Federal Reserve Bulletin, 1999-07

Volume 85 • Number 7 • July 1999 Federal Reserve BULLETIN Board of Governors of the Federal Reserve System, Washington, D.C. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Table of Contents 459 BANKING RELATIONSHIPS OF was off more than 2 percentage points from a LOWER-INCOME FAMILIES AND THE year earlier. GOVERNMENTAL TREND TOWARD ELECTRONIC PAYMENT 477 STATEMENTS TO THE CONGRESS In the past three years, the federal government Patrick M. Parkinson, Associate Director, Diviand many states have lowered their costs of sion of Research and Statistics, Board of Goveradministering welfare and benefits programs by nors, highlights a few key conclusions and recexpanding the use of electronic payment. These ommendations of the Report on Hedge Funds, initiatives promise to have their greatest signifi- Leverage, and the Lessons of Long-Term Capicance, and meet their greatest challenge, among tal Management by the President's Working lower-income families, the demographic group Group on Financial Markets and testifies that the with the lowest rate of bank account ownership Working Group has concluded that the central and the least familiarity with electronic transpolicy issue raised by the Long-Term Capital actions. Although the payment programs do not Management episode is how to constrain leverrequire a banking relationship, the move to elecage more effectively. Further, he states that the tronic transfer may change the financial prac- Working Group believes that the best approach tices of many recipients without a deposit to addressing concerns about excessive leverage account or with no banking relationship at all. is to make market discipline more effective and For example, they may continue to obtain cash that the primary responsibility for increasing from check cashing outlets and grocery stores, the effectiveness of market discipline necessarbut the attraction of a bank account may become ily rests with market participants. (Testimony heightened by a federal plan to make special before the House Committee on Banking and accounts available at depository institutions pri- Financial Services, May 6, 1999) marily for the electronic transfer of federal payments. Moreover, the greater use of the banking 479 Laurence H. Meyer, member, Board of Goversystem by lower-income families could har- nors, comments on H.R. 1585, the "Depository monize with the emphasis that welfare reform Institutions Regulatory Streamlining Act of has placed on asset-building, a goal that may 1999" and testifies that the Board welcomes this be harder to achieve without the use of a bank legislation and supports its purpose of revising account. This article examines the ways in outdated banking statutes that are imposing costs which lower-income families obtain checking without providing commensurate benefits to the and credit services, the effects that the govern- safety and soundness of depository institutions, ment move to electronic payment may have on enhancing consumer protection, or expanding these families and on depository institutions, credit availability. He states further that the legand the promotional and educational efforts that islation builds upon past successes in regulatory may be needed to facilitate the move of the reform and relieves regulatory burdens on bankunbanked to electronic services. ing organizations; in a few areas, however, the bill may not achieve meaningful reform but instead would lead to competitive inequities or 474 INDUSTRIAL PRODUCTION AND CAPACITY raise safety and soundness and other concerns. UTILIZATION FOR MAY 1999 (Testimony before the Subcommittee on Finan- Industrial production rose 0.2 percent in May cial Institutions and Consumer Credit of the after gains of 0.4 percent in April and 0.7 per- House Committee on Banking and Financial cent in March. At 134.1 percent of its 1992 Services, May 12, 1999) average, industrial production in May was 1.7 percent higher than in May 1998; capacity 484 Patrick M. Parkinson presents the views of the utilization for total industry—at 80.5 percent— Board on whether it is necessary to modernize Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

the Commodity Exchange Act and testifies that Publication of a revised handbook on the Board believes that modernization of the act adjustable-rate mortgages. is essential and that the reauthorization of the Changes in Board staff. Commodity Futures Trading Commission offers the best opportunity to make the necessary 493 MINUTES OF THE FEDERAL OPEN changes. He states further that counterparties to MARKET COMMITTEE MEETING HELD ON financial derivatives transactions are predomi- MARCH 30, 1999 nantly institutions and other professional counterparties and that the Board believes that At its meeting on March 30, 1999, the Commitprivately negotiated derivatives transactions tee adopted a directive that called for maintainbetween professional counterparties should be ing conditions in reserve markets that would be excluded from the act. (Testimony before the consistent with an unchanged federal funds rate Subcommittee on Risk Management, Research, of 43A percent and that did not contain any bias and Specialty Crops of the House Committee on with respect to the direction of possible adjust- Agriculture, May 18, 1999) ments to policy during the intermeeting period. 487 Alan Greenspan, Chairman, Board of Gover- 499 LEGAL DEVELOPMENTS nors, testifies that exposure of an economy to short-term capital inflows before its financial Various bank holding company, bank service system is sufficiently sturdy to handle a large corporation, and bank merger orders; and pendunanticipated withdrawal is a highly risky ven- ing cases. ture; thus some set of suggested standards that countries should strive to meet would help the A1 FINANCIAL AND BUSINESS STATISTICS new highly sensitive international financial sys- These tables reflect data available as of tem function effectively. Further, he states that May 26, 1999. improvements in transparency, commercial and legal structures, and supervision cannot be implemented quickly and that the transition to a A3 GUIDE TO TABULAR PRESENTATION more effective and stable international financial A4 Domestic Financial Statistics system will take time. (Testimony before the A42 Domestic Nonfinancial Statistics House Committee on Banking and Financial A50 International Statistics Services, May 20, 1999) A63 GUIDE TO STATISTICAL RELEASES AND 490 ANNOUNCEMENTS SPECIAL TABLES Statement after the meeting of the Federal Open Market Committee on May 18, 1999. A66 INDEX TO STATISTICAL TABLES Statement by Chairman Greenspan on the res- A68 BOARD OF GOVERNORS AND STAFF ignation of Secretary of the Treasury Robert Rubin. A70 FEDERAL OPEN MARKET COMMITTEE AND Meeting of the Consumer Advisory Council. STAFF; ADVISORY COUNCILS Issuance of guidance on loan-loss allowances. A72 FEDERAL RESERVE BOARD PUBLICATIONS Proposed actions. A74 MAPS OF THE FEDERAL RESERVE SYSTEM Enforcement actions. Publication of the Annual Report and Budget A76 FEDERAL RESERVE BANKS, BRANCHES, Review. AND OFFICES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

PUBLICATIONS COMMITTEE Lynn S. Fox, Chair • Karen H. Johnson • Donald L. Kohn Q Stephen R. Malphrus • J. Virgil Mattingly, Jr. • Michael J. Prell • Dolores S. Smith • 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

Banking Relationships of Lower-Income Families and the Governmental Trend toward Electronic Payment Jeanne M. Hogarth and Kevin H. O 'Donnell, of the difficult transition for many of them, given survey Board's Division of Consumer and Community results on why they do not currently use the banking Affairs, prepared this article. system. This article examines the ways in which lower- In the past three years, the federal government and income families obtain checking and credit services, many states have lowered their costs of administering the effects that the government move to electronic welfare and benefits programs by expanding the use payment may have on these families and on deposiof electronic payment. These initiatives promise to tory institutions, and the promotional and educational have their greatest significance, and meet their great- efforts that may be needed to facilitate the move to est challenge, among lower-income families, the electronic services. demographic group with the lowest rate of bank account ownership and the least familiarity with electronic transactions. OWNERSHIP OF TRANSACTION ACCOUNTS Although the payment programs do not require a AND USE OF FINANCIAL INSTITUTIONS banking relationship, the move to electronic transfer could change the financial practices of many recipi- According to the Federal Reserve Board's Survey of ents without a deposit account or with no banking Consumer Finances (SCF), about 87 percent of all relationship at all. Recipients of social security and U.S. families in 1995 had a transaction account at a other benefits payments who do not have a checking financial institution.1 Most of these (85 percent of all account may well continue to obtain cash and other families) had a checking account, and 36 percent of financial services from alternative service providers, all families had a savings account (table 1; also see such as check cashing outlets and grocery stores. But box "Account Ownership over Time"). 2 in light of the increased promotion of direct deposit, many of these recipients may be more inclined to open a deposit account. The attraction of a bank 1. Except as noted, data in this article are from the SCF. Details on account for some families without one may become the survey and its results are available in Arthur B. Kennickell, heightened as governments and the payment system Martha Starr-McCluer, and Annika E. Sunden, "Family Finances in the U.S.: Recent Evidence from the Survey of Consumer Finances," in general move more toward electronic transactions. Federal Reserve Bulletin, vol. 83 (January 1997), pp. 1-24; see also An example of such a move is the federal govern- the survey's web site, at www.federalreserve.gov/pubs/oss/oss2/ ment's introduction this summer of special accounts scfindex.html. Although the present article does not directly address the statistical significance of the results presented, it highlights findto be made available at depository institutions primaings that are significant or provide insight in a broad context. rily for the transfer of federal payments. 2. The SCF asks respondents whether they have a "checking In these ways, the governmental move to elec- account," but under the term "transaction account" the SCF also tracks ownership of a broader set of assets—"checkable" accounts tronic payment may do more than the "basic bankand savings accounts. ing" effort of the 1980s to spread the use of bank Checkable accounts consist of checking accounts and money maraccounts to "unbanked" families. Moreover, the ket accounts at depository institutions, money market accounts with mutual funds, and call/cash accounts at brokerages. Savings accounts greater use of the banking system by these families are passbook and statement savings accounts at depository institutions could harmonize with the emphasis that welfare but not term accounts such as certificates of deposit. reform has placed on asset-building for lower-income Depository institutions consist of commercial banks, trust companies, thrift institutions, and credit unions. Thrift institutions consist of families, a goal that may be harder to achieve without savings and loan associations and savings banks. See the SCF Codethe use of a bank account. On the other hand, a move book for a full listing of financial institutions covered by the SCF. by greater numbers of lower-income families into the In this article, the terms "bank" and "banking" are used generically to encompass all depository institutions unless specifically mainstream of the payment system is likely to be a limited to commercial banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

460 Federal Reserve Bulletin • July 1999 1. Ownership of transaction accounts and other financial lion families) did not; about 72 percent of lowerproducts, 1995 income families had a checking account (table 1). In Percent addition, substantial percentages of lower-income All U.S. Lower-income families held an array of other financial products families families including loans, investments, and life insurance, some Transaction account of which may have involved a relationship with a Either checking or savings ... 87.4 75.8 depository institution. Hence many of the 11 million Checking 85.0 72.1 it Savings 36.0 25.4 lower-income families that reported having no trans- Both checking and savings ... 33.5 21.5 action account could well have had some other for- Credit mal connection with a depository institution. Major credit card' 66.5 44.6 Loan m Vehicle 30.8 18.6 Education 11.8 10.6 Consumer 14.2 13.5 Use of Financial Institutions by Lower-Income Mortgage2 First 38.7 18.1 ii Families Second 3.4 1.4 Home equity line of credit . 11.0 4.3 MEMO: Owns home 64.7 49.6 Our most sharply defined area of attention in this Savings and investments article is lower-income families with no direct con- Certificate of deposit 14.3 12.9 Hi nection to the mainstream system of banking and Savings bonds 22.8 10.6 IRA or Keogh account 26.1 12.1 finance. These families would require the most atten- Mutual fund 12.3 4.2 Stocks 15.2 6.7 tion by programs promoting the use of checking and Bonds 3.1 .6 savings accounts and electronic payment. These fami- Annuities 3.2 2.1 lies will be found among those with no transaction Life insurance3 Any 71.9 55.0 accounts. Term 76.0 71.0 Whole life 44.4 40.1 About 13 percent of lower-income families in the Both term and whole life 20.4 11.1 1995 SCF said that they did not have any accounts or NOTE. Data in this and other tables in this article are from the 1995 Survey of loans with financial institutions nor did they "regu- Consumer Finances except as noted. For details and definition of lower income, larly" conduct any personal financial business see text and appendix A. For definition of transaction account and depository institution, see text note 2. through financial institutions (table 2). Thus, of the 1. Discover, MasterCard, Optima, and Visa. 11 million or so lower-income families without a 2. On primary residence. 3. Percentages of respondents holding particular types are for those owning transaction account in 1995, about 1.5 million had life insurance. little or no contact of any kind with financial institu- IRA Individual Retirement Account. tions (see appendix B for a further discussion of these data and their limitations) Use of Financial Services by Lower-Income Individuals who report regularly doing business Families with a financial institution may be relatively more The median income of the 100 million families in the United States (including single-person households) 2. Financial institutions used regularly by lower-income for the year preceding the 1995 SCF was roughly families, by status of transaction account ownership, 1995 Percent $32,000. At the threshold commonly used to define low to moderate income (80 percent of median All Has Has no —- lowerincome), approximately 45 percent of U.S. families in income transaction transaction account account 1995, or about 45 million families, were in that families category (hereafter referred to as lower income; see Any1 86.62 100.0 44.42 box "Some Characteristics of Low- to Moderate- Depository institution 97.6 99.8 81.8 Income Families" and appendix A).3 Commercial bank or trust company 78.7 82.3 52.6 Of the lower-income families in the 1995 survey, Thrift institution 23.1 23.5 20.1 Credit union 25.4 25.7 22.9 about 75 percent (roughly 34 million families) had a Finance or loan company 17.5 16.9 22.2 transaction account, and 25 percent (roughly 11 mil- Vehicle finance company 1.2 1.1 1.3 MEMO: Median umber of financial institutions used2 2 2 1 NOTE. See general note to table 1. 3. The median income measure is for 1994 and is from the Bureau 1. Percentages of respondents using particular types are for those using an of the Census, Current Population Survey. The number of families at institution. or beneath the 80 percent threshold is from the 1995 SCF, which asked 2. Includes unspecified regular use of one or more unidentified financial respondents for their income in calendar year 1994. institutions; see appendix B. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Banking Relationships of Lower-Income Families and the Governmental Trend toward Electronic Payment 461 Account Ownership over Time Estimates of account ownership rates have varied between families with the same head of household have retained 1977 and 1996 by data source, definition of account hold- their accounts over time.2 ing, and timing of the study (table). Nonetheless, one can Among families with the same head of household compare findings from the same surveys—for example, the between 1984 and 1989, account ownership was fairly Survey of Consumer Finances (SCF) conducted in 1983, high and steady throughout the period at about 83 percent 1989,1992, and 1995 or the Panel Study of Income Dynam- (data not shown). Among families with the same head of ics (PSID) conducted 1984, 1989, and 1994.1 household between 1989 and 1994, however, ownership In the SCF data, ownership rates apparently decline from had dropped by the end of the period, to about 80 percent. 1983 to 1989, rise during the 1989-92 period, and then hold The pattern of ebb and flow in ownership during the steady from 1992 to 1995. In the PSID data, however, two periods is as follows: Of households with an account ownership rates for roughly the same periods seem to rise to in 1984, 6 percent no longer had one in 1989; conversely, a peak in 1989 and decline thereafter. of households without an account in 1984, 8 percent had Because the PSID data are longitudinal (covering the acquired one by 1989. In contrast, the figures for the same respondents over time) rather than cross-sectional (as 1989-94 period are 9 percent losing account ownership are the SCF data), one can examine the rate at which and 6 percent acquiring account ownership. 1. The SCF is conducted by the Board of Governors of the Federal Reserve System (see text note 1), and the PSID is conducted by the 2. Erik Hurst, Ming Ching Luoh, and Frank Stafford, "The Wealth University of Michigan Survey Research Center. The Board conducted a Dynamics of American Families, 1984-94," Brookings Papers on Eco- Survey of Consumer Finances in 1986, as well, but, among other differences, nomic Activity, 1:1998, pp. 267-338; see the discussion on pp. 299-301 it was of more limited scope. on transaction accounts. Surveys with data on ownership of checking and savings accounts Account Measure of Survey Sample type Year ownership account ownership (percent) Consumer Credit Survey, Board of National probability sample; cross 1977 Checking or savings account 91 Governors of the Federal Reserve System section; personal interview Survey of Consumer Finances, Board National probability sample plus 1983 Checking, savings, or money market 87.5 of Governors of the Federal Reserve System oversampling of wealthy 1989 deposit account, money market mutual 85.5 households; cross section; personal 1992 fund, or call/cash account at brokerage 87.1 interview 1995 87.6 Panel Study of Income Dynamics, Survey Began as national probability sample; 1984 Checking, saving, or money market 80.8 Research Center, University of Michigan longitudinal data follow all members 1989 account, nonstock individual 81.2 of original households; personal 1994 retirement account, or Treasury bills 77.8 interview Survey of Consumers, Survey Research National probability sample; cross 1984 Checking or savings account 92 Center, University of Michigan section; telephone interview 1996 90 willing to consider opening an account with that community development credit unions, community institution when changes in the payment system make development loan funds, microenterprise funds, and an account more attractive. Consumers without venture capital funds.4 accounts who do not regularly use financial institutions may be relatively less willing to open an account when these changes arise. Reasons for Not Having a Checking Account A helpful initiative in terms of broadening the involvement of lower-income families with main- The 1995 SCF asked respondents without checking stream financial services has been the creation of accounts to state their "most important" reason for "community development financial institutions" (CDFIs) to serve lower-income neighborhoods. Since their widespread rise in the 1990s, CDFIs have been providing housing and business lending, consumer 4. See David Saunders and David Stoesz, "Welfare Capitalism in a Global Economy: The American Experience," Virginia Commonfinancial services (such as checking and savings wealth University (paper prepared for the Symposium on Financial accounts and home improvement loans), credit coun- Services in a Post-Welfare-Reform Society, Federal Reserve Bank of Richmond, April 1998). CDFI customers and their financial practices seling, and business planning assistance. CDFIs can are a promising area of study for insight into broader issues regarding take the form of community development banks, the finances of lower-income families. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

462 Federal Reserve Bulletin • July 1999 Some Characteristics of Low- to Moderate-Income Families Low- to moderate-income (lower-income) families differ than a high school education, and one-third of the heads of from families overall in a number of respects (table). families have only a high school education. Lower-income Lower-income families tend to be older and to include a families also have lower net worth—a median of $22,100 in higher proportion of minorities and of family heads who are 1995 compared with $57,450 for all families (although, as single females. measured, the lower-income group may include some On average, lower-income families have less education wealthy families that happen to have a temporarily low than the U.S. population as a whole: Three out of ten current income). Lower-income families are less likely to lower-income families are headed by individuals with less be homeowners and are less likely to be employed. Demographic characteristics of U.S. families, 1995 Demographic characteristics—Continued Percent except as noted Lower- Lower- CChhaarraacctteerriissttiicc All CChhaarraacctteerriissttiicc All income income All 110000 4455 Marital status and sex of head Race or ethnicity Married or living with partner 52.4 30.2 White non-Hispanic 77.7 71.1 Single female 28.5 47.2 African American 12.8 18.8 13.3 16.9 Hispanic 5.6 6.9 Other ..33..99 33..22 Family size (number of persons) 2 2 Age of head (years) 18-24 5.3 9.2 Housing status 25-34 19.5 18.5 Homeowner 64.7 49.6 35-44 23.0 16.2 Renter or other 35.3 50.4 45-54 17.8 11.0 55-64 12.5 11.9 Current employment status of head 65 or more 21.9 33.2 Employed 67.8 49.1 Median 45 50 Retired 17.9 26.0 Unemployed or laid off 4.0 6.3 Education of head Other not employed 10.3 18.6 No high school diploma or GED 18.5 29.8 High school diploma or GED 31.7 35.2 Region of residence Some college but no degree 19.1 19.1 19.8 19.9 College degree or more 30.7 15.9 North Central 24.0 23.7 Median (years) 12 12 35.1 34.9 West 2211..11 2211..55 Family income in 1994 (dollars)' Less than 15,000 25.9 57.2 NOTE. See general note to table 1. 15,000 to 29,999 25.6 42.8 1. These data will not match values cited in the text for median income, 30,000 to 49,999 24.1 which are from the Bureau of the Census, Current Population Survey (see 50,000 or more 24.4 appendix A). Family net worth in 1995 GED General education diploma. Median (dollars) 57,450 22,100 . . . Not applicable. not having one (see also appendix A). Among the checks" was cited distinctly more frequently than lower-income families, about one-fourth said the other explanations as the most important reason for main reason was that they "don't write enough not having a checking account. Among the remaining checks," another one-fourth said the main reason was two-thirds, who did not make regular use of financial "don't have enough money," and one-fifth said the institutions, the most prominent primary reason for main reason was "do not like dealing with banks" not having a checking account was "don't have (table 3). The remaining responses were spread over enough money." a miscellany of reasons involving costs and practical Other studies have also found that lack of money factors. Only a few respondents identified lack was cited as the main reason for not having an of access to branches or inconvenient hours as account. A 1996 Treasury survey of recipients of problems. federal benefit checks such as those for social secu- About one-third of lower-income families without rity and Supplemental Security Income found that, of checking accounts used financial institutions in some the roughly 20 percent that did not have a checking way, such as through loans, or other types of asset or savings account, about half cited "don't have accounts, or unspecified regular personal business enough money" as the primary reason. (table 3). Among these families, "don't write enough In a 1996 survey of low-income families, the most Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Banking Relationships of Lower-Income Families and the Governmental Trend toward Electronic Payment 463 3. Lower-income families without checking accounts, Other Financial Products and Services Used distributed by reasons given and by status of by Lower-Income Families financial institution usage, 1995 Percent Besides a checking account, a major credit card was Does not the most widely held financial product among lower- Uses Reason All financial fin u a s n e c ial income families (table 4).7 Although holdings of savinstitution institution ings and investment products were not widely Any 100 36.3 63.6 reported by lower-income families, more than half of them reported having term or whole-life insurance Don't write enough checks. .. 26.2 31.6 23.1 Don't have enough money ... 25.5 12.6 32.9 (table 1). Nearly half of lower-income families were Don't like dealing with banks 20.5 21.4 20.2 homeowners; of these, more than one-third had first Cost factors1 17.0 19.9 15.4 Practical factors2 10.0 13.2 8.1 mortgages on their homes, while about 5 percent had No depository institution some type of second mortgage. with convenient hours or location # * * Not surprisingly, holdings of other financial prod- NOTE. See general note to table 1. ucts vary by ownership of a deposit account (table 4). 1. Includes minimum balance too high, service charges too high, must keep Lower-income families with a deposit account are balances low because of welfare. 2. Includes can't manage or balance checking account, haven't gotten around more likely to have a major credit card, a first mortto it, don't need or want checking account, use alternative checking source, gage, and a vehicle loan, and they are more likely to checkbook has been lost or stolen. * Number of respondents too few to be meaningful. have insurance and term savings such as certificates of deposit.8 frequently cited main reason was "no savings" fol- 7. For these families, the average interest rate was 14.9 percent, lowed by "bank account fees too high" and "banks and the average credit limit was $8,400. Just over half of lowerrequire too much money just to open an account." 5 income families with credit cards carried a balance, the median of Anecdotal evidence indicates that concern over which was $1,300. These results indicate use comparable to that of attachment of funds to satisfy court judgments U.S. families as a whole: The average interest rate for all SCF families was 14.5 percent, and the average total credit limit was $13,000; for regarding debt, child support, or other payments is the 59 percent who carried a balance, the median amount was $ 1,500. another reason families do not have accounts. 8. Other factors also affect the likelihood that a lower-income Although this response has appeared only rarely in family will have such products and accounts. See also Jeanne M. Hogarth and Kevin H. O'Donnell, "If You Build It, Will They Come? most surveys to date, one out of five respondents A Simulation of Financial Product Use among Low-to-Moderate without a checking account in the 1996 low-income Income Families," Proceedings of the Association for Financial Counsurvey indicated that wanting to "keep our financial seling and Planning Education (November 1998), pp. 146-54. records private" was their primary reason for not having an account. The frequencies with which all families have cited 4. Ownership of financial products by all families, and certain explanations as the main reason for not hav- by lower-income families by status of transaction account ownership ing a checking account have changed between the Percent 1989 and 1995 SCF. "Don't write enough checks" remained the most frequently cited main reason, but Lower-income families the proportion of families giving this response fell PPrroodduucctt ff AA aa ll mm ll UU iillii .. ee SS ss .. Has Has no about one-fifth. The proportion of families citing "do All transaction transaction account account not like dealing with banks" as the main reason rose about one-half, and the proportion citing "can't man- Credit Major credit card1 66.5 44.6 56.2 7.7 age or balance a checking account" as the main Loan reason rose about four-fifths.6 First mortgage 38.7 18.1 21.3 8.1 Vehicle 30.8 18.6 20.0 14.1 Education 11.8 10.6 10.7 10.2 Consumer 14.2 13.5 13.9 12.1 Savings and investment Certificate of deposit .. 14.3 12.9 16.5 * IRA or Keogh account . 26.1 12.1 15.7 * 5. John Caskey, Lower-Income Americans, Higher-Cost Financial Services (University of Wisconsin-Madison: Filene Research Insti- Life insurance 71.9 55.0 61.5 34.0 tute, Center for Credit Union Research, 1997), table 3. NOTE. See general note to table 1. 6. Kennickell, Starr-McCluer, and Sunden, "Family Finances 1. Discover, MasterCard, Optima, and Visa. in the U.S." (see section on "Families without a Checking Account," IRA Individual Retirement Account. p. 7). * Number of respondents too few to be meaningful. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

464 Federal Reserve Bulletin • July 1999 Cross-Use of Checking Accounts and Check Some attention has been given to changes in the Cashing Outlets number of branches and community banks in the midst of growth in mergers and acquisitions. As Many families with bank accounts also use check noted, however, surveys do not reveal a noticeable cashing outlets and various retail stores to obtain problem with the location or hours of depository cash, and many families without accounts use banks institutions for those without accounts. Moreover, for cashing checks. The 1996 survey by Treasury access to the financial mainstream is clearly not the asked families where they cashed their benefit checks. issue for the many users of alternative financial ser- Banks were most commonly cited (88 percent vices who have transaction accounts. reported using them); even among families without Recent work on the effects of consolidation in the accounts, 58 percent reported cashing their checks banking industry has some bearing on the analysis of at a bank. Among all respondents, nearly one-fourth changes in the market for financial services. A study used grocery stores, 8 percent used check cashing employing a newly constructed database covering services, and 2 percent used other retail stores. When banking consolidation and neighborhood characterisquestioned about their willingness to have their pay- tics for 1975-95 found that the number of banking ments electronically deposited, some account-holding offices rose about 30 percent over the period. In check recipients said that having their checks mailed general, the number of offices per capita in highergave them greater certainty about the arrival of pay- income areas increased while the number in lowerments and about resolving errors.9 income areas decreased. By 1995, the number of A 1996 survey of low-income families with and banking offices per capita was roughly constant without accounts found that about half (48 percent) across neighborhood income categories.12 of the respondents cashed checks at depository insti- A second study, employing an updated version of tutions and 17 percent used check cashing outlets.10 the database and covering 1993-97, looked at the The same survey revealed that one out of seven effect of consolidation on home-purchase lending to account holders used check cashers. Looking at the minority and lower-income borrowers and neighboropposite case, survey and trade association data indi- hoods. It found that, after consolidation, banking cate that about half to two-thirds of consumers who organizations decreased home-purchase lending in use check cashers may have checking accounts.11 some areas and increased it in others; independent mortgage companies and credit unions also increased their activity in some areas. The net effect was that consolidation caused no significant change in such GROWTH OF ALTERNATIVE FINANCIAL lending to minority and lower-income borrowers and SERVICES neighborhoods, but at the end of the period, more The number of check cashing outlets in the United than half of all home-purchase loans were being States has grown sharply over the past decade or so, made by offices outside the borrower's local commufrom about 2,100 in the mid-1980s to about 6,000 nity.13 Although the potential ease of obtaining a in 1997 (the latest year measured). The expansion, mortgage from an institution located outside one's roughly on the order of 9 percent per year, has neighborhood would seem to be greater than that of generated several attempts at explanation. cashing a check outside one's neighborhood, the data suggest that conclusions about the effects of bank consolidation are not obvious or straightforward. Another theory is that the mix and fee structure of 9. U.S. Department of the Treasury, Mandatory EFT Demographic products and services offered by banking organiza- Study, OMB 1510-00-68, Financial Management Service (1997), tions have become less attractive to lower-income pp. 57-60. The average income of recipients still receiving their families than the offerings of the alternative financial payments by check was $19,700; seven out of ten were white, and nearly four out of ten had less than a high school education. 10. Caskey, Lower-Income Americans, Higher-Cost Financial Services, tables 3 and 5. The results of this survey differ from those in the Treasury study primarily because Treasury surveyed federal benefit check recipients, a sample that contains virtually all income groups. An indication of the transactions needs among the low-income in this 12. Robert B. Avery, Raphael Bostic, Paul S. Calem, and Glenn B. study is that, among those who used check cashing outlets ten or more Canner, "Changes in the Distribution of Banking Offices," Federal times per year, 37 percent purchased between eleven and thirty money Reserve Bulletin, vol. 83 (September 1997), p. 723. orders per year, and 35 percent purchased more than thirty. 13. Robert B. Avery, Raphael Bostic, Paul S. Calem, and Glenn B. 11. The survey is in Sherrie Rhine and Maude Toussaint, "The Use Canner, "Trends in Home Purchase Lending: Consolidation and the of Formal and Informal Markets Among Black Families," Consumer Community Reinvestment Act," Federal Reserve Bulletin, vol. 85 Interest Annual, vol. 45 (forthcoming). (February 1999), pp. 81-102. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Banking Relationships of Lower-Income Families and the Governmental Trend toward Electronic Payment 465 Where Can I Cash This Check? Policies and charges for check cashing vary widely but presented by someone who does not have an account generally hold regardless of the type of check (governmen- with the institution, and those that do often charge a fee. tal, payroll, or personal). The examples below involve a The fee may be limited by state law. check written either by, or to, the person presenting it • Grocery stores often will allow their customers to write ("second-party" checks) and do not necessarily apply to a check for the amount of purchase plus an extra amount checks written to someone else and endorsed on the back returned in cash (generally no more than $25 to $50). for payment to the presenter ("third-party" checks). • Grocery stores may allow customers to cash secondparty checks free of charge with a minimum purchase. • When a bank customer presents a second-party check • Check cashing outlets will charge either a flat fee or a at his or her bank and wishes to receive an equivalent fee based on the value of the check; the fees may be capped amount of cash, the bank will issue the cash only if it is by state law at a certain percentage of the check's value. In already available in the customer's account or through a New York, for example, check cashers can charge no more credit line. In that case, the customer is not actually "cash- than 1.4 percent of the value of the check. ing" the check but is simply depositing it and simultaneously withdrawing cash that was already available. A service provided by some check cashing outlets that is If the cash is not available, the customer must generally not available from depository institutions is the cashing of a wait at least one business day as the check passes through check drawn on the presenter's account but carrying a date the payment system before gaining access to the check's in the future. The service is known as "deferred presentfunds. The Federal Reserve's Regulation CC on funds avail- ment" because the check casher must defer its presentment ability determines the maximum length of time that a bank of the check to the customer's bank until the date given on may hold the funds under varying circumstances. The the check. The date may be a payday for the customer, or it majority of banks generally do not use the full hold periods may be the end of a hold period placed by the customer's available to them. bank on another check previously deposited. Some states • Credit unions often give their customers instant avail- consider deferred presentment to be a loan and hence ability of the full amount of a second-party check for require that customers receive Truth-in-Lending disclosures amounts that may exceed the customer's current account when the service is provided. Some other states limit the fee balance or credit line. for the service. • Many depository institutions will not cash a check sector. For example, small short-term loans are a be relatively small.15 Three-fourths of families facing popular product in the alternative financial sector, emergency expenses related to illness and three-fifths where check cashers make funds immediately avail- of families facing them because of unemployment able to customers via the cashing of post-dated have reported using some type of informal financing checks (also known as "payday loans" or "deferred arrangement. Information that helps both borrowers presentment"). Except for cash advances on credit and lenders in the informal market is often inexpencards, such loans are generally not found in the sive to obtain relative to other markets. mainstream financial sector (see box "Where Can I Cash This Check?"). Others contend that the factor bringing users to alternative service providers is not ALTERNATIVE AND MAINSTREAM FINANCIAL convenience but comfort; that is, users find that the SERVICES: A COMPARISON OF COSTS alternative sector provides more person-to-person contact than mainstream institutions (a consideration Check cashing outlets generally charge a percentage sometimes called "high touch versus high tech").14 of the amount of the check being cashed, often up to The informal financial market—that is, family, some maximum fee. Some states limit these fees; for friends, and social organizations—is also a signifi- example, at the 1.4 percent limit imposed in New cant source of credit and financial services to lower- York, the fee for cashing a $340 check would be income families, especially in the face of financial shocks, although the dollars transacted are likely to 15. See Rhine and Toussaint, "The Use of Formal and Informal Markets Among Black Families"; and Philip Bond and Robert Townsend, "Formal and Informal Financing in a Chicago Ethnic 14. D. Fontana, "Need Seen to Teach the Poor About High-Tech Neighborhood," Federal Reserve Bank of Chicago, Economic Per- Banking," American Banker, March 17, 1997. spectives, vol. 20 (July/August 1996), pp. 3-27. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

466 Federal Reserve Bulletin • July 1999 about $4.75, which is nearly equal to the average know or understand the APR while still being aware monthly fee charged by banks and savings associa- of the dollar amount paid for the loan.20 tions in 1998 for a noninterest "fee-only" checking Consumers who use alternative financial service account.16 providers may not consistently receive federal Truth in Lending disclosures and other information that could help them make appropriate decisions regard- Check Cashing and Bill Paying ing these loan products. For example, in examinations during the first nine months of 1998, the Ten- According to some estimates, consumers relying on nessee Department of Financial Institutions found check cashers pay from $86 to $500 per year to cash various violations at 53 percent of the state's licensed checks and pay bills, while the cost would have been check cashing outlets, among the most frequent being $30 to $60 had they used a bank where they held an failure under the Truth in Lending Act to make the account.17 Researchers often infer from this price required form of disclosure of the APR.21 The high difference that lower-income families are not sensi- rate of violations may have been an anomaly because tive to the price of financial services. Another pos- 1998 was the first year of examinations under the sible explanation is that consumers do not realize state's Deferred Presentment Services Act, passed in how much more they are paying at check cashers 1997. Nonetheless, another implicit cost to users of than they would at a bank. Some surveys have found, alternative service providers in some states may be however, that a large proportion of consumers are relative weakness in consumer protections and their aware of the price difference and understand that the enforcement. fees charged by check cashers depend on the size of the transaction.18 BASIC BANKING Credit During the 1980s, various state legislatures and consumer groups began exploring the provision of life- Consumers who obtain credit from alternative finan- line or "basic banking" services to consumers.22 One cial service providers may also pay higher fees than of the first formal demands for basic banking was a they would have through a depository institution. 1984 petition filed with California's attorney general Most of the loans in question are payday loans for and state banking superintendent on behalf of a coalismall amounts (generally in the $100 to $500 range) tion of consumer groups. The petition asserted that and for short periods (usually seven to fourteen days), recent developments in banking practices in although some can be for as long as sixty days; the California—including the requirement of a credit borrower is often allowed to renew the loan for card to open a bank account—prevented low-income additional periods. Although the fees may seem low consumers from obtaining the services they needed. to the consumer (say, 15 percent up to a fee cap of Although the petition was rejected by the California $30 for as much as a $500 loan), the annual percent- banking superintendent, the banking relationships and age rate (APR) of interest can be more than 1,000 account features outlined in the petition became the percent.19 In these cases the customer might not model for other basic-banking initiatives. 16. Board of Governors of the Federal Reserve System, Annual Report to the Congress on Retail Fees and Services of Depository 20. A 1972 study of the so-called small small loan industry in Institutions (June 1999), table 1, p. 3. A fee-only account imposes a Texas found that only 2.4 percent of consumers were aware of the monthly fee but requires no minimum balance. APR, but two-thirds were aware of the dollar cost of their loan, and 17. Joseph J. Doyle, Jose A. Lopez, and Marc R. Saidenberg, four-fifths believed that the small small loan companies charged more "How Effective Is Lifeline Banking in Assisting the 'Unbanked'?" for loans than banks did (Thomas A. Durkin, A High Rate Market for Federal Reserve Bank of New York, Current Issues in Economics and Consumer Loans: The Small Small Loan Industry in Texas, Technical Finance, vol. 4 (June 1998); Organization for a New Equality, Cash, Studies of the National Commission on Consumer Finance, vol. 2, Credit & EFT '99: Reducing the Cost of Credit and Capital for the Government Printing Office, 1975). Urban Poor (Washington, D.C.: Organization for a New Equality, 21. See Tennessee Department of Financial Institutions, Report to 1998). the 101st General Assembly on the Deferred Presentment Services Act 18. Joan Koonce-Lewis, Roger Swagler, and John Burton, "Low- (January 1999); for example, instead of carrying the APR to at least Income Consumers' Use of the Alternative Financial Sector," Con- the required two places to the right of the decimal, some licensees sumer Interest Annual, vol. 42 (1996), pp. 271-74. rounded it to the nearest whole number. See also Robert E. Smith, 19. Jean Ann Fox, The Growth of Legal Loan Sharking: A Report "Payday Loaners Sued," Chicago Defender, March 23, 1999, p. 1. on the Payday Loan Industry (Washington, D.C.: Consumer Federa- 22. See, for example, Glenn Canner and Ellen Maland, "Basic tion of America, 1998). Banking," Federal Reserve Bulletin, vol. 70 (April 1987), pp. 255-69. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Banking Relationships of Lower-Income Families and the Governmental Trend toward Electronic Payment 467 Basic banking is broadly considered to consist of a of large banks offered a "basic/no frills" checking minimum level of financial services that should be account. The average monthly fee was $3, and most available to all. In an October 1986 policy statement, of the banks allowed between eight and ten checks the FFIEC encouraged efforts by trade associations per month before charging a per-check fee; the and depository institutions to offer "basic financial median per-check fee was $0.50. services, consistent with safe and sound business Some critics point out that depository institutions practices," and specified three elements of such ser- are doing little marketing, if any, to promote their vices: a safe and accessible place to keep money, a basic banking accounts, and that without such marway to obtain cash (including, for example, the cash- keting, many lower-income consumers without ing of government checks), and a way to make third- accounts will not know the basic accounts exist. A party payments.23 1996 survey of financial institutions in New York At the state level, different models of basic bank- City found no signage about the availability of basic ing have emerged. State laws in Illinois, New Jersey, banking accounts at any of the eighty-three branches and New York outline account features and set spe- of the thirty banks surveyed.25 The survey found that cific fees and limits. Vermont's law encourages banks brochures on basic banking accounts were available operating in the state to provide basic banking at only 40 percent of the branches; and staff members accounts. Rhode Island and Minnesota require banks at 40 percent of the branches failed to mention the to offer savings accounts at no charge provided that availability of the basic banking account to the surthe balance is above a given threshold.24 Massachu- veyors. Critics also contend that a policy followed at setts implemented a voluntary basic-banking pro- some banks to obtain a consumer's credit report in gram in 1994 that encourages banks in the state to the deposit account application process discourages offer low- or no-cost accounts to lower-income some consumers from seeking accounts at mainfamilies. stream financial institutions. Many banks in basic-banking states, and in other A recent study concludes that low-cost accounts, states as well, offer services priced below the caps set characterized by low minimum deposits and low by the states. For example, in a 1997 survey, the monthly fees, have had limited success in drawing Consumer Bankers Association found that 36 per- the unbanked into the mainstream financial sector.26 cent of institutions offered a low-cost "ATM-only" The potential cost of a bank account includes more account, and 70 percent offered a low-priced account than the monthly fee or minimum balance requirefor certain groups, such as senior citizens or students. ments, however, especially for lower-income families Eighty percent of banks, savings and loan associa- who may face a high probability of overdrawing the tions, and savings banks surveyed indicated that they account or of depositing a "bad" check. The costs of have a basic "economy" checking account that offers such events are not trivial: In 1998 the average charge limited service at a lower cost than "regular" check- by banks and savings associations for NSF (not suffiing accounts. Of these economy accounts, 76 percent cient funds) checks written by the customer was had a fixed fee that averaged $3.66 per month with no approximately $17, whether the check was paid by minimum balance requirement. For the three-fourths the institution or returned unpaid. On the deposit of these accounts with a check fee, the average num- side, about three-fifths of banks and four-fifths of ber of checks that could be written per month without savings associations charged a fee for deposit items a fee was about eight, and the fee for each check over returned; these fees averaged about $5.50 at banks the limit averaged $0.59. and about $7.50 at savings associations.27 The American Bankers Association's 1998 survey Hence, even on the grounds of price competition, of retail banking found that 48 percent of small basic-banking accounts may not be competitive with banks, 58 percent of midsized banks, and 69 percent alternative providers when the total cost of use expected by a lower-income customer is considered. 23. The member agencies of the Federal Financial Institutions Examination Council (FFIEC) are the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, 25. Chris Meyer and Tracy Shelton, Buried Treasure: A Survey of the Office of the Comptroller of the Currency, the Office of Thrift New York City Banks Shows "Lifeline Law" to be Best-Kept Con- Supervision (formerly, the Federal Home Loan Bank Board), and the sumer Secret in New York (New York Public Interest Research Group, National Credit Union Administration. 1996). 24. Illinois's and Rhode Island's laws were passed in 1986, Ver- 26. Doyle, Lopez, and Saidenberg, "How Effective Is Lifeline mont's in 1987, New Jersey's in 1994, and Minnesota's and New Banking in Assisting the 'Unbanked'?" York's in 1995. Pennsylvania had a basic-banking law in the late 27. Board of Governors, Annual Report to the Congress on Retail 1980s but repealed it in 1995. Fees and Services of Depository Institutions, p. 10. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

468 Federal Reserve Bulletin • July 1999 THE GOVERNMENTAL MOVE TOWARD vacy; EBT can also lower the recipient's costs of ELECTRONIC PAYMENT obtaining benefits by eliminating check cashing and the associated fees.29 Despite the evidence that In the mid-1990s, legislators turned their attention lower-income consumers who use the alternative from basic banking to the electronic delivery of gov- financial services sector prefer high person-to-person ernment payments. As a result of two federal laws, involvement with financial transactions, recipients' electronic payment methods were established for all experiences with EBT suggest that they may find needs-based, federally assisted programs—that is, a smooth transition to electronic financial services food stamps and family welfare payments—and for (see box "Methods of Doing Business with Deposiall federal benefits, such as social security and veter- tory Institutions").30 ans payments. During the early development of the EBT program, a major policy issue involved the level of consumer protections afforded to welfare recipients. State agen- Electronic Benefit Transfers cies expressed concern about the compliance costs associated with the Electronic Fund Transfer Act In the early 1990s, pilot programs were established (EFTA) and its implementing rules (Regulation E), for electronic delivery of food stamp benefits and particularly in the areas of liability for unauthorized certain cash programs such as Aid to Families with transfers and error resolution. Dependent Children (AFDC). Recipients used plastic The Federal Reserve Board supported state and cards and personal identification numbers to obtain federal efforts to provide benefits electronically and food stamp benefits at point-of-sale (POS) terminals sought to accommodate agency concerns while mainin grocery stores and cash benefits at automated teller taining consumer protections. In 1995 the Board machines and POS terminals. adopted a final rule for Regulation E that made some The Personal Responsibility and Work Opportu- exceptions to facilitate compliance by state and fednity Reconciliation Act of 1996 established elec- eral agencies. At the same time, the Board detertronic delivery for food stamps and for payments mined that all consumers using electronic funds transunder Temporary Assistance for Needy Families fer services—including welfare recipients—were (TANF), the program that replaced AFDC. Under the entitled to the same protections under the EFTA and law, all food stamp benefits will be delivered elec- Regulation E. The Board set a three-year period for tronically by October 1, 2002. voluntary compliance, after which the rules were to A growing number of states—for example, New become mandatory. In response to states' concerns, York, Maryland, and the members of the Southern however, the Congress exempted state-administered, Alliance of States—deliver food stamps and TANF federally assisted benefits from coverage under the benefits electronically.28 As part of the movement EFTA in the Personal Responsibility and Work toward electronic benefit transfers (EBT), these and Opportunity Reconciliation Act of 1996. other states deliver state-level welfare benefits electronically as well. Some states have formed alliances with each other and with private-sector service pro- Electronic Transfer of Recurring Federal viders to deliver these benefits, either through a debit Benefits card system or by encouraging clients to establish a direct deposit account at a financial institution. For The Congress took electronic delivery of federal payprogram agencies, the electronic transfer of benefits ments beyond the realm of welfare when it enacted offers significant advantages over paper-based delivthe Debt Collection Improvement Act of 1996. A ery systems: It reduces the cost of benefit delivery, facilitates the management of program funds, and helps reduce fraud. 29. Barbara Leyser, "Recipient Concerns with the Use of Elec- For recipients, the EBT program can provide tronic Benefit Transfer Systems for the Delivery of State and Federal Benefits," National Poverty Law Center, Clearinghouse Review, greater convenience and security than the papervol. 32 (September-October 1998), pp. 216-51. based system because funds can be obtained or used 30. See Josephine Swanson, Jeanne M. Hogarth, and Jane Baker more quickly, only as needed, and with greater pri- Segelken, "Voices of Experience: Limited Resource Families and Financial Management," Proceedings of the Family Economics & Management Conference (American Home Economics Association 28. The members of the Southern Alliance of States are Alabama, Meetings, 1993), pp. 13-28; and Jeanne M. Hogarth and Josephine Arkansas, Florida, Georgia, Kentucky, Missouri, North Carolina, and Swanson, "Using Contemporary Adult Education Principles in Finan- Tennessee. Mississippi and West Virginia are considering joining the cial Education with Low Income Audiences," Family Economics & alliance. Resource Management Biennial, vol. 1 (1995), pp. 139^6. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Banking Relationships of Lower-Income Families and the Governmental Trend toward Electronic Payment 469 Methods of Doing Business with Depository Institutions In 1995, the most common method of doing business with gies.2 For example, as families become familiar with direct depository institutions for all families with a transaction deposit, electronic benefit transfers from welfare programs, account was a teller visit; use of electronic methods was or electronic transaction accounts, they may be more willsecond, and the mail was third. About 75 percent of all ing to use other electronic technologies for their banking. families with transaction accounts used some form of electronic technology for their banking, and about 70 percent of 2. Jeanne M. Hogarth, Kevin H. O'Donnell, Jinkook Lee, and Eun-Ju Lee, lower-income families with accounts did so (table).1 Simi- "Consumers' Use of Electronic Technologies in Financial Services: A View toward the 21st Century," Consumer Interest Annual, vol. 45 (forthcoming). larly, one-third of all families with accounts used automated teller machines (ATMs), while one-fourth of all lower- Methods of doing business with depository institutions, income families did so. Sex, age, education, marital status, for families with transaction accounts, 1995 and region of residence also influenced the probability of Percent ATM use. The field of market research has shown that product All U.S. Lower-income families families innovation and diffusion follow a somewhat predictable pattern; and learning theory posits that, once consumers Electronic Any 78.0 69.4 become comfortable with one technology, they are able to generalize and apply that learning to other technologies. ATM 35.3 25.7 Telephone 26.8 16.7 Thus, one could expect to see growth over time in the Computer 3.9 1.7 proportions of families who use some of these technolo- Direct deposit 53.4 14.0 Direct payment 24.7 16.6 ATM, telephone. or computer 50.5 36.3 Non-electronic 1. See Arthur B. Kennickell and Myron L. Kwast, "Who Uses Electronic Teller visits 86.5 85.0 Banking? Results from the 1995 Survey of Consumer Finances," Finance Mail 58.6 40.0 and Economics Discussion Series 1997-35 (Board of Governors of the Federal Reserve System. 1997), for a more detailed discussion of consumers' NOTE. See general note to table I. use of electronic technologies in banking. ATM Automated teller machine. portion of the bill that became known as "EFT '99" to families without direct deposit, including the reladeclared that by January 2, 1999, the Department of tively large number of lower-income benefit recipithe Treasury would have to use direct deposit for all ents without deposit accounts at financial institutions. recurring federal benefits, such as payments for social Treasury's EFT '99 program fostered the formation security, Supplemental Security Income, veterans of the Financial Services Education Coalition, a benefits, and retirement. The primary motivation for major community-based program involving other this new law was to save tax dollars: A check costs federal agencies, trade associations, and community the government $0.43 to prepare and have delivered, groups, to help unbanked recipients choose and use while an electronic funds transfer costs only $0.02. financial accounts. Treasury's final rules for implementing EFT '99, The coalition prepared a resource guide, Helping issued in September 1998, stop short of mandating People in Your Community Understand Basic Finandirect deposit.31 Instead, consumers have the choice cial Services, to provide community-based educators of receiving their benefits through direct deposit; with information on planning, implementing, and receiving a check; or using a special new account, the evaluating EFT '99 education programs in their com- Electronic Transfer Account (ETA), which is sched- munities.32 Regional and state-level train-the-trainer uled to become available in late 1999. Between the July 1996 enactment of EFT '99 and April 1999, 32. Members of the Financial Services Education Coalition are the the proportion of recurring federal benefit payments American Association of Retired Persons, the American Bankers delivered electronically grew from 58 percent of unit Association, the Board of Governors of the Federal Reserve System, volume to 73 percent. Call for Action, the Consumer Information Center, the Credit Union National Association, the Federal Deposit Insurance Corporation, the An additional effect of the law was to draw the Federal Trade Commission, the Independent Bankers Association of attention of Treasury and other government agencies America, the National Association of Federal Credit Unions, the National Community Reinvestment Coalition, the National Consumers League, the National Foundation for Consumer Credit, the Organization for a New Equality, the U.S. Department of Agriculture's 31. Federal Register, "Management of Federal Agency Disburse- Cooperative States Research, Education, and Extension Service, ments, 31 CFR 208," September 25, 1998, pp. 51489-505. and the U.S. Department of the Treasury's Financial Management Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

