 Liabilities 45 Deposits 3,144.6 3,214.5 3,183.7 3,211.6 3,248.4 3,272.4 3,330.7 3,353.0 3,334.4 3,354.0 3,352.6 3,366.3 46 Transaction 722.4 677.8 659.8 651.9 670.3 662.1 676.7 698.9 652.6 690.2 713.9 746.6 47 Nontransaction 2,422.2 2,536.7 2,523.8 2,559.6 2,578.1 2,610.3 2,654.0 2,654.0 2,681.9 2,663.8 2,638.7 2,619.7 48 Large time 641.3 683.4 664.8 679.4 687.6 701.5 715.4 707.2 715.4 709.6 703.0 698.1 49 Other 1,780.9 1,853.3 1,859.0 1,880.2 1,890.5 1,908.8 1,938.6 1,946.8 1,966.5 1,954.1 1,935.7 1,921.6 50 Borrowings 817.2 868.1 862.1 852.6 891.9 932.3 970.7 979.8 971.2 987.9 981.0 983.0 51 From banks in the U.S 308.8 292.3 295.4 294.1 307.2 315.7 328.8 330.7 329.8 335.7 327.6 328.8 52 From others 508.4 575.8 566.6 558.5 584.7 616.7 641.9 649.1 641.4 652.2 653.4 654.2 53 Net due to related foreign offices 193.7' 176.6 189.1 203.6 202.3 223.7 216.5 218.2 223.1 213.8 215.7 224.8 54 Other liabilities 281.9 308.0 321.4 334.9 343.9 359.0 342.4 343.9 337.3 347.7 343.3 347.7 55 Total liabilities 4,4373' 4,567.2 4,5563 4,602.6 4,686.6 4,787.4 4,860.2 4,894.9 4*66.0 4,903.4 4,892.6 4JI21* 56 Residual (assets less liabilities)7 408.3 411.0 420.3 426.3 431.3 432.4 433.0 431.3 434.6 434.1 428.9 427.8 MEMO 57 Revaluation gains on off-balance-sheet items8 82.5 92.7 92.7 95.7 110.0 130.1 110.0 119.2 123.8 114.4 112.5 58 Revaluation losses on off-balancesheet itemss 85.8 90.6 90.6 96.5 110.7 128.1 109.4 116.3 120.1 113.3 112.0 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Financial Statistics • March 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 Dec. June July Aug. Sept. Oct. Nov. Dec. Dec. 9 Dec. 16 Dec. 23 Dec. 30 Seasonally adjusted Assets I Bank credit 3.551.6' 3,695.5 3,708.4 3 753.2 3.794.4 3,864.1 3,909.6 3,950.9 3,951.9 !,951.4 3,957.0 3 951.9 2 Securities in bank credit 895.8 921.4 929.3 944.1 961.6 995.9 1,002.8 1,019.1 1,017.4 1,021.5 1,024.9 1,017.5 3 U.S. government securilies 670.7 668.4 669.6 677.1 685.2 694.1 710.2 711.8 712.0 704.3 712.9 718.0 4 Other securities 225.0 253.0 259.6 266.9 276.5 301.8 292.5 307.2 305.4 317.2 312.1 299.5 5 Loans and leases in bank credit- 2,655.9r 2,774.1 2,779.1 2.809.2 2.832.7 2,868.2 2,906.8 2 931 9 2 934 5 2 929 9 2 932 1 2 934 4 6 Commercial and industrial 633.5' 675.2 683.6 692.0 700.3 715.0 723.1 726.9 725.2 726.7 728.5 728.2 7 Real estate 1,204 8 1,250 3 1,247 6 1 257.1 1 259 6 1 264 4 1 287 6 1 303 2 1 309 9 1 299 2 1 298 9 1 305 1 8 Revolving home equiw 97.7 97.8 97.5 ' 97.6 97.9 97.0 97.4 97.4 97.6 97.8 97.3 97.1 9 Other 1,107.1 1 152 5 1 150 1 1 159.5 1,161.7 1,167.4 1,190.2 1,205.8 1,212.3 1,201.4 1,201.6 1,208.0 10 Consumer 506.5 503.2 496.3 495.0 497.9 497.5 500.0 503.7 501.3 504.7 504.4 506.0 11 Security^ 52.9 67.6 69.9 73.5 75.2 89.2 87.5 85.4 85.7 85.5 88.7 82.6 12 Other loans and leases 258.3' 277.9 281.6 291.5 299.6 302.1 308.5 312.6 312.5 313.8 311.5 312.5 13 Interbank loans 178.5 193.9 192.3 186.1 191.4 194.8 193.3 187.8 186.6 190.3 188.5 186.8 14 Cash assets4 229.6 215.6 208.5 217.8 219.3 207.7 216.2 215.7 226.0 205.9 227.2 204.0 15 Other assets^ 252.8 278.7 278.7 282.4 285.5 283.9 290.5 289.9 285.1 290.9 291.7 290.6 16 Total assets6 4,156.0r 4.326.4 4,330.4 4,382.6 4,433.3 4,492.8 4,551.7 4,586.4 4,592.0 4,580.7 4,606.4 4,575.2 Liabilities 17 Deposits 2,839.6 2,919.3 2,893.6 2 915.8 2,929.7 2,949.8 2.996.9 3,013.6 3,008.9 3,007.1 3,036.7 3,002.0 18 Transaction 678.2 671.6 651.0 653.1 659.7 650.9 653.7 654.5 639.0 641.7 681.0 663.8 19 Nontransaction 2,161.4 2.247.7 2.242.6 2,262.7 2,270.0 2,298.9 2,343.2 2,359.2 2,369.9 2,365.4 2,355.8 2,338.1 20 Large time 176.9 393.4 385.1 385.1 384.3 397.5 410.5 409.0 409.5 409.4 408.5 406.7 21 Other 1.784.5 1.854.3 1,857.5 1,877.7 1,885.7 1,901.4 1,932.7 1,950.2 1,960.4 1,956.0 1,947.3 1,931.4 22 Borrowings 669.7 691.4 690.0 694.7 709.8 750.9 789.2 805.3 815.5 803.6 796.6 811.2 23 From banks in the US 279.2 259.9 269.5 276.1 278.2 287.8 295.1 298.1 302.3 296.6 292.0 302.1 24 From others 390.6 431.5 420.5 418.5 431.6 463.2 494.2 507.2 513.2 506.9 504.6 509.1 25 Net due to related foreign offices 73.2 73.4 79.8 93.6 105.6 116.9 116.3 114.9 122.5 112.2 112.6 113.4 26 Other liabilities 185.2' 218.8 228.6 235.5 240.2 252.0 238.7 242.2 233.1 241.6 245.1 249.3 27 Total liabilities 3,767.8r 3,902.9 3,892.0 3,939.6 3,985.4 4,069.6 4,141.2 4,176.0 4,180.0 4,164.4 4,191.1 4,175.9 28 Residual (assets less liabilities)7 388.3' 423.5 438.4 443.0 447.9 423.2 410.5 410.4 412.0 416.2 415.3 399.2 Not seasonally adjusted Assets 29 Bank credit 3 562 3' 1693 8 3 699 5 3,737.2 3,786.4 3,868.3 3,925.5 3,963.2 3,956.2 3,962.9 3,964.4 3,973.8 30 Securities in bank credit 894.7 921.2 920.9 931.3 952.8 991.8 1,007.7 1.018.4 1,018.4 1,017.3 1,019.1 1,020.1 31 U.S. governmenl securities 669.0 670.8 666.1 671.5 680.1 691.0 710.5 710.7 714.0 704.7 710.0 712.8 32 Other securities 225.7 250.4 254.8 259.8 272.8 300.9 297.2 307.7 304.4 312.6 309.1 307.3 33 Loans and leases in bank credit- .... 2,667.5' 2,772.7 2,778.6 2,805.9 2,833.6 2,876.4 2,917.8 2,944.8 2,937.8 2,945.6 2,945.2 2,953.7 34 Commercial and industrial 630.8 678.0 683.5 687.1 695.9 713.1 722.0 724.0 718.5 723.2 726.5 728.3 35 Real estate 1,208.1 1,248.0 1,250.0 1 260.8 1,264.6 1.270.8 1.294.1 1,306.7 1,315.6 1,303.8 1,300.5 1,307.1 36 Revolving home equity 98.0 97.5 97.6 97.8 98.6 97.8 98.1 97.7 97.9 98.0 97.4 97.5 37 Other 1 110 1 1 150 5 1,152.4 1 16.3.0 1,166.0 1,173.0 1,195.9 1,209.0 1,217.7 1,205.7 1,203.1 1,209.6 38 Consumer 512.8 500.3 494.4 496.7 500.7 499.3 502.5 510.0 504.1 510.2 512.2 515.4 39 Security' 54.1 67.7 68.3 69.8 72.2 89.6 89.1 87.2 87.8 90.0 90.6 81.6 40 Other loans and leases 261.6 278.6 282.4 291.5 300.3 303.6 310.2 316.9 311.8 318.4 315.5 321.4 41 Interbank loans 187.9 190.5 185.9 179.1 185.8 190.8 199.8 197.7 197.6 204.1 193.1 195.5 42 Cash assets4 247.2 209.6 204.2 205.5 217.1 211.2 224.6 232.2 219.1 225.6 235.6 248.2 43 Other assets5 252.4 278.0 280.3 283.5 286.7 284.0 291.1 289.3 283.7 290.0 289.0 292.6 44 Total assets6 4,193.2r 4,314.6 4,312.4 4,348.0 4,418.4 4,496.7 4,583.0 4,624.5 4,598.7 4,624.7 4,624.0 4,652.2 Liabilities 45 Deposits 2,869.0 2,909.6 2,887.9 2,906.9 2,932.3 2,954.0 3.016.5 3,042.5 3.020.7 3,042.2 3,043.3 3.059.6 46 Transaction 712.1 666.6 646.0 639.7 654.4 646.8 664.4 687.7 642.2 678.7 702.1 736.0 47 Nontransaction 2.156.9 2,243.0 2,241.9 2,267.2 2,278.0 2,307.2 2,352.0 2.354.8 2,378.5 2,363.6 2,341.2 2,323.6 48 Large time 377.1 391.0 384.0 387.5 387.8 400.9 415.5 409.5 413.6 411.0 407.1 403.6 49 Other 1,779.8 1,851.9 1,857.9 1,879.8 1,890.2 1.906.3 1,936.5 1,945.3 1,965.0 1,952.6 1,934.1 1,920.0 50 Botrowin°s 667.7 701.1 694.4 687.4 713.0 746.8 785.1 800.4 794.5 801.4 800 7 809 3 51 From banks in the U.S 283.0 262.8 269.7 272.1 277.0 283.7 295.4 302.2 302.4 301.9 299.8 306.0 52 From others 384.8 438.2 424.7 415.2 435.9 463.1 489.7 498.2 492.1 499.6 500.9 503.2 53 Net due to related foreign offices 67.1 80.1 84.9 96.7 106.8 115.5 113.7 111.3 119.6 108.7 109.2 109.1 54 Other liabilities 185.2' 218.8 228.6 235.5 240.2 252.0 238.7 242.2 233.1 241.6 245.1 249.3 55 Total liabilities 3.789.0' 3,909.6 3,895.7 3,926.5 3,992.3 4,068.4 4,154.0 4,196.5 4,167.9 4,193.9 4,198.4 4,227.3 56 Residual (assets less liabilities)7 .... 404.1' 405.1 416.7 421.5 426.1 428.3 429.0 428.0 430.8 430.7 425.6 424.9 MEMO 57 Revaluation gains on off-balance-sheet items* 41.0 50.5 51.0 51.9 61.7 78.7 62.7 n.a. 68.3 73.0 69.5 66.8 58 Revaluation losses on off-balancesheet items*' 43.9 50.1 50.4 54.2 65.1 80.5 65.1 n.a. 69.1 73.2 71.9 69.8 59 Mortgage-backed securities1' 281.1 291.2 294.4 301.9 314.0 337.2 346.4 n.a. 348.6 343.6 344.4 347.7 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 1997 1998' Dec.' July Aug. Sept. Oct. Nov. Dec. 23 Dec. 30 Seasonally adjusted Assets 1 Bank credit 2,171.7 2,275.4 2,274.4 2305.1 2,336.2 2,391.9 2,411.9 2,434.1 2,439.5 2,434.5 2,439.1 2,430.6 2 Securities in bank credit 494.6 519.5 521.5 532.2 547.0 572.6 569.4 577.6 578.4 580.7 582.6 573.4 3 U.S. government securities .... 355.1 356.9 355.4 361.3 367.8 371.8 380.1 376.6 378.1 369.7 377.1 381.2 4 Trading account 27.4 23.4 20.4 21.3 22.0 20.9 23.4 24.0 22.6 21.3 25.8 26.8 5 Investment account 327.7 333.5 335.0 340.0 345.8 350.9 356.7 352.6 355.6 348.4 351.2 354.4 6 Other securities 139.5 162.7 166.1 170.9 179.2 200.8 189.3 201.0 200.2 211.0 205.5 192.3 7 Trading account 63.3 79.5 81.1 83.1 89.5 109.1 92.5 99.9 99.7 109.4 103.8 90.9 8 Investment account 76.2 83.2 85.0 87.7 89.8 91.7 96.8 101.1 100.6 101.7 101.7 101.4 9 State and local government 22.1 22.2 22.4 22.6 23.2 23.9 24.6 25.0 24.8 25.0 25.0 25.1 10 Other 54.0 60.9 62.6 65.1 66.6 67.8 72.2 76.2 75.8 76.7 76.8 76.3 11 Loans and leases in bank credit2 . 1,677.1 1,755.9 1,752.8 1,772.9 1,789.1 1,819.3 1,842.5 1,856.5 1,861.1 1,853.8 1,856.5 1,857.2 12 Commercial and industrial .... 458.0 490.4 497.6 502.9 508.9 521.4 527.7 529.6 528.3 529.6 531.0 530.4 13 Bankers acceptances 1.3 1.2 1.3 1.3 1.3 1.2 1.2 1.2 1.3 1.3 1.3 1.3 14 Other 456.8 489.2 496.3 501.7 507.6 520.2 526.5 528.4 528.7 530.0 531.3 530.7 15 Real estate 677.1 695.0 686.6 687.8 685.5 686.1 698.6 705.9 714.6 703.0 701.0 705.2 16 Revolving home equity 69.4 69.1 68.7 68.6 68.8 68.0 67.7 67.5 67.6 67.8 67.5 67.2 17 Other 607.7 625.8 617.9 619.2 616.7 618.1 630.8 638.5 647.0 635.3 633.6 638.0 18 Consumer 302.8 301.8 294.6 295.8 298.7 299.7 300.6 301.8 301.1 301.5 301.6 303.5 19 Security3 47.4 61.6 63.9 67.4 68.9 82.7 79.0 78.9 79.1 82.5 76.5 20 Federal funds sold to and repurchase agreements with broker-dealers .... 31.1 42.9 44.9 48.0 50.1 64.7 63.6 62.8 62.1 63.6 66.5 59.7 21 Other 16.3 18.7 19.0 19.4 18.8 18.0 17.3 16.3 16.8 15.5 16.0 16.9 22 State and local government .. 11.9 11.6 11.1 11.5 11.5 11.6 11.9 11.6 11.6 11.6 11.5 11.6 23 Agricultural 10.1 10.1 10.0 10.0 10.0 9.9 10.0 10.1 10.1 10.1 10.2 10.2 24 Federal funds sold to and repurchase agreements with others 11.6 5.6 8.9 12.4 12.9 12.4 16.1 14.6 17.8 15.2 17.9 25 All other loans 75.2 85.3 83.9 93.2 93.5 97.8 96.5 97.8 96.4 96.3 94.6 26 Lease-financing receivables 83.0 94.4 96.3 98.7 100.0 101.4 102.8 105.7 104.1 104.7 107.2 107.3 27 Interbank loans 127.8 128.0 123.9 115.7 117.5 119.0 119.3 120.5 118.7 123.8 120.3 120.9 28 Federal funds sold to and repurchase agreements with commercial banks 87.4 77.2 70.1 62.5 64.2 73.6 75.2 73.6 73.7 77.7 71.3 72.1 29 Other 40.4 50.8 53.8 53.2 53.4 45.4 44.0 46.9 45.0 46.2 49.0 48.8 30 Cash assets4 162.2 149.1 143.8 151.2 151.3 141.0 147.9 147.7 157.6 139.4 155.8 138.5 31 Other assets5 196.2 214.8 215.7 219.3 219.8 215.8 218.2 216.9 211.6 218.1 218.2 218.9 32 Total assets6 2,620.4 2,729.4 2,720.0 2,754.0 2,7873 2329.8 2359.4 2381.4 2389.7 2378.1 23953 23703 Liabilities 33 Deposits 1,613.0 1,644.3 1,620.1 1,627.8 1,628.2 1,639.7 1,666.3 1,672.6 1,671.5 1,669.3 1,689.4 1,660.8 34 Transaction 392.8 383.2 367.8 369.3 373.1 366.6 368.3 367.3 357.6 358.8 384.6 372.7 35 Nontransaction 1,220.2 1,261.1 1,252.3 1,258.5 1,255.1 1,273.1 1,298.1 1,305.4 1,313.9 1,310.5 1,304.8 1,288.2 36 Large time 215.8 222.5 216.1 214.9 209.8 221.5 230.3 230.0 230.4 231.1 229.8 227.7 37 Other 1,004.4 1,038.5 1,036.2 1,043.5 1,045.3 1,051.6 1,067.7 1,075.4 1,083.5 1,079.5 1,075.0 1,060.4 38 Borrowings 519.3 532.5 526.6 531.8 544.5 579.2 610.0 621.2 630.9 620.2 613.4 625.5 39 From banks in the US 209.3 188.8 190.5 197.5 198.4 204.0 208.1 209.3 212.8 207.4 204.1 213.3 40 From others 310.0 343.7 336.1 334.2 346.2 375.3 401.8 411.8 418.1 412.9 409.3 412.2 41 Net due to related foreign offices 68.9 69.6 76.1 89.9 101.8 112.3 112.7 111.3 118.9 109.0 108.9 109.3 42 Other liabilities 157.3 189.0 198.5 204.9 209.6 220.2 206.0 209.7 200.5 208.9 212.8 216.8 43 Total liabilities 23583 2,435.4 14213 2/1543 2,484.2 2395.0 2,614.7 2,6213 2,6074 2,624.6 2.61Z5 44 Residual (assets less liabilities)7 . .. 261.9 294.0 298.6 299.7 303.2 264.4 266.7 267.9 270.8 270.9 258.3 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Financial Statistics • March 1999 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued C. Large domestically chartered commercial banks—Continued Monthly averages Wednesdiy figures Account 1997 1998' 1998 Dec' June July Aug. Sept. Oct. Nov. Dec. Dec. 9 Dec. 16 Dec. 23 Dec. 30 Not seasonally adjusted Assets 45 Bank credit 2,181.6 2,269.0 2,267.4 2,289.6 2,326.1 2,396.3 2,428.6 2,445.9 2,446.5 2,446.5 2,442.1 2,449.7 46 Securities in bank credit 495.4 516.2 514.5 520.5 539.0 571.6 577.7 578.9 582.7 578.9 577.1 576.9 47 U.S. government securities 354.9 356.6 353.1 356.5 363.1 371.0 383.2 377.0 382.6 371.9 374.5 377.0 48 Trading account 27.0 22.5 19.9 21.2 21.9 21.9 24.6 23.6 24.5 21.9 24.2 23.4 49 Investment account 327.9 334.1 333.3 335.3 341.2 349.0 358.6 353.5 358.1 350.0 350.3 353.6 50 Mortgage-backed securities . . 217.1 217.7 219.1 225.9 236.5 255.3 258.0 n.a. 256.7 250.8 251.6 253.1 51 Other 111.1 116.7 114.5 109.7 105.0 93.9 100.5 n.a. 101.4 99.1 98.7 100.5 52 One year or less 30.0 31.6 30.4 29.0 27.7 26.1 27.2 n.a. 27.0 25.7 26.3 26.9 53 One to five years 56.9 49.2 52.1 48.9 44.2 37.2 38.2 n.a. 38.8 38.4 38.5 38.0 54 More than five years ... 24.2 35.9 31.9 31.8 33.0 30.6 35.2 n.a 35.6 35.0 33.9 35.7 55 Other securities 140.5 159.6 161.3 164.0 175.9 200.7 194.5 201.8 200.1 207.0 202.6 199.9 56 Trading account 63.6 76.7 77.0 76.8 86.4 108.8 96.4 99.6 98.2 104.3 100.1 97.6 57 Investment account 77.0 82.9 84.3 87.2 89.4 91.9 98.0 102.2 101.9 102.7 102.5 102.3 58 State and local government .. 22.2 22.4 22.3 22.7 23.2 24.0 24.6 25.0 24.8 25.0 25.0 25.1 59 Other 54.8 60.6 62.1 64.6 66.2 67.9 73.4 77.2 77.1 77.8 77.5 77.2 60 Loans and leases in bank credit2 .. 1,686.2 1,752.8 1,752.9 1,769.1 1,787.1 1,824.6 1,851.0 1,867.0 1,863.8 1,867.7 1,865.0 1,872.7 61 Commercial and industrial 456.0 491.5 497.7 499.5 506.0 521.1 527.8 527.2 522.9 527.0 528.9 530.2 62 Bankers acceptances 1.3 1.2 1.2 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 63 Other 454.6 490.3 496.5 498.3 504.6 519.8 526.5 525.9 521.6 525.6 527.6 528.9 64 Real estate 679.5 692.1 688.9 691.1 688.8 690.2 702.8 708.5 719.3 706.5 701.2 706.4 65 Revolving home equity 69.7 68.9 68.9 68.9 69.4 68.6 68.4 67.8 68.0 68.1 67.5 67.6 66 Other 371.0 382.2 382.8 384.5 380.6 382.6 393 6 n.a. 4099 3961 3907 395.4 67 Commercial 238.4 237.0 236.8 237.3 238.4 238.6 240.1 n.a. 241.4 242.3 243.0 243.4 68 Consumer 306.7 300.6 294.4 297 3 3007 3006 3016 305 8 3024 305.1 305.8 310.4 69 Security3 48.7 61.7 62.3 63.7 65.8 83.1 82.3 80.8 81.1 83.6 84.4 75.6 70 Federal funds sold to and repurchase agreements with broker-dealers .... 31.4 42.6 43.9 45.1 47.6 65.2 65.0 63.7 64.7 66.6 66.8 57.8 71 Other 17.2 19.2 18.5 18.6 18.2 17.9 17.3 17.1 16.4 17.0 17.7 17.8 72 State and local government .... 12.0 11.5 11.1 11.5 11.6 11.6 12.0 11.7 11.8 11.7 11.7 11.7 73 Agricultural 10.1 10.2 10.3 10.3 10.3 10.1 10.1 10.1 10.0 10.0 10.1 10.4 74 Federal funds sold to and repurchase agreements with others 11.6 5.6 8.9 10.0 12.4 12.9 12.4 16.1 14.6 17.8 15.2 17.9 75 All other loans 78.4 85.5 83.5 88.2 92.7 94.0 99.3 100.6 97.7 101.2 100.5 101.8 76 Lease-financing receivables .... 83.2 94.0 95.8 97.5 98.9 101.0 102.8 106.0 104.0 104.6 107.2 108.5 77 Interbank loans 133.2 128.4 122.9 113.1 116.3 116.2 121.3 125.6 119.9 132.1 123.0 128.5 78 Federal funds sold to and repurchase agreements with commercial banks 91.5 77.5 69.4 60.7 63.7 70.9 76.9 77.5 74.4 84.9 72.5 77.5 79 Other 41.6 50.9 53.5 52.5 52.7 45.2 44.4 48.2 45.5 47.2 50.5 51.0 80 Cash assets4 176.2 144.0 140.2 141.1 149.8 144.6 154.0 161.0 152.2 155.6 163.5 172.9 81 Other assets'* 196.2 214.8 215.7 219.3 219.8 215.8 218.2 216.9 211.6 218.1 218.2 218.9 82 Total assets6 2,649.6 2,7183 2,7083 2,725.4 2,7743 2^35.0 2^84.1 2^11.6 2&14A 2,908.9 Liabilities 83 Deposits 1,634.6 1,637.9 1,620.0 1,625.4 1,634.3 1,645.9 1,679.5 1,694.2 1,678.0 1,697.5 1,694.3 1,704.3 84 Transaction 416.0 379.8 365.6 360.2 370.0 364.4 374.9 390.4 356.8 385.8 399.7 424.7 85 Nontransaction 1,218.5 1,258.1 1,254.5 1,265.2 1,264.3 1,281.5 1,304.6 1,303.7 1,321.1 1,311.7 1,294.5 1,279.6 86 Large time 216.1 220.1 215.0 217.3 213.3 224.8 235.3 230.5 234.4 232.6 228.4 224.6 87 Other 1,002.5 1,038.0 1,039.5 1047 9 10510 1,056.7 10693 1,073.3 1,086.7 1,079.1 1,066.2 1,055.0 88 Borrowings 516.5 541.8 530.9 523.1 544.3 574.7 606.4 615.6 612.9 617.3 613.1 622.1 89 From banks in the US 213.0 191.2 190.5 192.7 196.0 200.4 209.6 213.4 214.6 212.7 210.0 216.5 90 From nonbanks in the US 303.6 350.7 340.4 330.4 348.3 374.3 396.8 402.2 398.3 404.6 403.1 405.5 91 Net due to related foreign offices 62.8 76.2 81.2 92.9 103.0 110.9 110.1 107.7 116.0 105.5 105.5 105.0 92 Other liabilities 157.3 189.0 198.5 204.9 209.6 220.2 206.0 209.7 200.5 208.9 212.8 216.8 93 Total liabilities 2371.2 2.445.0 2430.6 2,446.4 2,491.2 2^51.7 2,602.1 2,6273 2,6073 2,629.1 2,625.7 2,648.1 94 Residual (assets less liabilities)7 .... 278.4 273.2 277.6 279.1 283.0 283.3 282.1 284.4 284.9 285.3 283.3 284.1 MEMO 95 Revaluation gains on off-balancesheet items8 41.0 50.5 51.0 51.9 61.7 78.7 62.7 n.a. 68.3 73.0 69.5 66.8 96 Revaluation losses on off-balancesheet items8 43.9 50.1 50.4 54.2 65.1 80.5 65.1 n.a. 69.1 73.2 71.9 69.8 97 Mortgage-backed securities^ 235.6 239.9 242.6 249.3 260.1 280.4 287.1 n.a. 287.4 281 8 282 1 285.4 98 Pass-through securities 158.7 157.7 157.8 161.1 167.1 189.3 196.6 n.a. 197.4 193.2 1944 195.0 99 CMOs, REMICs, and other mortgage-backed securities .. 76.9 82.2 84.8 88.2 93.0 91.1 90.5 n.a. 90.1 88.5 87.7 90.4 100 Net unrealized gains (losses) on available-for-sale securities . .. 2.1 3.2 3.5 3.1 3.7 4.4 3.1 n.a. 3.1 3.0 3.0 2.9 101 Offshore credit to U.S. residents" .. 34.2 36.1 35.3 35.6 36.8 38.5 39.1 38.5 37.3 37.6 39.8 39.0 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities A19 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued D. Small domestically chartered commercial banks Billions of dollars Monthly averages Wednesday figures 1997 1998' 1998 June July Aug. Sept. Oct. Nov. Seasonally adjusted Assets 1 Bank credit 1,380.0 1,420.1 1,434.0 1,448.1 1,458.2 1,472.2 1,497.6 1,516.8 1,512.4 1,516.9 1,517.9 1,521.3 2 Securities in bank credit 401.2 401.9 407.8 411.9 414.6 423.2 433.4 441.5 439.0 440.8 442.4 444.1 3 U.S. government securities . 315.7 311.5 314.3 315.8 317.4 322.2 330.1 335.3 333.8 334.7 335.8 336.8 4 Other securities 85.5 90.4 93.5 96.1 97.2 101.0 103.2 106.2 105.2 106.2 106.6 107.3 5 Loans and leases in bank credit2 978.8 1,018.2 1,026.3 1,036.2 1,043.6 1,049.0 1,064.3 1,075.4 1,073.4 1,076.1 1,075.5 1,077.2 6 Commercial and industrial . 175.4 184.7 186.1 189.1 191.5 193.6 195.4 197.3 196.9 197.1 197.5 197.8 7 Real estate 527.7 555.3 561.1 569.3 574.1 578.2 589.1 597.2 595.3 596.2 597.9 599.9 8 Revolving home equity . 28.3 28.6 28.8 29.0 29.0 29.0 29.7 29.9 30.0 30.0 29.8 29.9 9 Other 499.4 526.7 532.2 540.2 545.1 549.2 559.4 567.3 565.3 566.2 568.1 570.0 10 Consumer 203.8 201.3 201.7 199.3 199.1 197.8 199.4 202.0 200.2 203.1 202.9 202.5 11 Security1 5.4 6.0 6.0 6.1 6.3 6.5 6.7 6.4 6.7 6.4 6.2 6.0 12 Other loans and leases 66.4 70.9 71.4 72.5 72.6 72.8 73.6 72.5 74.3 73.3 71.0 71.0 13 Interbank loans 50.7 65.9 68.3 70.4 73.9 75.8 74.0 67.3 67.9 66.4 68.3 65.9 14 Cash assets4 67.4 66.5 64.7 66.6 68.0 66.7 68.3 67.9 68.4 66.5 71.3 65.5 15 Other assets5 56.6 63.9 63.0 63.1 65.6 68.0 72.3 73.0 73.5 72.8 73.6 71.8 16 Total assets6 1,535.7 1,597.0 1.610.4 1,628.7 1,646.0 1.663.0 1,6923 1,704.9 1,7023 1,7015 1,710.9 1,7043 Liabilities 17 Deposits 1,226.6 1,275.0 1,273.5 1,288.0 1,301.5 1310.1 1,330.6 1,341.0 1,337.4 1,337.8 1,347.3 1,341.1 18 Transaction 285.4 288.4 283.2 283.7 286.6 284.3 285.5 287.2 281.4 283.0 296.4 291.2 19 Nontransaction 941.2 986.6 990.3 1,004.3 1,014.9 1,025.8 1,045.1 1,053.8 1,056.0 1,054.9 1,051.0 1.050.0 20 Large time 161.0 170.9 169.0 170.1 174.5 176.1 180.1 179.0 179.1 178.4 178.7 179.0 21 Other 780.1 815.7 821.3 834.1 840.4 849.8 865.0 874.8 876.9 876.5 872.3 871.0 22 Borrowings 150.5 158.8 163.4 162.9 165.3 171.7 179.2 184.1 184.6 183.3 183.2 185.7 23 From banks in the US 69.9 71.1 79.0 78.6 79.8 83.8 86.9 88.8 89.5 89.3 87.9 88.8 24 From others 80.6 87.7 84.4 84.3 85.4 87.9 92.3 95.4 95.1 94.1 95.3 96.9 25 Net due to related foreign offices 4.3 3.9 3.7 3.7 3.7 4.7 3.6 3.6 3.6 3.2 3.7 4.1 26 Other liabilities 27.9 29.8 30.1 30.7 30.6 31.8 32.7 32.5 32.6 32.8 32.3 32.5 27 Total liabilities 1,4093 14673 1,470.7 1,4853 1,501.2 13183 13462 1,5613 1,5582 1,557.1 13663 13633 28 Residual (assets less liabilities)7 126.4 129.5 139.8 143.4 144.8 144.8 146.1 143.7 144.1 145.5 144.4 140.9 Not seasonally adjusted Assets 29 Bank credit 1,380.6 1,424.9 1,432.1 1,447.7 1,460.4 1,472.0 1,496.9 1,517.3 1,509.7 1,516.4 1,522.2 1,524.1 30 Securities in bank credit 399.3 405.0 406.5 410.8 413.9 420.2 430.1 439.5 435.7 438.4 442.0 443.1 31 U.S. government securities . . 314.1 314.2 313.0 315.0 317.0 320.0 327.3 333.7 331.4 332.8 335.5 335.8 32 Other securities 85.2 90.8 93.5 95.8 96.9 100.2 102.8 105.8 104.3 105.6 106.5 107.4 33 Loans and leases in bank credit2 . 981.3 1,019.9 1,025.7 1,036.9 1,046.5 1,051.8 1,066.8 1,077.8 1,074.0 1,077.9 1,080.2 1,081.0 34 Commercial and industrial . . 174.9 186.5 185.8 187.6 190.0 191.9 194.2 196.8 195.6 196.2 197.5 198.1 35 Real estate 528.6 555.9 561.1 569.7 575.8 580.7 591.2 598.2 596.2 597.2 599.3 600.7 36 Revolving home equity . . 28.3 28.5 28.7 28.9 29.2 29.2 29.8 29.9 29.9 29.9 29.9 29.9 37 Other 500.3 527.4 532.4 540.8 546.6 551.5 561.5 568.3 566.4 567.3 569.5 570.8 38 Consumer 206.2 199.7 200.0 199.4 200.0 198.7 201.0 204.2 201.7 205.1 206.4 205.0 39 Security3 5.4 6.0 6.0 6.1 6.3 6.5 6.7 6.4 6.7 6.4 6.2 6.0 40 Other loans and leases 66.2 71.8 72.8 74.1 74.4 74.0 73.7 72.3 73.8 73.0 70.7 71.2 41 Interbank loans 54.8 62.1 63.0 65.9 69.5 74.7 78.5 72.1 Til 72.0 70.1 67.0 42 Cash assets4 71.0 65.6 64.0 64.4 67.3 66.6 70.5 71.2 66.9 70.0 72.1 75.3 43 Other assets5 56.2 63.2 64.6 64.2 66.8 68.2 72.9 72.4 72.1 72.0 70.8 73.7 44 Total assets6 1,543.6 1,5964 1,604.2 1,6223 1.644J 1,661.7 1,698.9 1,7119 1,7063 1,710.2 1,715.1 1,720.0 Liabilities 45 Deposits 1,234.4 1,271.6 1,267.9 1,281.5 1,298.1 1,308.1 1,336.9 1,348.4 1,342.8 1,344.8 1,349.0 1,355.3 46 Transaction 296.1 286.8 280.4 279.5 284.4 282.4 289.6 297.3 285.4 292.9 302.3 311.3 47 Nontransaction 938.3 984.8 987.4 1,002.0 1,013.7 1,025.6 1,047.4 1,051.0 1,057.4 1,051.9 1,046.7 1,044.0 48 Large time 161.0 170.9 169.0 170.1 174.5 176.1 180.1 179.0 179.1 178.4 178.7 179.0 49 Other 777.3 814.0 818.4 831.9 839.2 849.6 867.2 872.0 878.2 873.5 868.0 865.0 50 Borrowings 151.2 159.3 163.5 164.2 168.7 172.1 178.7 184.8 181.6 184.2 187.7 187.2 51 From banks in the US 70.0 71.7 79.2 79.4 81.0 83.3 85.8 88.8 87.8 89.2 89.8 89.5 52 From others 81.2 87.6 84.3 84.8 87.6 88.9 92.9 96.0 93.9 94.9 97.9 97.7 53 Net due to related foreign offices 4.3 3.9 3.7 3.7 3.7 4.7 3.6 3.6 3.6 3.2 3.7 4.1 54 Other liabilities 27.9 29.8 30.1 30.7 30.6 31.8 32.7 32.5 32.6 32.8 32.3 32.5 55 Total liabilities 1,417.8 1464.6 1/465.1 1,480.2 1,501.1 1,516.7 1,551.9 13693 1360.6 13643 13717 1379.1 56 Residual (assets less liabilities)7 . 125.8 131.9 139.1 142.4 143.1 145.1 147.0 143.6 145.9 145.4 142.4 140.9 MEMO 57 Mortgage-backed securities9 52.6 53.9 56.8 59.3 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Financial Statistics • March 1999 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued E. Foreign-related institutions Billions of dollars Monthly averages Wednesday figures July Aug. Sept Oct. Nov. Seasonally adjusted Assets 1 Bank credit 543.4' 572.1 588.4 604.6 624.7 620.1 601.1 613.4 611.1 592.0 586.7 2 Securities in bank credit 186.2' 200.2 201.1 212.4 215.4 221.9 223.9 216.7 220.1 216.6 214.4 214.5 3 U.S. government securities . . 76.6 88.6 91.0 94.1 82.2 80.2 80.5 81.0 79.5 80.7 81.5 82.9 4 Other securities 109.6 111.6 110.1 118.4 133.2 141.7 143.4 135.7 140.7 135.9 132.9 131.6 5 Loans and leases in bank credit' 357.2' 368.0 371.0 376.0 389.2 402.8 396.2 384.4 393 3 394.5 377.6 372.3 6 Commercial and industrial . . 220.5' 211.8 214.1 214.1 218.0 223.8 223.9 218.0 225.5 221.9 214.4 209.9 7 Real estate 25.9 24.2 23.9 23.9 23.6 23.3 22.0 20.7 21.2 20.7 20.3 20.3 8 Security1 44.8' 62.5 62.0 64.2 67.6 69.6 65.0 66.0 64.3 67.2 67.4 65.9 9 Other loans and leases 66.1 69.4 70.9 73.9 80.0 86.1 85.4 79.7 82.3 84.7 75.5 76.1 10 Interbank loans 31.2 23.9 21.0 20.0 28.4 25.4 26.5 27.1 20.0 24.3 32.6 32.2 11 Cash assets4 33.3 34.8 35.0 33.8 34.0 35.4 33.5 33.9 34.4 35.4 32.2 33.2 12 Other assets5 43.1 33.8 34.1 35.7 37.9 39.2 36.6 39.1 38.3 41.5 39.5 38.3 13 Total assets6 650.8r 660.4 661.9 677.6 704.6 724.5 7164 700.9 705.9 712.0 696.1 6903 Liabilities 14 Deposits 272.5 303.1 297.6 305.9 314.5 318.9 315.3 307.3 312.3 309.4 303.7 301.8 15 Transaction 9.8 11.1 13.7 12.3 15.3 15.2 12.3 10.7 10.4 10.9 11.2 9.8 16 Nontransaction 262.7 292.0 283.9 293.6 299.2 303.7 303.0 296.6 302.0 298.5 292.4 292.0 17 Borrowings 149.4' 167.0 167.7 165.2 178.9 185.5 185.6 179.4 176.7 186.5 180.3 173.7 18 From banks in the US 25.8 29.5 25.8 21.9 30.2 32.0 33.4 28.5 27.4 33.8 27.8 22.8 19 From others 123.6 137.5 141.9 143.3 148.8 153.5 152.2 150.9 149.2 152.7 152.5 150.9 20 Net due to related foreign offices . .. 121.7' 97.3 107.8 110.2 97.1 109.1 102.1 102.3 105.2 102.2 100.6 102.9 21 Other liabilities 95.7 89.9 93.5 99.3 104.0 107.3 102.3 100.7 102.9 105.1 97.5 97.4 22 Total liabilities 639.4' 6573 666.6 680.7 694.6 720.8 7053 689.8 697.1 7033 682.1 675.9 23 Residual (assets less liabilities)7 3.0 3.6 11.1 13.9 Not seasonally adjusted Assets 24 Bank credit 542.6' 571.2 574.9 590.8 599.3 624.0 612.5 599.6 606.6 609.1 591.4 592.1 25 Securities in bank credit 182.4' 203.4 203.9 216.6 212.0 222.2 218.5 212.6 216.8 214.0 208.8 210.2 26 U.S. government securities 76.3' 88.6 90.7 94.8 82.2 80.8 81.4 80.7 80.5 80.7 80.2 81.7 27 Trading account 13.7 20.0 25.1 30.7 20.2 16.0 13.8 n.a. 14.4 15.6 15.7 17.0 28 Investment account 62.5 68.6 65.2 63.3 61.1 63.3 66.6 n.a. 66.1 65.1 64.5 64.7 29 Other securities 106.1 114.8 113.2 121.7 129.8 141.5 137.1 131.9 136.3 133.3 128.6 128.6 30 Trading account 61.9 70.1 70.1 75.3 83.4 89.6 82.3 n.a. 83.6 80.4 76.4 77.0 31 Investment account 44.1 44.6 43.0 46.3 46.2 51.7 55.0 n.a. 52.6 52.9 52.2 51.6 32 Loans and leases in bank credit^ . . . 