470 Federal Reserve Bulletin • July 1999 and direct-to-consumer training sessions were held No additional features, such as checkwriting or across the country to provide the type of one-to-one electronic debits initiated by billers, will be allowed contact recommended by focus groups and survey with or without an extra fee. Institutions may charge participants. Trained staff from community-based for balance inquiries and withdrawals above the miniorganizations have worked with church groups, hous- mum allowed; they may also charge for other sering service providers, senior citizen groups, nutrition vices, such as card replacement and account research, programs, and tribal councils to reach consumers at their customary rates. Depository institutions may with information on choices for receiving federal choose to pay interest on ETA balances. Treasury payments. will pay a one-time set-up fee to institutions for each ETA they open. Electronic Transfer Accounts ALTERNATIVE FINANCIAL SERVICE PROVIDERS Part of the EFT '99 legislation charged Treasury with AND ELECTRONIC BENEFIT PAYMENTS ensuring access to an account at a depository institution for individuals affected by the electronic delivery In Treasury's demographic survey, 8 percent of check mandate contemplated at that time.33 Through survey recipients reported using check cashers; in the survey studies and focus groups, Treasury developed the for the Center for Credit Union Research, 17 percent ETA to be an account that would meet recipients' of low-income families reported using check cashers. needs at a low cost. As previously noted, the number of outlets has been On the basis of the studies as well as negotiations growing fast, and the current market is large: The with financial institutions, Treasury determined that National Check Cashers Association (NaCCA), the allowing no check writing with the ETA was reason- trade association for 3,500 of the 6,000 check cashing able given the greater potential for overdrafts and outlets in the United States, estimates that their memassociated fees on the accounts. As announced by bers annually cash about 180 million checks with a Treasury on June 30, 1999, some depository institu- face value exceeding $55 billion.34 tions will offer the ETA by late summer, and the The EFT '99 initiative has led check cashers to accounts will have the following characteristics: look for ways that federal check recipients could receive their benefits electronically through check • Be available only at federally insured depository cashing outlets. Under Treasury's definition of finaninstitutions to any individual receiving payments for cial institution, check cashers are not eligible to offer federal benefits, wages, salary, or retirement through deposit accounts or to receive electronic deposits Treasury directly from the government. Instead, some have • Carry the same protections afforded other developed arrangements with financial institutions to account holders at the financial institution have consumers open an account and then move the • Accept electronic federal payments; the deposi- account's funds into an intermediary account that tory institution may allow other types of deposits consumers can access through check cashing outlets. • Allow at least four withdrawals per month in any Under such "hybrid" arrangements, however, combination of ATM and over-the-counter (teller) funds moved into the intermediary account are no transactions longer covered by FDIC insurance or other federal • Allow at least four balance inquiries per month protections, such as the EFTA and Regulation E. at an ATM or teller window Consumer advocates have raised some concerns • Allow unlimited use with POS networks (includ- about the cost and safety of these arrangements. As a ing those permitting a cash-back feature) if available result, Treasury in early 1999 issued a request for • Carry a maximum fee of $3 per month and a comment on the possible need to regulate or prohibit maximum overdraft fee of $10 such hybrid accounts. • Have no minimum balance except as required by federal or state law • Provide a monthly statement. 34. National Check Cashers Association, Q&A—NaCCA Facts, 1999 (www.nacca.org/q&a.htm). Check cashers, pawn brokers, wire transfer companies, and other alternative financial service providers Service. Copies of the guide and other education materials in have been the subject of several studies over the past decade. See, for English and Spanish are available at www.fms.treas.gov/eft/educ/ example, Jean Ann Fox, The High Cost of 'Banking' at the Corner educmain.html or through Treasury's Financial Management Service. Check Casher (Washington, D.C.: Consumer Federation of America, 33. Federal Register, "Electronic Transfer Account Notice," 1997); and John Caskey, Fringe Banking: Check-Cashing Outlets, November 23, 1998, pp. 64820-25. Pawnshops, and the Poor (Russell Sage, 1994). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Banking Relationships of Lower-Income Families and the Governmental Trend toward Electronic Payment 471 In one of several partnership arrangements taking another approach, NaCCA has joined with a major Asset Limits and Individual Development depository institution to offer a debit card to individu- Accounts als without bank accounts who frequently cash federal benefit or payroll checks at a check casher affili- In 1996, Iowa became the first state to raise asset limits ated with NaCCA. Under the program, the individual for welfare recipients and, for low-income families more generally, to test a new savings instrument, the Individual receives a special account at the bank that allows Development Account (IDA).1 The use of funds in an debit-card purchases or ATM withdrawals at any IDA is limited to education expenses, a first-time home NaCCA-member outlet in the country. The program purchase, or the start-up of a small business. In an IDA is set for testing this summer. program, a household's deposits are matched, up to a limit, by funds from foundations and other sources. The matching funds are generally not counted as assets in ASSET-BUILDING OPPORTUNITIES FOR considering a family's welfare eligibility. LOWER-INCOME FAMILIES Since 1996, thirty-five other states and the District of Columbia either provide for IDAs or have enabling leg- The ownership of savings instruments by lower- islation pending. Since Iowa's action in 1996, another income families is more limited than their ownership thirty-eight states have raised their welfare-related limits of checking accounts.35 The awareness is growing, on assets, some to as much as $10,000. The Assets for however, that lower-income families could better Independence Act of 1998 reinforced the emphasis on their chances for income gains by building savings asset building for lower-income households by providing additional resources for IDAs. Pending federal legislation for home ownership, education, training, and entrewould allow tax credits to financial institutions that propreneurship. As programs for EBT and for direct vide matching funds on IDAs they open and would allow deposit of federal payments reach more people, the tax credits to organizations contributing funds to nonfamiliarity with mainstream financial institutions that profit organizations that administer IDA programs. is necessary for many of the unbanked to establish Improving the awareness of welfare recipients regardsavings may grow as well. ing eligibility limits could help them make the most Even with a greater willingness to deal with effective use of IDAs. In a 1996 report, only 13 percent depository institutions, families receiving welfare of welfare recipients surveyed correctly identified the benefits face a special problem in acquiring savings $1,000 asset limit of their state's welfare program; because of state limitations on asset holdings. A 84 percent thought the asset limit was $500; 3 percent family whose income and assets are above particular thought it was $2,000. Such misunderstanding of welfare eligibility limits may be as much of a barrier to assetlevels will not qualify for welfare benefits. The allowbuilding as the limits themselves.2 able level of assets varies by state, and in some cases by region within the state, even for the federally 1. The IDA concept was introduced in Sherraden and Gilbert, Assets assisted welfare programs (food stamps and TANF). and the Poor (see text note 35). More information on IDAs is available In general, asset limits have been set in the range of from the Corporation for Enterprise Development, Washington, D.C. (www.cfed.org). $1,000 to $2,000. Many states have raised the limits 2. The data on knowledge of eligibility limits is in Julia Marlowe, and, along with the federal government, have begun Deborah Godwin, and Esther Maddux, "Barriers to Effective Financial Management Among Welfare Recipients," Advancing the Consumer to respond to the problem of savings with programs Interest, vol. 8 (Fall 1996), pp. 9-13. See also John Caskey, Beyond Cash that will also tend to bring families without accounts and Carry: Financial Savings, Financial Services, and Low-Income Households in Two Communities (Washington, D.C.: Consumer Federainto banking (see box "Asset Limits and Individual tion of America, 1997). Development Accounts"). become interested in a basic type of banking account because of the ETA marketing. CHALLENGES AND OPPORTUNITIES IN BACKING Nonetheless, many lower-income families are RELATIONSHIPS FOR LOWER-INCOME FAMILIES probably still without a deposit account and might benefit from the greater wealth-building potential that Treasury's EFT '99 initiative and the advent of the a banking relationship could offer. Moreover, evi- ETA may open new doors to basic banking services dence suggests that lower-income families are less for federal benefit recipients. The marketing of the informed about the financial marketplace than other ETAs may also have spillover effects for those who families. Many may not know the choices they have are not recipients of a federal payment but who among institutions and accounts, especially as new accounts and transaction products become available. 35. See Michael Sherraden and Neil Gilbert, Assets and the Poor: Others may not clearly understand the long-term A New American Welfare Policy (M.E. Sharpe, 1991). 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472 Federal Reserve Bulletin • July 1999 costs and the opportunity costs of the services they APPENDIX A use. And families who qualify for welfare may not be MEASURING INCOME AND OWNERSHIP aware of the higher asset limits offered by their states OF CHECKING ACCOUNTS or their opportunity to build assets through ID As. While laws may provide the opportunity for lower- Agencies required to implement laws regarding lowincome families to more fully use mainstream finan- to moderate-income households or families (referred cial services, factors such as innovation, information, to in the text as lower-income families) often define and education will play an important role in creating that income as being no more than 80 percent of awareness of the choices available to these families. the median income for the area or region of resi- For example, for families without a checking account, dence. This article combines data on median regional the primary barrier to having one seems to be that income from the Current Population Survey of the they "don't write enough checks." Therefore, such Bureau of the Census with data on family income families might see an advantage in an all-electronic from the Survey of Consumer Finances (SCF) to account with access to low-cost money orders, debits, estimate the number of lower-income families in the and direct payment for bill paying. Those that say United States. The Current Population Survey covers they "don't have enough money" might find that a sample population far larger than that of the SCF low- or no-cost accounts offer advantages relative to and offers a more stable base for estimating incomes check cashing outlets and other alternative financial nationally and regionally. service providers. For lower-income families, account ownership seems to be as much a function of household charac- Census Measure of Median Income teristics as it is of account features and the other product offerings, services, and delivery systems of To get data on each family's income for a full year, financial institutions. The move toward more electhe SCF collects information on families' total cash tronic delivery of banking services may be fairly income before taxes in the preceding calendar year. smooth for those lower-income families already using Hence, the 1995 SCF reports 1994 income. The electronic benefit transfers for food stamp and present study distributes the SCF sample across TANF benefits and for those federal benefit recipients the four regions of the United States as defined by who sign up for an ETA. The theory of diffusion of the U.S. Bureau of the Census and compares the innovation leads to the conclusion that, over time, respondents' reported incomes with 80 percent of more families will use these newer electronic techthe 1994 median incomes that Census reported for nologies, and learning theory predicts that, with expethose regions. These regions, their 1994 median rience, families will use additional electronic techincomes, and the corresponding 80 percent maxinologies. For families without experience in using mums for lower income are as follows: electronic technology, assistance from community educators and financial institutions can help them • Northeast, $34,926 and $27,940 become more familiar with the technology and other considerations about bank accounts so that they might • Midwest, $32,505 and $26,004 better assess their options. • South, $30,021 and $24,016 Navigating the transition to an "all-electronic Treasury," evaluating account offerings at both main- • West, $34,452 and 27,561. stream and alternative financial sector providers, and helping lower-income families build wealth require a Of the 4,299 families in the SCF, 1,372 (about combination of policy development and education 45 percent, weighted data) reported income in the initiatives that target both sides of the marketplace. low to moderate range of the regional Census data. On the consumers' side of the market, lower-income families may need additional exposure to information and education if they are to choose accounts and Ownership of Checking Accounts products that fit their needs and to use electronic technologies to manage these accounts. On the firms' Transaction accounts at financial institutions are side of the market, financial institutions need to have checkable accounts and savings accounts as described appropriate products, services, delivery systems, and in text note 2. information available to consumers to enable them to In addition to questions about specific transaction more fully participate in the financial marketplace. accounts and other assets, the SCF asks respondents Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Banking Relationships of Lower-Income Families and the Governmental Trend toward Electronic Payment 473 whether they or any family members living with The families reporting that they had no financial them have a checking account. The interviewer does institutions at which they had accounts or loans or not limit the meaning of "checking account" in this regularly did personal financial business are the famiquestion except to ask the respondent to exclude lies categorized in this article as making no regular money market funds not used regularly as checking use of a financial institution (and being the most accounts. If the answer to the question is "no," the clearly "unbanked"). interviewer asks for the "most important" reason for The SCF reconciles the "accounts or loans" aspect not holding a checking account. of the answers to the question with information col- In this article, families that hold only other prod- lected from subsequent questions. For example, if a ucts (major credit cards, first mortgages, home equity respondent answers "none" to the question "With loans, vehicle loans, education loans, consumer loans, how many financial institutions .. ." and later reports certificates of deposit, IRAs and Keogh accounts, or having a loan or other account, the original answer is life insurance) are considered separately from fami- revised to reflect the new information. lies owning transaction accounts to shed some light The SCF has no follow-up questions, however, that on possible interrelationships among holdings of would shed light on "regularly do personal financial financial products. business." Therefore, answers to this question from families without accounts are not as reliable as the answers regarding the "accounts or loans" aspect of APPENDIX B the question from families with accounts. For exam- MEASURING USE OF FINANCIAL INSTITUTIONS ple, a family may answer, say, "one or two" to the question "With how many financial institutions . . ." Little data beyond those in the Survey of Consumer If the family is subsequently found to have no Finances (SCF) indicate the number of families that accounts or loans, they are nonetheless assumed to make no use whatsoever of depository institutions, conduct some unspecified regular personal financial not even to cash checks. The data on this issue in the business with a financial institution. No subsequent SCF are indicative, but the question on which they questions are asked to discover the nature of the use are based is not sharply drawn. Some detailed discus- implied by the original answer. Conceivably, some sion of the question and possible answers is war- respondents with no accounts or loans may consider, ranted to ensure that interpretations of the results are say, their regular purchase of stamps in a bank lobby not too broad. as constituting regular business. On the other hand, The SCF does not have any questions that specifi- some families without accounts or loans may answer cally probe for the use of alternative financial service "none" to the question even though they regularly providers such as check cashing outlets nor for the cash checks at one or more banks. So the responses to use of banks for check cashing and other services by the question may constitute both under-reporting and those without accounts or loans at banks. The ques- over-reporting of families with no accounts or loans tion in the 1995 SCF that does touch on this issue who indicate that they regularly do personal financial asks, "With how many financial institutions do you business with a financial institution. • and your family currently living here have accounts or loans, or regularly do personal financial business?" The respondents were asked to include "banks, savings and loans, credit unions, brokerages, loan companies, and so forth" but to exclude institutions at which they had only a credit card account or business loan.36 36. Question X305, 1995 SCF Codebook. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

474 Industrial Production and Capacity Utilization for May 1999 Released for publication June 16 1992 average, industrial production in May was 1.7 percent higher than in May 1998; capacity utili- Industrial production rose 0.2 percent in May after zation for total industry—at 80.5 percent—was off gains of 0.4 percent in April and 0.7 percent in more than 2 percentage points from a year earlier. March. Manufacturing output advanced 0.4 percent in May, about matching the pace of the previous three MARKET GROUPS months. Production at utilities fell sharply, and mining activity was little changed. At 134.1 percent of its The production of consumer goods, which had accel- Industrial production and capacity utilization Ratio scale, 1992 = 100 Percent of capacity Industrial production Capacity utilization Manufacturing Total industry Total industry Manufacturing Industrial production, market groups Consumer goods Intermediate products Durable Construction supplies Nondurable Business supplies Equipment Materials Business Durable goods Nondurable goods and energy Defense and space All series are seasonally adjusted. Latest series, May. Capacity is an index of potential industrial production. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

475 Industrial production and capacity utilization, May 1999 Industrial production, index, 1992= 100 Percentage change CCaatteeggoorryy 11999999 19991 MMaayy 11999988 ttoo Feb.' Mar.r Apr.r May? Feb.r Mar.r Apr.r MayP MMaayy 11999999 Total 132.5 133.3 133.8 134.1 .1 .7 .4 .2 1.7 Previous estimate 132.5 133.2 134.0 .1 .5 .6 Major market groups Products, total2 124.6 125.3 125.7 125.8 .1 .5 .4 .0 1.0 Consumer goods 115.3 115.6 115.9 116.1 .1 .2 .3 .1 -.6 Business equipment 167.6 168.5 169.9 170.1 .2 .5 .9 .1 4.3 Construction supplies 132.7 132.1 132.5 132.2 .2 -.4 .3 -.2 4.4 Materials 145.3 146.5 147.1 147.8 .2 .9 .4 .5 2.9 Major industry groups Manufacturing 136.9 137.5 138.1 138.6 .3 .4 .4 .4 2.4 Durable 161.7 162.9 164.0 164.9 .2 .7 .7 .6 4.9 Nondurable 111.9 112.0 112.0 112.2 .5 .1 A .2 -.7 Mining 98.9 98.3 97.7 97.8 .4 -.6 -.6 .1 -7.2 Utilities 111.3 116.8 117.2 114.6 -3.0 4.9 .3 -2.2 -.5 Capacity utilization, percent MEMO Capacity, cceennttaaggee 1998 1999 cchhaannggee,, Average, Low, High, MMaayy 11999988 1967-98 1982 1988-89 May Feb.r Mar.' Apr/ MayP ttoo MMaayy 11999999 Total 82.1 71.1 85.4 82.6 80.2 80.5 80.5 80.5 4.4 Previous estimate 80.2 80.4 80.6 Manufacturing 81.1 69.0 85.7 81.6 79.5 79.5 79.6 79.7 4.9 Advanced processing 80.5 70.4 84.2 80.7 78.4 78.5 78.6 78.7 5.9 Primary processing . 82.4 66.2 88.9 84.3 82.7 82.7 82.7 82.7 2.5 Mining 87.5 80.3 88.0 87.9 81.8 81.2 80.7 80.7 1.1 Utilities 87.4 75.9 92.6 91.3 87.7 92.0 92.2 90.1 .7 NOTE. Data seasonally adjusted or calculated from seasonally adjusted 2. Contains components in addition to those shown, monthly data. r Revised, 1. Change from preceding month. p Preliminary. erated in March and April, edged up. The growth in information processing equipment and in the assemthe output of durable consumer goods decreased to a bly of business vehicles was counterbalanced by still-strong 0.8 percent rate. The deceleration prima- lackluster activity in farm machinery and equiprily reflected a large drop in the production of appli- ment, another cutback in the production of civilian ances after a strong advance in April; other major aircraft, and a decline in the output of industrial categories posted output gains. In particular, the pro- equipment. duction of automotive products increased sharply The production of construction supplies receded for a second consecutive month. The production of 0.2 percent but, on balance, has remained little nondurable consumer goods edged down; a small changed from its high level earlier in the year: Over increase in the production of non-energy goods was the past twelve months, output in this sector has more than offset by a significant drop in the pro- increased 4.4 percent. The index for business supduction of energy goods, mainly utility output plies declined 0.3 percent after having increased subfor residential use. Among non-energy nondurable stantially in March and April. The output of materials consumer goods, growth in the production of con- increased 0.5 percent. Among producers of durable sumer chemicals, food, tobacco, and paper products goods materials, the output of semiconductors and was partially offset by a drop in the production of computer parts continued to gain appreciably. The clothing. production of nondurable goods materials remained The output of business equipment inched up sluggish and was about 1 percent below the level of after an upward-revised advance of 0.9 percent in May 1998; the production of energy materials April. A substantial further rise in the production of dropped. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

476 Federal Reserve Bulletin • July 1999 INDUSTRY GROUPS Mining production inched up. Reductions in the output of coal and stone and earth minerals partly Production in manufacturing increased 0.4 percent. offset advances in drilling for oil and gas wells and in The factory operating rate inched up, to 79.7 percent, metal mining. The rate of capacity utilization in but was down from its May 1998 level of 81.6 per- mining stayed at 80.7 percent in May, down from cent. Durable goods production rose 0.6 percent— 87.9 percent twelve months earlier. Most of the drop about the same pace as in the previous two months. in capacity utilization over the past year reflects In particular, the output of electrical machinery grew severe weakness in oil and gas drilling activity that noticeably—albeit at a slower rate than in April— has persisted throughout the period. boosted by robust increases in the output of commu- Output at utilities, which had rebounded 4.9 pernications equipment and semiconductors. The pro- cent in March and posted a small increase in April, duction of motor vehicles and parts and of computers fell 2.2 percent, with declines in both gas and electric increased more than 2 percent. Excluding computers, utilities. The operating rate at electric utilities the production of industrial machinery declined more remained above its historic average, while utilization than 1 percent. The production of fabricated metals at gas utilities was about 7 percentage points below also retreated in May, but the output of iron and steel the 1967-98 average. rebounded. With gains in production matching gains in productive capacity, the rate of capacity utilization in durable manufacturing remained unchanged at 79.5 percent, a level identical to its 1967-98 average. NOTICE The output of nondurable manufactured goods advanced 0.2 percent; production has been advancing This release contains revised estimates of capacity slowly since last autumn and has increased about and capacity utilization for selected industries begin- 1 percent over the past four months. Furthermore, ning with the data for January 1999. With the revimost major industries posted gains in May. The only sion, the estimated growth of aggregate capacity major industries registering declines were textile and between the fourth quarter of 1998 and the fourth apparel products, both of which had posted substan- quarter of 1999 increased 0.2 percentage point, to tial increases in April. The operating rate in nondura- about 33/ percent. In addition, beginning with the 4 ble manufacturing edged up 0.1 percentage point, to data for February 1999, the industrial production 80.4 percent: Utilization for these industries was indexes were revised to reflect the semiannual revimore than 2 percentage points below its level of May sion to seasonal factors for motor vehicle assemblies 1998 and was 3 percentage points below its long- and for series that use production-worker hours as term average. their monthly indicator. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

477 Statements to the Congress Statement by Patrick M. Parkinson, Associate Direc- this way, it is very difficult to measure. The fact that tor, Division of Research and Statistics, Board of no other large U.S. financial institution saw its capital Governors of the Federal Reserve System, before the significantly impaired indicates that none was so Committee on Banking and Financial Services, U.S. vulnerable as LTCM to the extraordinary market con- House of Representatives, May 6, 1999 ditions that emerged last August. In our market-based economy, the discipline pro- I am pleased to appear before this committee to vided by creditors and counterparties is the primary discuss the President's Working Group on Financial mechanism that regulates firms' leverage. If a firm Markets' Report on Hedge Funds, Leverage, and the seeks to achieve greater leverage, its creditors and Lessons of Long-Term Capital Management. Under counterparties will ordinarily respond by increasing Secretary Gensler has made a comprehensive presen- the cost or reducing the availability of credit to the tation of the report's conclusions and recommenda- firm. The rising cost or reduced availability of funds tions. Chairman Greenspan participated actively in provides a powerful economic incentive for firms to the Working Group's discussions and supports the restrain their risk-taking. In our system, government contents of the report. My remarks this morning will oversight of leverage is the exception, not the rule. be limited to highlighting a few key conclusions and Even when government oversight has been deemed recommendations. appropriate, as is the case of banks and brokerdealers, it is intended to supplement and reinforce market discipline, not to replace it. LEVERAGE AND MARKET DISCIPLINE However, in the case of LTCM, market discipline seems largely to have broken down. LTCM received As the title of its report indicates, the Working Group very generous credit terms, even though it took an has concluded that the central public policy issue exceptional degree of risk. Furthermore, this breakraised by the Long-Term Capital Management down in market discipline reflected weaknesses in (LTCM) episode is excessive leverage. Leverage risk-management practices by LTCM's counterparplays a positive role in our financial system, resulting ties that were also evident, albeit to a lesser degree, in in greater market liquidity, lower credit costs, and a their dealings with other highly leveraged firms. more efficient allocation of resources in our econ- If market discipline is to be effective, counterparomy. But leverage poses risks to firms and their ties of a firm must obtain sufficient information to creditors, and the LTCM episode demonstrated that a make reliable assessments of its risk profile, both at single firm could become both so large and so highly the inception of the credit relationship and throughleveraged that failure of its business strategies could out its duration. Furthermore, they must have in place pose risks to the financial system as well. mechanisms that place limits on the credit risk expo- While LTCM is a hedge fund, excessive leverage is sures that become more stringent as the firm's riskineither characteristic of, nor necessarily limited to, ness increases and its creditworthiness declines. In hedge funds. Available data indicate that no other the case of LTCM, however, few, if any, of its counhedge fund was or is as large as LTCM, and no other terparties really seem to have understood its risk large hedge fund was or is so highly leveraged. profile, especially its very large positions in certain Indeed, a large majority of hedge funds are not sig- illiquid markets. And many of its counterparties did nificantly leveraged, having balance sheet leverage not effectively limit their risk exposures to LTCM. In ratios of less than 2 to 1. Many financial institutions, part, they simply did not anticipate the extraordinary including some banks and securities firms, are far market conditions last August. But a combination of larger than LTCM and are significantly leveraged. the aggressive pursuit of earnings in a highly com- Whether any of these larger financial institutions was petitive environment and excessive confidence in or is as highly leveraged as LTCM cannot be estab- LTCM's management appears to have led some counlished definitively. Leverage is best defined as the terparties to suspend or ignore fundamental riskratio of economic risk relative to capital, but defined management principles. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

478 Federal Reserve Bulletin • July 1999 The Working Group's recommendations are in- tives Association has issued a review of collateral tended to make market discipline more effective management practices that draws lessons from collatby (1) improving risk-management practices, and eral managers' experiences during the LTCM epi- (2) increasing the availability of information on the sode and other recent periods of market volatility. risk profiles of hedge funds and their creditors. The The practitioners found that collateralization proved Working Group has not recommended steps, such as to be a highly successful tool for mitigating credit direct government regulation of hedge funds, that risk during such periods. However, echoing concerns would risk significantly weakening market discipline expressed by bank supervisors, they warned that colby creating or exacerbating moral hazard. lateralization should be regarded as a complement to, not a replacement for, other credit risk safeguards. In particular, they emphasized that it does not obviate careful credit analysis of the counterparty. The review ENHANCING RISK MANAGEMENT set out recommendations for improving collateral management practices and an action plan for facilitat- Primary responsibility for addressing the weaknesses ing their implementation. in risk-management practices that were evident in the A broader and more ambitious initiative also is LTCM episode rests with the private financial well under way. In January, twelve major internationinstitutions—a relatively small number of U.S. and ally active banks and securities firms formed the foreign banks and broker-dealers, most of which Counterparty Risk Management Policy Group. As the were LTCM's counterparties—whose credit and co-chairmen of the group testified in March before clearing services are critical to the establishment of this Committee's Capital Markets Subcommittee, the leveraged trading positions. Addressing the weak- objective is to develop flexible standards for strengthnesses is in their self-interest, as their experience ened risk-management practices in providing creditwith LTCM demonstrated. And as the world leaders based services to major counterparties, including, but in risk management, these firms have the capabilities not limited to, hedge funds. The group has estabas well as the incentives to address the weaknesses. lished three working parties to address issues relating Nonetheless, prudential supervisors and regulators to risk management, reporting, and risk reduction have a responsibility to help to ensure that the pro- through cooperative initiatives. The group hopes to cesses that banks and securities firms utilize to man- complete its work and publish its findings in midage risk are commensurate with the size and com- June. plexity of their portfolios and responsive to changes Such private-sector initiatives can fulfill their conin financial market conditions. siderable promise only if their words are translated Since the LTCM episode, both private financial into actions. Here again, the private market particiinstitutions and prudential supervisors and regulators pants should have primary responsibility. But superhave taken steps to strengthen risk-management prac- visors and regulators undoubtedly will study these tices. Banks and securities firms have demanded reports carefully and, when appropriate, incorporate more information and tightened their credit terms, their findings in supervisory guidance, as they did especially vis-a-vis highly leveraged institutions. Su- with the findings of the Group of Thirty's earlier pervisors and regulators have sought to lock in this report. progress by issuing guidance on sound practices. As banking supervisors testified in March before two of this committee's subcommittees, the Basle Committee on Banking Supervision, the Federal Reserve, and IMPROVING INFORMATION ON RISK PROFILES the Office of the Comptroller of the Currency have all issued such guidance recently. The International Or- Improving the quality of information on the risk ganization of Securities Commissions is well along in profiles of hedge funds and certain other highly leverdeveloping appropriate guidance for securities firms. aged institutions is particularly challenging because That said, further improvements in risk- the liquidity of markets permits them to alter their management practices can and should be made. And risk profiles significantly within days or even hours. as was demonstrated so clearly by the Group of In this instance, too, the Working Group's recommen- Thirty's 1993 work on risk management, shared dations call for actions by both the private sector and private-sector initiatives can be extremely effective in public authorities. One of the most difficult and fostering progress. One such initiative has already important issues to be addressed by the Counterbeen completed. The International Swaps and Deriva- party Risk Management Policy Group involves the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 479 exchange of information between creditors and coun- closed would be total exposures (aggregating across terparties. The challenge is to develop meaningful all relevant transactions), disaggregated by sector (for measures of risk that could be exchanged frequently example, commercial banks, securities firms, hedge without revealing proprietary information on strate- funds, and so on). The goal is to enhance market gies or positions. The revelation of proprietary infor- discipline on creditors of significantly leveraged instimation not only would jeopardize market partici- tutions, which, in turn, would enhance creditor discipants' profits but could also significantly impair pline on the leveraged institutions themselves. The market liquidity and widen liquidity premiums for precise nature of any new disclosure requirements the assets traded. will be determined by the Securities and Exchange The need for timely information on rapidly chang- Commission (SEC), taking into account public coming risk profiles means that counterparties cannot ments through the normal rule-making process. Both expect to rely on public disclosure mechanisms to fellow regulators and market participants will need to meet their requirements. Nonetheless, new public support and assist the SEC in developing requiredisclosure requirements for both hedge funds and ments that are both meaningful and cost effective. public companies could also contribute to the goal of strengthening market discipline. With respect to hedge funds, the Working Group has recommended that more frequent and more mean- SUMMARY ingful information be made public. Some hedge funds are already required to report certain financial infor- To sum up, then, the Working Group has concluded mation to the Commodity Futures Trading Commis- that the central public policy issue raised by the sion. However, the information is only reported annu- LTCM episode is how to constrain leverage more ally, does not include comprehensive and meaningful effectively. In our market-based economy, we have measures of risk, and cannot be made available to the always relied on market discipline as the primary public. Quarterly release to the public of enhanced mechanism for constraining leverage. Although marinformation on a broader group of hedge funds (not ket discipline seems to have largely broken down in limited to those that trade futures) would help inform the case of LTCM, the Working Group believes that public opinion about the role of hedge funds in the best approach to addressing concerns about excesour financial system. Equally important, by making sive leverage is to make market discipline more clear that public disclosure is the sole objective of effective. Primary responsibility for increasing the any reporting requirements, any false impression that effectiveness of market discipline necessarily rests the regulatory agency operating the reporting system with market participants. Nonetheless, prudential is conducting prudential oversight of hedge funds supervisors and regulators of the banks and brokerwould be discouraged. Such a false impression can dealers that are critical sources of credit to leveraged be dangerous because it weakens private market dis- institutions should seek to ensure that the necessary cipline without any hope that government oversight improvements in risk-management practices are is making up for what is lost. implemented. The Working Group believes that fur- In the case of public companies, including finan- ther progress in this area can and should be made cial institutions, the Working Group recommends that and, through its constituent agencies, will be monitorthey publicly disclose additional information about ing the credit-risk-management policies of large comtheir material financial exposures to significantly mercial banks and securities firms and assessing their leveraged institutions. The information to be dis- effectiveness. Statement by Laurence H. Meyer, Member, Board of duced by Representative Roukema. The Board wel- Governors of the Federal Reserve System, before comes this legislation and supports its purpose of the Subcommittee on Financial Institutions and revising outdated banking statutes that are imposing Consumer Credit of the Committee on Banking and costs without providing commensurate benefits to Financial Services, U. S. House of Representatives, the safety and soundness of depository institutions, May 12, 1999 enhancing consumer protection, or expanding credit availability. As the members of this subcommittee The Board of Governors appreciates this opportunity are aware, unnecessary regulatory burdens hinder the to comment on H.R. 1585, the "Depository Institu- ability of banking organizations to compete effection Regulatory Streamlining Act of 1999," intro- tively in the broader financial services marketplace Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

480 Federal Reserve Bulletin • July 1999 and, ultimately, adversely affect the availability and represents a significant waste of resources for the prices of banking services and credit products to economy. In addition, because some small banks do consumers. not have a sufficient volume of deposits to justify these costs, current reserve avoidance techniques tend to place smaller institutions at a competitive disadvantage. MEASURES THE BOARD SUPPORTS The reserve avoidance measures utilized by deposi- In my testimony today, I would like to highlight those tory institutions could also eventually complicate provisions of this legislation that the Board supports the implementation of monetary policy. Declines in and believes are particularly significant in reducing required reserve balances through avoidance schemes burden and promoting efficient regulation. The Board could lead to increased volatility in the federal funds strongly supports allowing the Federal Reserve Sys- rate. Since last July, when I spoke to this subcommittem to pay interest on required and excess reserve tee on the same topic, required reserve balances have balances held by depository institutions at the Federal fallen further and some episodes of heightened vola- Reserve Banks, and it supports allowing banks to pay tility in federal funds rates have occurred, although interest on demand deposits. (Attached to this state- they were associated in part with stresses on global ment is an appendix containing an expanded discus- financial markets. Allowing the payment of interest sion of these topics.)1 The Board also strongly sup- on required reserve balances would reduce current ports the protections embodied in title V of this bill, incentives for reserve avoidance and would likely the "Bank Examination Report Privilege Act," which induce a rebuilding of reserve balances over time. If promote effective bank supervision by enhancing the volatility in the federal funds rate nevertheless did cooperative exchange of information between super- become a persistent concern, the Federal Reserve at vised financial institutions and their regulators. present has a limited set of tools to address such a situation; authorizing interest payments on excess While the Board also applauds many of the other reserve balances would be a useful addition to the measures contained in this bill, which eliminate Federal Reserve's monetary policy tools for this purrestrictions that no longer serve a useful purpose and pose. Several other major central banks, including the thereby enhance the ability of U.S. banking institu- European Central Bank and the Bank of Canada, tions to operate efficiently and effectively in increasalready have the power to pay interest on excess ingly competitive financial markets, there are a few reserve balances. provisions with which the Board has concerns. While I will discuss them, I do not wish these objections If increased volatility in the federal funds rate did to detract from my central message—that the nation's become a persistent feature of the money market, it banking system would benefit from the type of would affect other overnight interest rates, raising reform embodied in this legislation. funding risks for large banks, securities dealers, and other money market participants. Suppliers of funds to the overnight markets, including many small banks and thrift institutions, would also face greater uncer- Interest on Reserves and Interest tainty about the returns they would earn. Accordon Demand Deposits ingly, allowing the Board to pay interest on required reserve balances would not only eliminate economic The Board strongly supports provisions in secinefficiencies but also alleviate risks that could affect tion 101 of H.R. 1585, which would permit the Fedmonetary policy and the smooth functioning of the eral Reserve to pay interest on both required and money markets. excess reserve balances that depository institutions Because the level of required reserve balances has maintain at Federal Reserve Banks. Because required fallen substantially in recent years, because of the reserve balances do not currently earn interest, banks implementation of additional reserve avoidance meaand other depository institutions employ costly prosures by depository institutions, estimates of the revecedures to reduce such balances to a minimum. The nue losses to the Treasury associated with paying cost of designing and maintaining the systems interest on required reserve balances have dropped to that facilitate these reserve avoidance techniques a relatively low level. After having taken account of the increases in revenue from a related measure, the 1. The attachment to this statement is available from Publications payment of interest on demand deposits, the Congres- Services, Mail Stop 127, Board of Governors of the Federal Reserve sional Budget Office recently estimated that the net System, Washington, DC 20551, and on the Board's site on the World federal budget costs of similar legislation pending in Wide Web (http://federalreserve.gov). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 481 the Senate would be about $130 million per year over bill, is not advisable. Such a long delay would be the next five years. associated with further wasteful sweep activities and The Board strongly supports allowing the immedi- would disadvantage small banks and their business ate payment of interest on demand deposits held by customers relative to the larger organizations already businesses. The current prohibition against paying using sweep programs that can be modified to incorinterest on such deposits is an anachronism that no porate a new MMDA product. longer serves any public policy purpose. This prohi- Finally, the committee has asked the Board to bition was enacted in the 1930s, at a time when the comment specifically on the impact on the banking Congress was concerned that large money center industry of repealing the prohibition on paying interbanks had earlier bid deposits away from country est on business checking accounts. For banks, interest banks to make loans to stock market speculators. on demand deposits will increase costs, at least in the This rationale for the prohibition is certainly not short run. Larger banks (and securities firms) may applicable today: Funds flow freely around the coun- also lose some of the fees they currently earn on try and among banks of all sizes. The absence of sweeps of business demand deposits. The higher interest on demand deposits is no bar to the move- costs to banks will be partially offset by interest ment of money from depositories with surpluses— on reserve balances, and, over time, these measures whatever their size or location—to the markets where should help the banking sector attract liquid funds in funds can be profitably employed. competition with nonbank institutions and direct mar- Moreover, although the prohibition has no current ket investments by businesses. Small banks, in parpolicy purpose, it imposes a significant burden both ticular, should be able to bid for business demand on banks and on those holding demand deposits, deposits on a more level playing field vis-a-vis both especially small banks and small businesses. Smaller nonbank competition and large bank sweep probanks complain that they are unable to compete for grams. Moreover, large and small banks will be the deposits of businesses precisely because of their strengthened by fairer prices on the services they inability to offer interest on demand deposit accounts. offer and by the elimination of unnecessary costs Small banks, unlike their larger counterparts, lack the associated with sweeps and other procedures cursystems to offer compensating balance schemes and rently used to try to minimize the level of reserves. sweep accounts that allow these banks to offer businesses credit for or interest on excess demand balances. Small businesses, which often earn no interest Bank Examination Report Privilege on their demand deposits because they do not have account balances large enough to justify the fees The Board endorses title V of the bill, the Bank charged for sweep programs, stand to gain the most Examination Report Privilege Act (BERPA). BERPA from eliminating the prohibition of interest on would take three steps to promote effective supervidemand deposits. sion of depository institutions by helping to preserve For these reasons, the Board strongly supports candor in communications between such institutions immediate repeal of the prohibition of interest and their examiners. First, BERPA would clarify that on demand deposits. In contrast, section 102 of a supervised institution may voluntarily disclose H.R. 1585 would allow payment of interest on information that is protected by the institution's own demand deposits to begin on October 1, 2004. During privileges, such as the attorney-client privilege, to a a transition period lasting until that time, the bill federal banking agency without waiving those priviwould authorize a twenty-four-transaction-per-month leges as to third parties. Some courts have ruled that money market deposit account (MMDA). Demand disclosure of information to examiners waives an deposits could be swept into this new MMDA in institution's privileges in private civil litigation, and, order to earn interest. The twenty-four-transaction as a result, some institutions have attempted to with- MMDA would be fully reservable, and therefore hold information from their supervisors. By ensuring would not contribute to further declines in required that privileges are not waived when data is given reserve balances and the complications that might to examiners, BERPA would overcome the present entail for the implementation of monetary policy. reluctance of many institutions to disclose informa- While a relatively short transition period before the tion for fear of losing common-law privileges. implementation of direct payments on demand depos- Second, BERPA would establish uniform proceits would not be objectionable, delaying direct inter- dures that govern how a third party may seek to est payments on demand deposits for any extended obtain confidential supervisory information from a period, such as the five years or so proposed in the banking agency. BERPA would require that third Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

482 Federal Reserve Bulletin • July 1999 parties request such information directly from the direct activities of banks. Eliminating section 3(f) federal banking agencies, under regulations and pro- would put savings banks that are subsidiaries of bank cedures adopted by the agencies. Third parties may holding companies on equal competitive footing with turn to the courts only after having exhausted their their state bank counterparts, allowing savings banks administrative remedies. Finally, BERPA would and their subsidiaries to engage in those activities define what constitutes confidential supervisory infor- that are permissible for state banks under state law. mation and would strengthen the protection afforded Section 303 of the bill authorizes the banking to such information. In this regard, the measure agencies to act jointly to allow up to 100 percent of would also require that federal courts afford to confi- the fair market value of an institution's purchased dential supervisory information of state and foreign mortgage servicing rights to be included in its tier 1 bank supervisory authorities the same status with capital. Currently, only 90 percent of the value of regard to privilege as is afforded to the confiden- such assets can be included. Developments since the tial supervisory information of the federal banking Congress enacted current law in 1991 have greatly agencies. reduced the concerns that prompted the existing capi- By protecting disclosures by depository institu- tal "haircut." Accordingly, the Board believes the tions to their examiners and by safeguarding supervi- change envisioned in section 303 would reduce regsory information based on such disclosures, BERPA ulatory burden without compromising safety and would prevent unwarranted disclosures that would soundness. The Board also suggests changing all the have a chilling effect on the examinations process. section's references concerning "purchased mort- Taken together, these measures would enhance the gage servicing rights" to "mortgage servicing assets" ability of the federal banking agencies to assess and to reflect current accounting terminology. to protect the safety and soundness of depository In another area, the alternative consumer credit institutions. disclosure mechanism permitted by section 401 will The banking agencies may have some further sug- be less burdensome to creditors, and just as helpful to gestions for refining the language of sections 501 and consumers, as the disclosure requirement embodied 502, and we would be pleased to work with the in current law. The Congress has already eliminated subcommittee on those suggestions. the requirement that creditors disclose a historical table for closed-end variable rate loans. Taking similar action with respect to open-end variable rate Other Burden Reduction Provisions home-secured loans would reduce regulatory burdens without sacrificing consumer protections. There are other parts of this bill, as well, that would relieve regulatory burden without giving rise to safety and soundness, supervisory, consumer protection, or AREAS OF CONCERN other policy concerns. For example, section 311 would eliminate the outdated and largely redundant Although the Board supports most of the provisions requirement in section ll(m) of the Federal Reserve in the bill, there are a few sections of the legislation Act, which currently sets a rigid ceiling on the perthat cause us concern. These provisions may give centage of bank capital and surplus that may be certain entities unfair competitive advantages, may represented by loans collateralized by securities. Curharm the safety and soundness of depository institurent supervisory policy, as well as national and state tions, or are unnecessary. bank lending limits, addresses concerns regarding concentrations of credit more comprehensively than section ll(m) but does so without the unnecessary constraining effects of this section of the Federal Nonbank Banks Reserve Act. Section 312 would eliminate section 3(f) of the Two sections of the bill would eliminate limitations Bank Holding Company Act, which applies certain that have been applied to nonbank banks. Section 223 restrictions that govern the nonbanking activities of would allow nonbank banks, and FDIC-insured credit bank holding companies to the activities conducted card banks, to offer business credit cards, even when directly by savings banks under state law. Since the these business loans are funded by insured demand enactment of section 3(f), the courts have found that deposits. Section 222 would remove the activity limithe insurance and other nonbanking prohibitions of tations and cross-marketing restrictions that currently the Bank Holding Company Act do not apply to the apply to nonbank banks. It would also liberalize the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 483 divestiture requirements that apply when companies Call Report Simplification violate the nonbank bank operating limitations and allow nonbank banks to acquire assets from credit Section 302 of the bill largely restates section 307 of card banks. Eliminating these restrictions on nonbank the Riegle Community Development and Regulatory banks, at first glance, may have intuitive appeal. Improvement Act (Riegle Act). The Board and However, there are important reasons for the Board's the other Banking agencies, working through the concern about these provisions. Federal Financial Institutions Examination Council Nonbank banks—which, despite their popular (FFIEC), have made substantial progress in implename, are federally insured, national or state- menting the mandate of section 307 of the Riegle Act chartered banks—came into existence by exploiting and the Board believes that this section of the bill is a loophole in the law. By means of this loophole, unnecessary. industrial, commercial, and other companies were Thus far, in response to section 307, the federal able to acquire insured banks and to mix banking and banking agencies have eliminated approximately commerce in a manner that was then, and remains 100 Call Report data items; placed revised instructoday, statutorily prohibited for banking organizations and forms on the Internet for the Call Report, tions. In 1987, in the Competitive Equality Banking the Bank Holding Company (BHC) Reports, and the Act (CEBA), the Congress closed the nonbank-bank Thrift Financial Report (TFR); adopted generally loophole. At that time, the Congress chose not to accepted accounting principles (GAAP) as the require that the fifty-seven companies operating nonreporting basis for all Call Reports (and consistent bank banks divest these institutions. Instead, the Conwith the reporting basis for the BHC reports and the gress permitted the companies owning these banks to TFR); produced a draft core report that is consistent retain their ownership so long as they complied with with the TFR report and resolves most of the definia carefully crafted set of limitations on the activities tional differences between the reports; condensed of nonbank banks and their parents. In a unique four sets of Call Report instructions into one; prostatutory explanation of legislative purpose, the Convided an index for Call Report instructions; implegress stated in CEBA that these limitations were mented an electronic filing requirement for all instinecessary to prevent the owners of nonbank banks tutions submitting Call Reports (consistent with from competing unfairly with bank holding compaexisting mandatory electronic filing for the TFR and nies and independent banks. optional electronic filing for the BHC reports); placed Fewer than fifteen nonbank banks currently claim much of the Call Report data and some of the BHC the grandfather rights accorded in CEBA. The Board data on the Internet; and reported to the Congress on is concerned that removal of the limitations and recommendations to enhance efficiency for filers and restrictions that apply to nonbank banks would users. enhance advantages that this relative handful of organizations already possess over other owners of banks The agencies surveyed users of the information to and would give rise to the potential adverse effects identify additional Call Report items that could be about which the Congress has in the past expressed eliminated, while retaining items that are essential for concern. In addition, removal of limitations would safety and soundness and other public policy purpermit the increased combination of banking and poses. The FFIEC's Reports Task force is analyzing commerce for a select group of commercial compa- the results of the survey of Call Report users throughnies, a mixture that the House Banking Committee out each of the agencies to identify all of the current recently considered and decided not to permit in the purposes served by the information. After the surveys context of a broader effort to modernize our financial are analyzed, the Task Force will recommend ways to laws. further streamline the reporting requirements and The Board continues to believe that the questions continue to refine a set of common, or "core," reportof whether and to what extent it is appropriate to ing items. The agencies have not determined an enhance the position of nonbank banks are questions implementation date, given year 2000 concerns for most fairly determined in connection with broad the banking industry and the regulatory agencies, and financial modernization legislation. In that broader given that banking institutions have requested a minicontext, it may be possible to relieve some of the mum lead time of one year to implement a "core" restraints placed on the handful of existing nonbank report. However, we believe significant progress that banks without seriously disadvantaging the majority has been made by the agencies to date and the agenof banking organizations that do not have the privi- cies' ongoing efforts suggest that this section of the leges enjoyed by nonbank banks. draft bill is not necessary. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

484 Federal Reserve Bulletin • July 1999 CLOSING THOUGHTS The Board applauds the efforts of the subcommittee to continue to eliminate unnecessary governmentimposed burdens. The subcommittee has fashioned The legislation being considered by the subcommit- legislation that, in the main, builds upon past suctee today builds on two prior reform measures, the cesses in regulatory reform and relieves regulatory Community Development and Regulatory Improve- burdens on banking organizations. In a few areas, ment Act of 1994 and the Economic Growth and however, the bill may not achieve meaningful reform Regulatory Paperwork Reduction Act of 1996, that but instead would lead to competitive inequities or the Board supported. Those were useful measures raise safety and soundness and other concerns. that achieved meaningful reductions in regulatory The Board has long endorsed regulatory relief and burden. Those bills—coupled with the Board's inde- financial modernization strategies that promote regupendent initiatives to make our regulations simpler, latory equity for all participants in the financial serless burdensome, and more transparent—have had a vices industry, minimize the chances that federal practical, bottom-line effect: Fewer applications need safety net subsidies will be expanded into new activito be filed with the Board, and banking organizations ties and beyond the confines of insured depository have saved substantial regulatory, legal, compliance, institutions, guarantee adequate federal supervision and other costs. Those statutory and regulatory of financial organizations, and ensure the continued changes have enhanced the competitiveness of bank- safety and soundness of financial organizations. The ing organizations and have benefited the customers of Board would be pleased to work with the subcommitthese financial institutions. Nonetheless, more can tee and its able staff to reach these goals through and should be done. legislation. Statement by Patrick M. Parkinson, Associate Direc- clear: to deter market manipulation and to protect tor, Division of Research and Statistics, Board of investors. Governors of the Federal Reserve System, before the The objective of the Grain Futures Act of 1922 Subcommittee on Risk Management, Research, and was to reduce or eliminate "sudden or unreasonable Specialty Crops of the Committee on Agriculture, U.S. fluctuations" in the prices of grain on futures House of Representatives, May 18, 1999 exchanges. The framers of the act believed that such price fluctuations reflected the susceptibility of grain I am pleased to be here today to present the Federal futures to manipulation. During the latter part of the Reserve Board's views on whether it is necessary nineteenth century and the early part of the twentieth to modernize the Commodity Exchange Act (CEA). century, attempts to corner the markets for wheat and The Board believes that modernization of the act is other grains, while rarely successful, often led to essential. The reauthorization of the Commodity temporary, but sharp, increases in prices that engen- Futures Trading Commission (CFTC) offers the best dered large losses to short sellers of futures contracts opportunity to make the necessary changes. If this who had no alternative but to buy and deliver grain opportunity is lost, the Board is concerned that mar- under their contractual obligations. Because quantiket participants will abandon hope for regulatory ties of grain after a harvest are generally known and reform in the United States and take critical steps to limited, it is possible, at least in principle, to corner shift their activity to jurisdictions that provide more a grain market. Furthermore, because grain futures appropriate legal and regulatory frameworks. prices were widely disseminated and widely used as the basis for pricing grain transactions off the exchanges, price fluctuations from attempts at manipulation had broad ramifications for the agricul- THE NEED FOR MODERNIZATION tural sector and, given the relative size of the agricultural sector at the time, for the economy as a OF THE CEA whole. The key elements of the CEA were put in place in the The Commodity Exchange Act of 1936 introduced 1920s and 1930s to regulate the trading on exchanges provisions to protect retail investors in agricultural of grain futures by the general public, including retail futures. Retail participation in these markets had been investors. The public policy objectives were, and are, increasing and was viewed as beneficial, but retail Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 485 investors may lack the knowledge and sophistication vide for modernization of the regulation of financial to protect themselves effectively against fraud or to derivatives, this could change—perhaps quickly. manage counterparty credit exposures effectively. Rapid advances in technology are making electronic Safeguards against fraud and counterparty losses trading systems increasingly attractive, both as an were intended to foster their participation in these alternative to open outcry trading on exchanges and markets. as an alternative to the use of telephones and voice Although the objectives of the CEA have not brokers in the over-the-counter (OTC) markets. Such changed since the 1930s, what are now called electronic trading systems might develop in the the derivatives markets have undergone profound United States, but if the United States continues to changes. On the futures exchanges themselves, finan- impose what market participants perceive as unnecescial contracts now account for about 70 percent of the sary regulatory burdens, such systems could instead activity, and retail participation in most financial con- develop abroad. In particular, much of the existing tracts is negligible. Outside the exchanges, enormous activity in financial derivatives consists of transacmarkets have developed in which banks, corpora- tions between large global financial institutions, all of tions, and other institutions privately negotiate cus- which already have substantial operations in London. tomized derivatives contracts, the vast majority of Regulatory burdens on financial derivatives transwhich are based on interest rates or exchange rates. actions in the United Kingdom (UK) are generally The Board believes that the application of the CEA perceived to be significantly lighter than those curto the trading of financial derivatives by professional rently imposed by the CEA, yet participants have counterparties is unnecessary. Prices of financial considerable confidence in the integrity of the UK derivatives are not susceptible to, that is, easily influ- markets. If unnecessary regulatory burdens in the enced by, manipulation. Some financial derivatives, United States prompt global institutions to join, or for example, Eurodollar futures or interest rate swaps, even develop, a London-based electronic trading sysare virtually impossible to manipulate because they tem for financial derivatives, the United States would are settled in cash, and the cash settlement is based suffer a serious and perhaps irreversible blow to its on a rate or price in a highly liquid market with a international competitiveness in financial services. very large or virtually unlimited deliverable supply. For other financial derivatives—for example, futures contracts for government securities—manipulation of MODERNIZING THE CEA: prices is possible, but it is by no means easy. Large OTC DERIVATIVES inventories of the instruments are immediately available to be offered in markets if traders endeavor to In the Board's view, then, significant changes in the create an artificial shortage. Furthermore, the issuers CEA are appropriate, and the time to make those of the instruments can add to the supply if circum- changes is in the next CFTC reauthorization. In the stances warrant. This contrasts sharply with supplies case of privately negotiated derivatives transactions of agricultural commodities, for which supply is between institutions, the Board has supported exclulimited to a particular growing season and finite sion of such transactions from coverage under the carryover. CEA in the past and continues to do so. In these In addition, professional counterparties simply do markets, private market discipline appears to achieve not require the kind of investor protections that the the public policy objectives of the CEA quite effec- CEA provides. Such counterparties typically are quite tively and efficiently. Counterparties to these transacadept at managing credit risks and are more likely to tions have limited their activity to contracts that are base their investment decisions on independent judg- very difficult to manipulate. A global survey conment. And, if they believe they have been defrauded, ducted by central banks and coordinated by the Bank they are quite capable of seeking restitution through for International Settlements revealed that, as of June the legal system. Nor is there any obvious public 1998, 97 percent of OTC derivatives were interest policy reason to foster direct retail participation in rate or foreign exchange contracts. The vast majority financial derivatives markets. of these OTC contracts are settled in cash rather than Most professional counterparties in financial through delivery. Cash settlement is typically based derivatives markets view the regulatory protections on a rate or price in a highly liquid market with a imposed by the CEA as unnecessary and burden- very large or virtually unlimited deliverable supply— some. Although to date there is no clear-cut evidence for example, LIBOR (London interbank offered rate) of a significant migration of activity to other jurisdic- or the spot dollar-yen exchange rate. tions, should the next CFTC reauthorization not pro- To be sure, some types of OTC contracts that have Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

486 Federal Reserve Bulletin • July 1999 a limited deliverable supply, such as equity swaps great majority of the remainder responded neutrally and some credit derivatives, are growing in impor- rather than indicating that they were dissatisfied. tance. However, unlike agricultural futures, for which failure to deliver has additional significant penalties, costs of failure to deliver in OTC derivatives are almost always limited to actual damages. Thus, MODERNIZING THE CEA: CENTRALIZED manipulators attempting to corner a market, even if EXECUTION OR CLEARING OF FINANCIAL successful, would have great difficulty inducing sell- DERIVATIVES ers in privately negotiated transactions to pay significantly higher prices to offset their contracts or to Recently, some participants in the OTC markets have purchase the underlying assets. shown interest in utilizing centralized mechanisms Finally, the prices established in privately negoti- for clearing or executing OTC derivatives transacated transactions are not used directly or indiscrimi- tions. For example, the London Clearing House plans nately as the basis for pricing other transactions. to introduce clearing of interest rate swaps and for- Counterparties in the OTC markets can be expected ward rate agreements in the second half of 1999, and to recognize the risks to which they would be several entities are developing electronic trading sysexposed by failing to make their own independent tems for interest rate and foreign exchange contracts. valuations of their transactions, whose economic and Such mechanisms could well reduce risk and increase credit terms may differ in significant respects. More- transparency in derivatives markets. However, their over, they usually have access to other, often more development in the United States is being impeded reliable or more relevant, sources of information on by the specter that the CEA might be held to apply to valuations. Hence, any price distortions in particular transactions executed or settled through such mechatransactions would not affect other buyers or sellers nisms. Application of the act not only is perceived as of the underlying asset. entailing unnecessary regulatory burdens, but also, Professional counterparties to privately negotiated because of the exchange trading requirement of the contracts have also demonstrated their ability to act, it raises questions about the legal enforceability protect themselves from losses from counterparty of the contracts traded or cleared. insolvencies and from fraud. In general, they have Provided that participation is limited to profesmanaged credit risks effectively through careful sional counterparties acting as principals, the Board evaluation of counterparties, the setting of internal believes financial derivatives executed or cleared credit limits, and judicious use of netting and collat- through such centralized mechanisms should noneeral agreements. In particular, they have insisted that theless be excluded from the CEA. The use of such dealers have financial strength sufficient to warrant a mechanisms would not make these transactions any credit rating of A or higher. This, in turn, provides more susceptible to manipulation than when the substantial protection against losses from fraud. Deal- transactions are bilaterally executed and cleared. Nor ers are established institutions with substantial assets would their use impair the demonstrated ability of and significant investments in their reputations. When professional counterparties to protect themselves they have engaged in deceptive practices, the profes- from losses from fraud. sional counterparties that have been victimized have Because clearing concentrates and often mutualbeen able to obtain redress under laws applicable to izes counterparty risks, some type of government contracts generally. Moreover, the threat of legal oversight of clearing systems may be appropriate. damage awards provides dealers with strong incen- However, it is not obvious that regulation of such tives to avoid misconduct. A far more powerful clearing facilities under the CEA would always be incentive, however, is the fear of loss of the dealer's the best approach. For example, the Board sees no good reputation, without which it cannot compete reason why a clearing agency regulated by the Secueffectively, regardless of its financial strength or rities and Exchange Commission should not be financial engineering capabilities. allowed to clear OTC derivatives transactions, espe- The effectiveness of these incentives was con- cially if it already clears the instruments underlying firmed in a 1995 survey of end-users of OTC deriva- the derivatives. Likewise, if a clearing facility were tives that was conducted by the General Accounting established in the United States for privately negoti- Office. When asked if they were satisfied with deriva- ated interest rate or exchange rate contracts between tives dealers' sales practices, 85 percent of users of dealers, most of which were banks, oversight by one plain vanilla derivatives and 79 percent of users of of the federal banking agencies would seem most more complex derivatives indicated satisfaction. The appropriate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 487 MODERNIZING THE CEA: HARMONIZING such transactions that would be overseen by another REGULATION OF THE OTC MARKETS AND regulator. In general, with respect to such transac- FUTURES EXCHANGES tions, the exchanges should have the same options and be subject to the same constraints as competing Beyond question, the centralized execution and clear- service providers. ing of what to date have been privately negotiated and bilaterally cleared transactions would narrow the existing differences between exchange-traded and SUMMARY OTC derivatives transactions. However, that is not a reason to extend the CEA to cover OTC transactions. To sum up, the Commodity Exchange Act was As we have argued, doing so is unnecessary to designed in the 1920s and 1930s to regulate the achieve the public policy objectives of the act. More- trading of grain and other agricultural futures by over, as the economic differences between OTC and the general public, including retail investors. Since exchange-traded contracts are narrowing, it is becom- then, what are now called the derivatives markets ing more apparent that OTC market participants share have undergone profound changes. Both on futures this conclusion; their decision to trade outside the exchanges and in the OTC markets, financial derivaregulated environment implies they do not see the tives now account for the great bulk of the activity. benefits of the act as outweighing its costs. Counterparties to financial derivatives transactions Instead, the Federal Reserve believes that the are predominantly institutions and other professional futures exchanges should be allowed to compete in counterparties; retail participation in most of these offering such services to professional counterparties, markets is negligible. Financial derivatives are not free from the constraints and burdens of the CEA. susceptible to manipulation, and professional coun- The conclusion that centralized mechanisms for terparties do not need the protections that retail invesprofessional trading of financial derivatives do not tors do. require regulation under the act is valid even if those The Board believes that privately negotiated centralized mechanisms are operated by entities that derivatives transactions between professional counalso operate traditional futures exchanges. terparties should be excluded from the act. Fur- If an exchange chooses to clear professional trans- thermore, the exclusion should apply to centrally actions in financial derivatives through the same executed or cleared transactions, provided that any clearinghouse that clears its traditional CEA- clearing system is subject to official oversight. regulated contracts, then the clearing should be regu- Futures exchanges should be allowed to compete as lated by the CFTC. But exchanges should be allowed operators of such trading or clearing systems, free to choose to establish a separate clearing system for from the burdens and constraints of the act. Statement by Alan Greenspan, Chairman, Board of lenged the ability of inward-looking and protectionist Governors of the Federal Reserve System, before the economies to maintain effective barriers, which, Committee on Banking and Financial Services, U.S. along with the superior performance of their more House of Representatives, May 20,1999 open trading partners, has led, over the past decade, to a major dismantling of impediments to the free We at the Federal Reserve are in broad agreement flow of trade and capital. The new international finanwith the approach outlined by Secretary Rubin and cial system that has evolved as a consequence has expect to continue to work closely with the Treasury been, despite recent setbacks, a major factor in the in this area. marked increase in living standards for those econo- As I have indicated previously before this commit- mies that have chosen to participate in it. tee, dramatic advances in computer and telecommuni- Notwithstanding the demonstrable advantages of cations technologies in recent years have enabled the new international financial system, the Mexican a broad unbundling of risks through innovative financial breakdown in late 1994 and, of course, the financial engineering. The financial instruments of a most recent episodes in East Asia and elsewhere have bygone era, common stocks and debt obligations, raised questions about the inherent stability of this have been augmented by a vast array of complex new system. hybrid financial products that has led to a far more These newly open markets were exposed to a huge efficient financial system. These same new technolo- expansion in capital inflows that their economic and gies and financial products, however, have chal- financial systems were not ready to absorb. These Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

488 Federal Reserve Bulletin • July 1999 flows, in turn, were engendered by the increasing emerging-market economies are also highly leverdiversification out of industrial country investment aged, but their supervision often has not proved portfolios, augmented by huge capital gains through adequate to forestall failures and a general financial 1997. Net private capital inflows into emerging mar- crisis. The failure of some banks is highly contagious kets roughly quadrupled between 1990 and the onset to other banks and businesses that deal with them, as of the Asian crisis. Such diversification was particu- the Asian crisis has so effectively demonstrated. larly directed at those economies in Asia that had This weakness in banking supervision in emerging been growing so vigorously through the 1970s, market economies was not a major problem for the 1980s, and into the 1990s—the so-called "Asian rest of the world before those economies' growing tigers." In the event, these economies were ill pre- participation in the international financial system over pared to absorb such volumes of funds. There were the past decade or so. Exposure of an economy to simply not enough productive investment opportuni- short-term capital inflows, before its financial system ties to yield the returns that investors in the West is sufficiently sturdy to handle a large unanticipated were seeking. It was perhaps inevitable then that withdrawal, is a highly risky venture. the excess cash found its way in too many instances It thus seems clear that some set of suggested into ill-conceived and unwisely financed real estate standards that countries should strive to meet would ventures. help the new highly sensitive international financial What appeared to be a successful locking of cur- system function effectively. There are many ways rencies onto the dollar over a period of years in East to promote such standards without developing an Asia, led, perhaps inevitably, to large borrowings of inappropriately exclusive and restrictive club of cheaper dollars to lend, unhedged, at elevated domes- participants. tic interest rates that reflected unheeded devaluation For example, in any set of standards there should risk premiums. When the amount of such unhedged surely be an enhanced level of transparency in the dollar borrowings finally became excessive, as was way domestic finance operates and is supervised. almost inevitable, the exchange rate broke. This is essential if investors are to make more knowl- Although it might seem that the consequences were edgeable commitments and supervisors are to judge easily discernible, they were not. Problems with the soundness of such commitments by their finanimprudently financed real estate investments emerge cial institutions. A better understanding of financial with chronic frequency around the globe without regimes as yet unseasoned in the vicissitudes of our triggering the size of the collapse experienced in East international financial system also will enable coun- Asia in 1997. The size of the crisis became evident terparties to more appropriately evaluate the credit only when the normal buffers that any economy standing of institutions investing in such financial builds up to absorb shocks were, in the case of the systems. There should be no mechanism, however, to East Asian economies, so readily breached under insulate investors from making foolish decisions, but pressure. some of the ill-advised investing of recent years can It has taken the long-standing participants in the be avoided in the future if investors, their superinternational financial community many decades to visors, and counterparties are more appropriately build sophisticated financial and legal infrastructures forewarned. that buffer shocks. Those infrastructures discourage To be sure, counterparties often exchange otherspeculative attacks against a well-entrenched cur- wise confidential information as a condition of a rency because financial systems are robust and are transaction. But broader dissemination of detailed able to withstand the consequences of vigorous pol- disclosures by governments, financial institutions, icy responses to such attacks. For the newer par- and firms is required if the greater risks inherent in ticipants in global finance, their institutions, until our vastly expanded global financial structure are recently, had not been tested against the rigors of to be contained. A market system can approach an major league pitching, to use a baseball analogy. appropriate equilibrium only if the signals to which The heightened sensitivity of exchange rates of individual market participants respond are -curate emerging economies under stress would be of less and adequate to the needs of the adjustment; xocess. concern if banks and other financial institutions in Product and asset prices, interest rates, debt by matuthose economies were strong and well capitalized. rity, and detailed accounts of central banks and pri- Developed countries' banks are highly leveraged but vate enterprises are among the signals so essential to subject to sufficiently effective supervision both by the effective functioning of a global economy. I find counterparties and regulatory authorities so that, in it difficult to believe, for example, that the crises that most countries, banking problems do not escalate arose in Thailand and Korea would have been nearly into international financial crises. Most banks in so virulent had their central banks published data Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 489 before the crises on net reserves instead of the not insurance that is almost always well worth the very informative gross reserve positions only. Some price. inappropriate capital inflows would almost surely Adherence to such a rule is no guarantee that all have been withheld, and policymakers would have financial crises can be avoided. If the confidence of been forced to make difficult choices more promptly domestic residents is undermined, they can generate if earlier evidence of difficulty had emerged. demands for foreign exchange that would not be As a consequence, the Group of Ten and the Inter- captured in this analysis. But controlling the structure national Monetary Fund (IMF) initiated an effort to of external assets and liabilities nonetheless could establish standards for disclosure of on- and off- make a significant contribution to stability. balance-sheet foreign currency activities of the public Considerable progress has been made in recent sector by countries that participate, or aspire to par- years in developing sophisticated financial instruticipate, in international capital markets. The focus ments. These developments create added complexity of this work was the authorities' foreign currency that all financial market participants, including poliliquidity position, which consists of foreign exchange cymakers from emerging-market economies, must resources that can be easily mobilized, adjusted for manage. However, they also create opportunities that potential drains on those resources. This work was emerging-market economies should seek to exploit. part of a larger effort to enhance disclosure of a In doing so there are lessons they can learn from broader set of economic and financial data under the advances in risk-management strategies developed IMF Special Data Dissemination Standard. by major financial institutions. Such transparency suggests a second standard To the extent that policymakers are unable to worth considering. Countries that lack the seasoning anticipate or evaluate the types of complex risks that of a long history of dealing in international finance the newer financial technologies are producing, the should manage their external assets and liabilities in answer, as it always has been, is less leverage, that is, such a way that they are always able to live without less debt, more equity, and, hence, a larger buffer new foreign borrowing for up to, for example, one against adversity and contagion. year. That is, usable foreign exchange reserves should A third standard could be a legal infrastructure that exceed scheduled amortizations of foreign currency enables the inevitable bankruptcies that will occur in debts (assuming no rollovers) during the following today's complex world to be adjudicated in a manner year. This rule could be readily augmented to meet that minimizes the disruption and contagion that the additional test that the average maturity of a can surface if ready resolutions to default are not country's external liabilities should exceed a certain available. threshold, such as three years. This could be accom- A fourth standard is the obvious necessity of sound plished directly or through the myriad innovations monetary and fiscal policies whose absence was so to augment maturities through rollover options. The often the cause of earlier international financial constraint on the average maturity ensures a degree crises. With increased emphasis on private internaof private sector "burden sharing" in times of crisis tional capital flows, especially interbank flows, pribecause in the event of a crisis the market value vate misjudgments within flawed economic strucof longer maturities would doubtless fall sharply. tures have been the major contributors to recent Clearly few, if any, locked-in holders of long-term problems. But inappropriate macropolicies also have investments could escape without significant loss. been a factor for some emerging-market economies Short-term foreign creditors, on the other hand, are in the current crisis. able to exit without significant loss as their instru- There are, of course, numerous other elements ments mature. If the preponderance of a country's of sound international finance that are worthy of liabilities are short term, the entire burden of a crisis detailed consideration, but the aforementioned would would fall on the emerging market economy in the constitute a good start. Even so, improvements in form of a run on reserves. transparency, commercial and legal structures, as well Some emerging-market countries may argue that as supervision cannot be implemented quickly. Such they have difficulty selling long-term maturities. If improvements and the transition to a more effective that is indeed the case, their economies are being and stable international financial system will take exposed to too high a risk generally. For too long, too time. The current crisis, accordingly, has had to be many emerging-market economies have managed addressed with ad hoc remedies. It is essential, howtheir external liabilities so as to minimize their ever, that those remedies not conflict with a broader current borrowing cost. This shortsighted approach vision of how our new international financial system ignores the insurance embedded in long-term debt, will function as we enter the next century. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

490 Announcements STATEMENT AFTER THE MEETING OF THE would hold its next meeting on Thursday, June 24, in FEDERAL OPEN MARKET COMMITTEE a session open to the public. ON MAY 18,1999 The council's function is to advise the Board on the exercise of its responsibilities under the Con- The Federal Reserve released the following statement sumer Credit Protection Act and on other matters on after the Federal Open Market Committee meeting on which the Board seeks its advice. May 18, 1999: While the FOMC did not take action today to alter the stance of monetary policy, the Committee was concerned ISSUANCE OF GUIDANCE ON LOAN-LOSS about the potential for a buildup of inflationary imbalances ALLOWANCES that could undermine the favorable performance of the economy and therefore adopted a directive that is tilted toward the possibility of a firming in the stance of mone- The Federal Reserve on May 21, 1999, issued guidtary policy. Trend increases in costs and core prices have ance to supervisors and bankers regarding a Financial generally remained quite subdued. But domestic financial Accounting Standards Board (FASB) staff article on markets have recovered and foreign economic prospects loan-loss allowances. This guidance includes emerghave improved since the easing of monetary policy last ing points of agreement between the Securities and fall. Against the background of already-tight domestic labor markets and ongoing strength in demand in excess of Exchange Commission and the Federal Reserve on productivity gains, the Committee recognizes the need to loan-loss accounting matters. be alert to developments over coming months that might The Federal Reserve expects institutions to conindicate that financial conditions may no longer be consissider the FASB guidance in maintaining conservatent with containing inflation. tive loan-loss allowances, consistent with generally accepted accounting principles (GAAP). In this regard, banks may record their loan-loss allowances STATEMENT ON THE RESIGNATION OF at the high end of the range of estimated losses when SECRETARY OF THE TREASURY ROBERT RUBIN it reflects management's best estimate. Furthermore, determining the appropriate allow- Chairman Alan Greenspan of the Federal Reserve ance involves a high degree of management judg- Board on May 12, 1999, issued the following ment. And allowances designated as unallocated are statement: not inconsistent with GAAP, provided they reflect an estimate of inherent credit losses determined in accor- I am saddened by the resignation of my friend Bob dance with GAAP. Rubin. He has been one of the most effective Secretaries of the Treasury in this nation's history. He will be missed, It is expected that recent accounting developments especially by those of us at the Federal Reserve who have discussed in the FASB article will have a limited been privileged to work with him over these last four and a effect on the level of the banking industry's loan-loss half years. allowances. As the federal banking agencies and the Fortunately, the President has chosen Larry Summers to Securities and Exchange Commission noted in a joint succeed him. He is a person of extraordinary talent and letter on March 10: judgment, who will continue the important work Bob Rubin initiated. I, and my colleagues, look forward to working with our 71st Secretary of the Treasury. We recognize that today instability in global markets, for example, is likely to increase loss inherent in affected institutions' portfolios and consequently require higher allowances for credit losses than were appropriate in more MEETING OF THE CONSUMER ADVISORY stable times. COUNCIL Looking ahead, given the fundamental changes The Federal Reserve Board on May 24, 1999, that have taken place in credit-risk management in announced that the Consumer Advisory Council recent years, a broader reexamination of accounting Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

491 standards for loan-loss allowances would appear bene- The federal banking agencies announced on ficial. The Federal Reserve intends to play an active May 21, 1999, the execution of an agreement with role in promoting and participating in such an effort Trans Alliance, L.R, Bellevue, Washington. The to ensure that allowance levels remain conservative agreement addresses the Year 2000 readiness of and prudent, consistent with safety and soundness TranAlliance's electronic funds transfer services. considerations. The supervisory guidance letter is available on The Federal Reserve Board on May 21, 1999, the Federal Reserve's web site (http://www. announced the issuance of a consent order against federalreserve.gov). B.O.T. Corporation, N.V., Curacao, Netherlands Antilles. B.O.T. Corporation, without admitting to any allegations, consented to the issuance of the PROPOSED ACTIONS order in connection with allegations of violations of the Bank Holding Company Act as a result of B.O.T. The Federal Reserve Board on May 18, 1999, Corporation's indirect acquisition of a controlling requested comments on the benefits and drawbacks interest in the Lippo Bank, Los Angeles, California, of modifying the Federal Reserve Banks' deposit and in connection with a preliminary determination deadlines and pricing practices for automated clearthat B.O.T. Corporation exercises a controlling influinghouse (ACH) transactions they exchange with ence over the management or policies of the bank. private-sector ACH operators. These modifications The order requires the divestiture of at least 98 permay have implications for competition in the provicent of the voting shares of the Lippo Bank. The sion of ACH services, for the efficiency of the ACH order also requires B.O.T. Corporation to pay a civil system, and for long-term growth of ACH volume. money penalty of $300,000 and any profit from the Comments are requested by August 6, 1999. sale of the bank. The Federal Reserve Board on May 21, 1999, The issuance of the order by the Board does not requested comments on a proposal to establish a relate in any manner to the condition or activities of Century Date Change Special Liquidity Facility, a the Lippo Bank. program for lending to depository institutions from November 1, 1999, through April 7, 2000. The facility should enable depository institutions to confidently commit to supplying loans to other financial PUBLICATION OF THE ANNUAL REPORT AND institutions and businesses through the rollover to BUDGET REVIEW the new century. Comments are requested by July 2, The 85th Annual Report, 1998, of the Board of Gov- 1999. ernors of the Federal Reserve System, covering Under the proposal, the interest rate charged on operations for the calendar year 1998, is now availloans from the special facility would be higher than able from Publications Services, Mail Stop 127, the Federal Open Market Committee's intended fed- Board of Governors of the Federal Reserve System, eral funds rate. Although the collateral requirements Washington, DC 20551 or phone 202-452-3244 or would be the same as for regular discount window 3245. Also available from Publications Services is loans, there would be fewer restrictions on the use a separately printed companion document, Annual and duration of loans from the special facility. More- Report: Budget Review, 1999, which describes the over, borrowers would not be required to seek funds budgeted expenses of the Federal Reserve System elsewhere first. Use of the special facility would for 1999, the 1999 phase of the Board's current be restricted to adequately and well-capitalized two-year (1998-99) budget, and income and expenses institutions. for 1997 and 1998. Both reports are also available on the Federal Reserve Board's web site (http:// www.federalreserve.gov). ENFORCEMENT ACTIONS The Federal Reserve Board on May 18, 1999, announced the execution of a written agreement by PUBLICATION OF A REVISED HANDBOOK ON and among the Wellington State Bank, Wellington, ADJUSTABLE-RATE MORTGAGES Texas, the Federal Reserve Bank of Dallas, and The Banking Commissioner of Texas. The written The Federal Reserve Board announced on May 14, agreement includes provisions addressing Year 2000 1999, that it had issued a revised Consumer Handreadiness. book on Adjustable Rate Mortgages. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

492 Federal Reserve Bulletin • July 1999 Regulation Z, which implements the Truth in On May 18, 1999, the Federal Reserve Board Lending Act, requires creditors to provide the bro- announced the appointment of Louise L. Roseman as chure, or a suitable substitute, to consumers when an Director of the Division of Reserve Bank Operations application form is provided or before the consumer and Payment Systems. Her appointment was effective pays a nonrefundable fee. Creditors may use the on June 13, 1999, shortly before the retirement of earlier version of the brochure until existing supplies Clyde Farnsworth. Ms. Roseman joined the Board's are exhausted. staff in 1985. She was appointed an officer in 1987 Copies of the revised brochure are available from and in 1994 was promoted to Associate Director. Publications Services, Mail Stop 127, Board of Gov- The Division of Reserve Bank Operations and ernors of the Federal Reserve System, Washington, Payment Systems oversees the Federal Reserve DC 20551. The first 100 copies are free. The bro- Banks' provision of financial services to depository chure is also available on the Board's public web site institutions, fiscal agency services to the Treasury (http ://w w w .federalreserve .gov/consumers .htm) and other government agencies, and significant support functions, such as information technology, financial and cost accounting, audit, human resources, and CHANGES IN BOARD STAFF facilities management. The division is also responsible for the develop- The Federal Reserve Board announced on May 24, ment of policies and regulations to foster the effi- 1999, that Clyde H. Farnsworth, Jr., Director of the ciency and integrity of the U.S. payments system, and Division of Reserve Bank Operations and Payment it works with other central banks and international Systems, would retire in June after thirty years of organizations to improve the payments system more service in the Federal Reserve System. broadly. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

493 Minutes of the Federal Open Market Committee Meeting Held on March 30, 1999 A meeting of the Federal Open Market Committee Ms. Low, Open Market Secretariat Assistant, was held in the offices of the Board of Governors of Division of Monetary Affairs, Board of Governors the Federal Reserve System in Washington, D.C., on Tuesday, March 30, 1999, at 9:00 a.m. Ms. Pianalto, First Vice President, Federal Reserve Bank of Cleveland Present: Mr. Greenspan, Chairman Ms. Browne, Messrs. Eisenbeis, Goodfriend, Hakkio, Mr. McDonough, Vice Chairman Kos, Rasche, and Sniderman, Senior Vice Mr. Boehne Presidents, Federal Reserve Banks of Boston, Mr. Ferguson Atlanta, Richmond, Kansas City, New York, Mr. Gramlich St. Louis, and Cleveland respectively Mr. Kelley Mr. McTeer Mr. Meyer Messrs. Judd and Weber, Vice Presidents, Federal Mr. Moskow Reserve Banks of San Francisco and Ms. Rivlin Minneapolis respectively Mr. Stern By unanimous vote, the minutes of the meeting of Messrs. Broaddus, Guynn, Jordan, and Parry, the Federal Open Market Committee held on Febru- Alternate Members of the Federal Open Market ary 2-3, 1999, were approved. Committee The Manager of the System Open Market Account reported on recent developments in foreign exchange Mr. Hoenig, Ms. Minehan, and Mr. Poole, Presidents of the Federal Reserve Banks of Kansas City, markets. There were no open market operations in Boston, and St. Louis respectively foreign currencies for the System's account in the period since the previous meeting, and thus no vote Mr. Kohn, Secretary and Economist was required of the Committee. Mr. Bernard, Deputy Secretary The Manager also reported on developments in Ms. Fox, Assistant Secretary domestic financial markets and on System open mar- Mr. Gillum, Assistant Secretary Mr. Mattingly, General Counsel ket transactions in government securities and federal Mr. Prell, Economist agency obligations during the period February 3, Ms. Johnson, Economist 1999, through March 29, 1999. By unanimous vote, the Committee ratified these transactions. Messrs. Cecchetti, Hooper, Hunter, Lang, Lindsey, The Committee then turned to a discussion of the Slifman, Stockton, and Rosenblum, Associate economic and financial outlook and the implementa- Economists tion of monetary policy over the intermeeting period ahead. A summary of the economic and financial Mr. Fisher, Manager, System Open Market Account information available at the time of the meeting and Mr. Ettin, Deputy Director, Division of Research and of the Committee's discussion is provided below. Statistics, Board of Governors The domestic policy directive that was approved by the Committee and issued to the Federal Reserve Messrs. Madigan and Simpson, Associate Directors, Bank of New York follows the summary. Divisions of Monetary Affairs and Research and The information reviewed at this meeting sug- Statistics respectively, Board of Governors gested that the economic expansion remained robust early in the year. Consumer spending was particu- Mr. Reinhart, Deputy Associate Director, Division of Monetary Affairs, Board of Governors larly strong, and housing starts climbed higher. While Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

494 Federal Reserve Bulletin • July 1999 growth of business capital spending moderated some- of office buildings trended still higher and the buildwhat after a fourth-quarter surge, it was still quite ing of lodging facilities picked up. rapid. Heavy competition from imports damped the Total business inventories changed little in Janurise of industrial production; however, employment ary, and stocks generally were at comfortable levels, expansion remained brisk and labor markets tight. though conditions varied across industries. Manufac- Price inflation was still low. turing stocks fell in January, largely reflecting further Nonfarm payroll employment posted sizable fur- reductions in inventories of aircraft and parts, and the ther gains in January and February. Hiring in con- aggregate stock-sales ratio for the sector was at the struction and retail trade was notably strong, and bottom of its range over the past twelve months. In employment in the service industries continued to the wholesale sector, a reduction in inventories in trend higher. By contrast, manufacturing suffered fur- January was concentrated in motor vehicles. The ther job losses. The civilian unemployment rate, at decline in stocks was closely paralleled by a drop in 4.4 percent in February, stayed in the narrow 4lA to sales, and the aggregate inventory-sales ratio for the 41/2 percent range that had prevailed since spring sector stayed around the top of its range over the past 1998. twelve months. Retail inventories increased consider- Total industrial production was unchanged in Janu- ably in January, but with sales growing rapidly, the ary and rose slightly in February. Gas and oil extrac- aggregate inventory-sales ratio remained at the bottion slumped in January, and mild weather restrained tom of its range over the past year. utility output in February. Manufacturing production The U.S. trade deficit in goods and services widincreased modestly in both months, reflecting strong ened substantially in January from its fourth-quarter increases in the output of high-tech industries that average. The value of exports fell for a third straight more than offset declines in the production of aircraft month and reached its lowest level since last August; and of motor vehicles and parts. The factory operat- half of the drop was in agricultural products. The ing rate fell further in the January-February period, value of imports retraced in January most of its as the growth in manufacturing capacity continued to December decline, with sizable increases recorded outpace the rise in production. for imported consumer goods, computers, and motor Consumer spending surged in the early months of vehicles from Canada. The economies of many of the 1999, supported by rapidly rising disposable personal major foreign industrial countries faltered in the income, soaring household net worth, and buoyant fourth quarter. Japan recorded a fifth straight quarconsumer sentiment. Attractive pricing and the favor- terly decline in economic activity, and growth in real able trends in income and wealth contributed to output weakened in the euro area and remained slugstrong underlying demand for motor vehicles, and gish in the United Kingdom. By contrast, economic substantial gains were recorded in most other catego- activity rebounded in Canada. Elsewhere, while ecories of retail sales as well. Expenditures on services nomic activity continued to decline in Latin America in January (latest available data) also exhibited and Russia, there were indications that some Asian strength, most notably in spending for energy ser- economies might be bottoming out and that recovery vices, which picked up after an unseasonably warm might be under way in Korea. December. Inflation remained subdued in early 1999. Both the Housing demand remained elevated. Single-family total and core measures of consumer prices increased home sales were still at a very strong level in January only slightly in January and February, and core infla- (latest data), despite a drop from their recent record tion for the twelve months ended in February was high. Housing starts increased appreciably in the somewhat lower than for the year-earlier period. January-February period, as builders took advantage At the producer level, prices of finished goods other of good weather to try to catch up with backlogged than food and energy changed little over January demand. and February. For the twelve months ended in Feb- Business fixed investment appeared to have decele- ruary, core producer price inflation was somewhat rated noticeably from the very fast pace of the fourth higher than for the year-earlier period, but the quarter. Data on shipments of nondefense capital pickup partly reflected the large increase in tobacco goods in January and February suggested that busi- prices that had resulted from the settlement of the ness outlays for computers and motor vehicles were lawsuit brought by state attorneys general. Average growing less rapidly, and purchases of most other hourly earnings of private production or nonsupervitypes of durable equipment seemed to be slowing sory workers increased moderately on balance over somewhat. Nonresidential construction activity was the January-February period. The rise in average down on balance in January, though the construction hourly earnings for the year ended in February Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 495 was noticeably smaller than that for the year-earlier funds as conditions in financial markets brightened. period. Both aggregates were estimated to have increased At its meeting on February 2-3, 1999, the Commit- over the first quarter at rates somewhat above the tee adopted a directive that called for maintaining Committee's annual ranges. Total domestic nonfinanconditions in reserve markets consistent with an cial debt continued to expand at a pace somewhat unchanged federal funds rate of about 43A percent above the middle of its range. and that did not contain any bias relating to the The staff forecast prepared for this meeting sugdirection of possible adjustments to policy during gested that the expansion would gradually moderate the intermeeting period. The Committee judged this to a rate commensurate with the growth of the econopolicy stance to be consistent with its objectives of my's estimated potential. Growth of private final fostering high employment and sustained low infla- demand would be damped by the anticipated waning tion and, over the near term at least, viewed the risks of positive wealth effects stemming from earlier large to this outlook as reasonably well balanced. increases in equity prices and by slower growth of Open market operations throughout the intermeet- spending on consumer durables, housing units, and ing period were directed toward maintaining the fed- business equipment after the earlier buildup in the eral funds rate at around 43A percent. Market interest stocks of these items. The lagged effects of the earlier rates changed little immediately after the February rise in the foreign exchange value of the dollar were meeting because market participants had expected expected to place continuing, though diminishing, the Committee's decision. Subsequently, however, restraint on the demand for U.S. exports for some Treasury yields moved up significantly in response to period ahead and to lead to further substitution of incoming data suggesting further robust growth in imports for domestic products. Pressures on labor aggregate spending and then retraced much of the resources were likely to remain substantial. Price rise after the receipt of favorable news on inflation. inflation was projected to rise somewhat over the Short-term interest rates changed little on balance projection horizon, largely as a result of an expected over the intermeeting interval, and longer-term rates upward trend in energy prices. rose somewhat. Key indexes of stock market prices In the Committee's discussion of current and prorecorded mixed changes. spective economic developments, members com- The trade-weighted value of the dollar in foreign mented that for an extended period most forecasters exchange markets increased somewhat over the inter- had been projecting slower economic growth and meeting period in relation to the currencies of a broad higher inflation than actually had materialized. With group of important U.S. trading partners. Much of the regard to output, current indicators provided little dollar's upward movement came against a subset evidence of any moderation in the pace of the expanof major currencies. A large rise in terms of the yen sion from the robust growth experienced on average occurred in response to an easing of monetary policy over the last few years. Even so, most members by the Bank of Japan that reduced the overnight call viewed a slowing to a rate closer to most estimates of rate to an extremely low level and fostered a consid- the growth of the economy's potential as a reasonable erable decline in Japanese bond yields. The dollar expectation. They agreed, however, that the timing also rose substantially against the euro, which was and extent of such moderation were subject to a wide weighed down by signs of continued weakness in range of uncertainty. Factors expected to foster Germany and, late in the period, by the outbreak of slower growth in key demand sectors of the economy hostilities in the Balkans. Among the emerging coun- included the buildup of large stocks of business tries, the Brazilian real depreciated on balance against equipment, housing units, and durable goods by the dollar, although it firmed late in the period as households and an assumption that the stock market overall financial conditions in that country stabilized would play a more neutral role than in recent years. somewhat, and the Mexican peso appreciated against The effects of domestic demand on domestic prothe dollar in association with a rebound in oil prices. duction would continue to be damped by further Expansion of M2 and M3 moderated considerably increases in the trade deficit, though the offset from on balance in the early months of 1999 from the rapid this source might well diminish if financial markets increases of the fourth quarter. The deceleration of and economies in key developing nations were to these aggregates apparently reflected the waning exhibit more signs of stabilization or improvement. effects of the policy easings of last autumn in nar- Given the persistence of robust growth in domestic rowing the opportunity cost of holding M2 assets, a demand and the continuing forward momentum in slowdown in mortgage refinancing activity, and a U.S. economic activity, many of the members combounceback in household purchases of stock mutual mented that the risks to their forecasts were tilted Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

496 Federal Reserve Bulletin • July 1999 toward the eventual emergence of somewhat greater moderate over time as a result of the large buildup inflation pressures. Despite the persistence of very and reduced utilization of capacity and the forecasted tight labor markets across the nation, however, there slower growth in final sales. While the prospect of currently were only scattered indications of more further declines in the prices of some equipment rapid increases in wages and no evidence of rising would encourage continued growth in spending, the price inflation. The reasons underlying this remark- lower prices were not expected to outweigh the able economic performance were potentially transi- effects of relatively low capacity usage and more tory but also possibly of a longer-term nature. Lower moderate growth in overall demand in coming quaroil and other input prices had played a role. However, ters. In this regard, some signs of deceleration could it also seemed likely that accelerating productivity be detected in the currently available data, though helped to account for the economy's ability to sustain from extremely rapid rates of growth. With respect to not only higher rates of growth of output but also commercial building, members reported strong conrelatively low levels of unemployment, at least for a struction activity in many areas, but some also noted time, without generating higher inflation. that such construction appeared to have reached a In their review of developments across the nation, peak, as evidenced in part by signs of overbuilding in the members reported sustained, and in some areas a few areas. Moreover, current data suggested little or rising, overall growth in regional economic activity. no growth in overall expenditures on nonresidential At the same time, some sectors were continuing to structures. experience varying degrees of softness, notably those Residential sales and construction were described most affected by developments abroad such as manu- as very strong in many parts of the country and facturing, agriculture, and energy. A number of mem- indeed were being held down in some areas by low bers referred, however, to signs of recent improve- inventories of housing available for sale and a limited ment in manufacturing that appeared to be associated supply of qualified construction workers. Some memprimarily with the strength of domestic demand but bers commented that housing construction backlogs to some extent also with increased demand from and unusually mild winter weather in many areas had some developing countries. sustained a high level of housing construction in With regard to developments in key expenditure recent months. Looking ahead, however, members sectors of the economy, the members anticipated that observed that residential building activity appeared to growth in consumer spending would retain consider- have peaked in some areas, and an oversupply of able upward momentum, given their expectations of apartments was reported in a few major cities. More favorable fundamentals such as further expansion in generally, the rise in mortgage rates since last fall and employment and incomes, the rise in financial wealth some softening of demand indicators pointed to less that had continued through the first quarter, and ready strength in the housing sector. Even so, the outlook access to consumer credit. Some also referred to for jobs and income and the buildup of financial the currently elevated level of consumer confidence. wealth constituted favorable home affordability fac- As time went on, however, it seemed unlikely that tors that appeared likely to support a continuing high growth in consumer spending would be sustained level of housing demand, especially in the singleat its recent exceptional pace. The accumulation of family sector. durable goods by consumers in recent years should at Relatively heavy spending on imports owing to some point inhibit further large increases in spending strong domestic demand and low prices likely would for such goods. Moreover, the favorable effect of the exert a continuing negative effect on net exports over extended run-up in stock market wealth evidently had the next several quarters. Nevertheless, demand for been a factor in bolstering consumer confidence and U.S. exports could begin to pick up, given what now willingness to spend. While the course of stock mar- appeared to be improved prospects for economic ket prices could not reliably be predicted, the mar- activity in several emerging market economies. ket's stimulative effect on spending was likely to Financial market conditions had become more settled wane over time in the absence of further appreciable in a number of these economies, and contagion from advances in prices. Current indications of some soft- developments in Brazil now seemed to present a ening in home sales and reduced mortgage refinanc- reduced threat to that nation's trading partners. Even ing activity, should they persist, also augured less so, foreign-sector forecasts—for industrial as well as stimulus to consumer spending in coming quarters. emerging market economies—remained subject to considerable downside risk, including uncertainties The extraordinary expansion in business fixed stemming from the recent flare-up of hostilities in the investment in recent years, fueled to a major extent Balkans. by purchases of new equipment, was also expected to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 497 In the Committee's discussion of the outlook for that they favored an unchanged policy stance. Several inflation, members commented that they saw no evi- commented that they saw no significant changes in dence of any acceleration in price inflation despite the tenor of recent statistical and anecdotal reports the continuing strength of the economic expansion that would constitute the basis for an adjustment to and the tightness of labor markets. Anecdotal reports policy or a greater presumption that policy might from around the nation continued to underscore the need to be changed soon. Many referred in particular difficulty or inability of most business firms to raise to the absence of any warning signs of accelerating prices in highly competitive markets. There were a inflation over the near term as a major consideralimited number of reports of relatively sizable tion in support of a steady policy at this time. In the increases in wages paid to workers with skills in view of some, however, the next policy action was especially short supply, but on the whole employers more likely to be a firming than an easing. They were successful in holding down increases in labor saw a greater likelihood that tight—and perhaps compensation and offsetting them through improve- tightening—labor markets would add to price presments in productivity. Indeed, increases in unit labor sures than that demand would falter or that inflation costs, at least in the nonfinancial corporate sector and would decrease further. Yet they recognized that such perhaps more widely as well, had declined to a very forecasts were subject to a substantial degree of low rate over the past year. uncertainty. This argued for a cautious approach to The members saw little reason to anticipate any any policy change, especially in light of an economic significant, continuing increase in inflation in the performance that had not conformed to historical near term. Inflation was expected to rise, owing to the patterns in recent years. While a number of members recent hikes in oil prices, but the increase should be noted that a case might be made for unwinding part limited. And with little evidence of rising pressures of the Committee's easing actions during the fall of on prices at early stages of production or on nominal last year, given the recovery in financial markets and wages, inflation should remain contained for a time. the improvement in the economic outlook since then, However, some members were concerned about the they argued that the incoming data and prospects for risk that sustained rapid growth in aggregate demand sustained favorable economic performance did not would stretch markets even more. Even presuming support such an action. The members concluded that that growth in economic activity would moderate to a the Committee was in a position to wait for developpace close to the economy's potential, labor markets ments to unfold, especially given the absence of any would remain relatively taut and at some point could evidence of an impending acceleration of underlying trigger faster increases in labor compensation and, in inflation. If the risks of higher inflation intensified, it turn, rising price inflation. Moreover, the dissipation would still have time to take action to head off price or reversal of favorable supply factors—including, pressures in order to foster sustained economic for example, in addition to energy prices the waning growth and a high level of employment. Many of the effects of the dollar's earlier appreciation—could con- members emphasized, however, that in such circumtribute to higher inflation expectations and faster stances the Committee might need to act promptly to nominal compensation increases. In the view of some forestall a buildup of inflationary forces that could others, though, the impact on prices of the unwinding destabilize the expansion. of the favorable factors might well be muted or offset All the members endorsed a proposal to retain the by a possible further uptick in productivity growth. existing symmetry of the directive with respect to Accelerating productivity had been spurring invest- possible adjustments to policy during the intermeetment in capacity and intense competition among busi- ing period. While many believed that the next policy nesses and had been holding down labor costs. Fur- move likely would be in the direction of some tightthermore, optimism about improving productivity ening, such an outcome was not a foregone concluwas evident in projections of business profits and the sion, and in any event the timing of the next policy high level of equity prices. In any event, it was clear action was highly uncertain. It also was noted that a that forecasts in recent years typically had overstated biased directive would not be consistent with the the rise in inflation, and a great deal of uncertainty members' view that a policy adjustment was unlikely surrounded the extent to which productivity gains in the period just ahead. Moreover, while the Comand other factors, some unspecified, might continue mittee's disclosure procedures do not always require to hold down inflation in a period of robust economic the immediate announcement of a shift in symmetry, growth and relatively tight labor markets. the members agreed that were they to announce a In the Committee's discussion of policy for the shift to a tightening bias, it would likely have in intermeeting period ahead, all the members indicated current circumstances a relatively pronounced and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

498 Federal Reserve Bulletin • July 1999 undesired effect on financial markets. In particular, moderation in March. Both aggregates are estimated to the markets might well build in higher odds of a have increased over the first quarter at rates somewhat above the Committee's annual ranges. Total domestic nonpolicy tightening move at the May or June meetings financial debt has continued to expand at a pace somewhat than currently was consistent with the members' above the middle of its range. thinking. It also seemed desirable to defer any change The Federal Open Market Committee seeks monetary in the directive and await further developments relat- and financial conditions that will foster price stability and ing to the hostilities in the Balkans. promote sustainable growth in output. In furtherance of these objectives, the Committee at its meeting in Feb- At the conclusion of this discussion, the Commitruary established ranges for growth of M2 and M3 of 1 to tee voted to authorize and direct the Federal Reserve 5 percent and 2 to 6 percent respectively, measured from Bank of New York, until it was instructed other- the fourth quarter of 1998 to the fourth quarter of 1999. wise, to execute transactions in the System Account The range for growth of total domestic nonfinancial debt in accordance with the following domestic policy was set at 3 to 7 percent for the year. The behavior of the monetary aggregates will continue to be evaluated in the directive: light of progress toward price level stability, movements in their velocities, and developments in the economy and The information reviewed at this meeting suggests that financial markets. the expansion in economic activity is still robust. Nonfarm To promote the Committee's long-run objectives of price payroll employment posted sizable further gains in January stability and sustainable economic growth, the Committee and February, and the civilian unemployment rate remained in the immediate future seeks conditions in reserve markets below 4V2 percent. Total industrial production edged higher consistent with maintaining the federal funds rate at an over the first two months of the year. Total retail sales rose average of around 43A percent. In view of the evidence sharply further over the two months, and housing starts currently available, the Committee believes that prospecincreased appreciably from an already elevated level. tive developments are equally likely to warrant an increase Available indicators suggest that business capital spending or a decrease in the federal funds rate operating objective decelerated in early 1999 but growth was still relatively during the intermeeting period. rapid. The nominal deficit on U.S. trade in goods and services widened substantially in January from its fourth- Votes for this action: Messrs. Greenspan, McDonough, quarter average. Inflation has remained subdued despite Boehne, Ferguson, Gramlich, Kelley, McTeer, Meyer, very tight labor markets. Moskow, Ms. Rivlin, and Mr. Stern. Votes against this Short-term interest rates have changed little since the action: None meeting on February 2-3, 1999, while longer-term rates have risen somewhat on balance. Key measures of share It was agreed that the next meeting of the Commitprices in equity markets have registered mixed changes tee would be held on Tuesday, May 18, 1999. over the intermeeting period. In foreign exchange markets, the trade-weighted value of the dollar has risen somewhat The meeting adjourned at 12:35 p.m. over the period in relation to the currencies of a broad group of important U.S. trading partners, and the appre- Donald L. Kohn ciation has been a bit larger against a subset of major Secretary currencies. M2 and M3 continued to record large increases in January and February, but available data pointed to substantial Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

499 Legal Developments ORDERS ISSUED UNDER BANK HOLDING COMPANY mont, controlling deposits of $2 billion, representing ap- ACT proximately 27.3 percent of state deposits. Chittenden is the 32d largest depository institution in Orders Issued Under Section 3 of the Bank Holding Massachusetts, controlling deposits of $499 million, repre- Company Act senting less than 1 percent of state deposits. Vermont Financial is the 71st largest depository institution in the Chittenden Corporation state, controlling deposits of $238 million, also represent- Burlington, Vermont ing less than 1 percent of state deposits. On consummation of the proposal, Chittenden would become the 18th largest Order Approving the Acquisition of a Bank Holding depository institution in Massachusetts, controlling depos- Company its of $737 million, representing less than 1 percent of state deposits.3 Chittenden Corporation ("Chittenden"), a bank holding company within the meaning of the Bank Holding Com- Interstate Analysis pany Act ("BHC Act"), has requested the Board's approval under section 3 of the BHC Act (12 U.S.C. § 1842) Section 3(d) of the BHC Act allows the Board to approve to acquire Vermont Financial Services Corp., Brattleboro, an application by a bank holding company to acquire Vermont ("Vermont Financial"), and its wholly owned control of a bank located in a state other than the home subsidiary banks, Vermont National Bank ("Vermont state of the bank holding company if certain conditions are National"), also in Brattleboro, and United Bank, Green- met.4 For purposes of the BHC Act, the home state of field, Massachusetts ("United Bank").1 Chittenden is Vermont, and Vermont Financial's subsid- Notice of the proposal, affording interested persons an iary banks are located in Vermont, Massachusetts, and opportunity to submit comments, has been published New Hampshire.5 Thus, for purposes of section 3(d), this (64 Federal Register 6361 (1999)). The time for filing transaction involves the acquisition by a Vermont bank comments has expired, and the Board has considered the holding company of banks in Massachusetts and New proposal and all comments received in light of the factors Hampshire. set forth in section 3 of the BHC Act. All the conditions for an interstate acquisition enumer- Chittenden, with total consolidated assets of $2.1 billion, ated in section 3(d) of the BHC Act are met in this case.6 In operates depository institutions in Vermont and Massachusetts.2 Chittenden is headquartered in Vermont and is the 3. Vermont Financial's subsidiary banks also maintain branches in third largest depository institution in the state, controlling New Hampshire. On consummation of the proposal, Chittenden would deposits of $1.2 billion, representing approximately become the sixth largest depository institution in New Hampshire, 16.8 percent of total deposits in insured depository institu- controlling deposits of $229 million, representing approximately tions in the state ("state deposits"). Vermont Financial, 1.7 percent of state deposits. 4. See 12 U.S.C. § 1842(d). A bank holding company's home state with total consolidated assets of $2.1 billion, also operates is that state in which the total deposits of all banking subsidiaries of depository institutions in Vermont and Massachusetts. Verthe company were the largest on July 1, 1966, or on the date on which mont Financial is the second largest depository institution the company became a bank holding company, whichever is later. in Vermont, controlling deposits of $1.3 billion, represent- 12 U.S.C. § 1841(o)(4)(C). ing approximately 17.3 percent of state deposits. On con- 5. For purposes of section 3(d) of the BHC Act, the Board considers a bank to be located in the states in which the bank is chartered or summation of the proposal, and after accounting for the headquartered or operates a branch. NationsBank Corporation, proposed divestitures discussed in this order, Chittenden 84 Federal Reserve Bulletin 858 (1998). would become the largest depository institution in Ver- 6. See 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). Chittenden is adequately capitalized and adequately managed, as defined in the BHC Act, and the subsidiary banks of Vermont Finan- 1. Chittenden expects to merge the subsidiary banks of Vermont cial have been in existence and operated for the minimum periods of Financial into the subsidiary banks of Chittenden in the near future. time necessary to satisfy age requirements established by applicable Chittenden also has requested the Board's approval to hold and to state law. See Mass. Gen. Laws Ann. Ch. 167A, § 2 (West 1998) exercise an option to acquire up to 19.9 percent of the voting shares of (three years). Chittenden also would not exceed applicable state law Vermont Financial. This option would expire on consummation of the deposit limitations as calculated under state law. See Mass. Gen. Laws proposal. Ann. Ch. 167A, § 2 (West 1998) (30 percent); N.H. Rev. Stat. Ann. 2. Asset data are as of December 31, 1998. State deposit data are as § 384-B:3 (1999) (20 percent). On consummation of the proposal, of June 30, 1998. In this context, depository institutions include Chittenden would control less than 10 percent of the total amount of commercial banks, savings banks, and savings associations. deposits in insured depository institutions in the United States. All Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

500 Federal Reserve Bulletin • July 1999 view of all the facts of record, the Board is permitted to ing markets.11 After consummation of the proposal, numerapprove the proposal under section 3(d) of the BHC Act. ous competitors would remain in each banking market and the markets would remain moderately concentrated as mea- Competitive Considerations sured by the HHI. The BHC Act prohibits the Board from approving an B. Banking Markets in Vermont application under section 3 of the BHC Act if the proposal would result in a monopoly or would be in furtherance of To mitigate the potential anticompetitive effects of the any attempt to monopolize the business of banking. The proposal in the eight banking markets in Vermont, Chit- BHC Act also prohibits the Board from approving a pro- tenden has committed to divest 18 branches that control a posed combination that would substantially lessen compe- total of $497 million in deposits.12 After accounting for the tition or tend to create a monopoly in any relevant banking proposed divestitures, consummation of the proposal market, unless the Board finds that the anticompetitive would be consistent with Board precedent and the DOJ effects of the proposal are clearly outweighed in the public Guidelines in six of the Vermont banking markets: interest by the probable effects of the proposal in meeting Bennington, Brattleboro, Middlebury, Rutland, Springfield, the convenience and needs of the community to be served.7 and Vergennes.13 In addition, a significant number of com- Chittenden and Vermont Financial compete directly in petitors would remain in each of these banking markets eight banking markets in Vermont and two banking mar- relative to the size of the market after consummation of the kets in Massachusetts.8 The Board has carefully reviewed proposal. the competitive effects of the proposal in these banking Consummation of the proposal in the Barre-Montpelier markets in light of all the facts of record, including the and Burlington-St. Albans banking markets would exceed number of competitors that would remain in the markets, the DOJ Guidelines after accounting for the proposed the relative shares of total deposits in depository institu- divestitures. In these markets, the Board has considered tions in the markets ("market deposits")9 controlled by the whether other factors either mitigate the competitive efcompanies involved in this transaction, the concentration fects of the proposal in the market or indicate that the levels of market deposits and the increase in these levels as proposal would have a significantly adverse effect on commeasured by the Herfindahl-Hirschman Index ("HHI") petition in the market.14 under the Department of Justice Merger Guidelines ("DOJ Barre-Montpelier. Chittenden is the fourth largest depos- Guidelines"),10 and other characteristics of the markets. itory institution in the market, controlling deposits of $106.6 million, representing approximately 15.4 percent of A. Banking Markets in Massachusetts market deposits. Vermont Financial is the second largest depository institution in the market, controlling deposits of Consummation of the proposal without divestitures would $150.9 million, representing approximately 21.9 percent of be consistent with Board precedent and the DOJ Guide- market deposits. Chittenden proposes to divest two lines in the Boston and Springfield, Massachusetts, bank- branches in the Barre-Montpelier banking markets with total deposits of $30.1 million to a banking organization other requirements of section 3(d) of the BHC Act also would be met 11. The effect of the proposal on the concentration of banking on consummation of the proposal. resources in these markets is set forth in Appendix B. 7. 12 U.S.C. § 1842(c). 12. With respect to each market in which Chittenden has committed 8. The banking markets are described in Appendix A. to divest offices to mitigate the anticompetitive effects of the proposal, 9. Market share data are as of June 30, 1998, and are based on Chittenden has committed to execute, before consummation of the calculations that, except as noted in this order, include the deposits of acquisition of Vermont Financial, sales agreements for the proposed thrift institutions at 50 percent. The Board previously has indicated divestitures with a purchaser determined by the Board to be competithat thrift institutions have become, or have the potential to become, tively suitable and to complete the divestiture within 180 days of significant competitors of commercial banks. See, e.g., Midwest consummation of the acquisition of Vermont Financial. Chittenden Financial Group, 75 Federal Reserve Bulletin 386 (1989); National also has committed that, if it is unsuccessful in completing any City Corporation, 70 Federal Reserve Bulletin 743 (1984). Thus, the divestitures within the 180-day period, it will transfer the unsold Board has regularly included thrift deposits in the calculation of branch(es) to an independent tnistee that is acceptable to the Board market share on a 50-percent weighted basis. See, e.g., First Hawai- and will instruct the trustee to sell the branch(es) promptly to one or ian, Inc., 77 Federal Reserve Bulletin 52 (1991). more alternative purchasers acceptable to the Board. See Bank- 10. Under the DOJ Guidelines, 49 Federal Register 26,823 (1984), America Corporation, 78 Federal Reserve Bulletin 338 (1992); United a market in which the post-merger HHI is more than 1800 is consid- New Mexico Financial Corporation, 11 Federal Reserve Bulletin 484 ered highly concentrated. The Department of Justice has informed the (1991). Chittenden also has committed to submit to the Board an Board that a bank merger or acquisition generally will not be chal- executed trust agreement acceptable to the Board stating the terms of lenged (in the absence of other factors indicating anticompetitive these divestitures. effects) unless the post-merger HHI is at least 1800 and the merger 13. The effect of the proposal on the concentration of banking increases the HHI by more than 200 points. The Department of Justice resources in these markets is set forth in Appendix C. has stated that the higher than normal HHI thresholds for screening 14. The number and strength of factors necessary to mitigate the bank mergers for anticompetitive effects implicitly recognize the competitive effects of a proposal depend on the level of concentration competitive effects of limited-purpose lenders and other nondeposi- and size of the increase in market concentration. See NationsBank tory financial institutions. Corporation, 84 Federal Reserve Bulletin 129 (1998). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 501 that does not currently have a presence in the market. On market deposits. The HHI would increase not more than consummation of the proposed merger and divestiture, 219 points to 2198. Chittenden would become the largest depository institution Several factors mitigate the potential adverse effects that in the market, controlling deposits of $227.3 million, repre- may result from the proposal in the Burlington-St. Albans senting approximately 32.9 percent of market deposits. banking market. In particular, the Board has considered the A number of factors indicate that the competitive effects number of competing institutions in and the structure of the of the proposal are not likely to be significantly adverse in Burlington-St. Albans banking market. Seven depository this market. First, a large number of financial institutions institutions in addition to Chittenden would remain in the compete in this market. Seven commercial banks, in addi- market after the proposed acquisition. The proposed acquition to Chittenden, would remain in the market after the ror of the divested branches would become the fourth merger. In addition, one savings association that competes largest depository institution in the market, controlling in the market is particularly active in commercial as well as 11.2 percent of market deposits. Four depository institumortgage and consumer lending. Based on these activities, tions in addition to Chittenden would each control more the Board has concluded that this savings association than 9 percent of market deposits. should be considered as a full competitor of banks in this The market also appears to be attractive for entry by market.15 Seven credit unions also compete in the market out-of-market competitors. Average household income in and control approximately $234.2 million of deposits. One the Burlington MSA, which closely approximates the bankcredit union controls approximately $191.9 million of de- ing market, substantially exceeds the statewide average in posits and represents that its members include approxi- Vermont, and the population in the Burlington MSA inmately 38 percent of all households in the market.16 creased 7.8 percent from 1990 to 1997, compared to an Second, the Barre-Montpelier banking market has char- average statewide increase of 5.1 percent. In addition, one acteristics that make it attractive for entry. From 1993 to depository institution entered the market de novo in 1998, 1998, market deposits increased 13.8 percent, compared to and three depository institutions have entered by acquisian average statewide increase of 10.6 percent in Vermont. tion since 1993. One bank entered the market de novo in 1995, and three other banks have entered the market by acquisition since C. Views of Other Agencies and Conclusion 1993. The proposed divestiture to an out-of-market commercial banking organization would provide another mar- The Department of Justice has conducted a detailed review ket entrant. of the proposal and advised the Board that, conditioned on Burlington-St. Albans. Chittenden is the second largest completion of the proposed divestitures, consummation of depository institution in the market, controlling deposits of the proposal would not likely have a significantly adverse $604.2 million, representing approximately 26.6 percent of effect on competition in any relevant banking market. The market deposits. Vermont Financial is the third largest Office of the Comptroller of the Currency ("OCC") and depository institution in the market, controlling deposits of the Federal Deposit Insurance Corporation ("FDIC") also $348.5 million, representing approximately 15.3 percent of have been afforded an opportunity to comment and have market deposits. Chittenden proposes to divest seven not objected to consummation of the proposal. branches in the Burlington-St. Albans banking market with After carefully reviewing all the facts of record, and for total deposits of $220.8 million, representing approxi- the reasons discussed in the order and appendices, the mately 9.7 percent of market deposits, to a suitable compet- Board concludes that consummation of the proposal would itor. On consummation of the proposed merger and divesti- not likely result in a significantly adverse effect on competure, Chittenden would become the largest depository tition or on the concentration of banking resources in any institution in the market, controlling deposits of of the ten banking markets in which Chittenden and Ver- $731.9 million, representing approximately 32.2 percent of mont Financial directly compete or in any other relevant banking market. Accordingly, based on all the facts of record, and subject to completion of the proposed divesti- 15. The Board previously has indicated that, when analyzing the tures and compliance with the related commitments, the competitive effects of a proposal, it may consider the competition of Board has determined that competitive factors are consissavings associations at a level greater than 50 percent of the savings tent with approval of the proposal. association's deposits if appropriate. See, e.g., Banknorth Group, Inc., 73 Federal Reserve Bulletin 703 (1989). This savings association controls deposits of approximately $252.7 million and accounted for Convenience and Needs Considerations more than 30 percent of all small business loans originated in the market from September 1997 to June 1998. On the basis of In acting on a proposal under section 3 of the BHC Act, the 100-percent deposit weighting, this savings association is the third Board is required to consider the effect of the proposal on largest depository institution in the market, with 30.9 percent of market deposits, and Chittenden would become the second largest the convenience and needs of the community to be served. depository institution in the market, with 27.8 percent of market The Board has carefully considered the effect of the prodeposits. In this light, the post-merger HHI would increase 277 points posal on the convenience and needs of the communities to to 2314. be served in light of all the facts of record, including 16. Credit unions control 22.2 percent of all insured deposits in the comments submitted by two community development orgamarket, compared to 9 percent of insured deposits controlled by credit unions statewide in Vermont. nizations in Vermont and New Hampshire ("Comment- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