360.2 367.8 371.1 374.3 387.3 401.7 394.0 387.0 389.8 395.1 382.6 381.9 33 Commercial and industrial 221.3 211.8 213.9 213.0 216.9 223.7 223.5 218.9 223.3 221.4 216.5 214.3 34 Real estate 26.0 24.0 23.7 23.7 23.5 23.5 22.3 20.8 21.3 20.8 20.3 20.4 35 Security3 46.1 62.4 61.4 63.4 67.4 69.7 64.7 67.1 64.1 68.4 68.8 68.1 36 Other loans and leases 66.8 69.7 72.1 74.2 79.5 84.8 83.4 80.3 81.1 84.4 76.9 79.1 37 Interbank loans 31.2 23.9 21.0 20.0 28.4 25.4 26.5 27.1 20.0 24.3 32.6 32.2 38 Cash assets4 34.9 35.7 34.8 33.8 34.1 35.7 34.4 35.5 35.5 37.2 34.3 35.1 39 Other assets5 43.9 33.0 33.7 36.5 37.9 38.3 37.0 39.8 40.0 42.5 39.5 38.2 40 Total assets6 652.4r 663.6 6642 680.9 699.4 723.1 710.2 701.7 701.8 712,8 697.5 697.4 Liabilities 41 Deposits 275.6 304.9 295.8 304.6 316.1 318.4 3143 310.5 313.7 311.8 309.3 306.7 42 Transaction 10.3 11.2 13.8 12.2 15.9 15.2 12.3 11.2 10.4 11.6 11.9 10.7 43 Nontransaction 265.3 293.7 282.0 292.4 300.1 303.1 302.0 299.3 303.3 300.2 297.5 296.1 44 Borrowings 149.4' 167.0 167.7 165.2 178.9 185.5 185.6 179.4 176.7 186.5 180.3 173.7 45 From banks in the U.S 25.8 29.5 25.8 21.9 30.2 32.0 33.4 28.5 27.4 33.8 27.8 22.8 46 From others 123.6 137.5 141.9 143.3 148.8 153.5 152.2 150.9 149.2 152.7 152.5 150.9 47 Net due to related foreign offices 126.6' 96.5 104.2 106.9 95.6 108.1 102.8 106.9 103.5 105.1 106.4 115.6 48 Other liabilities 96.7' 89.1 92.8 99.3 103.7 107.0 103.6 101.7 104.2 106.1 98.2 •98.4 49 Total liabilities 6483r 657.6 660.5 676.0 6943 719.0 7063 6984 698.1 709.5 6943 694^ 50 Residual (assets less liabilities)7 MEMO 51 Revaluation gains on off-balance-sheet itemss 41.5 42.2 41.7 43.8 48.3 51.4 47.3 50.9 50.8 44.9 45.7 52 Revaluation losses on off-balancesheet items* 41.9 40.6 40.2 42.3 45.5 47.7 44.3 47.2 46.9 41.4 42.1 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities A21 NOTES TO TABLE 1.26 NOTE. Tables 1.26, 1.27, and 1.28 have been revised to reflect changes in the Board's H.8 group that contained the acquired bank and put into past data for the group containing the statistical release, "Assets and Liabilities of Commercial Banks in the United States." Table acquiring bank. Balance sheet data for acquired banks are obtained from Call Reports, and a 1.27, "Assets and Liabilities of Large Weekly Reporting Commercial Banks," and table 1.28, ratio procedure is used to adjust past levels. "Large Weekly Reporting U.S. Branches and Agencies of Foreign Banks," are no longer 2. Excludes federal funds sold to, reverse RPs with, and loans made to commercial banks being published in the Bulletin. Instead, abbreviated balance sheets for both large and small in the United States, all of which are included in "Interbank loans." domestically chartered banks have been included in table 1.26, parts C and D. Data are both 3. Consists of reverse RPs with brokers and dealers and loans to purchase and carry merger-adjusted and break-adjusted. In addition, data from large weekly reporting U.S. securities. branches and agencies of foreign banks have been replaced by balance sheet estimates of all 4. Includes vault cash, cash items in process of collection, balances due from depository foreign-related institutions and are included in table 1.26, part E. These data are break- institutions, and balances due from Federal Reserve Banks. adjusted. 5. Excludes the due-from position with related foreign offices, which is included in "Net The not-seasonally-adjusted data for all tables now contain additional balance sheet items, due to related foreign offices." which were available as of October 2, 1996. 6. Excludes unearned income, reserves for losses on loans and leases, and reserves for 1. Covers the following types of institutions in the fifty states and the District of transfer risk. Loans are reported gross of these items. Columbia: domestically chartered commercial banks that submit a weekly report of condition 7. This balancing item is not intended as a measure of equity capital for use in capital (large domestic); other domestically chartered commercial banks (small domestic); branches adequacy analysis. On a seasonally adjusted basis this item reflects any differences in the and agencies of foreign banks, and Edge Act and agreement corporations (foreign-related seasonal patterns estimated for total assets and total liabilities. institutions). Excludes International Banking Facilities. Data are Wednesday values or pro 8. Fair value of derivative contracts (interest rate, foreign exchange rate, other commodity and rata averages of Wednesday values. Large domestic banks constitute a universe; data for equity contracts) in a gain/loss position, as determined under FASB Interpretation No. 39. small domestic banks and foreign-related institutions are estimates based on weekly samples 9. Includes mortgage-backed securities issued by U.S. government agencies, U.S. and on quarter-end condition reports. Data are adjusted for breaks caused by reclassifications government-sponsored enterprises, and private entities. of assets and liabilities. 10. Difference between fair value and historical cost for securities classified as available- The data for large and small domestic banks presented on pp. A17-19 are adjusted to for-sale under FASB Statement No. 115. Data are reported net of tax effects. Data shown are remove the estimated 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 • March 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 . D 19 e 9 c 6 . D 19 e 9 c 7 . lune luly Aug. Sept. Oct. Nov. 1 All issuers 555,075 595,382 674,904 775,371 966,699 1,091,554 1,102,307 1,119,816 1,152337 1,150,213 1,159,027 Financial companies 2 Dealer-placed paper2, total 218,947 223,038 275,815 361,147 513,307 597,193 616,382 606,355 639,571 627,170 621,246 3 Directly placed paper , total 180,389 207,701 210,829 229,662 252,536 276,476 266,022 281,927 271,526 289,184 304,545 4 Nonfinancial companies 155,739 164,643 188,260 184,563 200,857 217,885 219,904 231,534 241,239 233,859 233,236 1. Institutions engaged primarily in commercial, savings, and mortgage banking; sales, 3. As reported by financial companies that place their paper directly 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 banks' 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 5,413 1. Includes eligible, dollar-denominated bankers 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 Date of change Rate Period Av r e a r t a e ge Period Av r e a r t a e ge Period Av r e a r te age 1996—Jan. 1 8.50 1996 8.27 1997—Jan 8.25 1998—Jan 8.50 Feb. 1 8.25 1997 8.44 Feb 8.25 Feb 8.50 1998 8.35 Mar. 8.30 Mar. 8.50 1997—Mar. 26 8.50 Apr. 8.50 Apr. 8.50 1996—Jan 8.50 May 8.50 May 8.50 1998—Sept. 30 8.25 Feb 8.25 June 8.50 June 8.50 Oct. 16 8.00 Mar. 8.25 July 8.50 July 8.50 Nov. 18 7.75 Apr. 8.25 Aug 8.50 Aug 8.50 May 8.25 Sept 8.50 Sept 8.49 lune 8.25 Oet 8.50 Oet 8.12 July 8.25 Nov 8.50 Nov 7.89 Aug 8.25 Dec 8.50 Dec 7.75 Sept 8.25 Oet 8.25 1999—Jan 7.75 Nov 8.25 Dec 8.25 1. The prime rate is one of several base rates that banks use to price short-term business Report. Data in this table also appear in the Board's H.15 (519) weekly and G.13 (415) loans. The table shows the date on which a new rate came to be the predominant one quoted monthly statistical releases. For ordering address, see inside front cover. by a majority of the twenty-five largest banks by asset size, based on the most recent Call Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A23 1.35 INTEREST RATES Money and Capital Markets Percent per year; figures are averages of business day data unless otherwise noted 1998 1998, week ending Sept. Nov. Dec, Nov. 27 Dec. 4 Dec. 11 Dec. 18 Dec. 25 MONEY MARKET INSTRUMENTS 1 Federal funds113 5.30 5.46 5.35 5.5) 5.07 4.83 4.68 4.54 4.86 4.68 4.97 4.69 2 Discount window borrowing2'4 5.02 5.00 4.92 5.00 4.86 4.63 4.50 4.50 4.50 4.50 4.50 4.50 Commercial paper Nonfinancial 3 1-month 5.57 5.40 5.44 5.14 5.00 5.24 4.84 5.09 5.16 5.26 5.44 4 2-month n.a. 5.57 5.38 5.37 5.08 5.14 5.12 5.07 5.16 5.09 5.13 5.20 5 3-month n.a. 5.56 5.34 5.31 5.04 5.06 5.00 4.99 5.04 5.00 5.00 5.02 Financial 6 1-month 5.59 5.42 5.45 5.18 5.04 5.31 4.87 5.14 5.33 5.35 5.44 7 2-month 5.59 5.40 5.38 5.12 5.19 5.13 5.11 5.21 5.13 5.14 5.14 8 3-month 5.60 5.37 5.32 5.09 5.15 5.04 5.10 5.04 5.05 5.04 5.06 Commercial paper (historical) ' ' 9 1-month 5.43 5.54 n.a. n.a. n.a. n.a. 10 3-month 5.41 5.58 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 11 6-month 5.42 5.62 n.a. n.a. n.a. n.a. n.a. Finance paper, directly placed (historical)3'5'8 12 1-month 5.31 5.44 n.a. n.a. n.a. n.a. 13 3-month 5.29 5.48 n.a. n.a. n.a. n.a. n.a. n.a. 14 6-month 5.21 5.48 n.a. n.a. n.a. n.a. Bankers acceptances ' ' 15 3-month 5.31 5.54 5.39 5.38 5.12 5.15 5.08 5.10 5.13 5.07 5.04 5.07 16 6-month 5.31 5.57 5.30 5.27 4.88 4.92 4.91 4.91 4.94 4.87 4.87 4.92 Certificates of deposit, secondary marker' 17 1-month " 5.35 5.54 5.49 5.49 5.24 5.16 5.47 5.09 5.53 5.44 5.51 5.58 18 3-month 5.39 5.62 5.47 5.41 5.21 5.24 5.14 5.18 5.20 5.13 5.14 5.18 19 6-month 5.47 5.73 5.44 5.33 4.99 5.07 5.01 5.06 5.03 4.98 4.99 5.04 20 Eurodollar deposits, 3-month3 " 5.38 5.61 5.16 U.S. Treasury bills Secondary market3"5 21 3-month 5.01 5.06 4.78 4.61 3.96 4.41 4.39 4.47 4.38 4.36 4.37 4.44 22 6-month 5.08 5.18 4.83 4.63 4.05 4.42 4.40 4.45 4.36 4.38 4.38 4.48 23 1-year 5.22 5.32 4.80 4.50 3.95 4.33 4.32 4.38 4.26 4.31 4.27 4.41 Auction high3'5*12 24 3-month 5.02 5.07 4.81 4.74 4.08 4.44 4.42 4.45 4.44 4.32 4.39 4.44 25 6-month 5.09 5.18 4.85 4.75 4.15 4.43 4.43 4.43 4.41 4.38 4.39 4.44 26 1-year 5.23 5.36 4.85 4.51 4.06 4.40 4.31 4.31 U.S. TREASURY NOTES AND BONDS Constant maturities ~ 27 1-year 5.52 5.63 5.05 4.71 4.12 4.53 4.52 4.59 4.46 4.49 4.47 4.63 28 2-year 5.84 5.99 5.13 4.67 4.09 4.54 4.51 4.64 4.43 4.45 4.43 4.67 29 3-year 5.99 6.10 5.14 4.62 4.18 4.57 4.48 4.64 4.42 4.43 4.41 4.64 30 5-year 6.18 6.22 5.15 4.62 4.18 4.54 4.45 4.62 4.39 4.39 4.36 4.59 31 7-year 6.34 6.33 5.28 4.76 4.46 4.78 4.65 4.80 4.60 4.59 4.57 4.78 32 10-year 6.44 6.35 5.26 4.81 4.53 4.83 4.65 4.83 4.64 4.60 4.59 4.75 33 20-year 6.83 6.69 5.72 5.38 5.30 5.48 5.36 5.46 5.31 5.29 5.32 5.47 34 30-year 6.71 6.61 5.58 5.20 5.01 5.25 5.06 5.21 5.05 5.00 5.01 5.16 Composite 6.80 6.67 5.69 35 More than 10 years (long-term) STATE AND LOCAL NOTES AND BONDS Moodv's series 5.52 5.32 4.93 4.84 4.76 4.87 4.83 4.86 4.87 4.78 4.80 4.86 36 Aaa ' 5.79 5.50 5.14 5.11 5.10 5.15 5.17 5.18 5.15 5.13 5.15 5.21 37 Baa 5.76 5.52 5.09 4.99 4.93 5.03 4.98 5.01 4.96 4.94 4.96 5.03 38 Bond Buyer series'3 CORPORATE BONDS 7.66 7.54 6.87 6.77 6.68 6.69 6.80 39 Seasoned issues, all industries16 Rating group 7.37 7.27 6.53 6.40 6.37 6.41 6.22 6.28 6.18 6.18 6.19 6.29 40 Aaa 7.55 7.48 6.80 6.68 6.70 6.79 6.65 6.70 6.60 6.62 6.62 6.72 41 Aa 7.69 7.54 6.93 6.82 6.85 6.95 6.80 6.85 6.77 6.77 6.77 6.87 42 A 8.05 7.87 7.22 7.09 7.18 7.34 7.23 7.28 7.19 7.19 7.21 7.30 43 Baa MEMO Dividend-price ratio 44 Common stocks 1.59 1.59 1.43 1.37 1.37 1.39 1.37 1.41 1.34 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 general 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 fo9.r RFeRprAesSenEtatRive 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 • March 1999 1.36 STOCK MARKET Selected Statistics 1996 1997 1998 Apr. May June July Aug. Sept, Oct. Nov. Dec Prices and trading volume (averages of daily figures)1 Common slock prices (indexes) 1 New York Slock Exchange (Dec. 31, 1965 = 50) 357.98 456.99 550.65 578.05 574.46 569.76 586.39 539.16 506.56 511.49 564.26 576.05 2 Industrial 453.57 574.97 684.35 711.89 712.39 731.01 718.54 665.66 629.51 636.62 704.46 717 14 3 Transportation 327.30 415.08 468.61 523.73 505.02 492.98 503.89 441.36 408.75 396.61 442.95 456.70 4 Utility 126.36 143.87 190.52 207.32 198.25 188.26 189.95 186.24 186.17 195.09 206.29 215.57 5 Finance 303.94 424.84 516.65 563.07 551.28 548.57 579.67 511.22 454.28 448.12 501.45 510.31 6 Standard & Poor's Corporation (1941-43 = 10)2 670.49 873.43 1,085.50 1,112.20 1,108.42 1,108.39 1,156.58 1,074.62 1,020.64 1,032.47 1,144.43 1,190.05 7 American Stock Exchange (Aug. 31, 1973 = 50)3 570.86 628.34 682.69 742.33 735.02 704.59 724.83 655.67 621.48 607.16 667.60 660.76 Volume of trading (thousands of shares) 8 New York Stock Exchange 409,740 523,254 666,534 647,110 569,239 605,576 639,744 712,710 790,238 808,816 668,932 680,397 9 American Stock Exchange 22,567 n.a. n.a. 29,544 27,004 25,447 26,473 32,721 33.331 31.946 27,266 28,756 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers4 97,400 126,090 140,980 140,240 143,600 147,700 154370 147,800 137,540 130,160 139,710' 140,980 Free credit balances at brokers 11 Margin accounts 22,540 31,410 40,250 28,160 26,200 29,840 31.820 38,460 41,970 43,500 40,620' 40.250 12 Cash accounts 40,430 52,160 62,450 51,050 47,770 51,205 53,780 53.850 54.240 54,610 56,170' 62.450 Margin requirements (percent of market value and effective date)7 Mar. 11, 1968 June 8, 1968 May 6, 1970 Dec. 6, 1971 Nov. 24, 1972 Jan. 3, 1974 13 Margin stocks 70 65 55 65 50 14 Convertible bonds 50 60 50 50 50 50 15 Short sales 70 80 65 55 65 50 1. Daily data on prices are available upon request to the Board of Governors. For ordering 6. Series initiated in June 1984. address, see inside front cover. 7. Margin requirements, stated in regulations adopted by the Board of Governors pursuant 2. In July 1976 a financial group, composed of banks and insurance companies, was added to the Securities Exchange Act of 1934. limit the amount of credit that can be used to to the group of stocks on which the index is based. The index is now based on 400 industrial purchase and carry "margin securities" (as defined in the regulations) when such credit is stocks (formerly 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and collateralized by securities. Margin requirements on securities are the difference between the 40 financial. market value (100 percent) and the maximum loan value of collateral as prescribed by the 3. On July 5, 1983, the American Stock Exchange rebased its index, effectively cutting Board. Regulation T was adopted effective Oct. 15, 1934; Regulation U, effective May 1, previous readings in half. 1936; Regulation G, effective Mar. 11, 1968; and Regulation X, effective Nov. 1. 1971. 4. Since July 1983, under the revised Regulation T, margin credit at broker-dealers has On Jan. 1, 1977, the Board of Governors for the first time established in Regulation T the included credit extended against stocks, convertible bonds, stocks acquired through the initial margin required for writing options on securities, setting it at 30 percent of the current exercise of subscription rights, corporate bonds, and government securities. Separate report- market value of the stock underlying the option. On Sept. 30, 1985, the Board changed the ing of data for margin stocks, convertible bonds, and subscription issues was discontinued in required initial margin, allowing it to be the same as the option maintenance margin required April 1984. by the appropriate exchange or self-regulatory organization; such maintenance margin rules 5. Free credit balances are amounts in accounts with no unfulfilled commitments to must be approved by the Securities and Exchange Commission. brokers and are subject to withdrawal by customers on demand. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A25 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Fiscal year Calendar year Type of account or operation 1998 1996 1997 1998 July Aug. Sept. Oct. Nov. Dec. US budget' 1 Receipts, total 1,453.062 1.579.292 1,721,798 119,723 111,741 180.936 119,974 113,978 178.646 2 On-budget 1,085.570 1.187,302 1,305,999 87,820 79.135 149,726 90.064 81,836 143,337 3 Off-budget 367.492 391,990 415,799 31,903 32,606 31,210 29,910 32,142 35,309 4 Outlays, total 1,560,512 1,601,235 1,652,552 143,807 122.907 142,725 152,436 131,095 184,056 5 On-budget 1,259,608 1,290,609 1.335,948 115,714 92.555 107,900 123,687 100,078 149,401 6 Off-budget 300,904 310,626 316,604 28,094 30,352 34,814 28,749 31,017 34,655 7 Surplus or deficit (—), total -107,450 -21,943 69,246 -24,084 -11,166 38,222 -32,462 -17,117 -5.410 8 On-budget -174,038 -103,307 -29,949 -27,894 -13,420 41,826 -33,623 -18,242 -6.064 9 Off-budget 66,588 81,364 99,195 3,809 2,254 -3,604 1,161 1,125 654 Source of financing (total) 10 Borrowing from the public 129.712 38.171 -51,049 -16,370 33,989 -46,413 15,330 22,364 -5.390 11 Operating cash (decrease, or increase (—)) -6,276 604 4,743 36,210 -362 -2,451 2,661 20,335 -1,621 12 Other2 -15.986 -16,832 -22,940 4.244 -22,461 10,642 14.471 -25,582 12,421 MEMO 13 Treasury operating balance (level, end of period) 44,225 43,621 38,878 36,065 36,427 38,878 36,217 15,882 17,503 14 Federal Reserve Banks 7,700 7,692 4,952 4,648 6,704 4,952 4,440 5,219 6.086 15 Tax and loan accounts 36.525 35,930 33,926 31.417 29,722 33,926 31,776 10,663 11,417 1. Since 1990. off-budget items have been the social secunty 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); loan.s to the IMF; other cash and monetary assets; Receipts and Outlays of the U.S. Government; fiscal year totals: U.S. Office of Management accrued interest payable to the public; allocations of SDRs; deposit funds; miscellaneous and Budget, Budget of the U.S. Government. liability (including checks outstanding) and asset accounts; seigniorage; increment on gold; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic Financial Statistics • March 1999 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS' Millions of dollars Fiscal year Calendar year Source or lype 1997 1998 1998 1997 1998 RECEIPTS 1 All sources . 1,579,292 1,721,798 845,527 773,812 922,632 824,998 119,974 113,978 178,646 2 Individual income taxes, net 737,466 828,586 400,436 354,072 447.514 392,332 60,255 51.341 75,988 3 Withheld 580,207 646,483 292,252 306,865 316,309 339,144 54.277 52.530 69,628 4 Nonwithheld 250,753 281,527 191,050 58,069 219,136 65,204 7,098 2.214 7,094 5 Refunds 93,560 99.476 82,926 10.869 87,989 12,032 1,120 3,404 734 Corporation income taxes 6 Gross receipts 204,493 213.249 106,451 104,659 109,353 104,163 6,547 4,805 45.123 7 Refunds 22,198 24.593 9,635 10,135 14.220 14,250 4,789 1.364 2,749 8 Social insurance taxes and contributions, net. 539,371 571,831 288,251 260,795 312,713 268,466 41,237 45.926 48,601 9 Employment taxes and contributions2 506,751 540,014 268,357 247,794 293,520 256,142 39,690 42 940 47,869 10 Unemployment insurance 28,202 27,484 17,709 10,724 17,080 10,121 1,142 2,655 315 11 Other net receipts' 4,418 4,333 2,184 2,280 2,112 2,202 405 331 417 12 Excise taxes 56,924 57,673 28,084 31,133 29,922 33.366 9,630 6,021 5,446 13 Customs deposits 17,928 18,297 8,619 9,679 8,546 9,838 1,776 1,380 1,472 14 Estate and gift taxes 19,845 24,076 10,477 10,262 12,971 12,359 2,089 2,132 2,239 15 Miscellaneous receipts4 25,465 32,658 12,866 13,348 15,837 18,735 3,228 3,738 2.527 OUTLAYS 16 All types 1,601,235 1,652,552 797,418 824,370 815,886 877,026 152,436 131,095 184,056 17 National defense 270,473 268,456 132,698 140,873 129,351 140,196 25,730 18,173 27,178 18 International affairs 15,228 13,109 5,740 9,420 4,610 8,296 169 4,924 822 19 General science, space, and technology. 17,174 18,219 8,938 10,040 9,426 10,142 1,550 1.558 1,918 20 Energy 1,483 1,270 803 411 957 699 -135 -218 151 21 Natural resources and environment .... 21,369 22,396 9,628 11,106 10,051 12,671 1,859 2.080 2,545 22 Agriculture 9,032 12,206 1,465 10,590 2,387 16.757 3,287 5,620 3,238 23 Commerce and housing credit -14,624 1,014 -7,575 -3,526 -2,483 4,046 1,078 -701 -1.821 24 Transportation 40,767 40,332 16,847 20,414 16,196 20,834 3,445 3 447 3,400 25 Community and regional development . 11,005 9,720 5,678 5,749 4,863 6,972 1,260 1,405 1,505 26 Education, training, employment, and social services 53,008 54.919 25,080 26,851 25,928 27,245 4,861 5,465 27 Health 123,843 131,440 61,809 63,552 65,053 67,836 12.572 10,477 11,757 28 Social security and Medicare 555,273 572,047 278,863 283,109 286,305 316,809 50.544 43.728 79,633 29 Income security 230,886 233,202 124,034 106,353 125,196 109,481 20,104 14.644 21,945 30 Veterans benefits and services . . 39,313 41,781 17,697 22,077 19,615 22,750 5,465 1,841 5,305 31 Administration of justice 20,197 22,832 10,670 10,212 11,287 12,041 1,899 2,067 2,132 32 General government 12,768 13,444 6,623 7,302 6,139 9,079 2.377 1,418 2,198 33 Net interest5 244,013 243,359 122,655 122,620 122,345 116,954 19.442 19,350 20,029 34 Undistributed offsetting receipts6 -49,973 -47,194 -24,235 -22,795 -21,340 -25,795 -3.078 -2,828 -3,343 1. Functional details do not sum to total outlays for calendar year data because revisions to 4. Deposits of earnings by Federal Reserve Banks and other miscellaneous receipts. monthly totals have not been distributed among functions. Fiscal year total for receipts and 5. Includes interest received by trust funds. outlays do not correspond to calendar year data because revisions from the Budget have not 6. Rents and royalties for the outer continental shelf, U.S. government contributions for been fully distributed across months. employee retirement, and certain asset sales. 2. Old-age, disability, and hospital insurance, and railroad retirement accounts. SOURCE. Fiscal year totals: U.S. Office of Management and Budget, Budget of the US. 3. Federal employee retirement contributions and civil service retirement and Government, Fiscal Year 2000; monthly and half-year totals: U.S. Department of the Treadisability fund. sury, Monthly Treasury Statement of Receipts and Outlays of the US. Government. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A27 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars, end of month 1996 1997 1998 Item Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 5357 5 415 5,410 5,446 5,536 5,573 5,578 5,556 5 643 5 323 5,381 5.376 5,413 5.502 5,542 5,548 5,526 5,614 3 Held by public 3,826 3,874 3,805 3,815 3.847 3,872 3.790 3,761 n.a. 4 Held by agencies 1.497 1,507 1,572 1,599 1,656 1,670 1,758 1,766 n.a. 5 Agency securities 14 34 34 33 34 31 30 29 29 6 Held by public 27 26 26 26 27 26 26 26 n.a. 8 8 7 7 7 5 4 4 8 Debt subject to statutory limit 5,237 5,294 5,290 5,328 5,417 5,457 5,460 5,440 5,530 9 Public debt securities 5,237 5,294 5.290 5,328 5.416 5,456 5.460 5,439 5.530 10 Other debt1 0 0 0 0 0 0 0 0 0 MEMO 11 Statutory debt limit 5,500 5,500 5,500 5,950 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. U.S. Department of the Treasury, Monthly Statement of the Public Debt of the participation certificates, notes to international lending organizations, and District of Colum- United States and Treasury Bulletin. bia stadium bonds. 1.41 GROSS PUBLIC DEBT OF U.S. TREASURY Types and Ownership Billions of dollars, end of period Type and holder 1997 Qi Q2 Q3 Q4 1 Total gross public debt 4,988.7 5,323.2 5,502.4 5,614.2 5,542.4 5,547.9 5,526.2 5,614.2 By type 2 Interest-bearing 4,964.4 5,317.2 5,494.9 5,605.4 5,535.3 5,540.2 5,518.7 5,605.4 3 Marketable 3,307.2 3,459.7 3,456.8 3,355.5 3,467.1 3,369.5 3,331.0 3,355.5 4 Bills 760.7 777.4 715.4 691.0 720.1 641.1 637.7 691.0 5 Notes 2,010.3 2,112.3 2,106.1 1,960.7 2,091.9 2.064.6 2,009.1 1,960.7 6 Bonds 521.2 555.0 587.3 621.2 598.7 598.7 610.4 621.2 7 lnfiation-indexed notes and bonds' n.a. n.a. 33.0 50.6 41.5 50.1 41.9 50.6 8 Nonmarketable2 1.657.2 1,857.5 2,038.1 2,249.9 2,068.2 2.170.7 2,187.7 2,249.9 9 State and local government series 104.5 101.3 124.1 165.3 139.1 155.0 164.4 165.3 10 Foreign issues3 40.8 37.4 36.2 34.3 35.4 36.0 35.1 34.3 11 Government 40.8 47.4 36.2 34.3 36.4 36.0 35.1 34.3 12 Public .0 .0 .0 .0 .0 .0 .0 .0 13 Savings bonds and notes 181.9 182.4 181.2 180.3 181.2 180.7 180.8 180.3 14 Government account series4 1,299.6 1,505.9 1,666.7 1,840.0 1,681.5 1,769.1 1,777.3 1,840.0 15 Non-interest-bearing . 24.3 6.0 7.5 7.2 7.7 7.5 By holder5 16 U.S. Treasury and other federal agencies and trust funds 1,304.5 1,497.2 1,655.7 1,670.4 1,757.6 1,765.6 17 Federal Reserve Banks 391.0 410.9 451.9 400.0 458.4 458.1 18 Private investors 3,294.9 3.411.2 3,393.4 3,430.7 3,330.6 3,301.0 19 Commercial banks 278.7 261.8 269.8 278.6 263.7 260.0 20 Money market funds 71.5 91.6 88.9 84.8 82.7 84.2 21 Insurance companies 241.5 214.1 224.9 182.2 185.0 188.0 22 Other companies 228.8 258.5 265.0 268.1 267.2 271.4 23 State and local treasuries • 469.6 482.5 493.0 444.8 464.7 469.0 Individuals 24 Savings bonds 185.0 187.0 186.5 186.3 186.0 186.0 25 Other securities 162.7 169.6 168.4 165.8 165.0 166.4 26 Foreign and international8 862.2 1.135.6 1,278.0 1,240.3 1,248.6 1,217.2 27 Other miscellaneous investors " 794.9 610.5 418.8 579.8 467.7 458.9 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 States; data by holder, Treasury Bulletin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic Financial Statistics • March 1999 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions1 Millions of dollars, daily averages 1998 1998, week ending item Sept. Oct. Nov. Nov. 4 Nov. 11 Nov. 18 Nov. 25 Dec. 2 Dec. 9 Dec. 16 Dec. 23 Dec. 30 OUTRIGHT TRANSACTIONS2 By type of security 1 U.S. Treasury bills 35,694 30,362 35,010 36,927 37,505 37,730 27,247 39,754 35,490 31,544 22,028 27,504 Coupon securities, by maturity 2 Five years or less 141,855 131,248 111.370 119,017 113,914 116,567 106,682 93,540 97,507 78,916 61,226 56,767 3 More dian five years 85,071 94,390 73,238 79,512 100,016 66,838 59,214 61,330 59,804 52,035 40,259 25,372 4 Inflation-indexed 1,173 1.497 602 799 723 566 561 259 386 239 236 157 Federal agency 5 Discount notes 46,151 46,265 43,274r 48,124 44,257 45,013 38,786 40,902 41,600 38,054 36,437 36,404 Coupon securities, by maturity 6 One year or less 1,127 700 856 556 1,007 1,089 749 693 454 975 953 254 7 More dian one year, but less than or equal to five years 4,853 4,864 3,461 3,480 3,828 3,695 2,465 4,599 6,101 2.720 2,527 1,616 8 More than five years 2,911 4,640 3,894 5.642 6,525 3,377 1,994 2,048 2,896 2,230 2,378 1,377 9 Mortgage-backed 89,908 92,708 68,053 65,166 98,205 68,541 47,392 62,512 99,250 63,416 37,763 24,278 fly type of counterparty With interdeater broker 10 US Treasury 146.046 146,311 121 806 134,810 142 375 119,988 106,181 104,774 107,472 91709 65.449 56.682 11 Federal agency 3,186 3,478 2,223 2,328 2,325 2,306 1,954 2,327 3,568 1,806 1,517 1.390 12 Mortgage-backed 30,665 31,293 22,926 23,531 29,348 24,085 17,183 20,633 34,264 23,038 14,505 8,562 witn otrter 13 US Treasury 117,747 111,185 98,413 101,445 109,782 101,713 87,522 90,109 85,715 71,025 58,300 53,118 14 Federal agency 51,856 52,991 49,261' 55,474 53,292 50,868 42,039 45,914 47,483 42,172 40,778 38,260 15 Mortgage-backed 59,243 61,415 45,127 41,635 68,857 44,456 30,209 41,879 64,986 40,379 23,259 15.716 FUTURES TRANSACTIONS3 By type of deliverable security 16 U.STreasury bills '. 