502 Federal Reserve Bulletin • July 1999 ers"). Commenters expressed concern that the proposal During 1996 and 1997, the bank ranked second in the may result in reduced lending for affordable housing and percentage of home mortgage loans originated in its assesscommunity development activities, reduced accessibility ment area, and the number and dollar volume of its home of banking services, and elimination of certain products mortgage loans and its market share of all such loans and services offered by Vermont National. steadily increased during these two years. Chittenden Trust The Board has long held that consideration of the conve- also originated a higher percentage of its home mortgage nience and needs factor includes a review of the records of loans during 1996 and 1997 among low- and moderatethe relevant depository institutions under the Community income ("LMI") borrowers than did lenders in the aggre- Reinvestment Act (12 U.S.C. § 2901 etseq.) ("CRA"). As gate. provided in the CRA, the Board has evaluated this factor in Examiners reported that Chittenden Trust provided a light of examinations by the appropriate federal banking broad range of loan products, including state and federal supervisors of the CRA performance records of the rele- supported affordable mortgage loan programs.19 Chittenden vant institutions.17 Chittenden's lead subsidiary bank, Chit- Trust also has developed its own affordable mortgage loan tenden Trust Company, Burlington, Vermont ("Chittenden programs in response to the needs of the community it Trust"), has received five consecutive "outstanding" rat- serves. For example, the bank offers the Chittenden Affordings for CRA performance from the FDIC, most recently able Real Estate ("CARE") Mortgage, which provides as of June 1998. Chittenden's other subsidiary banks, The home mortgage loans featuring flexible underwriting Bank of Western Massachusetts, Springfield, Massachu- guidelines to LMI borrowers. Chittenden Trust originated setts ("Western Massachusetts"), and Flagship Bank & approximately $6.7 million of CARE loans during 1996 Trust Company, Worcester, Massachusetts, also received and 1997. "outstanding" ratings for CRA performance from the Examiners cited consumer lending by Chittenden Trust FDIC at their most recent examinations, as of June 1998 during 1997 as an indicator of the bank's responsiveness to and June 1997, respectively. Vermont Financial's lead sub- the needs of its community.20 Examiners also commended sidiary bank, Vermont National, was rated "satisfactory" Chittenden Trust for its responsiveness to a demand for for CRA performance by the OCC, as of June 1997, and small business loans, noting that during 1996 it originated Vermont Financial's other subsidiary bank, United Bank, nearly 23 percent of the total number of small business was rated "satisfactory" for CRA performance by the loans made in its assessment area by reporting financial FDIC, as of December 1996. institutions.21 In reviewing this case, the Board has paid particular In addition, examiners found that Chittenden Trust parattention to the record of performance of Chittenden Trust ticipated in community development lending in a manner in helping to meet the convenience and needs of the consistent with the needs of its assessment area. The bank community, because Chittenden has indicated that Chit- originated over $1.5 million of qualified community develtenden Trust and Vermont National would merge no later than April 1, 2000, and that, in the interim, executive officers of Chittenden Trust would serve as directors and 19. Commenters questioned whether Chittenden would expand its officers of Vermont National.18 Chittenden also has com- support for affordable housing loans and multi-family housing projects mitted that it will extend Chittenden Trust's comprehen- to compensate fully for the loss of support for these projects by sive regulatory compliance program to Vermont National Vermont National. Commenters expressed particular concern that Chittenden might not maintain Vermont National's level of support of after consummation of the proposal. the Home Ownership Using Shared Equity ("HOUSE") program sponsored by the Vermont Housing Finance Authority ("VHFA"), A. Chittenden Trust's CRA Performance Record which combines state subsidies, low-cost bank funding, and the assistance of nonprofit associations to provide affordable mortgages to In the most recent CRA performance examination of Chit- low-income homebuyers. Chittenden has indicated that it intends to maintain funding for HOUSE in the same manner as provided by tenden Trust, examiners found that the geographical distri- Vermont National through the membership of its subsidiary bank, bution of lending by Chittenden Trust reflected lending Western Massachusetts, in the Federal Home Loan Bank of Boston. throughout its assessment area and at all income levels. Chittenden Trust also offers Federal Housing Administration and Examiners noted no substantive or technical violations at Veterans Administration loans and loans sponsored by Vermont Rural the bank of any antidiscrimination laws or regulations. Housing Services. 20. Chittenden Trust made 29.8 percent of the total number of its consumer loans and 23.7 percent of the total dollar volume of these loans to low-income households, while low-income households repre- 17. The Interagency Questions and Answers Regarding Community sented 22.1 percent of total households in its assessment area. Chit- Reinvestment provide that an institution's most recent CRA perfor- tenden Trust similarly made 27.3 percent of the total number of its mance evaluation is a particularly important consideration in the consumer loans, accounting for 25.4 percent of the total dollar amount applications process because it represents a detailed on-site evaluation of its consumer loans, to moderate-income households, which repreof the institution's overall record of performance under the CRA by sented 17.2 percent of total households in its assessment area. the appropriate federal banking supervisor. 62 Federal Register 21. More than 65 percent of the bank's loans were made to borrow- 52,105, 52,121 (1997). ers with gross annual revenues of $1 million or less, while reporting 18. Chittenden also has indicated that United Bank would be lenders in the assessment area in the aggregate made less than merged into Western Massachusetts no later than September 30, 1999. 35 percent of their loans to borrowers in this category. In addition, Both the proposed bank mergers are subject to the prior approval of more than 75 percent of Chittenden Trust's small business loans and the FDIC under the Bank Merger Act. all its small farm loans were originated in amounts under $100,000. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 503 opment loans in its assessment area during the period C. Conclusion on Convenience and Needs covered in the CRA performance examination. The bank Considerations also made 74 qualified community development investments, totaling $9.5 million, during this period.22 The Board has carefully considered all the facts of record, Chittenden Trust was considered by examiners to be including the comments received, responses to these comcompetitive in the banking hours it offered, the accessibil- ments, and the CRA performance records of Chittenden ity of its branches and alternative retail delivery systems, Trust, Vermont National, and the other subsidiary banks of and the variety of its banking products.23 For example, Chittenden and Vermont Financial, including relevant re- Chittenden Trust's Basic Banking Account requires no ports of examination and other supervisory information. minimum balance and, for a $3 monthly fee, includes ten Based on a review of the entire record and for the reasons checks a month and offers free ATM access. Chittenden discussed above, the Board concludes that convenience Trust also offers a free checking account to senior citizens. and needs considerations, including the CRA records of Branch openings and closings during 1996 and 1997 were performance of the institutions involved, are consistent reported not to have affected any LMI areas.24 with approval of the proposal. B. Vermont National's CRA Performance Record Financial, Managerial, and Other Supervisory Factors In the most recent CRA performance examination of Ver- The BHC Act also requires the Board, in acting on an mont National, Vermont Financial's lead subsidiary bank, application, to consider the financial and managerial reexaminers found that Vermont National extended credit to sources and future prospects of the companies and banks borrowers of all income levels and to businesses of all involved in a proposal, the convenience and needs of the sizes throughout its assessment area. The Socially Respon- community to be served, and certain other supervisory sible Banking Fund ("SRB Fund"), an independent divi- factors. sion of the bank, contributed to this performance by offer- The Board has carefully considered the financial and ing the 1-4 Affordable Housing mortgage, which featured managerial resources and future prospects of Chittenden flexible underwriting guidelines and below-market fixed and Vermont Financial and their respective subsidiary interest rates for residences in low-income housing banks, and other supervisory factors in light of all the facts projects.25 The SRB Fund also offered mobile home and of record. As part of this consideration, the Board has manufactured housing loans and other innovative home reviewed relevant reports of examination and other superfinancing for LMI households. A fair lending review con- visory information prepared by the Federal Reserve Bank ducted concurrently with the CRA performance examina- of Boston and other federal banking supervisory agencies, tion did not identify any violations of antidiscrimination including reports concerning the parties' data processing laws and regulations and noted that the bank had an effec- systems. The Board notes that the bank holding companies tive fair lending compliance program in place. and their subsidiary banks are well capitalized and are expected to remain so after consummation of the proposal. The Board also has considered other aspects of the financial condition and resources of the two organizations, the structure of the proposed transaction, and the manage- 22. Of this amount, $5 million was fully funded and $4.5 million rial resources of each of the entities and the combined consisted of unfunded commitments at the time of the examination. organization. Based on these and other facts of record, the Funded investments included $1.4 million invested under programs sponsored by the VHFA to develop four low-income housing projects. Board concludes that considerations relating to the finan- 23. Commenters raised concerns that branch closings, consolida- cial and managerial resources and future prospects of Chittions, and divestitures after consummation of the proposal would tenden, Vermont Financial, and their respective subsidiarreduce customer convenience, and that Chittenden Trust would not ies are consistent with approval of the proposal, as are the offer certain consumer lending and deposit products currently offered other supervisory factors that the Board must consider by Vermont National. 24. Commenters questioned whether job losses and community under section 3 of the BHC Act. disruptions might arise as a result of consolidations that would occur after consummation of the proposal. Chittenden has described certain Conclusion steps it would take to minimize these effects, including posting notices of job openings among Vermont Financial employees before consummation of the proposal and maintaining Chittenden's and Vermont Based on the foregoing, and in light of all the facts of Financial's operations centers at their current locations. record, the Board has determined that the application 25. Vermont National originated 64 mortgage loans totaling should be, and hereby is, approved. Approval of the appli- $6.4 million under this program during 1996 and the first half of 1997. cation is specifically conditioned on compliance by Chit- Commenters commended Vermont Financial for the expertise and leadership in community development activities that it has provided tenden with all the commitments made in connection with through the SRB Fund, and expressed concern that Chittenden may the proposal and with the conditions stated or referred to in not retain this program and provide the same level of support for this order, including Chittenden's divestiture commitments. state-supported affordable housing programs and community develop- For purposes of this transaction, the commitments and ment programs. Chittenden has indicated that it intends to maintain the SRB Fund, including its staff and advisory board, after consumma- conditions referred to in this order shall be deemed to be tion of the proposal. conditions imposed in writing by the Board in connection Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

504 Federal Reserve Bulletin • July 1999 with its findings and decision and, as such, may be en- Grand Isle County; and Belvidere, Cambridge, and Waterforced in proceedings under applicable law. ville in Lamoille County. The acquisition shall not be consummated before the Middlebury: fifteenth calendar day after the effective date of this order, Addison County, excluding the city of Vergennes and and the proposal shall not be consummated later than three the towns of Addison, Ferrisburg, Goshen, Granville, Hanmonths after the effective date of this order, unless such cock, Monkton, Panton, Starksboro, and Waltham. period is extended for good cause by the Board or by the Rutland: Federal Reserve Bank of Boston, acting pursuant to dele- Rutland RMA and the towns of Benson, Pittsfield, Poultgated authority. ney, Sherburne, and West Haven in Rutland County and By order of the Board of Governors, effective May 12, Goshen in Addison County. 1999. Springfield: The towns of Athens, Grafton, Rockingham, and West- Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and minster in Windham County and Andover, Baltimore, Cav- Governors Kelley, Meyer, and Ferguson. Absent and not voting: endish, Chester, Londonderry, Jamaica, Ludlow, Reading, Governor Gramlich. Springfield, Wethersfield, Weston, and Windham in Windsor County. ROBERT DEV. FRIERSON Vergennes: Associate Secretary of the Board The city of Vergennes and the towns of Addison, Ferrisburg, Panton, and Waltham in Addison County. Appendix A Appendix B Banking Markets in which Chittenden and Vermont Banking Markets in Massachusetts Financial Directly Compete Boston: Massachusetts Chittenden is the 179th largest depository institution in Boston: the market, controlling deposits of $11.6 million, represent- Boston Rand McNally Marketing Area ("RMA") and ing less than 1 percent of market deposits. Vermont Finanthe town of Lyndeboro in New Hampshire. cial is the 142d largest depository institution in the market, Springfield: controlling deposits of $27.3 million, also representing less Springfield RMA and the towns of Otis in Berkshire than 1 percent of market deposits. On consummation of the County; Deerfield, Leverett, Shutesbury, and Whately in proposal, Chittenden would become the 118th largest de- Franklin County; Blandford, Chester, Granville, and pository institution in the market, controlling deposits of Tolland in Hampden County; Chesterfield, Cummington, $38.9 million, representing less than 1 percent of market Goshen, Pelham, Plainfield, Westhampton, and Worthing- deposits. The HHI would remain unchanged at 1373. ton in Hampshire County; and Hardwick and Warren in Springfield: Worcester County. Chittenden is the seventh largest depository institution in the market, controlling deposits of $228.8 million, repre- Vermont senting approximately 4 percent of market deposits. Vermont Financial is the 18th largest depository institution in Barre-Montpelier: the market, controlling deposits of $64 million, represent- Barre-Montpelier RMA and the towns of Groton, Hard- ing approximately 1.1 percent of market deposits. On conwick, Stannard, and Walden in Caledonia County; Chelsea summation of the proposal, Chittenden would become the and Topsham in Orange County; and Cabot, Duxbury, fifth largest depository institution in the market, controlling Roxbury, and Woodbury in Washington County. deposits of $292.8 million, representing approximately Bennington: 5.2 percent of market deposits. The HHI would increase Bennington County, excluding the towns of Readsboro 9 points to 1205. and Stamford, and the towns of Danby, Pawlet, Wells, and West Pawlet in Rutland County. Appendix C Brattleboro: The towns of Brattleboro, Brookline, Dummerston, Guil- Banking Markets in Vermont ford, Halifax, Marlboro, Newfane, Putney, Townsend, and Vernon in Windham County and the town of Hinsdale in Bennington: New Hampshire. Chittenden is the third largest depository institution in Burlington-St. Albans: the market, controlling deposits of $102.8 million, repre- Burlington RMA and Franklin County and the towns of senting approximately 20.9 percent of market deposits. Monkton and Starksboro in Addison County; Bolton, Vermont Financial is the fourth largest depository institu- Buel's Gore, Huntington, Underhill, and Westford in Chit- tion in the market, controlling deposits of $53.9 million, tenden County; Alburg, Grand Isle, and Isle La Motte in representing approximately 11 percent of market deposits. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 505 Chittenden proposes to divest one branch with deposits of mont Financial is the largest depository institution in the approximately $53.9 million to a suitable competitor. After market, controlling deposits of $141.5 million, representthe proposed merger and divestiture, Chittenden would ing approximately 36.1 percent of market deposits. Chitremain the third largest of seven depository institutions in tenden proposes to divest three branches with total deposits the market, controlling deposits of $102.8 million, repre- of $68.1 million. After the proposed merger and divestisenting approximately 20.9 percent of market deposits. ture, Chittenden would become the largest of eight deposi- Thus, Chittenden's market share would not increase in this tory institutions in the market, controlling deposits of market. Assuming that Chittenden would sell branches to a $157.2 million, representing approximately 40.1 percent of suitable in-market competitor, the HHI would increase not market deposits. The HHI would increase 150 points to more than 112 points to 1872. 2428. Brattleboro: Vergennes: Chittenden is the fourth largest depository institution in Chittenden is the largest depository institution in the the market, controlling deposits of $26 million, represent- market, controlling deposits of $33.6 million, representing ing approximately 5.8 percent of market deposits. Vermont approximately 55.1 percent of market deposits. Vermont Financial is the largest depository institution in the market, Financial is the second largest depository institution in the controlling deposits of $206.8 million, representing ap- market, controlling deposits of $18.7 million, representing proximately 46.1 percent of market deposits. Chittenden approximately 30.7 percent of market deposits. Chittenden proposes to divest one branch with deposits of approxi- proposes to divest one branch with deposits of $18.7 milmately $28.5 million. After the proposed merger and dives- lion. After the proposed merger and divestiture, Chittenden titure, Chittenden would become the largest of eight depos- would remain the largest of three depository institutions in itory institutions in the market, controlling deposits of the market, controlling deposits of $33.6 million, represent- $204.3 million, representing approximately 45.5 percent of ing approximately 55.1 percent of market deposits. The market deposits. The HHI would decrease 45 points to HHI would remain unchanged at 4181. 3234. Middlebury: Orders Issued Under Sections 3 and 4 of the Bank Chittenden is the second largest depository institution in Holding Company Act the market, controlling deposits of $68.8 million, representing approximately 25 percent of market deposits. Vermont BOK Financial Corporation Financial is the fourth largest depository institution in the Tulsa, Oklahoma market, controlling deposits of $22.3 million, representing approximately 8.4 percent of market deposits. Chittenden BOKF Merger Corporation proposes to divest one branch with deposits of approxi- Number Seven mately $22.3 million to a suitable competitor. After the Tulsa, Oklahoma proposed merger and divestiture, Chittenden would remain the second largest of six depository institutions in the Order Approving Acquisition of a Bank Holding market, controlling deposits of $68.8 million, representing Company approximately 25 percent of market deposits. Thus, Chittenden's market share would not increase in this market. BOK Financial Corporation ("BOK Financial"), a bank Assuming that Chittenden would sell branches to a suitable holding company within the meaning of the Bank Holding in-market competitor, the HHI would increase not more Company Act ("BHC Act"), and BOKF Merger Corporathan 47 points to 2332. tion Number Seven ("Merger Corporation") have re- Rutland: quested the Board's approval under section 3 of the BHC Chittenden is the fourth largest depository institution in Act (12 U.S.C. § 1842) to acquire First Bancshares of the market, controlling deposits of $117.6 million, repre- Muskogee, Inc. ("First Bancshares"), and its wholly senting approximately 14.6 percent of market deposits. owned subsidiary, First National Bank and Trust Company Vermont Financial is the third largest depository institution of Muskogee ("First National"), both of Muskogee, Oklain the market, controlling deposits of $135.7 million, repre- homa.1 BOK Financial and Merger Corporation also have senting approximately 17.6 percent of market deposits. requested the Board's approval under section 4(c)(8) of the Chittenden proposes to divest two branches in the Rutland BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to acquire First banking market with total deposits of $54.7 million. After the proposed merger and divestiture, Chittenden would become the second largest of seven depository institution in the market, controlling deposits of $193.6 million, repre- 1. Merger Corporation has filed an application to become a bank senting approximately 25.1 percent of market deposits. The holding company in connection with the proposed transaction. Merger HHI would increase 158 points to 2141. Corporation and First Bancshares would merge, with Merger Corpora- Springfield: tion as the survivor. BOK Financial proposes to merge First National into BOK Financial's subsidiary bank, Bank of Oklahoma, National Chittenden is the second largest depository institution in Association ("BOK"), on consummation of the proposal, subject to the market, controlling deposits of $83.8 million, representapproval by the Office of the Comptroller of the Currency under the ing approximately 21.4 percent of market deposits. Ver- Bank Merger Act. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

506 Federal Reserve Bulletin • July 1999 of Muskogee Insurance Corporation, Muskogee, Okla- on the basis of the facts of record in this case, the Board homa ("First Insurance"), and thereby engage in credit- concludes that the cluster of banking products and services related insurance agency activities pursuant to section represents the appropriate line of commerce for analyzing 225.28(b)(ll)(i) of the Board's Regulation Y (12 C.F.R. the competitive effects of this proposal. 225.28(b)(ll)(i)). Once the relevant line of commerce or product market Notice of the proposal, affording interested persons an has been defined, the appropriate geographic market in opportunity to submit comments, has been published which competition for the supply and demand of the line of (64 Federal Register 1804 (1999)). The time for filing commerce occurs must be defined. In defining the relevant comments has expired, and the Board has considered the geographic market, the Board consistently has sought to proposal and all comments received in light of the factors identify the area in which the cluster of products and set forth in sections 3 and 4(c)(8) of the BHC Act. services is provided by the competing institutions and in BOK Financial, with total consolidated assets of which purchasers of the products and services seek to $6.8 billion, operates banks in Oklahoma, Arkansas, New obtain these products and services.5 The Supreme Court Mexico, and Texas, and engages through nonbanking sub- has indicated that this is the area in which the effect of an sidiaries in permissible leasing and securities-related activ- acquisition will be direct and immediate.6 In applying these ities. BOK Financial is the largest depository institution in standards to bank acquisition proposals, the Board and the Oklahoma, controlling deposits of $3.5 billion, represent- Court consistently have held that the geographic market for ing approximately 10.5 percent of total deposits in insured the cluster of services is local in nature.7 depository institutions in the state ("state deposits").2 First Bancshares is the 23d largest depository organization in The Muskogee Banking Market Oklahoma, controlling deposits of $218 million, representing less than 1 percent of state deposits. On consummation BOK and First Financial operate in Muskogee, Oklahoma. of the proposal, BOK Financial would remain the largest In determining the geographic market to be applied in this banking organization in Oklahoma, controlling deposits of case, the Board notes that the city of Muskogee is signifi- $3.7 billion, representing approximately 11.2 percent of cantly larger than any other community in the surrounding state deposits. area, and provides substantially more employment opportunities, professional and commercial services, and retail Competitive Considerations outlets than the surrounding communities.8 Commuting between the surrounding communities and Section 3 of the BHC Act prohibits the Board from approv- Muskogee appears to be extensive. Divided four-lane highing a proposal that would result in a monopoly in any relevant banking market. That section also prohibits the Board from approving a proposal that may substantially States v. Connecticut National Bank, 418 U.S. 656 (1974); Phillipslessen competition in any relevant banking market, unless burg National Bank, 399 U.S. 350 (1969) ("Phillipsburg National"). 5. See, e.g., Sunwest Financial Services, Inc., 73 Federal Reserve the anticompetitive effects of the proposal are clearly out- Bulletin 463 (1987); Pikeville National Corporation, 71 Federal Reweighed in the public interest by the probable effect of the serve Bulletin 240 (1985); Wyoming Bancorporation, 68 Federal proposal in meeting the convenience and needs of the Reserve Bulletin 313 (1982), aff'd 729 F.2d 687 (10th Cir. 1984). community to be served.3 6. Philadelphia National, 374 U.S. at 357 (1963). In that case, the Court stated that the "area of effective competition in the known line In order to determine the effect of a particular transaction of commerce must be charted by careful selection of the market area on competition, it is necessary to designate the area of in which the seller operates, and to which the purchaser can practicaeffective competition between the parties, which the courts bly turn for supplies." Id. at 359 (emphasis in orginal) (quoting Tampa have held is decided by reference to the relevant "line of Electric Co. v. Nashville Coal Co., 365 U.S. 320, 327 (1961)). 7. See Philadelphia National, 374 U.S. at 357; Phillipsburg Nacommerce" or product market and a geographic market. tional; First Union Corporation, 84 Federal Reserve Bulletin 489 The Board and the courts have consistently recognized that (1998); Chemical; St. Joseph Valley Bank, 68 Federal Reserve Bullethe appropriate product market for analyzing the competi- tin 673 (1982) ("St. Joseph"). In determining the geographic scope of tive effects of bank mergers and acquisitions is the cluster local banking markets, the Board considers a number of factors, of products (various kinds of credit) and services (such as including the following: population density; worker commuting patterns (as indicated by census data); shopping patterns; the availability checking accounts and trust administration) offered by and geographic reach of various modes of advertising; the presence of banking institutions.4 Consistent with this precedent, and shopping, employment, health care, and other necessities; the availability of transportation systems and routes; branch banking patterns; deposit and loan activity; and other indicia of economic integration 2. All asset, deposit, and ranking data are as of June 30, 1998. In and the transmission of competitive forces among depository instituthis context, depository institutions include commercial banks, sav- tions that affect the pricing and availability of banking products and ings banks, and savings associations. services. See Crestar Bank, 81 Federal Reserve Bulletin 200, 201 n.5 3. 12 U.S.C. § 1842(c)(1). (1995); Pennbancorp, 69 Federal Reserve Bulletin 548 (1983); 4. See Chemical Banking Corporation, 82 Federal Reserve Bulletin St. Joseph. 239 (1996) ("Chemical"), and the cases and studies cited therein. The 8. The population of the Muskogee Ranally Metropolitan Area, Supreme Court has emphasized that it is the cluster of products and which closely approximates the city of Muskogee and immediately services that, as a matter of trade reality, makes banking a distinct line adjacent communities, is approximately 50,000. The next largest of commerce. See United States v. Philadelphia National Bank, towns in the area are Tahlequah (population 11,965); Wagoner (popu- 374 U.S. 321, 357 (1963) ("Philadelphia National"); accord United lation 7,242); and Checotah (population 3,290). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 507 ways connect Muskogee with the towns of Tahlequah, by Tahlequah businesses.13 In addition, both the daily and Wagoner, and Checotah, and traffic counts indicate that a the weekly newspaper in Tahlequah regularly carry news substantial majority of the daily trips on these roads are stories about events in Muskogee and advertisements by between the four communities.9 Within a 10-mile radius of Muskogee businesses.14 All four radio stations in Musko- Muskogee, approximately 2,400 businesses employ almost gee advertise in the Tahlequah newspaper and carry adver- 28,000 workers, which exceeds the available workforce of tisements for Tahlequah businesses. The local telephone 21,500 in that area. A survey of the 17 largest employers in book for the "Muskogee-Tahlequah Region" combines the Muskogee area, which employ 7,267 workers, found listings for businesses in those two communities, Wagoner, that 30 percent of their workers lived outside Muskogee Checotah, and other small towns in the area. and the nearby community of Ft. Gibson.10 In addition, the Discussions by the Reserve Bank with local bankers and Oklahoma Department of Commerce divides the state of business and civic leaders also indicated that businesses in Oklahoma into 23 labor markets. The department includes Tahlequah regularly seek financial services in Muskogee, Muskogee in the Muskogee-Tahlequah labor market, which and that the distance between the communities is not a comprises all of Muskogee County, all of Cherokee County significant impediment.15 Based on Reserve Bank surveys, (including Tahlequah), the eastern half of Wagoner County it further appears that there is little or no difference in (including Wagoner), the northern half of Mcintosh County prices for banking products and services among Muskogee (including Checotah), and Adair County.11 and the surrounding communities, including Tahlequah. Muskogee also offers a broad range of goods and ser- Based on the foregoing and all other facts of record, the vices that are unavailable in the surrounding communities Board concludes that the appropriate banking market for and that attract residents to Muskogee. Muskogee has a considering the competitive effects of this case is the 336-bed hospital staffed by more than 200 physicians, a cluster of banking products and services, and that the Veterans Adminstration hospital, 160 businesses in the appropriate geographic market for considering the compethealth services industry, and an enclosed mall that features itive effects of this proposal is the area that includes three major national department store anchors and several Muskogee County, Cherokee County (including Tahlother national retail chains. Data from the mall's anchor equah), the eastern half of Wagoner County (including stores indicate that only 40 percent of their sales are Wagoner), and the town of Checotah in Mcintosh County, derived from Muskogee residents, and that the majority of all in Oklahoma (the "Muskogee banking market"). the their business is from residents of the surrounding In the Muskogee banking market, BOK Financial is the communities.12 A survey conducted by the Federal Reserve third largest depository institution, controlling deposits of Bank of Kansas City ("Reserve Bank") revealed that $148 million, representing approximately 12.8 percent of 55 percent of respondents in Tahlequah traveled to Musko- all deposits held by depository institutions in the market gee at least once a month, including 13 percent who ("market deposits").16 First Bancshares is the second largreported that they traveled to Muskogee at least once a est depository institution in the market, controlling deposweek. In Wagoner, 70 percent of respondents indicated that its of $217 million, representing approximately 18.9 perthey traveled to Muskogee at least once a month, including cent of market deposits. On consummation of the proposal, 32 percent who traveled to Muskogee at least once a week. BOK Financial would become the largest depository insti- Newspaper circulation statistics also indicate that there tution in the Muskogee banking market, controlling deposis extensive economic interaction between Muskogee and its of $365 million, representing approximately 31.7 per- Tahlequah. Approximately 22 percent of Tahlequah house- cent of market deposits. The concentration of market holds receive the daily Muskogee newspaper, which fea- deposits, as measured by the Herfindahl-Hirschman Index tures stories about events in Tahlequah and advertisements 13. In addition, more than one-third of the households in Wagoner 9. For example, more than 10,000 vehicles pass daily between and three-fourths of the households in Checotah receive the Muskogee Tahlequah and Muskogee on U.S. Highway 62. East of Tahlequah and daily newspaper. west of Muskogee, this highway has two lanes and the traffic count 14. An independent newspaper circulation audit firm has deterdrops to 1,500, according to the Oklahoma Department of Transporta- mined that the newspaper market for the Muskogee daily newspaper tion. includes all of Muskogee County, western portions of Cherokee 10. The statistics are from a survey by the Greater Muskogee County (including Tahlequah), eastern portions of Wagoner County Development Corporation. The survey indicated that 13.7 percent of (including Wagoner), and northeastern portions of Mcintosh County the workforce in Tahlequah was employed in Muskogee County. Data (including Checotah). from the 1990 United States census indicate that 23 percent of the 15. The Tehlequah office of Oklahoma Small Business Developworkforce in the town of Checotah and 19 percent of the workforce in ment Center indicated that it often refers its small business clients in the town of Wagoner were employed in Muskogee County. Tahlequah to banks in Muskogee to obtain financing. 11. In response to a survey conducted by the Federal Reserve Bank 16. Market share data are based on calculations in which the of Kansas City, the Tahlequah office of the Oklahoma Employment deposits of thrift institutions are included at 50 percent. The Board Security Commission reported that it placed 10 percent to 15 percent previously has indicated that thrift institutions have become, or have of its applicants in jobs in Muskogee, and employment services in the potential to become, significant competitors of commercial banks. Muskogee indicated that 10 percent to 20 percent of their applicants See Midwest Financial Group, 75 Federal Reserve Bulletin 386 were from Tahlequah. (1989); National City Corporation, 70 Federal Reserve Bulletin 743 12. Tahlequah residents provided approximately 10 percent of the (1984). Thus, the Board has regularly included thrift institutions in the stores' receipts, and sales to residents of Wagoner and Checotah calculation of market shares on a 50-percent weighted basis. See, e.g., approximated their percentage of the area population. First Hawaiian, Inc., 77 Federal Reserve Bulletin 52 (1991). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

508 Federal Reserve Bulletin • July 1999 ("HHI"), would not exceed the threshold level set in the centration of banking resources in the Muskogee banking Department of Justice Merger Guidelines ("DOJ Guide- market or any other relevant banking market. lines").17 In reviewing the likely competitive effects of the pro- Financial, Managerial, and Other Considerations posal in the Muskogee banking market, the Board has considered all the facts of record. Twelve commercial The BHC Act also requires the Board to consider the banks, including BOK Financial, and two savings associa- financial and managerial resources and future prospects of tions would remain in the market after consummation of the companies and banks involved in the proposal, the the proposal, which represents a large number of competi- convenience and needs of the community to be served, and tors relative to the size of the market.18 One competing certain supervisory factors. The Board has reviewed these commercial bank would control more than 20 percent of factors in light of all the facts of record, including supervimarket deposits, and 5 additional competing commercial sory reports of examination assessing the financial and banks would each control at least five percent of market managerial resources of the organizations. Based on all the deposits. facts of record, the Board concludes that the financial and The market also appears attractive for additional entry. managerial resources and future prospects of BOK Finan- From 1990 to 1998, household income increased 33 per- cial, First Bancshares, and their respective subsidiaries are cent in Muskogee County and 39.1 percent in Cherokee consistent with approval. Considerations related to the County, compared to an average statewide increase of convenience and needs of the community and the other 19.5 percent. Deposits also increased at a higher percent- supervisory factors the Board must consider under section age than the statewide average Total deposits in insured 3 of the BHC Act also are consistent with approval. depository institutions increased 20.2 percent in Muskogee County and 14.7 percent in Cherokee County, compared to Nonbanking Activities an average increase of 14.6 percent statewide. Cherokee County's population increased 14.3 percent from 1990 to BOK Financial also has filed a notice under section 4(c)(8) 1998, compared to an average statewide increase of of the BHC Act to acquire First Bancshares' nonbanking 2.4 percent. subsidiary, First Insurance, and thereby engage in credit- Thus, the market structure and other characteristics of related insurance agency activities. The Board has deterthe Muskogee banking market, including the significant mined by regulation that providing credit-related insurance number of depository institutions in the market, the market is closely related to banking for purposes of the BHC shares and resources of those institutions, and the potential Act.20 BOK Financial has committed to conduct this nonfor entry by additional competitors, reduce the likelihood banking activity in accordance with the limitations set of successful anticompetitive pricing or collusion in the forth in Regulation Y and the Board's orders and interpremarket. As in other cases, the Board sought comments tations governing this activity. from the Department of Justice, the Federal Deposit Insur- In order to approve a notice under section 4(c)(8) of the ance Corporation ("FDIC"), and the Office of the Comp- BHC Act, the Board also must determine that the proposed troller of the Currency ("OCC") on the competitive effects activities are a proper incident to banking, that is, that the of the proposal. Neither the FDIC nor the OCC have proposal "can reasonably be expected to produce benefits objected to the proposal.19 to the public . . . that outweigh possible adverse effects, Based on all the facts of record, and for the reasons such as undue concentration of resources, decreased or discussed above, the Board concludes that consummation unfair competition, conflicts of interests, or unsound bankof the proposal would not result in a monopoly or have a ing practices."21 As part of its evaluation of these factors, significantly adverse effect on competition or on the con- the Board considers the financial condition and managerial resources of the notificant and its subsidiaries, including the companies to be acquired, and the effect of the pro- 17. On consummation of the proposal, the HHI would increase 484 posed transaction on those resources. Based on all the facts points to 1705. Under the DOJ Guidelines (49 Federal Register of record, the Board has concluded that financial and 26,823 (June 29, 1984)), a market in which the post-merger HHI is managerial considerations are consistent with approval of between 1000 and 1800 is considered to be moderately concentrated. the notice. The Department of Justice has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other BOK currently does not provide credit-related insurance factors indicating anticompetitive effects) unless the post-merger HHI and, therefore, the proposed acquisition would not result in is at least 1800 and the merger increases the HHI by more than 200 a loss of competition in any market. Based on all the facts points. The Department of Justice has stated that the higher than of record, the Board has concluded that the proposal would normal HHI thresholds for screening bank mergers for anticompetinot result in any significantly adverse competitive effects in tive effects implicitly recognize the competitive effects of limitedpurpose lenders and other nondepository financial entities. any relevant market. In addition, as the Board has previ- 18. In addition, BOK Financial has contracted, after consummation ously noted, there are public benefits to be derived from of the proposal, to divest two offices and $2 million of deposits in Muskogee to an in-market commercial bank. After accounting for this divestiture, the HHI would increase 473 points to 1695. 19. The Department of Justice has advised the Board that the 20. See 12 C.F.R. 225.28(b)(ll)(i). proposal is under review. 21. 12U.S.C. § 1843(c)(8). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 509 permitting capital markets to operate so that bank holding Voting for this action: Vice Chair Rivlin and Governors Kelley, companies can make potentially profitable investments in Meyer, Ferguson, Gramlich. Absent and not voting: Chairman Greenspan. nonbanking companies and from permitting banking organizations to allocate their resources in the manner they ROBERT DEV. FRIERSON consider to be most efficient when such investments and Associate Secretary of the Board actions are consistent, as in this case, with the relevant considerations under the BHC Act.22 Deutsche Bank AG The Board also concludes that the conduct of the pro- Frankfurt am Main, Germany posed nonbanking activity within the framework established under Regulation Y is not likely to result in adverse Order Approving an Application to Become a Bank effects, such as undue concentration of resources, de- Holding Company and Notices to Acquire Nonbanking creased or unfair competition, conficts of interests, or un- Companies sound banking practices, that would outweigh the public benefits of the proposal, such as increased customer conve- Deutsche Bank AG ("Deutsche Bank"), a foreign banking nience and gains in efficiency. Accordingly, based on all organization subject to the Bank Holding Company Act the facts of record, the Board has determined that the ("BHC Act"), has requested the Board's approval under balance of public benefits that the Board must consider section 3 of the BHC Act (12 U.S.C. § 1842) to become a under the proper incident to banking standard of section bank holding company by acquiring all the voting shares of 4(c)(8) of the BHC Act is favorable and consistent with Bankers Trust Corporation, New York, New York ("BT approval of BOK Financial's notice. Corp"), and its wholly owned subsidiary banks, Bankers Trust Company, New York, New York ("Bankers Trust"); Conclusion Bankers Trust (Delaware), Wilmington, Delaware ("Delaware Bank"); and Bankers Trust Florida, N.A., Palm Based on the foregoing, and in light of all the facts of Beach, Florida ("Florida Bank").1 Deutsche Bank also has record, the Board has determined that the applications and requested the Board's approval under section 4(c)(8) of the notice should be, and hereby are, approved. Approval of BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.24 of the applications and notice is specifically conditioned on the Board's Regulation Y (12 C.F.R. 225.24) to acquire the compliance by BOK Financial with all the commitments nonbanking subsidiaries of BT Corp and thereby engage made in connection with the proposal and with the condi- worldwide in certain permissible nonbanking activities.2 In tions stated or referred to in this order. The Board's deteraddition, Deutsche Bank proposes to acquire the Edge mination on nonbanking activity also is subject to all the corporations of BT Corp pursuant to section 25A of the terms and conditions set forth in sections 225.7 and Federal Reserve Act (12 U.S.C. § 611 et seq.) and the 225.25(c) (12 C.F.R. 225.7 and 25.25(c)), and to the Board's Regulation K (12 C.F.R. 211).3 Board's authority to require such modification or termina- Notice of the proposal, affording interested persons an tion of the activities of a bank holding company or any of opportunity to submit comments, has been published (64 its subsidiaries as the Board finds necessary to ensure Federal Register 5061 (1999)). The time for filing comcompliance with, and to prevent evasion of, the provisions ments has expired, and the Board has considered the proof the BHC Act and the Board's regulations and orders posal and all comments received in light of the factors set thereunder. For purposes of this order, the commitments forth in sections 3 and 4 of the BHC Act. and conditions referred to above are deemed to be condi- Deutsche Bank, with total consolidated assets of tions imposed in writing by the Board in connection with $734 billion, is the largest bank in Germany and one of the its findings and decision and, as such, may be enforced in largest banking organizations in the world.4 Deutsche Bank proceedings under applicable law. operates a branch in New York, New York, which controls The acquisition of First National shall not be consummated before the thirtieth calendar day after the effective date of this order, and the proposal may not be consummated later than three months after the effective date of this 1. Deutsche Bank proposes to acquire BT Corp by merging an indirect, wholly owned acquisition subsidiary with and into BT Corp, order, unless such period is extended for good cause by the with BT Corp as the surviving company. Deutsche Bank also proposes Board or by the Reserve Bank, acting pursuant to delegated to hold BT Corp through an intermediate holding company in the authority. United States. Because this intermediate company would indirectly By order of the Board of Governors, effective May 24, control a U.S. bank, it would be a bank holding company for purposes of the BHC Act. 1999. 2. The nonbanking activities in which BT Corp engages and for which Deutsche Bank has sought Board approval under section 4 of the BHC Act are listed in the Appendix. 3. Deutsche Bank also has requested the Board's approval to hold and exercise an option to acquire up to 19.9 percent of the shares of BT Corp's common stock. The option would expire on consummation 22. See, e.g., Banc One Corporation, 84 Federal Reserve Bulletin of the proposal. 553 (1998); First Union Corporation, 84 Federal Reserve Bulletin 4. Asset and ranking data are as of December 31, 1998, and are 489 (1998). based on exchange rates then applicable. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

510 Federal Reserve Bulletin • July 1999 $21.9 billion in deposits in New York State,5 and a repre- Interstate Analysis sentative office in San Francisco, California. Deutsche Bank also engages in a broad range of permissible non- Section 3(d) of the BHC Act allows the Board to approve banking activities in the United States through subsidiaries, an application by a bank holding company to acquire including underwriting and dealing in debt and equity control of a bank located in a state other than the home securities to a limited extent. state of the bank holding company if certain conditions are BT Corp, with total consolidated assets of $133 billion, met. For purposes of the BHC Act, the home state of is the eighth largest commercial banking organization in Deutsche Bank is New York,7 and the subsidiary banks of the United States, and the third largest commercial banking BT Corp are located in New York, Delaware, and Florida.8 organization in New York, controlling deposits of approxi- All the conditions for an interstate acquisition enumerated mately $26.8 billion in the state. BT Corp also engages in a in section 3(d) are met in this case.9 In light of all the facts broad range of permissible nonbanking activities in the of record, the Board is permitted to approve the proposal United States, including underwriting and dealing in debt under section 3(d) of the BHC Act. and equity securities to a limited extent. The proposal would represent the largest acquisition by Competitive Considerations a foreign bank of a U.S. banking organization to date. On consummation of the proposal, Deutsche Bank would be- Section 3 of the BHC Act prohibits the Board from approvcome the largest commercial banking organization in the ing a proposal that would result in a monopoly. The BHC world ranked by assets. Act also prohibits the Board from approving a proposed bank acquisition that would substantially lessen competi- Factors Governing Board Review of Transaction tion in any relevant banking market unless the anticompetitive effects of the proposal are clearly outweighed in the The BHC Act sets forth the factors that the Board must public interest by the probable effect of the proposal in consider when reviewing the formation of a bank holding meeting the convenience and needs of the community to be company or the acquisition of banks. These factors are the served.10 competitive effects of the proposal in the relevant geo- Deutsche Bank and BT Corp control banking operations graphic markets; the financial and managerial resources that compete directly in the New York/New Jersey Metroand future prospects of the companies and banks involved politan banking market ("New York banking market").11 in the proposal; the convenience and needs of the commu- On consummation of the proposal, Deutsche Bank would nity to be served, including the records of performance control deposits of $48.7 billion, including the deposits in under the Community Reinvestment Act (12 .S.C. §2901 Deutsche Bank's New York branch, in the New York et seq.) ("CRA") of the insured depository institutions banking market. After the transaction, the market would involved in the transaction; the availability of information needed to determine and enforce compliance with the BHC Act and other applicable federal banking law; and, in the 7. A bank holding company's home state is that state in which the case of applications involving a foreign bank such as total deposits of all banking subsidiaries of such company were the Deutsche Bank, whether the foreign bank is subject to largest on July 1, 1966, or the date on which the company became a comprehensive supervision and regulation on a consoli- bank holding company, whichever is later. 12 U.S.C. § 1841(o)(4)(C). On consummation of the proposal, Deutsche Bank would become a dated basis by its home country supervisor. In cases involvbank holding company, and the state in which the total deposits of its ing interstate bank acquisitions, the Board also must con- U.S. banking subsidiaries are the largest would be New York. sider the concentration of deposits in the nation and 8. For purposes of section 3(d), the Board considers a bank to be relevant individual states, as well as compliance with other located in the states in which the bank is chartered, headquartered, or provisions of section 3(d) of the BHC Act. operates a branch. 9. Deutsche Bank is adequately capitalized and adequately man- The Board has considered these factors in light of a aged, as defined by applicable law. 12 U.S.C. § 1842(d)(1)(A). Delacomprehensive record that includes information provided ware ank and Florida Bank have been in existence and operated by Deutsche Bank, confidential supervisory and examina- continuously for at least the period of time required by applicable state tion information, and publicly reported financial and other laws. See 12 U.S.C. § 1842(d)(1)(B); Del. Code Ann. tit. 5, § 795 (1997) (5 years); Fla. Stat. ch. 658.295 (1997) (3 years). Deutsche information. The Board also has considered information Bank and BT Corp do not operate insured depository institutions in collected from the primary home country supervisors of the same states, and, on consummation of the proposal, Deutsche Deutsche Bank and various federal and state agencies, Bank and its affiliates would control less than 10 percent of the total including the New York State Banking Department, the amount of deposits of insured depository institutions in the United United States Department of State ("State Department"), States. 12 U.S.C. § 1842(d)(2). All other requirements of section 3(d) of the BHC Act would be met on consummation of the proposal. and other relevant agencies. In addition, the Board has 10. 12 U.S.C. § 1842(c)(1). considered information provided by public commenters in 11. The New York banking market includes New York City; Nasconnection with the proposal.6 sau, Orange, Putnam, Rockland, Suffolk, Sullivan, and Westchester Counties in New York; Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union, Warren, and a portion of Mercer Counties in New Jersey; Pike County 5. Deposit data are as of June 30, 1998. in Pennsylvania; and portions of Fairfield and Litchfield Counties in 6. The Board received comments from 17 public commenters. Connecticut. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 511 remain unconcentrated, as measured by the Herfindahl- Moreover, the Board has reviewed information submitted Hirschman Index ("HHI") under the Department of Justice by Deutsche Bank about the programs that Deutsche Bank Merger Guidelines ("DOJ Guidelines").12 In addition, nu- and BT Corp have implemented to prepare their systems merous competitors would remain in the New York bank- for the Year 2000 and confidential examination and supering market. Based on these and all other facts of record, the visory information assessing the organizations' efforts to Board concludes that consummation of the proposal would ensure Year 2000 readiness, both before and after the not result in any significantly adverse effects on competi- proposed transaction. tion or on the concentration of banking resources in the In evaluating financial factors in expansion proposals by New York banking market or any other relevant banking banking organizations, the Board consistently has considmarket. ered capital adequacy to be especially important.14 The Board expects banking organizations contemplating expan- Financial and Managerial Considerations sion to maintain strong capital levels substantially in excess of the minimum levels specified in the Board's Capital The Board has carefully considered the financial and man- Adequacy Guidelines. Deutsche Bank's capital ratios exagerial resources and future prospects of the companies ceed the minimum levels that would be required under the and banks involved in the proposal, the effect the proposed Basle Capital Accord, and are considered equivalent to the transaction would have on such resources, and other super- capital that would be required of a U.S. banking organizavisory factors in light of all the facts of record, including tion. Moreover, the proposed transaction would not materipublic comments.13 ally affect the capital of Deutsche Bank or BT Corp, and is In evaluating the financial and managerial factors, the not expected to have a significantly adverse effect on the Board has considered the terms of the merger, including financial resources of Deutsche Bank. Other financial facthe proposed financing arrangements for the transaction. tors are consistent with approval. The Board also has reviewed the proposed structure of the The Board also has carefully considered the managerial combined organization, including proposals to restructure resources of Deutsche Bank and BT Corp in light of all the the current operations of BT Corp, and various commit- facts of record, including confidential examination and ments made by Deutsche Bank regarding the proposal and other supervisory information.15 Based on all the facts of the restructuring. In particular, the Board has considered record, the Board concludes that considerations relating to that Deutsche Bank proposes to hold BT Corp and its the financial and managerial resources and future prospects subsidiaries, including BT Alex. Brown Incorporated ("BT of the organizations involved are consistent with approv- Alex. Brown"), and Deutsche Bank's U.S. nonbanking al.16 operations, through a registered bank holding company located in the United States. In addition, the Board has Convenience and Needs Factor reviewed confidential examination and other supervisory information assessing the financial and managerial strength The Board also has carefully considered the effect of the of Deutsche Bank and its subsidiaries and of BT Corp and proposal on the convenience and needs of the communities its subsidiaries, including Bankers Trust in particular. to be served in light of all the facts of record, including comments received on the effect the proposal would have on the communities to be served by the combined organiza- 12. See 49 Federal Register 26,823 (June 29, 1984). Under the DOJ tion. Guidelines, a market in which the post-merger HHI is less than 1000 points is considered to be unconcentrated. The Department of Justice has informed the Board that a bank merger or acquisition generally A. CRA Performance Examinations will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger HHI is at least 1800 The Board has long held that consideration of the conveand the merger increases the HHI by more than 200 points. The nience and needs factor includes a review of the records of Department of Justice has stated that the higher than normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effects of limited-purpose lenders and other nondepository financial entities. The HHI in the New York 14. See Chemical Banking Corporation, 82 Federal Reserve Bullebanking market would remain less than 1000 points after consumma- tin 230 (1996). tion of the proposal. 15. One commenter alleged that the current management of BT 13. Several commenters expressed concerns about the financial and Corp does not include a sufficient number of minorities or women. managerial resources of Deutsche Bank and BT Corp. The comments The racial and gender composition of management are not factors the included contentions that: (i) Deutsche Bank's financial resources Board is authorized to consider under the BHC Act. may be impaired by the Holocaust-related class action lawsuits filed 16. In reviewing the managerial resources factor, the Board has against the bank; (ii) Deutsche Bank has inadequate operating systems considered Bankers Trust's recent guilty plea on federal charges and back office arrangements; (iii) BT Corp has made risky invest- relating to the organization's client processing services unit. The ments in Russia and Indonesia and has insufficient risk management Board has taken particular note of BT Corp's cooperation with regulapolicies and programs; (iv) the executive officers of BT Corp receive tory authorities in identifying and remedying fraudulent activities, its excessive compensation; and (v) BT Corp's management has demon- actions to ensure future compliance with all laws and standards strated inadequacies in its involvement with Delta Funding Corpora- applicable to these activities, and its discipline of individuals responsition, Woodbury, New York ("Delta"). The Board also has considered ble for the activities. The Board also has contacted and considered these comments, as relevant, in reviewing the convenience and needs information provided by the U.S. Attorney for the Southern District of factor in this case. New York and other government agencies regarding this matter. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

512 Federal Reserve Bulletin • July 1999 the relevant depository institutions under the CRA. As Bankers Trust as a wholesale bank and to maintain the provided in the CRA, the Board evaluates the record of CRA policies of Bankers Trust. Bankers Trust's designaperformance of an institution in light of examinations by tion as a wholesale bank requires the Board to evaluate the the appropriate federal supervisors of the CRA perfor- bank's record of CRA performance under a separate "commance records of the relevant institutions. An institution's munity development test."19 Community development acmost recent CRA performance evaluation is a particularly tivities as a general matter must benefit areas within an important consideration in the applications process because institution's assessment area(s) or a broader statewide or it represents a detailed, on-site evaluation of the institu- regional area that includes the institution's assessment tion's overall record of performance under the CRA by its area(s).20 appropriate federal supervisor.17 The 1998 Examination indicated that Bankers Trust's Deutsche Bank currently does not control an institution community development loan commitments during the exsubject to evaluation under the CRA. The Board has re- amination period (May 28, 1996, through June 1, 1998) viewed in detail, however, the CRA performance records totalled $137 million, and represented a 49.6 percent inof the insured depository institutions of BT Corp. Bankers crease since the previous examination. Consistent with Trust received an "outstanding" CRA performance rating Bankers Trust's wholesale bank operations, 88 percent of from the Federal Reserve Bank of New York ("Reserve these loans were indirect, i.e., they were made to intermedi- Bank") at its most recent examination, as of June 1, 1998 aries supporting housing and economic development within (the "1998 Examination"), and at its previous examina- the bank's assessment area.21 Examiners made special tion, as of May 28, 1996. In addition, the New York State mention of Bankers Trust's participation in several innova- Banking Department, as of May 29, 1998, rated Bankers tive lending programs, including Closing Assistance Sup- Trust's CRA performance "outstanding" pursuant to sec- port for Homebuyers, a joint effort by Neighborhood Houstion 28-b of New York state banking law. Delaware Bank ing Services of New York City and a consortium of local received a "satisfactory" rating from its appropriate fed- banks led by Bankers Trust to provide down payment and eral supervisor, the Federal Deposit Insurance Corporation closing cost assistance loans to LMI homebuyers, and ("FDIC"), at its most recent examination for CRA perfor- Global Resources for Affordable Neighborhood Developmance, as of January 6, 1998. Florida Bank also received ment, a loan pool organized and administered by Bankers an overall rating of "satisfactory" from its appropriate Trust that makes funds available, at below market rates, for federal supervisor, the Office of the Comptroller of the the construction of new affordable housing units in LMI Currency ("OCC"), at its most recent evaluation for CRA communities. The 1998 Examination also stated that, durperformance, as of September 9, 1996. ing the examination period, Bankers Trust received a Examiners found no evidence of prohibited discrimina- $975,000 incentive grant award from the U.S. Treasury's tion or other illegal credit practices at Bankers Trust, Community Development Financial Institutions Fund as a Delaware Bank, or Florida Bank and found no violations of result of the bank's record of financing projects critically fair lending laws. Examiners also reviewed the assessment needed in its communities. areas delineated by the depository institutions and found The 1998 Examination determined that Bankers Trust that such assessment areas were reasonable and did not had an excellent level of community development investarbitrarily exclude low- and moderate-income ("LMI") areas. 19. See 12 C.F.R. 228.25(a). This test evaluates a wholesale bank on its record of community development services, community develop- B. Community Development Record of Bankers ment investments, and community development lending. 12 C.F.R. Trust 228.25(c). The primary purpose of any service, investment, or loan considered under the test must be "community development," which Bankers Trust is a wholesale banking institution that pro- is defined in terms of specific categories of activities that benefit LMI individuals, LMI areas, or small businesses or farms. See 12 C.F.R. vides investment banking, global sales and trading, asset 228.12(h). management, and financial advisory services to major cor- 20. Community development activities outside an institution's asporations, financial institutions, governments, and high net sessment area(s) may also be considered if the institution has adeworth individuals. As such, Bankers Trust has been evalu- quately addressed the needs of its assessment area(s). See 12 C.F.R. 228.25(e). ated as a "wholesale bank" under the Board's CRA regula- 21. One commenter criticized BT Corp for making few home tions.18 Deutsche Bank proposes to continue to operate mortgage and small business loans. The Board notes that the CRA does not require an institution to offer any specific credit products but allows an institution to help serve the credit needs of the institution's 17. The Interagency Questions and Answers Regarding Community community by providing credit of the types consistent with the institu- Reinvestment provide that a CRA examination is an important and tion's overall business strategy and expertise. As discussed above, often controlling factor in the consideration of an institution's CRA Bankers Trust does not engage in the business of extending home record. See 64 Federal Register 23,641 (1999). mortgage or small business loans, and has been designated a whole- 18. A "wholesale bank" is a bank that (i) is not in the business of sale bank, consistent with the CRA regulations of the banking agenextending home mortgage, small business, small farm, or consumer cies. Accordingly, its CRA performance is measured by a community loans to retail customers and (ii) has been designated as a wholesale development test rather than the traditional lending, investment, and bank by its appropriate federal supervisor. 12C.F.R. 228.12(w). In service tests. As noted below, BT Corp's other insured subsidiary August 1997, the Board designated Bankers Trust as a "wholesale banks also have been designated as wholesale banks by their appropribank" under the CRA. ate federal supervisors. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 513 ments. Qualified investments totalled $164 million, a 126 Board also has carefully considered the effect of the propercent increase over the bank's investment levels at the posed acquisition of BT Corp by Deutsche Bank on the time of the previous examination. Examiners noted, in future performance of BT Corp's subsidiary banks under particular, Bankers Trust's tax credit investments of the CRA. In connection with the proposal, Deutsche Bank $67.6 million in the New York Equity Fund, an investment has indicated that it intends to continue BT Corp's outpool for corporate equity investments supporting low- standing record of CRA performance. income housing development.22 Examiners also found that The Board expects that, after the proposed acquisition by Bankers Trust provided a high level of community devel- Deutsche Bank, Bankers Trust and BT Corp's other subsidopment services in its assessment area, including technical iary banks will demonstrate the same commitment to servassistance, investment advisory services, in-kind dona- ing the community development needs of their communitions, and mentoring programs.23 ties that they have demonstrated to date. Deutsche Bank is a large banking organization with a satisfactory record of C. Conclusion on Convenience and Needs complying with U.S. banking regulations, and has financial and managerial resources that are sufficient to ensure com- The Board has carefully considered all the facts of record,24 pliance by BT Corp's subsidiary banks with all relevant including the public comments received, responses to the regulatory requirements, including the CRA. Based on a comments, and reports of examinations of CRA perfor- review of the entire record, and for the reasons discussed mance of the institutions involved, in reviewing the propos- above, the Board concludes that convenience and needs al's effect on the convenience and needs of the communi- considerations, including the CRA performance records of ties to be served by the combined organization.25 The BT Corp's subsidiary banks, are consistent with approval of the proposal.26 22. Examiners also noted favorably (i) Bankers Trust's lead Other Comments on the Proposal $1 million investment in the Neighborhood 2000 Fund, which will provide support for about 50 nonprofit organizations with annual The Board has received several comments from individuals grants for operating expenses to support housing, economic developand organizations that expressed concern about certain ment, and community building initiatives; and (ii) Bankers Trust's proprietary Microcredit Development Fund, which provides below activities of Deutsche Bank during World War II. The market rate loans to nonprofit microcredit lending programs world- commenters, who included representatives in pending class wide. action lawsuits against Deutsche Bank, generally alleged 23. The FDIC, which designated Delaware Bank as a wholesale that the bank, before and during World War II, collaborated bank on June 17, 1996, found at its most recent CRA examination of with the Nazi regime to confiscate and liquidate Jewish Delaware Bank that the bank provided an adequate level of community development loans, investments, and services to its assessment assets, and that the bank financed and controlled other area. The OCC, which designated Florida Bank as a wholesale bank companies that used slave or forced labor. Other commenton April 16, 1996, found at its most recent CRA examination of ers expressed concern that the bank may have handled gold Florida Bank that the bank's level of community development lend- stolen by the Nazis. Several commenters alleged that they, ing, investments, and services to its assessment area was reasonable. or the individuals they represent, had been unsuccessful in 24. One commenter urged the Board to condition approval of the proposal on BT Corp's making certain community reinvestment and attempts to recover assets in World War II-era accounts other commitments. The Board notes that the CRA requires only that, from Deutsche Bank. in considering an acquisition proposal, the Board carefully review the Some commenters urged the Board to investigate these actual record of past performance of the relevant depository institualleged activities and produce a full accounting of any tions in helping to meet the credit needs of their communities. The CRA does not require depository institutions to make pledges of assets wrongfully retained by Deutsche Bank and any future performance under the CRA. The Board also notes that the profits that the bank realized from companies controlled or future activities of Deutsche Bank's subsidiary banks will be reviewed by the appropriate federal supervisors in future performance examinations, and such CRA performance records will be considered by the Board in any subsequent applications by Deutsche Bank to acquire a Urban Development and to the Federal Trade Commission, which depository institution. have responsibility for reviewing compliance with the fair lending 25. Several commenters maintained that BT Corp has engaged in laws by nonbanking companies. discriminatory lending practices as a result of its relationships to 26. One commenter asserted that BT Corp has not provided sufficertain subprime lenders, including in particular Delta. BT Corp cient information on the quantity of goods and services it acquires provides trust and custodial services to Delta and other subprime from minority-owned businesses. Although the Board fully supports lenders in connection with the securitization of home loans made by programs designed to stimulate and create economic opportunities for such lenders. BT Corp has indicated that (i) neither BT Corp nor any all members of society, the Board considers the third-party contracting of its subsidiaries has had any involvement in the origination of activities of BT Corp to be beyond the scope of the CRA and other mortgage loans by Delta; and (ii) BT Corp has no business relation- relevant banking statutes. A few commenters expressed concern that ship with Delta other than acting as custodian and trustee in the the proposal would result in the loss of jobs. The effect of a proposed context of Delta's securitizations. The Board has considered these transaction on employment in a community is not among the factors comments in light of BT Corp's limited role solely as trustee and included in the BHC Act, and the convenience and needs factor has custodian for the securitization trusts of subprime lenders, and its lack been consistently interpreted by the federal banking agencies, the of involvement in originating the underlying loans that are securitized courts, and Congress to relate to the effect of a proposal on the and in developing and monitoring the criteria governing the types of availability and quality of banking services in the community. See loans that may be securitized. The Board has forwarded a copy of all Wells Fargo & Company, 82 Federal Reserve Bulletin 445, 457 comments on Delta to the Departments of Justice and Housing and (1996). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

514 Federal Reserve Bulletin • July 1999 financed by it that used slave labor. Others requested that also indicated that it has supported Deutsche Bank's conthe Board withhold approval of the proposal until the asset tinuing efforts to conduct a historical review of the bank's conversion and slave labor issues are resolved and appro- activities under the Nazi regime. The State Department priate restitution and compensation is made. further noted that sanctions against German banks are not Deutsche Bank has provided substantial information justified and would only retard progress on Holocaustabout the steps that the bank has taken and is taking to related issues.31 address its activity during World War II.27 In addition to The Board has carefully reviewed the issues presented the steps that it previously has taken to address its by the commenters in light of all the facts of record, Holocaust-related activities, Deutsche Bank, along with 12 including the information received from the State Departother German banks, insurers, and nonfinancial corpora- ment, and in light of the Board's authority under the tions, recently proposed the establishment of the Founda- federal banking laws. To the extent that the matters raised tion Initiative of German Enterprises: Remembrance, Re- by commenters relate to the factors that the Board is sponsibility and Future ("Foundation Initiative").28 As authorized to consider, the Board has considered, in particproposed, the Foundation Initiative includes a humanitar- ular, the past efforts of Deutsche Bank to investigate and ian fund (the "Fund") for the benefit of Holocaust victims address its Holocaust involvement, and the forthcoming and a foundation to support projects linked to the Fund's and ongoing efforts of current management to resolve these purpose.29 The Fund is expected to compensate forced and matters. The Board also has taken into account that many slave laborers and to resolve claims against German banks of the matters raised by the commenters involve subjects of arising from their conversion of Jewish assets and their public concern that are not within the Board's limited handling of World War II-era bank accounts.30 jurisdiction to adjudicate or do not relate to the factors that The Board sought the views of the State Department on the Board may consider when reviewing an application or current German efforts to address Holocaust-related issues. notice under the BHC Act.32 For these reasons, and based Although it took no position on the merits of the subject on all the facts of record, the Board concludes that the proposal, the State Department noted that it has sought to Holocaust-related matters presented by commenters do not expedite resolution of Holocaust-era claims and has sup- warrant denial of the proposal. ported the Foundation Initiative. The State Department Other Supervisory Considerations 27. See Historical Commission Appointed to Examine the History Under section 3 of the BHC Act, the Board may not of Deutsche Bank in the Period of National Socialism (Avraham approve an application involving a foreign bank unless the Barkai et al.), The Deutsche Bank and Its Gold Transactions during bank is "subject to comprehensive supervision or regulathe Second World War (1998) ("Gold Report"); and John Authers & Uta Harnischfeger, Deutsche Admits Auschwitz Link, Fin. Times, Feb tion on a consolidated basis by the appropriate authorities 5, 1999. See also Lothar Gall et al., The Deutsche Bank: 1870-1995 in the bank's home country."33 The Board previously has (J.A. Underwood et al. trans., 1995) (a comprehensive history of Deutsche Bank commissioned by the bank and compiled by five independent scholars); Jewish Organizations to Receive Proceeds of Deutsche Bank Gold Sale, The Week in Germany, March 27, 1998. 31. The Comptroller of the City of New York originally informed 28. See the statement, dated February 16, 1999, released by the 13 the Board of his view that Deutsche Bank's proposal should not be German organizations that proposed the Foundation Initiative to the approved until all interested parties agreed on a structure to settle all German Chancellor ("Joint Statement"). Holocaust-era claims. Based on recent progress toward negotiation of One commenter stated that persons with disabilities should not be a final settlement of outstanding Holocaust-era issues, however, the excluded from Holocaust reparations and argued that Deutsche Bank Comptroller withdrew his original objection and indicated that the should make a commitment to disabled victims of the Holocaust as a Board should base its decision exclusively on the proposal's impact condition of its acquisition of BT Corp. Although the Joint Statement on the banks, the public, and the financial community. does not specify categories of claimants or specifically address the 32. The factors that the Board may consider when reviewing an rights of the disabled, the Joint Statement does state that its paramount application or notice under the BHC Act are limited by the Act. goal is "to provide cooperative, fair, unbureaucratic and above all Moreover, the Board previously has noted and the courts have held prompt assistance to Nazi victims." The Joint Statement evinces no that the Board's limited jurisdiction to review applications and notices intent to exclude any category of Holocaust survivors from receiving under the BHC Act does not authorize the Board to adjudicate reparations. disputes involving an applicant that do not arise under laws adminis- 29. See Joint Statement. The Board also notes that the German tered and enforced by the Board. See Union Bank of Switzerland, 84 companies involved in establishing the Foundation Initiative intend to Federal Reserve Bulletin 684 (1998); Norwest Corporation, 82 Fedfinalize arrangements and begin making payments from the Fund by eral Reserve Bulletin 580 (1996); see also Western Bancshares v. September 1, 1999. Id. Board of Governors, 480 F.2d 749 (10th Cir. 1973). 30. See Letter dated March 25, 1999, from Ambassador Stuart 33. 12 U.S.C. § 1842(c)(3)(B). As provided in Regulation Y, the Eizenstat, Under Secretary of State for Economic, Business, and Board determines whether a foreign bank is subject to consolidated Agricultural Affairs, United States Department of State, to Alan home country supervision under the standards set forth in Regula- Greenspan, Chairman, Board of Governors of the Federal Reserve tion K. 12 C.F.R. 225.13(a)(4). Regulation K provides that a foreign System. Deutsche Bank publicly has denied that it used slave labor bank may be considered subject to consolidated supervision if the during the Holocaust era. See Suing for Reparations, Baltimore Sun, Board determines that the bank is supervised or regulated in such a Jan. 17, 1999, at ID; see also Reuters, Deutsche Bank Pressed for Big manner that its home country supervisor receives sufficient informa- Sums in Holocaust Talks, Feb. 8, 1999. Moreover, Deutsche Bank tion on the worldwide operations of the foreign bank, including the made reparations to slave laborers who worked for a company that the relationships of the bank to its affiliates, to assess the foreign bank's bank purchased in 1985. See U.P.I. Foreign News Briefs, Decem- overall financial condition and compliance with law and regulation. ber 26, 1985. 12 C.F.R. 211.24(c)(l)(ii). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 515 determined, in applications under the International Bank- rities brokerage, private placement, riskless principal, fuing Act (12 U.S.C. § 3101 et seq.) ("IBA") and the BHC tures commission merchant, and other agency transactional Act, that certain German commercial banks were subject to services, investing and trading activities, community develcomprehensive consolidated supervision by their home opment activities, data processing and transmission activicountry authorities.34 In this case, the Board has deter- ties, underwriting and dealing to a limited extent in debt mined that Deutsche Bank is supervised on substantially and equity securities, and providing administrative services the same terms and conditions as the other German banks.35 to open-end investment companies ("mutual funds").36 Based on all the facts of record, the Board has concluded The Board has determined by regulation or order that the that Deutsche Bank is subject to comprehensive supervi- types of activities for which notice has been provided are sion and regulation on a consolidated basis by its home closely related to banking for purposes of section 4(c)(8) of country supervisor. the BHC Act.37 Deutsche Bank has committed that it will The BHC Act also requires the Board to determine that conduct these activities in accordance with the Board's the foreign bank has provided adequate assurances that it regulations and in accordance with the orders approving will make available to the Board such information on its these activities for BT Corp. operations and activities and those of its affiliates that the Board deems appropriate to determine and enforce compli- A. Bank-Ineligible Securities Activities ance with the BHC Act. The Board has reviewed the restrictions on disclosure in jurisdictions where Deutsche Deutsche Bank currently is engaged in underwriting and Bank has material operations and has communicated with dealing in bank-ineligible securities, to a limited extent, relevant government authorities concerning access to infor- through Deutsche Bank Securities Inc. ("DBSI").38 BT mation. Deutsche Bank has committed that, to the extent Corp also currently is engaged in underwriting and dealing not prohibited by applicable law, it will make available to in bank-ineligible securities, to a limited extent, through the Board such information on the operations of Deutsche BT Alex. Brown.39 Deutsche Bank intends to make BT Bank and any of its affiliates that the Board deems neces- Alex. Brown a wholly owned subsidiary of DBSI on or sary to determine and enforce compliance with the BHC immediately after consummation of the proposal and to Act, the IBA, and other applicable federal law. Deutsche merge BT Alex. Brown with and into DBSI as soon as Bank also has committed to cooperate with the Board to practicable thereafter. DBSI and BT Alex. Brown are, and obtain any waivers or exemptions that may be necessary in after consummation of the proposal will continue to be, order to enable Deutsche Bank to make any such informa- registered as broker-dealers with the Securities and Extion available to the Board. In light of these commitments change Commission ("SEC") under the Securities Exand other facts of record, the Board has concluded that change Act of 1934 (15 U.S.C. § 78a et seq.) and members Deutsche Bank has provided adequate assurances of access of the National ssociation of Securities Dealers, Inc. to any appropriate information the Board may request. For ("NASD"). Accordingly, DBSI and BT Alex. Brown are, these reasons, and based on all the facts of record, the and will continue to be, subject to the record-keeping and Board has concluded that the supervisory factors it is reporting obligations, fiduciary standards, and other rerequired to consider under section 3(c)(3) of the BHC Act quirements of the Securities Exchange Act of 1934, the are consistent with approval. SEC, and the NASD. The Board has determined that, subject to the framework Nonbanking Activities of prudential limitations established in previous decisions Deutsche Bank also has filed notice under section 4(c)(8) of the BHC Act to acquire the nonbank subsidiaries of BT 36. BT Corp is currently engaged in providing investment advisory, Corp. Deutsche Bank has proposed to hold these nonbank brokerage, administrative, and other services to mutual funds. See Bankers Trust New York Corporation, 83 Federal Reserve Bulletin subsidiaries, in particular BT Alex. Brown, through a U.S. 780 (1997) ("BT/Alex. Brown"). Deutsche Bank proposes to continue company that will be a registered bank holding company. providing such services to mutual funds and has proposed interlocks Through these subsidiaries, Deutsche Bank would engage that are consistent with the limitations established by the Board in in a number of nonbanking activities, including lending previous orders. See, e.g., Travelers Group Inc., 84 Federal Reserve Bulletin 985 (1998). activities, activities related to extending credit, leasing 37. See 12 C.F.R. 225.28(b)(1), (2), (3), (5), (6), (7), (8)(i) and (ii), activities, performing trust company functions, providing (12), and (14); J.P. Morgan & Co. Inc., et al, 75 Federal Reserve investment and financial advisory services, providing secu- Bulletin 192 (1989), aff'd sub nom. Securities Industry Ass'n v. Board of Governors of the Federal Reserve System, 900 F.2d 360 (D.C. Cir. 1990) ("J.P. Morgan")', Citicorp, 73 Federal Reserve Bulletin 473 (1987), aff'd sub nom. Securities Industry Ass'n v. Board of Gover- 34. See Commerzbank AG, 85 Federal Reserve Bulletin 336 (1999); nors of the Federal Reserve System, 839 F.2d 47 (2d Cir.), cert, Sudwestdeutsche Landesbank Girozentrale, 83 Federal Reserve Bulle- denied, 486 U.S. 1059 (1988) ("Citicorp") (underwriting and dealing, tin 937 (1997); West Merchant Bank Limited, 81 Federal Reserve to a limited extent, in all types of securities); Mellon Bank Corpora- Bulletin 519(1995). tion, 79 Federal Reserve Bulletin 626 (1993), and Commerzbank AG, 35. A commenter contended that the failure of German bank regula- 83 Federal Reserve Bulletin 678 (1997) ("Commerzbank") (providing tors to address Deutsche Bank's Holocaust-related activities calls into administrative services to mutual funds). question the determinations under the Foreign Bank Supervision En- 38. See Deutsche Bank AG, 79 Federal Reserve Bulletin 133 (1993). hancement Act that the Board must make in this case. 39. See BT/Alex. Brown. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

516 Federal Reserve Bulletin • July 1999 to address the potential for conflicts of interests, unsound B. Proper Incident Considerations banking practices, or other adverse effects, underwriting and dealing in bank-ineligible securities is so closely re- In order to approve the notice, the Board also must deterlated to banking as to be a proper incident thereto within mine that the acquisition of the nonbank subsidiaries of BT the meaning of section 4(c)(8) of the BHC Act.40 The Corp and the performance of the proposed activities by Board also has determined that underwriting and dealing in Deutsche Bank can reasonably be expected to produce bank-ineligible securities is consistent with section 20 of benefits to the public that outweigh possible adverse efthe Glass-Steagall Act (12 U.S.C. § 377), provided that the fects, such as undue concentration of resources, decreased ompany engaged in the activities derives no more than or unfair competition, conflicts of interests, or unsound 25 percent of its gross revenues from underwriting and banking practices. dealing in bank-ineligible securities over a two-year peri- Deutsche Bank has indicated that the proposed transacod.41 Deutsche Bank has committed that, after consumma- tion would allow the combined organization to reduce tion of the proposal, DBSI and BT Alex. Brown will costs and realize revenue synergies by cutting back overconduct their bank-ineligible securities underwriting and lapping operations and blending complementary operations dealing activities subject to the 25-percent revenue limita- of Deutsche Bank and BT Corp. Deutsche Bank also has tion and the prudential limitations previously established stated that the proposal would allow it to benefit from by the Board,42 and this order is conditioned on compli- economies of scale in certain business lines, and that the ance by Deutsche Bank with the revenue restriction and the acquisition would enable the combined organization to Operating Standards established for section 20 subsidiar- serve better the convenience and needs of its customers ies 43 and communities. In addition, Deutsche Bank has indicated The Board also has reviewed the capitalization of Deut- that the acquisition of BT Corp would assist Deutsche sche Bank, DBSI, and BT Alex. Brown in light of the Bank in maintaining a well-balanced revenue stream and a standards set forth in the Section 20 Orders. The Board broad capital base and, accordingly, would increase the finds the capitalization of each to be consistent with ap- financial stability of the combined organization. proval of the proposal. The Board's determination is based In addition, there are public benefits to be derived from on all the facts of record, including the projections of the permitting capital markets to operate so that bank holding volume of bank-ineligible securities underwriting and deal- companies can make potentially profitable investments in ing activities to be conducted by DBSI and BT Alex. nonbanking companies and from permitting banking orga- Brown.44 nizations to allocate their resources in the manner they consider to be most efficient when such investments and actions are consistent, as in this case, with the relevant 40. See J.P. Morgan; Citicorp; as modified by Review of Restric- considerations under the BHC Act. tions on Director, Officer and Employee Interlocks, Cross-Marketing The Board has carefully considered the competitive ef- Activities, and the Purchase and Sale of Financial Assets Between a fects of the proposed transaction under section 4 of the Section 20 Subsidiary and an Affiliated Bank or Thrift, 61 Federal BHC Act. To the extent that Deutsche Bank and BT Corp Register 57,679 (1996); Amendments to Restrictions in the Board's Section 20 Orders, 62 Federal Register 45,295 (1997); and Clarifica- offer different types of nonbanking products, the proposed tion to the Board's Section 20 Orders, 63 Federal Register 14,803 acquisition would result in no loss of competition. Certain (1998) (collectively, "Section 20 Orders"). nonbanking subsidiaries of Deutsche Bank and BT Corp 41. See Section 20 Orders. Compliance with the revenue limitation do compete, however, in commercial lending, investment shall be calculated in accordance with the method stated in the Section advisory, asset management, securities brokerage, private 20 Orders, as modified by Order Approving Modifications to the Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989); placement, and securities underwriting and dealing activi- 10 Percent Revenue Limit on Bank-Ineligible Activities of Subsidiaries ties. The markets for each of these nonbanking activities of Bank Holding Companies Engaged in Underwriting and Dealing in are regional or national in scope. The record in this case Securities, 61 Federal Register 48,953 (1996); and Revenue Limit on indicates that there are numerous providers of these ser- Bank-Ineligible Activities of Subsidiaries of Bank Holding Companies Engaged in Underwriting and Dealing in Securities, 61 Federal vices and that the markets for these nonbanking services Register 68,750 (1996) (collectively, "Modification Orders"). are unconcentrated. For these reasons, and based on all the 42. As noted above, Deutsche Bank intends to merge BT Alex. facts of record, the Board concludes that consummation of Brown with and into DBSI as soon as practicable after consummation the proposal would have a de minimis effect on competiof the proposal. Until that merger occurs, both DBSI and BT Alex. tion. Brown will be independently subject to the 25-percent revenue limitation on underwriting and dealing in bank-ineligible securities. See Citicorp at 486 n.5. 43. 12 C.F.R. 225.200. DBSI and BT Alex. Brown each may provide services that are necessary incidents to the proposed bank- holding companies under section 4 of the BHC Act and Regulation Y ineligible securities underwriting and dealing activities. Unless DBSI within two years of acquiring Alex. Brown. See BT/Alex. Brown. or BT Alex. Brown receives specific approval under section 4(c)(8) of Deutsche Bank now has requested a one-year extension of this conthe BHC Act to conduct the incidental activities independently, any formance period, until September 1, 2000. Based on the good faith revenues from such activities must be treated as ineligible revenues efforts made by BT Corp to fulfill the commitment, the additional subject to the Board's revenue limitation. restructuring options that would be made available to BT Corp by the 44. In connection with its 1997 acquisition of Alex. Brown Incorpo- Deutsche Bank acquisition, and the other facts of record, the Board rated, BT Corp committed to conform the activities and investments has determined to approve this request for a one-year extension of the of Alex. Brown and its subsidiaries to those permissible for bank BT/Alex. Brown conformance period. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 517 The Board also believes that the conduct of the proposed utes.47 The Board's approval is specifically conditioned on nonbanking activities within the framework established in compliance by Deutsche Bank with all the commitments this order, prior orders, and Regulation Y is not likely to made in connection with this application and notice, inresult in adverse effects, such as undue concentration of cluding the commitments discussed in this order, and the resources, decreased or unfair competition, conflicts of conditions set forth in this order and the above-noted interests, or unsound banking practices, that would not be Board regulations and orders. The Board's approval of the outweighed by the public benefits of the proposal, such as nonbanking aspects of the proposal also is subject to all the increased customer convenience and gains in efficiency. conditions set forth in Regulation Y, including those in Accordingly, based on all the facts of record, the Board sections 225.7 and 225.25(c) of Regulation Y (12 C.F.R. has determined that the balance of public interest factors 225.7 and 225.25(c)), and to the Board's authority to that the Board must consider under the proper incident to require such modification or termination of the activities of banking standard of section 4(c)(8) of the BHC Act is a bank holding company or any of its subsidiaries as the favorable and consistent with approval. Board finds necessary to ensure compliance with, and to Deutsche Bank also has provided notice under section prevent evasion of, the provisions of the BHC Act and the 25A of the Federal Reserve Act and sections 211.4 and Board's regulations and orders issued thereunder. These 211.5 of Regulation K (12 C.F.R. 211.4 and 211.5) to commitments and conditions are deemed to be conditions acquire BT Corp's companies organized under section 25A imposed in writing by the Board in connection with its of the Federal Reserve Act. The Board concludes that all findings and decision, and, as such, may be enforced in the factors required to be considered under the Federal proceedings under applicable law. Underwriting and deal- Reserve Act, the BHC Act, and the Board's Regulation K ing in any manner other than as approved in this order and are consistent with approval of the proposal.45 the Section 20 Orders (as modified by the Modification Orders) is not within the scope of the Board's approval and Conclusion is not authorized for Deutsche Bank. The acquisition of BT Corp's subsidiary banks may not Based on the foregoing, the Board has determined that the be consummated before the fifteenth calendar day after the transaction should be, and hereby is, approved 46 In reach- effective date of this order, and the proposal may not be ing its conclusion, the Board has considered all the facts of consummated later than three months after the effective record in light of the factors that the Board is required to date of this order, unless such period is extended for good consider under the BHC Act and other applicable stat- cause by the Board or by the Reserve Bank, acting pursuant to delegated authority. By order of the Board of Governors, effective May 20, 1999. 45. Bankers Trust controls an amount of shares of a non-U.S. company that, when aggregated with shares controlled by Deutsche Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Bank in the same company, would make this investment impermissi- Governors Kelley, Meyer, Ferguson, and Gramlich. ble on consummation of the proposal. Deutsche Bank has committed to conform this investment to the requirements of Regulation K within ROBERT DEV. FRIERSON six months of consummation of the proposal. 46. Four commenters requested that the Board hold a public meet- Associate Secretary of the Board ing or hearing on the proposal. Section 3(b) of the BHC Act does not require the Board to hold a public hearing on an application unless the appropriate supervisory authority for the bank to be acquired makes a timely written recommendation of denial of the application. The Board has not received such a recommendation from the appropriate 47. A number of commenters requested that the Board delay action supervisory authorities. or extend the comment period on the proposal until (i) pending Under its rules, the Board also may, in its discretion, hold a public Holocaust-related lawsuits against Deutsche Bank and other meeting or hearing on an application to acquire a bank if a meeting or Holocaust-related issues are resolved; (ii) Deutsche Bank makes cerhearing is necessary or appropriate to clarify factual issues related to tain CRA and diversity commitments; and (iii) Deutsche Bank subthe application and to provide an opportunity for testimony. 12 C.F.R. mits additional information regarding the acquisition and its plans for 225.16(e). Section 4 of the BHC Act and the Board's rules thereunder BT Corp. The requests for delay do not warrant postponement of the provide for a hearing on a notice to acquire nonbanking companies if Board's consideration of the proposal. The Board has accumulated a there are disputed issues of material fact that cannot be resolved in significant record in this case, including reports of examination, some other manner. 12 U.S.C. § 1843(c)(8); 12 C.F.R. 225.25(a)(2). supervisory information, public reports and information, and consider- The Board has considered carefully these commenters' requests in able public comment. In the Board's view, for the reasons discussed light of all the facts of record. In the Board's view, commenters have above, commenters have had ample opportunity to submit their views, had ample opportunity to submit their views, and did submit written and, in fact, have provided substantial written submissions that have comments that have been considered carefully by the Board in acting been considered carefully by the Board in acting on the proposal. on the proposal. The commenters' requests fail to demonstrate why Moreover, the BHC Act and Regulation Y require the Board to act on their written comments do not present their views adequately and fail proposals submitted under those provisions within certain time perito identify disputed issues of fact that are material to the Board's ods. Based on a review of all the facts of record, the Board concludes decision that would be clarified by a public meeting or hearing. For that the record in this case is sufficient to warrant Board action at this these reasons, and based on all the facts of record, the Board has time, and that further delay of consideration of the proposal, extension determined that a public meeting or hearing is not required or war- of the comment period, or denial of the proposal on the grounds ranted in this case. Accordingly, the requests for a public meeting on discussed above or on the basis of informational insufficiency is not the proposal are denied. warranted. 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518 Federal Reserve Bulletin • July 1999 Appendix zil, a foreign bank within the meaning of the International Banking Act ("IBA"), has applied under section 10(a) of Nonbanking Activities of Bankers Trust Corporation the IBA (12 U.S.C. § 3107(a)) to stablish a representative office in New York, New York. The Foreign Bank Supervi- (1) Extending credit and servicing loans, in accordance sion Enhancement Act of 1991, which amended the IBA, with section 225.28(b)(1) of the Board's Regula- provides that a foreign bank must obtain the approval of tion Y (12 C.F.R. 225.28(b)(1)); the Board to establish a representative office in the United (2) Activities related to extending credit, in accordance States. with section 225.28(b)(2) of the Board's Regula- Notice of the application, affording interested persons an tion Y (12 C.F.R. 225.28(b)(2)); opportunity to submit comments, has been published in a (3) Providing leasing services, in accordance with sec- newspaper of general circulation in New York, New York tion 225.28(b)(3) of Regulation Y (12 C.F.R. (New York Post, February 13, 1998). The time for filing 225.28(b)(3)); comments has expired, and the Board has considered the (4) Performing trust company functions, in accordance application and all comments received. with section 225.28(b)(5) of Regulation Y (12 C.F.R. Bank, with assets of approximately $6.8 billion,1 was 225.28(b)(5)); incorporated in Brazil in 1988. Bank engages in a full (5) Providing investment and financial advisory ser- range of commercial and investment banking activities. In vices, in accordance with section 225.28(b)(6) of addition, through subsidiaries, Bank provides consumer Regulation Y (12 C.F.R. 225.28(b)(6)); loans and private banking services. Bank operates five (6) Providing securities brokerage, riskless principal, banking offices in Brazil, a branch in Nassau, the Bahamas, private placement, futures commission merchant, and a representative office in Buenos Aires, Argentina. and other agency transactional services, in accor- Bank recently received approval from the U.K. Financial dance with section 225.28(b)(7) of Regulation Y Services Authority to establish a representative office in (12 C.F.R. 225.28(b)(7)); London, England. (7) Underwriting and dealing in government obligations Bank is a subsidiary of BBA Participacoes S.A. ("Parand money market instruments in which state mem- ticipacoes"), Sao Paulo, Brazil, a holding company, and ber banks may underwrite and deal under 12 U.S.C. Bank Austria Aktiengesellschaft ("Bank Austria"), §§ 335 and 24(7), and investing and trading activi- Vienna, Austria. Participacoes owns a registered brokerties, in accordance with section 225.28(b)(8)(i) and dealer, BBA Securities Corp., in New York, New York. (ii) of Regulation Y (12 C.F.R. 225.28(b)(8)(i) and Bank Austria operates branches in Greenwich, Connecti- (ii)); cut, and New York, New York; representative offices in (8) Community development activities, in accordance Atlanta, Georgia, Chicago, Illinois, and San Francisco, with section 225.28(b)(12) of Regulation Y California; and owns several U.S. subsidiaries that engage (12 C.F.R. 225.28(b)(12)); in nonbanking activities in accordance with the Bank Hold- (9) Data processing and transmission activities, in accor- ing Company Act ("BHC Act") and Regulation Y.2 dance with section 225.28(b)(14) of Regulation Y The proposed representative office would solicit new (12 C.F.R. 225.28(b)(14)); business, conduct research, and act as a liaison between (10) Underwriting and dealing in, to a limited extent, all Bank's head office in Brazil and customers in the United types of debt and equity securities other than inter- States. ests in open-end investment companies, in accor- In acting on an application to establish a representative dance with previous Board decisions (see Bankers office, the IBA and Regulation K provide that the Board Trust New York Corporation, 83 Federal Reserve shall take into account whether the foreign bank engages Bulletin 780 (1997)); and directly in the business of banking outside the United (11) Providing administrative services to open-end invest- States and has furnished to the Board the information it ment companies ("mutual funds"), in accordance needs to assess the application adequately. The Board also with previous Board decisions (see Mellon Bank shall take into account whether the foreign bank and any Corporation, 79 Federal Reserve Bulletin 626 foreign bank parent is subject to comprehensive supervi- (1993), and Commerzbank AG, 83 Federal Reserve sion or regulation on a consolidated basis by its home Bulletin 678 (1997)). country supervisor (12 U.S.C. § 3107(a)(2); 12 C.F.R. ORDERS ISSUED UNDER INTERNATIONAL BANKING 1. Data are as of December 31, 1998. ACT 2. Bank Austria's Greenwich, Connecticut, branch, and its Atlanta, Georgia, and San Francisco, California, representative offices were Banco BBA-Creditanstalt S.A. previously owned by Creditanstalt-Bankverein ("Creditanstalt"). Effective September 24, 1998, Creditanstalt was merged with and into Sao Paulo, Brazil Bank Austria. Before the merger, Bank Austria received approval from the Board, under section 211.24(a)(3) of Regulation K, to Order Approving Establishment of a Representative Office continue to operate these offices pending consideration of its applica- Banco BBA-Creditanstalt S.A. ("Bank"), Sao Paulo, Bra- tion. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 519 211.24(d)(2)).3 In addition, the Board may take into ac- The Board also has determined that for the purposes of count additional standards set forth in the IBA and Regula- the IBA and Regulation K, Bank and Bank Austria engage tion K (12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. directly in the business of banking outside of the United 211.24(c)(2)). The Board previously has stated that the States. Bank and its parent companies have provided the standards that apply to the establishment of a branch or Board with information necessary to assess the application agency need not in every case apply to the establishment of through submissions that address the relevant issues. a representative office, because representative offices do The Board also has taken into account the additional not engage in a banking business and cannot take deposits standards set forth in section 7 of the IBA and Reguor make loans.4 lation K (see 12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. With respect to home country supervision of Bank, the 211.24(c)(2)). As noted above, the Central Bank has no Board has considered the following information. Bank is objection to Bank's establishment of the proposed represubject to the regulatory and supervisory authority of the sentative office. The Board also has determined that finan- Central Bank of Brazil ("Central Bank"), which has pri- cial and managerial factors are consistent with approval of mary responsibility for the regulation of financial institu- the proposed representative office. Bank appears to have tions in Brazil. The Central Bank has no objection to the experience and capacity to support the proposed repre- Bank's establishment of the proposed representative office. sentative office and has established controls and procedures The Board has previously determined that the Central for the proposed representative office to ensure compliance Bank exercises a significant degree of supervision over the with U.S. law. activities of two other Brazilian banks, both of which were With respect to access to information about Bank's approved to establish representative offices in the United operations, the Board has reviewed the restrictions on States.5 The Board has determined that Bank is supervised disclosure in relevant jurisdictions in which Bank operates by the Central Bank on substantially the same terms and and has communicated with relevant government authoriconditions as the other Brazilian banks. ties regarding access to information. Bank and its ultimate Bank Austria is subject to the supervisory authority of parents have committed to make available to the Board the Austrian Federal Ministry of Finance ("Ministry") and such information on the operations of Bank and any of its the Austrian National Bank. The Board has previously affiliates that the Board deems necessary to determine and determined that the Austrian supervisors exercise a signifi- enforce compliance with the IBA, the BHC Act, as cant degree of supervision over the activities of Bank amended, and other applicable federal law. To the extent Austria in connection with the establishment of a represen- that the provision of such information to the Board may be tative office in Chicago, Illinois.6 prohibited by law, Bank and its ultimate parents have Based on all the facts of record, the Board has deter- committed to cooperate with the Board to obtain any mined that factors relating to the supervision of Bank and necessary consents or waivers that might be required from Bank Austria by their respective home country supervisors third parties for disclosure of such information. In addition, are consistent with approval of the proposed representative subject to certain conditions, the Central Bank and Minisoffice. try may share information on Bank's operations with other supervisors, including the Board. In light of these commitments and other facts of record, and subject to the conditions described below, the Board concludes that Bank has provided adequate assurances of access to any necessary information that the Board may request. 3. In assessing this standard, the Board considers, among other On the basis of all the facts of record, and subject to the factors, the extent to which the home country supervisors: commitments made by Bank and its ultimate parents, and (i) Ensure that the bank has adequate procedures for monitoring and the terms and conditions set forth in this order, the Board controlling its activities worldwide; has determined that Bank's application to establish a repre- (ii) Obtain information on the condition of the bank and its subsidiaries and offices through regular examination reports, audit reports, sentative office should be, and hereby is, approved. Should or otherwise; any restrictions on access to information on the operations (iii) Obtain information on the dealings with and relationship be- or activities of Bank and its affiliates subsequently interfere tween the bank and its affiliates, both foreign and domestic; with the Board's ability to obtain information to determine (iv) Receive from the bank financial reports that are consolidated on and enforce compliance by Bank or its affiliates with a worldwide basis, or comparable information that permits analysis of the bank's financial condition on a worldwide consolidated basis; applicable federal statutes, the Board may require termina- (v) Evaluate prudential standards, such as capital adequacy and risk tion of any of Bank's direct or indirect activities in the asset exposure, on a worldwide basis. These are indicia of compre- United States. Approval of this application also is specifihensive consolidated supervision. No single factor is essential and cally conditioned on compliance by Bank and its ultimate other elements may inform the Board's determination. 4. See 58 Federal Register 6348, 6351 (1993). See also Citizens parents with the commitments made in connection with National Bank, 79 Federal Reserve Bulletin 805 (1993); Agricultural this application and with the conditions in this order.7 The Bank of China, 83 Federal Reserve Bulletin 617 (1997). 5. See Banco Bandeirantes, S.A., 81 Federal Reserve Bulletin 742 (1995); Unibanco-Uniao de Bancos Brasileiros, S.A., 82 Federal Reserve Bulletin 1148 (1996). 7. The Board's authority to approve the establishment of the pro- 6. See Bank Austria, A.G., 81 Federal Reserve Bulletin 979 (1995). posed representative office parallels the authority of the State of New Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

520 Federal Reserve Bulletin • July 1999 commitments and conditions referred to above are condi- By order of the Board of Governors, effective May 17, tions imposed in writing by the Board in connection with 1999. its decision, and may be enforced in proceedings under 12 U.S.C. § 1818 against Bank and its affiliates. Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Meyer, Ferguson, and Gramlich. ROBERT DEV. FRIERSON Associate Secretary of the Board York to license offices of a foreign bank. The Board's approval of this application does not supplant the authority of the State of New York and its agent, the New York State Banking Department ("Depart- accordance with any terms or conditions that the Department may ment"), to license the proposed representative office of Bank in impose. APPLICATIONS APPROVED UNDER BANK HOLDING COMPANY ACT By the Secretary of the Board Recent applications have been approved by the Secretary of the Board as listed below. Copies are available upon request to the Freedom of Information Office, Office of the Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Section 3 Applicant(s) Bank(s) Effective Date FirstBank Holding Company Employee FirstBank of Adams County, May 27, 1999 Stock Ownership Plan, Thornton, Colorado Lakewood, Colorado FirstBank Holding Company of Colorado, Lakewood, Colorado FirstBank Holding Company Employee FirstBank of El Paso County, May 21, 1999 Stock Ownership Plan, Colorado Springs, Colorado Lakewood, Colorado FirstBank Holding Company of Colorado, Lakewood, Colorado First Security Corporation, XEON Financial Corporation, May 14, 1999 Salt Lake City, Utah Stateline, Nevada Nevada Banking Company, Stateline, Nevada Comstock Bancorp, Reno, Nevada Comstock Bank, Reno, Nevada Section 4 Applicant(s) Bank(s) Effective date Cullen/Frost Bankers, Inc., Frost Securities, Inc., May 21, 1999 San Antonio, Texas Dallas, Texas New Galveston Company, Wilmington, Delaware First National of Nebraska, Inc., Path Technology Group, Inc., May 17, 1999 Omaha, Nebraska Des Moines, Iowa Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 521 Section 4—Continued Applicant(s) Bank(s) Effective date Old Kent Financial Corporation, CFSB Bancorp, Inc., May 27, 1999 Grand Rapids, Michigan Lansing, Michigan Community First Bank, Lansing, Michigan Community First Mortgage Corporation, Lansing, Michigan Capitol Consolidated Financial Corporation, Lansing, Michigan Allegan Insurance Agency, Inc., Lansing, Michigan 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 Amoret Bancshares, Inc., C. J. Bancshares, Inc., Kansas City May 20, 1999 Butler, Missouri Harrisonville, Missouri Citizens Bank of Missouri, Harrisonville, Missouri Bloomfield Hills Bancorp, Inc. The Bank of Rochester, Chicago May 5, 1999 Bloomfield Hills, Michigan Rochester, Michigan BOK Financial Corporation, Chaparral Bancshares, Inc., Kansas City April 30, 1999 Tulsa, Oklahoma Richardson, Texas Canyon Creek National Bank, Richardson, Texas Van Alstyne Financial Corporation, Van Alstyne, Texas BOK Financial Corporation, Mid-Cities Bancshares, Inc., Kansas City May 12, 1999 Tulsa, Oklahoma Hurst, Texas Mid-Cities National Bank, Hurst, Texas BSB Bancorp, Inc., Skaneateles Savings Bank, New York April 28, 1999 Binghamton, New York Ridgefield, Connecticut BSB Bank and Trust Company, Skaneateles Bancorp, Inc., Binghamton, New York Ridgefield, Connecticut Capitol Bancorp Limited, East Valley Community Bank, Chicago May 3, 1999 Lansing, Michigan Chandler, Arizona Sun Community Bancorp Limited, Phoenix, Arizona Centon Bancorp, Inc., Richton Bank and Trust Company, Atlanta May 5, 1999 Richton, Mississippi Richton, Mississippi Central Financial Corporation, Mid-America Bancorp, Inc., Kansas City May 14, 1999 Hutchinson, Kansas Jewell, Kansas Citizens Bancshares of Southwest Citizens National Bank of Southwest Atlanta May 6, 1999 Florida, Florida, Naples, Florida Naples, Florida Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

522 Federal Reserve Bulletin • July 1999 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date CNB, Inc., Centennial National Bank, Minneapolis April 29, 1999 Walker, Minnesota Walker, Minnesota Decatur Corporation, Inc., Spectrum Bancorporation, Inc., Chicago May 12, 1999 Leon, Iowa Omaha, Nebraska Durant Bancorp, Inc., First United Bank and Trust Company, Kansas City May 12, 1999 Durant, Oklahoma Durant, Oklahoma First Shawnee Bancshares, Inc., Shawnee, Oklahoma First State Bank and Trust Company, Shawnee, Oklahoma Fifth Third Bancorp, South Florida Bank Holding Company, Cleveland April 27, 1999 Cincinnati, Ohio Fort Myers, Florida First Financial Banc Corporation, First Financial Bank, A Federal Savings St. Louis April 27, 1999 El Dorado, Arkansas Bank, El Dorado, Arkansas First National Bank of Nevada First Bank of Arkansas, N.A., San Francisco April 20, 1999 Holding Company, Scottsdale, Arizona Scottsdale, Arizona F & M Bancorporation, Inc., F & M Merger Corporation, Chicago April 21, 1999 Kaukauna, Wisconsin Kaukauna, Wisconsin CBE, Inc., Elkhorn, Wisconsin Community Bank of Elkhorn, Elkhorn, Wisconsin FNBR Holding Corporation, Yampa Valley National Bank, Kansas City April 21, 1999 Meeker, Colorado Hayden, Colorado First National Bank of the Rockies, Meeker, Colorado Foresight Financial Group, Inc., State Bank FFG, Chicago April 22, 1999 Freeport, Illinois Freeport, Illinois Hudson City, MHC, Hudson City Savings Bank, New York May 14, 1999 Paramus, New Jersey Paramus, New Jersey Hudson City Bancorp, Inc., Paramus, New Jersey Macks Creek Bancshares, Inc., Bank of Macks Creek, St. Louis May 14, 1999 Macks Creek, Missouri Macks Creek, Missouri MHBC Investments Limited Bank of England, St. Louis April 29, 1999 Partnership, England, Arkansas Little Rock, Arkansas Minster Financial Corp, Minster Bank, Cleveland May 6, 1999 Minster, Ohio Minster, Ohio New Commerce BanCorp, New Commerce Bank, N.A., Richmond April 29, 1999 Simpsonville, South Carolina Simpsonville, South Carolina Newco Alaska, Inc., First Bancorp, Inc., San Francisco May 13, 1999 Ketchikan, Alaska Ketchikan, Alaska First Bank, Ketchikan, Alaska Ogden Bancshares, Inc., Community Bank of Boone, Chicago May 18, 1999 Ogden, Iowa Boone, Iowa Oswego County, MHC, Oswego County Savings Bank, New York May 20, 1999 Oswego, New York Oswego, New York Oswego County Bancorp, Inc., Oswego, New York Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 523 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Penn Laurel Financial Corp., Clearfield Bank & Trust Company, Philadelphia May 18, 1999 Curwensville, Pennsylvania Clearfield, Pennsylvania Poteau Bancshares, Inc., The First State Bank, Kansas City May 19, 1999 Poteau, Oklahoma Wister, Oklahoma First Poteau Corporation, Poteau, Oklahoma Rich Land Bancorp, Inc., Cisne State Bank, St. Louis April 23, 1999 Olney, Illinois Cisne, Illinois Roxton Corporation Employee Stock The Roxton Corporation, Dallas April 22, 1999 Ownership Plan, Celeste, Texas Waco, Texas Sharon Bancshares, Inc., First Northwest Bancshares, Inc. St. Louis May 13, 1999 Martin, Tennessee Kenton, Tennessee First State Bank, Kenton, Tennessee Simmons First National NBC Bank Corp., St. Louis May 20, 1999 Corporation, El Dorado, Arkansas Pine Bluff, Arkansas National Bank of Commerce of El Dorado, El Dorado, Arkansas South Texas Bancorp, Inc., Hebbronville State Bank, Dallas April 24, 1999 Hebbronville, Texas Hebbronville, Texas South Texas Bancorp of Delaware, Inc., Wilmington, Delaware Sterling Bancorp, Inc., Northeast Bancorp, Inc., Philadelphia May 10, 1999 Lancaster, Pennsylvania North East, Maryland First National Bank of North East, North East, Maryland Summit Bancorp, Prime Bancorp, Inc., New York May 17, 1999 Princeton, New Jersey Fort Washington, Pennsylvania First Valley Corporation, Prime Bank, Bethlehem, Pennsylvania Philadelphia, Pennsylvania Van Orin Bancorp, Inc., First State Bank of Van Orin, Chicago May 6, 1999 Van Orin, Illinois Van Orin, Illinois W Holding Company, Inc., Westernbank Puerto Rico, New York May 17, 1999 Mayagiiez, Puerto Rico Mayagiiez, Puerto Rico Section 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Bank of Montreal, Nesbitt Burns Securities, Inc., Chicago April 23, 1999 Toronto, Canada Chicago, Illinois Bankmont Financial Corp., Chicago, Illinois The Bank of New York Company, BNY Trust Company of Missouri, New York April 29, 1999 Inc., St. Louis, Missouri New York, New York Union Planters Bank, N.A., Memphis, Tennessee Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

524 Federal Reserve Bulletin • July 1999 Section 4—Continued Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Community Trust Financial Services Drummond Association, Inc., Atlanta May 10, 1999 Corp., Cartersville, Georgia Hiram, Georgia Bartow Loan Company, Community Loan Company, Cartersville, Georgia Hiram, Georgia First Finance, Cartersville, Georgia Dahlonega Loan Company, Dahlonega, Georgia Griffin Finance & Thrift, Griffin, Georgia First Finance & Thrift, Rome, Georgia Darlington County Bancshares, Inc., Darlington County Bank, Richmond May 3, 1999 Darlington, South Carolina Darlington, South Carolina Deutsche Bank AG, Transatlantic Capital Company, L.L.C., New York May 12, 1999 Frankfurt, Germany New York, New York German American Capital Corporation, New York, New York First Mutual of Richmond, Inc., BSI Financial Services, Inc., Chicago April 29, 1999 Richmond, Indiana Titusville, Pennsylvania Richmond Mutual Bancorporation, Inc., Richmond, Indiana First National Bankshares of Beloit, Beloit Development, L.P., Kansas City May 10, 1999 Inc., Beloit, Kansas Beloit, Kansas Guaranty Development Company, Kennedy American Mortgage, LLC, Minneapolis May 3, 1999 Livingston, Montana Bozeman, Montana Guaranty, Inc., Beloit Development, L.P., Kansas City April 21, 1999 Beloit, Kansas Beloit, Kansas North Country Financial North Country Financial Group, Inc., Minneapolis May 13, 1999 Corporation, Denver, Colorado Manistique, Michigan Passumpsic Bancorp, Passumpsic Bank, FSB, Boston May 7, 1999 St. Johnsbury, Vermont Littleton, New Hampshire Piesco, Inc., Springfield Investment Company Doing Minneapolis May 3, 1999 Springfield, Minnesota Business as F&M Insurance Agency, Springfield, Minnesota Readlyn Bancshares, Inc., To engage in extending credit and Chicago April 30, 1999 Saint Paul, Minnesota servicing loans Republic Bancorp, Inc., D & N Financial Corporation, Chicago April 29, 1999 Ann Arbor, Michigan Hancock, Michigan D & N Bank, Hancock, Michigan D & N Mortgage Corporation, Hancock, Michigan D & N Capital Corporation, Hancock, Michigan Sharon Bancshares, Inc., American Holdings Investment, Inc., St. Louis May 4, 1999 Martin, Tennessee Union City, Tennessee Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 525 Section 4—Continued Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date SunTrust Banks, Inc., SunTrust Community Development Atlanta April 29, 1999 Atlanta, Georgia Corporation, Atlanta, Georgia Regency Development Associates, Inc. Raleigh, North Carolina Regency Constructors, Inc., Raleigh, North Carolina Susquehanna Bancshares, Inc., AExpert, Inc., Philadelphia April 22, 1999 Lititz, Pennsylvania Lititz, Pennsylvania AExpert Advisory, Inc., Lititz, Pennsylvania Trustmark Corporation, Trustmark Bankcard, National Atlanta April 27, 1999 Jackson, Mississippi Association, Columbus, Georgia Virginia Commonwealth Financial Virginia Commonwealth Trust Richmond April 26, 1999 Corporation, Company, Culpeper, Virginia Culpeper, Virginia Sections 3 and 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date BB&T Corporation, First Citizens Corporation, Richmond May 12, 1999 Winston-Salem, North Carolina Newnan, Georgia FCNB Corp, First Frederick Financial Corporation, Richmond May 19, 1999 Frederick, Maryland Frederick, Maryland APPLICATIONS APPROVED UNDER BANK MERGER ACT By the Secretary of the Board Recent applications have been approved by the Secretary of the Board as listed below. Copies are available upon request to the Freedom of Information Office, Office of the Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Applicant(s) Bank(s) Effective Date Central Savings Bank, North Country Bank & Trust, May 7, 1999 Sault Ste. Marie, Michigan Manistique, Michigan First Security Bank of Nevada, Comstock Bank, May 14, 1999 Salt Lake City, Utah Reno, Nevada First Security Corporation, Nevada Banking Company, Salt Lake City, Utah Stateline, Nevada Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