180 0 50 0 n.a. n.a. 87 34 80 166 0 0 Coupon securities, by maturity 17 Five years or less 4,378 3,296 3,281 3,395 3,049 2,659 3,522 4,526 2,717 2,936 2,718 1.820 18 More than five years 20,105 19,467 16,164 14,398 19,134 15,334 16,172 14,928 12,523 11,200 8,845 5,211 19 Inflation-indexed 0 0 0 0 0 0 0 0 0 0 0 0 Federal agency 20 Discount notes 0 0 0 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 21 One year or less 0 0 0 0 0 0 0 0 0 0 0 0 22 More than one year, but less than or equal to five years 0 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 0 24 Mortgage-backed 0 0 0 0 0 0 0 0 0 0 0 0 OPTIONS TRANSACTIONS4 By type of underlying security 25 U.S." Treasury bills 0 0 0 0 0 0 0 0 0 0 0 0 Coupon secunties, by maturity 26 Five years or less 1,984 1,685 1,145 997 1,123 1,567 805 1,209 684 1,242 864 733 27 More than five years 6 152 8,125 5 621 6,295 6,655 6,364 4 126 4,418 3,474 3,189 2,737 1,471 28 Inflation-indexed 0 0 0 0 0 0 0 0 0 0 0 0 Federal agency 29 Discount noles 0 0 0 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 30 One year or less 0 0 0 0 0 0 0 0 0 0 0 0 31 More than one year, but less than or equal to five years 0 0 0 0 0 0 0 0 0 0 0 0 32 More than five years 0 0 0 0 0 0 0 0 0 0 0 0 33 Mortgage-backed 745 862 912 3,861 1,821 682 480 822 1,258 781 326 733 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 are reported at principal value, which does not more than thirty business days. include accrued interest; options transactions are reported at the face value of the underlying 3. Futures transactions are standardized agreements arranged on an exchange. All futures securities. transactions are included regardless of time to delivery. Dealers report cumulative transactions for each week ending Wednesday. 4. Options transactions are purchases or sales of put and call options, whether arranged on 1. Outright transactions include immediate and forward transactions. Immediate delivery an organized exchange or in the over-the-counter market, and include options on futures refers to purchases or sales of securities (other than mortgage-backed federal agency securi- contracts on U.S. Treasury and federal agency securities. ties) for which delivery is scheduled in five business days or less and "when-issued" NOTE, "n.a." indicates that data are not published because of insufficient activity. secunties that settle on the issue date of offering. Transactions for immediate delivery of mortgagebacked agency secunties 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 1998, week ending Sept. Oct. Nov. Nov 4 Nov. 11 Nov. 18 Nov. 25 Dec. 2 Dec. 9 Dec. 16 Dec 23 Positions2 NET OUTRIGHT POSITIONS' By type of security 1 U.S. Treasury bills 853 -9.335 -6,782 -10,085 -5,730 -7,128 -12,085 2,294 4,374 -11,472 -9,773 Coupon securities, by maturity 2 Five years or less -5,360 1,196 558 5,186 2,529 -499 -970 -2,286 -5,282 -7,691 -5,142 -2.004 6,412 7,272 4.171 7,601 10,547 6.549 5,717 4,007 3.512 3,304 4 Inflation-indexed 1.554 2,705 1.798 2.381 2,153 1,703 1,406 1,517 1,241 1.089 1,104 Federal agency 17,211 18,395 17,666 17,306 21,745 16.948 14.748 17.333 21,969 22.540 22,223 Coupon securities, by maturity 2,668 1,870 2,188 1,765 1,587 2.473 2.702 2,251 1,958 2.297 1.895 7 More than one year, but less than or equal to five years 4.801 5,119 3,208 3.903 4,172 2,954 1.967 3,396 4,026 4,415 2.257 8 More than five years 6,913 6,797 5,584 4 485 5,391 6,935 5.566 4,866 5.302 4.338 1.964 9 Mortgage-backed 58.415 48,954 37,219 40.623 41,319 36,771 34.469 33.233 41,692 39.932 37,331 NET FUTURES POSITIONS4 B\ type of deliverable security 10 U.S.'Treasury bills 606 n.a. 271 n.a. -51 245 418 551 495 n.a. n.a. Coupon securities, by maturity 11 Five years or less -8,716 -9,070 -4,399 -5,152 -3,919 -4,721 -2.838 -6.203 -5,845 -4.269 -2,998 12 More than five years -25,612 -24.562 -27 583 -^2 823 -"*6 °86 - 13 074 -26 851 -^6 519 - 26 034 - 26,745 -23.356 13 Inflation-indexed 0 0 0 0 0 0 0 0 0 0 0 Federal agency 14 Discount notes 0 0 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 15 One year or less 0 0 0 0 0 0 0 0 0 0 0 16 More than one year, bul less than 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 By type of deliverable security 19 U.S. Treasury bills 0 0 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 20 Five yeans or less -1,153 -1,301 -2,128 -1,738 -2.316 -1,947 -2.137 -2.418 -2,535 -3.260 -3,928 21 More than five years -2,553 -3,788 -1,602 -2,696 -1,461 - 1.502 -1,824 -752 -721 -1.275 -1,858 0 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0 0 0 Federal agency 0 0 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 24 One year or less 0 0 0 0 0 0 0 0 0 0 0 25 More than one year, but less than or equal to five years 0 0 0 0 0 0 0 0 0 0 0 26 More than five years n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a 27 Mortgage-backed 1,629 3,160 2,380 3,033 2.956 2,229 2.240 1,458 479 1.087 1,815 Financing5 Reverse repurchase agreements 28 Overnight and continuing 316,256 278,468 240,639 260,682 217,473 253,440 233,620 248,942 250.409 265,083 226,311 29 Term 784,437 847,663 780,552 875,786 906,415 683,253 733,259 730,585 778.286 814,651 850,670 Securities borrowed 30 Overnight and continuing 229.685 234,431 210,066 219,573 209,364 219,514 196,395 209,357 206,947 205,544 203,289 31 Term 99.774 109,805 107,922 106.468 113,261 97,449 1 12.719 I09.5M 1 M.5I7 111.511 112,705 Securities received as pledge 3,152 2.851 3,174 2,900 2,741 3,494 3,435 3,186 2,816 3,203 1,104 33 Term 0 0 63 n.a. n.a. 60 64 67 67 n.a. n.a. Repurchase agreements 34 Overnight and continuing 718.744 666,957 588,736 613.268 566,780 631,286 535.673 614,567 612,649 646.524 598,564 15 Term 704.430 777,445 709,894 796.810 834,146 598,187 701.538 634.759 685 047 705.563 758,512 Securities loaned 36 Overnight and continuing 11,057 8,157 8,943 8,693 8,48.1 9,069 9.076 9.424 9.863 9,803 7,669 37 Term 4,119 3,947 4,008 4,011 4.117 4,085 3.895 3,904 4,409 3,763 2,434 Securities pledged 38 Overnight and continuing 52,222 53,861 46,851 54.969 45,686 49,081 44.093 42,728 45,538 48,618 48,429 39 Term 5.624 5.112 3.556 4.904 4,789 489 3,893 4.576 4,610 5.279 5,207 Collate rallied loans 40 Total 14.140 21,841 23,528 21,712 23,009 26,943 21,054 24,391 22,408 26,182 20,734 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 Ihe U.S. government securities dealers on its published lisi of contracts for mortgage-backed agency securities arc included when Ihe time to delivery is primary dealers. Weekly figures are close -of- bus mess 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 than one business day. Financing "when-issued" securities that settle on the issue dale 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 NOTfc "n.a." indicates thai data are noi 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 D March 1999 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period Agency June July Aug. Sept. 1 Federal and federally sponsored agencies. 738,928 844,611 925,823 1,022,609 1,061,253 1,172,575 2 Federal agencies. . 39,186 37,347 29,380 27,792 26,817 26,990 26,668 26,691 26,350 Defense Department 6 6 6 6 6 6 6 6 6 Export-Import Bank2'3 3,455 2,050 1,447 552 1,295 Federal Housing Administration 116 97 102 144 Government National Mortgage Association certificates of participation5 n.a. n.a. Postal Service6 8.073 5,765 n.a. n.a. Tennessee Valley Authority 27,536 29,429 27,853 27,786 26,811 26,984 26,507 26,685 26,344 United States Railway Association6 n.a. 10 Federally sponsored agencies7 699,742 807,264 896,443 994,817 1,073,863' 1,090,715 1,103,596 1,145,884 n.a. 11 Federal Home Loan Banks 205,817 243,194 263,404 313.919 328,514 328,009 334,494 343,188 367,274 12 Federal Home Loan Mortgage Corporation 93,279 119,961 156,980 169,200 200,314 208,800 213,800 232,994 246,708 13 Federal National Mortgage Association 257,230 299,174 331,270 369,774 406,162 415,229 423,188 430,582 431,300 14 Farm Credit Banks8 53,175 57,379 60,053 63,517 64,717 64,528 57,910 64,332 60,720 15 Student Loan Marketing Association9 50,335 47,529 44,763 37,717 33,231 33,270 33,350 33,760 n.a. 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 Corporation" 1,261 1,261 1.261 1,261 1,261 1,261 1,261 1,261 1,261 18 Resolution Funding Corporation12 29,996 29,996 29,996 29,996 29,996 29,996 29.996 29,996 29,996 MEMO 19 Federal Financing Bank debt13 103,817 78,681 58,172 49,090 136,892 42,610 42,396 45,955 44,952 Lending to federal and federally sponsored agencies 20 Ex port-Import Bank 3,449 2,044 1,431 1,295 21 Postal Service* 8,073 5,765 n.a. n.a. 22 Student Loan Marketing Association n.a. n.a. n.a. n.a. 2 2 3 4 T U e n n i n te e d s s S ee ta t V es a ll R e a y i l A w u ay th o A ri s t s y ociation6 n 3 . , a 2 . 00 n 3 . , a 2 . 00 n n. . a a . . n n. . a a . . n.a. Other lending* 25 Farmers Home Administration 33,719 21,015 18,325 13,530 13,530 10,900 9,756 9,500 9,500 26 Rural Electrification Administration 17,392 17,144 16,702 14,898 14,819 14,126 14,284 14,166 14,191 27 Other 37,984 29,513 21,714 20,110 107,248 17,584 18,356 22,289 21,261 1. Consists of mortgages assumed by the Defense Department between 1957 and 1963 10. The Financing Corporation, established in August 1987 to recapitalize the Federal under family housing and homeowners assistance programs. Savings and Loan Insurance Corporation, undertook its first borrowing in October 1987. 2. Includes participation certificates reclassified as debt beginning Oct. 1, 1976. 11. The Farm Credit Financial Assistance Corporation, established in January 1988 to 3. On-budget since Sept. 30, 1976. provide assistance to the Farm Credit System, undertook its first borrowing in July 1988. 4. Consists of debentures issued in payment of Federal Housing Administration insurance 12. The Resolution Funding Corporation, established by the Financial Institutions Reform, claims Once issued, these securities may be sold privately on the securities market. Recovery, and Enforcement Act of 1989, undertook its first borrowing in October 1989. 5. Certificates of participation issued before fiscal year 1969 by the Government National 13. The FFB, which began operations in 1974, is authorized to purchase or sell obligations Mortgage Association acting as trustee for the Fanners 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 1998 Type of issue or issuer, or use May June July Aug. Sept. Oct. Dec. 1 All issues, new and refunding1 145,657 171,222 214,694 22,862 29,665 22,599 20,344 17,526 19,528 19,325 24,288 By type of issue 2 General obligation 56,980 60,409 69,934 4,827 10,135 6,515 5,812 5,619 6,791 5,433 8,632 3 Revenue 88,677 110,813 134,989 18,035 19,530 16,084 14,532 11,907 12,737 13,892 15,656 By type of issuer 4 State 14,665 13,651 18.237 1,146 2,809 1,972 1,483 1,280 1,865 778 2,561 5 Special district or statutory authority 93,500 113,228 134,919 16,865 18,099 16,244 14,233 12,490 12,924 13,473 15,937 6 Municipality, county, or township 37,492 44,343 70,558 4,851 7.220 5,673 4,628 3,756 4,739 5,073 5,790 7 Issues for new capital 102,390 112,298 135,519 15,281 19,341 15,895 11,258 9,106 12,736 12,452 14,517 By use of proceeds 8 Jiducation 23,964 26,851 31,860 2,819 4,911 2,733 2,435 2,041 2,605 2,353 2,766 9 Transportation 11,890 12,324 13.951 1,043 2,962 3,677 1,982 918 1,598 806 1,800 10 Utilities and conservation 9,618 9,791 12,219 5,971 2,368 795 1,179 831 2,785 2,225 984 11 Social welfare 19,566 24,583 27,794 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 12 Industrial aid 6,581 6,287 6,667 576 563 1,002 709 315 471 638 1,376 13 Other purposes 30,771 32,462 35,095 2,482 5,279 4,674 2,764 2,726 3,359 3,242 4,477 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, or issuer 1995 1996 1997 Apr. May June July Aug. Sept. Oct.' Nov. 1 All issues' 673,571 n.a. n.a. 83,646 84,449 109,687 77,750 60,708 85,833 70,907 105,985 2 Bonds2 572,998 n.a. n.a. 71,929 70,313 93,243 68,133 57,145 81,352 62,692 97,640 By type of offering 408,707 465,489 537,880 55,452 56,965 78,280 54,266 45,745 71,134 48,256 82,034 4 Private placement, domestic3 87,492 n.a. n.a. 7,600 7,600 7,600 7,600 7,600 7,600 7,600 7,600 5 Sold abroad 76,799 83,433 103,188 8.878 5,748 7,363 6,267 3,800 2,618 6,837 8,006 By industry group 156,763 n.a. n.a. 24,585 20.456 24,444 24,821 20,399 16,562 16,632 32,087 416,235 429,157 510,953 47.345 49,857 68,799 43,313 36,746 64,790 46,060 65,553 8 Stocks2 105,323 122,006 117,880 12,470 14,700 17,111 9,772 3,725 4,640 8,655 8,869 By type of offering 9 Public 73,223 122,006 117,880 12,470 14,700 17,111 9,772 3,725 4,640 8,655 8,869 10 Private placement3 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 5,551 9,271 10,248 6,390 2,560 2,266 5,879 6,112 20,516 41,546 57,494 6,919 5,429 6,863 3,382 1,165 2,374 2,776 2,757 1. Figures represeni gross proceeds of issues maturing in more than one year; they are ihe 2. Monthly data cover only public offerings. principal amount or number of units calculated by multiplying by the offering price. Figures 3. Mondily 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

A32 Domestic Financial Statistics • March 1999 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Assets1 Millions of dollars 1998 May June July Aug. Sept. Oct. Nov.1 Dec 1 Sales of own shares2 1.190,900 1,461,125 113,593 122.288 134,801 111,587 118,478 116.471 112,627 141.19S 2 Redemptions of own shares 918,728 1,216,714 84,421 97,899 107,368 118,812 107.049 108,838 89,702 133,981 3 Nel sales' 272,172 245,210 29,172 24,389 27,433 -7,225 11,429 7,633 22,925 7,214 4 Assets4 3,409,315 4,176,935 3,882,061 3,986.952 3,957,093 3,479,401 3,625,841 3,804,591 4,002,089 4,176,935 5 Cash5 174,154 192,361 171,425 199,135 195,966 194,435 211,253 210,026 207.422 192,361 6 Other 3,235,161 3,984,574 1,710,636 3,787.817 3.761,127 3,284.967 3.414,588 1,594 565 3.794,667 3,984.574 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 debt 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 underwriting*, of newly formed companies after their market mutual funds within the same fund familv. 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 672.4 750.4 817.9 762.0 794.3 815.5 840.9 820.8 829.2 820.6 827.0 2 Profits before taxes 635.6 680.2 734.4 685.7 712.4 729.8 758.9 736.4 719.1 723.5 720.5 3 Profits-tax liability 211.0 226.1 246.1 224.2 238.8 241.9 254.2 249.3 239.9 241.6 243.2 424.6 454.1 488.3 461.5 473.6 487.8 504.7 487.1 479.2 481.8 477.3 5 Dividends 205.3 261.9 275.1 273.6 274.1 274.7 275.1 276.4 277.3 278.1 279.0 219.3 192.3 213.2 187.9 199.5 213.2 229.5 210.6 201.8 203.7 198.3 7 Inventory valuation -22.6 -1.2 6.9 3.0 8.1 10.3 4.8 4.3 25.3 7.8 11.7 8 Capital consumption adjustment 59.4 71.4 76.6 73.3 73.8 75.5 77.2 80.1 84.9 89.4 94.8 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 1998 1994 1995 Ql Q2 Q3 Q4 Ql Q2 Q3 ASSETS 1 Accounts receivable, gross2 543.7 607.0 637.1 648.0 651.6 660.5 663.3 667.2 676.0 688.9 2 Consumer 201.9 233.0 244.9 249.4 255.1 254.5 256.8 251.7 251.3 255.3 3 Business 274.9 301.6 309.5 315.2 311.7 319.5 318.5 325.9 334.9 335.1 4 Real estate 66.9 72.4 82.7 83.4 84.8 86.4 87.9 89.6 89.9 98.5 5 LESS: Reserves for unearned income 52.9 60.7 55.6 51.3 57.2 54.6 52.7 52.1 53.2 52.4 6 Reserves for losses 11.3 12.8 13.1 12.8 13.3 12.7 13.0 13.1 13.2 13.2 7 Accounts receivable, net 479.5 533.5 568.3 583.9 581.2 593.1 597.6 601.9 609.6 623.3 2J6.8 250.9 290.0 289.6 306.8 289.1 312.4 329.7 340.1 313.6 8 All other 69«.3 784.4 858.3 882.3 910.0 931.6 949.7 936.8 9 Total assets LIABILITIES AND CAPITAL 14.8 15.3 19.7 18.4 18.8 20.4 24.1 22.0 22.3 24.9 10 Bank loans 171.6 168.6 177.6 185.3 193.7 189.6 201,5 211.7 225.9 226.9 11 Commercial paper Debt 12 Owed to parent 41.8 51.1 60.3 61.0 60.0 61.6 64.7 64.6 60.0 58.3 13 Not elsewhere classified 247.4 300.0 332.5 324.6 345.3 322.8 328.8 338.2 348.7 337.7 14 All other liabilities 146.2 163.6 174.7 189.2 171.4 190.1 189.6 193.1 188.9 185.4 15 Capital, surplus, and undivided profits 74.6 85.9 93.5 94.9 98.7 97.9 101.3 102.1 103.9 103.6 16 Total liabilities and capital 696.3 784.4 858.3 873.4 887.9 882.3 910.0 931.6 949.7 936.8 1. Includes finance company subsidiaries ot 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: secunlized 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 Type of credit July Aug. Sept. Oct. Nov. Seasonally adjusted 761.9 809.8 831.3 840.6 846.4 853.5 867.2' 2 Consumer 283.1 307.7 327.7 332.5 336.6 339.1 343.9 351.7' 353.8 3 Real estate 72.4 111.9 121.1 120.9 125.2 128.1 128.8 132.3 134.3 4 Business 326.8 342.4 361.0 377.9 378.7 379.2 380.7 383.2' 384.7 Not seasonally adjusted 5 Total 689.5 769.7 818.1 836.0 835.2 842.6 850.0 865.5r 874.4 6 Consumer 285.8 310.6 330.9 335.4 338.5 340.5 344.9 351.2' 353.9 7 Motor vehicles loans 81.1 86.7 87.0 89.9 91.7 95.3 96.2 97.6 99.0 8 Motor vehicle leases 80.8 92.5 96.8 97.0 97.3 96.9 94.9 94.6 94.4 9 Revolving2 28.5 32.5 38.6 29.9 29.6 30.2 29.3 34.6 34.7 10 Other3 42.6 33.2 34.4 34.4 35.0 34.7 34.6 34.6 34.6 Securitized assets 11 Motor vehicle loans 34.8 36.8 44.3 49.3 50.2 49.2 51.8 51.6' 53.4 12 Motor vehicle leases 3.5 8.7 10.8 10.9 10.8 10.7 14.2 14.4 14.2 13 Revolving n.a. 0.0 0.0 5.3 5.3 5.3 5.3 5.3 5.3 14 Other 14.7 20.1 19.0 18.6 18.5 18.2 18.8 18.6 18.4 15 Real estate 72.4 111.9 121.1 120.9 125.2 128.1 128.8 132.3 134.3 16 One- to four-family n.a. 52.1 59.0 62.3 65.9 68.6 68.4 72.2 74.1 17 Other n.a. 30.5 28.9 27.5 28.5 28.7 30.1 30.2 30.7 Securitized real estate assets 18 One- to four-family n.a. 28.9 33.0 30.9 30.6 30.7 30.2 29.8 29.4 19 Other n.a. 0.4 0.2 0.1 0.1 0.1 0.1 0.1 0.1 20 Business 331.2 347.2 366.1 379.7 371.5 374.0 376.2 382.C 386.3 21 Motor vehicles 66.5 67.1 63.5 68.4 61.1 62.5 65.5 68.5 70.9 22 Retail loans 21.8 25.1 25.6 29.2 29.2 29.6 30.0 30.4 29.4 23 Wholesale loans5 36.6 33.0 27.7 28.2 21.0 22.0 24.2 27.0 30.3 24 Leases 8.0 9.0 10.2 11.0 10.9 10.9 11.3 11.1 11.2 25 Equipment 8.0 9.0 10.2 212.8 212.8 212.0 210.8 211.5 212.0 26 Loans 8.0 9.0 10.2 52.7 51.6 51.8 47.9 47.2 47.8 27 Leases 8.0 9.0 10.2 160.2 161.2 160.2 162.9 164.3 164.2 28 Other business receivables6 8.0 9.0 10.2 53.7 54.5 57.0 58.9 59.6 60.4 Securitized assets 29 Motor vehicles 8.0 9.0 10.2 29.1 26.3 25.9 24.5 25.0 25.8 30 Retail loans 8.0 9.0 10.2 2.3 2.2 2.1 2.0 1.9 2.4 31 Wholesale loans 8.0 9.0 10.2 26.7 24.1 23.8 22.5 23.2 23.4 32 Leases 8.0 9.0 10.2 0.0 0.0 0.0 0.0 0.0 0.0 33 Equipment 8.0 9.0 10.2 10.5 11.5 11.4 11.3 12.0' 11.8 34 Loans 8.0 9.0 10.2 4.1 5.1 4.9 4.9 5.6 5.4 35 Leases 8.0 9.0 10.2 6.4 6.4 6.4 6.4 6.4' 6.4 36 Other business receivables 8.0 9.0 10.2 5.3 5.4 5.2 5.3 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 1996 Survey of Finance Compa- because of rounding. nies. In that benchmark survey, and in the monthly surveys that have followed, more detailed 2. Excludes revolving credit reported as held by depository institutions that are subsidiarbreakdowns have been obtained for some components. In addition, previously unavailable ies of finance companies. data on securitized real estate loans are now included in this table. The new information has 3. Includes personal cash loans, mobile home loans, and loans to purchase other types of resulted in some reclassification of receivables among the three major categories (consumer, consumer goods such as appliances, apparel, boats, and recreation vehicles. real estate, and business) and in discontinuities in some component series between May and 4. Outstanding balances of pools upon which securities have been issued; these balances June 1996. are no longer carried on the balance sheets of the loan originator. Includes finance company subsidiaries of bank holding companies but not of retailers and 5. Credit arising from transactions between manufacturers and dealers, that is, 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 1. Owned receivables are those carried on the balance sheet of the institution. Managed receivable dealer capital; small loans used primarily for business or farm purposes; and receivables are outstanding balances of pools upon which securities have been issued; these wholesale and lease paper for mobile homes, campers, and travel trailers. balances are no longer carried on the balance sheets of the loan originator. Data are shown Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A34 Domestic Financial Statistics D March 1999 1.53 MORTGAGE MARKETS Mortgages on New Homes Millions of dollars except as noted 1998 June July Aug. Sept. Oct. Nov. Dec. Terms and yields in primary and secondary markets PRIMARY MARKETS Terms 1 Purchase price (thousands of dollars) 182.4 180.1 195.2 193.7 208.7 191.5 192.7 201.4 192.1 206.0 139.2 140.3 151 1 151.0 160.1 150.4 150.8 155.8 148.1 159.0 3 Loan-to-price ratio (percent) 78.2 80.4 80.0 81.0 78.7 81.3 80.9 79.8 79.5 79.4 27.2 28.2 28.4 28.3 28.5 28.6 28.7 28.6 28.3 28.7 5 Fees and charges (percent of loan amount)2 1.21 1.02 0.89 0.85 0.90 0.87 0.85 0.86 0.76 0.98 Yield (percent per year) 7 56 7 57 6 95 7 03 6.99 6.95 6.85 6 72 6 68 6.80 7.77 7.73 7.08 7.16 7.13 7.09 6.98 6.85 6.80 6.94 8 Contract rate (HUD series)4 8.03 7.76 7.00 7.08 7.05 6.86 6.64 6.86 6.84 6.83 SECONDARY MARKETS Yield (percent per vear) 9 FHA mortgages (Section 203)5 8.19 7.89 7.04 7.07 7.05 7.03 6.53 7.07 7.02 7.06 10 GNMA securities6 7.48 7.26 6.43 6.54 6.48 6.42 6.05 6.10 6.25 6.18 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 287,052 316,678 414,515 349,249 359,827 366,890 375,665 386,452 399,804 414.515 12 FHA/VA insured 30,592 31,925 33,770 32,896 33,036 32,929 32,903 32,814 33,420 33,770 256 460 284 753 380 745 316.353 326 791 133 961 342 762 353 638 366 384 380 745 14 Mortgage transactions purchased (during period) 68,618 70,465 188,448 11,916 17,326 14,316 15,681 18,967 23,557 26.222 Mortgage commitments (during period) 15 Issued7 65,859 69,965 193,795 16,921 13,217 17,016 16,282 30,551 17,994 16,803 16 To sell8 . . 130 1 298 1,880 0 419 233 249 393 0 434 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)8 17 Total 137,755 164,421 255,009 196,634 202,582 206,856 216,521 231,458 242,270 255.009 18 FHA/VA insured 220 177 602 422 456 489 569 569 602 602 137,535 164 244 254,407 196,212 202,126 206,367 215.952 230,889 241,668 254,407 Mortgage transactions f during period) 125,103 117,401 267,402 22,394 22,605 21,507 25,366 20,629 23,986 34,299 21 Sales 119,702 114,258 250,565 21.133 22,263 20,634 24,294 19,472 22,660 28,024 22 Mortgage commitments contracted (during period)9 .... 128,995 120,089 281.899 20,008 23,528 24,694 23,375 25,025 28.903 29,703 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 thiny-year mortgages insured by the 2. Includes all fees, commissions, discounts, and "points" paid (by the borrower or the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. seller) to obtain a loan. 7. Does not include standby commitments issued, but includes standby commitments 3. Average effective interest rate on loans closed for purchase of newly built homes, converted. assuming prepayment at the end of ten years. 8. Includes participation loans as well as whole loans. 4. Average contract rate on new commitments for conventional first mortgages; from U.S. 9. Includes conventional and government-underwritten loans. The Federal Home Loan Department of Housing and Urban Development (HUD). Based on transactions on the first Mortgage Corporation's mortgage commitments and mortgage transactions include activity day of the subsequent month. under mortgage securities swap programs, whereas the corresponding data for FNMA 5. Average gross yield on thirty-year, minimum-downpayment first mortgages insured exclude swap activity. by the Federal Housing Administration (FHA) for immediate delivery in the private secondary market. Based on transactions on first day of subsequent month. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Real Estate A35 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period Type of holder and property Q3 Q4 Ql Q2 Q3P 1 All holders 4392,794 4,602,654 4,929,422 5,180,913 5,279,327 5,502,583 5,642,865 By type of property 2 One- to four-famiiy residences . 3,355,485 3,529,403 3,761,017 3,956,813 4,029,268 4,101,294 4,192,363 4,297.628 3 Multifamily residences 271,748 281,592 300,559 308,417 314,585 320,229 326,532 332,922 4 Nonfarm, nonresidential 682,590 707,098 780,713 825,922 845,057 866,402 890,708 918,020 5 Farm 82,971 84,561 87,134 89,760 90,417 91,425 92,980 94,295 By type of holder 6 Major financial institutions . 