526 Federal Reserve Bulletin • July 1999 By Federal Reserve Banks Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to the Reserve Banks. Applicant(s) Bank(s) Reserve Bank Effective Date BANKFIRST, Minnesota BANKFIRST, Minneapolis May 12, 1999 Sioux Falls, South Dakota Minneapolis, Minnesota The Eaton Bank, World Savings Bank, FSB, Kansas City May 19, 1999 Eaton, Colorado Oakland, California FCNB Bank, First Bank of Frederick, Richmond May 19, 1999 Frederick, Maryland Frederick, Maryland Minster Bank, MSB Interim Bank, Cleveland May 6, 1999 Minster, Ohio Minster, Ohio Summit Bank, Prime Bank, Philadelphia May 17, 1999 Bethlehem, Pennsylvania Philadelphia, Pennsylvania PENDING CASES INVOLVING THE BOARD OF GOVERNORS This list of pending cases does not include suits against the Board of Governors v. Carrasco, No. 98 Civ. 3474 (LAK) Federal Reserve Banks in which the Board of Governors is not (S.D.N.Y., filed May 15, 1998). Action to freeze assets of named a party. individual pending administrative adjudication of civil money penalty assessment by the Board. On May 26, 1998, the court issued a preliminary injunction restraining the transfer or dis- Sedgwick v. Board of Governors, No. Civ 99 0702 (D. Ariposition of the individual's assets and appointing the Federal zona, filed April 14, 1999). Action under Federal Tort Reserve Bank of New York as receiver for those assets. Claims Act alleging violation of bank supervision requirements. Board of Governors v. Pharaon, No. 98-6101 (2d Cir., filed May 4, 1998). Appeal and cross-appeal of district court Hunter v. Board of Governors, No. 1:98CV02994 (TFH) order granting in part and denying in part the Board's (D.D.C., filed December 9, 1998). Action under the Freemotion for summary judgment seeking prejudgment interest dom of Information Act and the Privacy Act. and a statutory surcharge in connection with a civil money Folstad v. Board of Governors, No. 1:99 CV 124 (W.D. Mich., penalty assessed by the Board. On February 24, 1999, the filed February 17, 1999). Freedom of Information Act comcourt granted the Board's appeal and denied the crossplaint. On March 23, 1999, the Board filed a motion to appeal, and remanded the matter to the district court for dismiss or for summary judgment. determination of prejudgment interest due to the Board. Nelson v. Greenspan, No. 1:99CV00215 (EGS) (D.D.C., filed Fenili v. Davidson, No. C-98-01568-CW (N.D. California, January 28, 1999). Employment discrimination complaint. filed April 17, 1998). Tort and constitutional claim arising On March 29, 1999, the Board filed a motion to dismiss the out of return of a check. On June 5, 1998, the Board filed its action. motion to dismiss. Fraternal Order of Police v. Board of Governors, No. Logan v. Greenspan, No. 1:98CV00049 (D.D.C., filed Janu- 1:98CV03116 (D. D.C., filed December 22, 1998). Declaraary 9, 1998). Employment discrimination complaint. tory judgment action challenging Board labor practices. On February 26, 1999, the Board filed a motion to dismiss the Goldman v. Department of the Treasury, No. 98-9451 (11th action. Circuit, filed November 10, 1998). Appeal from a District Inner City Press/Community on the Move v. Board of Gover- Court order dismissing an action challenging Federal Reserve notes as lawful money. nors, No.98-9604 (2d Cir., filed December 3, 1998). Appeal of district court order dated October 6, 1998, granting Kerr v. Department of the Treasury, No. CV-S-97-01877summary judgment for the Board in a Freedom of Informa- DWH (D. Nev., filed December 22, 1997). Challenge to tion Act case. income taxation and Federal Reserve notes. On Septem- Independent Bankers Association of America v. Board of Gov- ber 3, 1998, a motion to dismiss was filed on behalf of ernors, No. 98-1482 (D.C. Cir., filed October 21, 1998). all federal defendants. The court dismissed the action on Petition for review of a Board order dated September 23, March 31, 1999, and on April 28, 1999, the plaintiff filed a 1998, conditionally approving the applications of Travelers notice of appeal. Group, Inc., New York, New York, to become a bank Bettersworth v. Board of Governors, No. 97-CA-624 (W.D. holding company by acquiring Citicorp, New York, New Tex., filed August 21, 1997). Privacy Act case. On June 1, York, and its bank and nonbank subsidiaries. 1999, the Board filed a motion for summary judgment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 527 FINAL ENFORCEMENT ORDERS ISSUED BY THE WRITTEN AGREEMENTS APPROVED BY FEDERAL BOARD OF GOVERNORS RESERVE BANKS Wellington State Bank Wellington, Texas B.O.T. Corporation, N.V., Curacao, Netherlands Antilles The Federal Reserve Board announced on May 18, 1999, the execution of a Written Agreement by and among the The Federal Reserve Board announced on May 21, 1999, Wellington State Bank, Wellington, Texas, the Federal the issuance of a consent Order against B.O.T. Corpora- Reserve Bank of Dallas, and The Banking Commissioner tion, N.V., Curacao, Netherlands Antilles. of Texas. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A1 Financial and Business Statistics A3 GUIDE TO TABULAR PRESENTATION Federal Finance—Continued All 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, 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 A31 New security issues—Tax-exempt state and local Policy Instruments governments and corporations A7 Federal Reserve Bank interest rates A32 Open-end investment companies—Net sales A8 Reserve requirements of depository institutions and assets A9 Federal Reserve open market transactions A32 Corporate profits and their distribution A32 Domestic finance companies—Assets and Federal Reserve Banks liabilities A3 3 Domestic finance companies—Owned and managed A10 Condition and Federal Reserve note statements receivables All Maturity distribution of loan and security holding Real Estate Monetary and Credit Aggregates A34 Mortgage markets—New homes A12 Aggregate reserves of depository institutions A3 5 Mortgage debt outstanding and monetary base A13 Money stock, and debt measures Consumer Credit A3 6 Total outstanding Commercial Banking Institutions— A3 6 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 All 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

2 Federal Reserve Bulletin • July 1999 INTERNATIONAL STATISTICS Securities Holdings and Transactions A60 Foreign transactions in securities Summary Statistics A61 Marketable U.S. Treasury bonds and A50 U.S. international transactions notes—Foreign transactions A51 U.S. foreign trade A51 U.S. reserve assets Interest and Exchange Rates A51 Foreign official assets held at Federal Reserve A62 Foreign exchange rates Banks A52 Selected U.S. liabilities to foreign official A63 GUIDE TO STATISTICAL RELEASES AND institutions SPECIAL TABLES Reported by Banks in the United States SPECIAL TABLE A52 Liabilities to, and claims on, foreigners A53 Liabilities to foreigners A64 Pro forma balance sheet and income A55 Banks' own claims on foreigners statements for priced service operations, A56 Banks' own and domestic customers' claims on March 31, 1999 foreigners A56 Banks' own claims on unaffiliated foreigners A66 INDEX TO STATISTICAL TABLES A57 Claims on foreign countries—Combined domestic offices and foreign branches Reported by Nonbanking Business Enterprises in the United States A58 Liabilities to unaffiliated foreigners A59 Claims on unaffiliated foreigners Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A3 Guide to Tabular Presentation SYMBOLS AND ABBREVIATIONS c Corrected G-10 Group of Ten e Estimated GNMA Government National Mortgage Association n.a. Not available GDP Gross domestic product P Preliminary HUD Department of Housing and Urban r Revised (Notation appears on column heading Development when about half of the figures in that column IMF International Monetary Fund are changed.) IO Interest only * Amounts insignificant in terms of the last decimal IPCs Individuals, partnerships, and corporations place shown in the table (for example, less than IRA Individual retirement account 500,000 when the smallest unit given is millions) MMDA Money market deposit account 0 Calculated to be zero MSA Metropolitan statistical area Cell not applicable NOW Negotiable order of withdrawal ATS Automatic transfer service OCD Other checkable deposit BIF Bank insurance fund OPEC Organization of Petroleum Exporting Countries CD Certificate of deposit OTS Office of Thrift Supervision CMO Collateralized mortgage obligation PMI Private mortgage insurance CRA Community Reinvestment Act of 1977 PO Principal only FFB Federal Financing Bank REIT Real estate investment trust FHA Federal Housing Administration REMIC Real estate mortgage investment conduit FHLBB Federal Home Loan Bank Board RP Repurchase agreement FHLMC Federal Home Loan Mortgage Corporation RTC Resolution Trust Corporation FmHA Farmers Home Administration SCO Securitized credit obligation FNMA Federal National Mortgage Association SDR Special drawing right FSLIC Federal Savings and Loan Insurance Corporation SIC Standard Industrial Classification G-7 Group of Seven VA Department of Veterans Affairs GENERAL INFORMATION In many of the tables, components do not sum to totals because of include not fully guaranteed issues) as well as direct obligarounding. tions of the Treasury. 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

A42 Domestic Nonfinancial Statistics • July 1999 1.10 RESERVES, MONEY STOCK, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted1 1998 1999 1998 1999 MMoonneettaarryy oorr ccrreeddiitt aaggggrreeggaattee Q2 Q3 Q4 Qlr Dec. Jan.1 Feb.r Mar.r Apr. Reserves of depository institutions2 1 Total -3.6r —7.7r — 1.8r -1.2 10.9r 6.0 -15.3 -22.5 7.2 2 Required -2.5 — 8.9r —2.5r 1.0 12.5r 7.5 -7.0 -25.6 11.5 3 Nonborrowed —4.1r -8.6r -1.3 10.0r 3.6 -13.0 -21.1 4.5 4 Monetary base3 5.4r 6.9r 8.7r 9.1 7.5r 10.5 9.4 7.8 10.3 Concepts of money, liquid assets, and debt4 5 Ml 1.0 -2.0 5.0 2.7 4.8r -2.6 1.6 10.1 6.9 6 M2 7.5 6.9 11.0 7.2 10.1 6.6 5.7 2.8 8.8 7 M3 10.1 8.6 12.9 7.2 12.0 4.0 8.7 -2.2 7.9 8 Debt 5.9r 5.9r 6.4 5.7 6.1 5.3 4.7 6.3 n.a. Nontransaction components 9 In M25 9.8 9.9 13.0 8.7 11.9r 9.6 7.0 .3 9.4 10 In M3 only6 17.8 13.5 18.4 7.1 17.3 -3.2 16.9 -15.7 5.2 Time and savings deposits Commercial banks 11 Savings, including MMDAs 13.4 15.8 17.6 11.6 19.2 12.6 5.4 .2 17.5 12 Small time7 .1 .1 .4 -5.4 -4.2 -7.7 -7.5 -3.5 -3.3 13 Large time8'9 16.4 3.5 3.9 -2.4 8.0 10.6 -26.8 -23.2 14.7 Thrift institutions 14 Savings, including MMDAs 10.8 9.0 10.1 12.7 10.8 15.0 14.3 7.3 9.5 15 Small time7 -4.4 -7.3 -6.7 -6.2 -5.9 -4.8 -5.9 -7.8 -4.1 16 Large time8 -4.5 .5 10.4 7.4 16.4 25.6 -14.5 -16.0 4.1 Money market mutual funds 17 Retail 20.9 19.0 28.4 20.5 22.4r 22.7 22.6 3.1 12.6 18 Institution-only 34.7 26.6 41.8 17.9 29.5 -2.8 34.7 -1.8 21.1 Repurchase agreements and Eurodollars 19 Repurchase agreements10 14.5 11.7 16.4 11.2 34.0 -25.0 68.7 -50.2 -39.0 20 Eurodollars10 -3.3 21.7 7.6 -2.7 -20.0 -28.1 34.4 31.9 3.0 Debt components4 21 Federal -1.4 -1.5 -2.0 -2.6 -.4 -2.1 -7.3 -1.1 n.a. 22 Nonfederal 8.4 8.3r 9ff 8.2 8.2r 7.5 8.3 8.5 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 currency 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 time 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 Apr. Apr. 7 Apr. 14 Apr. 21 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 501,636 507,920 508,369 511,052 511.893 513,556 U.S. government securities 2 Bought outright—System account3 458,706 464,000 469,926 464,197 464,809 465,257 466,781 469,667 470,563 3 Held under repurchase agreements 3,310 6,499 6,691 4,497 8,006 7,863 9,002 6,496 6,685 Federal agency obligations 4 Bought outright 336 318 311 311 311 311 311 311 311 5 Held under repurchase agreements 3,222 3,408 2,110 3,690 3,944 3,387 2,212 1,660 2,022 6 Acceptances 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 118 32 167 4 87 44 168 32 199 8 Seasonal credit 10 17 38 16 20 21 27 30 36 9 Extended credit 0 0 0 0 0 0 0 0 0 10 Float 446 210 297 62 -453 -41 13 264 103 11 Other Federal Reserve assets 35,488 33,436 33,330 34,837 31,646 32,657 32,538 33,433 33,638 12 Gold stock 11,049 11,048 11,050 11,049 11,048 11,048 11,051 11,050 11,049 13 Special drawing rights certificate account 9,200 8,329 8,200 8,200 8,200 8,200 8,200 8,200 8,200 14 Treasury currency outstanding 26,454 26,58 lr 26,675 26,573r 26,605r 26,638r 26,652 26,666 26,680 ABSORBING RESERVE FUNDS 15 Currency in circulation 510,631 514,736r 519,355 514,779 515,112r 515,762r 518,373 519,963 519,632 16 Treasury cash holdings 114 132 144 132 134 135 135 141 145 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 4,800 5,463 6,379 6,313 5,309 5,160 5,644 4,853 6,790 18 Foreign 202 177 208 180 166 168 245 188 215 19 Service-related balances and adjustments . . 7,129 6,979r 6,716 6,896 7,227r 6,815r 6,636 6,672 6,717 20 Other 270 247 283 261 236 227 311 305 283 21 Other Federal Reserve liabilities and capital . 16,686 17,002 17,275 17,117 17,184 17,091 17,188 17,322 17,269 22 Reserve balances with Federal Reserve Banks' 8,507 9,143r 8,435 7,758 8,856r 10,029r 8,422 8,365 8,435 End-of-month figures Wednesday figures Apr. Mar. 31 Apr. 7 Apr. 14 Apr. 21 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 503,077 516,387 519,959 508,228 516,531 512,417 514,232 U.S. government securities 2 Bought outright—System account3 461,036 465,686 473,573 464,506 464,744 465,686 467,237 471,409 470,506 3 Held under repurchase agreements 3,558 12,730 8,930 4,495 17,013 12,730 8,910 5,880 5,880 Federal agency obligations 4 Bought outright 311 311 311 311 311 311 311 311 5 Held under repurchase agreements 5,606 3,292 3,840 4,533 5,606 2,096 1,334 1,334 6 Acceptances 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 4 223 2 1 2 223 1,030 74 1,367 8 Seasonal credit 12 22 65 20 17 22 28 32 41 9 Extended credit 0 0 0 0 0 0 0 0 0 0 Float 39 -882 36 163 -305 -882 146 -319 1,050 1 Other Federal Reserve assets 34,208 32,690 33,749 34,893 30,217 32,690 32,802 33,695 33,744 12 Gold stock 11,047 11,049 11,050 11,049 11,047 11,049 11,051 11,048 11,049 13 Special drawing rights certificate account 9,200 8,200 8,200 8,200 8,200 8,200 8,200 8,200 8,200 14 Treasury currency outstanding 26,508 26,638r 26,708 26,573r 26,605r 26,638r 26,652 26,666 26,680 ABSORBING RESERVE FUNDS 15 Currency in circulation 511,709 517,790r 519,702 515,774r 516,177r 517,790r 520,543 520,911 520,370 16 Treasury cash holdings 120 135 167 134 134 135 140 145 145 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 4,538 5,374 10,040 6,318 5,199 5,374 5,438 4,157 6,690 18 Foreign 200 166 260 173 169 166 183 191 193 19 Service-related balances and adjustments . . 7,030 6,815r 6,788 6,896 1,221' 6,815r 6,636 6,672 6,717 20 Other 225 235 263 247 220 235 304 306 240 21 Other Federal Reserve liabilities and capital . 16,460 16,805 17,214 16,906 17,089 16,805 17,135 17,040 17,007 22 Reserve balances with Federal Reserve Banks4 9,551 14,954r 11,484 7,602 16,167r 14,954r 8,083 8,909 8,800 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

A42 Domestic Nonfinancial Statistics • July 1999 1.12 RESERVES AND BORROWINGS Depository Institutions1 Millions of dollars Prorated monthly averages of biweekly averages RReesseerrvvee ccllaassssiiffiiccaattiioonn 1996 1997 1998 1998 1999 Dec/ Dec.r Dec. Oct.r Nov. Dec. Jan. Feb. Mar.r Apr. 1 Reserve balances with Reserve Banks2 13,330 10,664 9,02 lr 9,027 8,855 9,02 lr 9,658r 8,578 8,851 9,240 2 Total vault cash3 44,525 44,740 44,305 43,268 43,104 44,305 45,499 46,468 42,898 42,162 3 Applied vault cash4 37,844 37,255 35,997 35,089 35,297 35,997 36,687 36,660 34,270 34,407 4 Surplus vault cash5 6,681 7,485 8,308 8,179 7,807 8,308 8,812 9,809 8,628 7,755 5 Total reserves6 51,174 47,920 45,018r 44,117 44,152 45,018r 46,345r 45,237 43,121 43,647 6 Required reserves 49,758 46,235 43,435 42,543 42,528r 43,435 44,811 44,022 41,816 42,483 7 Excess reserve balances at Reserve Banks7 1,416 1,685 l,583r 1,574 1,624 l,583r l,534r 1,215 1,305 1,164 8 Total borrowings at Reserve Banks8 155 324 117 174 83r 117 206 116 65 166 9 Seasonal borrowings 68 79 15 107 37 15 7 9 18 39 10 Extended credit9 0 0 0 0 0 0 0 0 0 0 Biweekly averages of daily figures for two week periods ending on dates indicated 1998 1999 Dec. 30 Jan. 13r Jan. 27 Feb. 10 Feb. 24 Mar. 10 Mar. 24 Apr. 7r Apr. 21 May 5 1 Reserve balances with Reserve Banks2 9,057 9,550 10,019 8,750 8,233 9,356 8,309 9,213 8,409 10,554 2 Total vault cash3 45,470 45,023 44,837 49,363 45,597 42,284 43,524 42,525 42,348 41,592 3 Applied vault cash4 36,748 35,911 36,847 38,649 35,997 34,007 34,521 34,147 34,422 34,587 4 Surplus vault cash5 8,722 9,112 7,990 10,714 9,600 8,277 9,004 8,378 7,926 7,006 5 Total reserves6 45,805 45,461 46,866 47,399 44,230 43,362 42,830 43,360 42,831 45,141 6 Required reserves 43,999 43,241 45,878 46,181 43,041r 42,062 41,613 41,872 41,915 43,842 7 Excess reserve balances at Reserve Banks7 1,806 2,220 988 1,217 1,189 1,300 1,217 1,487 916 1,299 8 Total borrowings at Reserve Banks8 195 370 68 158 112 22 63 130 149 223 9 Seasonal borrowings 18 9 5 8 9 14 18 24 33 59 10 Extended credit9 0 0 0 0 0 0 0 0 0 0 1. Data in this table also appear in the Board's H.3 (502) weekly statistical release. For 5. Total vault cash (line 2) less applied vault cash (line 3). ordering address, see inside front cover. Data are not break-adjusted or seasonally adjusted. 6. Reserve balances with Federal Reserve Banks (line 1) plus applied vault cash 2. Excludes required clearing balances and adjustments to compensate for float and (line 3). includes other off-balance-sheet "as-of' adjustments. 7. Total reserves (line 5) less required reserves (line 6). 3. 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 elfect 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 A7 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per year Current and previous levels Adjustment credit1 Seasonal credit2 Extended credit3 FFeeddeerraall RReesseerrvvee BBaannkk 6/1 O 1 n / 99 Effective date Previous rate 6/1 O 1 n /9 9 Effective date Previous rate 6/1 O 1 n /9 9 Effective date Previous rate Boston 4.50 11/18/98 4.75 4.85 6/3/99 4.80 5.35 6/3/99 5.30 New York 11/17/98 Philadelphia 11/17/98 Cleveland 11/19/98 Richmond 11/18/98 Atlanta 11/18/98 Chicago 11/19/98 St. Louis 11/19/98 Minneapolis 11/19/98 Kansas City 11/18/98 Dallas 11/17/98 San Francisco .... 4.50 11/17/98 4.75 4.85 6/3/99 4.80 5.35 6/3/99 5.30 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 Effecti\ 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 6 6 1982—July 20 11.5-12 11.5 1990—Dec. 19 6.5 6.5 23 11.5 11.5 1978—Jan. 9 6-6.5 6.5 Aug. 2 11-11.5 11 1991—Feb. 1 6-6.5 6 20 6.5 6.5 3 11 11 4 6 6 May 11 6.5-7 7 16 10.5 10.5 Apr. 30 5.5-6 5.5 12 7 7 27 10-10.5 10 May 2 5.5 5.5 July 3 7-7.25 7.25 30 10 10 Sept. 13 5-5.5 5 10 7.25 7.25 Oct. 12 9.5-10 9.5 17 5 5 Aug. 21 7.75 7.75 13 9.5 9.5 Nov. 6 4.5-5 4.5 Sept. 22 8 8 Nov. 22 9-9.5 9 7 4.5 4.5 Oct. 16 8-8.5 8.5 26 9 9 Dec. 20 3.5^1.5 3.5 20 8.5 8.5 Dec. 14 8.5-9 9 24 3.5 3.5 Nov. 1 8.5-9.5 9.5 15 8.5-9 8.5 3 9.5 9.5 17 8.5 8.5 1992—July 2 3-3.5 3 7 3 3 1979—July 20 10 10 1984—Apr. 9 8.5-9 9 Aug. 17 10-10.5 10.5 13 9 9 1994—May 17 3-3.5 3.5 20 10.5 10.5 Nov. 21 8.5-9 8.5 18 3.5 3.5 Sept. 19 10.5-11 11 26 8.5 8.5 Aug. 16 3.5-4 4 21 11 11 Dec. 24 8 8 18 4 4 Oct. 8 11-12 12 Nov. 15 4-4.75 4.75 10 12 12 1985—May 20 7.5-8 7.5 17 4.75 4.75 24 7.5 7.5 1980—Feb. 15 12-13 13 1995—Feb. 1 4.75-5.25 5.25 19 13 13 1986—Mar. 7 7-7.5 7 9 5.25 5.25 May 29 12-13 13 10 7 7 30 12 12 Apr. 21 6.5-7 6.5 1996—Jan. 31 5.00-5.25 5.00 June 13 11-12 11 23 6.5 6.5 Feb. 5 5.00 5.00 16 11 11 July 11 6 6 July 28 10-11 10 Aug. 21 5.5-6 5.5 1998—Oct. 15 4.75-5.00 4.75 29 10 10 22 5.5 5.5 Oct. 16 4.75 4.75 Sept. 26 11 11 Nov. 17 12 12 1987—Sept. 4 5.5-6 6 1998—Nov. 17 4.50-4.75 4.50 Dec. 5 12-13 13 11 6 6 Nov. 19 4.50 4.50 8 13 13 1981—May 5 13-14 14 1988—Aug. 9 6-6.5 6.5 In effect June 11, 1999 4.50 4.50 8 14 14 11 6.5 6.5 Nov. 2 13-14 13 6 13 13 1989—Feb. 24 6.5-7 7 Dec. 4 12 12 27 7 7 1. Available on a short-term basis to help depository institutions meet temporary needs for of the Federal Reserve Bank, this time period may be shortened. Beyond this initial period, a funds that cannot be met through reasonable alternative sources. The highest rate established flexible rate somewhat above rates charged on market sources of funds is charged. The rate for loans to depository institutions may be charged on adjustment credit loans of unusual size ordinarily is reestablished on the first business day of each two-week reserve maintenance that result from a major operating problem at the borrower's facility. period, but it is never less than the discount rate applicable to adjustment credit plus 50 basis 2. Available to help relatively small depository institutions meet regular seasonal needs for points. funds that arise from a clear pattern of intrayearly movements in their deposits and loans and 4. For earlier data, see the following publications of the Board of Governors: Banking and that cannot be met through special industry lenders. The discount rate on seasonal credit takes Monetary Statistics, 1914-1941, and 1941-1970\ and the Annual Statistical Digest, 1970into account rates charged by market sources of funds and ordinarily is reestablished on the 1979. first business day of each two-week reserve maintenance period; however, it is never less than In 1980 and 1981, the Federal Reserve applied a surcharge to short-term adjustment-credit the discount rate applicable to adjustment credit. borrowings by institutions with deposits of $500 million or more that had borrowed in 3. May be made available to depository institutions when similar assistance is not successive weeks or in more than four weeks in a calendar quarter. A 3 percent surcharge was reasonably available from other sources, including special industry lenders. Such credit may in effect from Mar. 17, 1980, through May 7, 1980. A surcharge of 2 percent was reimposed be provided when exceptional circumstances (including sustained deposit drains, impaired on Nov. 17, 1980; the surcharge was subsequently raised to 3 percent on Dec. 5, 1980, and to access to money market funds, or sudden deterioration in loan repayment performance) or 4 percent on May 5, 1981. The surcharge was reduced to 3 percent effective Sept. 22, 1981, practices involve only a particular institution, or to meet the needs of institutions experiencing and to 2 percent effective Oct. 12, 1981. As of Oct. 1, 1981, the formula for applying the difficulties adjusting to changing market conditions over a longer period (particularly at times surcharge was changed from a calendar quarter to a moving thirteen-week period. The of deposit disintermediation). The discount rate applicable to adjustment credit ordinarily is surcharge was eliminated on Nov. 17, 1981. charged on extended-credit loans outstanding less than thirty days; however, at the discretion Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • July 1999 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1 Type of deposit Net transaction accounts 1 $0 million-$46.5 million3 . 12/31/98 2 More than $46.5 million4 . 12/31/98 3 Nonpersonal time deposits; 12/27/90 4 Eurocurrency liabilities6. . . 12/27/90 1. Required reserves must be held in the form of deposits with Federal Reserve Banks succeeding calendar year by 80 percent of the percentage increase in the total reservable or vault cash. Nonmember institutions may maintain reserve balances with a Federal liabilities of all depository institutions, measured on an annual basis as of June 30. No Reserve Bank indirectly, on a pass-through basis, with certain approved institutions. For corresponding adjustment is made in the event of a decrease. The exemption applies only to previous reserve requirements, see earlier editions of the Annual Report or the Federal accounts that would be subject to a 3 percent reserve requirement. Effective with the reserve Reserve Bulletin. Under the Monetary Control Act of 1980, depository institutions maintenance period beginning December 31, 1998, for depository institutions that report include commercial banks, savings banks, savings and loan associations, credit unions, weekly, and with the period beginning January 14, 1999, for institutions that report quarterly, 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 11/2 years was reduced from 3 percent to 1 x/2 percent for by check, draft, debit card, or similar order payable directly to third parties) are savings the maintenance period that began Dec. 13, 1990, and to zero for the maintenance period that deposits, not transaction accounts. began Dec. 27, 1990. For institutions that report quarterly, the reserve requirement on 3. The Monetary Control Act of 1980 requires that the amount of transaction accounts nonpersonal time deposits with an original maturity of less than 1 '/i years was reduced from 3 against which the 3 percent reserve requirement applies be modified annually by 80 percent of percent to zero on Jan. 17, 1991. the percentage change in transaction accounts held by all depository institutions, determined The reserve requirement on nonpersonal time deposits with an original maturity of \l/2 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 11/2 years (see note 5). Under the Garn-St Germain Depository Institutions Act of 1982, the Board adjusts the amount of reservable liabilities subject to a zero percent reserve requirement each year for the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A9 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS1 Millions of dollars 1998 1999 TTyyppee ooff ttrraannssaaccttiioonn aanndd mmaattuurriittyy 11999966 11999977 11999988 Sept. Oct. Nov. Dec. Jan. Feb. Mar. U.S. TREASURY SECURITIES2 Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 9,901 9,147 3,550 0 0 0 0 00 00 00 7 Gross sales 0 0 0 0 0 0 0 0 0 0 Exchanges 426,928 436,257 450,835 33,140 40,712 34,957 41,393 35,069 36,862 35,065 4 For new bills 426,928 435,907 450,835 33,140 40,712 34,957 41,393 35,069 36,862 35,065 5 Redemptions 0 0 2,000 0 0 0 0 0 0 0 Others within one year Gross purchases 524 5,549 6,297 1,038 741 662 0 0 2,103 1,060 7 Gross sales 0 0 0 0 0 0 0 0 0 0 8 Maturity shifts 30,512 41,716 46,062 2,301 2,423 5,444 2,539 2,865 5,578 3,015 9 Exchanges -41,394 -27,499 -49,434 -2,242 -400 -8,093 -2,555 -400 -7,458 -5,956 10 Redemptions 2,015 1,996 2,676 0 602 0 0 492 0 0 One to five years 11 Gross purchases 3,898 19,680 12,901 3,989 725 2,397 0 0 2,752 2,428 17. Gross sales 0 0 0 0 0 0 0 0 0 0 13 Maturity shifts -25,022 -37,987 -37,777 -2,301 -2,423 -4,574 -2,539 -2,865 -4,928 -3,015 14 Exchanges 31,459 20,274 37,154 2,242 0 6,013 2,555 0 4,778 5,956 Five to ten years 15 Gross purchases 1,116 3,849 2,294 351 0 862 0 0 335 346 16 Gross sales 0 0 0 0 0 0 0 0 0 0 17 Maturity shifts -5,469 -1,954 -5,908 0 0 718 0 0 -650 0 18 Exchanges 6,666 5,215 7,439 0 400 1,135 0 400 1,340 0 More than ten years 19 Gross purchases 1,655 5,897 4,884 0 1,674 698 0 615 0 2,404 70 Gross sales 0 0 0 0 0 0 0 0 0 0 21 Maturity shifts -20 -1,775 -2,377 0 0 -1,589 0 0 0 0 22 Exchanges 3,270 2,360 4,842 0 0 945 0 0 1,340 0 All maturities 23 Gross purchases 17,094 44,122 29,926 5,377 3,140 4,619 0 615 5,190 6,238 7,4 Gross sales 0 0 0 0 0 0 0 0 0 0 25 Redemptions 2,015 1,996 4,676 0 602 0 0 492 0 0 Matched transactions 76 Gross purchases 3,092,399 3,577,954 4,395,430 380,594 402,581 358,438 418,538 365,779 324,078 393,267 27 Gross sales 3,094,769 3,580,274 4,399,330 382,063 400,995 359,256 420,397 363,604 322,669 394,865 Repurchase agreements 78 Gross purchases 457,568 810,485 512,671 63,924 40,823 23,884 49,296 2211,,996688 2266,,009988 6622,,887788 29 Gross sales 450,359 809,268 514,186 59,731 48,672 19,200 38,592 37,157 27,025 53,706 30 Net change in U.S. Treasury securities 19,919 41,022 19,835 8,101 -3,725 8,484 8,845 -12,891 5,672 13,812 FEDERAL AGENCY OBLIGATIONS Outright transactions 31 Gross purchases 0 0 0 0 0 0 0 0 0 0 37 Gross sales 0 0 25 0 0 0 0 0 0 0 33 Redemptions 409 1,540 322 48 15 20 30 2 0 25 Repurchase agreements 34 Gross purchases 75,354 160,409 284,316 18,486 51,471 51,419 48,815 23,577 37,416 35,731 35 Gross sales 74,842 159,369 276,266 19,953 50,032 48,785 44,285 31,744 36,067 34,009 36 Net change in federal agency obligations 103 -500 7,703 -1,515 1,424 2,614 4,500 -8,169 1,349 1,697 37 Total net change in System Open Market Account... 20,021 40,522 27,538 6,586 -2,301 11,098 13,345 -21,060 7,021 15,509 1. Sales, redemptions, and negative figures reduce holdings of the System Open Market 2. Transactions exclude changes in compensation for the effects of inflation on the principal Account; all other figures increase such holdings. of inflation-indexed securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • July 1999 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements1 Millions of dollars Wednesday End of month AAAccccccooouuunnnttt 1999 1999 Mar. 31 Apr. 7 Apr. 14 Apr. 21 Apr. 28 Feb. 28 Mar. 31 Apr. 30 Consolidated condition statement ASSETS 1 Gold certificate account 11,049 11,051 11,048 11,049 11,048 11,047 11,049 11,050 2 Special drawing rights certificate account 8,200 8,200 8,200 8,200 8,200 9,200 8,200 8,200 3 Coin 428 424 408 415 416 464 428 430 Loans 4 To depository institutions 246 1,058 107 1,408 66 16 246 68 5 Other 0 0 0 0 0 0 0 0 6 Acceptances held under repurchase agreements 0 0 0 0 0 0 0 0 Federal agency obligations 7 Bought outright 311 311 311 311 311 336 311 311 8 Held under repurchase agreements 5,606 2,096 1,334 1,334 3,015 3,884 5,606 3,292 9 Total U.S. Treasury securities 478,416 476,147 477,289 476,386 480,357 464,594 478,416 482,503 10 Bought outright2 465,686 467,237 471,409 470,506 473,627 461,036 465,686 473,573 11 Bills 196,759 197,758 199,600 198,718 199,175 198,357 196,759 199,121 12 Notes 194,968 195,425 197,493 197,120 199,721 191,126 194,968 199,721 13 Bonds 73,959 74,055 74,317 74,667 74,730 71,553 73,959 74,731 14 Held under repurchase agreements 12,730 8,910 5,880 5,880 6,730 3,558 12,730 8,930 15 Total loans and securities 484,578 479,611 479,041 479,439 483,748 468,830 484,578 486,174 16 Items in process of collection 7,097 8,303 7,910 9,065 8,254 5,176 7,097 5,248 17 Bank premises 1,303 1,304 1,308 1,309 1,311 1,302 1,303 1,310 Other assets 18 Denominated in foreign currencies3 15,171 15,250 15,254 15,258 15,263 18,702 15,171 15,034 19 All other4 16,126 16,160 16,995 17,110 17,496 14,313 16,126 17,336 20 Total assets 543,952 540,303 540,165 541,845 545,736 529,034 543,952 544,782 LIABILITIES 21 Federal Reserve notes 491,715 494,455 494,798 494,250 494,606 485,784 491,715 493,590 22 Total deposits 28,316 20,893 20,396 22,406 26,392 21,798 28,316 28,623 23 Depository institutions 22,541 14,968 15,742 15,283 17,442 16,835 22,541 18,061 24 U.S. Treasury—General account 5,374 5,438 4,157 6,690 8,545 4,538 5,374 10,040 25 Foreign—Official accounts 166 183 191 193 168 200 166 260 26 Other 235 304 306 240 237 225 235 263 27 Deferred credit items 7,117 7,821 7,931 8,182 7,682 4,992 7,117 5,354 28 Other liabilities and accrued dividends5 4,328 4,379 4,239 4,184 4,230 4,205 4,328 4,493 29 Total liabilities 531,475 527,547 527,365 529,023 532,911 516,779 531,475 532,062 CAPITAL ACCOUNTS 30 Capital paid in 6,122 6,123 6,172 6,166 6,180 6,063 6,122 6,182 31 Surplus 5,944 5,952 5,952 5,952 5,952 5,872 5,944 5,952 32 Other capital accounts 411 681 677 704 693 320 411 586 33 Total liabilities and capital accounts 543,952 540,303 540,165 541,845 545,736 529,034 543,952 544,782 MEMO 34 Marketable U.S. Treasury securities held in custody for foreign and international accounts n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Federal Reserve note statement 35 Federal Reserve notes outstanding (issued to Banks) 665,942 671,979 676,627 681,449 685,435 641,086 665,942 687,900 36 LESS: Held by Federal Reserve Banks 174,228 177,524 181,829 187,199 190,828 155,302 174,228 194,309 37 Federal Reserve notes, net 491,715 494,455 494,798 494,250 494,606 485,784 491,715 493,590 Collateral held against notes, net 38 Gold certificate account 11,049 11,051 11,048 11,049 11,048 11,047 11,049 11,050 39 Special drawing rights certificate account 8,200 8,200 8,200 8,200 8,200 9,200 8,200 8,200 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. Treasury and agency securities 472,466 475,204 475,550 475,001 475,358 465,537 472,466 474,340 42 Total collateral 491,715 494,455 494,798 494,250 494,606 485,784 491,715 493,590 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 End of month TTTyyypppeee ooofff hhhooollldddiiinnnggg aaannnddd mmmaaatttuuurrriiitttyyy 1999 1999 Mar. 31 Apr. 7 Apr. 14 Apr. 21 Apr. 28 Feb. 26 Mar. 31 Apr. 30 1 Total loans 246 1,058 107 1,408 66 445 65 68 2 Within fifteen days1 243 1,033 77 1,406 52 445 64 40 3. Sixteen days to ninety days 3 26 30 2 14 0 1 28 4 Total U.S. Treasury securities2 478,416 476,147 477,289 476,386 480,357 470,976 478,416 482,503 5 Within fifteen days1 26,785 18,048 20,396 20,105 22,035 24,996 26,785 13,804 6 Sixteen days to ninety days 98,303 101,247 97,871 96,179 100,866 98,522 98,303 103,293 7 Ninety-one days to one year 134,439 137,410 138,060 138,454 134,011 133,298 134,439 142,071 8 One year to five years 112,263 112,518 113,451 113,786 115,258 110,291 112,263 115,147 9 Five years to ten years 46,598 46,894 47,220 47,221 47,545 46,246 46,598 47,546 10 More than ten years 60,029 60,029 60,292 60,642 60,642 57,623 60,029 60,642 11 Total federal agency obligations 5,917 2,407 1,645 1,645 3,326 7,559 5,917 3,603 12 Within fifteen days' 5,606 2,096 1,334 1,334 3,015 7,248 5,606 3,292 13 Sixteen days to ninety days 27 27 32 32 37 0 27 37 14 Ninety-one days to one year 79 79 84 84 79 106 79 79 15 One year to five years 30 30 20 20 20 30 30 20 16 Five years to ten years 175 175 175 175 175 175 175 175 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 securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A12 Domestic Financial Statistics • July 1999 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 1998 1999 1995 1996 1997 1998 IItteemm Dec.r Dec/ Dec.r Dec. Sept.1" Oct.r Nov.1" Dec. Jan. Feb. Mar/ Apr. Seasonally adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS2 1 Total reserves3 56.45 50.16 46.86 44.90r 44.54 44.41 44.50 44.90r 45.13r 44.55r 43.72 43.98 2 Nonborrowed reserves4 56.20 50.01 46.54 44.79 44.29 44.23 44.41 44.79 44.92r 44.44r 43.65 43.82 3 Nonborrowed reserves plus extended credit5 56.20 50.01 46.54 44.79 44.29 44.23 44.41 44.79 44.92r 44.44r 43.65 43.82 4 Required reserves 55.16 48.75 45.18 43.32 42.85 42.83 42.87 43.32 43.59r 43.34r 42.41 42.82 5 Monetary base6 434.10 451.37 478.88 512.32r 502.04 505.84 509.14 512.32r 516.8 lr 520.84r 524.23 528.72 Not seasonally adjusted 6 Total reserves7 58.02 51.45 48.01 45.12r 44.27 44.20 44.24 45.12r 46.34 45.25 43.14 43.67 7 Nonborrowed reserves 57.76 51.30 47.69 45.00r 44.02 44.03 44.16 45.00r 46.14r 45.13 43.08 43.51 8 Nonborrowed reserves plus extended credit5 57.76 51.30 47.69 45.00r 44.02 44.03 44.16 45.00r 46.14r 45.13 43.08 43.51 9 Required reserves8 56.73 50.04 46.33 43.54' 42.58 42.63 42.62 43.54r 44.81 44.03 41.84 42.51 10 Monetary base9 439.03 456.63 484.98 518.28r 500.98 504.47 510.14 518.28"" 520.01 519.70 523.35 526.75 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS10 11 Total reserves11 57.90 51.17 47.92 45.02 44.20 44.12 44.15 45.02 46.35 45.24 43.12 43.65 12 Nonborrowed reserves 57.64 51.02 47.60 44.90 43.95 43.94 44.07 44.90 46.14 45.12 43.06 43.48 13 Nonborrowed reserves plus extended credit5 57.64 51.02 47.60 44.90 43.95 43.94 44.07 44.90 46.14 45.12 43.06 43.48 14 Required reserves 56.61 49.76 46.24 43.44 42.50 42.54 42.53 43.44 44.81 44.02 41.82 42.48 15 Monetary base12 444.45 463.40 491.79 525.06 507.83 511.36 516.96 525.06 527.59 526.85 530.30 533.47 16 Excess reserves13 1.29 1.42 1.69 1.58 1.69 1.57 1.62 1.58 1.53r 1.22 1.31 1.16 17 Borrowings from the Federal Reserve .26 .16 .32 .12 .25 .17 .08 .12 .21 .12 .07 .17 1. Latest monthly and biweekly figures are available from the Board's H.3 (502) weekly 8. To adjust required reserves for discontinuities that are due to regulatory changes in statistical release. Historical data starting in 1959 and estimates of the effect on required reserve requirements, a multiplicative procedure is used to estimate what required reserves reserves of changes in reserve requirements are available from the Money and Reserves would have been in past periods had current reserve requirements been in effect. Break- Projections Section, Division of Monetary Affairs, Board of Governors of the Federal Reserve adjusted required reserves include required reserves against transactions deposits and nonper- System, Washington, DC 20551. sonal time and savings deposits (but not reservable nondeposit liabilities). 2. Figures reflect adjustments for discontinuities, or "breaks," associated with regulatory 9. The break-adjusted monetary base equals (1) break-adjusted total reserves (line 6), plus changes in reserve requirements. (See also table 1.10.) (2) the (unadjusted) currency component of the money stock, plus (3) (for all quarterly 3. Seasonally adjusted, break-adjusted total reserves equal seasonally adjusted, break- reporters on the "Report of Transaction Accounts, Other Deposits and Vault Cash" and for all adjusted required reserves (line 4) plus excess reserves (line 16). those weekly reporters whose vault cash exceeds their required reserves) the break-adjusted 4. Seasonally adjusted, break-adjusted nonborrowed reserves equal seasonally adjusted, difference between current vault cash and the amount applied to satisfy current reserve break-adjusted total reserves (line 1) less total borrowings of depository institutions from the requirements. Federal Reserve (line 17). 10. Reflects actual reserve requirements, including those on nondeposit liabilities, with no 5. Extended credit consists of borrowing at the discount window under the terms and adjustments to eliminate the effects of discontinuities associated with regulatory changes in conditions established for the extended credit program to help depository institutions deal reserve requirements. with sustained liquidity pressures. Because there is not the same need to repay such 11. Reserve balances with Federal Reserve Banks plus vault cash used to satisfy reserve borrowing promptly as with traditional short-term adjustment credit, the money market effect requirements. of extended credit is similar to that of nonborrowed reserves. 12. The monetary base, not break-adjusted and not seasonally adjusted, consists of (1) total 6. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally reserves (line 11), plus (2) required clearing balances and adjustments to compensate for float adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted currency at Federal Reserve Banks, plus (3) the currency component of the money stock, plus (4) (for component of the money stock, plus (3) (for all quarterly reporters on the "Report of all quarterly reporters on the "Report of Transaction Accounts, Other Deposits and Vault Transaction Accounts, Other Deposits and Vault Cash" and for all those weekly reporters Cash" and for all those weekly reporters whose vault cash exceeds their required reserves) the whose vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted difference between current vault cash and the amount applied to satisfy current reserve difference between current vault cash and the amount applied to satisfy current reserve requirements. Since 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 AND DEBT MEASURES1 Billions of dollars, averages of daily figures 1999 IItteemm D 19 e 9 c 5 . D 19 e 9 c 6 . D 19 e 9 c 7 . D 19 e 9 c 8 . Jan.r Feb/ Mar.r Apr. Seasonally adjusted Measures2 1 Ml 1,126.7 1,081.3 1,074.9 l,093.4r 1,091.0 1,092.5 1,101.7 1,108.0 2 M2 3,649.1 3,823.9 4,046.6 4,402. lr 4,426.2 4,447.1 4,457.3 4,489.9 3 M3 4,618.5 4,955.6 5,404.7 5,999.8r 6,019.6 6,063.1 6,052.2 6,091.8 4 Debt 13,703.2 14,425.3 15,141.3 16,085.5r 16,156.1 16,219.5 16,304.7 n.a. Ml components 5 Currency3 372.3 394.1 424.5 459.2 462.7 467.6 472.0 476.5 6 Travelers checks4 8.3 8.0 7.7 7.8 7.8 7.7 7.8 7.8 7 Demand deposits5 389.4 403.0 396.5 377.5 371.1 371.6 373.9 373.6 8 Other checkable deposits6 356.7 276.2 246.2 248.8r 249.5 245.5 248.0 250.1 Nontransaction components 9 In M27 2,522.4 2,742.6 2,971.8 33,,330088..77rr 3,335.2 3,354.6 3,355.5 3,381.9 10 In M3 only8 969.4 1,131.7 1,358.0 1,597.7 1,593.5 1,616.0 1,594.9 1,601.8 Commercial banks 11 Savings deposits, including MMDAs 775.3 905.2 1,022.9 1,189.8 1,202.3 1,207.7 1,207.9 1,225.5 12 Small time deposits9 575.0 593.7 626.1 626.1 622.1 618.2 616.4 614.7 13 Large time deposits10' 11 346.6 414.8 490.2 541.1 545.9 533.7 523.4 529.8 Thrift institutions 14 Savings deposits, including MMDAs 359.8 367.1 377.3 415.2 420.4 425.4 428.0 431.4 15 Small time deposits9 356.7 353.8 343.2 325.9 324.6 323.0 320.9 319.8 16 Large time deposits10 74.5 78.4 85.9 89.1 91.0 89.9 88.7 89.0 Money market mutual funds 17 Retail 455.5 522.8 602.3 751,7r 765.9 780.3 782.3 790.5 18 Institution-only 255.9 313.3 379.9 516.2 515.0 529.9 529.1 538.4 Repurchase agreements and Eurodollars 19 Repurchase agreements12 198.7 211.3 252.8 297.7 291.5 308.2 295.3 285.7 20 Eurodollars12 93.7 113.9 149.2 153.6 150.0 154.3 158.4 158.8 Debt components 21 Federal debt 3,638.9 3,780.6 3,798.4 3,747.4 3,740.9 3,718.2 3,714.7 n.a. 22 Nonfederal debt 10,064.2 10,644.7 11,342.9 12,338.2r 12,415.3 12,501.3 12,590.0 n.a. Not seasonally adjusted Measures2 23 Ml 1,152.4 1,104.9 1,097.4 1,115.3 1,098.3 1,083.2 1,096.9 1,113.4 24 M2 3.671.7 3,843.7 4,064.8 4,418.9r 4,429.6 4,441.4 4,480.8 4,527.4 25 M3 4,638.0 4,972.5 5,420.8 6,016.0r 6,027.9 6,071.8 6,091.1 6,128.8 26 Debt 13,704.6 14,425.3 15,140.9 16,086.0r 16,139.7 16,191.5 16,296.9 n.a. Ml components 27 Currency3 376.2 397.9 428.9 464.2 462.5 466.5 471.3 476.0 28 Travelers checks4 8.5 8;3 7.9 8.0 7.9 7.9 7.9 7.9 29 Demand deposits5 407.2 419.9 412.3 392.4 375.7 364.6 368.7 373.7 30 Other checkable deposits6 360.5 278.8 248.3 250.7 252.2 244.2 249.0 255.8 Nontransaction components 31 In M27 2,519.3 2,738.9 2,967.4 3,303.6r 3,331.3 3,358.1 3,383.9 3,414.1 32 In M3 only8 966.4 1,128.8 1,356.0 1,597.0 1,598.3 1,630.5 1,610.4 1,601.4 Commercial banks 33 Savings deposits, including MMDAs 774.1 903.3 1,020.4 l,186.8r 1,197.3 1,203.8 1,217.6 1,241.3 34 Small time deposits9 573.8 592.7 625.3 625.4 622.8 619.6 617.3 614.8 35 Large time deposits10, 11 345.8 413.3 487.7 537.5 532.2 529.1 527.8 530.6 Thrift institutions 36 Savings deposits, including MMDAs 359.2 366.3 376.4 414.1 418.6 424.0 431.5 437.0 37 Small time deposits9 355.9 353.2 342.8 325.6 324.9 323.7 321.3 319.8 38 Large time deposits10 74.3 78.1 85.4 88.5 88.8 89.1 89.5 89.1 Money market mutual funds 39 Retail 456.1 523.2 602.5 775511..77rr 767.6 787.0 796.2 801.1 40 Institution-only 257.7 316.0 384.5 523.3 529.3 547.3 537.9 536.7 Repurchase agreements and Eurodollars 41 Repurchase agreements12 193.8 205.7 246.1 290.3 292.9 307.7 297.9 288.4 42 Eurodollars12 94.9 115.7 152.3 157.4 155.1 157.1 157.3 156.6 Debt components 43 Federal debt 3,645.9 3,787.9 3,805.8 3,754.9 3,736.6 3,721.8 3,741.2 n.a. 44 Nonfederal debt 10,058.7 10,637.3 11,335.1 12,331. lr 12,403.0 12,469.7 12,555.7 n.a. Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 DomesticN onfinancial Statistics • July 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 Account 1998 1998 1999 1999 Apr.r Oct. Nov. Dec. Jan. Feb. Mar. Apr. Apr. 7 Apr. 14 Apr. 21 Apr. 28 Seasonally adjusted Assets 1 Bank credit 4,219.0 4,488.0 4,528.0 4,547.1 4,529.8 4,516.7 4,483.5 4,490.2 4,489.6 4,497.2 4,483.2 4,490.4 2 Securities in bank credit 1,112.9 1,216.4 1,220.4 1,224.3 1,215.3 1,205.1 1,186.0 1,186.4 1,186.4 1,189.8 1,182.0 1,187.9 3 U.S. government securities 764.3 776.4 789.6 791.4 792.8 790.4 797.9 798.1 802.0 802.3 793.0 796.4 4 Other securities 348.6 440.0 430.9 433.0 422.5 414.7 388.1 388.3 384.3 387.5 389.0 391.6 5 Loans and leases in bank credit2 . . . 3,106.1 3,271.6 3,307.6 3,322.8 3,314.5 3,311.6 3,297.5 3,303.9 3,303.2 3,307.4 3,301.2 3,302.5 6 Commercial and industrial 873.7 942.2 952.9 950.7 947.1 947.1 950.7 954.1 951.4 955.1 957.3 953.6 7 Real estate 1,272.2 1,293.1 1,316.1 1,330.8 1,334.8 1,337.8 1,337.7 1,338.9 1,340.5 1,337.3 1,340.7 1,335.7 8 Revolving home equity 100.6 99.1 99.3 99.1 98.8 98.4 98.6 99.4 98.9 99.2 99.5 99.7 9 Other 1,171.6 1,194.0 1,216.8 1,231.7 1,236.0 1,239.3 1,239.1 1,239.5 1,241.6 1,238.0 1,241.3 1,236.0 10 Consumer 502.1 496.4 499.5 501.3 502.9 502.4 501.3 501.9 500.7 502.4 503.2 502.0 11 Security3 117.8 157.8 151.2 151.6 147.1 139.6 119.5 122.8 122.4 127.1 117.4 123.9 12 Other loans and leases 340.4 382.1 388.0 388.4 382.5 384.7 388.3 386.2 388.3 385.5 382.6 387.2 13 Interbank loans 213.0 218.8 217.6 217.4 222.6 225.8 219.2 213.7 216.5 205.2 204.5 227.5 14 Cash assets4 266.9 247.7 255.0 257.6 264.5 262.3 263.7 264.9 259.0 264.0 264.9 270.5 15 Other assets5 307.6 329.7 337.8 339.0 351.4 356.6 356.2 345.7 347.6 342.5 350.7 343.1 16 Total assets6 4,949.2 5,2263 5,280.5 5303.2 5,3103 5303.2 5,264.2 5,256.1 5,254.4 5,250.7 5,244.9 5,273.2 Liabilities 17 Deposits 3,203.1 3,289.7 3,324.9 3,341.1 3,362.7 3,372.4 3,360.5 3,370.7 3,357.7 3,391.5 3,376.9 3,355.4 18 Transaction 688.5 673.4 670.7 672.3 667.2 662.0 668.7 664.7 647.7 665.2 671.0 677.7 19 Nontransaction 2,514.6 2,616.3 2,654.2 2,668.8 2,695.5 2,710.4 2,691.8 2,706.0 2,710.0 2,726.4 2,705.9 2,677.7 20 Large time 688.4 716.4 727.8 719.3 723.8 728.2 718.1 724.8 718.2 728.9 726.3 726.2 21 Other 1,826.2 1,899.9 1,926.4 1,949.5 1,971.7 1,982.2 1,973.7 1,981.2 1,991.8 1,997.5 1,979.6 1,951.5 22 Borrowings 906.8 983.7 1,017.5 1,023.0 1,003.3 990.2 984.5 980.5 988.8 972.4 965.2 996.8 23 From banks in the U.S 305.6 315.0 323.9 323.3 318.1 316.1 318.1 310.8 321.9 309.1 302.5 310.0 24 From others 601.2 668.6 693.6 699.8 685.3 674.1 666.4 669.7 666.9 663.3 662.7 686.8 25 Net due to related foreign offices 185.6 220.9 214.4 213.9 213.5 217.4 217.3 210.2 232.0 208.6 203.0 195.8 26 Other liabilities 262.1 315.4 302.5 305.7 305.4 298.1 274.8 275.4 274.2 272.0 277.0 279.9 27 Total liabilities 4,557.7 4,809.7 43593 4,883.7 4,884.9 4,878.1 4,837.1 4,836.9 4,852.7 4^445 4322.1 4327.8 28 Residual (assets less liabilities)7 391.6 416.6 421.3 419.5 425.4 425.1 427.1 419.2 401.7 406.2 422.8 445.4 Not seasonally adjusted Assets 29 Bank credit 4,225.7 4,493.0 4,541.4 4,562.5 4,538.8 4,514.3 4,481.9 4,498.3 4,494.2 4,505.7 4,494.8 4,496.1 30 Securities in bank credit 1,121.1 1,214.3 1,226.6 1,226.0 1,217.9 1,210.6 1,192.7 1,195.0 1,199.2 1,199.5 1,189.2 1,192.7 31 U.S. government securities 773.3 771.7 792.0 792.2 793.1 794.6 804.3 808.0 813.4 812.9 802.0 804.7 32 Other securities 347.8 442.6 434.7 433.8 424.8 416.0 388.4 387.0 385.8 386.6 387.2 388.0 33 Loans and leases in bank credit2 . . . 3,104.6 3,278.8 3,314.8 3,336.5 3,321.0 3,303.8 3,289.3 3,303.3 3,295.0 3,306.2 3,305.6 3,303.4 34 Commercial and industrial 879.6 941.9 952.3 950.6 946.0 948.6 954.3 960.7 955.9 960.3 966.4 960.4 35 Real estate 1,269.1 1,296.6 1,320.1 1,332.7 1,333.9 1,332.1 1,331.2 1,335.5 1,336.4 1,334.4 1,336.9 1,332.8 36 Revolving home equity 99.9 99.9 100.1 99.5 98.9 98.1 97.7 98.7 97.7 98.4 99.1 99.5 37 Other 1,169.2 1,196.6 1,220.0 1,233.2 1,235.0 1,234.0 1,233.5 1,236.8 1,238.7 1,236.0 1,237.8 1,233.3 38 Consumer 498.6 496.9 499.8 506.6 509.1 502.3 496.5 498.4 495.0 498.1 500.3 500.5 39 Security3 119.1 159.4 153.6 153.7 147.2 139.2 122.9 124.7 121.0 130.3 121.2 125.8 40 Other loans and leases 338.2 384.0 388.9 392.7 384.8 381.6 384.4 384.0 386.8 383.1 380.8 384.0 41 Interbank loans 217.7 216.7 227.0 225.6 225.5 225.6 222.3 218.6 229.3 216.7 206.6 222.1 42 Cash assets4 264.1 248.1 261.8 273.1 277.8 263.4 256.0 262.5 252.1 266.0 263.6 267.3 43 Other assets5 309.8 327.6 336.2 339.9 344.1 353.3 351.6 348.7 350.3 345.9 352.1 346.5 44 Total assets6 4,960.2 5,227.6 5308.4 5343.1 5328.6 5,298.5 5,253.5 5,269.9 5,267.9 5,276.2 5,258.9 5,273.7 Liabilities 45 Deposits 3,216.8 3,289.2 3,350.7 3,374.9 3,362.0 3,349.4 3,355.1 3,381.5 3,385.0 3,425.9 3,378.1 3,338.7 46 Transaction 698.8 663.3 681.0 706.5 682.0 657.1 662.2 672.4 658.3 688.8 675.0 672.1 47 Nontransaction 2,518.0 2,625.9 2,669.7 2,668.4 2,680.1 2,692.4 2,692.9 2,709.1 2,726.7 2,737.1 2,703.1 2,666.7 48 Large time 685.3 718.0 732.7 723.9 722.0 728.9 720.1 721.8 714.6 724.7 722.7 724.3 49 Other 1,832.8 1,907.9 1,937.0 1,944.5 1,958.1 1,963.5 1,972.9 1,987.3 2,012.1 2,012.3 1,980.4 1,942.3 50 Borrowings 907.0 985.9 1,023.1 1,025.6 1,019.6 993.3 978.9 981.0 971.6 959.7 977.7 1,011.2 51 From banks in the U.S 306.5 313.1 327.6 329.2 323.1 316.6 318.0 311.6 318.4 306.0 307.1 314.2 52 From others 600.5 672.7 695.5 696.4 696.5 676.7 660.9 669.4 653.2 653.7 670.6 697.1 53 Net due to related foreign offices .... 179.0 223.4 216.3 219.1 216.4 227.1 215.4 203.4 209.6 189.1 198.0 214.6 54 Other liabilities 261.8 313.9 302.8 306.4 306.3 300.5 275.4 275.0 273.6 271.6 276.1 279.9 55 Total liabilities 4,564.6 4,812.4 4,892.8 4,926.1 4,9043 4,8703 4,824.8 4,840.9 4,839.7 4,8463 4329.9 43445 56 Residual (assets less liabilities)7 395.6 415.2 415.6 417.1 424.3 428.2 428.7 429.0 428.2 429.9 429.0 429.2 MEMO 57 Revaluation gains on off-balance-sheet items8 84.0 132.3 112.8 114.8 112.4 108.5 87.0 87.1 88.0 86.5 86.5 87.4 58 Revaluation losses on off-balancesheet items8 85.4 129.5 111.6 112.9 109.5 106.7 85.7 87.8 88.6 86.3 87.5 88.5 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Financial Statistics • July 1999 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued B. Domestically chartered commercial banks Billions of dollars Monthly averages Wednesday figures Account 1998 1998r 1999 1999 Apr. Oct. Nov. Dec. Jan. Feb/ Mar/ Apr. Apr. 7 Apr. 14 Apr. 21 Apr. 28 Seasonally adjusted Assets 1 Bank credit 3,658.7r 3,868.3 3,917.5 3,949.4 3,946.8 3,947.9 3,929.3 3,938.5 3,940.2 3,942.2 3,930.4 3,939.9 2 Securities in bank credit 915.1 997.8 1,005.2 1,011.5 1,004.3 1,001.0 987.6 985.8 988.7 989.1 980.3 985.8 3 U.S. government securities 676.0 695.6 708.2 709.8 709.4 707.9 714.0 710.8 714.7 714.7 706.1 708.7 4 Other securities 239.1 302.2 297.1 301.7 294.9 293.1 273.5 275.1 273.9 274.3 274.2 277.1 5 Loans and leases in bank credit2 2,743.6r 2,870.5 2,912.3 2,937.9 2,942.5 2,946.9 2,941.7 2,952.6 2,951.6 2,953.1 2,950.1 2,954.2 6 Commercial and industrial 660. lr 719.5 729.6 733.3 734.4 735.8 741.1 747.3 743.4 745.6 749.8 750.4 7 Real estate l,247.1r 1,269.6 1,293.5 1,309.1 1,313.0 1,316.1 1,316.0 1,317.0 1,318.6 1,315.4 1,318.8 1,313.7 8 Revolving home equity 100.6r 99.1 99.3 99.1 98.8 98.4 98.6 99.4 98.9 99.2 99.5 99.7 9 Other l,146.5r 1,170.5 1,194.2 1,210.0 1,214.2 1,217.7 1,217.4 1,217.6 1,219.8 1,216.1 1,219.4 1,214.0 10 Consumer 502.lr 496.4 499.5 501.3 502.9 502.4 501.3 501.9 500.7 502.4 503.2 502.0 11 Security3 64.2 87.8 86.1 85.6 84.3 80.6 69.3 71.5 72.5 75.4 65.6 72.5 12 Other loans and leases 270. lr 297.3 303.6 308.5 308.0 311.9 314.0 315.0 316.4 314.4 312.6 315.5 13 Interbank loans 190.4 193.1 190.4 189.3 193.1 193.9 192.8 187.6 188.9 182.2 179.0 198.4 14 Cash assets4 231.7 212.0 220.1 221.8 228.0 226.1 226.5 227.1 221.1 226.8 227.6 232.3 15 Other assets5 271.8r 291.2 300.9 300.6 312.9 318.9 318.7 308.2 308.7 306.4 311.2 307.3 16 Total assets6 4,295.6r 4,507.1 4,571.1 4,603.6 4,623.2 4,628.8 4,609.1 4,603.3 4,601.0 4,599.7 4,590.0 4,619.8 Liabilities 17 Deposits 2,909.5 2,971.9 3,009.4 3,032.5 3,044.4 3,051.4 3,049.2 3,055.2 3,050.0 3,073.8 3,057.4 3,037.7 18 Transaction 676.4 658.0 657.9 660.8 654.3 648.0 655.6 652.0 634.7 652.3 657.9 665.6 19 Nontransaction 2,233.1 2,313.9 2,351.6 2,371.7 2,390.2 2,403.3 2,393.7 2,403.2 2,415.4 2,421.5 2,399.6 2,372.1 20 Large time 408.1 415.9 426.9 422.9 419.6 422.3 421.0 423.4 425.2 425.4 421.1 422.0 21 Other 1,824.9 1,898.1 1,924.6 1,948.8 1,970.6 1,981.0 1,972.7 1,979.8 1,990.2 1,996.2 1,978.5 1,950.1 22 Borrowings 722.6 768.4 802.9 819.3 809.7 809.4 810.5 806.4 814.9 796.2 791.1 824.8 23 From banks in the U.S 279.1 284.5 291.8 296.0 296.6 298.1 293.8 289.3 299.7 284.7 281.7 291.2 24 From others 443.5 484.0 511.2 523.3 513.1 511.3 516.7 517.1 515.1 511.5 509.5 533.6 25 Net due to related foreign offices .... 79.5 115.3 115.2 112.4 111.7 117.3 117.8 115.3 119.3 115.9 113.5 110.0 26 Other liabilities 195.lr 236.3 226.3 229.0 231.1 227.7 206.7 207.8 206.3 205.3 205.6 214.1 27 Total liabilities 3,906.7r 4,091.9 4,153.9 4,193.2 4,197.0 4,205.9 4,184.2 4,184.7 4,190.5 4,191.3 4,167.8 4,186.5 28 Residual (assets less liabilities)7 389.0r 415.2 417.3 410.4 426.2 422.9 424.9 418.5 410.4 408.4 422.3 433.2 Not seasonally adjusted Assets 29 Bank credit 3,668.3 3,869.2 3,927.7 3,962.0 3,952.4 3,941.7 3,926.1 3,949.4 3,945.4 3,954.0 3,944.7 3,950.5 30 Securities in bank credit 924.8 992.6 1,008.2 1,014.6 1,006.7 1,004.8 993.1 996.0 1,000.1 1,000.5 990.5 993.9 31 U.S. government securities 685.5 690.9 710.1 710.4 710.1 711.8 719.6 721.1 726.0 725.9 716.7 717.0 32 Other securities 239.2 301.6 298.1 304.2 296.6 293.1 273.5 275.0 274.1 274.6 273.8 276.8 33 Loans and leases in bank credit2 2,743.5 2,876.6 2,919.5 2,947.4 2,945.8 2,936.9 2,933.0 2,953.4 2,945.3 2,953.5 2,954.3 2,956.7 34 Commercial and industrial 6613' 718.2 727.8 730.6 731.4 735.4 744.3 755.4 748.9 752.4 759.8 759.3 35 Real estate l,244.4r 1,272.8 1,297.2 1,311.0 1,311.9 1,310.1 1,309.4 1,313.9 1,314.7 1,312.7 1,315.2 1,311.1 36 Revolving home equity 99.9r 99.9 100.1 99.5 98.9 98.1 97.7 98.7 97.7 98.4 99.1 99.5 3/ Other l,144.5r 1,172.9 1,197.1 1,211.5 1,213.0 1,212.0 1,211.7 1,215.2 1,217.0 1,214.4 1,216.1 1,211.6 38 Consumer 498.6r 496.9 499.8 506.6 509.1 502.3 496.5 498.4 495.0 498.1 500.3 500.5 39 Security3 65.8 89.6 89.1 87.3 84.4 80.6 72.1 73.5 71.4 78.7 69.3 74.3 40 Other loans and leases 267.5r 299.0 305.4 311.9 309.0 308.6 310.6 312.3 315.2 311.5 309.6 311.5 41 Interbank loans 195.1 191.0 199.8 197.6 196.0 193.7 195.9 .192.5 201.7 193.7 181.1 192.9 42 Cash assets4 230.2 212.0 226.3 235.8 240.9 227.9 220.0 226.0 215.9 229.9 227.5 230.2 43 Other assets5 275.6r 289.3 299.1 300.0 305.3 314.5 313.5 313.0 313.0 311.5 314.9 312.3 44 Total assets6 4,312.5r 4,503.9 4,595.1 4,637.7 4,637.3 4,619.9 4,597.3 4,622.9 4,618.2 4,631.3 4,610.3 4,628.0 Liabilities 45 Deposits 2,924.2 2,971.0 3,035.6 3,062.7 3,046.4 3,029.7 3,040.6 3,066.6 3,078.9 3,109.7 3,059.9 3,019.8 46 Transaction 686.9 647.9 668.2 694.6 669.0 643.4 648.9 659.8 645.4 676.1 662.3 660.1 47 Nontransaction 2,237.3 2,323.1 2,367.4 2,368.1 2,377.4 2,386.3 2,391.7 2,406.7 2,433.5 2,433.6 2,397.6 2,359.8 48 Large time 406.3 417.6 432.4 425.4 421.2 424.8 420.8 421.3 423.3 423.2 419.1 419.3 49 Other 1,831.0 1,905.4 1,935.0 1,942.7 1,956.2 1,961.5 1,970.9 1,985.4 2,010.2 2,010.4 1,978.4 1,940.4 50 Borrowings 722.8 770.6 808.5 821.9 826.0 812.5 804.9 806.9 797.7 783.6 803.6 839.3 51 From banks in the U.S 279.9 282.6 295.4 302.0 301.7 298.6 293.7 290.1 296.2 281.6 286.3 295.4 52 From others 442.9 488.1 513.0 519.9 524.3 513.9 511.2 516.8 501.4 502.0 517.3 543.9 53 Net due to related foreign offices .... 78.0 115.5 113.7 111.4 112.0 123.4 117.7 114.0 108.1 104.1 114.0 127.0 54 Other liabilities 195.7r 235.5 225.7 228.3 231.8 228.5 207.3 208.5 207.1 206.1 206.1 214.8 55 Total liabilities 3,920.7r 4,092.7 4,183.5 4,224.4 4,216.1 4,194.2 4,170.5 4,195.9 4,191.8 4,203.5 4,183.6 4,200.8 56 Residual (assets less liabilities)7 391.8r 411.2 411.6 413.3 421.2 425.8 426.8 427.0 426.5 427.8 426.8 427.2 MEMO 57 Revaluation gains on off-balance-sheet items8 43.9 80.3 64.3 66.7 66.5 64.9 46.8 48.3 48.3 48.0 47.3 49.2 58 Revaluation losses on off-balancesheet items8 46. lr 82.0 66.6 68.3 67.2 65.4 46.6 49.0 49.0 48.2 47.9 50.3 59 Mortgage-backed securities9 294.7 335.8 346.0 345.4 341.5 339.5 333.5 331.4 333.2 332.5 329.1 329.8 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities All 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued C. Large domestically chartered commercial banks Billions of dollars Monthly averages Wednesday figures AAAccccccooouuunnnttt 1998 1998r 1999 1999 Apr.r Oct. Nov. Dec. Jan.r Feb.r Mar.r Apr. Apr. 7 Apr. 14 Apr. 21 Apr. 28 Seasonally adjusted Assets 1 Bank credit 2,268.0 2,404.3 2,425.4 2,436.8 2,428.3 2,421.9 2,394.9 2,398.7 2,402.6 2,401.5 2,391.0 2,399.6 2 Securities in bank credit 520.2 577.6 576.1 575.1 565.5 559.3 542.9 539.9 543.1 542.5 535.4 539.7 3 U.S. government securities 369.4 375.6 381.6 379.1 377.5 375.1 378.6 374.7 378.7 378.0 370.8 372.7 4 Trading account 23.5 21.0 22.3 23.0 25.1 17.9 22.5 25.9 28.6 28.6 24.2 23.6 5 Investment account 345.9 354.6 359.3 356.1 352.4 357.2 356.2 348.8 350.1 349.3 346.7 349.1 6 Other securities 150.8 202.1 194.5 196.0 188.0 184.2 164.2 165.2 164.4 164.6 164.6 167.0 7 Trading account 70.0 110.4 98.4 98.9 91.4 87.5 66.7 66.1 66.3 65.6 65.0 67.2 8 Investment account 80.8 91.7 96.1 97.0 96.6 96.7 97.5 99.1 98.1 99.0 99.6 99.8 9 State and local government . 22.8 23.9 24.5 24.8 24.6 24.7 24.9 24.6 24.5 24.8 24.5 24.5 10 Other 58.0 67.8 71.7 72.2 71.9 72.0 72.7 74.5 73.6 74.2 75.1 75.3 11 Loans and leases in bank credit2 . . . 1,747.8 1,826.7 1,849.3 1,861.7 1,862.9 1,862.6 1,852.1 1,858.7 1,859.4 1,859.0 1,855.6 1,859.9 12 Commercial and industrial 480.5 527.1 534.3 535.1 535.1 536.3 540.6 545.3 542.2 544.0 547.6 547.6 13 Bankers acceptances 1.2 1.3 1.3 1.3 1.3 1.2 1.1 1.1 1.2 1.1 1.1 1.1 14 Other 479.3 525.7 532.9 533.8 533.9 535.1 539.4 544.2 541.0 542.9 546.5 546.5 15 Real estate 704.3 692.6 703.8 709.3 707.7 706.9 703.5 702.1 704.5 701.1 703.9 698.3 16 Revolving home equity 72.6 70.8 70.6 70.4 70.1 70.0 70.1 70.7 70.3 70.6 70.8 71.0 17 Other 631.6 621.9 633.2 638.9 637.6 636.9 633.5 631.4 634.2 630.5 633.1 627.3 18 Consumer 304.6 300.7 301.9 302.4 305.3 304.3 301.8 300.2 300.5 300.8 300.7 299.3 19 Security3 58.0 81.3 79.3 79.2 78.1 74.5 63.2 65.7 66.2 69.2 59.9 67.3 20 Federal funds sold to and repurchase agreements with broker-dealers 40.2 63.4 61.8 62.5 61.4 57.6 46.1 47.7 4499..22 5511..22 4411..22 4499..55 21 Other 17.9 17.9 17.5 16.7 16.7 16.9 17.1 18.0 17.0 18.0 18.7 17.8 22 State and local government 11.6 11.6 11.9 11.6 11.6 11.5 11.5 11.8 12.0 11.7 11.7 11.7 23 Agricultural 10.0 10.0 10.1 10.2 10.2 10.3 10.2 10.3 10.1 10.4 10.4 10.2 24 Federal funds sold to and repurchase agreements with others 7.4 13.0 12.4 16.2 12.7 12.0 12.0 11.4 1122..33 1111..66 1111..55 1100..66 25 All other loans 80.8 89.0 92.1 91.6 93.5 93.7 93.6 94.3 94.6 92.8 91.7 96.4 26 Lease-financing receivables 90.5 101.4 103.6 106.2 108.6 113.1 115.6 117.8 117.1 117.3 118.1 118.6 27 Interbank loans 128.3 120.4 120.7 123.2 125.3 126.8 129.0 125.6 127.4 119.7 115.8 137.0 28 Federal funds sold to and repurchase agreements with commercial banks 78.0 74.4 74.7 74.1 78.6 78.8 8811..88 7788..00 8811..66 7733..66 6699..55 8855..77 29 Other 50.3 46.0 46.0 49.2 46.7 48.0 47.2 47.6 45.8 46.1 46.3 51.4 30 Cash assets4 167.6 144.3 150.0 151.4 157.3 155.2 154.8 156.3 151.0 157.4 157.7 159.3 31 Other assets5 214.0 224.1 229.2 226.8 235.9 242.8 242.6 231.9 231.4 230.5 234.6 231.6 32 Total assets6 2,739.9 2,855.0 2,8873 2,900.2 2,908.7 2,9083 2,882.9 2,874.4 2,874.1 2,871.0 2,860.9 2,8893 Liabilities 33 Deposits 1,655.4 1,656.8 1,672.9 1,677.5 1,678.5 1,673.9 1,672.4 1,679.1 1,675.1 1,695.9 1,678.5 1,665.4 34 Transaction 394.2 372.9 370.4 370.5 365.4 358.8 363.0 365.0 354.7 367.4 367.3 372.4 35 Nontransaction 1,261.2 1,283.9 1,302.5 1,307.0 1,313.1 1,315.1 1,309.4 1,314.1 1,320.4 1,328.5 1,311.2 1,293.0 36 Large time 225.5 225.0 231.9 230.1 229.5 228.8 226.1 227.0 228.8 229.4 224.7 225.2 37 Other 1,035.7 1,058.9 1,070.6 1,076.9 1,083.7 1,086.3 1,083.3 1,087.1 1,091.6 1,099.1 1,086.5 1,067.8 38 Borrowings 569.9 597.5 623.8 634.9 628.3 624.2 621.1 618.7 628.5 608.6 606.4 633.2 39 From banks in the U.S 209.1 203.9 207.5 209.5 213.8 214.0 208.7 205.8 217.7 202.0 199.3 204.5 40 From others 360.9 393.6 416.2 425.4 414.5 410.2 412.4 412.9 410.7 406.6 407.1 428.6 41 Net due to related foreign offices 76.0 110.6 111.6 108.8 108.7 114.1 113.3 110.4 114.2 110.8 108.7 105.3 42 Other liabilities 167.9 206.1 195.5 197.8 200.0 197.3 176.3 176.8 175.4 174.5 174.5 182.8 43 Total liabilities 2,469.2 2,571.0 2,603.8 2,619.0 2,615.5 2,609.6 2,583.1 2,585.0 2,593.2 2,589.9 2,568.0 2,586.6 44 Residual (assets less liabilities)7 270.7 283.9 283.4 281.1 293.1 298.7 299.7 289.4 280.9 281.2 292.9 302.7 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Financial Statistics • July 1999 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued C. Large domestically chartered commercial banks—Continued Monthly averages Wednesday figures AAAccccccooouuunnnttt 1998 1998r 1999 1999 Apr.r Oct. Nov. Dec. Jan/ Feb/ Mar/ Apr. Apr. 7 Apr. 14 Apr. 21 Apr. 28 Not seasonally adjusted Assets 45 Bank credit 2,273.1 2,406.1 2,438.3 2,451.2 2,440.4 2,426.5 2,397.5 2,404.6 2,408.3 2,409.8 2,398.0 2,401.4 46 Securities in bank credit 525.1 575.3 581.3 578.6 568.5 565.3 546.8 545.2 551.1 549.3 540.0 542.0 47 U.S. government securities 374.9 373.6 385.8 379.8 378.7 380.5 382.6 380.8 387.0 385.3 376.6 376.1 48 Trading account 22.9 21.9 24.6 23.7 25.2 18.6 23.4 25.2 30.0 28.9 23.1 20.8 49 Investment account 352.0 351.6 361.3 356.1 353.5 362.0 359.2 355.5 357.0 356.3 353.5 355.3 50 Mortgage-backed securities . . 228.4 257.4 260.4 255.6 252.2 250.0 243.4 240.5 242.7 241.3 238.7 239.0 51 Other 123.6 94.2 100.9 100.5 101.3 112.0 115.8 115.0 114.3 115.0 114.8 116.3 52 One year or less 33.2 26.2 27.3 26.7 27.6 25.7 23.9 24.3 24.3 23.8 24.1 25.3 53 One to five years 54.1 37.3 38.3 38.5 37.7 46.9 52.2 53.1 52.7 53.8 53.0 52.9 54 More than five years . . . 36.2 30.7 35.3 35.3 36.1 39.4 39.7 37.6 37.4 37.4 37.8 38.1 55 Other securities 150.3 201.7 195.5 198.7 189.8 184.8 164.2 164.5 164.1 164.1 163.5 165.9 56 Trading account 70.0 110.4 98.4 98.9 91.4 87.5 66.7 66.1 66.3 65.6 65.0 67.2 57 Investment account 80.3 91.3 97.1 99.8 98.4 97.3 97.5 98.4 97.8 98.5 98.5 98.8 58 State and local government . . 22.9 24.0 24.6 25.0 24.8 24.8 24.9 24.7 24.5 24.9 24.7 24.7 59 Other 57.3 67.4 72.5 74.8 73.6 72.5 72.6 73.7 73.3 73.6 73.8 74.1 60 Loans and leases in bank credit2 .. 1,747.9 1,830.8 1,857.0 1,872.6 1,871.9 1,861.2 1,850.6 1,859.3 1,857.2 1,860.5 1,858.0 1,859.4 61 Commercial and industrial 485.7 527.2 533.9 533.2 532.8 536.2 543.2 551.3 546.7 549.1 555.0 553.9 62 Bankers acceptances 1.2 1.3 1.3 1.3 1.3 1.2 1.1 1.1 1.2 1.1 1.1 1.1 63 Other 484.5 525.9 532.5 531.8 531.6 535.1 542.0 550.2 545.5 548.0 553.9 552.9 64 Real estate 701.7 694.4 707.1 712.8 710.5 705.6 700.5 699.2 702.3 698.9 700.0 694.9 65 Revolving home equity 72.0 71.4 71.1 70.6 70.2 69.7 69.4 70.1 69.3 69.9 70.4 70.8 66 Other 387.1 382.3 393.4 397.9 393.6 386.3 380.5 377.2 381.4 377.2 376.8 372.8 67 Commercial 242.6 240.8 242.6 244.4 246.7 249.7 250.7 251.9 251.5 251.8 252.8 251.3 68 Consumer 302.3 300.6 301.6 305.7 310.6 304.7 299.2 297.7 297.1 298.2 298.4 297.7 69 Security3 59.6 83.1 82.4 80.9 78.2 74.5 66.0 67.6 65.1 72.5 63.6 69.1 70 Federal funds sold to and repurchase agreements with broker-dealers .... 41.8 65.2 65.0 63.7 62.0 58.1 48.7 49.6 49.3 54.4 44.2 50.7 71 Other 17.8 18.0 17.4 17.2 16.2 16.4 17.3 18.0 15.8 18.1 19.5 18.3 72 State and local government .... 11.5 11.7 12.0 11.7 11.6 11.5 11.5 11.6 11.8 11.6 11.6 11.6 73 Agricultural 9.8 10.2 10.1 10.2 10.2 9.9 9.8 10.0 9.8 10.1 10.2 10.0 74 Federal funds sold to and repurchase agreements with others 7.4 13.0 12.4 16.2 12.7 12.0 12.0 11.4 12.3 11.6 11.5 10.6 75 All other loans 79.1 89.9 95.0 96.1 95.1 92.2 91.9 92.4 94.4 90.5 89.6 93.2 76 Lease-financing receivables .... 90.7 100.7 102.6 105.8 110.3 114.4 116.5 118.1 117.8 117.9 118.1 118.4 77 Interbank loans 131.9 116.8 122.1 126.4 128.2 126.6 129.1 129.6 130.8 125.3 120.1 139.9 78 Federal funds sold to and repurchase agreements with commercial banks 80.4 71.4 77.4 77.9 82.2 79.3 81.5 80.7 83.5 77.8 72.6 87.1 79 Other 51.5 45.4 44.7 48.5 46.0 47.3 47.6 48.9 47.3 47.5 47.5 52.8 80 Cash assets4 166.1 144.9 154.1 161.9 167.0 156.0 149.8 155.2 145.5 159.3 158.3 158.1 81 Other assets5 217.7 222.0 226.1 226.2 231.3 239.6 238.7 236.3 235.0 235.3 239.0 236.0 82 Total assets6 2,750.9 2,851.7 2,902.5 2,927.7 2,929.1 2,910.5 2£76.6 2,887.7 2,881.7 2,891.9 2,877.4 2,897.4 Liabilities 83 Deposits 1,663.7 1,653.2 1,686.9 1,701.7 1,687.7 1,669.6 1,670.8 1,685.2 1,691.5 1,719.0 1,679.5 1,653.2 84 Transaction 400.9 365.9 377.1 393.5 375.6 355.9 357.6 369.1 357.3 381.8 369.9 370.7 85 Nontransaction 1,262.9 1.287.4 1,309.8 1,308.2 1,312.1 1,313.7 1,313.1 1,316.1 1,334.2 1,337.2 1,309.6 1,282.5 86 Large time 223.7 226.8 237.4 232.7 231.1 231.2 225.9 224.9 226.9 227.2 222.7 222.5 87 Other 1,039.2 1,060.6 1,072.4 1,075.5 1,081.0 1,082.5 1,087.2 1,091.2 1,107.2 1,110.0 1,086.8 1,060.0 88 Borrowings 572.4 597.3 627.2 635.6 644.1 629.9 621.1 621.8 618.3 602.9 619.0 644.9 89 From banks in the U.S 211.4 200.3 209.5 213.5 218.2 215.7 210.9 208.3 217.7 202.7 204.6 207.9 90 From nonbanks in the U.S 361.0 397.0 417.7 422.1 426.0 414.2 410.1 413.5 400.6 400.1 414.4 436.9 91 Net due to related foreign offices . . . 74.5 110.9 110.1 107.8 109.0 120.2 113.1 109.1 103.0 99.0 109.1 122.3 92 Other liabilities 167.9 206.1 195.5 197.8 200.0 197.3 176.3 176.8 175.4 174.5 174.5 182.8 93 Total liabilities 2,478.5 2,567.5 2,619.7 2,642.8 2,640.9 2,617.1 2,581.3 2,592.9 2,588.2 2,595.4 2,582.0 2,603.2 94 Residual (assets less liabilities)7 .... 272.4 284.2 282.8 284.8 288.3 293.4 295.3 294.9 293.5 296.5 295.3 294.2 MEMO 95 Revaluation gains on off-balancesheet items8 43.9 80.3 64.3 66.7 66.5 64.9 46.8 48.3 48.3 48.0 47.3 49.2 96 Revaluation losses on off-balancesheet items8 46.1 82.0 66.6 68.3 67.2 65.4 46.6 49.0 49.0 48.2 47.9 50.3 97 Mortgage-backed securities9 249.3 282.8 289.2 286.2 281.7 278.8 271.8 269.0 271.3 270.1 267.2 267.3 98 Pass-through securities 168.1 191.5 198.6 196.7 193.9 189.2 182.1 179.1 181.1 180.0 177.3 178.1 99 CMOs, REMICs, and other mortgage-backed securities . . 81.2 91.3 90.6 89.4 87.8 89.6 89.7 89.9 90.3 90.2 89.9 89.2 100 Net unrealized gains (losses) on available-for-sale securities10 . . . 3.0 4.4 3.1 3.0 3.0 2.3 0.6 0.9 0.7 1.0 0.9 0.9 101 Offshore credit to U.S. residents" . . . 35.5 38.5 39.1 38.5 38.9 38.9 39.0 37.9 37.7 37.5 37.7 38.2 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities A15 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'—Continued D. Small domestically chartered commercial banks Billions of dollars Monthly averages Wednesday figures Account 1998 1998r 1999 1999 Apr/ Oct. Nov. Dec. Jan.r Feb.r Mar.r Apr. Apr. 7 Apr. 14 Apr. 21 Apr. 28 Seasonally adjusted Assets 1 Bank credit 1,390.7 1,464.0 1,492.1 1,512.6 1,518.5 1,526.0 1,534.3 1,539.8 1,537.7 1,540.7 1,539.4 1,540.4 2 Securities in bank credit 395.0 420.2 429.2 436.4 438.8 441.7 444.7 445.9 445.5 446.5 444.9 446.1 3 U.S. government securities 306.6 320.1 326.6 330.7 331.9 332.8 335.4 336.1 336.0 336.8 335.3 336.0 4 Other securities 88.4 100.1 102.6 105.8 106.9 108.9 109.3 109.8 109.5 109.8 109.6 110.1 5 Loans and leases in bank credit2 995.8 1,043.8 1,062.9 1,076.2 1,079.7 1,084.2 1,089.6 1,093.9 1,092.1 1,094.1 1,094.5 1,094.3 6 Commercial and industrial 179.6 192.4 195.3 198.3 199.2 199.6 200.5 202.0 201.2 201.6 202.2 202.8 7 Real estate 542.9 577.0 589.7 599.8 605.3 609.2 612.5 614.9 614.2 614.2 615.0 615.5 8 Revolving home equity 28.0 28.4 28.8 28.8 28.7 28.4 28.5 28.7 28.6 28.6 28.7 28.7 9 Other 514.9 548.6 560.9 571.1 576.6 580.7 584.0 586.2 585.6 585.6 586.2 586.7 10 Consumer 197.5 195.7 197.5 199.0 197.6 198.1 199.5 201.8 200.2 201.6 202.5 202.7 11 Security3 6.1 6.5 6.8 6.4 6.2 6.1 6.1 5.8 6.3 6.2 5.7 5.3 12 Other loans and leases 69.7 72.3 73.6 72.7 71.4 71.3 71.1 69.5 70.3 70.5 69.1 68.1 13 Interbank loans 62.1 72.7 69.6 66.1 67.8 67.1 63.9 61.9 61.5 62.5 63.2 61.3 14 Cash assets4 64.2 67.8 70.1 70.5 70.7 70.8 71.7 70.8 70.1 69.4 69.9 73.0 15 Other assets5 57.7 67.1 71.7 73.9 77.1 76.1 76.1 76.3 77.4 75.9 76.6 75.7 16 Total assets6 1,555.8 1,652.1 1,683.9 1,703.4 1,714.5 1,7205 1,7263 1,728.9 1,726.9 1,728.7 1,729.2 1,730.4 Liabilities 17 Deposits 1,254.1 1,315.1 1,336.5 1,355.0 1,365.9 1,377.5 1,376.9 1,376.1 1,375.0 1,378.0 1,378.9 1,372.3 18 Transaction 282.3 285.1 287.5 290.3 288.9 289.2 292.6 286.9 280.0 284.9 290.6 293.2 19 Nontransaction 971.8 1,030.1 1,049.0 1,064.7 1,077.0 1,088.3 1,084.3 1,089.2 1,095.0 1,093.1 1,088.4 1,079.2 20 Large time 182.6 190.9 195.0 192.8 190.1 193.5 194.9 196.5 196.4 196.0 196.4 196.8 21 Other 789.2 839.2 854.0 872.0 887.0 894.8 889.4 892.7 898.6 897.1 892.0 882.3 22 Borrowings 152.7 170.9 179.2 184.4 181.4 185.2 189.4 187.7 186.4 187.6 184.8 191.6 23 From banks in the U.S 70.0 80.5 84.2 86.5 82.8 84.1 85.1 83.5 82.0 82.6 82.4 86.7 24 From others 82.7 90.3 94.9 97.9 98.6 101.1 104.2 104.2 104.4 105.0 102.4 105.0 25 Net due to related foreign offices .... 3.5 4.7 3.6 3.6 3.0 3.2 4.5 4.9 5.1 5.1 4.9 4.6 26 Other liabilities 27.2 30.2 30.8 31.2 31.1 30.4 30.3 31.0 30.9 30.8 31.2 31.3 27 Total liabilities 1/437.4 1,520.9 1,550.0 1,574.2 15815 15963 1,601.1 1599.7 I597.4 1,601.4 1,599.8 1,599.9 28 Residual (assets less liabilities)7 118.3 131.2 133.8 129.2 133.1 124.1 125.2 129.2 129.5 127.3 129.4 130.6 Not seasonally adjusted Assets 29 Bank credit 1,395.2 1,463.1 1,489.3 1,510.9 1,512.0 1,515.2 1,528.6 1,544.9 1,537.1 1,544.2 1,546.7 1,549.2 30 Securities in bank credit 399.6 417.3 426.9 436.1 438.1 439.5 446.2 450.8 449.0 451.2 450.4 451.9 31 U.S. government securities 310.7 317.4 324.3 330.6 331.4 331.2 337.0 340.3 338.9 340.7 340.1 341.0 32 Other securities 89.0 99.9 102.6 105.5 106.8 108.3 109.3 110.5 110.1 110.5 110.3 110.9 33 Loans and leases in bank credit2 995.6 1,045.8 1,062.5 1,074.8 1,073.9 1,075.7 1,082.4 1,094.1 1,088.1 1,093.0 1,096.3 1,097.3 34 Commercial and industrial 181.6 191.0 194.0 197.4 198.5 199.2 201.1 204.1 202.3 203.4 204.8 205.4 35 Real estate 542.6 578.4 590.1 598.1 601.4 604.4 608.9 614.7 612.5 613.8 615.2 616.2 36 Revolving home equity 27.9 28.6 29.0 28.9 28.7 28.4 28.3 28.6 28.4 28.5 28.7 28.7 37 Other 514.7 549.8 561.1 569.2 572.7 576.0 580.5 586.1 584.1 585.3 586.5 587.4 38 Consumer 196.3 196.3 198.3 201.0 198.5 197.6 197.3 200.7 197.9 199.9 201.9 202.7 39 Security3 6.1 6.5 6.8 6.4 6.2 6.1 6.1 5.8 6.3 6.2 5.7 5.3 40 Other loans and leases 69.0 73.6 73.3 71.9 69.3 68.5 68.9 68.8 69.2 69.8 68.7 67.7 41 Interbank loans 63.3 74.2 77.7 71.2 67.8 67.1 66.8 62.9 70.9 68.4 61.0 53.1 42 Cash assets4 64.1 67.0 72.2 73.9 73.9 71.9 70.2 70.7 70.3 70.6 69.2 72.0 43 Other assets5 57.9 67.3 73.1 73.8 74.0 74.9 74.7 76.6 78.0 76.1 75.9 76.4 44 Total assets6 1,561.5 1,652.1 1,692.6 1,710.0 1,708.2 1,709.4 1,720.7 1,735.2 1,7365 1,739.4 1,733.0 1,730.6 Liabilities 45 Deposits 1,260.5 1,317.8 1,348.7 1,361.0 1,358.6 1,360.0 1,369.9 1,381.3 1,387.4 1,390.7 1,380.4 1,366.7 46 Transaction 286.0 282.1 291.1 301.1 293.4 287.5 291.3 290.7 288.0 294.3 292.4 289.4 47 Nontransaction 974.4 1,035.7 1,057.6 1,060.0 1,065.2 1,072.6 1,078.6 1,090.6 1,099.3 1,096.4 1,088.0 1,077.3 48 Large time 182.6 190.9 195.0 192.8 190.1 193.5 194.9 196.5 196.4 196.0 196.4 196.8 49 Other 791.8 844.8 862.6 867.2 875.2 879.0 883.7 894.1 903.0 900.4 891.6 880.4 50 Borrowings 150.4 173.3 181.3 186.3 181.9 182.6 183.9 185.1 179.4 180.7 184.6 194.4 51 From banks in the U.S 68.6 82.3 85.9 88.5 83.5 82.9 82.8 81.8 78.6 78.9 81.6 87.4 52 From others 81.8 91.0 95.3 97.8 98.3 99.7 101.1 103.3 100.8 101.8 103.0 107.0 53 Net due to related foreign offices .... 3.5 4.7 3.6 3.6 3.0 3.2 4.5 4.9 5.1 5.1 4.9 4.6 54 Other liabilities 27.8 29.4 30.2 30.5 31.7 31.2 30.9 31.7 31.7 31.6 31.7 32.0 55 Total liabilities 1,442.2 1,525.1 1,563.7 1,581.5 1575.2 1,577.1 1,589.2 1,603.1 1,603.6 1,608.1 1,601.6 1,597.7 56 Residual (assets less liabilities)7 119.4 127.0 128.8 128.5 133.0 132.3 131.5 132.1 133.0 131.3 131.4 133.0 MEMO 57 Mortgage-backed securities' 45.4 53.0 56.8 59.2 59.8 60.7 61.7 62.4 61.9 62.3 62.0 62.5 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Financial Statistics • July 1999 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued E. Foreign-related institutions Billions of dollars Monthly averages Wednesday figures Account 1998 1998 1999 1999 Apr. Oct. Nov. Dec. Jan. Feb. Mar." Apr. Apr. 7 Apr. 14 Apr. 21 Apr. 28 Seasonally adjusted Assets 1 Bank credit 560.3r 619.7 610.6 597.7 583.0" 568.8r 554.3 551.8 549.4 555.0 552.8 550.5 2 Securities in bank credit 197.7 218.6 215.2 212.8 211.0 204.1 198.4 200.5 197.7 200.7 201.7 202.2 3 U.S. government securities 88.3 80.8 81.4 81.6 83.3 82.5 83.8 87.3 87.3 87.5 86.8 87.7 4 Other securities 109.5 137.8 133.8 131.2 127.6 121.6 114.6 113.2 110.4 113.2 114.8 114.5 5 Loans and leases in bank credit2 .. . 362.5 401.1 395.4 384.8r 372.0" 364.7r 355.8 351.2 351.6 354.3 351.1 348.3 6 Commercial and industrial 213.5r 222.8r 223.3r 217.3r 212.8r 211.3r 209.7 206.8 208.0 209.5 207.4 203.2 7 Real estate 25.1 23.5 22.6 21.7 21.8 21.6 21.7 21.9 21.9 21.9 21.9 22.0 8 Security3 53.7r 70.0r 65.2r 65.9" 62.9" 59.0" 50.2 51.3 49.9 51.7 51.8 51.4 9 Other loans and leases 70.3r 84.8r 84.3r 19.9 74.5r 72.8r 74.3 71.2 71.8 71.1 70.0 71.7 10 Interbank loans 22.6 25.7 27.2 28.0 29.5 31.9 26.4 26.1 27.6 23.0 25.5 29.1 11 Cash assets4 35.1 35.7 34.9 35.8 36.4 36.2 37.2 37.8 37.9 37.2 37.3 38.2 12 Other assets5 35.9 38.5 36.9 38.4 38.5 37.7 37.5 37.5 38.8 36.1 39.6 35.8 13 Total assets6 653.6 7193 709.4 699.7 687.1r 674.4r 655.1 652.9 653.4 651.0 654.8 653/4 Liabilities 14 Deposits 293.6 317.8 315.4 308.6 318.3 321.0 311.2 315.5 307.6 317.7 319.5 317.6 15 Transaction 12.1 15.4 12.8 11.5 12.9 13.9 13.1 12.7 13.0 12.9 13.1 12.1 16 Nontransaction 281.5 302.4 302.6 297.1 305.3 307.1r 298.1 302.8 294.7 304.8 306.4 305.6 17 Borrowings 184.2 215.3 214.6 203.7 193.6 180.7 174.0 174.1 173.9 176.1 174.1 172.0 18 From banks in the U.S 26.6 30.6 32.1 27.2 21.5 18.0 24.3 21.5 22.1 24.4 20.8 18.8 19 From others 157.6 184.7 182.5 176.5 172.2 162.8r 149.7 152.6 151.8 151.7 153.2 153.2 20 Net due to related foreign offices 106.1 105.6 99.2 101.5 101.7 100.1 99.5 95.0 112.7 92.7 89.5 85.8 21 Other liabilities 67.0 79.1 76.2 76.7 74.3 70.4 68.1 67.6 67.8 66.7 71.4 65.8 22 Total Uabilities 651.0 717.8 705.4 690.5 687.9 672.2r 652.8 652.2 662.1 653.2 6543 641.2 23 Residual (assets less liabilities)7 2.6 1.5 4.0 9.2 —,8r 2.2" 2.3 .7 -8.7 -2.2 .5 12.2 Not seasonally adjusted Assets 24 Bank credit 557.4r 623.9 613.8 600.5r 586.4r 572.6" 555.9 548.9 548.8 551.7 550.0 545.6 25 Securities in bank credit 196.3 221.7 218.4 211.4 211.2 205.8 199.6 198.9 199.1 199.0 198.7 198.8 26 U.S. government securities 87.8 80.7 81.8 81.8 83.0 82.8r 84.7 86.9 87.4 87.0 85.4 87.7 27 Trading account 18.5 16.6 14.1 15.2 17.5 18.5 19.9 21.3 21.3 21.0 20.0 23.3 28 Investment account 69.3 64.2 67.7 66.6 65.5 64.4 64.8 65.7 66.1 66.0 65.4 64.4 29 Other securities 108.5 141.0 136.6 129.6 128.2 122.9 114.9 112.0 111.7 112.0 113.4 111.1 30 Trading account 65.0 91.6 84.8 78.9 79.1 75.4 71.4 69.8 69.9 69.4 70.7 69.1 31 Investment account 43.5 49.3 51.8 50.8 49.1 47.5 43.5 42.2 41.8 42.6 42.7 42.1 32 Loans and leases in bank credit2 . .. 361.0 402.2 395.4 389.1 375.2r 366.8r 356.3 350.0 349.7 352.7 351.3 346.8 33 Commercial and industrial 212.2r 223.7r 224.5r 220. lr 214.6r 213.2" 210.0 205.3 206.9 207.9 206.6 201.1 34 Real estate 24.8 23.7 22.9 21.8 22.0 22.0 21.8 21.7 21.6 21.6 21.7 21.7 35 Security3 53.3r 69.8r 64.5r 66.4r 62.8r 58.6" 50.9 51.3 49.6 51.6 51.9 51.4 36 Other loans and leases 70.7r 85.0" 83.5r 80.8r 75.8r 73.0" 73.7 71.7 71.6 71.6 71.2 72.5 37 Interbank loans 22.6 25.7 27.2 28.0 29.5 31.9 26.4 26.1 27.6 23.0 25.5 29.1 38 Cash assets4 33.9 36.1 35.5 37.3 36.9 35.5 36.1 36.6 36.3 36.1 36.1 37.1 39 Other assets5 34.2 38.3 37.1 39.9 38.8 38.8 38.1 35.7 37.3 34.4 37.2 34.1 40 Total assets6 647.8r 723.7 7133r 705.4r 6913r 678.6r 656.2 647.0 649.7 644.9 648.5 645.7 Liabilities 41 Deposits 292.7 318.2 315.0 312.2 315.7 319.8" 314.5 314.9 306.1 316.2 318.2 318.9 42 Transaction 11.9 15.4 12.7 11.9 13.0 13.7 13.3 12.5 12.9 12.7 12.7 12.0 43 Nontransaction 280.7 302.8 302.3 300.3 302.7 306.1" 301.2 302.4 293.2 303.5 305.5 306.9 44 Borrowings 184.2 215.3 214.6 203.7 193.6 180.7 174.0 174.1 173.9 176.1 174.1 172.0 45 From banks in the U.S 26.6 30.6 32.1 27.2 21.5 18.0 24.3 21.5 22.1 24.4 20.8 18.8 46 From others 157.6 184.7 182.5 176.5 172.2 162.8r 149.7 152.6 151.8 151.7 153.2 153.2 47 Net due to related foreign offices .... 101.0 107.8 102.6 107.7 104.4 103.7 97.7 89.4 101.5 85.0 84.1 87.6 48 Other liabilities 66.1 78.4 77.1 78.1 74.5 71.9 68.1 66.5 66.5 65.5 70.0 65.2 49 Total liabilities 644.0 719.7 709.4 701.7 688.2 676.1r 6543 644.9 648.0 642.8 6463 643.6 50 Residual (assets less liabilities)7 3.8 4.0 3.9" 3.7r 3.1r 2.4r 1.9 2.0 1.7 2.1 2.2 2.1 MEMO 51 Revaluation gains on off-balance-sheet items8 40.1 52.0 48.6 48.1 45.9 43.6 40.2 38.8 39.7 38.4 39.2 38.1 52 Revaluation losses on off-balancesheet items8 39.3 47.5 44.9 44.5 42.2 41.3 39.1 38.8 39.7 38.2 39.6 38.1 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities All 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