1,819,806 1,894,420 1,979,114 2,068,002 2,086,764 2.119,323 2,124,305 2,144,075 7 Commercial banks 1,012,711 1,090,189 1.145,389 1,227.131 1.244,151 1,270,076 1,280,778 1,295,721 8 One- to four-family 615,861 669,434 698,508 752,323 762,556 779,954 784,957 784,958 9 Multifamily 39,346 43,837 46,675 49,166 50,642 51,790 52,175 53,049 10 Nonfarm, nonresidential 334,953 353,088 375,322 398,841 403,975 410,876 415,329 429,032 11 Farm 22,551 23,830 24,883 26,801 26,978 27,456 28,316 28,682 12 Savings institutions3 596,191 596,763 628.335 631,444 631,822 637,012 629,882 633,281 13 One- to four-family 477,626 482,353 513,712 519,564 520,672 527,036 520,276 525,174 14 Multifamily 64,343 61.987 61,570 60,348 59,543 59,074 58,704 56,631 15 Nonfarm, nonresidential 53,933 52,135 52,723 51,187 51,252 50,532 50,519 51,078 16 Farm 289 288 331 346 354 369 383 398 17 Life insurance companies 210,904 207,468 205,390 209,426 210,792 212,235 213,645 215.073 18 One- to four-family 7,018 7,316 6,772 7,080 7,186 7,321 7,488 7,629 19 Multifamily 23,902 23,435 23,197 23,615 23,755 23,902 24,038 24,181 20 Nonfarm. nonresidential 170,421 167,095 165,399 168,374 169,377 170,423 171,393 172,411 21 Farm 9,563 9,622 10,022 10,358 10,473 10,589 10,726 10,851 22 Federal and related agencies 315,580 306,774 300,935 291,410 292,581 293,499 294,547 294,307 23 Government National Mortgage Association 6 2 2 7 8 7 24 One- to four-family 6 2 2 7 8 7 25 Multifamily 0 0 0 0 0 0 0 0 26 Farmers Home Administration4 41,781 41,791 41.596 41,332 41,195 40,972 40,921 40,907 27 One- to four-family 18,098 17,705 17,303 17,458 17,253 17,160 17,059 17,025 28 Multifamily 11,319 11,617 11.685 11,713 11,720 11,714 11,722 11,736 29 Nonfarm, nonresidential 5,670 6,248 6,841 7,246 7,370 7,369 7,497 7,566 30 Farm 6,694 6,221 5,768 4,916 4,852 4,729 4,644 4,579 31 Federal Housing and Veterans' Administrations 10,964 9,809 6,244 3,462 3,821 3,694 3,631 3,448 32 One- to four-family 4,753 5,180 3,524 1,437 1,767 1,641 1,610 1,593 33 Multifamily 6,211 4,629 2,719 2,025 2,054 2,053 2,021 1,855 34 Resolution Trust Corporation 10,428 1,864 0 0 0 0 0 0 35 One- to four-family 5,200 691 0 0 0 0 0 0 36 Multifamily 2,859 647 0 0 0 0 0 0 37 Nonfarm, nonresidential 2,369 525 0 0 0 0 0 0 38 Farm 0 0 0 0 0 0 0 0 39 Federal Deposit Insurance Corporation 7,821 4,303 2,431 1,476 724 786 564 482 40 One- to four-family 1,049 492 365 221 109 118 85 72 41 Multifamily 1,595 428 413 251 123 134 96 82 42 Nonfarni, nonresidential 5,177 3,383 1.653 1,004 492 534 384 328 43 Farm 0 0 0 0 0 0 0 0 44 Federal National Mortgage Association 174,312 176,824 174,556 168,458 167,722 166,670 167,202 166,243 45 One- to four-family 158,766 161,665 160,751 156,363 156,245 155,876 156,769 156,208 46 Multifamily 15,546 15,159 13,805 12,095 11,477 10,794 10,433 10.035 47 Federal Land Banks 28,555 28,428 29,602 30,346 30,657 31,005 31,352 32,009 48 One- to four-family 1,671 1,673 1,742 1,786 1,804 1,824 1,845 1,883 49 Farm 26,885 26,755 27.860 28,560 28,853 29,181 29,507 30,126 50 Federal Home Loan Mortgage Corporation 41,712 43,753 46.504 46,329 48,454 50,364 50.869 51,211 51 One- to four-family 38,882 39.901 41,758 40,953 42,629 44,440 44.597 44,254 52 Multifamily 2,830 3,852 4,746 5,376 5,825 5,924 6,272 6,957 53 Mortgage pools or trusts 1,730,004 1,863,210 2,064,882 2,202,549 2,272,999 2,330,674 2,442,603 2,548,050 54 Government National Mortgage Association 450,934 472,283 506,340 529,867 536,810 533,011 537,586 541,431 55 One- to four-family 441,198 461,438 494,158 516,217 523,156 519,152 523,243 526,934 56 Multifamily 9,736 10,845 12.182 13,650 13,654 13,859 14,343 14,497 Federal Home Loan Mortgage Corporation 490,851 515,051 554,260 569,920 579,385 583,144 609.791 635,726 One- to four-family 487,725 512,238 551.513 567,340 576,846 580,715 607.469 633.124 Multifamily 3,126 2,813 2,747 2,580 2,539 2,429 2.322 2.602 Federal National Mortgage Association 530,343 582,959 650,780 690.919 709,582 730,832 761,359 798.460 One- to four-family 520,763 569,724 633,210 670,677 687,981 708,125 737,631 770.979 Multifamily 9,580 13,235 17,570 20,242 21,601 22,707 23,728 27,481 Farmers Home Administration4 19 11 3 2 2 2 2 2 One- to four-family 3 0 0 0 0 0 0 Multifamily 0 0 0 0 0 0 0 0 Nonfarm, nonresidential 9 5 0 0 0 0 0 0 Farm 7 4 3 2 2 2 Private mortgage conduits 257,857 292,906 353,499 411.841 447,219 483,685 533,865 572,431 One- to four-family 208,500 227,800 261,900 299,400 318,000 336,824 364,316 391,736 Multifamily 11,744 15,584 21,967 25,655 29,264 33,477 38,144 40,893 Nonfarm, nonresidentia! 37,613 49,522 69,633 86.786 99,955 113,384 131,405 139,802 Farm 0 0 0 0 0 0 0 0 73 Individuals and others .. 527,404 538,251 584,491 618.951 626,984 635,855 641,129 656,433 74 One- to four-family .... 368,366 371,789 375,798 405,988 413,057 421,100 425,010 436,052 75 Multifamily 69,611 73,524 81,282 81,702 82,387 82,372 82,535 82.921 76 Nonfarm, nonresidential 72,445 75,097 109,143 112,485 112,636 113,283 114,182 117,803 77 Farm 16,983 17,841 18,268 18,777 18,904 19,100 19,402 19,657 1. Multifamily debt refers to loans on structures of five or more units. 6. Includes securitized home equity loans. 2. Includes loans held by nondeposit trust companies but not loans held by bank trust 7. Other holders include mortgage companies, real estate investment trusts, state and local departments. credit agencies, state and local retirement funds, noninsured pension funds, credit unions, and 3. Includes savings banks and savings and loan associations. finance companies. 4. FmHA-guaranteed securities sold to the Federal Financing Bank were reallocated from SOURCE. Based on data from various institutional and government sources. Separation of FmHA mortgage pools to FmHA mortgage holdings in 1986:Q4 because of accounting nonfarm mortgage debt by type of property, if not reported directly, and interpolations and changes by the Fanners 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 • March 1999 1.55 CONSUMER CREDIT' Millions of dollars, amounts outstanding, end of period 1998 Holder and type of credit 1995 1996 1997 June July Aug. Sept.' Oct.' Nov. Seasonally adjusted 1 Total 1,095,711 1,181,913 1,233,099 1,263,683 l,269,844r l,277,412r 1,285,346 1,297,171 1,301,068 364,209 392,321 413,369 425,510 428,121 432,240 434,964 436,966 441,340 443,183 499,486 531,140 545,339 543,612' 548,747' 552,462 557,093 556,403 4 Other5 288,319 290.105 288,590 292,834 298,111' 296,425' 297,920 303,113 303,325 Not seasonally adjusted 5 Total 1,122,828 1,211,590 1,264,103 1,256,897 1,262,958' 1,277,61 V 1,288,362 1,299,809 138,947 By major holder 6 Commercial banks 501,963 526,769 512,563 491,509 491,507' 498,219' 497,860 501,982 500,383 152,123 152,391 160,022 154,275 156,366 160,151 160,078 166,861 168,262 131,939 144,148 152,362 152,400 153,735 154,146 155,167 156,043 156,467 9 Savings institutions 40,106 44,711 47,172 48,329 48,989 49,648 50,307 50,966 51,625 10 Nonfinancial business3 85,061 77,745 78,927 65,265 65.478 66,004 65,557 65,949 66,632 11 Pools of securitized assets 211,636 265,826 313,057 345,119 346,883' 349,443' 359,393 358,008 365,578 By major type of credit* 367,069 395,609 416,962 425,227 429,723 434,924 438,965 442,255 445,465 151,437 157,047 155,254 150,877 153,203 155,508 156,287 156,788 157,126 14 Finance companies 81,073 86,690 87,015 89,948 91,741 95,257 96,183 97,637 98,954 15 Pools of securitized assets 44,635 51,719 64,950 71,615 72,470 70,766 72,146 71.788 72,582 464,134 522,860 555,858 539,572 537,349r 545,564' 549,786 555,456 559,079 17 Commercial banks 210,298 228,615 219,826 200,901 197,646 200,424 197,615 199,234 195,377 18 Finance companies 28,460 32,493 38,608 29,893 29,605 30,155 29,312 34.597 34,696 19 Nonfinancial business3 53,525 44,901 44.966 33,544 33,807 34,009 «,743 33,762 33,787 20 Pools of securitized assets4 147,934 188,712 221,465 245,635 246,635' 251,165' 259,348 258,139 265,311 21 Other 291,625 293,121 291,283 292,098 295.886' 297,123' 299,611 302,098 304,403 140,228 141,107 137,483 139,731 140,658' 142,287' 143,958 145,960 147,880 23 Finance companies 42,590 33,208 34,399 34,434 35,020 34,739 34,583 34,627 34,612 24 Nonfinancial business3 31,536 32,844 33,961 31,721 31,671 31,995 31,814 32,187 32,845 25 Pools of securitized assets 19,067 25,395 26,642 27,869 27,778 27.512 27,899 28.081 27.685 1. The Board's series on amounts of credit covers most short- and intermediate-term credit 3. Includes retailers and gasoline companies. extended to individuals. Data in this table also appear in the Board's G.19 (421) monthly 4. Outstanding balances of pools upon which securities have been issued; these balances statistical release. For ordering address, see inside front cover. are no longer carried on the balance sheets of the loan originator. 2. Comprises mobile home loans and all other loans that are not included in automobile or 5. Totals include estimates for certain holders for which only consumer credit totals are revolving credit, such as loans for education, boats, trailers, or vacations. These loans may be available. secured or unsecured. 1.56 TERMS OF CONSUMER CREDIT1 Percent per year except as noted 1998 Item 1995 1996 1997 May June July Aug. Sept. Oct. Nov. INTEREST RATES Commercial banks 9.57 9.05 9.02 8.69 n.a. n.a. 8.71 n.a. n.a. 8.62 2 24-month personal 13.94 13.54 13.90 13.76 n.a. n.a. 13.45 n.a. n.a. 13.75 Credit card plan 3 All accounts 15.90 15.63 15.77 15.67 n.a. n.a. 15.83 n.a. n.a. 15.69 15 64 15 50 15 57 15 62 15 85 15 72 Auto finance companies 11.19 9.84 7.12 6.07 6.02 6.23' 6.00 5.92 6.33 6.79 14 48 13 53 13 27 12 73 12 63 1251 12 68 12 65 12 58 1241 OTHER TERMS' Maturity {months) 7 New car 54.1 51.6 54.1 50.8 50.9 51.7 53.0 53.1 53.1 52.8 8 Used car 52 2 51 4 51 0 52 9 54 0 54 1 S4 1 54 2 54 2 54 3 Loan-to-value ratio 92 91 92 93 91 92 93 93 92 91 10 Used car 99 100 99 99 100 100 101 101 100 100 Amount financed (dollars) 16,210 16,987 18,077 18,793 18,878 19,084 19.068 19,028 19.199 19,590 12 Used car 11,590 12,182 12,281 12,607 12,698 12,733 12,407 12,731 12,914 13,112 1. The Board's series on amounts of credit covers most short- and intermediate-term credit 2. Data are available for only the second month of each quarter. extended to individuals. Data in this table also appear in the Board's G.19 (421) monthly 3. At auto finance companies. statistical release. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A37 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS1 Billions of dollars; quarterly data at seasonally adjusted annual rates Transaction category or .sector Ql Q2 Q3 Q4 Ql Q2 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors. 588.0 700.4 617.7 955.1 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 5 Nonfederal 331.9 611.0 661.2 799.2 914.3 1.008.9 1,067.0 By instrument 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 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 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 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 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 Mortgages 123.7 172.7 204.3 318.8 342.1 253.0 296.7 413.0 405.8 428.1 481.2 497.8 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 Multir'amily 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 Commercial -26.7 -6.4 20.8 38.3 59.1 28.6 68.4 67.9 71.6 80.0 91.9 103.9 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 Consumer credit 60.7 124.9 138.9 52.5 62.5 59.5 50.3 37.8 57.3 65.1 By borrowing sector Household 207.8 311.0 343.7 370.3 355.6 3M.9 129.7 362.9 394.9 437.2 469.8 472.7 Nontinancial 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 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 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 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 State 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 -2.0 .9 1.2 -3.5 -6.5 -7.0 -4.4 -2.6 28 Total domestic plus foreign 657.8 557.5 771.5 826.5 707.1 679.3 922.1 997.4 990.6 1,024.7 903.5 Financial sectors 29 Total net borrowing by financial sectors .. . 468.4 456.4 556.2 644.3 336.5 657.1 595.5 987.9 839.8 1,012.9 992.8 By instrument 30 Federal government-related 165.3 287.5 204 1 231.5 212.8 105.7 286.2 161.0 298.1 227.3 413.4 561.6 31 Government-sponsored enterprise securities . 80.6 176.9 105 9 90.4 98.4 -8.9 198.1 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 129.1 180.9 252.3 324.7 431.5 230.9 370.9 434.5 689.8 612.5 599.5 431.2 35 Open market paper -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 -144 -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 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 - 1 .1 .1 -.2 2 2 .3 5 .2 1.0 43 Life insurance companies .3 -.1 I.I 2 .8 1 '.2 -.1 .0 — 6 1.6 44 Government-sponsored enterprises 80.6 172.1 105.9 90.4 98.4 -89 198.1 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 S.I -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 I Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Financial Statistics • March 1999 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS1—Continued Transaction category or sector Ql Q2 Q3 Q4 Ql Q2 Q3 52 Total net borrowing, all sectors 952.2 1,025.9 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 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 85.0 112.0 196.8 108.9 109.4 157.6 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 88.2 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 -118.2 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. residents 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 -11.9 66 Mutual fund shares 292.0 100.6 147.4 237.6 265.1 249.6 250.1 299.9 261.0 321.4 383.7 148.5 1. Data in this table also appear in the Board's Z.I (780) quarterly statistical release, tables F.2 through F.4. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A39 1.58 SUMMARY OF FINANCIAL TRANSACTIONS1 Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1997 Transaction category or sector Ql Q2 Q3 Q4 01 Q2 NET LENDING IN CREDIT MARKETS2 1 Total net lending in credit markets 952.2 1,025.9 1,227.8 1,359.8 1,470.7 1,043.7 1336.4 1,517.6 1,985.3 1,8303 2,037.6 2 Domestic nonfederal nonfinancial sectors 41.6 238.0 -107.0 -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 7Federal government -18.4 -27.5 -.2 -7.7 4.9 1.7 5.7 3.3 9.0 15.5 12.8 Rest of the world 129.3 132.3 273.9 414.7 312.5 330.6 308.6 402.9 208.0 237.4 317.5 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 in 11 Commercial banking 142.2 163.4 265.9 187.5 324.3 316.0 290.0 226.2 464.9 292.9 136.1 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 22 5.1 -5.0 19.4 15.3 -17.6 15 Banks in U.S.-affiliated areas 24 3.3 4.2 .7 3.7 6.1 1.8 5.8 II 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 Other 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 1,025.9 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 -5.8 -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 98.0 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 persona] 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 71.5 49.3 40.7 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 3,557.7 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 -27.0 15.1 -8.7 -58.7 48.0 79.7 12.6 -97.1 65 Total identified to sectors as assets 2,430.0 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.1 (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. F.I 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 • March 1999 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1 Billions of dollars, end of period 1997 1998 Ql Q2 Q3 Q4 Ql 02 Q3 Nonfinancial 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 Bx sector and instrument 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 "i 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 9 521.4 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 2,145.0 By instrument 6 Commercial paper 139.2 157.4 156.4 168.6 168.7 179.3 176.6 168.6 193.1 202.5 216.9 7 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 8 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 9 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 1.097.0 1.123.9 10 Other loans and advances 669.6 736.9 770.6 X39.3 784 4 788.5 802.9 839.3 865.6 873.8 887.6 11 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 3,355.5 3,529.4 3,761.0 4,029.3 3,805.7 3,860.6 3,956.8 4,029.3 4,101.3 4,192.4 4.297.6 13 Multifamily residential 265.6 273.6 289.9 301.4 290.9 294.2 295.8 301.4 306.4 312.0 317.7 14 Commercial 670.0 690.8 759.1 818.3 766.3 783.4 800.3 818.3 838.3 861.2 887.2 15 Farm 83.0 84.6 87.1 90.4 87.7 88.7 89.8 90.4 91.4 93.0 94.3 16 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 4,452.5 4,801.1 5,142.7 5,500.9 5,177.1 5,268.6 5,379.0 5,500.9 5,558.5 5,683.7 5,823.5 18 Nonfinancial business 3,947.3 4,206.0 4,452.9 4,783.5 4,532.1 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 nonnnandal sectors, domestic and foreign 13,384.5 14,156.0 14,959.6 15,778.4 15.132.5 15,26677 15,489.2 15,778.4 16,024.5 16,242.6 16.465.5 Financial actors 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 iiLttnment 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 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 15 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 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 133.6 148.0 150.0 168.6 151.6 160.5 164.0 168.6 181.2 190.5 200.3 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 5 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 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 (REITs) 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 18,437.2 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 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,l (780) quarterly statistical release, tables L.2 through LA 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 Transaction category or sector Ql 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 21,227.0 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 1,530.3 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 16,778.3 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 3,254.3 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 US.-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 22.5 23.8 22.5 27.4 31.2 26.8 28.3 15 Banks in US.-affiliated areas 29.2 33.4 34.1 37.8 35.6 36.1 37.5 37.8 39.2 40.4 41.1 16 Savings institutions 920.8 913.3 933.2 928.5 931.9 937.8 929.0 928.5 931.0 928.1 937.8 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 trusts and estates 248.0 239.7 232.0 239.5 232.8 235.5 237.3 239.5 240.1 240.9 241.4 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 1,823.3 20 Other insurance companies 446.4 468.7 491.2 515.3 491.6 498.6 506.6 515.3 521.1 520.8 518.3 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 718.8 771.3 820.2 901.1 838.5 861.3 890.4 901.1 939.3 977.6 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 28 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 476.2 526.2 544.5 566.4 552.4 553.1 564.4 566.4 572.0 579.0 593.7 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 (REITs) 13.3 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 17^06.8 18,437.2 19,797.0 21,227.0 20,049.0 20351.5 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 2,474.1 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 3,117.3 46 Security credit 279.0 305.7 358.1 468.2 380.0 414.8 432.2 468.2 505.3 481.0 491.8 47 Life insurance reserves 505.3 550.2 593.8 646.7 606.2 621.9 637.6 646.7 658.6 667.8 674.3 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 45,244.2 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 8,331.3 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 -7.3 -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 -8.1 -9.7 -6.8 -7.8 -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 67,6*5.8 71,235.2 72,323.7 70,543.7 I. 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. 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 • March 1999 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures Monthly data seasonally adjusted, and indexes 1992=100, except as noted Apr. May July Sept. 1 Industrial production 119.5 126.8 130.5 132.4 132.5 132.8 Market groupings 2 Products, total 114.4 119.6 123.7 124.0 124.5 123.6 123.3 124.9 124.1' 125.2' 124.9 125.0 3 Final, total 115.5 121.1 125.6 126.2 126.6 125.5 124.7 126.8 126.0 127.1' 126.8 126.5 4 Consumer goods 111.3 114.1 115.4 116.4 116.8 115.1 114.0 116.1 114.8 115.6' 115.8 115.8 5 Equipment 122.7 133.9 144.2 143.6 144.2 144.1 143.9 146.0 146.2' 147.8' 146.5 145.8 6 intermediate 110.9 115.2 118.1 117.3 118.2 118.0 119.1 119.1 118.3' 119.2' 119.3 120.3 7 Materials 127.8 138.2 144.0 143.1 143.6 141.8 141.9 144.4 144.4 144.5' 144.6 145.3 Industry groupings 121.4 129.7 135.1 134.9 135.4 133.7 133.6 135.2 136.3' 136.7 8 Manufacturing 81.4 82.0 81.7 81.6 80.2 79.8 80.1 80.4' 80.1 79.9 9 Capacity utilization, manufacturing (percent) 10 Construction contracts3 130.9 142.7 149.9 151.0' 152.0' 153.0' 154.0' 154.0' 149.0' 147.0' 148.0 147.0 117.3 120.3 123.4 122.8 123.2 123.3 123.5 123.8 123.9 124.1 124.3 124.7 11 Nonagricultural employment, total4 2.4 2.4 2.3 102.7 102.5 102.6 101.9 102.4 102.3 102.2 102.1 102.4 12 Goods-producing, total 97.4 98.2 98.5 99.1 99.0 98.9 97.9 98.4 98.4 98.1 97.7 97.7 13 Manufacturing, total 98.6 99.6 99.6 100.4 100.1 99.9 98.4 99.1 99.3 99.0 98.6 98.5 14 Manufacturing, production workers 123.1 126.5 130.1 129.3 129.7 130.0 130.4 130.6 130.9 131.1 131.5 131.8 15 Service-producing 165.2 174.5 n.a. 181.4 182.2 182.7 183.4 184.2 184.8 185.6 186.4 n.a. 16 Personal income, total 159.8 171.2 n.a. 180.3 181.5 181.8 182.8 184.1 184.6 185.5 186.6 n.a. 17 Wages and salary disbursements 135.7 144.7 n.a. 151.0 151.5 150.5 149.6 151.3 152.1 151.7 151.7 n.a. 18 Manufacturing 164.0 171.7 n.a. 177.0 177.5 177.9 178.7 179.4 179.9 180.8 181.5 n.a. 19 Disposable personal income 159.6 166.9 175.3 173.7 175.8 176.0 174.8 174.9 175.6 177.7 178.9 180.4 20 Retail sales5 Prices6 21 Consumer (1982-84=100) 156.9 160.5 163.0 162.5 162.8 163.0 163.2 163.4 163.6 164.0 164.0 163.9 22 Producer finished goods (1982= 100) 131.3 131.8 130.7 130.4 130.6 130.7 131.0 130.7' 130.6 131.4 130.8 131.0 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 recent 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 Resen'e 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, DR1 McGraw-Hill, U.S. Department of Commerce, and other sources. 2.11 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT Thousands of persons; monthly data seasonally adjusted Category 1996' May July Sept. HOUSEHOLD SURVEY DATA1 1 Civilian labor force2 133,943 136,297 137,673 137,369' 137,498' 137.407' 137,481' 138,081' 138,116 138,193 138,547 Employment 2 Nonagricultural industries3 123,264 126,159 128,085 127,979' 127,890' 127,753' 127,772' 128,348' 128,300 128,765 129,304 3 Agriculture 3,443 3.399 3,378 3,351' 3,363' 3,423' 3,492' 3,470' 3,558 3.348 3,222 Unemployment 4 Number 7,236 6,739 6,210 6,039' 6,245' 6,231' 6,217r 6,263' 6,258 6,080 6,021 5 Rate (percent of civilian labor force) 5.4 4.9 4.5 4.4' 4.5 4.5 4.5 4.5' 4.5 4.4 4.3 ESTABLISHMENT SURVEY DATA 6 Nonagricultural payroll employment4 119,608 122,690 125,833 125,562 125,751 125,869 126,191 126,363 126,527 126,778 127,156 7 Manufacturing 18,495 18,657 18,716 18.805 18,780 18.594 18,693 18,692 18,633 18,570 18,557 8 Mining 580 592 575 579 578 571 571 568 564 560 557 9 Contract construction 5,418 5,686 5,965 5,917 5,946 5,970 5,989 5,981 6,012 6,054 6,158 10 Transportation and public utilities 6,253 6,395 6,551 6,534 6,538 6,550 6,570 6,579 6,595 6,609 6,641 11 Trade 28,079 28,659 29,299 29,238 29,269 29,374 29,383 29,454 29,453 29,529 29,589 12 Finance 6,911 7,091 7,341 7,311 7,333 7,370 7,372 7,393 7,417 7,439 7,467 13 Service 34,454 36,040 37,525 37,350 37,494 37,614 37,691 37,768 37,905 38,041 38,152 14 Government 19,419 19.570 19,862 19,828 19,813 19,826 19,922 19,928 19.948 19,976 20,035 1. Beginning January 1994, reflects redesign of current population survey and population 4. Includes all full- and part-time employees who worked during, or received pay for, the controls from the 1990 census. pay period that includes the twelfth day of the month; excludes proprietors, self-employed 2. Persons sixteen years of age and older, including Resident Armed Forces. Monthly persons, household and unpaid family workers, and members of the armed forces. Data are figures are based on sample data collected during the calendar week that contains the twelfth adjusted to the March 1992 benchmark, and only seasonally adjusted data are available at this day; annual data are averages of monthly figures. By definition, seasonality does not exist in time. population figures. SOURCE. Based on data from U.S. Department of Labor, Employment and Earnings. 3. Includes self-employed, unpaid family, and domestic service workers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A43 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION1 Seasonally adjusted 1998 1998 Ql 02 Q3r Q4 Ql Q2 Q3 Q4 Ql Q2 Q3r Q4 Output (1992=100) Capacity (percent of 1992 output) Capacity utilization rate (percent)2 1 Total industry 130.4 131.3 131.6 161.5 163.5 82.7 82.3 81.5 81.1 2 Manufacturing 136.5 163.5 165.8 81.8 81.2 80.2 3 Primary processing3 121.2 121.1 120.2 120.3 143.0 144.0 145.1 146.1 84.8 84.1 82.9 82.4 4 Advanced processing4 140.1 141.4 142.1 144.6 173.5 176.4 179.2 182.0 80.2 79.3 79.5 5 Durable goods 154.4 156.1 157.9 161.2 190.2 193.9 197.5 201.2 81.2 80.5 79.9 80.1 6 Lumber and products 115.6 116.4 117.7 118.8 142.0 143.0 143.9 144.9 81.4 81.4 81.8 82.0 7 Primary metals 128.2 125.3 122.4 119.4 140.8 142.0 143.2 144.4 91.0 88.3 85.5 82.7 8 Iron and steel 128.3 124.0 118.7 111.3 140.9 142.8 144.6 146.5 91.0 86.9 82.1 76.0 9 Nonferrous 128.0 127.0 126.8 129.0 140.4 140.8 141.3 141.7 91.2 90.1 89.7 91.0 10 Industrial machinery and equipment 194.1 203.0 207.9 212.1 226.5 234.7 242.9 251.6 85.7 86.5 85.6 84.3 11 Electrical machinery 278.2 282.8 292.7 303.7 351.2 366.6 381.6 396.7 79.2 77.1 76.7 76.6 12 Motor vehicles and parts 140.8 135.3 137.2 149.1 182.8 183.9 184.9 186.0 77.0 73.6 74.2 80.2 13 Aerospace and miscellaneous transportation equipment 102.7 106.1 106.6 106.1 127.0 127.5 128.0 128.5 80.8 83.2 83.3 82.5 14 Nondurable goods 112.7 112.7 111.3 111.6 135.8 136.6 137.5 138.4 83.1 82.5 80.9 80.6 15 Textile mill products 113.6 113.2 112.1 111.5 134.8 134.9 135.1 135.2 84.3 83.9 83.0 82.5 16 Paper and products 115.5 115.0 115.0 115.1 130.6 131.6 132.5 133.4 88.5 87.4 86.8 86.3 17 Chemicals and products 116.8 116.9 114.4 114.1 147.1 148.0 148.9 149.7 79.4 79.0 76.8 76.2 18 Plastics materials 127.3 127.5 128.4 128.5 139.4 140.7 141.9 143.2 91.3 90.6 90.5 89.8 19 Petroleum products 111.6 112.0 112.7 112.8 116.2 116.5 116.8 117.1 96.1 96.1 96.5 96.3 20 Mining 107.0 105.3 103.6 101.4 119.7 119.9 120.1 120.5 89.4 87.8 86.2 84.1 21 Utilities 110.9 115.6 119.6 115.7 125.9 126.2 126.5 126.7 88.1 91.6 94.6 91.3 22 Electric 112.8 118.3 121.2 119.0 123.5 123.8 124.0 124.3 91.3 95.6 97.7 95.8 1975 Previous cycle Latest cycle6 High Low High Low High Low Dec. July Aug. Sept.r Oct.r Nov. Dec Capacity utilization rate (percent)2 1 Total industry 89.2 72.6 87.3 71.1 85.4 78.1 83.4 81.1 82.0 81.3 81.4 81.0 2 Manufacturing 70.5 86.9 69.0 85.7 76.6 82.5 79.8 80.7 80.1 80.4 80.1 79.9 3 Primary processing3 91.2 68.2 88.1 66.2 88.9 77.7 85.4 83.4 83.1 82.1 82.4 82.3 82.4 4 Advanced processing 87.2 71.8 86.7 70.4 84.2 76.1 81.4 78.5 79.9 79.5 79.8 79.5 79.2 5 Durable goods 89.2 68.9 87.7 63.9 84.6 73.1 82.0 78.6 80.9 80.3 80.6 80.0 79.8 6 Lumber and products 88.7 61.2 87.9 60.8 93.6 75.5 81.4 81.8 82.3 81.1 81.5 82.0 82.4 7 Primary metals 100.2 65.9 94.2 45.1 92.7 73.7 91.3 85.9 86.9 83.7 84.1 82.1 81.8 8 Iron and steel 105.8 66.6 95.8 37.0 95.2 71.8 91.3 83.5 84.7 78.1 78.3 74.9 74.7 9 Nonferrous 90.8 59.8 91.1 60.1 89.3 74.2 91.5 88.9 89.7 90.6 91.2 91.2 90.7 10 Industrial machinery and equipment 96.0 74.3 93.2 64.0 85.4 72.3 85.3 87.0 85.2 84.5 85.0 84.3 83.6 11 Electrical machinery 89.2 64.7 89.4 71.6 84.0 75.0 81.1 76.8 76.2 77.0 76.9 76.4 76.4 12 Motor vehicles and parts 93.4 51.3 95.0 45.5 89.1 55.9 81.7 58.3 83.4 80.9 80.9 80.1 79.5 13 Aerospace and miscellaneous transportation equipment 78.4 67.6 81.9 66.6 87.3 79.2 78.9 83.8 83.5 82.6 83.7 82.5 81.4 14 Nondurable goods 87.8 71.7 87.5 76.4 87.3 80.7 83.4 81.7 80.9 80.2 80.5 80.8 80.6 15 Textile mill products 91.4 60.0 91.2 72.3 90.4 77.7 84.1 83.9 82.8 82.3 83.4 82.3 81.8 16 Paper and products 97.1 69.2 96.1 80.6 93.5 85.0 89.4 87.7 87.0 85.7 86.7 86.2 86.0 17 Chemicals and products 87.6 69.7 84.6 69.9 86.2 79.3 80.1 77.9 76.7 75.9 76.2 76.2 76.3 18 Plastics materials 102.0 50.6 90.9 63.4 97.0 74.8 93.6 91.6 92.9 87.1 89.1 89.8 90.4 19 Petroleum products 96.7 81.1 90.0 66.8 88.5 85.1 95.4 97.2 97.7 94.7 94.5 96.9 97.5 20 Mining 94.3 88.2 96.0 80.3 88.0 87.0 89.0 87.2 86.3 85.2 84.6 84.2 83.6 21 Utilities 96.2 82.9 89.1 75.9 92.6 83.4 89.9 93.7 95.1 95.0 92.7 89.9 91.3 22 Electric 99.0 82.7 88.2 78.9 95.0 87.1 92.2 96.7 97.8 98.8 96.9 94.7 95.7 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 drags and toiletries; agricultural chemicals; leather production and capacity utilization, see "Industrial Production and Capacity Utilization: and products; machinery; transportation equipment; instruments; and miscellaneous manufac- Historical 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. Historical 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 D March 1999 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data seasonally adjusted 1992 1997 pro- 1998 Group por- avg. tion Dec. Apr. May July Aug. Sept.' Oct.' Index (1992 = 100) MAJOR MARKETS 1 Total index. 100.0 131.4 130.3 130.3 130.2 130.7 131.3 131.9 130.6 130.5 132.4 131.9 132.6 132.5 132.8 60.5 123.7 122.3 122.6 122.5 123.2 124.0 124.5 123.6 123.3 124.9 124.1 125.2 124.9 125.0 3 Final products 46.3 125.6 124.0 124.5 124.2 125.3 126.2 126.6 125.5 124.7 126.8 126.0 127.1 126.8 126.5 4 Consumer goods, total 29.1 115.4 115.4 116.0 115.2 115.8 116.4 116.8 115.1 114.0 116.1 114.8 115.6 115.8 115.8 5 Durable consumer goods 6.1 135.8 133.3 135.1 134.5 135.9 136.9 138.3 130.7 124.6 140.1 137.4 140.0 140.0 140.6 6 Automotive products 2.6 132.9 134.5 133.0 131.5 132.7 134.6 136.8 121.7 107.3 141.7 136.4 140.7 139.9 139.9 7 Autos and trucks 1.7 137.9 144.1 141.0 138.6 138.9 141.3 143.5 118.2 92.8 151.4 143.4 150.6 149.7 148.3 g Autos, consumer .9 109.1 113.1 115.1 104.8 106.5 107.4 108.4 93.8 75.8 124.4 128.3 119.9 113.6 115.4 9 Trucks, consumer .7 166.4 173.5 166.1 170.5 169.8 173.8 177.1 142.2 110.0 178.9 161.1 181.0 184.3 180.3 10 Auto parts and allied goods .9 124.9 119.8 120.5 120.3 122.7 123.7 126.0 125.4 125.6 127.6 125.9 126.6 125.8 127.6 11 Other 3.5 138.0 132.3 136.7 136.9 138.5 138.8 139.4 137.8 138.7 138.5 138.0 139.1 139.7 140.9 12 Appliances, televisions, and air conditioners 1.0 205.8 187.4 195.5 197.9 203.8 203.4 202.7 199.9 207.8 209.4 209.9 213.6 220.7 223.1 13 Carpeting and furniture .8 117.4 112.6 119.2 115.8 114.3 115.9 119.1 117.0 117.3 116.7 116.3 119.3 118.5 119.3 14 Miscellaneous home goods 1.6 115.1 114.1 115.6 116.8 118.3 118.2 117.9 117.1 115.9 115.3 114.5 113.6 112.8 113.6 15 Nondurable consumer goods 23.0 110.4 110.9 111.3 110.5 110.8 111.4 111.5 111.2 111.2 110.3 109.3 109.7 110.0 109.8 16 Foods and tobacco 10.3 108.9 108.4 110.4 110.1 109.1 110.2 110.8 108.5 108.5 107.5 106.9 108.1 109.5 109.1 17 Clothing 2.4 97.8 100.6 100.7 99.3 1O0.4 99.9 98.8 98.8 98.4 97.7 97.1 95.7 94.8 93.8 18 Chemical products 4.5 120.8 121.8 121.3 121.2 121.3 123.2 122.5 122.8 122.2 119.0 118.0 118.8 119.5 120.0 19 Paper products 2.9 105.8 109.5 109.2 107.7 106.3 106.2 105.7 105.3 106.3 106.6 105.9 105.2 104.6 103.2 20 Energy 2.9 113.6 112.5 109.1 106.5 113.2 111.5 112.5 118.2 118.4 120.1 116.8 116.9 113.7 115.5 21 Fuels .8 111.1 110.2 111.0 110.4 111.2 111.6 110.9 111.4 112.9 112.1 108.3 108.4 112.2 113.0 22 Residential utilities 2.1 114.3 113.2 107.6 104.0 113.7 111.0 112.9 121.2 120.7 123.7 120.7 120.8 113.8 116.3 23 Equipment 17.2 144.2 139.4 139.5 140.3 142.4 143.6 144.2 144.1 143.9 146.0 146.2 147.8 146.5 145.8 24 Business equipment 13.2 163.6 156.5 156.3 157.0 160.1 162.2 163.1 163.6 163.5 166.6 167.4 169.5 168.2 168.1 25 Information processing and related.. 5.4 210.1 194.5 195.3 199.2 202.3 206.0 209.2 210.3 211.8 213.1 217.3 220.0 219.6 222.5 26 Computer and office equipment .. 1.1 647.3 496.8 520.3 547.4 584.9 601.5 620.6 638.6 654.6 671.6 693.6 722.0 749.0 765.6 27 Industrial 4.0 139.9 139.8 138.4 136.6 139.4 139.4 138.1 142.9 144.2 142.3 139.5 141.5 140.2 139.5 28 Transit 2.5 133.8 125.6 126.0 126.8 130.3 133.6 135.5 128.2 121.9 141.6 140.1 142.3 140.8 139.6 29 Autos and trucks 1.2 124.2 127.4 126.2 120.9 121.6 123.4 125.1 108.6 91.7 136.9 135.6 136.1 134.0 134.0 30 Other 1.3 139.1 138.7 137.7 136.9 139.8 140.8 139.6 141.7 146.6 132.6 140.9 141.0 138.2 134.6 31 Defense and space equipment 3.3 75.7 75.8 76.2 76.3 75.9 75.9 76.0 75.8 76.1 76.5 75.5 76.4 75.4 74.1 32 Oil and gas well drilling .6 135.0 149.6 153.9 157.4 155.7 147.6 147.1 136.7 131.9 127.7 123.4 119.4 115.2 106.5 33 Manufactured homes .2 148.9 142.3 147.1 149.6 148.0 148.0 149.0 146.1 151.1 145.7 147.8 150.9 154.6 153.0 34 Intermediate products, total . 14.2 118.1 117.0 117.0 117.1 116.9 117.3 118.2 118.0 119.1 119.1 118.3 119.2 119.3 120.3 35 Construction supplies 5.3 127.1 124.2 125.5 125.7 124.7 125.4 126.6 126.1 128.5 128.0 126.9 128.2 129.6 130.4 36 Business supplies 8.9 112.7 112.6 112.0 112.1 112.2 112.5 113.3 113.2 113.6 113.8 113.3 113.9 113.2 114.3 37 Materials . 39.5 144.0 143.4 142.6 142.5 142.7 143.1 143.6 141.8 141.9 144.4 144.4 144.5 144.6 145.3 38 Durable goods materials.... 20.8 176.3 174.1 173.6 173.5 173.7 174.5 175.4 171.7 171.8 177.4 177.7 178.8 179.4 180.5 39 Durable consumer parts .. 4.0 144.1 150.0 143.1 144.2 143.7 144.4 147.9 131.9 129.7 149.6 147.7 146.3 146.0 145.6 40 Equipment parts 7.6 277.2 261.1 263.4 264.5 265.8 266.9 268.6 271.0 274.1 278.0 282.7 286.3 288.8 292.9 41 Other 9.2 128.9 130.0 130.7 129.7 129.7 130.3 129.6 128.3 128.1 128.3 127.7 128.5 128.8 129.1 42 Basic metal materials .. 3.1 121.3 123.5 126.1 125.9 123.7 123.5 123.0 120.1 120.2 121.9 118.2 118.5 117.5 117.3 43 Nondurable goods materials. 8.9 113.4 116.1 114.8 114.9 114.2 114.4 114.1 113.9 114.1 113.1 112.0 111.5 111.6 111.5 44 Textile materials 1.1 109.3 113.5 109.9 111.1 110.6 110.5 111.0 110.2 110.1 107.7 107.6 108.9 107.0 106.4 45 Paper materials 1.8 116.1 117.9 117.2 117.0 116.3 116.3 115.5 117.3 117.3 116.4 115.0 115.7 114.5 114.2 4 4 4 4 5 6 7 8 9 0 En C P C O er r h o t g i h e m n y e m v a r e m i r r c y t a a e t l e d e n m r e i f a u r a l g e t s e l y ri m al a s terials.. 3 2 9 6 3 . . . . . 9 1 3 7 3 1 1 1 1 1 1 0 0 0 1 4 8 1 3 1 . . . . . 1 5 4 8 3 1 1 1 1 1 1 0 0 0 1 7 1 9 3 2 . . . . . 6 1 1 8 3 1 1 1 1 1 1 0 1 0 0 7 5 0 3 1 . . . . . 2 8 0 0 6 1 1 1 1 1 1 0 0 0 1 6 2 1 5 1 . . . . . 5 8 4 6 4 1 1 1 1 1 0 1 0 1 0 1 5 3 1 9 . . . . . 6 7 0 0 0 1 1 1 1 1 1 0 1 0 0 0 1 6 3 8 . . . . . 2 9 3 8 6 1 1 1 1 1 1 0 1 0 1 5 1 1 4 0 . . . . . 6 0 2 3 8 1 1 1 1 1 1 1 1 0 0 4 0 0 4 1 . . . . . 8 6 7 8 8 1 1 1 1 1 1 1 0 0 0 4 1 8 2 4 . . . . . 7 6 6 9 8 1 1 1 1 1 1 1 0 1 0 3 0 4 1 1 . . . . . 6 7 4 6 2 1 1 1 1 1 1 0 1 0 1 1 5 1 2 0 . . . . . 8 2 5 3 9 1 1 1 1 1 1 1 0 0 0 0 0 3 2 6 . . . . . 9 2 8 6 3 1 1 1 1 1 1 1 0 0 0 0 2 3 0 7 . . . . . 8 7 0 6 9 1 1 1 1 1 1 1 0 0 0 2 1 9 3 1 . . . . . 4 0 2 9 3 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.1 131.4 130.2 130.2 130.2 130.7 131.3 131.8 131.2 131.6 132.1 131.7 132.3 132.2 132.6 52 Total excluding motor vehicles and parts 95.1 130.9 129.5 129.7 129.7 130.3 130.9 131.3 131.2 131.7 131.3 131.0 131.7 131.7 132.0 53 Total excluding computer and office equipment 98.2 127.1 126.9 126.7 126.4 126.7 127.3 127.7 126.4 126.2 128.0 127.4 127.9 127.7 127.9 54 Consumer goods excluding autos and trucks 27.4 114.1 113.8 114.7 113.9 114.5 115.1 115.3 114.8 114.9 114.3 113.2 113.8 114.0 114.1 55 Consumer goods excluding energy 26.2 115.6 115.7 116.8 116.2 116.1 117.0 117.3 114.7 113.5 115.7 114.6 115.5 116.1 115.9 56 Business equipment excluding autos and trucks 159.9 159.7 161.1 164.6 166.7 167.4 170.0 171.8 169.9 171.0 173.3 172.0 57 Business equipment excluding computer and office equipment 12.1 142.5 139.7 138.8 138.7 140.8 142.3 142.6 142.7 142.2 144.8 145.1 146.5 144.6 144.2 58 Materials excluding energy 29.8 156.6 155.8 155.0 155.0 154.9 155.5 156.0 153.4 153.6 156.9 156.7 157.2 157.6 158.3 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 1997 1998 Group SIC pro- 1998 code por- avg. tion Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept.' Oct.' Nov. Dec.p Index(1992 =100) MAJOR INDUSTRIES 59 Tbtal index 100.0 131.4 130.3 130.3 130.2 130.7 131.3 131.9 130.6 130.5 132.4 131.9 132.6 132.5 132.8 60 Manufacturing 85.4 135.1 133.7 133.8 133.7 134.1 134.9 135.4 133.7 133.6 135.7 135.2 136.3 136.5 136.7 61 Primary processing 26.5 120.6 121.5 121.6 121.1 121.0 121.5 121.4 120.2 120.7 120.6 119.3 120.1 120.3 120.6 62 Advanced processing 58.8 142.1 139.7 139.8 140.0 140.6 141.6 142.3 140.4 139.9 143.3 143.2 144.4 144.6 144.8 63 Durable goods 45.0 157.5 154.0 153.9 154.0 155.2 156.2 157.2 154.8 154.4 159.8 159.6 161.1 160.9 161.5 64 Lumber and products 24 2.0 116.9 115.0 115.2 116.2 115.3 116.1 116.4 116.7 117.5 118.5 117.0 117.9 118.9 119.7 65 Furniture and fixtures 25 1.4 121.5 120.4 119.4 118.6 121.5 121.0 120.6 122.0 120.8 120.1 121.6 123.8 123.9 125.1 66 Stone, clay, and glass products 32 2.1 125.9 125.0 124.6 124.0 124.5 124.0 124.5 123.5 125.4 127.0 126.6 127.6 129.3 129.6 67 Primary metals 33 3.1 123.8 127.8 129.2 128.1 127.1 127.5 126.5 122.1 122.6 124.4 120.1 121.0 118.6 118.5 68 Iron and steel 331,2 1.7 120.7 127.6 128.9 128.2 127.7 126.7 125.5 119.8 120.2 122.5 113.4 114.3 109.7 109.9 69 Raw steel 331PT .1 115.7 119.6 122.5 123.3 120.0 122.4 121.9 116.0 118.3 120.3 112.6 109.7 100.2 102.2 70 Nonferrous 333-6,9 1.4 127.5 128.1 29.7 128.0 126.4 128.4 127.6 124.9 125.4 126.7 128.1 129.1 129 2 128 7 71 Fabricated metal products. .. 34 5.0 127.2 128.2 127.6 126.6 127.2 127.8 128.7 128.0 127.8 126.3 126.2 127.0 127.3 128.0 72 Industrial machinery and equipment 35 8.0 203.7 189.0 191.8 192.3 198.4 200.6 202.5 205.8 209.0 207.0 207.7 211.3 212.1 212.9 73 Computer and office equipment 357 1.8 650.4 502.2 526.3 552.6 589.6 605.4 623 9 641.4 657.0 673.6 695.5 723.9 751.1 767.4 74 Electrical machinery 36 7.3 291.5 276.5 277.7 278.5 278.2 280.8 282.0 285.5 289.4 290.8 297.7 301.0 303.0 307.0 75 Transportation equipment. . . 37 9.5 123.1 124.1 121.3 121.5 122.3 123.3 125.2 114.2 108.2 130.3 127.6 128.6 127.4 126.2 76 Motor vehicles and parts . 371 4.9 141.2 148.6 141.9 140.4 140.0 140.8 144.1 121.1 107.6 154.2 149.9 150.2 149.0 148.1 77 Autos and light trucks . 371PT 2.6 128.5 134.1 132.0 128.2 128.8 130.9 132.7 110.1 86.9 142.0 136.5 140.4 138.5 137.8 78 Aerospace and miscellaneous transportation equipment 372-6,9 4.6 105.0 100.0 100.9 102.6 104.5 105.7 106.3 106.3 107.1 106.9 105.8 107.4 106.0 104.8 79 Instruments 38 5.4 113.1 112.0 111.5 112.5 112.8 113.0 113.8 112.4 112.6 113.0 114.2 115.0 113.9 114.4 80 Miscellaneous 39 1.3 117.7 119.9 119.7 119.9 120.0 120.1 119.1 118.5 118.5 117.7 117.0 115.9 114.4 115.8 81 Nondurable goods 40.4 112.0 112.7 113.1 112.8 112.4 113.0 113.0 112.0 112.1 111.3 110.6 111.2 111.8 111 8 82 Foods 20 9.4 109.5 109.0 110.5 109.9 109.7 110.3 110.7 109.2 109.0 107.9 107.7 109.2 111.1 110.6 83 Tobacco products 21 1.6 106.0 106.4 110.1 1127 105 3 109.8 111.5 104.7 106.0 107.0 104.2 101 9 99.8 100.0 84 Textile mill products 22 1.8 112.7 113.1 115.0 113.2 112.6 113.3 114.5 112.0 113.2 111.8 111.2 112.7 111.3 110.6 85 Apparel products 23 2.2 99.2 102.3 102.5 101.1 101.6 101.0 100.4 100.5 100.1 99.2 98.3 97.4 95.7 95.4 86 Paper and products 26 3.6 115.2 116.2 115.7 115.9 115.0 115.2 115.0 114.9 115.9 115.3 113.9 115.4 115.0 115.0 87 Printing and publishing 27 6.7 105.2 107.0 106.4 106.4 105.4 105.5 105.6 105.5 105.4 104.9 104.6 104.8 105.3 105.0 88 Chemicals and products .... 28 9.9 115.5 117.3 117.0 116.7 116.6 117.7 116.9 116.2 115.7 114.3 113.3 113.9 114.0 114.5 89 Petroleum products 29 1.4 112.2 110.6 111.2 110.5 113.0 112.8 111.5 111.6 113.4 114.1 110.7 110.6 113.5 114.3 90 Rubber and plastic products . 30 3.5 132.6 130.9 13L0 131.1 131.4 133.2 133.1 132.4 132.7 132.2 132.6 133.5 134.9 135.8 91 Leather and products 31 .3 75.3 78.8 77.3 78.3 77.9 76.3 75.8 74.5 75.3 74.0 73.5 73.1 Til 72.8 92 Mining 6.9 104.1 106.4 107.6 107.5 105.8 105.7 105.4 104.7 104.6 103.7 102.4 101.8 101.4 100.8 93 Metal 10 .5 110.2 107.5 110.9 123.2 109.3 106.9 108.5 108.0 105.7 109.0 106.4 111.1 112.0 111.5 94 Coal 12 1.0 109.7 116.1 112.4 104.3 103.4 107.2 106.0 110.4 112.8 109.7 115.8 110.8 108.6 114.5 95 Oil and gas extraction 13 4.8 99.9 102.2 103.6 104.6 104.0 102.9 102.4 100.4 100.0 99.2 96.8 96.8 95.2 93.4 % Stone and earth minerals 14 .6 124.4 121.9 127.5 123.1 120.0 123.3 124.4 125.6 125.4 124.3 120.3 118.8 128.3 126.0 97 Utilities 7.7 114.6 113.1 109.8 109.0 114.0 112.8 115.2 118.7 118.3 120.2 120.3 117.4 113.9 115.7 98 Electric 491,493PT 6.2 117.8 113.8 111.4 111.2 115.7 115.2 118.9 121.0 119.8 121.2 122.6 120.3 117.7 119.0 99 Gas 492.493PT 1.6 103.3 109.9 102.2 99.3 106.3 102.0 98.3 108.4 111.7 115.7 109.7 103.8 96.5 100.6 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 80.5 134.7 132.8 133.4 133.4 133.8 134.6 134.9 134.5 135.1 134.6 134.4 135.5 135.8 136.1 101 Manufacturing excluding computer and office equipment S3.6 130.2 129.7 129.6 129.4 129.5 130.2 130.6 128.8 128.6 130.6 130.0 130.9 131.0 131.1 102 Computers, communications equipment, and semiconductors 5.9 515.5 451.5 459.3 467.6 473.4 482.7 490.7 502.9 511.8 522.5 538.3 551.9 561.9 574.1 103 Manufacturing excluding computers and semiconductors 81.1 120.2 120.4 120.3 120.1 120.2 120.9 121.1 119.2 118.9 120.6 119.9 120.6 120.5 120.5 104 Manufacturing excluding computers, communications equipment, and semiconductors 79.5 118.6 118.9 118.8 118.5 118.7 119.3 119.5 117.5 117.2 119.0 118.1 118.9 118.9 118.8 Gross value (billions of 1992 dollar, annual ates) Major Markets 105 Products, total 2,001.9 2,492.8 2,455.0 2,462.9 2,456.2 2,474.5 2,489.8 2,498.5 2,470.3 2,454.6 2,525.1 2,501.0 2,526.0 2,524.5 2,528.5 106 Final 1,552.1 1,960.9 1,927.4 1,935.8 1,928.6 1.948.1 1,961.6 1.966.1 1,938.2 1.915.6 1,985.9 1,966.4 1,988.4 1,987.0 1,985.8 107 Consumer goods 1,049.6 1,214.9 1.212.7 1,220.1 1,210.8 1,218.7 1,224.8 1,225.2 1,201.8 1,185.0 1,227.4 1,208.2 1,221.4 1,226.3 1,227.8 108 Equipment 502.5 747.1 717.3 718.2 720.6 732.5 739.9 744.2 740.1 734.3 762.5 762.7 771.5 764.8 761.9 109 Intermediate 449.9 533.8 528.2 528.0 528.3 527.6 529.7 533.6 532.6 538.4 540.3 535.7 539.0 538.8 543.6 1. Data in this table appear in the Board's G.I7 (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 • March 1999 2.14 HOUSING AND CONSTRUCTION Monthly figures at seasonally adjusted annual rates except as noted 1995 Apr. May July Aug. Sept.' Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 1,333 1,426 1,441' 1,635 1,569 1,517 1,543 1,517 1,581 1,618 1,544 1,690 1,656 2 One-family 997 1,070 1,062' 1,176 1,136 1,145 1,152 1,128 1,173 1,180 1,164 1,198 1,238 3 Two-family or more 335 356 387 459 433 372 391 389 408 438 380 492 418 4 Started 1,354 1,477 1,474 1,616 1,585 1,546 1,538 1,620 1,704 1,621 1,569 1,693 1,662 5 One-family 1,076 1.161 1,134 1,263 1,239 1,237 1,224 1,269 1,300 1,261 1,250 1.291 1,367 6 Two-family or more 278 316 340 353 346 309 314 351 404 360 319 402 295 7 Under coasiiuction at end of period1, 776 820 834 907 911 911 917 930 937 940 948 969 970 8 One-family 554 584 570 609 616 619 627 639 643 645 650 659 666 9 Two-family or more 222 235 264 298 295 292 290 291 294 295 298 310 304 10 Completed 1.319 1,405 1,407 1,461 1,486 1.509 1,458 1,484 1,549 1,515 1,466 1,447 1.596 11 One-family 1.073 1,123 1,122 1,142 1,130 1.198 1,112 1,166 1,225 1,178 1,185 1.156 1,254 12 Two-family or more 247 283 285 319 356 311 346 318 324 337 281 291 342 13 Mobile homes shipped 341 361 354 377 374 370 374 362 380 368 369 352 390 Merchant builder activity in one-family units 14 Number sold 667 757 803 878 836 892 892 919 877 839' 843 897 965 15 Number for sale at end of period1. 374 326 287 281 285 286 287 287 284 285 289 293 292 Price of units sold (thousands of dollars)1 16 Median 133.9 140.0 145.9 156.0 152.0 148.0 153.2 148.0 149.9 154.9' 153.0 150.0 148.7 17 Average 158.7 166.4 175.8 181.6 178.9 176.7 183.5 175.9 179.8 186.5' 182.6 181.5 175.4 EXISTING UNITS (one-family) 18 Number sold 3,812 4,087 4.215 4,770 4,890 4.770 4,830 4,740 4,910 4,730 4,690 4,770 4,880 Price of units sold {thousands of dollars)1 19 Median 113.1 118.2 124.1 124.5 127.1 128.2 130.5 134.0 133.8 132.9 131.2 130.7 131.7 20 Average 139.1 145.5 154.2 153.9 157.2 159.7 162.3 169.2 168.4 165.9 162.9 161.8 163.9 Value of new construction (millions of dollars)3 CONSTRUCTION 21 Total put in place 538,158 581,813 618,051 638,180 639,913 645,974 635,396 650,341 658,673' 663,300' 670,133 672,049 677,752 22 Private 408,012 444,743 470,969 490,896 494,333 500,078 496,495 503,592 511,514' 516,601' 521,050 527,069 529,624 23 Residential 231,191 255,570 265,536 282,496 286,045 289,666 288,003 291,907 299,300' 300,612' 304,993 307,533 311,191 24 Nonresidential 176,821 189,173 205,433 208,400 208,288 210,412 208.492 211,685 212,214' 215,989' 216,057 219,536 218,433 25 Industrial buildings 32,535 32,563 31,417 30,936 31,474 31,457 29,642 30,067 28,616' 32,302' 30,300 29,069 28,247 26 Commercial buildings 68,245 75,722 83,727 84,152 83,981 86,064 86,321 88,480 ss^io1 86,243' 87,553 90,271 92,885 27 Other buildings 27,084 30,637 37,382 39,151 37,812 39,168 37,678 37,334 37,406' 38,305r 38,309 38,006 37,624 28 Public utilities and other 48,957 50,252 52,906 54,161 55,021 53,723 54,851 55,804 57,882' 59,139' 59,895 62,190 59,677 29 Public 130,147 137,070 147,082 147,284 145,580 145,896 138,901 146,749 147,159' 146,699' 149,083 144,979 148,128 30 Military 2,983 2.639 2,625 2,916 2,818 2,850 2,471 2,659 3,325' 3,187' 2,325 2,577 2,499 31 Highway 38.126 41,326 45.246 45,561 45,559 46.175 42,030 44,541 43,809' 44,291' 45,719 45,713 46,045 32 Conservation and development 6,371 5,926 5,628 6,305 5.488 4,985 5.146 5,989 5,475' 5.442' 5,904 5,148 5,763 33 Other 82,667 87,179 93,583 92,502 91.715 91,886 89.254 93,560 94,550' 93.779' 95,135 91.541 93,821 1. Not at annual rates. SOURCE. Bureau of the Census estimates for all series except (1) mobile homes, which are 2. Not seasonally adjusted. private, domestic shipments as reported by the Manufactured Housing Institute and season- 3. Recent data on value of new construction may not be strictly comparable with data for ally adjusted by the Census Bureau, and (2) sales and prices of existing units, which are previous periods because of changes by the Bureau of the Census in its estimating techniques. published by the National Association of Realtors. All back and current figures are available For a description of these changes, see Construction Reports (C-30-76-5), issued by the from the originating agency. Permit authorizations are those reported to the Census Bureau Census Bureau in July 1976. from 19,000 jurisdictions beginning in 1994. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A47 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data except as noted 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 Index level, Dec 1998' Sept. Aug. Sept. Oct. Nov. CONSUMER PRICES2 (1982-84=100) 1 AU items 1.7 2.5 1.5 2.2 .2 .0 .2 .2 163.9 2 Food 1.5 2.3 1.3 3.0 2.0 2.8 .2 .0 .6 .1 .0 162.3 3 Energy items -3.4 -8.8 -21.1 -1.9 -8.7 -2.0 -1.0 -1.3 .9 .0 -1.4 98.9 4 All items less food and energy 2.2 2.4 2.4 2.6 2.3 2.5 .2 2 .2 .2 .3 174.8 5 Commodities .4 1.3 1.1 1.1 2.0 .2 -.1 .0 -.1 .6 143.9 6 Services 3.0 3.0 3.2 3.0 2.5 .3 .3 .2 .3 .2 192.5 PRODUCER PRICES (1982=100) 7 Finished goods -.1 -3.0 .3 .3 1.9 -.3' .2' .2 -.2 .4 131.0 8 Consumer foods -.1 -1.8 .9 1.8 -1.2 -.2' .2' .4 -.5 -.1 134.3 9 Consumer energy -6.4 12.1 -27.0 -1.1 10.2 -8.9 -2.5' .r/ 1.2 -1.2 -2.3 70.5 10 Other consumer goods .3 4.1 3.9 1.4 3.3 7.8 .1' .4' .0 .1 1.7 151.5 11 Capital equipment -.6 -.1 .0 -1.2 .9 .0 .3' .0 .1 -.1 137.8 12 I E n x te c r lu m d e i d n i g a t f e o o m d a s te a r n i d a ls feeds -2.9 -4.4 1.3 -1.9 -4.2 -.3 _2 _ 2 -.2 -.6 121.5 13 Excluding energy -1.5 -.9 1.2 -1.5 -2.7 -.1' -.2' -.3 -.2 -.2 132.3 Crude materials 14 Foods -4.0 -10.8 -14.3 -22.6 -5.9 -.8' -2.1r 4.0 -1.9 -3.4 97.2 15 Energy -23.1 -26.5 -53.5 -14.6 -15.2 -13.0 -9.0' -.5' 1.9 .0 -5.2 62.0 16 Other .0 -16.0 -13.6 -5.6 -18.3 -25.4 -2.6" -.9' -2.7 -2.5 -2.0 128.1 1. Not seasonally adjusted. SOURCE. U.S. Department of Labor, Bureau of Labor Statistics. 2. Figures for consumer prices are for all urban consumers and reflect a rental-equivalence measure of homeownership. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • March 1999 2.16 GROSS DOMESTIC PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates Q3 Q4 Ql Q2 Q3 GROSS DOMESTIC PRODUCT 1 Total .... 7^69.6 7,661.6 8,110.9 8,170.8 8,254.5 8384.2 8,440.6 8,537.9 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 5,846.7 3 Durable goods 611.0 643.3 673.0 681.2 682.2 705.1 720.1 718.9 4 Nondurable goods 1,473.6 1,539.2 1,600.6 1,611.3 1,613.2 1,633.1 1,655.2 1,670.0 5 Services 2,869.2 3,033.2 3,220.1 3,247.9 3,297.8 3,338.2 3,398.4 3,457.7 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 1,364.4 7 Fixed investment 1,012.5 1,099.8 1,188.6 1,211.1 1,220.1 1,271.1 1,305.8 1,307.5 8 Nonresidential 727.7 787.9 860.7 882.3 882.8 921.3 941.9 931.6 9 Structures 201.3 216.9 240.2 243.8 246.4 245.0 245.4 246.2 10 Producers' durable equipment .. 526.4 571.0 620.5 638.5 636.4 676.3 696.6 685.4 11 Residential structures 284.8 311.8 327.9 328.8 337.4 349.8 363.8 375.8 12 Change in business inventories . 30.7 32.1 67.4 54.6 71.9 95.5 39.2 57.0 13 Nonfarm 40.1 24.5 63.1 47.3 66.9 90.5 31.5 49.3 14 Net exports of goods and services ... -83.9 -91.2 -93.4 -94.7 -98.8 -123.7 -159.3 -165.5 15 Exports 819.4 873.8 965.4 981.7 988.6 973.3 949.6 936.2 16 Imports 903.3 965.0 1,058.8 1,076.4 1,087.4 1,097.1 1,108.9 1,101.7 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 1,492.3 18 Federal 509.1 518.4 520.2 521.0 520.1 511.6 520.7 519.4 19 State and local 847.3 934.4 938.5 947.9 953.3 960.4 972.9 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 8,480.9 21 Goods 2,644.9 2,780.3 2,911.2 2,944.3 2,948.7 3,005.8 3,025.3 3,029.0 22 Durable 1,143.4 1,228.8 1,310.1 1,337.1 1,334.3 1,376.9 1,380.8 1,373.0 23 Nondurable 1,501.5 1,551.6 1,601.0 1,607.2 1,614.4 1,628.8 1,644.4 1,655.9 24 Services 3,974.9 4,179.5 4,414.1 4,448.0 4,501.2 4,538.4 4,619.5 4,678.5 25 Structures 619.1 669.7 718.3 723.9 732.7 744.6 756.6 773.5 26 Change in business inventories . 30.7 32.1 67.4 54.6 71.9 95.5 39.2 57.0 27 Durable goods 32.4 20.8 33.6 19.9 34.0 49.9 4.5 19.5 28 Nondurable goods -1.7 11.4 33.8 34.7 37.9 45.6 34.7 37.5 MEMO 29 Total GDP in chained 1992 dollars 6,761.7 6,994.8 7,269.8 7,311.2 7^64.6 7,464.7 7,498.6 7,566.5 NATIONAL INCOME 30 Total . 5,923.7 6,256.0 6,646.5 6,704.8 6,767.9 6,875.0 6,945.5 7,032.3 31 Compensation of employees 4,208.9 4,409.0 4,687.2 4,715.5 4,798.0 4,882.8 4,945.2 5,011.6 32 Wages and salaries 3,441.9 3,640.4 3,893.6 3,919.3 3,993.6 4,065.9 4,121.6 4,181.1 33 Government and government enterprises . .. 622.7 640.9 664.2 666.7 671.4 679.5 685.8 692.7 34 Other 2,819.2 2,999.5 3,229.4 3,252.6 3,322.2 3,386.4 3,435.8 3,488.4 35 Supplement to wages and salaries 767.0 768.6 793.7 796.2 804.4 816.8 823.5 830.5 36 Employer contributions for social insurance 365.3 381.7 400.7 402.7 407.4 414.1 417.9 422.1 37 Other labor income 401.6 387.0 392.9 393.6 397.0 402.8 405.7 408.4 38 Proprietors' income 488.1 527.7 551.2 556.5 558.0 564.2 571.7 576.1 39 Business and professional1 465.6 488.8 515.8 520.2 526.6 536.8 544.0 550.9 40 Farm1 22.4 38.9 35.5 36.3 31.4 27.4 27.7 25.2 41 Rental income of persons2 133.7 150.2 158.2 158.6 158.8 158.3 161.0 163.6 42 Corporate profits 672.4 750.4 817.9 840.9 820.8 829.2 820.6 827.0 43 Profits before tax3 635.6 680.2 734.4 758.9 736.4 719.1 723.5 720.5 44 Inventory valuation adjustment -22.6 -1.2 6.9 4.8 4.3 25.3 7.8 11.7 45 Capital consumption adjustment 59.4 71.4 76.6 77.2 80.1 84.9 89.4 94.8 46 Net interest 420.6 418.6 432.0 433.3 432.4 440.5 447.1 454.0 1. With inventory valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.48. 2. With capital consumption adjustment. SOURCE. U.S. Devilment 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 03 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 7,160.8 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 4,177.1 3 Commodity-producing industries 863.9 909.0 975.0 979.4 1,003.7 1,019.0 1,023.2 1,028.0 4 Manufacturing 647.9 674.6 719.5 722.3 741.3 750.4 750.8 750.9 5 Distributive industries 782.9 823.3 879.8 886.3 904.5 918.9 932.2 945.8 6 Service industries 1,158.9 1,257.9 1,370.8 1,383.2 1,410.2 1,444.5 1,476.4 1,510.6 7 Government and government enterprises 622.7 640.9 664.2 666.7 671.4 679.5 685.8 692.7 8 Other labor income 401.6 387.0 392.9 393.6 397.0 402.8 405.7 408.4 9 Proprietors' income1 488.1 527.7 551.2 556.5 558.0 564.2 571.7 576.1 10 Business and professional1 465.6 488.8 515.8 520.2 526.6 536.8 544.0 550.9 11 Farm1 22.4 38.9 35.5 36.3 31.4 27.4 27.7 25.2 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 704.9 719.4 747.3 750.5 753.0 757.0 763.0 769.2 15 Transfer payments 1,015.9 1,068.0 1,110.4 1,114.0 1,120.5 1,139.0 1,145.8 1,152.9 16 Old-age survivors, disability, and health insurance benefits .. 507.8 538.0 565.9 568.3 572.2 581.6 585.0 589.0 17 LESS: Personal contributions for social insurance 293.6 306.3 326.2 328.2 333.6 340.9 345.1 349.5 18 EQUALS: Personal income 6,072.1 6,425.2 6,784.0 6,820.9 6,904.9 7,003.9 7,081.9 7,160.8 19 LESS: Personal tax and nontax payments 795.0 890.5 989.0 999.0 1,025.5 1,066.8 1,092.9 1,108.4 20 EQUALS: Disposable personal income 5,277.0 5,534.7 5,795.1 5,821.8 5,879.4 5,937.1 5,988.9 6,052.4 21 LESS: Personal outlays 5,097.2 5,376.2 5,674.1 5,723.3 5,781.2 5,864.0 5,963.3 6,039.8 22 EQUALS: Personal saving 179.8 158.5 121.0 98.5 98.2 73.0 25.6 12.6 MEMO Per capita (chained 1992 dollars) 23 Gross domestic product 25,690.5 26,335.8' 27,136.2 27,260.4 27,398.2 27,718.8 27,783.0 27,972.1 24 Personal consumption expenditures 17,498.4 17,893.1' 18,340.8' 18,445.2 18,530.5 18,771.1 19,007.8 19,156.3 25 Disposable personal income 18,640.0 18,989.0 19,349.0 19,385.0 19,478.0 19,632.0 19,719.0 19,829.0 26 Saving rate (percent) 3.4 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 1,474.5 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 1.078.7 29 Personal saving 179.8 158.5 121.0 98.5 98.2 73.0 25.6 12.6 30 Undistributed corporate profits' 256.1 262.4 296.7 311.5 295.0 312.0 300.9 304.8 31 Corporate inventory valuation adjustment -22.6 -1.2 6.9 4.8 4.3 25.3 7.8 11.7 Capital consumption allowances 32 Corporate 431.1 452.0 477.3 480.8 487.7 492.5 497.8 503.1 33 Noncorporate 225.9 232.3 242.8 244.4 247.0 248.6 250.7 254.2 34 Gross government saving 81.2 160.0 264.7 288.0 296.4 352.4 369.4 395.7 35 Federal -103.7 -39.6 49.5 70.0 72.3 128.7 143.9 161.6 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 92.0 38 State and local 184.8 199.7 215.2 218.0 224.1 223.7 225.6 234.2 39 Consumption of fixed capital 73.2 77.1 81.1 81.4 82.7 83.5 84.3 85.4 40 Current surplus or deficit (—), national accounts 111.7 122.6 134.1 136.6 141.4 140.2 141.3 148.7 41 Gross investment 1,160.9 1,242.3 1,350.5 1,361.9 1,360.7 1,428.4 1,362.7 1,372.5 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 1,364.4 43 Gross government investment 218.4 229.7 235.4 237.3 236.5 237.4 232.5 239.7 44 Net foreign investment -100.6 -119.2 -140.9 -141.0 -167.8 -175.6 -214.8 -231.6 45 Statistical discrepancy -26.5 -67.3 -54.1 -85.7 -102.0 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 • March 1999 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data seasonally adjusted except as noted1 1997 1998 Item credits or debits 1996 1997 Q3 Q4 Ql Q2 Q3" 1 Balance on current account -115,254 -134,915 -155,215 -38,094 -45,043 -46,735 -56,690 -61,299 2 Merchandise trade balance2 -173,729 -191,337 -197,954 -49,296 -49,839 -55,698 -64,443 -64,360 3 Merchandise exports 575,845 611,983 679,325 172,302 174,284 171,469 164,821 163,560 4 Merchandise imports -749,574 -803,320 -877,279 -221,598 -224,123 -227,167 -229,264 -227,920 5 Military transactions, net 4,769 4,684 6,781 1,945 1,103 1,527 1,043 1,101 6 Other service transactions, net 69,069 78,079 80,967 20,246 20,277 19,164 19,529 17,504 7 Investment income, net 19,275 14.236 -5,318 -1,544 -4,247 -2,248 -3,377 -5,460 8 U.S. government grants -11,170 -15,023 -12,090 -2,362 -5,213 -2,266 -2,063 -2,582 9 U.S. government pensions and other transfers -3,433 -4,442 -4,193 -1,056 -1,069 -1,126 -1,126 -1,132 0 Private remittances and other transfers -20,035 -21,112 -23,408 -6,027 -6,055 -6,088 -6,253 -6,370 11 Change in U.S. government assets other than official reserve assets, net (increase, —) -589 -708 174 436 29 -388 -433 194 12 Change in U.S. official reserve assets (increase, -) -9,742 6,668 -1,010 -730 -4,524 -444 -1,945 -2,026 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -808 370 -350 -139 -150 -182 72 188 15 Reserve position in International Monetary Fund -2,466 -1,280 -3,575 -463 -4,221 -85 -1,031 -2,078 16 Foreign currencies -6,468 7,578 2,915 -128 -153 -177 -986 -136 17 Change in U.S. private assets abroad (increase, —) -317,122 -374,761 -477,666 -123,023 -118,946 -44,816 -107,409 -46,220 18 Bank-reported claims3 -75,108 -91,555 -147,439 -29,577 -27,539 3,074 -24,615 -28,335 19 Nonbank-reported claims -45,286 -86,333 -120,403 -24,791 -47,907 -6,596 -14,327 20 U.S. purchases of foreign securities, net -100,074 -115,801 -87,981 -41,167 -8,030 -6,973 -27,878 16,970 21 U.S. direct investments abroad, net -96,654 -81,072 -121,843 -27,488 -35,470 -34,321 -40,589 -21,243 22 Change in foreign official assets in United States (increase, +) . 109,768 127,344 15,817 21,258 -26,979 11,324 -10,274 -46,370 23 U.S. Treasury securities 68,977 115,671 -7,270 6,686 -24,578 11,336 -20,318 -32,811 24 Other U.S. government obligations 3,735 5,008 4,334 2,667 86 2,610 254 1,906 25 Other U.S. government liabilities4 -217 -362 -2,521 -1,167 -244 -1,059 -422 -414 26 Other U.S. liabilities reported by U.S. banks3 34,008 5,704 21,928 12,439 -3,250 -607 9,380 -12,607 27 Other foreign official assets5 3,265 1,323 -654 633 1,007 -956 832 -2,444 28 Change in foreign private assets in United States (increase, +) . . . 355,681 436,013 717,624 160,180 247,470 84,205 175,133 159,232 29 U.S. bank-reported liabilities3 30,176 16,478 148,059 12,606 89,643 -50,497 37,670 82,680 30 U.S. nonbank-reported liabilities 59,637 39,404 107,779 26,275 47,390 32,707 18,040 31 Foreign private purchases of U.S. Treasury securities, net 99,548 154,996 146,710 35,432 35,301 -1,701 26,916 -257 32 U.S. currency flows 12,300 17,362 24,782 6,576 9,900 746 2,349 7,277 33 Foreign purchases of other U.S. securities, net 96,367 130,151 196,845 60,327 36,783 77,019 71,017 22,938 34 Foreign direct investments in United States, net 57,653 77,622 93,449 18,964 28,453 25,931 19,141 27,065 35 Allocation of special drawing rights 0 0 0 0 0 0 0 0 36 Discrepancy -22,742 -59,641 -99,724 -20,027 -52,007 -3,146 1,618 -3,511 37 Due to seasonal adjustment -10,018 3,528 6,217 1,474 -10,760 38 Before seasonal adjustment -22,742 -59,641 -99,724 -10,009 -55,535 -9,363 144 7,249 MEMO Changes in official assets 39 U.S. official reserve assets (increase, -) -9,742 -1,010 -730 -4,524 -444 -1,945 -2,026 40 Foreign official assets in United States, excluding line 25 (increase, +) 109,985 127,706 18,338 22,425 -26,735 12,383 -9,852 -45,956 41 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22) 4,239 14,911 10,822 3,031 -1,282 -968 -494 -12,013 1. Seasonal factors are not calculated for lines 12-16, 18-20, 22-34, and 38-40. 4. Associated primarily with military sales contracts and other transactions arranged with 2. Data are on an international accounts basis. The data differ from the Census basis data, or through foreign official agencies. shown in table 3.11, for reasons of coverage and timing. Military exports are excluded from 5. Consists of investments in U.S. corporate stocks and in debt securities of private merchandise trade data and are included in line 5. corporations and state and local governments. 3. Reporting banks include all types of depository institutions as well as some brokers and SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current dealers. Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A51 3.11 U.S. FOREIGN TRADE1 Millions of dollars; monthly data seasonally adjusted 1998 Item 1995 1996 1997 May June July Aug. Sept. Oct. Nov.p 1 Goods and services, balance -101,857 -111,040 -113,684 -15,641 -14,213 -14,917 -16,674 -14,369 -13,588 -15,493 -173,560 -191,170 -198,975 -22,578 -20,530 -21,029 -22,735 -20,801 -20,167 -21,881 71,703 80,130 85,291 6,937 6,317 6,112 6,061 6,432 6.579 6,388 4 Goods and services, exports 794,610 848,833 931,370 76,650 76,225 74,994 74,988 77,467 80,219 78,653 575,871 612,069 678,150 54,719 54,767 53,825 53,862 56,005 58,339 56,837 6 Services 218,739 236,764 253,220 21,931 21,458 21,169 21,126 21,462 21,880 21,816 7 Goods and services, imports -896,467 -959,873 -1,045,054 -92,291 -90,438 -89,911 -91,662 -91,836 -93,807 -94,146 -749,431 -803,239 -877,125 -77,297 -75,297 -74,854 -76,597 -76,806 -78,506 -78,718 9 Services -147,036 -156,634 -167,929 -14,994 -15,141 -15,057 -15,065 -15,030 -15,301 -15,428 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 US. RESERVE ASSETS Millions of dollars, end of period 1998 Asset 1995 1996 1997 May June July Aug. Sept. Oct. Nov. Dec.p 1 Total 85,832 75,090 69,954 70,723 71,161 72,264 73,544 75,66 79,183 77,683 81,755 2 Gold stock, including Exchange 11,050 11,049 11,050 11,049 11,047 11,046 11,046 11,044 11,041 11,041 11,041 3 Special drawing rights2'3 11,037 10,312 10,027 10,296 10,001 9,586 9,891 10,106 10,379 10,393 10,603 4 Reserve position in International Monetary Fund2 14,649 15,435 18,071 18,957 18,945 20,780 21,161 21,644 22,278 22,049 24,111 5 Foreign currencies4 49,096 38,294 30,809 30,421 31,168 30,852 31,446 32.882 35,485 34,200 36,001 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 May June July Aug. Sept. Oct. Nov. Dec.p 1 Deposits 386 167 457 156 200 161 161 347 154 211 167 Held in custody 2 U.S. Treasury securities 522,170 638,049 620,885 622,557 616,569 613,893 588,337 578,403 588,768 608,060 607,574 3 Earmarked gold3 11,702 11,197 10,763 10,641 10,617 10,586 10,510 10,457 10,403 10,355 10,343 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 • March 1999 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1998 Item 1996 1997 May' June July Aug. Sept. Oct. Nov.p 1 Total1 758,624 778,596' 786,183 781,205' 775,372' 760,864' 735,121' 747,509' 753,911 By type 2 Liabilities reported by banks in the United States 113,098 135,384' 142,657 144,235' 142,375' 144,120' 131,551' 135,088' 125,470 3 US. Treasury bills and certificates3 198,921 148,301 137,652 134,324 131,089 130,398 128,146 128,598 133,702 US. Treasury bonds and notes 379,497 423,456 431,702 428,216 428,685 411,765 401,461 410,462 422,305 5 Nonmarketable4 5,968 5,994 6,189 6,229 6,269 6,311 6,350 5,997 6,035 6 U.S. securities other than U.S. Treasury securities5 61,140 65,461 67.983 68,201 66,954 68,270 67.613 67,364 66,399 By area 7 Europe1 257,915 263,221' 269,174 264,718' 270,355' 266,600 258,234 270,632 271,962 8 Canada 21,295 18.749 20,122 19,396 19,963 16,387 16,170 17,216 19,457 9 Latin America and Caribbean 80,623 97,616 101,833 100,924' 100,901' 98,480" 79.838' 78,123' 77,418 10 Asia 385,484 382,363' 379.147 378,113 367,687 363,902 365,631 368,068' 371,796 7,379 10,118 10,577 11,555 11,904 11,501 11.721 11,113' 10,221 12 Other countries 5,926 6,527 5,328 6,497 4,560 3,992 3,525 2,355 3,055 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 Dec. Mar. June Sept. 1 Banks' liabilities 89,258 109,713 103,383 117,524 100,638 87,889 93,815 60,711 74,016 66,018 83,038 82,209 68,286 67,813 3 Deposits 19,661 22,696 22,467 28.661 28,127 27,387 27,293 41,050 51,320 43,551 54,377 54,082 40,899 40,520 5 Claims of banks' domestic customers2 10,878 6,145 10,978 8,191 7,926 7,354 8,453 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 US. dollars Millions of dollars, end of period May1 June July Aug. Sept. Oct. Nov.p BY HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners . 1,099,549 1,162,148 l,283,787r 1,260,399 1,288,032 1,306,155' 1,341,295' l,350,292r 1,372,015 1,346,836 2 Banks' own liabilities 753,461 758,998 883,74r/ 852,149 884,734 896,972 928,182 917,008' 910,971 881,306 3 Demand deposits . . 24,448 27,034 32,104 31,199 36,246 30,928 33,038 33,547 32,071 32,077 4 Time deposits .... 192,558 186,910 198,546' 185,309 186,686 188,056 183,556' 174,173' 158,651 149,730 5 O-.th.-er1 140.165 143,510 168,011' 192,115 183,402' 192,536 190,542' 165,205' 153,050 143,375 6 Own foreign offices . . 396,290 401,544 485,079' 443,526 478,400' 485,452 521,046 544,083' 567,199 556,124 7 Banks' custodial liabilities5 346,088 403,150 400,047 408,250 403,298 409,183' 413,113' 433,284 461,044 465,530 8 U.S. Treasury bills and certificates6 197,355 236,874 193,239 173,873 169,225 164,274 162,235 160,598 168,764 182,917 9 Other negotiable and readily transferable instruments7 52,200 72,011 93,641 107,826 112,598 117,433 123,378 142,169 151,229 142,391 10 Other 96,533 94,265 113,167 126,551 121,475 127,476' 127,500' 130,517 141,051 140,222 11 Nonmonetary international and regional organizations 11,039 13,972 11,690 14,202 14,103 14,314 15,188 15,215 12,688 13,201 12 Banks' own liabilities 10,347 13,355 11,486 13,559 13,441 12,188 13.684 13,862 11,522 12,261 13 Demand deposits 21 29 16 227 226 19 59 408 97 234 14 Time deposits2 4,656 5,784 5,466 7,029 6,784 6,354 6,252 5,763 5,418 5,802 15 Other3 5,670 7,542 6,004 6,303 6,431 5,815 7,373 7,691 6,007 6,225 16 Banks' custodial liabilities 692 617 204 643 662 2,126 1,504 1,353 1,166 940 17 U.S. Treasury bills and certificates6 350 352 69 359 338 349 490 435 509 570 18 Other negotiable and readily transferable instruments 265 133 284 322 1.777 1,012 818 657 370 19 Other 1 0 2 0 2 0 100 0 0 20 Official institutions9 275,928 312,019 283,685' 280,309 278,559' 273,464' 274,518' 259,697' 263,686 259,172 21 Banks' own liabilities 83,447 79,406 102,028' 104,389 102,392' 102,275' 101,608' 85,310' 85,092 79,655 22 Demand deposits .. 2,098 1,511 2,314 2,052 2,582 3,560 3,456 3,607 3,325 2,744 23 Time deposits2 30,717 33,336 41,396' 36,074 36,044' 36,333' 35,578' 28,076' 26,434 25,851 24 Other1 50,632 44,559 58,318' 66,263 63,766' 62,382' 62,574' 53,627' 55,333 51,060 25 Banks' custodial liabilities 192,481 232,613 181,657' 175,920 176,167 171,189 172,910 174,387 178,594 179,517 26 U.S. Treasury bills and certificates6 168,534 198,921 148.301 137,652 134,324 131,089 130,398 128,146 128,598 133,702 27 Other negotiable and readily transferable instruments7 23.603 33,266 33.151' 37,978 41,180 39,792 41,759 45,684 49,691 45,346 28 Other 344 426 205 290 663 308 753 557 305 469 29 Banks'" 691,412 694,835 816,007' 782,954 809,091' 824,652' 852,890' 876,463' 898,782 886,291 30 Banks' own liabilities 567,834 562,898 642,207' 602,048 632,872' 643,722' 673,127' 687,824' 690,431 674,151 31 Unaffiliated foreign banks 171,544 161,354 157,128' 158,522 154,472' 158,270' 152,081' 143,741' 123,232 118,027 32 Demand deposits 11,758 13,692 17,527 16,111 20,772 15,097 16,063 15,799 15,802 15,119 33 Time deposits 103,471 89,765 83,433 74,168 75,231 78,252 74,201 71,259' 55,837 51,190 34 Other3 56,315 57,897 56,168' 68,243 58,469' 64,921' 61,817' 56,683' 51,593 51,718 35 Own foreign offices 396,290 401,544 485,079' 443,526 478,400' 485,452 521,046 544,083' 567,199 556,124 36 Banks' custodial liabilities5 123,578 131,937 173,800' 180,906 176,219 180,930' 179,763' 188,639 208,351 212,140 37 U.S. Treasury bills and certificates6 15,872 23,106 31,915 26,920 25,337 22,929 20,696 21,563 27,556 35,213 38 Other negotiable and readily transferable instruments7 13,035 17,027 35,393' 38,231 38,122 39,203 40,180 44,807 48,230 44,991 39 Other 94,671 91.804 106,492 115,755 112,760 118,798' 118,887' 122,269 132,565 131,936 40 Other foreigners 121,170 141,322 172,405' 182,934 186,279' 193,725' 198,699 198,917 196,859 188,172 41 Banks' own liabilities 91,833 103,339 128,019' 132,153 136,029' 138,787' 139,763 130,012 123,926 115,239 42 Demand deposits 10,571 11,802 12,247 12,809 12,666 12,252 13,460 13,733 12,847 13,980 43 Time deposits2 53,714 58,025 68,251' 68,038 68,627' 67,117' 67,525 69,075 70,962 66,887 44 Other3 27,548 33,512 47,521 51,306 54,736 59,418 58,778 47,204 40,117 34,372 45 Banks' custodial liabilities 29,337 37,983 44,386 50,781 50,250 54,938 58,936 68,905 72,933 72,933 46 U.S. Treasury bills and certificates6 12.599 14,495 12.954 8,942 9,226 9,907 10,651 10,454 12,101 13,432 47 Other negotiable and readily transferable ii tnics tttrnuimmoerntttos 15,221 21,453 24,964 31,333 32,974 36,661 40,427 50,860 52,651 51,684 48 Other 1,517 2.035 6,468 10,506 8,050 8,370 7,858 7,591 8,181 7,817 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 9,103 23,440 21,229 22,847 25,867 27,391 29,905 28,793 1. Reporting banks include all types of depository institutions as well as some brokers and 6. Includes nonmarketable certificates of indebtedness and Treasury bills issued to official dealers. Excludes bonds and notes of maturities longer than one year. institutions of foreign countries. 2. Excludes negotiable time certificates of deposit, which are included in "Other negotia- 7. Principally bankers acceptances, commercial paper, and negotiable time certificates of ble and readily transferable instruments." deposit. 3. Includes borrowing under repurchase agreements. 8. Principally the International Bank for Reconstruction and Development, the Inter- 4. For U.S. banks, includes amounts owed to own foreign branches and foreign subsidiar- American Development Bank, and the Asian Development Bank. Excludes "holdings of ies consolidated in quarterly Consolidated Reports of Condition filed with bank regulatory dollars" of the International Monetary Fund. agencies. For agencies, branches, and majority-owned subsidiaries of foreign banks, consists 9. Foreign central banks, foreign central governments, and the Bank for International principally of amounts owed to the head office or parent foreign bank, and to foreign Settlements. branches, agencies, or wholly owned subsidiaries of the head office or parent foreign bank. 10. Excludes central banks, which are included in "Official institutions." 5. Financial claims on residents of the United States, other than long-term securities, held by or through reporting banks for foreign customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 International Statistics D March 1999 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1—Continued May June July Aug. Sept. Nov.11 50 Total, all foreigners 1,099,549 1,162,148 1,283,787' 1,260,399' 1,288,032 1,306,155' 1,341,295' U50,292r 1,372,015 1,346,836 51 Foreign countries 1,088,510 1,148,176 l,272,097r l,246,197r 1,273,929 1,291,841' U26,107r 1,335,077' 1,359,327 1,333,635 52 Europe 362,819 376,590 420,432' 405,476' 402,103 431,783 457,537 450,587' 451,340 449,626 53 Austria 3,537 5,128 2,717 3,012 2,268 2,602 2,671 3,137' 2,799 2,940 54 Belgium and Luxembourg . 24,792 24,084 41,007 35,518 35,454 33,845 35,086 33,934' 39,911 42,014 55 Denmark 2,921 2,565 1,514 1,443 1,989 2,013 2,128 1,578 1,813 1,675 56 Finland 2,831 1,958 2,246 1,365 1,438 1,211 1,350 1,181 1,193 1,706 57 France 39,218 35,078 46,607 47,869 46,162 47,140 48,328 50,405' 47,348 48,172 58 Germany 24,035 24,660 23,737 26,452 25,470 23,730 28,751 25,811 22,014 22,602 59 Greece 2,014 1,835 1,552 2,610 2,429 2,784 2,941 2,544 2,901 2,444 60 Italy 10,868 10,946 11,378 11,127 11,509 11,114 10,625 9,183 7,124 6,378 61 Netherlands 13,745 11,110 7,385 7,265 6,845 7,097 9,239 8,066 7,306 9,298 62 Norway 1,394 1,288 317 774 607 1,179 1,469 688 1,149 797 63 Portugal 2,761 3,562 2,262 2,160 2,334 2,823 2,424 2,292 2,377 2,400 64 Russia 7,948 7,623 7,968 3,952 4,654 6,398 2,718 3,085 3,735 2,698 65 Spain 10,011 17,707 18,989 15,519' 11,649 12,079 14,283 20,485' 26,569 27,015 66 Sweden 3,246 1,623 1,628 2,181' 3,148 2,198 1,769 3,285 3,257 3,857 67 Switzerland 43,625 44,538 39,023' 33,852' 38,986' 44,676' 39,362 48,393' 47,332 50,167 68 Turkey 4,124 6,738 4,054 4,467 4,894 5,077 4,317 4,264 4,105 3,842 69 United Kingdom 139,183 153,420 181,904 178,335' 176,703 196,859 219,197 204,915 202,481 195,045 70 177 206 239 270 234 322 242 253 362 271 71 Other Europe and other former U.S.S.R.12 . 26,389 22,521 25,905' 27,305' 25,330' 28,636' 30,637 27,088' 27,564 26,305 72 Canada 30,468 38,920 28,341 26,021 28,864 29,526 27,844 28,701 31,278 29,221 73 Latin America and Caribbean 440,213 467,529 536,393' 550,702' 568,228 564,055' 556,699' 561,502' 576,056 545,916 74 Argentina 12,235 13,877 20,199 16,938 18,502 21,010 21,655 18,384 17,706 18,892 75 Bahamas 94,991 88,895 112,217 114,222 116,435 115,309 113,543 124.2491 128,893 115,598 76 Bermuda 4,897 5,527 6,911 7,142 7,769 7,216 7,332 7,920 7,247 7,241 77 Brazil 23,797 27,701 31,037 38,421' 35,345 34,292 27,824 18,453 17,308 13,371 78 British West Indies 239,083 251,465 276,418' 277,962' 295,321 290,009' 291,098' 298,697' 310,332 298,962 79 Chile 2,826 2,915 4,072 4,234' 4,356 4,987 4,726 5,725 5,598 4,780 80 Colombia 3,659 3,256 3,652 4,383 4,805 4,023 4,102 4,475 4,888 4,120 81 Cuba 8 21 66 59 63 63 62 62 57 63 82 Ecuador 1,314 1,767 2,078 1,783 1,616 1,772 1,608 1,540 1,679 1,509 83 Guatemala 1,276 1,282 1,494 1,353 1,363 1,273 1,237 1,241 1,232 1,206 84 Jamaica 481 628 450 438 522 519 550 541 578 524 85 Mexico 24,560 31,240 33,972 37,679' 38,044 38,554 38,087 35,681 38,058 36,704 86 Netherlands Antilles 4,673 6,099 5,085 7,447 6,861 8,922 8,340 8,588 6,200 6,010 87 Panama 4,264 4,099 4,241 4,104' 3,723 3,596 3,675 3,826 3,793 3,776 88 Peru 974 834 893 964 925 984 900 843 799 814 89 Uruguay 1,836 1,890 2,382 1,991 1,982 2,097 2,091 2,276 2,223 2,199 90 Venezuela 11,808 17,363 21,601 21,600 20,442 19,492 20,125 19,180 19,662 19,607 91 Other 7,531 8,670 9,625' 9,982' 10,154 9,937 9,744 9,821 9,803 10,540 92 Asia 240,595 249,083 269,379' 244,770' 254,412 247,952 266,480 275,745' 284,371 293,576 China 93 Mainland 33,750 30,438 18,252 20,209 21,558 18,919 18,506 18,523 15,813 13,783 94 Taiwan 11,714 15,995 11,840' 12,648 11,619 11,333 11,290 12,080 12,800 12,359 95 Hong Kong 20,197 18,789 17,722 18,106 19,720 15,826 18,349 16,627 16,508 16,739 96 India 3,373 3,930 4,567 4,882 4,821 4,678 6,437 5,144 5,337 5,089 97 Indonesia 2,708 2,298 3,554 3,185' 3,848 3,938 5,651 5,470 5,671 6,247 98 Israel 4,041 6,051 6,281 6,251 6,095 5,969 5,296 5,984 4,781 8,106 99 Japan 109,193 117,316 143,401 111,623 118,669 123,167 131,376 142,767 156,279 164,311 100 Korea (South) 5,749 5,949 13,060 14,010 13,269 12,713 12,493 12,971 12,499 12,391 101 Philippines 3,092 3,378 3,250 2,802 3,418 2,609 2,777 2,712 2,539 2,849 102 Thailand ., 12,279 10,912 6,501 8,876 7,148 6,780 7,869 6,664 7,134 6,788 103 Middle Eastern oil-exporting countries1; 15,582 16,285 14,959 15,300' 13,829 13,902 14,532 16,627 14,718 16,370 104 Other 18,917 17,742 25,992 26,878' 30,418 28,118 31,904 30,176' 30,292 28,544 105 Africa .. 7,641 8,116 10,347 10,968' 10,735 10,788 10,562 11,098 9,749 106 Egypt 2,136 2,012 1,663 1,460 1,523 1,319 1,459 1,616 1,288 1,498 107 M•'orocco 104 112 138 115 84 74 76 88 78 75 108 South Africa 739 458 2,158 2,465 2,642 2,446 2,428 2,658 2,358 1,659 109 Zaire ... 10 10 10 5 5 7 35 6 7 12 110 Oil-exporting countries 1,797 2,626 3,060 4,079 3,552 3,893 3,684 3,727 3,291 3,017 Other 2,855 2,898 3,318 2,844' 2,929 3,049 2,880 3,003 2,727 2,628 112 Other 6,774 7,938 7,205' 8,260 9,587 7,737 6,985 7,444 6,533 6,407 113 Australia 5,647 6,479 6,304 7,416 8,510 6,490 5,931 6,427 5,372 5,180 114 Other 1,127 1,459 901' 844 1,077 1,247 1,054 1,017 1,161 1,227 115 Nonmonetary international and regional organizations 11,039 13,972 11,690 14,202' 14,103 14,314 15,188 15,215 12,688 13,201 116 International15 9,300 12,099 10,517 12,509 12,548 11,220 12,825 12,782 10,397 11,292 117 Latin American regional16 893 1,339 424 846' 694 750 721 803 1,008 598 118 Other regional" 846 534 749 847 861 2,344 1,642 1,630 1,283 1,311 11. Since December 1992, has excluded Bosnia, Croatia, and Slovenia. 15. Principally the International Bank for Reconstruction and Development. Excludes 12. Includes the Bank for International Settlements. Since December 1992, has "holdings of dollars" of the International Monetary Fund. included all parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, and Slovenia. 16. Principally the Inter-American Development Bank. 13. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab 17. Asian, African, Middle Eastern, and European regional organizations, except the Bank Emirates (Trucial States). for International Settlements, which is included in "Other Europe." 14. Comprises Algeria, Gabon, Libya, and Nigeria. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Bank-Reported Data A55 3.18 BANKS' OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States1 Payable in U.S. Dollars Millions of dollars, end of period Area or country May June July Aug. Sept.' Oct. Nov.p 1 Total, all foreigners .. 532,444 599,925 708,225r 703,521' 727,960' 740,227' 764,878 768,427 749,489 755,148 2 Foreign countries 530,513 597,321 705,762' 701,129' 725,045' 735,817' 760,488 763,105 744,099 750,910 3 Europe 132,150 165,769 199,880 208,567 223,277 229,928 227,688 234,967 224,661 228,909 4 Austria 565 1,662 1,354 2,130 1,259 1,892 1,856 1,849 2,373 2,311 5 Belgium and Luxembourg 7,624 6,727 6,641 6,115 7,782 8,459 6,779 8,200 9,230 7,409 6 Denmark 403 492 980 1,286 1,198 933 1,374 1,059 1,768 2,524 7 Finland 1,055 971 1,233 931 1,146 1,032 1,161 1,073 1,149 1,056 8 France 15,033 15,246 16,239 16,276 15,474 14,421 17,314 17,077 16,307 18,875 9 Germany 9,263 8,472 12,676 15,301 15,751 11,327 12,029 15,375 15,121 17.997 10 Greece 469 568 402 428 364 450 530 373 415 510 11 Italy 5,370 6,457 6,230 6,533 6,435 6,345 8,617 6,510 7,153 6,531 12 Netherlands 5,346 7,117 6,141 3,980 5,763 5,642 4,321 4,803 5,230 5,686 13 Norway 665 808 555 736 680 553 1,110 640 662 385 14 Portugal 888 418 777 1,496 888 1,156 725 975 885 679 15 Russia 660 1,669 1,248 1,117 1,057 1,345 1,209 920 883 760 16 Spain 2,166 3,211 2,942 6,218 5,560 6,424 5,225 7,980 6,051 5,234 17 Sweden 2,080 1,739 1,854 3,181 3,069 4,553 4,456 4,319 4,508 5,087 18 Switzerland 7,474 19,798 28,846 29,317 34,970 49,359 49,258 55,798 43,337 45,858 19 Turkey 803 1,109 1,558 2,386 2,414 2,010 1,990 1,900 1,848 1,915 20 United Kingdom 67,784 85,234 103,143 102,889 109,755 104,397 99,174 97,436 98,746 97,072 21 Yugoslavia- 147 115 52 19 53 79 53 53 53 53 22 Other Europe and other former U.S.S.R.3 . 4,355 3,956 7,009 8,228 9,659 9,551 10,507 8,627 8,942 8,967 20,874 26,436 27,189r 24,974' 32,701' 36,007 41,402 41,165 37,316 44,750 256,944 274,153 343,730' 361,015' 365,814 359,277 379,383 373,237 368,394 367,393 6,439 7,400 8,924 8,228' 8,518 8,421 8,724 8,777 9,087 9,225 Bahamas 58,818 71,871 89,379 78,083 77,595 78,770 77,875 86,867 88,923 91,171 Bermuda 5,741 4,129 8,782 8,890 9,452 10,622 9,629 10,610 6,585 5,702 Brazil 13,297 17,259 21,696 25,354 24,552 24,187 23,530 19,073 17,644 17,813 British West Indies 124,037 105,510 145,471 168,124 176,825 166,203 192,334 182,757 183,122 178,578 Chile 4,864 5,136 7,913 8,482 8,497 8,434 8,307 8,345 8,549 8,645 Colombia 4,550 6,247 6,945 7,208 7,102 6,914 6,905 6,813 6,764 6,639 Cuba 0 0 0 0 0 0 0 0 0 0 Ecuador 825 1,031 1,311 1,498 1,430 1,649 1,518 1,458 1,444 1,344 Guatemala 457 620 886 955 932 911 950 1,166 947 1,483 Jamaica 323 345 424 385 320 335 318 305 330 299 Mexico 18,024 18,425 19,428' 21,127' 20,371 20,062 20,078 20,677 22,039 22,483 Netherlands Antilles 9,229 25,209 17,838 17,352 14,294 16,278 12,939 10,294 7,323 7,696 Panama 3,008 2,786 4,364 4,393 4,233 4,308 4,157 4,226 4,011 3,853 Peru 1,829 2,720 3,491 3,792 3,965 4,009 4,061 3,829 3,706 3,629 Uruguay 466 589 629 807 959 1,154 1,055 955 958 1,040 Venezuela 1,661 1,702 2,129 2,381 2,495 2,436 2,649 2,638 2,689 2,788 Other 3,376 3,174 4,120 3,956 4,274 4,584 4,354 4,447 4,273 5,005 43 Asia 115,336 122,478 125,092' 96,855' 94,825' 100,187' 102,382 104,614 104,727 100,720 China 44 Mainland 1,023 1,401 1,579 2,934 1,989 1,679 2,703 1,380 2,275 2,476 45 Taiwan 1,713 1,894 922' 724' 836' 585' 651 1,031 1,079 957 46 Hong Kong 12,821 12,802 13,991' 12,886' 12,870' 11,045 13,821 10,548 8,244 8,238 47 India 1,846 1,946 2,200 1,913 1,972 1,822 1,878 1,823 1,582 1,533 48 Indonesia 1,696 1,762 2,651' 2,128' 2,098 2,010 2,031 2,108 1,990 2,048 49 Israel 739 633 768 893 954 1,116 898 941 1,504 914 50 Japan 61,468 59,967 59,549' 42,080' 43,005' 45,566 44,822 52,213 52,904 48,406 51 Korea (South) 13,975 18,901 18,162 11,936 11,027' 12,863 11,508 9,823 9,733 8,943 52 Philippines 1,318 1,697 1,689 1,614 1,541 1,244' 1,259 1,280 1,128 1,619 53 Thailand 2,612 2,679 2,259 1,906 1,889 1,820 1,883 2,129 1,952 1,884 54 Middle Eastern oil-exporting countries4 . 9,639 10,424 10,790 9,338 8,448 11,207 12,136 12,681 13,531 15,079 55 Other 6,486 8,372 10,532' 8,503' 8,196 9,230 8,792 8,657 8,805 8,623 56 Africa 2,742 2,776 3,530 3,693 2,484 3,497 3,262 3,012 2,785 2,611 57 Egypt 210 247 247 281 283 294 279 272 322 259 58 Morocco 514 524 511 490 430 471 426 390 405 390 59 South Africa 465 584 805 859 653 630 653 694 665 704 60 Zaire 1 0 0 0 0 0 0 0 0 0 Oil-exporting countries5 552 420 1,212 1,078 308 1,331 1,046 787 533 454 Other 1,000 1,001 755 985 810 771 858 869 860 804 63 Other 2,467 5,709 6,341' 6,025' 5,944' 6,921 6,371 6,110 6,216 6,527 64 Australia 1,622 4,577 5.3OO1 5,705' 5,438' 6,067 5,999 5,783 5,809 6,008 65 Other 845 1,132 1,041 320 506 854 372 327 407 519 66 Nonmonetary international and regional organizations6. .. 1,931 2,604 2,463 2,392 2,915 4,410 4,390 5,322 5,390 4,238 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 (Tracial States). 2. Since December 1992, has excluded Bosnia, Croatia, and Slovenia. 5. Comprises Algeria, Gabon, Libya, and Nigeria. 3. Includes the Bank for International Settlements. Since December 1992, has included all 6. Excludes the Bank for International Settlements, which is included in "Other Europe." parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, and Slovenia. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A56 International Statistics • March 1999 3.19 BANKS' OWN AND DOMESTIC CUSTOMERS' CLAIMS ON FOREIGNERS Reported by Banks in the United States' Payable in U.S. Dollars Millions of dollars, end of period 1998 Type of claim 1995 1996 1997' May June' July' Aug.' Sept.' Oct. Nov.p 1 Total 655,211 743,919 852,852 880,836 926,478 2 Banks' claims 532,444 599,925 708,225 703,521' 727,960 740,227 764,878 768,427 749,489 755,148 3 Foreign public borrowers 22,518 22,216 20,581 28,927' 27,780 35,635 29,758 26,377 28,110 25,986 4 Own foreign offices 307,427 341,574 431,685 415,196' 435,201 446,536 466,019 486,452 476,973 486,997 5 Unaffiliated foreign banks 101,595 113,682 109,230 105,688' 107,832 101,956 106,034 108,972 109,140 118,015 6 Deposits 37,771 33,826 30,995 21,282 22,843 23,283 24,593 30,426 26,713 34,149 7 Other 63,824 79,856 78,235 84,406' 84,989 78,673 81,441 78,546 82,427 83,866 8 All other foreigners 100,904 122,453 146,729 153,710' 157,147 156,100 163,067 146,626 135,266 124,150 9 Claims of banks' domestic customers3 .... 122,767 143,994 144,627 152,876 158,051 10 Deposits 58,519 73,110 86,008 89,602 11 Negotiable and readily transferable 77,657 instruments4 44,161 53,967 52,171 53,512 12 Outstanding collections and other 51,207 20,087 17,550 14.697 14,937 15,130 MEMO 13 Customer liability on acceptances 8,410 10,388 9,624 6,599 6,068 14 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the 30.717 39,661 34,046 32,172 25,287 32,347 28,217 25,512 35,786 34,858 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 Maturity, by borrower and area 1996 Dec' Sept. 1 Total 202,282 224,932 258,106 276,550 285,570 292,747 281,085 By borrower 2 Maturity of one year or less . . . 170,411 178,857 211,859 205,781 214,779 211,347 208,392 3 Foreign public borrowers 15,435 14,995 15,411 12,081 16,965 16,997 14,613 4 All other foreigners 154,976 163,862 196,448 193,700 197,814 194,350 193,779 5 Maturity of more than one year 31,871 46,075 46.247 70,769 70,791 81.400 72,693 6 Foreign public borrowers 7,838 7,522 6.790 8.499 11,265 10.647 10,875 7 All other foreigners 24,033 38,553 39.457 62,270 59,526 70.753 61,818 By area Maturity of one year or less 8 Europe 56,381 55,622 55,690 58,294 69,150 73,787 69,010 Canada 6,690 6,751 8.339 9,917 9,297 8,766 8,953 10 Latin America and Caribbean 59,583 72,504 103,254 97,207 101,070 99.611 99,650 11 Asia 40,567 40,296 38.078 33,964 28,751 23,570 22,330 12 Africa 1,379 1,295 1,316 2,211 2,227 1,116 1,762 13 All other3 5,811 2,389 5,182 4,188 4,284 4,497 6,687 Maturity of more than one year 14 Europe 4,358 4,995 6,965 13,240 15,118 15,606 15,381 15 Canada 3,505 2,751 2,645 2,525 2,765 2,571 2,982 16 Latin America and Caribbean 15,717 27,681 24,943 42,049 39,363 47,969 39,134 17 Asia 5,323 7,941 9 392 10,235 10,786 12,589 12,122 18 Africa 1,583 1,421 1,361 1,236 1,254 1,259 1,170 19 All other1 1,385 1,286 941 1,484 1,505 1,406 1,904 1. Reporting banks include all types of depository institutions as welt as some brokers and 2. Maturity is time remaining until maturity. dealers. 3. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Bank-Reported Data A57 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. and Foreign Offices of U.S. Banks1 Billions of dollars, end of period Area or country 1995 Sept. Dec. June Sept. Dec. Mar. June 1 Total 499.5 551.9 586.2 645.3 647.6r 678.8 711.0 726.0r 739.1r 746.6' 2 G-10 countries and Switzerland 191.2 206.0 220.0 228.3 231.4 250.0 247.8' 242.8 249.01 275.0 3 Belgium and Luxembourg 7.2 13.6 11.3 11.7 14.1 9.4 11.4 11.0 11.2 13.1 4 France 19.1 19.4 17.4 16.6 19.7 17.9 20.2 15.4 15.5' 20.5 5 Germany 24.7 27.3 33.9 29.8 32.1 34.1 34.7 28.6 25.5 28.7 6 Italy 11.8 11.5 15.2 16.0 14.4 20.2 19.3 15.5 19.7 19.5 7 Netherlands 3.6 3.7 5.9 4.0 4.5 6.4 7.2 6.2 7.3 8.3 8 Sweden 2.7 2.7 3.0 2.6 3.4 3.6 4.1 3.3 4.8 3.1 9 Switzerland 5.1 6.7 6.3 5.3 6.0 5.4 4.8 7.2 5.6 6.9 10 United Kingdom 85.8 82.4 90.5 104.7 99.2 110.6 108.3 113.4 120.1 134.8 11 Canada 10.0 10.3 14.8 14.0 16.3 15.7 15.1 13.7 13.5 16.5 12 Japan 21.1 28.5 21.7 23.7 21.7 26.8 22.6 28.6 25.8 23.7 13 Other industrialized countries 45.7 50.2 62.1 65.7 66.4 71.7 73.8 64.5 74.3 72.0 14 Austria 1.1 .9 1.0 1.1 1.9 1.5 1.7 1.5 1.7 1.9 15 Denmark 1.3 2.6 1.7 1.5 1.7 2.8 3.7 2.4 2.0 2.1 16 Finland .9 .8 .6 .8 .7 1.4 1.9 1.3 1.5 1.4 17 Greece 4.5 5.7 6.1 6.7 6.3 6.1 6.2 5.1 6.1 5.8 18 Norway 2.0 3.2 3.0 8.0 5.3 4.7 4.6 3.6 4.0 3.4 19 Portugal 1.2 1.3 1.4 .9 1.0 1.1 1.4 .9 .7 1.3 20 Spain 13.6 11.6 16.1 13.2 14.4 15.4 13.9 11.7 16.5 15.1 21 Turkey 1.6 1.9 2.8 2.7 2.8 3.4 4.4 4.5 4.9 6.5 22 Other Western Europe 3.2 4.7 4.8 4.7 6.3 5.5 6.1 8.2 9.9 9.6 23 South Africa 1.0 1.2 1.7 2.0 1.9 1.9 1.9 2.2 3.7 5.0 24 Australia 15.4 16.4 22.8 24.0 24.4 27.8 28.0' 23.1 23.2 20.0 25 OPEC2 24.1 22.1 19.2 19.7 21.8 22.3 22.9 26.0 25.7 25.3 26 Ecuador .5 .7 .9 1.1 1.1 .9 1.2 1.3 1.3 1.2 27 Venezuela 3.7 2.7 2.3 2.4 1.9 2.1 2.2 2.5 3.3 3.2 28 Indonesia 3.8 4.8 5.4 5.2 4.9 5.6 6.5 6.7 5.5 5.1 29 Middle East countries 15.3 13.3 10.2 10.7 13.2 12.5 11.8 14.4 14.3 15.5 30 African countries .9 .6 .4 .4 .7 1.2 1.1 1.2 1.4 .3 31 Non-OPEC developing countries 96.0 112.6 128.1 140.6 137.0 138.7 147.4 Latin America 32 Argentina 11.2 12.9 15.0 14.3 14.3 16.4 17.1 18.4 19.3 20.2 33 Brazil 8.4 13.7 17.8 20.7 22.0 27.3 26.1 28.6 32.4 29.9 34 Chile 6.1 6.8 6.6 7.0 6.8 7.6 8.0 8.7 9.0 9.1 35 Colombia 2.6 2.9 3.1 4.1 3.7 3.3 3.4 3.4 3.3 3.6 36 Mexico 18.4 17.3 16.3 16.2 17.2 16.6 16.4 17.4 17.7 17.9 37 Peru .5 1.3 1.6 1.6 1.4 1.8 2.0 2.1 2.2 38 Other 2.7 3.0 3.3 3.4 3.4 3.6 4.1 4.0 4.4 Asia China 39 Mainland 1.1 1.8 2.6 2.5 2.7 3.6 4.3 3.2 4.2 3.9 40 Taiwan 9.2 9.4 10.4 10.3 10.5 10.6 9.7 9.0 11.7 11.3 41 India 4.2 4.4 3.8 4.3 4.9 5.3 4.9 4.9 5.0 4.9 42 Israel .4 .5 .5 .5 .6 .8 1.0 .7 .7 .9 43 Korea (South) 16.2 19.1 21.9 21.5 14.6 16.3 16.2 15.6 16.2 14.5 44 Malaysia 3.1 4.4 5.5 6.0 6.5 6.4 5.6 5.1 4.5 4.7 45 Philippines 3.3 4.1 5.4 5.8 6.0 7.0 5.7 5.7 5.0 5.4 46 Thailand 2.1 4.9 4.8 5.7 6.8 7.3 6.2 5.4 5.5 4.9 47 Other Asia 4.7 4.5 4.1 4.1 4.3 4.7 4.5 4.3 4.2 3.7 Africa 48 Egypt .4 .6 .7 .9 1.1 .9 1.0 1.5 49 Morocco .7 .7 .7 .6 .7 .7 .6 .6 50 Zaire .0 .0 .1 .0 .0 .0 .0 .0 51 Other Africa3 .9 1.0 .9 .9 .9 .9 1.1 52 Eastern Europe 2.7 4.2 5.3 6.9 8.9 7.1 9.8 9.1 12.0 10.9 53 Russia" .8 1.0 1.8 3.7 3.5 4.2 5.1 5.1 7.5 6.8 54 Other 1.9 3.2 3.5 3.2 5.4 2.9 4.7 4.0 4.6 4.1 55 Offshore banking centers 72.9 99.2 105.2 134.7 131.3 129.6 138.9 145.7 129.3 123.5 56 Bahamas 10.2 11.0 14.2 20.3 20.9 16.1 19.8 29.9 29.2 22.7 57 Bermuda 8.4 6.3 4.0 4.5 6.7 7.9 9.8 9.8 9.0 9.3 58 Cayman Islands and other British West Indies 21.4 32.4 32.0 37.2 32.8 35.1 45.7 43.4 24.9 33.9 59 Netherlands Antilles 1.6 10.3 11.7 26.1 19.9 15.8 21.7 14.6 14.0 10.5 60 Panama5 1.3 1.4 1.7 2.0 2.0 2.6 2.1 3.1 3.2 3.3 61 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 62 Hong Kong, China 20.0 25.0 26.0 27.9 30.8 35.2 27.2 32.2 33.8 30.0 63 Singapore 10.1 13.1 15.5 16.7 17.9 16.7 12.7 12.7 15.0 13.5 64 Other8 .1 .1 .1 .1 .1 .3 .1 .1 .1 .2 65 Miscellaneous and unallocated7 66.9 57.6 50.0 59.6 59.6 57.6 99.1 101.3 95.6 1. The banking offices covered by these data include U.S. offices and foreign branches of 2. Organization of Petroleum Exporting Countries, shown individually; other members of U.S. banks, including U.S. banks that are subsidiaries of foreign banks. Offices not covered OPEC (Algeria, Gabon, Iran, Iraq, Kuwait, Libya, Nigena, 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 • March 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 1995 1996 June Sept. Sept.p 54,309 46,448 54,798 56,501 55,891 59,618 58,040 56,822 55,139 2 Payable in dollars 38,298 33,903 38,956 38,651 39,746 41,888 42,258 45,210 43.894 3 Payable in foreign currencies 16,011 12,545 15,842 17,850 16,145 17.730 15,782 11,612 11,245 By type 4 Financial liabilities 32,954 24,241 26,065 28,263 26,461 29,113 28,050 22,322 19,331 5 Payable in dollars 18,818 12,903 11,327 11,442 11,487 12,975 13,568 11,988 9,812 6 Payable in foreign currencies 14,136 11,338 14,738 16,821 14,974 16,138 14.482 10,334 9,519 7 Commercial liabilities 21,355 22,207 28,733 28,238 29,430 30,505 29,990 34,500 35,808 8 Trade payables 10,005 11,013 12,720 11,040 10,885 10,904 10,107 14,989 16,200 9 Advance receipts and other liabilities 11,350 11,194 16,013 17,198 18,545 19,601 19,883 19,511 19,608 10 Payable in dollars 19.480 21,000 27,629 27,209 28.259 28,913 28,690 33,222 34,082 11 Payable in foreign currencies 1,875 1.207 1,104 1.029 1.171 1,592 1,300 1,278 1,726 By area or country Financial liabilities 12 Europe 21,703 15,622 16,195 18,530 18,019 19,238 20.307 15,468 12,905 13 Belgium and Luxembourg .. . 495 369 632 238 89 186 127 75 150 14 France 1,727 999 1,091 1,280 1,334 1,684 1,795 1,699 1,457 15 Germany 1,961 1,974 1,834 1,765 1,730 2,018 2,578 2,441 2,167 16 Netherlands 552 466 556 466 507 494 472 484 417 17 Switzerland 688 895 699 591 645 776 345 189 179 18 United Kingdom 15,543 10,138 10,177 12,968 12,165 12,318 13,145 8,765 6,610 19 Canada 629 632 1,401 1,616 651 2,392 1,045 539 389 20 Latin America and Caribbean .. 2,034 1,783 1,668 1,285 1,067 1,386 965 1,320 1,351 21 Bahamas 101 59 236 124 10 141 17 6 1 22 Bermuda 80 147 50 55 64 229 86 49 73 23 Brazil 207 57 78 97 52 143 91 76 154 24 British West Indies 998 866 1,030 775 669 604 517 845 834 25 Mexico 0 12 17 15 76 26 21 51 23 26 Venezuela 5 2 1 1 1 1 1 1 1 27 Asia 8,403 5,988 6.423 6,248 6,239 5,394 5,024 4,315 4,005 28 Japan 7,314 5,436 5,869 5,668 5,725 5,085 4,767 3,869 3,754 29 Middle Eastern oil-exporting countries 35 27 25 39 23 32 23 0 0 30 Africa 135 150 38 29 33 60 33 29 31 31 Oil-exporting countries 123 122 0 0 0 0 0 0 0 32 All other3 50 340 643 676 Commercial liabilities 33 Europe . . 6,773 7,700 9,767 8,683 9,343 10,228 9.951 15,327 16,708 34 Belgium and Luxembourg 241 331 479 736 703 666 565 557 629 35 France 728 481 680 708 782 764 840 613 750 36 Germany 604 767 1.002 845 945 1,274 1,068 1,222 1,410 37 Netherlands 722 500 766 288 452 439 443 502 441 38 Switzerland 327 413 624 429 400 375 407 355 509 39 United Kingdom 2,444 3,568 4,303 3,818 3,829 4,086 4,041 9,119 10,025 1,037 1,040 1,090 1,136 1,150 1,175 1,347 1,206 1,595 41 Latin America and Caribbean 1,857 1,740 2.574 2,500 2,224 2,176 2.051 2,290 1,845 42 Bahamas 19 1 63 33 38 16 27 14 48 43 Bermuda 345 205 297 397 180 203 174 209 168 44 Brazil 161 98 196 225 233 220 249 246 256 45 British West Indies 23 56 14 26 23 12 5 27 5 46 Mexico 574 416 665 594 562 565 520 557 511 47 Venezuela 276 221 328 304 322 261 219 196 230 48 Asia 10,741 10,421 13,422 13,875 14,628 14,966 14,672 13,655 13,605 49 Japan 4,555 3,315 4,614 4,430 4,553 4,500 4,372 4,039 3,846 50 Middle Eastern oil-exporting countries1. 1,576 1,912 2,168 2,420 2,984 3,111 3,138 3,194 3,582 51 Africa 428 619 1,040 941 929 833 921 810 52 Oil-exporting countries2 256 254 532 423 504 376 354 372 53 Other3 519 1,156 1,136 1,101 1,245 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 1996 Sept. Sept." 1 Total . . 57,888 52,509 63,642 68,266 70,760 70,077 71,004 74,1«5 79,514 2 Payable in dollars 53,805 48,711 58,630 62,082 64,144 62,173 65.359 68,329 73,284 3 Payable in foreign currencies 4,083 3,798 5,012 6,184 6,616 7,904 5,645 5,836 6,230 By type 4 Financial claims 33,897 27,398 35,268 40,717 42,059 38,908 40,301 32,341 37,262 5 Deposits 18,507 15,133 21,404 24,308 24,125 23,139 20,863 14,762 15,406 6 Payable in dollars 18,026 14,654 20,631 22,817 22,566 21,290 19,155 13,084 13,374 7 Payable in foreign currencies .. . 481 479 773 1,491 1,559 1,849 1,708 1,678 2,032 8 Other financial claims 15,390 12,265 13,864 16,409 17,934 15,769 19,438 17,579 21,856 9 Payable in dollars 14,306 10,976 12,069 13,152 14,621 11,576 16,981 14,904 19,867 10 Payable in foreign currencies 1,084 1,289 1,795 3,257 3,313 4,193 2,457 2,675 1,989 11 Commercial claims 23,991 25,111 28,374 27,549 28,701 31,169 30,703 41,824 42.252 12 Trade receivables 21,158 22,998 25,751 24,858 25,110 27,536 26,888 37,741 37,868 13 Advance payments and other claims . . . 2,833 2.113 2,623 2,691 3,591 3,633 3,815 4,083 4,384 14 Payable in dollars 21,473 23,081 25,930 26,113 26,957 29,307 29,223 40,341 40,043 15 Payable in foreign currencies 2,518 2,030 2,444 1,436 1,744 1,862 1,483 2,209 By area or country Financial claims 16 Europe 7,936 7,609 9,282 12,904 15,862 16,948 14,187 14,091 14,473 17 Belgium and Luxembourg 86 193 185 203 360 406 378 518 496 18 France 800 803 694 680 1,112 1,015 902 796 1.140 19 Germany 540 436 276 281 352 427 393 290 359 20 Netherlands 429 517 493 519 764 677 911 975 867 21 Switzerland 523 498 474 447 448 434 401 403 409 22 United Kingdom 4,649 4,303 6,119 9,814 11,254 12,286 9,289 9,639 9,849 23 Canada 3,581 2,851 3,445 6,422 4,279 3,313 4,688 3,020 4,090 24 Latin America and Caribbean 19,536 14,500 19,577 18,725 19,176 15,543 18,207 11,967 15,758 25 Bahamas 2,424 1,965 1,452 2,064 2,442 2,459 1,316 1,306 2.105 26 Bermuda 27 81 140 188 190 108 66 48 63 27 Brazil 520 830 1,468 1,617 1.501 1,313 1.408 1,394 710 28 British West Indies 15,228 10,393 15,182 13,553 12,957 10.311 13.551 7,349 10,960 29 Mexico 723 554 457 497 508 537 967 1,089 1,122 30 Venezuela 35 32 31 21 15 36 47 57 50 31 Asia 1,871 1,579 2,221 1,934 2,015 2,133 2,174 2,376 2,121 32 Japan 953 871 1,035 766 999 823 791 928 33 Middle Eastern oil-exporting countries 141 3 22 20 15 11 9 13 34 Africa 373 276 174 179 174 319 325 155 157 35 Oil-exporting countries2 0 5 14 15 16 15 16 15 16 36 All other' 553 553 652 663 Commercial claims 37 Europe 9,540 9,824 10,443 9,603 10,486 12,120 12,854 23,473 23,154 38 Belgium and Luxembourg 213 231 226 327 331 328 232 522 345 39 France 1,881 1,830 1,644 1,377 1,642 1,796 1,939 2,273 2,392 40 Germany 1,027 1,070 1,337 1,229 1,395 1,614 1,670 1,828 1,548 41 Netherlands 311 452 562 613 573 597 534 610 609 42 Switzerland 557 520 642 389 381 554 476 420 547 43 United Kingdom 2,556 2,656 2,946 2,836 2,904 3,660 4,828 14,376 14,128 44 Canada 1,988 1,951 2.165 2,464 2,649 2,660 2,882 2,779 2,296 45 Latin America and Caribbean 4,117 4.364 5,276 5.241 5,028 5.750 5.481 6,212 6,742 46 Bahamas 9 30 35 29 22 27 13 12 39 47 Bermuda 234 272 275 197 128 244 238 483 1,136 48 Brazil 612 898 1,303 1,136 1,101 1,162 1,128 1,183 1,062 49 British West Indies 83 79 190 98 98 109 88 110 91 50 Mexico 1,243 993 1,128 1,140 1,219 1,392 1,302 1,462 1,356 51 Venezuela 348 285 357 451 418 576 441 585 566 52 Asia 6,982 7,312 8,376 8,460 8,576 8,713 7.638 7,623 7,629 53 Japan 2,655 1,870 2,003 2,079 2,048 1,976 1.713 2,012 2,216 54 Middle Eastern oil-exporting countries 708 974 971 1,014 987 1,107 987 1,127 967 55 Africa 454 654 746 618 764 680 613 657 740 56 Oil-exporting countries2 67 87 166 81 207 119 122 116 128 57 Other3 910 1,006 1,368 1,163 1,198 1,246 1,235 1.080 1,691 1. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab 2. Comprises Algeria, Gabon, Libya, and Nigeria. Emirates (Trucial States). 3. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A60 International Statistics O March 1999 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1998 1998 Transaction, and area or country 1996 J N an o .— v. Mayr June' July' Aug.' Sept/ Oct. Nov.p U.S. corporate securities STOCKS 1 Foreign purchases 590,714 1,097,958 1,457,236 129,559 146,147 152,833 141,566 137,418 145,588 126,494 578,203 1,028,361 1,407,747 121,354 142,591 150,308 139,722 147,891 142,831 118,996 2 Foreign sales 12,511 69,597 49,489 8,205 3456 2,525 1,844 -10,473 2,757 7,498 3 Net purchases, or sales (—) 12,585 69,754 49,871 8,225 3,581 2,739 1,843 -10,430 2,754 7315 4 Foreign countries 5.367 62,688 69,888 10,670 7,227 6,983 5,459 2,182 -249 4,386 5 Europe -2,402 6,641 6,713 650 1,734 199 988 85 360 50 6 France 1,104 9,059 10,798 1,834 1,020 1,503 1,326 1,281 68 372 7 Germany 1,415 3,831 7,994 564 830 1,265 163 876 1,009 1,816 8 Netherlands 2,715 7,848 6,583 2,234 1,490 1,092 -277 -307 -1,974 -420 9 Switzerland 4,478 22,478 21,182 2,968 695 1,154 1,740 700 632 1,902 10 United Kingdom 2.226 -1,406 -3,787 -474 -1,600 -443 -276 -195 -507 -198 11 Canada 5,816 5,203 -2,307 -1,333 1,798 -614 610 -11,766 2,058 3,691 1 1 3 2 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 -12 - , 8 7 6 0 3 9 - - 6 2 1 3 1 4 -3,9 28 4 6 9 -2 - , 1 9 3 0 4 5 -4 - , 1 1 5 1 7 2 -6 1 7 4 8 8 - 1, 1 8 7 2 7 3 -3 - 3 8 4 14 Other Asia -372 4,787 -1,548 -208 -540 -306 214 519 597 822 15 Japan -85 472 608 275 204 -14 159 -98 -217 41 16 Africa -57 342 -959 -68 -385 -134 160 -23 23 -63 17 Other countries 18 Nonmonetary international and regional organizations -25 BONDS2 19 Foreign purchases 393,953 610,116 844,376 65,612 74,891 74,951 67,529 100,186 108,796 79,813 268,487 475,958 686,790 53,226 53,464 64,461 58,678 92,663 105,432 60,550 20 Foreign sales 125,466 134,158 157,586 12,386 21,427 10,490 8,851 7,523 3^64 19463 21 Net purchases, or sales (—) 125,295 133,595 158,007 12,328 21,328 10,567 8,813 7,473 3,353 20,233 22 Foreign countries 77,570 71,631 116,728 5,277 12,630 8,650 5,813 12,323 12,185 14,489 23 Europe 4,460 3,300 3,560 -17 667 451 233 184 701 235 24 France 4,439 2,742 4,164 -133 203 806 139 268 -135 435 25 Germany 2,107 3,576 2,494 546 369 -859 32 275 704 64 26 Netherlands 1,170 187 4,892 794 404 234 100 1,003 -50 251 27 Switzerland 60,509 54,134 88,575 4,296 9,283 5,665 3,924 9,760 10,187 11,527 28 United Kingdom 4,486 6,264 5,893 628 607 640 439 443 292 558 29 Canada 17,737 34,733 22,041 6,461 6,346 1,730 1,592 -2,927 -11,135 2,293 30 Latin America and Caribbean 1,679 2,155 2,522 109 162 171 -188 -58 2 835 31 Middle East' 23,762 16,996 9,557 -111 1,253 -597 1,709 -1,847 1,185 1,934 32 Other Asia 14,173 9,357 6,143 460 527 -511 -10 -713 1,624 1,194 33 Japan 624 1,005 174 -31 101 -48 -17 -61 55 24 34 Africa -563 811 1,092 -5 229 21 -535 -400 769 100 35 Other countries 36 Nonmonetary international and regional organizations 563 -421 58 99 -77 38 50 -970 Foreign securities 37 Stocks, net purchases, or sales (-) -59,268 -40,942 7,822 -3,383 2,502 -3,537 5,557 6,107 8,046 -2,569 38 Foreign purchases 450,365 756,015 870,999 80,967 88,610 82,247 74,376 89,496 90,407 70,301 39 Foreign sales 509,633 796,957 863,177 84,350 86,108 85,784 68,819 83,389 82,361 72,870 40 Bonds, net purchases, or sales (-) -51,369 -48,171 -14,185 -2,687 -12,413 3,076 1,049 3,384 15,980 -830 41 Foreign purchases 1,114,035 1,451,704 1,278,469 110,415 151,482 118,922 139,393 152,881 102,202 55,573 42 Foreign sales 113,102 163,895 115,846 138,344 149,497 86,222 56,403 1,165.404 1,499,875 1,292,654 43 Net purchases, or sales (—), of stocks and bonds -6,070 -9,911 -461 6,606 9,491 24,026 -3399 -110,637 -89,113 -6,363 44 Foreign countries -6,238 -9,885 -390 6,623 9,492 24,119 -3393 -109,766 -88,921 -6,194 45 Europe -57,139 -2,029 -7,273 2,281 1,202 6.007 10,792 2,331 46 Canada -7,685 -29,874 8,072 -1,338 161 2,201 2,667 -1,118 946 562 47 Latin America and Caribbean -11,507 -3,085 3,665 -1,893 -2,553 -4,838 -1,196 1,214 4,585 -3,907 48 Asia -27,831 -25,258 -12,674 -776 516 -59 4,227 3,550 6,699 -1,989 49 Japan -5,887 -25,123 -1,762 -678 -38 -316 1,741 2,239 6,134 -2,390 50 Africa -1,517 -10,001 219 -79 -32 -269 -122 -163 4 -56 51 Other countries -4,087 -3.293 -1,416 -123 -704 294 -155 2 1,093 -334 -2,288 -2,079 52 Nonmonetary international and regional organizations -169 168 -26 -71 -17 -1 -93 -6 ]. Comprises oil-exporting countries as follows: Bahrain. Iran, Iraq, Kuwait, Oman, Qatar, 2. Includes state and local government securities and securities of U.S. government Saudi Arabia, and United Arab Emirates (Trucial States). agencies and corporations. Also includes issues of new debt securities sold abroad by U.S. corporations organized to finance direct investments abroad. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Holdings and Transactions A61 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions' Millions of dollars; net purchases, or sales (-) during period 1998 Area or country J N a o n v . . - May June' July' Aug.' Sept.' Oct. Nov.p 1 Total estimated 232,241 184,171 35,978 21,495r l,50« -4,454 -15,795 -5,270 25,424 2 Foreign countries 234,083 183,688 34,632 21,344' 1,810 -4,507 -15,795 -5,261 -2,973 25,524 3 Europe 118,781 144,921 13,404 935' 229 -6,465 -2,823 -2,771 -9,987 5,488 4 Belgium and Luxembourg 1,429 3,427 1,657 176 -513 215 667 113 -606 510 5 Germany 17,980 22,471 704 14' -1,381 82 -1,799 894 1,171 307 6 Netherlands -582 1,746 -6,431 434' 543 -675 -3,081 -579 1,543 -1,156 7 Sweden 2,242 -465 905 184 335 239 -152 -330 193 586 8 Switzerland 328 6,028 5,065 44 -973 -827 -680 363 2,811 531 9 United Kingdom 65,658 98,253 9,046 -2,823' -1,543 -5,921 8,000 2,217 -13,168 3,207 10 Other Europe and former U.S.S.R 31,726 13,461 2,458 2,906 3,761 422 -5,778 -5,449 -1,931 1,503 11 Canada 2,331 -811 -42 -223 -83 -619 -2,088 -663 -1,188 3,694 12 Latin America and Caribbean 20,785 -2,554 82 20,063' 2,912 685 -5.940 -1,233 -491 1.961 13 Venezuela -69 655 -49 -313' 818 308 -1,308 6 -35 327 14 Other Latin America and Caribbean 8,439 -549 9,615 -330' 3,722 2,185 3,914 2,982 -1,288 -5,411 15 Netherlands Antilles 12,415 -2,660 -9,484 20,706' -1,628 -1,808 -8,546 -4,221 832 7,045 16 Asia 89,735 39,567 22,991 1,455 -1,152 1,326 -3,856 -207 7,756 13,587 17 Japan 41,366 20,360 9,298 1,582 -2,442 774 299 128 1,233 7,311 18 Africa 1,083 1,524 735 64' 145 -22 62 81 87 145 19 Other 1,368 1,041 -2,538 -950 -241 588 -1,150 -468 850 649 20 Nonmonetary international and regional organizations . . -1,842 483 1,346 151 -304 53 0 -9 662 -100 21 International -1,390 621 418 136 -318 -135 -10 -788 645 -19 22 Latin American regional -779 170 197 -1 0 192 0 -6 MEMO 23 Foreign countries 234,083 183,688 34,632 21,344' 1,810 -4,507 -15,795 -5,261 -2,973 25,524 24 Official institutions 85,807 43,959 -1,151 898 -3,486 469 -16,920 -10,304 9,001 11,843 25 Other foreign 148,276 139,729 35,783 20,446' 5,296 -4,976 1,125 5,043 -11,974 13,681 Oil-exporting countries 26 Middle East2 10,232 7,636 -14,112 951 -1,388 -2,578 -4,160 -5,837 -276 233 27 Africa3 1 -12 2 0 0 0 1 0 0 0 1. Official and private transactions in marketable U.S. Treasury securities having an 2. Comprises Bahrain, Iran. Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab original maturity of more than one year. Data are based on monthly transactions reports. Emirates (Trucial States). Excludes nonmarketable U.S. Treasury bonds and notes held by official institutions of foreign 3. Comprises Algeria, Gabon, Libya, and Nigeria. countries. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A62 International Statistics • March 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 Item 1996 1997 1998 Aug. Sept. Exchange Rates COUNTRY/CURRENCY UNIT 1 Australia/dollar2 78.28 74.37 62.91 58.88 58.89 61.79 63.49 61.82 63.20 2 Austria/schilling 10.589 12.206 12.379 12.574 11.955 11.524 11.840 11.746 n.a. 3 Belgium/franc 30.97 35.81 36.31 36.85 35.05 33.81 34.71 34.44 n.a. 4 Brazil/real 1.0051 1.0779 1.1605 1.1717 1.1805 1.1889 1.1932 1.2052 1.5120 5 Canada/dollar 1.3638 1.3849 1.4836 1.5346 1.5218 1.5452 1.5404 1.5433 1.5194 6 China, P.R./yuan 8.3389 8.3193 8.3008 8.3100 8.3055 8.2778 8.2778 8.2780 8.2789 7 Denmark/krone ^ 5.8003 6.6092 6.7030 6.8067 6.4717 6.2294 6.3960 6.3531 6.4194 8 European Monetary Union/euro" n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 1.1591 9 Finland/markka 4.5948 5.1956 5.3473 5.4340 5.1734 4.9845 5.1163 5.0769 n.a. 10 France/franc 5.1158 5.8393 5.8995 5.9912 5.6969 5.4925 5.6422 5.5981 n.a. 11 Germany/deutsche mark 1.5049 1.7348 1.7597 1.7869 1.6990 1.6381 1.6827 1.6698 n.a. 12 Greece/drachma 240.82 273.28 295.70 301.21 292.47 281.64 282.64 280.43 278.91 13 Hong Kong/dollar 7.7345 7.7431 7.7467 7.7494 7.7480 7.7483 7.7432 7.7471 7.7486 14 India/rupee. . ^ 35.51 36.36 41.36 42.84 42.58 42.39 42.43 42.59 42.55 15 Ireland/pound2 159.95 151.63 142.48 140.37 147.24 152.21 147.77 148.76 n.a. 16 Italy/lira 1,542.76 1,703.81 1,736.85 1,763.01 1,678.92 1,620.96 1,664.91 1,653.23 n.a. 17 Japan/yen 108.78 121.06 130.99 144.68 134.48 121.05 120.29 117.07 113.29 18 Malaysia/ringgit 2.5154 2.8173 3.9254 4.2036 3.8050 3.8000 3.80O0 3.8014 3.8000 19 Mexico/peso 7.600 7.918 9.152 9.371 10.219 10.159 9.969 9.907 10.128 20 Netherlands/guilder 1.6863 1.9525 1.9837 2.0148 1.9169 1.8479 1.8969 1.8816 n.a. 21 New Zealand/dollar2 68.77 66.25 53.61 50.11 50.44 52.13 53.40 52.23 53.88 22 Norway/krone 6.4594 7.0857 7.5521 7.7248 7.5564 7.4294 7.4562 7.6050 7.4532 23 Portugal/escudo 154.28 175.44 180.25 182.99 174.19 168.01 172.52 171.19 n.a. 24 Singapore/dollar 1.4100 1.4857 1.6722 1.7571 1.7226 1.6378 1.6378 1.6515 1.6791 25 South Africa/rand 4.3011 4.6072 5.5417 6.3198 6.0966 5.7991 5.6511 5.9030 5.9931 26 South Korea/won 805.00 950.77 1,400.40 1,314.29 1,375.54 1,344.14 1,294.01 1,213.22 1,175.11 27 Spain/peseta 126.68 146.53 149.41 151.72 144.33 139.23 143.05 142.08 n.a. 28 Sri Lanka/rupee 55.289 59.026 65.006 66.642 66.260 66.345 67.578 68.117 68.630 29 Sweden/krona 6.7082 7.6446 7.9522 8.1282 7.8816 7.8395 8.0140 8.0716 7.8188 30 Switzerland/franc 1.2361 1.4514 1.4506 1.4933 1.4000 1.3373 1.3852 1.3604 1.3856 31 Taiwan/dollar 27.468 28.775 33.547 34.731 34.646 33.121 32.603 32.337 32.300 32 Thailand/baht 25.359 31.072 41.262 41.720 40.402 38.118 36.527 36.276 36.622 33 United Kingdom/pound2 156.07 163.76 165.73 163.42 168.23 169.44 166.11 167.08 164.98 34 Venezuela/bolivar 417 19 488.39 548.39 571.88 583.85 570.68 569.66 565.89 569.80 Indexes3 NOMINAL 35 G-10 (March 1973 = 100)" 87.34 96.38 98.85 101.80 97.17 93.69 95.46 94.6054 n.a. 36 Broad (January 1997 = 100)' 97.43 104.47 116.25 120.14 118.85 115.46 115.34 114.5649 114.6788 37 Major currencies (March 1973= 100)6. . .. 85.23 91.85 96.52 100.96 96.99 93.46 94.23 93.4047 92.3726 38 Other important trading partners (January 1997=100)7 128.9817 REAL 39 Broad (March 1973= 100)5 85.89 90.49 98.37 101.82' 100.08' 97.07' 96.63 95.8551 95.8186 40 Major currencies (March 1973= 100)'.. .. 85.83 93.20 98.33 103.21 99.05 95.47' 96.22 95.4420 94.5743 41 Other important trading partners (March 1973 = 100)7 107.37' 108.91' 106.53' 104,31' 103.5331 104.6995 1. Averages of certified noon buying rates in New York for cable transfers. Data in this 5. Weighted average of the foreign exchange value of the U.S. dollar against the currencies table also appear in the Board's G.5 (405) monthly statistical release. For ordering address, of the other G-10 countries. The weight for each of the ten countries is the 1972-76 average see inside front cover. world trade of that country divided by the average world trade of all ten countries combined. 2. Value in U.S. cents. Series revised as of August 1978 (see Federal Reserve Bulletin, vol. 64 (August 1978), 3. As of January 1999, the euro is reported in place of the individual euro-area currencies. p. 700). These currency rates can be derived from the euro rate by using the fixed conversion rates (in 6. Weighted average of the foreign exchange value of the U.S. dollar against the currencies currencies per euro) as shown below: of a broad group of U.S. trading partners. The weight for each currency is computed as an average of U.S. bilateral import shares from and export shares to the issuing country and of a Euro equals measure of the importance to U.S. exporters of that country's trade in third country markets. 13.7603 Austrian schillings 1936.27 Italian lire 7. Weighted average of the foreign exchange value of the U.S. dollar against a subset of 40.3399 Belgian francs 40.3399 Luxembourg francs broad index currencies that circulate widely outside the country of issue. The weight for each 5.94573 Finnish markkas 2.20371 Netherlands guilders currency is its broad index weight scaled so that the weights of the subset of currencies in the 6.55957 French francs 200.482 Portuguese escudos index sum to one. 1.95583 German marks 166.386 Spanish pesetas 8. Weighted average of the foreign exchange value of the U.S. dollar against a subset of .787564 Irish pounds broad index currencies that do not circulate widely outside the country of issue. The weight for each currency is its broad index weight scaled so that the weights of the subset of 4. For more information on the indexes of the foreign exchange value of the dollar, see currencies in the index sum to one. Federal Reserve Bulletin, vol. 84 (October 1998), pp. 811-18. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A63 Guide to Statistical Releases and Special Tables STATISTICAL RELEASES-^ist 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 December31, 1997 May 1998 A64 March 31, 1998 August 1998 A64 June 30, 1998 November 1998 A64 September 30, 1998 February 1999 A64 Terms of lending at commercial banks February 1998 May 1998 A66 May 1998 August 1998 A67 August 1998 November 1998 A66 November 1998 February 1999 A66 Assets and liabilities of U.S. branches and agencies of foreign banks December31, 1997 May 1998 A70 March 31, 1998 August 1998 A72 June 30, 1998 November 1998 A72 September 30, 1998 February 1999 A72 Pro forma balance sheet and income statements for priced service 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 Federal Reserve Bulletin • March 1999 Index to Statistical Tables References are to pages A3-A62 although the prefix "A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Federal finance Assets and liabilities (See also Foreigners) Debt subject to statutory limitation, and types and ownership Commercial banks, 15-21 of gross debt, 27 Domestic finance companies, 32, 33 Receipts and outlays, 25, 26 Federal Reserve Banks, 10 Treasury financing of surplus, or deficit, 25 Foreign-related institutions, 20 Treasury operating balance, 25 Automobiles Federal Financing Bank, 30 Consumer credit, 36 Federal funds, 23, 25 Production, 44, 45 Federal Home Loan Banks, 30 Federal Home Loan Mortgage Corporation, 30, 34, 35 BANKERS acceptances, 5, 10, 22, 23 Federal Housing Administration, 30, 34, 35 Bankers balances, 15-21. (See also Foreigners) Federal Land Banks, 35 Bonds (See also U.S. government securities) Federal National Mortgage Association, 30, 34, 35 New issues, 31 Federal Reserve Banks Rates, 23 Condition statement, 10 Business activity, nonfinancial, 42 Discount rates (See Interest rates) Business loans (See Commercial and industrial loans) U.S. government securities held, 5, 10, 11, 27 Federal Reserve credit, 5, 6, 10, 12 CAPACITY utilization, 43 Federal Reserve notes, 10 Capital accounts Federally sponsored credit agencies, 30 Finance companies Commercial banks, 15-21 Federal Reserve Banks, 10 Assets and liabilities, 32 • Certificates of deposit, 23 Business credit, 33 Commercial and industrial loans Loans, 36 Commercial banks, 15—21 Paper, 22, 23 Weekly reporting banks, 17, 18 Float, 5 Commercial banks Flow of funds, 37—41 Assets and liabilities, 15-21 Foreign currency operations, 10 Commercial and industrial loans, 15—21 Foreign deposits in U.S. banks, 5 Consumer loans held, by type and terms, 36 Foreign exchange rates, 62 Real estate mortgages held, by holder and property, 35 Foreign-related institutions, 20 Foreign trade, 51 Time and savings deposits, 4 Foreigners Commercial paper, 22, 23, 32 Condition statements (See Assets and liabilities) Claims on, 52, 55, 56, 57, 59 Construction, 42, 46 Liabilities to, 51, 52, 53, 58, 60, 61 Consumer credit, 36 Consumer prices, 42 GOLD Consumption expenditures, 48, 49 Certificate account, 10 Corporations Stock, 5, 51 Profits and their distribution, 32 Government National Mortgage Association, 30, 34, 35 Security issues, 31, 61 Gross domestic product, 48, 49 Cost of living (See Consumer prices) Credit unions, 36 HOUSING, new and existing units, 46 Currency in circulation, 5, 13 Customer credit, stock market, 24 INCOME, personal and national, 42, 48, 49 Industrial production, 42, 44 DEBT (See specific types of debt or securities) Insurance companies, 27, 35 Demand deposits, 15-21 Interest rates Depository institutions Bonds, 23 Reserve requirements, 8 Consumer credit, 36 Reserves and related items, 4, 5, 6, 12 Federal Reserve Banks, 7 Deposits (See also specific types) Money and capital markets, 23 Commercial banks, 4, 15-21 Mortgages, 34 Federal Reserve Banks, 5, 10 Prime rate, 22 Interest rates, 14 International capital transactions of United States, 50-61 Discount rates at Reserve Banks and at foreign central banks and International organizations, 52, 53, 55, 58, 59 foreign countries (See Interest rates) Inventories, 48 Discounts and advances by Reserve Banks (See Loans) Investment companies, issues and assets, 32 Dividends, corporate, 32 Investments (See also specific types) Commercial banks, 4, 15-21 EMPLOYMENT, 42 Federal Reserve Banks, 10, 11 Financial institutions, 35 FARM mortgage loans, 35 Federal agency obligations, 5, 9, 10, 11, 28, 29 LABOR force, 42 Federal credit agencies, 30 Life insurance companies (See Insurance companies) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A65 Loans (See also specific types) Savings institutions, 35, 36, 37—41 Commercial banks, 15—21 Savings deposits (See Time and savings deposits) Federal Reserve Banks, 5, 6, 7, 10, 11 Securities (See also specific types) Financial institutions, 35 Federal and federally sponsored credit agencies, 30 Insured or guaranteed by United States, 34, 35 Foreign transactions, 60 New issues, 31 MANUFACTURING Prices, 24 Capacity utilization, 43 Special drawing rights, 5, 10, 50, 51 Production, 43, 45 State and local governments Margin requirements, 24 Holdings of U.S. government securities, 27 Member banks (See also Depository institutions) New security issues, 31 Reserve requirements, 8 Rates on securities, 23 Mining production, 45 Stock market, selected statistics, 24 Mobile homes shipped, 46 Stocks (See also Securities) Monetary and credit aggregates, 4, 12 New issues, 31 Money and capital market rates, 23 Prices, 24 Money stock measures and components, 4, 13 Student Loan Marketing Association, 30 Mortgages (See Real estate loans) Mutual funds, 13, 32 TAX receipts, federal, 26 Mutual savings banks (See Thrift institutions) Thrift institutions, 4. (See also Credit unions and Savings institutions) NATIONAL defense outlays, 26 Time and savings deposits, 4, 13,15—21 National income, 48 Trade, foreign, 51 Treasury cash, Treasury currency, 5 OPEN market transactions, 9 Treasury deposits, 5, 10, 25 Treasury operating balance, 25 PERSONAL income, 49 Prices Consumer and producer, 42,47 UNEMPLOYMENT, 42 Stock market, 24 U.S. government balances Prime rate, 22 Commercial bank holdings, 15-21 Producer prices, 42, 47 Treasury deposits at Reserve Banks, 5, 10, 25 Production, 42, 44 U.S. government securities Profits, corporate, 32 Bank holdings, 15-21,27 Dealer transactions, positions, and financing, 29 REAL estate loans Federal Reserve Bank holdings, 5, 10, 11, 27 Banks, 15-21, 35 Foreign and international holdings and Terms, yields, and activity, 34 transactions, 10, 27, 61 Type of holder and property mortgaged, 35 Open market transactions, 9 Reserve requirements, 8 Outstanding, by type and holder, 27, 28 Reserves Rates, 23 Commercial banks, 15-21 U.S. international transactions, 50-62 Depository institutions, 4, 5, 6, 12 Utilities, production, 45 Federal Reserve Banks, 10 U.S. reserve assets, 51 VETERANS Administration, 34, 35 Residential mortgage loans, 34, 35 Retail credit and retail sales, 36, 42 WEEKLY reporting banks, 17, 18 Wholesale (producer) prices, 42, 47 SAVING Flow of funds, 37—41 National income accounts, 48 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 Federal Reserve Bulletin • March 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, Deputy Congressional Liaison DAVID H. HOWARD, Senior Adviser BOB STAHLY MOORE, Special Assistant to the Board DONALD B. ADAMS, Assistant Director DIANE E. WERNEKE, Special Assistant to the Board THOMAS A. CONNORS, Assistant Director DIVISION OF RESEARCH AND STATISTICS LEGAL DIVISION MICHAEL J. PRELL, Director J. VIRGIL MATTINGLY, JR., General Counsel EDWARD C. ETTIN, Deputy Director SCOTT G. ALVAREZ, Associate General Counsel DAVID J. STOCKTON, Deputy Director RICHARD M. ASHTON, Associate General Counsel WILLIAM R. JONES, Associate Director OLIVER IRELAND, Associate General Counsel MYRON L. KWAST, Associate Director KATHLEEN M. O'DAY, Associate General Counsel PATRICK M. PARKINSON, Associate Director KATHERINE H. WHEATLEY, Assistant General Counsel THOMAS D. SIMPSON, Associate Director LAWRENCE SLIFMAN, Associate Director MARTHA S. SCANLON, Deputy Associate Director OFFICE OF THE SECRETARY STEPHEN D. OLINER, Assistant Director JENNIFER J. JOHNSON, Secretary STEPHEN A. RHOADES, Assistant Director ROBERT DEV. FRIERSON, Associate Secretary JANICE SHACK-MARQUEZ, Assistant Director BARBARA R. LOWREY, Associate Secretary and Ombudsman CHARLES S. STRUCKMEYER, Assistant Director ALICE PATRICIA WHITE, Assistant Director JOYCE K. ZICKLER, Assistant Director DIVISION OF BANKING GLENN B. CANNER, Senior Adviser SUPERVISION AND REGULATION DAVID S. JONES, Senior Adviser RICHARD SPILLENKOTHEN, Director JOHN J. MINGO, Senior Adviser STEPHEN C. SCHEMERING, Deputy Director HERBERT A. BIERN, Associate Director DIVISION OF MONETARY AFFAIRS ROGER T. COLE, Associate Director WILLIAM A. RYBACK, Associate Director DONALD L. KOHN, Director GERALD A. EDWARDS, JR., Deputy Associate Director DAVID E. LINDSEY, Deputy Director STEPHEN M. HOFFMAN, JR., Deputy Associate Director BRIAN F. MADIGAN, Associate Director JAMES V. HOUPT, Deputy Associate Director RICHARD D. PORTER, Deputy Associate Director JACK P. JENNINGS, Deputy Associate Director VINCENT R. REINHART, Deputy Associate Director MICHAEL G. MARTINSON, Deputy Associate Director WILLIAM C. WHITESELL, Assistant Director SIDNEY M. SUSSAN, Deputy Associate Director NORMAND R.V. BERNARD, Special Assistant to the Board MOLLY S. WASSOM, Deputy Associate Director HOWARD A. AMER, Assistant Director DIVISION OF CONSUMER NORAH M. BARGER, Assistant Director AND COMMUNITY AFFAIRS BETSY CROSS, Assistant Director DOLORES S. SMITH, Director RICHARD A. SMALL, Assistant Director GLENN E. LONEY, Deputy Director WILLIAM SCHNEIDER, Project Director, SANDRA F. BRAUNSTEIN, Assistant Director National Information Center 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

A67 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 LOUISE L. ROSEMAN, Associate Director PAUL W. BETTGE, Assistant Director MANAGEMENT DIVISION KENNETH D. BUCKLEY, Assistant Director JACK DENNIS, JR., Assistant Director S. DAVID FROST, Director STEPHEN J. CLARK, Associate Director, Finance Function JOSEPH H. HAYES, JR., Assistant Director JEFFREY C. MARQUARDT, Assistant Director DARRELL R. PAULEY, Associate Director, Human Resources MARSHA REIDHILL, Assistant Director Function JEFF STEHM, Assistant Director SHEILA CLARK, EEO Programs 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

A68 Federal Reserve Bulletin • March 1999 Federal Open Market Committee and Advisory 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 JAMIE B. STEWART, JR. JACK GUYNN ROBERT T. PARRY STAFF DONALD L. KOHN, Secretary and Economist STEPHEN G. CECCHETTI, Associate Economist NORMAND R.V. BERNARD, Deputy Secretary PETER HOOPER III, Associate Economist LYNN S. FOX, Assistant Secretary WILLIAM C. HUNTER, Associate Economist GARY P. GILLUM, Assistant Secretary RICHARD W. LANG, Associate Economist J. VIRGIL MATTINGLY, JR., General Counsel DAVID E. LINDSEY, Associate Economist THOMAS C. BAXTER, JR., Deputy General Counsel ARTHUR J. ROLNICK, Associate Economist MICHAEL J. PRELL, Economist HARVEY ROSENBLUM, Associate Economist KAREN H. JOHNSON, Economist LAWRENCE SLIFMAN, Associate Economist LEWIS S. ALEXANDER, Associate Economist DAVID J. STOCKTON, Associate Economist PETER R. FISHER, Manager, System Open Market Account FEDERAL ADVISORY COUNCIL ROBERT W. GILLESPIE, President KENNETH D. LEWIS,Wee President LAWRENCE K. FISH, First District NORMAN R. BOBINS, Seventh District DOUGLAS A. WARNER III, Second District KATIE S. WINCHESTER, Eighth District RONALD L. HANKEY, Third District RICHARD A. ZONA, Ninth District ROBERT W. GILLESPIE, Fourth District C. Q. CHANDLER, Tenth District KENNETH D. LEWIS, Fifth District RICHARD W. EVANS, JR., Eleventh District STEPHEN A. HANSEL, Sixth District WALTER A. DODS, JR., Twelfth District JAMES ANNABLE, Co-Secretary WILLIAM J. KORSVIK, Co-Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A69 CONSUMER ADVISORY COUNCIL YVONNE S. SPARKS, St. Louis. Missouri, Chairman DWIGHT GOLANN, Boston, Massachusetts, Vice Chairman LAUREN ANDERSON, New Orleans, Louisiana ANNE S. LI, Trenton, New Jersey WALTER J. BOYER, Garland, Texas MARTHA W. MILLER, Greensboro, North Carolina WAYNE-KENT A. BRADSHAW, LOS Angeles, California DANIEL W. MORTON, Columbus, Ohio MALCOLM M. BUSH, Chicago, Illinois CAROL J. PARRY, New York, New York JEREMY D. EISLER, Biloxi, Mississippi PHILIP PRICE, JR., Philadelphia, Pennsylvania ROBERT F. ELLIOT, Prospect Heights, Illinois MARTA RAMOS, San Juan, Puerto Rico JOHN C. GAMBOA, San Francisco, California DAVID L. RAMP, Minneapolis, Minnesota ROSE M. GARCIA, El Paso, Texas MARILYN ROSS, Omaha, Nebraska VINCENT J. GIBLIN, West Caldwell, New Jersey ROBERT G. SCHWEMM, Lexington, Kentucky KARLA S. IRVINE, Cincinnati, Ohio DAVID J. SHIRK, Eugene, Oregon WILLIE M. JONES, Boston, Massachusetts GAIL M. SMALL, Lame Deer, Montana JANET C. KOEHLER, Jacksonville, Florida GARY S. WASHINGTON, Chicago, Illinois GWENN S. KYZER, Allen, Texas ROBERT L. WYNN, II, Madison, Wisconsin JOHN C. LAMB, Sacramento, California THRIFT INSTITUTIONS ADVISORY COUNCIL WILLIAM A. FITZGERALD, Omaha, Nebraska, President F. WELLER MEYER, Falls Church, Virginia, Vice President GAROLD R. BASE, Piano, Texas BABETTE E. HEIMBUCH. Santa Monica, California JAMES C. BLAINE, Raleigh, North Carolina THOMAS S. JOHNSON, New York, New York DAVID A. BOCHNOWSKI, Munster, Indiana WILLIAM A. LONGBRAKE, Seattle, Washington LAWRENCE L. BOUDREAUX III, New Orleans, Louisiana KATHLEEN E. MARINANGEL, McHenry, Illinois RICHARD P. COUGHLIN, Stoneham, Massachusetts ANTHONY J. POPP, Marietta, Ohio Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Federal Reserve Bulletin • March 1999 Federal Reserve Board Publications For ordering assistance, write PUBLICATIONS SERVICES, Federal Reserve Regulatory Service. Four vols. (Contains all MS-127, Board of Governors of the Federal Reserve System, four Handbooks plus substantial additional material.) $200.00 Washington, DC 20551, or telephone (202) 452-3244, or FAX per year. (202) 728-5886. You may also use the publications order Rates for subscribers outside the United States are as follows form available on the Board's World Wide Web site and include additional air mail costs: (http://www.federalreserve.gov). When a charge is indicated, pay- Federal Reserve Regulatory Service, $250.00 per year. ment should accompany request and be made payable to the Each Handbook, $90.00 per year. Board of Governors of the Federal Reserve System or may be FEDERAL RESERVE REGULATORY SERVICE FOR PERSONAL ordered via Mastercard, Visa, or American Express. Payment from COMPUTERS. CD-ROM; updated monthly. foreign residents should be drawn on a U.S. bank. Standalone PC. $300 per year. Network, maximum 1 concurrent user. $300 per year. Network, maximum 10 concurrent users. $750 per year. BOOKS AND MISCELLANEOUS PUBLICATIONS Network, maximum 50 concurrent users. $2,000 per year. THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNCTIONS. Network, maximum 100 concurrent users. $3,000 per year. 1994. 157 pp. Subscribers outside the United States should add $50 to cover ANNUAL REPORT, 1997. additional airmail costs. ANNUAL REPORT: BUDGET REVIEW, 1998-99. THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A MULTI- FEDERAL RESERVE BULLETIN. Monthly. $25.00 per year or $2.50 COUNTRY MODEL, May 1984. 590 pp. $14.50 each. each in the United States, its possessions, Canada, and INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. Mexico. Elsewhere, $35.00 per year or $3.00 each. 440 pp. $9.00 each. ANNUAL STATISTICAL DIGEST: period covered, release date, num- FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. ber of pages, and price. December 1986. 264 pp. $10.00 each. 1981 October 1982 239 pp. $ 6.50 FINANCIAL SECTORS IN OPEN ECONOMIES: EMPIRICAL ANALY- 1982 December 1983 266 pp. $ 7.50 SIS AND POLICY ISSUES. August 1990. 608 pp. $25.00 each. 1983 October 1984 264 pp. $11.50 RISK MEASUREMENT AND SYSTEMIC RISK: PROCEEDINGS OF A 1984 October 1985 254 pp. $12.50 JOINT CENTRAL BANK RESEARCH CONFERENCE. 1996. 1985 October 1986 231 pp. $15.00 578 pp. $25.00 each. 1986 November 1987 288 pp. $15.00 1987 October 1988 272 pp. $15.00 1988 November 1989 256 pp. $25.00 EDUCATION PAMPHLETS 1980-89 March 1991 712 pp. $25.00 Short pamphlets suitable for classroom use. Multiple copies are 1990 November 1991 185 pp. $25.00 available without charge. 1991 November 1992 215 pp. $25.00 1992 December 1993 215 pp. $25.00 1993 December 1994 281 pp. $25.00 Consumer Handbook on Adjustable Rate Mortgages 1994 December 1995 190 pp. $25.00 Consumer Handbook to Credit Protection Laws 1990-95 November 1996 404 pp. $25.00 A Guide to Business Credit for Women, Minorities, and Small Businesses Series on the Structure of the Federal Reserve System SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SERIES OF The Board of Governors of the Federal Reserve System CHARTS. Weekly. $30.00 per year or $.70 each in the United The Federal Open Market Committee States, its possessions, Canada, and Mexico. Elsewhere, Federal Reserve Bank Board of Directors $35.00 per year or $.80 each. Federal Reserve Banks REGULATIONS OF THE BOARD OF GOVERNORS OF THE FEDERAL A Consumer's Guide to Mortgage Lock-Ins RESERVE SYSTEM. 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 to Fair Lending $5.00. How to File a Consumer Complaint GUIDE TO THE FLOW OF FUNDS ACCOUNTS. 672 pp. $8.50 each. Making Sense of Savings FEDERAL RESERVE REGULATORY SERVICE. Loose-leaf; updated SHOP: The Card You Pick Can Save You Money monthly. (Requests must be prepaid.) Welcome to the Federal Reserve Consumer and Community Affairs Handbook. $75.00 per year. When Your Home is on the Line: What You Should Know Monetary Policy and Reserve Requirements Handbook. $75.00 About Home Equity Lines of Credit per year. Keys to Vehicle Leasing Securities Credit Transactions Handbook. $75.00 per year. Looking for the Best Mortgage The Payment System Handbook. $75.00 per year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A71 STAFF STUDIES: Only Summaries Printed in the 163. CLEARANCE AND SETTLEMENT IN U.S. SECURITIES MAR- BULLETIN KETS, by Patrick Parkinson, Adam Gilbert, Emily Gollob, Lauren Hargraves, Richard Mead, Jeff Stehm, and Mary Studies and papers on economic and financial subjects that are of Ann Taylor. March 1992. 37 pp. general interest. Requests to obtain single copies of the full text or 164. THE 1989-92 CREDIT CRUNCH FOR REAL ESTATE, by to be added to the mailing list for the series may be sent to James T. Fergus and John L. Goodman, Jr. July 1993. Publications Services. 20 pp. 165. THE DEMAND FOR TRADE CREDIT: AN INVESTIGATION OF Staff Studies 1-157, 161, and 168-169 are out of print. MOTIVES FOR TRADE CREDIT USE BY SMALL BUSINESSES, by Gregory E. Elliehausen and John D. Wolken. September 158. THE ADEQUACY AND CONSISTENCY OF MARGIN REQUIRE- 1993. 18 pp. MENTS IN THE MARKETS FOR STOCKS AND DERIVATIVE 166. THE ECONOMICS OF THE PRIVATE PLACEMENT MARKET, by PRODUCTS, by Mark J. Warshawsky with the assistance of Mark Carey, Stephen Prowse, John Rea, and Gregory Udell. Dietrich Earnhart. September 1989. 23 pp. January 1994. Ill pp. 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUBSIDI- 167. A SUMMARY OF MERGER PERFORMANCE STUDIES IN BANK- ARIES OF BANK HOLDING COMPANIES, by Nellie Liang and ING, 1980-93, AND AN ASSESSMENT OF THE "OPERATING Donald Savage. February 1990. 12 pp. PERFORMANCE" AND "EVENT STUDY" METHODOLOGIES, 160. BANKING MARKETS AND THE USE OF FINANCIAL SER- by Stephen A. Rhoades. July 1994. 37 pp. VICES BY SMALL AND MEDIUM-SIZED BUSINESSES, by 170. THE COST OF IMPLEMENTING CONSUMER FINANCIAL REGU- Gregory E. Elliehausen and John D. Wolken. September LATIONS: AN ANALYSIS OF EXPERIENCE WITH THE TRUTH 1990. 35 pp. IN SAVINGS ACT, by Gregory Elliehausen and Barbara R. 162. EVIDENCE ON THE SIZE OF BANKING MARKETS FROM MORT- Lowrey, December 1997. 17 pp. GAGE LOAN RATES IN TWENTY CITIES, by Stephen A. 171. THE COST OF BANK REGULATION: A REVIEW OF THE EVI- Rhoades. February 1992. 11 pp. DENCE, by Gregory Elliehausen, April 1998. 35 pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A72 Federal Reserve Bulletin • March 1999 Maps of the Federal Reserve System (TON EW YORK mm&m?,: £•fc ADELPHIA St. Lows 8 -U ': • • : •. -& 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

A73 1-A 2-B 3-C 4-D 5-E Pittsburgh BaltimOTe MD innati BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 6-F 7-G 8-H Birmingham.^.. isville Memphis ATLANTA CHICAGO ST. LOUIS 9-1 MINNEAPOLIS 10-J 12-L ,f Ok KANSAS CITY 11-K HAWAII DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 Federal Reserve Bulletin • March 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 Jamie B. Stewart, Jr. Buffalo 14240 Bal Dixit Carl W. Turnipseed1 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. Cerino' 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. Tignanelli' Charlotte 28230 Joan H. Zimmerman Dan M. Bechter' ATLANTA 30303 John F. Wieland Jack Guynn Paula Lovell Patrick K. Barron James M. Mckee Birmingham 35283 V. Larkin Martin Fred R. Herri 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. Allardice1 ST. LOUIS 63166 Susan S. Elliott William Poole Charles W. Mueller W. LeGrande Rives Little Rock 72203 Diana T. Hueter Robert A. Hopkins Louisville 40232 Roger Reynolds Thomas A. Boone Memphis 38101 Mike P. Sturdivant, Jr. Martha L. Perine MINNEAPOLIS 55480 David A. Koch Gary H. Stern James J. Howard Colleen K. Strand Helena 59601 Thomas O. Markle Samuel H. Gane 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 Patricia Z. Holland-Branch Sammie C. Clay Houston 77252 Edward O. Gaylord Robert Smith, III' San Antonio 78295 Bartell Zachry James L. Stull' 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. Laurence' Salt Lake City 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