A42 Domestic Nonfinancial Statistics • July 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 1999 IItteemm 1994 1995 1996 1997 1998 Oct. Nov. Dec. Jan. Feb. Mar. 1 Ail issuers 595,382 674,904 775,371 966,699 1,163,303 1,150,213 1,159,027 1,163,303 1,178,168 1,178,303 1,204,627 Financial companies1 2 Dealer-placed paper, total2 223,038 275,815 361,147 513,307 614,142 627,170 621,246 614,142 629,569 615,053 684,616 3 Directly placed paper, total3 207,701 210,829 229,662 252,536 322,030 289,184 304,545 322,030 314,601 320,468 276,424 4 Nonfinancial companies4 164,643 188,260 184,563 200,857 227,132 233,859 233,236 227,132 233,998 242,782 243,587 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 Acceptances 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 te a ge Period Av r e a r te a ge Period Av r e a r te a ge 1996—Jan i 8 50 1996 8.27 1997—Jan 8.25 1998—Jan 8.50 Feb. 1 88..2255 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 Mav 8.50 1998—Sept. 30 8.25 Feb 8.25 June 8.50 June 8.50 Oct. 16 8.00 Mar. 8.25 Julv 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 June 8.25 Oct 8.50 Oct 8.12 July 8.25 Nov 8.50 Nov 7.89 8.25 Dec 88..5500 Dec 77..7755 Sept 8.25 Oct 8.25 1999—Jan 7.75 Nov 8.25 Feb 7.75 Dec 8.25 Mar 7.75 Apr. 7.75 May 7.75 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 1999 1999, week ending IItteemm 11999966 11999977 11999988 Jan. Feb. Mar. Apr. Apr. 2 Apr. 9 Apr. 16 Apr. 23 Apr. 30 MONEY MARKET INSTRUMENTS 1 Federal funds1' " 5.30 5.46 5.35 4.63 4.76 4.81 4.74 4.84 4.80 4.68 4.61 4.79 2 Discount window borrowing2,4 5.02 5.00 4.92 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 Commercial paper,'i,(l Nonfinancial 3 1-month n.a. 5.57 5.40 4.80 4.80 4.82 4.79 4.84 4.81 4.78 4.76 4.77 4 2-month n.a. 5.57 5.38 4.78 4.80 4.82 4.78 4.82 4.80 4.78 4.77 4.77 5 3-month n.a. 5.56 5.34 4.77 4.79 4.81 4.79 4.82 4.80 4.79 4.78 4.77 Financial 6 1-month n.a. 5.59 5.42 4.83 4.82 4.84 4.80 4.84 4.82 4.79 4.78 4.79 7 2-month n.a. 5.59 5.40 4.81 4.82 4.83 4.80 4.83 4.82 4.81 4.79 4.78 8 3-month n.a. 5.60 5.37 4.81 4.82 4.84 4.80 4.83 4.82 4.80 4.79 4.79 Commercial paper (historicalJ3'5,7 9 1-month 5.43 5.54 n.a. n.a. n.a. n.a. n.a. n.a. 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. n.a. n.a. n.a. 11 6-month 5.42 5.62 n.a. n.a. n.a. n.a. n.a. 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. n.a. n.a. 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. n.a. n.a. n.a. n.a. 14 6-month 5.21 5.48 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Bankers acceptances3'5'9 15 3-month 5.31 5.54 5.39 4.80 4.79 4.82 4.80 4.82 4.80 4.80 4.80 44..8800 16 6-month 5.31 5.57 5.30 4.73 4.74 4.82 4.80 4.83 4.80 4.80 4.80 4.80 Certificates of deposit, secondary market3'10 17 1-month 5.35 5.54 5.49 4.89 4.86 4.88 4.84 4.87 4.86 4.85 44..8833 44..8833 18 3-month 5.39 5.62 5.47 4.89 4.90 4.91 4.88 4.90 4.88 4.88 4.88 4.87 19 6-month 5.47 5.73 5.44 4.90 4.95 4.98 4.94 4.96 4.94 4.94 4.94 4.94 20 Eurodollar deposits, 3-month3'11 5.38 5.61 5.45 4.88 4.86 4.88 4.87 4.88 4.88 4.88 4.88 4.87 U.S. Treasury bills Secondary market3,5 7.1 3-month 5.01 5.06 4.78 4.34 4.44 4.44 4.29 4.35 4.29 4.20 44..2266 44..3399 ?? 6-month 5.08 5.18 4.83 4.33 4.44 4.47 4.37 4.34 4.35 4.34 4.38 4.43 23 1-year 5.22 5.32 4.80 4.31 4.48 4.53 4.45 4.48 4.43 4.43 4.45 4.49 Auction high3'5'12 74 3-month 5.02 5.07 4.81 4.34 4.45 4.48 4.28 4.38 4.27 4.19 4.23 4.34 75 6-month 5.09 5.18 4.85 4.36 4.43 4.52 4.36 4.34 4.35 4.32 4.37 4.41 26 1-year 5.23 5.36 4.85 4.34 4.37 4.67 4.50 4.50 n.a. n.a. n.a. 4.49 U.S. TREASURY NOTES AND BONDS Constant maturities13 27 1-year 5.52 5.63 5.05 4.51 4.70 4.78 4.69 4.72 4.66 4.67 4.70 4.73 78 2-year 5.84 5.99 5.13 4.62 4.88 5.05 4.98 4.99 4.91 4.96 5.00 5.03 79 3-year 5.99 6.10 5.14 4.61 4.90 5.11 5.03 5.06 4.96 5.01 5.06 5.10 30 5-year 6.18 6.22 5.15 4.60 4.91 5.14 5.08 5.12 5.00 5.05 5.10 5.15 31 1-year 6.34 6.33 5.28 4.80 5.10 5.36 5.28 5.37 5.24 5.25 5.29 5.32 37 10-year 6.44 6.35 5.26 4.72 5.00 5.23 5.18 5.24 5.11 5.14 5.20 5.26 33 20-year 6.83 6.69 5.72 5.45 5.66 5.87 5.82 5.92 5.78 5.78 5.83 5.85 34 30-year 6.71 6.61 5.58 5.16 5.37 5.58 5.55 5.63 5.50 5.51 5.56 5.58 Composite 35 More than 10 years (long-term) 6.80 6.67 5.69 5.39 5.60 5.81 5.77 5.88 5.73 55..7733 55..7788 5.80 STATE AND LOCAL NOTES AND BONDS Moody's series14 36 Aaa 5.52 5.32 4.93 4.85 4.80 4.96 4.89 4.97 4.93 4.85 4.85 4.86 37 Baa 5.79 5.50 5.14 5.21 5.21 5.32 5.27 5.34 5.25 5.25 5.26 5.27 38 Bond Buyer series15 5.76 5.52 5.09 5.01 5.03 5.10 5.08 5.11 5.07 5.06 5.07 5.07 CORPORATE BONDS 39 Seasoned issues, all industries16 7.66 7.54 6.87 6.76 6.89 7.07 7.05 7.12 7.01 7.02 7.06 7.09 Rating group 40 Aaa 7.37 7.27 6.53 6.24 6.40 66..6622 6.64 66..7700 6.59 66..6600 66..6655 66..6688 41 Aa 7.55 7.48 6.80 6.68 6.79 6.98 6.96 7.02 6.91 6.93 6.97 7.00 47 A 7.69 7.54 6.93 6.84 6.97 7.14 7.13 7.19 7.08 7.10 7.14 7.17 43 Baa 8.05 7.87 7.22 7.29 7.39 7.53 7.48 7.56 7.45 7.44 7.48 7.50 MEMO Dividend-price ratio17 44 Common stocks 2.19 1.77 1.49 1.30 1.32 1.30 1.24 1.29 1.24 1.24 1.24 1.23 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. A1 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. 9. Representative 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. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • July 1999 1.36 STOCK MARKET Selected Statistics 1998 1999 IInnddiiccaattoorr 11999966 11999977 11999988 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Prices and trading volume (averages of daily figures)1 Common stock prices (indexes) 1 New York Stock Exchange (Dec. 31, 1965 = 50) 357.98 456.99 550.65 539.16 506.56 511.49 564.26 576.05 595.43 588.70 603.69 627.75 2 Industrial 453.57 574.97 684.35 665.66 629.51 636.62 704.46 717.14 741.43 736.20 751.93 780.84 3 Transportation 327.30 415.08 468.61 441.36 408.75 396.61 442.95 456.70 479.72 477.47 491.25 523.08 4 Utility 126.36 143.87 190.52 186.24 186.17 195.09 206.29 215.57 224.75 218.24 218.11 228.48 5 Finance 303.94 424.84 516.65 511.22 454.28 448.12 501.45 510.31 523.38 514.75 544.08 564.99 6 Standard & Poor's Corporation (1941-43 = 10)2 670.49 873.43 1,085.50 1,074.62 1,020.64 1,032.47 1,144.43 1,190.05 1,248.77 1,246.58 1,281.66 1,334.76 7 American Stock Exchange (Aug. 31, 1973 = 50)' 570.86 628.34 682.69 655.67 621.48 607.16 667.60 660.76 704.22 699.15 711.08 748.29 Volume of trading (thousands of shares) 8 New York Stock Exchange 409,740 523,254 666,534 712,710 790,238 808,816 668,932 680,397 847,135 756,932 776,538 874,818 9 American Stock Exchange 22,567 24,390 28,870 32,721 33,331 31,946 27,266 28,756 31,015 31,774 29,563 38,895 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers4 97,400 126,090 140,980 147,800 137,540 130,160 139,710 140,980 153,240 151,530 156,440 172,880 Free credit balances at brokers5 11 Margin accounts6 22,540 31,410 40,250 38,460 41,970 43,500 40,620 40,250 36,880 38,850 40,120 41,200 12 Cash accounts 40,430 52,160 62,450 53,850 54,240 54,610 56,170 62,450 59,600 57,910 59,435 60,870 Margin requirements (percent of market value and effective date)7 Mar. 11, 1968 June 8, 1968 May 6, 1970 Dec. 6, 1971 Nov. 24, 1972 Jan. 3, 1974 13 Margin stocks 70 80 65 55 65 50 14 Convertible bonds 50 60 50 50 50 50 15 Short sales 70 80 65 55 65 50 1. Daily data on prices are available upon request to the Board of Governors. For ordering 6. Series initiated in June 1984. address, see inside front cover. 7. Margin requirements, stated in regulations adopted by the Board of Governors pursuant 2. In July 1976 a financial group, composed of banks and insurance companies, was added to the Securities Exchange Act of 1934, limit the amount of credit that can be used to to the group of stocks on which the index is based. The index is now based on 400 industrial purchase and carry "margin securities" (as defined in the regulations) when such credit is stocks (formerly 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and collateralized by securities. Margin requirements on securities are the difference between the 40 financial. market value (100 percent) and the maximum loan value of collateral as prescribed by the 3. On July 5, 1983, the American Stock Exchange rebased its index, effectively cutting Board. Regulation T was adopted effective Oct. 15, 1934; Regulation U, effective May 1, previous readings in half. 1936; Regulation G, effective Mar. 11, 1968; and Regulation X, effective Nov. 1, 1971. 4. Since July 1983, under the revised Regulation T, margin credit at broker-dealers has On Jan. 1, 1977, the Board of Governors for the first time established in Regulation T the included credit extended against stocks, convertible bonds, stocks acquired through the initial margin required for writing options on securities, setting it at 30 percent of the current exercise of subscription rights, corporate bonds, and government securities. Separate report- market value of the stock underlying the option. On Sept. 30, 1985, the Board changed the ing of data for margin stocks, convertible bonds, and subscription issues was discontinued in required initial margin, allowing it to be the same as the option maintenance margin required April 1984. by the appropriate exchange or self-regulatory organization; such maintenance margin rules 5. Free credit balances are amounts in accounts with no unfulfilled commitments to must be approved by the Securities and Exchange Commission. brokers and are subject to withdrawal by customers on demand. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A25 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Fiscal year Calendar year TTTyyypppeee ooofff aaaccccccooouuunnnttt ooorrr ooopppeeerrraaatttiiiooonnn 1998 1999 11999966 11999977 11999988 Nov. Dec. Jan. Feb. Mar. Apr. US. budget1 1 Receipts, total 1,453,062 1,579,292 1,721,798 113,978 178,646 171,722 99,414 130,292 266,142 2 On-budget 1,085,570 1,187,302 1,305,999 81,836 143,337 129,921 65,058 92,425 219,403 3 Off-budget 367,492 391,990 415,799 32,142 35,309 41,801 34,356 37,867 46,739 4 Outlays, total 1,560,512 1,601,235 1,652,552 130,915 183,802 101,217 141,760 152,701 152,683 5 On-budget 1,259,608 1,290,609 1,335,948 99,898 149,138 102,320 110,486 121,999 123,376 6 Off-budget 300,904 310,626 316,604 31,017 34,655 -1,103 31,274 30,702 29,307 7 Surplus or deficit (-), total -107,450 -21,943 69,246 -16,937 -5,156 70,505 -42,345 -22,409 113,459 8 On-budget -174,038 -103,307 -29,949 -18,062 -5,801 27,601 -45,428 -29,574 96,027 9 Off-budget 66,588 81,364 99,195 1,125 654 42,904 3,082 7,165 17,432 Source of financing (total) 10 Borrowing from the public 129,712 38,171 -51,049 22,364 -5,390 -31,249 1,688 37,013 -85,208 11 Operating cash (decrease, or increase (—)) -6,276 604 4,743 20,335 -1,621 -39,567 52,432 -16,988 -36,512 12 Other 2 -15,986 -16,832 -22,940 -25,762 12,167 311 -11,775 2,384 8,261 MEMO 13 Treasury operating balance (level, end of period) 44,225 43,621 38,878 15,882 17,503 57,070 4,638 21,626 58,138 14 Federal Reserve Banks 7,700 7,692 4,952 5,219 6,086 7,623 4,538 5,374 10,040 15 Tax and loan accounts 36,525 35,930 33,926 10,663 11,417 49,446 100 16,252 48,098 1. Since 1990, off-budget items have been the social security trust funds (federal old-age net gain or loss for U.S. currency valuation adjustment; net gain or loss for IMF loansurvivors insurance and federal disability insurance) and the U.S. Postal Service. valuation adjustment; and profit on sale of gold. 2. Includes special drawing rights (SDRs); reserve position on the U.S. quota in the SOURCE. Monthly totals: U.S. Department of the Treasury, Monthly Treasury Statement of International Monetary Fund (IMF); loans to the IMF; other cash and monetary assets; Receipts and Outlays of the U.S. Government; fiscal year totals: U.S. Office of Management accrued interest payable to the public; allocations of SDRs; deposit funds; miscellaneous and Budget, Budget of the U.S. Government. liability (including checks outstanding) and asset accounts; seigniorage; increment on gold; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 DomesticN onfinancial Statistics • July 1999 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS1 Millions of dollars Fiscal year Calendar year SSSooouuurrrccceee ooorrr tttyyypppeee 1997 1998 1999 11999977 11999988 HI H2 HI H2 Feb. Mar. Apr. RECEIPTS 1 All sources 1,579,292 1,721,798 845,527 773,810r 922,630r 825,057r 99,414 130,292 266,142 2 Individual income taxes, net 737,466 828,586 400,436 354,072 447,514 392,332 42,792 50,468 164,832 3 Withheld 580,207 646,483 292,252 306,865 316,309 339,144 59,055 69,559 55,484 4 Nonwithheld 250,753 281,527 191,050 58,069 219,136 65,204 2,949 7,245 145,935 5 Refunds 93,560 99,476 82,926 10,869 87,989 12,032 1199,,221199 2266,,335511 3366,,660000 Corporation income taxes 6 Gross receipts 204,493 213,249 106,451 104,659 109,353 104,163 3,641 23,131 27,118 / Refunds 22,198 24,593 9,635 10,135 14,220 14,250 2,465 4,578 5,419 8 Social insurance taxes and contributions, net . . . 539,371 571,831 288,251 260,795 312,713 268,466 46,683 49,216 65,162 9 Employment taxes and contributions2 506,751 540,014 268,357 247,794 293,520 256,142 43,735 48,592 60,186 10 Unemployment insurance 28,202 27,484 17,709 10,724 17,080 10,121 2,594 269 4,547 11 Other net receipts3 4,418 4,333 2,184 2,280 2,112 2,202 353 355 428 12 Excise taxes 56,924 57,673 28,084 31,133 29,922 33,366 3,892 5,880 5,579 13 Customs deposits 17,928 18,297 8,619 9,679 8,546 9,838 1,403 1,546 1,350 14 Estate and gift taxes 19,845 24,076 10,477 10,262 12,971 12,359 1,600 2,172 5,138 15 Miscellaneous receipts4 25,465 32,658 12,866 13,348 15,829 18,735 1,868 2,457 2,383 OUTLAYS 16 All types 1,601,235 1,652,552 797,418 824,368r 815,884r 877,412r 141,760r 152,701r 152,683 17 National defense 270,473 268,456 132,698 140,873 129,351 140,196 20,909 25,469 25,433 18 International affairs 15,228 13,109 5,740 9,420 4,610 8,297 1,372 949 1,686 19 General science, space, and technology 17,174 18,219 8,938 10,040 9,426 10,142 1,312 11,,666633 1,565 20 Energy 1,483 1,270 803 411 957 699 -189 558888 -156 21 Natural resources and environment 21,369 22,396 9,628 11,106 10,051 12,671 1,919 1,862 11,,661111 22 Agriculture 9,032 12,206 1,465 10,590 2,387 16,757 1,074 1,046 666666 23 Commerce and housing credit -14,624 1,014 -7,575 -3,526 -2,483 4,046 -1,237 -1,474 -536 24 Transportation 40,767 40,332 16,847 20,414 16,196 20,834 2,259 2,636 22,,773377 25 Community and regional development 11,005 9,720 5,678 5,749 4,863 6,972 720 11,,114488 668844 26 Education, training, employment, and social services 53,008 54,919 25,080 26.851 25,928 27,760r 4,908r 6,319r 4,202 27 Health 123,843 131,440 61,809 63,552 65,053 67,836 11,100 11,988 12,284 28 Social security and Medicare 555,273 572,047 278,863 283,109 286,305 316,809 46,727 49,846 51,816 29 Income security 230,886 233,202 124,034 106,353 125,196 109,481 29,856 27,065r 24,420 30 Veterans benefits and services 39,313 41,781 17,697 22,077 19,615 22,750 3,574 3,693 5,498 31 Administration of justice 20,197 22,832 10,670 10,212 11,287 12,041 1,832 2,180 2,625 32 General government 12,768 13,444 6,623 7,302 6,139 9,136 274 1,130 929 33 Net interest5 244,013 243,359 122,655 122,620 122,345 116,954 18,049 19,970 20,195 34 Undistributed offsetting receipts6 -49,973 -47,194 — 24,235 -22,795 -21,340 -25,795 -2,700 -3,376 -2,976 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: US. Office of Management and Budget, Budget of the U.S. 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 U.S. 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 1997 1998 1999 IItteemm Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 1 Federal debt outstanding 5,415 5,410 5,446 5,536 5,573 5,578 5,556 5,643 5,726 2 Public debt securities 5,381 5,376 5,413 5,502 5,542 5,548 5,526 5,614 5,652 3 Held by public 3,874 3,805 3,815 3,847 3,872 3,790 3,761 3,787 n.a. 4 Held by agencies 1,507 1,572 1,599 1,656 1,670 1,758 1,766 1,827 n.a. 5 Agency securities 34 34 33 34 31 30 29 29 74 6 Held by public 26 26 26 27 26 26 26 29 n.a. 7 Held by agencies 8 7 7 7 5 4 4 1 n.a. 8 Debt subject to statutory limit 5,294 5,290 5,328 5,417 5,457 5,460 5,440 5,530 5,566 9 Public debt securities 5,294 5,290 5,328 5,416 5,456 5,460 5,439 5,530 5,566 10 Other debt' 0 0 0 0 0 0 0 0 0 MEMO 11 Statutory debt limit 5,500 5,500 5,950 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 1998 1999 TTyyppee aanndd hhoollddeerr 11999955 11999966 11999977 11999988 Q2 Q3 Q4 Qi 1 Total gross public debt 4,988.7 5,323.2 5,502.4 5,614.2 5,547.9 5,526.2 5,614.2 5,651.6 By type 2 Interest-bearing 4,964.4 5,317.2 5,494.9 5,605.4 5,540.2 5,518.7 5,605.4 5,643.1 3 Marketable 3,307.2 3,459.7 3,456.8 3,355.5 3,369.5 3,331.0 3,355.5 3,361.3 4 Bills 760.7 777.4 715.4 691.0 641.1 637.7 691.0 725.5 5 Notes 2,010.3 2,112.3 2,106.1 1,960.7 2,064.6 2,009.1 1,960.7 1,912.0 6 Bonds 521.2 555.0 587.3 621.2 598.7 610.4 621.2 632.5 7 Inflation-indexed notes and bonds1 n.a. n.a. 33.0 50.6 50.1 41.9 50.6 59.2 8 Nonmarketable2 1,657.2 1,857.5 2,038.1 2,249.9 2,170.7 2,187.7 2,249.9 2,281.8 9 State and local government series 104.5 101.3 124.1 165.3 155.0 164.4 165.3 167.5 10 Foreign issues3 40.8 37.4 36.2 34.3 36.0 35.1 34.3 33.5 11 Government 40.8 47.4 36.2 34.3 36.0 35.1 34.3 33.5 12 Public .0 .0 .0 .0 .0 .0 .0 .0 13 Savings bonds and notes 181.9 182.4 181.2 180.3 180.7 180.8 180.3 180.6 14 Government account series4 1,299.6 1,505.9 1,666.7 1,840.0 1,769.1 1,777.3 1,840.0 1,870.2 15 Non-interest-bearing 24.3 6.0 7.5 8.8 7.7 7.5 8.8 8.5 By holder5 16 U.S. Treasury and other federal agencies and trust funds 1,304.5 1,497.2 1,655.7 1,826.8 1,757.6 1,765.6 1,826.8 17 Federal Reserve Banks 391.0 410.9 451.9 471.7 458.4 458.1 471.7 18 Private investors 3,294.9 3,411.2 3,393.4 3,334.0 3,330.6 3,301.0 3,334.0 19 Commercial banks 278.7 261.8 269.8 215.0 263.6 219.8 215.0 20 Money market funds 71.5 91.6 88.9 105.8 82.7 84.2 105.8 21 Insurance companies 241.5 214.1 224.9 186.0 183.6 186.1 186.0 22 Other companies 228.8 258.5 265.0 267.9 267.2 271.4 267.9 n.a. 23 State and local treasuries6'7 469.6 482.5 493.0 490.0 470.0 487.4 490.0 Individuals 24 Savings bonds 185.0 187.0 186.5 186.7 186.0 186.0 186.7 25 Other securities 162.7 169.6 168.4 164.9 165.0 166.4 164.9 26 Foreign and international8 835.2 1,102.1 1,241.6 1,276.3 1,256.0 1,221.8 1,276.3 27 Other miscellaneous investors7,9 825.9 678.9 552.0 441.4 456.5 477.9 441.4 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

A42 Domestic Nonfinancial Statistics • July 1999 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions1 Millions of dollars, daily averages 1999 1999, week ending IItteemm Jan. Feb. Mar. Mar. 3 Mar. 10 Mar. 17 Mar. 24 Mar. 31 Apr. 7 Apr. 14 Apr. 21 Apr. 28 OUTRIGHT TRANSACTIONS2 By type of security 1 U.S. Treasury bills 32,211 31,811 34,426 51,699 28,431 26,936 25,567 46,405 24,386 28,340 27,047 35,341 Coupon securities, by maturity 2 Five years or less 100,641 107,777 96,141 122,778 99,358 79,570 97,269 92,383 64,393 89,544 97,475 95,249 3 More than five years 68,441 71,489 62,008 83,554 73,684 51,433 54,205 55,781 40,696 64,236 51,897 54,133 4 Inflation-indexed 1,552 772 402 727 548 276 264 323 2,435 1,418 1,393 530 Federal agency 5 Discount notes 43,028 41,355 40,089 42,125 40,996 41,217 37,095 39,828 34,125 40,893 39,211 34,272 Coupon securities, by maturity 6 One year or less 11,,009988 11,,779966 1,097 1,515 1,009 1,176 1,281 672 363 1,050 1,691 1,734 7 More than one year, but less than or equal to five years 6,150 7,446 7,640 12,035 4,829 8,518 8,832 5,743 4,709 8,882 8,307 5,580 8 More than five years 4,079 3,633 3,141 3,312 5,367 3,068 1,974 2,052 1.532 5,697 3,396 7,323 9 Mortgage-backed 82,210 75,923 69,547 80,707 94,031 68,385 50,182 58,892 68,305 106,601 59,442 44,570 By type of counterparty With interdealer broker 10 U.S. Treasury 113,084 117,230 106,659 142,719 112,829 87,756 98,164 106,251 71,992 99,834 95,890 100,968 11 Federal agency 3,806 3,791 4,121 4,677 3,908 5,290 3,853 3,099 2,533 4,685 3,836 4,529 12 Mortgage-backed 24,932 25,301 23,601 24,875 31,902 24,202 16,254 21,281 20,165 35,318 23,725 15,829 With other 13 U.S. Treasury 89,761 94,620 86,316 116,038 89,192 70,459 79,140 88,640 59,919 83,704 81,921 84,285 14 Federal agency 50,548 50,438 47,846 54,311 48,293 48,689 45,329 45,195 38,197 51,838 48,768 44,380 15 Mortgage-backed 57,278 50,622 45,946 55,832 62,129 44,183 33,928 37,611 48,140 71,282 35,718 28,741 FUTURES TRANSACTIONS3 By type of deliverable security 16 U.S. Treasury bills 0 n.a. 0 n.a. n.a. n.a. 0 0 n.a. n.a. 0 n.a. Coupon securities, by maturity 17 Five years or less 2,225 2,512 2,649 5.110 3,180 2,399 2,048 1,492 1,656 1,645 1,847 2,127 18 More than five years 15,953 17,132 15,926 23,513 19,329 12,912 13,793 13,116 10,251 13,785 11,103 11,002 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 securities, by maturity 26 Five years or less 1,673 1,153 1,506 797 1,442 1,929 1,105 1,972 1,398 1,198 505 797 27 More than five years 4,712 5,798 5,050 5,453 5,276 5,257 4,763 4,662 4,380 4,326 4,471 4,745 28 Inflation-indexed 4,745 0 0 0 0 0 0 0 0 n.a. 0 0 Federal agency 29 Discount notes 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 1,309 844 825 1,123 650 852 1,184 434 1,010 1,170 392 537 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 2. Outright transactions include immediate and forward transactions. Immediate delivery an organized exchange or in the over-the-counter market, and include options on futures refers to purchases or sales of securities (other than mortgage-backed federal agency securi- contracts on U.S. Treasury and federal agency securities. ties) for which delivery is scheduled in five business days or less and "when-issued" NOTE, "n.a." indicates that data are not published because of insufficient activity. securities that settle on the issue date of offering. Transactions for immediate delivery of mortgagebacked agency securities include purchases and sales for which delivery is scheduled in thirty business days or less. Stripped securities are reported at market value by maturity of coupon or coipus. 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 1999 1999, week ending Jan. Feb. Mar. Mar. 3 Mar. 10 Mar. 17 Mar. 24 Mar. 31 Apr. 7 Apr. 14 Apr. 21 Positions2 NET OUTRIGHT POSITIONS^ By type of security 1 U.S. Treasury bills 1,346 4,509 24,510 25,480 25,042 20,081 17,666 34,834 33,128 33,463 21,008 Coupon securities, by maturity 2 Five years or less -8,148 -12,028 -18,124 -21,390 -21,756 -19,183 -13,623 -16,536 -14,410 -9,854 -14,757 3 More than five years 432 1,465 -6,408 -4,195 -5,998 -5,538 -6,597 -8,447 -6,437 -4,872 -5,400 4 Inflation-indexed 1,973 1,931 1,846 2,157 2,160 1,849 1,754 1,487 2,527 2,473 2,763 Federal agency 5 Discount notes 18,818 18,671 18,189 14,894 20,544 17,653 19,310 16,659 22,169 29,505 25,230 Coupon securities, by maturity 6 One year or less 2,858 3,450 2,683 3,439 2,744 3,060 2,361 2,243 2,007 3,072 2,545 7 More than one year, but less than or equal to five years 4,441 5,044 5,222 8,311 6,820 3,150 5,669 3,925 1,622 4,589 4,917 8 More than five years 4,545 3,146 4,110 2,544 4,670 5,455 3,710 3,275 3,518 6,643 5,864 9 Mortgage-backed 23,961 17,432 16,774 21,168 17,990 15,397 18,817 13,010 11,138 14,753 11,968 NET FUTURES POSITIONS4 By type of deliverable security 10 U.S. Treasury bills n.a. n.a. 0 n.a. n.a. 0 0 0 n.a. n.a. n.a. Coupon securities, by maturity 11 Five years or less -777 459 -910 -328 -576 -1,329 -1,111 -873 -1,380 -1,732 754 12 More than five years -20,814 -14,876 -12,929 -11,398 -11,713 -12,930 -15,091 -12,639 -17,065 -19,412 -17,518 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, but 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 years or less -1,090 -1,960 -1,268 -1,743 -1,893 -854 -970 -1,153 -652 -564 -1,427 21 More than five years -1,004 -1,487 -448 -1,215 -982 380 826 -1,687 -275 895 494 22 Inflation-indexed n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Federal agency 23 Discount notes 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 3,410 5,873 6,928 8,918 6,829 6,304 6,720 7,006 5,929 5,544 5,353 Financing5 Reverse repurchase agreements 28 Overnight and continuing 239,627 261,190 256,331 276,948 258,279 250,927 247,536 259,744 247,637 251,660 272,375 29 Term 799,672 788,073 781,168 762,673 783,478 800,575 829,709 718,837 761,966 793,952 828,632 Securities borrowed 30 Overnight and continuing 222,768 225,926 226,297 228,006 232,396 236,084 223,042 212,933 215,288 211,883 211,372 31 Term 105,788 100,463 93,810 94,536 92,844 93,192 97,864 91,031 92,377 99,873 106,626 Securities received as pledge 32 Overnight and continuing 2,509 2,380 2,555 n.a. n.a. n.a. 2,555 n.a. n.a. n.a. n.a. 33 Term n.a. n.a. 0 n.a. n.a. 0 n.a. n.a. n.a. n.a. Repurchase agreements 34 Overnight and continuing 633,520 666,536 655,676 679,928 659,715 677,844 654,994 619,756 651,616 689,099 705,273 35 Term 695,303 674,687 673,650 651,208 668,923 686,985 719,778 628,532 653,537 686,115 724,626 Securities loaned 36 Overnight and continuing 10,040 11,753 12,875 12,090 11,998 12,304 11,226 16,310 10,950 10,208 10,040 37 Term n.a. 5,776 6,122 5,776 6,242 6,142 6,129 n.a. 6,283 5,609 5,593 Securities pledged 38 Overnight and continuing 48,487 48,945 48,533 48,696 47,985 49,625 49,795 46,655 46,507 45,624 45,781 39 Term 5,776 5,896 7,712 6,388 6,843 6,890 8,249 9,434 9,340 10,223 11,720 Collateralized loans 40 Total 17,735 18,388 18,177 17,885 19,168 19,349 17,296 17,018 17,043 20,633 20,663 1. Data for positions and financing are obtained from reports submitted to the Federal securities are included when the time to delivery is more than five business days. Forward Reserve Bank of New York by the U.S. government securities dealers on its published list of contracts for mortgage-backed agency securities are included when the time to delivery is primary dealers. Weekly figures are close-of-business Wednesday data. Positions for calendar more than thirty business days. days of the report week are assumed to be constant. Monthly averages are based on the 4. Futures positions reflect standardized agreements arranged on an exchange. All futures number of calendar days in the month. positions are included regardless of time to delivery. 2. Securities positions are reported at market value. 5. Overnight financing refers to agreements made on one business day that mature on the 3. Net outright positions include immediate and forward positions. Net immediate posi- next business day; continuing contracts are agreements that remain in effect for more than one tions include securities purchased or sold (other than mortgage-backed agency securities) that business day but have no specific maturity and can be terminated without advance notice by have been delivered or are scheduled to be delivered in five business days or less and either party; term agreements have a fixed maturity of more than one business day. Financing "when-issued" securities that settle on the issue date of offering. Net immediate positions for data are reported in terms of actual funds paid or received, including accrued interest. mortgage-backed agency securities include securities purchased or sold that have been NOTE, "n.a." indicates that data are not published because of insufficient activity. delivered or are scheduled to be delivered in thirty business days or less. Forward positions reflect agreements made in the over-the-counter market that specify delayed delivery. Forward contracts for U.S. Treasury securities and federal agency debt Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • July 1999 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1998 1999 AAggeennccyy 11999955 11999966 11999977 11999988 Oct. Nov. Dec. Jan. Feb. 1 Federal and federally sponsored agencies 844,611 925,823 1,022,609 1,296,477 1,207,495 1,255,412 1,296,477 n.a. n.a. 2 Federal agencies 37,347 29,380 27,792 26,502 26,350 26,315 26,502 26,355 26,180 3 Defense Department1 6 6 6 6 6 6 6 6 6 4 Export-Import Bank2'3 2,050 1,447 552 n.a. n.a. n.a. n.a. n.a. n.a. 5 Federal Housing Administration4 97 84 102 205 188 205 205 70 69 6 Government National Mortgage Association certificates of participation5 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 7 Postal Service6 5,765 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 8 Tennessee Valley Authority 29,429 27,853 27,786 26,496 26,344 26,309 26,496 26,349 26,174 9 United States Railway Association6 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 10 Federally sponsored agencies7 807,264 896,443 994,817 1,269,975 1,181,145 1,229,097 1,269,975 n.a. n.a. 11 Federal Home Loan Banks 243,194 263,404 313,919 382,131 367,274 373,755 382,131 383,572 383,769 1? Federal Home Loan Mortgage Corporation 119,961 156,980 169,200 287,396 246,708 267,890 287,396 300,927 n.a. 13 Federal National Mortgage Association 299,174 331,270 369,774 460,291 431,300 446,377 460,291 461,157 471,300 14 Farm Credit Banks8 57,379 60,053 63,517 63,488 60,720 66,086 63,488 61,292 66,622 15 Student Loan Marketing Association9 47,529 44,763 37,717 35,399 33,981 33,928 35,399 36,385 36,464 16 Financing Corporation10 8,170 8,170 8,170 8,170 8,170 8,170 8,170 8,170 8,170 17 Farm Credit Financial Assistance Corporation" 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 18 Resolution Funding Corporation12 29,996 29,996 29,996 29,996 29,996 29,996 29,996 29,996 29,996 MEMO 19 Federal Financing Bank debt13 78,681 58,172 49,090 44,129 44,952 44,824 44,129 43,803 41,637 Lending to federal and federally sponsored agencies 20 Export-Import Bank3 22,,004444 11,,443311 555522 f f f t f t 21 Postal Service6 n.a. 22 Student Loan Marketing Association n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 2 2 4 3 T U e n n it n e e d s s S ee ta t V es a l R le a y i l A w u ay th o A r s it s y o ciation6 n 3 . , a 2 . 00 n n . . a a . . n n. . a a . . t1 t1 T1 1T t1 1T Other lending14 ?5 Farmers Home Administration 21,015 18,325 13,530 9,500 9,500 9,500 9,500 9,500 8,550 ?6 Rural Electrification Administration 17,144 16,702 14,898 14,091 14,191 14,199 14,091 14,101 13,999 27 Other 29,513 21,714 20,110 20,538 21,261 21,125 20,538 20,202 19,088 1. Consists of mortgages assumed by the Defense Department between 1957 and 1963 10. The Financing Corporation, established in August 1987 to recapitalize the Federal under family housing and homeowners assistance programs. Savings and Loan Insurance Corporation, undertook its first borrowing in October 1987. 2. Includes participation certificates reclassified as debt beginning Oct. 1, 1976. 11. The Farm Credit Financial Assistance Corporation, established in January 1988 to 3. On-budget since Sept. 30, 1976. provide assistance to the Farm Credit System, undertook its first borrowing in July 1988. 4. Consists of debentures issued in payment of Federal Housing Administration insurance 12. The Resolution Funding Corporation, established by the Financial Institutions Reform, claims. Once issued, these securities may be sold privately on the securities market. Recovery, and Enforcement Act of 1989, undertook its first borrowing in October 1989. 5. Certificates of participation issued before fiscal year 1969 by the Government National 13. The FFB, which began operations in 1974, is authorized to purchase or sell obligations Mortgage Association acting as trustee for the Farmers Home Administration, the Department issued, sold, or guaranteed by other federal agencies. Because FFB incurs debt solely for the of Health, Education, and Welfare, the Department of Housing and Urban Development, the purpose of lending to other agencies, its debt is not included in the main portion of the table to Small Business Administration, and the Veterans Administration. avoid double counting. 6. Off-budget. 14. Includes FFB purchases of agency assets and guaranteed loans; the latter are loans 7. Includes outstanding noncontingent liabilities: notes, bonds, and debentures. Includes guaranteed by numerous agencies, with the amounts guaranteed by any one agency generally Federal Agricultural Mortgage Corporation, therefore details do not sum to total. Some data being small. The Farmers Home Administration entry consists exclusively of agency assets, are estimated. whereas the Rural Electrification Administration entry consists of both agency assets and 8. Excludes borrowing by the Farm Credit Financial Assistance Corporation, which is guaranteed loans. shown on line 17. 9. Before late 1982, the association obtained financing through the Federal Financing Bank (FFB). Borrowing excludes that obtained from the FFB, which is shown on line 22. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Markets and Corporate Finance A31 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1998 1999 TTyyppee ooff iissssuuee oorr iissssuueerr,, oorr uussee 11999966 11999977 11999988 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 All issues, new and refunding1 171,222 214,694 262,342 17,526 19,528 19,325 24,288 16,926 16,233 24,323 15,758 By type of issue 2 General obligation 60,409 69,934 87,015 5,619 6,791 5,433 8,632 6,925 6,786 8,323 6,443 3 Revenue 110,813 134,989 175,327 11,907 12,737 13,892 15,656 10,001 9,446 16,000 9,315 By type of issuer 4 State 13,651 18,237 23,506 1,280 1,865 778 2,561 318 1,837 1,895 907 5 Special district or statutory authority2 113,228 134,919 178,421 12,490 12,924 13,473 15,937 12,929 11,145 14,604 10,010 6 Municipality, county, or township 44,343 70,558 60,173 3,756 4,739 5,073 5,790 3,679 3,251 7,825 4,841 7 Issues for new capital 112,298 135,519 160,568 9,106 12,736 12,452 14,517 11,917 10,674 16,201 10,474 By use of proceeds 8 Education 26,851 31,860 36,904 2,041 2,605 2,353 2,766 2,936 3,751 3,537 2,734 9 Transportation 12,324 13,951 19,926 918 1,598 806 1,800 1,706 628 1,640 1,107 10 Utilities and conservation 9,791 12,219 21,037 831 2,785 2,225 984 672 394 2,839 1,372 11 Social welfare 24,583 27,794 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 12 Industrial aid 6,287 6,667 8,594 315 471 638 1,376 452 343 1,084 618 13 Other purposes 32,462 35,095 42,450 2,726 3,359 3,242 4,477 4,439 3,207 3,918 2,592 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 1999 TTyyppee ooff iissssuuee,, ooffffeerriinngg,, 11999966 11999977 11999988 oorr iissssuueerr Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 All issues1 773,110 929,256 1,127,721 57,276 88,764 70,287 111,762 81,326 93,665 103,175 125,884 2 Bonds2 651,104 811,376 1,000,966 53,551 84,124 61,632 102,860 72,656 86,529 92,885 116,340 By type of offering 3 Public, domestic 567,671 708,188 923,001 49,751 81,507 54,795 95,106 69,395 76,511 82,871 100,924 4 Private placement, domestic3 83,433 103,188 77,965 3,800 2,618 6,837 7,754 3,261 10,018 10,014 15,416 5 Sold abroad n.a. n.a. n.a. 2,391 4,122 2,428 2,878 3,874 684 648 1,224 By industry group 6 Nonfinancial 167.904 222,603 308,157 16,067 10,738 14,426 32,124 25,008 21,193 23,131 39,368 7 Financial 483,200 588,773 692,809 37,483 73,386 47,206 70,736 47,648 65,336 69,754 76,973 8 Stocks2 122,006 117,880 126,755 3,725 4,640 8,655 8,902 8,670 7,136 10,290 9,544 By type of offering 9 Public 122.006 117,880 126,755 3,725 4,640 8,655 8,902 8,670 7,136 10,290 9,544 10 Private placement3 n.a. 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 80.460 60,386 74,113 2,560 2,266 5,879 6,145 7,559 3,701 8,911 88,,336677 12 Financial 41.546 57,494 52,642 1,165 2,374 2,776 2,757 1,111 3,435 1,379 1,177 1. Figures represent gross proceeds of issues maturing in more than one year; they are the 2. Monthly data cover only public offerings. principal amount or number of units calculated by multiplying by the offering price. Figures 3. Monthly data are not available. exclude secondary offerings, employee stock plans, investment companies other than closed- SOURCE. Beginning July 1993, Securities Data Company and the Board of Governors of end, intracorporate transactions, and Yankee bonds. Stock data include ownership securities the Federal Reserve System. issued by limited partnerships. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • July 1999 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Assets1 Millions of dollars 1998 1999 IItteemm 11999977 11999988 Sept. Oct. Nov. Dec. Jan. Feb. Mar.r Apr. 1 Sales of own shares2 1,190,900 1,461,430 118,478 116,471 112,627 140,700 161,889 132,199 164,290 165,893 2 Redemptions of own shares 918,728 1,217,022 107,049 108,838 89,702 134,289 135,713 128,125 146,479 139,066 3 Net sales3 272,172 244,408 11,429 7,633 22,925 6,412 26,176 4,074 17,811 26,827 4 Assets4 3,409,315 4,173,531 3,625,841 3,804,591 4,002,089 4,173,531 4,298,071 4,180,115 4,328,150 4,505,001 5 Cash5 174,154 191,393 211,253 210,026 207,422 191,393 203,470 198,134 198,741 212,315 6 Other 3,235,161 3,982,138 3,414,588 3,594,565 3,794,667 3,982,138 4,094,601 3,981,982 4,129,409 4,292,686 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 underwritings of newly formed companies after their market mutual funds within the same fund family. initial offering of securities. 1.48 CORPORATE PROFITS AND THEIR DISTRIBUTION Billions of dollars; quarterly data at seasonally adjusted annual rates 1997 1998 1999 AAccccoouunntt 11999966 11999977 11999988 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Ql 1 Profits with inventory valuation and capital consumption adjustment 750.4 817.9 824.6 815.5 840.9 820.8 829.2 820.6 827.0 821.7 853.5 2 Profits before taxes 680.2 734.4 717.8 729.8 758.9 736.4 719.1 723.5 720.5 708.1 738.4 3 Profits-tax liability 226.1 246.1 240.1 241.9 254.2 249.3 239.9 241.6 243.2 235.6 245.8 4 Profits after taxes 454.1 488.3 477.7 487.8 504.7 487.1 479.2 481.8 477.3 472.5 492.6 5 Dividends 261.9 275.1 279.2 274.7 275.1 276.4 277.3 278.1 279.0 282.3 285.6 6 Undistributed profits 192.3 213.2 198.5 213.2 229.5 210.6 201.8 203.7 198.3 190.2 207.1 7 Inventory valuation -1.2 6.9 14.5 10.3 4.8 4.3 25.3 7.8 11.7 13.4 10.4 8 Capital consumption adjustment 71.4 76.6 92.3 75.5 77.2 80.1 84.9 89.4 94.8 100.2 104.7 SOURCE. U.S. Department of Commerce, Survey of Current Business. 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities1 Billions of dollars, end of period; not seasonally adjusted 1997 1998 1999 AAccccoouunntt 11999966 11999977 11999988 Q3 Q4 Ql Q2 Q3 Q4 Ql ASSETS 1 Accounts receivable, gross2 637.1 663.3 711.7r 660.5 663.3 667.2 676.0 687.6' 711.7' 733.5 2 Consumer 244.9 256.8 261.8' 254.5 256.8 251.7 251.3 254.0' 261.8' 262.9 3 Business 309.5 318.5 347.5r 319.5 318.5 325.9 334.9 335.1 347.5' 361.7 4 Real estate 82.7 87.9 102.3r 86.4 87.9 89.6 89.9 98.5 102.3' 109.0 5 LESS: Reserves for unearned income 55.6 52.7 53.6 54.6 52.7 52.1 53.2 52.4 53.6 53.1 6 Reserves for losses 13.1 13.0 13.3 12.7 13.0 13.1 13.2 13.2 13.3 13.5 7 Accounts receivable, net 568.3 597.6 644.8' 593.1 597.6 601.9 609.6 622.0' 644.8' 666.9 8 All other 290.0 312.4 321.1 289.1 312.4 329.7 340.1 313.7 321.1 389.6 9 Total assets 858.3 910.0 965.9r 882.3 910.0 931.6 949.7 935.7r 965.9r 1,056.5 LIABILITIES AND CAPITAL 10 Bank loans 19.7 24.1 25.0 20.4 24.1 22.0 22.3 24.9 25.0 23.6 11 Commercial paper 177.6 201.5 232.3 189.6 201.5 211.7 225.9 226.9 232.3 333.5 Debt 12 Owed to parent 60.3 64.7 64.6 61.6 64.7 64.6 60.0 58.3 64.6 22.6 13 Not elsewhere classified 332.5 328.8 358.4 322.8 328.8 338.2 348.7 337.6 358.4 394.9 14 All other liabilities 174.7 189.6 194.6 190.1 189.6 193.1 188.9 185.4 194.6 179.8 15 Capital, surplus, and undivided profits 93.5 101.3 106.6 97.9 101.3 102.1 103.9 103.6 106.6 102.1 16 Total liabilities and capital 858.3 910.0 981.4 882.3 910.0 931.6 949.7 936.6 981.4 1,056.5 1. Includes finance company subsidiaries of bank holding companies but not of retailers 2. Before deduction for unearned income and losses, and banks. Data are amounts carried on the balance sheets of finance companies; securitized pools are not shown, as they are not on the books. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Market and Corporate Finance A3 3 1.52 DOMESTIC FINANCE COMPANIES Owned and Managed Receivables1 Billions of dollars, amounts outstanding 1998 1999 TTyyppee ooff ccrreeddiitt 11999966 11999977 Oct. Nov. Dec. Jan. Feb. Mar. Seasonally adjusted 1 Total 761.9 809.8 874.9 865.9 871.1 874.9 888.5 899.1 910.4 2 Consumer 307.7 327.7 352.5 350.4 352.1 352.5 356.8 361.3 363.9 3 Real estate 111.9 121.1 131.4 132.3 134.3 131.4 135.7 135.7 137.2 4 Business 342.4 361.0 391.0 383.2 384.7 391.0 396.0 402.0 409.3 Not seasonally adjusted 5 Total 769.7 818.1 884.0 864.2 872.8 884.0 888.7 898.4 911.0 6 Consumer 310.6 330.9 356.1 350.0 352.2 356.1 356.1 358.1 360.2 7 Motor vehicles loans 86.7 87.0 103.1 97.6 99.0 103.1 102.8 105.0 104.7 8 Motor vehicle leases 92.5 96.8 93.3 94.6 94.4 93.3 93.9 94.5 93.9 9 Revolving2 32.5 38.6 32.3 33.3 33.1 32.3 32.4 32.2 32.3 10 Other3 33.2 34.4 33.1 34.6 34.6 33.1 32.1 32.5 32.0 Securitized assets4 11 Motor vehicle loans 36.8 44.3 54.8 51.6 53.4 54.8 56.0 54.9 59.0 12 Motor vehicle leases 8.7 10.8 12.7 14.4 14.2 12.7 12.5 12.3 12.0 13 Revolving .0 .0 8.7 5.3 5.3 8.7 8.6 8.7 8.5 14 Other 20.1 19.0 18.1 18.6 18.4 18.1 17.9 18.1 17.8 15 Real estate 111.9 121.1 131.4 132.3 134.3 131.4 135.7 135.7 137.2 16 One- to four-family 52.1 59.0 75.7 72.2 74.1 75.7 80.1 80.3 77.7 17 Other 30.5 28.9 26.6 30.2 30.7 26.6 26.9 27.1 31.3 Securitized real estate assets4 18 One- to four-family 28.9 33.0 29.0 29.8 29.4 29.0 28.6 28.3 28.0 19 Other .4 .2 .1 .1 .1 .1 .1 .1 .3 20 Business 347.2 366.1 396.5 382.0 386.3 396.5 396.9 404.6 413.6 21 Motor vehicles 67.1 63.5 79.6 68.5 70.9 79.6 79.1 82.1 84.8 22 Retail loans 25.1 25.6 28.1 30.4 29.4 28.1 28.4 28.9 30.0 23 Wholesale loans5 33.0 27.7 32.8 27.0 30.3 32.8 31.9 34.3 36.0 24 Leases 9.0 10.2 18.7 11.1 11.2 18.7 18.9 18.9 18.8 25 Equipment 194.8 203.9 198.0 211.5 212.0 198.0 197.6 200.7 202.4 26 Loans 59.9 51.5 50.4 47.2 47.8 50.4 49.7 51.0 51.6 27 Leases 134.9 152.3 147.6 164.3 164.2 147.6 147.8 149.8 150.7 28 Other business receivables6 47.6 51.1 69.9 59.6 60.4 69.9 72.5 73.3 74.5 Securitized assets4 29 Motor vehicles 24.0 33.0 29.2 25.0 25.8 29.2 28.2 28.8 31.0 .30 Retail loans 2.7 2.4 2.6 1.9 2.4 2.6 2.5 2.4 2.4 31 Wholesale loans 21.3 30.5 24.7 23.2 23.4 24.7 23.8 24.6 26.6 32 Leases .0 .0 1.9 .0 .0 1.9 1.9 1.9 1.9 33 Equipment 11.3 10.7 13.0 12.0 11.8 13.0 12.7 12.9 12.8 34 Loans 4.7 4.2 6.6 5.6 5.4 6.6 6.3 6.2 6.1 35 Leases 6.6 6.5 6.4 6.4 6.4 6.4 6.4 6.7 6.7 36 Other business receivables6 2.4 4.0 6.8 5.2 5.3 6.8 6.8 6.8 8.2 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

A42 Domestic Nonfinancial Statistics • July 1999 1.53 MORTGAGE MARKETS Mortgages on New Homes Millions of dollars except as noted 1998 1999 IItteemm 11999966 11999977 11999988 Oct. Nov. Dec. Jan. Feb. Mar. Apr. Terms and yields in primary and secondary markets PRIMARY MARKETS Terms1 1 Purchase price (thousands of dollars) 182.4 180.1 195.2 201.4 192.1 206.0 202.3 204.1 211.0 209.4 2 Amount of loan (thousands of dollars) 139.2 140.3 151.1 155.8 148.1 159.0 153.3 155.4 162.9 162.4 3 Loan-to-price ratio (percent) 78.2 80.4 80.0 79.8 79.5 79.4 78.0 78.2 79.4 79.5 4 Maturity (years) 27.2 28.2 28.4 28.6 28.3 28.7 28.4 28.7 28.8 28.9 5 Fees and charges (percent of loan amount)2 1.21 1.02 .89 .86 .76 .98 1.01 .92 .82 .77 Yield (percent per year) 6 Contract rate' 7.56 7.57 6.95 6.72 6.68 6.80 6.81 6.78 6.74 6.74 7 Effective rate1'3 7.77 7.73 7.08 6.85 6.80 6.94 6.96 6.92 6.86 6.85 8 Contract rate (HUD series)4 8.03 7.76 7.00 6.86 6.84 6.83 6.80 7.02 7.03 6.93 SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (Section 203)5 8.19 7.89 7.04 7.07 7.02 7.06 7.08 7.10 7.07 7.08 10 GNMA securities6 7.48 7.26 6.43 6.10 6.25 6.18 6.18 6.42 6.58 6.50 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 287,052 316,678 414,515 386,452 399,804 414,515 418,323 431,836 440,139 446,025 12 111A/VA insured 30,592 31,925 33,770 32,814 33,420 33,770 33,483 34,000 34,870 36,158 13 Conventional 256,460 284,753 380,745 353,638 366,384 380,745 384,840 397,836 405,269 409,867 14 Mortgage transactions purchased (during period) 68,618 70,465 188,448 18,967 23,557 26,222 14,005 22,029 16,923 14,225 Mortgage commitments (during period) 15 Issued7 65,859 69,965 193,795 30,551 17,994 16,803 20,754 26,509 16,891 20,192 16 To sell8 130 1,298 1,880 393 0 434 0 0 266 75 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)8 17 Total 137,755 164,421 255,010 231,458 242,270 255,010 257,062 262,921 277,624 284,006 18 I-llA/VA insured 220 177 785 569 602 785 387 755 754r 750 19 Conventional 137,535 164,244 254,225 230,889 241,668 254,225 256,675 262,166 276,870r 283,256 Mortgage transactions (during period) 20 Purchases 125,103 117,401 267,402 20,629 23,986 34,299 27,672 25,225 29,921 26,473 21 Sales 119,702 114,258 250,565 19,472 22,660 28,024 31,431 24,232 28,740 25,464 22 Mortgage commitments contracted (during period)9 128,995 120,089 281,899 25,025 28,903 29,703 23,900 24,829 32,546 24,050 1. Weighted averages based on sample surveys of mortgages originated by major institu- 6. Average net yields to investors on fully modified pass-through securities backed by tional lender groups for purchase of newly built homes; compiled by the Federal Housing mortgages and guaranteed by the Government National Mortgage Association (GNMA), Finance Board in cooperation with the Federal Deposit Insurance Corporation. assuming prepayment in twelve years on pools of thirty-year mortgages insured by the 2. Includes all fees, commissions, discounts, and "points" paid (by the borrower or the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. seller) to obtain a loan. 7. Does not include standby commitments issued, but includes standby commitments 3. Average effective interest rate on loans closed for purchase of newly built homes, converted. assuming prepayment at the end of ten years. 8. Includes participation loans as well as whole loans. 4. Average contract rate on new commitments for conventional first mortgages; from U.S. 9. Includes conventional and government-underwritten loans. The Federal Home Loan Department of Housing and Urban Development (HUD). Based on transactions on the first Mortgage Corporation's mortgage commitments and mortgage transactions include activity day of the subsequent month. under mortgage securities swap programs, whereas the corresponding data for FNMA 5. Average gross yield on thirty-year, minimum-downpayment first mortgages insured exclude swap activity. by the Federal Housing Administration (FHA) for immediate delivery in the private secondary market. Based on transactions on first day of subsequent month. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Real Estate A3 5 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period 1997 1998 TTyyppee ooff hhoollddeerr aanndd pprrooppeerrttyy 11999955 11999966 11999977 Q4 Q1 Q2 Q3 Q4P 1 All holders 4,610,350 4,928,367 5,257,422 5,257,422 5,371,196 5,487,535 5,623,695 5,782,027 By type of property 2 One- to four-family residences 3,532,977 3,755,719 3,998,763 3,998,763 4,082,959 4,163,964 4,268,149 4,375,730 3 Multifamily residences 286,875 309,321 329,733 329,733 338,439 347,449 353,546 362,092 4 Nonfarm, nonresidential 705,937 776,193 838,627 838,627 858,641 883,476 908,192 949,230 5 Farm 84,561 87,134 90,299 90,299 91,157 92,646 93,808 94,974 By type of holder 6 Major financial institutions 1,900,089 1,981,885 2,083,978 2,083,978 2,114,528 2,121,939 2,137,412 2,193,378 7 Commercial banks2 1,090,189 1,145,389 1,245,315 1,245,315 1,271,037 1,281,849 1,295,768 1,337,664 8 One- to four-family 669,434 698,508 762,533 762,533 779,941 785,019 784,987 810,680 9 Multifamily 43,837 46,675 50,651 50,651 51,688 52,077 53,049 53,586 10 Nonfarm, nonresidential 353,088 375,322 405,144 405,144 411,949 416,434 429,045 444,363 11 Farm 23,830 24,883 26,986 26,986 27,458 28,319 28,688 29,034 12 Savings institutions3 596,763 628,335 631,822 631,822 637,012 632,359 634,244 643,773 13 One- to four-family 482,353 513,712 520,672 520,672 527,036 522,088 525,842 533,680 14 Multifamily 61,987 61,570 59,543 59,543 59,074 58,908 56,706 56,806 1.5 Nonfarm, nonresidential 52,135 52,723 51,252 51,252 50,532 50,978 51,297 52,871 16 Farm 288 331 354 354 369 386 399 417 17 Life insurance companies 213,137 208,161 206,841 206,841 206,480 207,730 207,399 211,940 18 One- to four-family 8,890 6,977 7,187 7,187 7,174 7,218 7,206 7,364 19 Multifamily 28,714 30,750 30,402 30,402 31,156 31,849 31,661 32,354 20 Nonfarm, nonresidential 165,876 160,314 158,780 158,780 157,696 158,146 158,032 161,492 21 Farm 9,657 10,120 10,472 10,472 10,454 10,517 10,500 10,730 22 Federal and related agencies 308,757 295,192 286,167 286,167 286,877 287,161 287,125 291,858 23 Government National Mortgage Association 2 2 8 8 8 8 7 7 24 One- to four-family 2 2 8 8 8 8 7 7 25 Multifamily 0 0 0 0 0 0 0 0 26 Farmers Home Administration4 41,791 41,596 41,195 41,195 40,972 40,921 40,907 40,851 27 One- to four-family 17,705 17,303 17,253 17,253 17,160 17,059 17,025 16,895 28 Multifamily 11,617 11,685 11,720 11,720 11,714 11,722 11,736 11,739 29 Nonfarm, nonresidential 6,248 6,841 7,370 7,370 7,369 7,497 7,566 7,705 30 Farm 6,221 5,768 4,852 4,852 4,729 4,644 4,579 4,513 31 Federal Housing and Veterans' Administrations 9,809 6,244 3,821 3,821 3,694 3,631 3,405 3,405 32 One- to four-family 5,180 3,524 1,767 1,767 1,641 1,610 1,550 1,550 33 Multifamily 4,629 2,719 2,054 2,054 2,053 2,021 1,855 1,855 34 Resolution Trust Corporation 1,864 0 0 0 0 0 0 0 35 One- to four-family 691 0 0 0 0 0 0 0 36 Multifamily 647 0 0 0 0 0 0 0 37 Nonfarm, nonresidential 525 0 0 0 0 0 0 0 38 Farm 0 0 0 0 0 0 0 0 39 Federal Deposit Insurance Corporation 4,303 2,431 724 724 786 564 482 361 40 One- to four-family 492 365 109 109 118 85 72 54 41 Multifamily 428 413 123 123 134 96 82 61 42 Nonfarm, nonresidential 3,383 1,653 492 492 534 384 328 245 43 Farm 0 0 0 0 0 0 0 0 44 Federal National Mortgage Association 178,807 168,813 161,308 161,308 160,048 159,816 159,104 157,675 45 One- to four-family 163,648 155,008 149,831 149,831 149,254 149,383 149,069 147,594 46 Multifamily 15,159 13,805 11,477 11,477 10,794 10,433 10,035 10,081 47 Federal Land Banks 28,428 29,602 30,657 30,657 31,005 31,352 32,009 32,473 48 One- to four-family 1,673 1,742 1,804 1,804 1,824 1,845 1,883 1,911 49 Farm 26,755 27,860 28,853 28,853 29,181 29,507 30,126 30,562 50 Federal Home Loan Mortgage Corporation 43,753 46,504 48,454 48,454 50,364 50,869 51,211 57,085 51 One- to four-family 39,901 41,758 42,629 42,629 44,440 44,597 44,254 49,106 52 Multifamily 3,852 4,746 5,825 5,825 5,924 6,272 6,957 7,979 53 Mortgage pools or trusts5 1,863,210 2,064,882 2,272,999 2,272,999 2,330,674 2,442,603 2,548,050 2,631,790 54 Government National Mortgage Association 472,283 506,340 536,810 536,810 533,011 537,586 541,431 537,431 55 One- to four-family 461,438 494,158 523,156 523,156 519,152 523,243 526,934 522,483 56 Multifamily 10,845 12,182 13,654 13,654 13,859 14,343 14,497 14,948 57 Federal Home Loan Mortgage Corporation 515,051 554,260 579,385 579,385 583,144 609,791 635,726 646,459 58 One- to four-family 512,238 551,513 576,846 576,846 580,715 607,469 633,124 643,465 59 Multifamily 2,813 2,747 2,539 2,539 2,429 2,322 2,602 2,994 60 Federal National Mortgage Association 582,959 650,780 709,582 709,582 730,832 761,359 798,460 834,518 61 One- to four-family 569,724 633,210 687,981 687,981 708,125 737,631 770,979 804,205 62 Multifamily 13,235 17,570 21,601 21,601 22,707 23,728 27,481 30,313 63 Farmers Home Administration4 11 3 2 2 2 2 2 1 64 One- to four-family 2 0 0 0 0 0 0 0 65 Multifamily 0 0 0 0 0 0 0 0 66 Nonfarm, nonresidential 5 0 0 0 0 0 0 0 67 Farm 4 3 2 2 2 2 2 1 68 Private mortgage conduits 292,906 353,499 447,219 447,219 483,685 533,865 572,431 613,382 69 One- to four-family6 227,800 261,900 318,000 318,000 336,824 364,316 391,736 410,900 70 Multifamily 15,584 21,967 29,264 29,264 33,477 38,144 40,893 44,690 71 Nonfarm, nonresidential 49,522 69,633 99,955 99,955 113,384 131,405 139,802 157,792 72 Farm 0 0 0 0 0 0 0 0 73 Individuals and others7 538,295 586,408 614,279 614,279 639,117 635,833 651,109 665,001 74 One- to four-family 371,806 376,039 388,988 388,988 409,548 402,395 413,480 425,836 75 Multifamily 73,528 82,492 90,879 90,879 93,430 95,534 95,992 94,686 76 Nonfarm, nonresidential 75,154 109,707 115,633 115,633 117,176 118,633 122,123 124,762 77 Farm 17,806 18,169 18,779 18,779 18,964 19,271 19,514 19,717 1. Multifamily debt refers to loans on structures of five or more units. 6. Includes securitized home equity loans. 2. Includes loans held by nondeposit trust companies but not loans held by bank trust 7. Other holders include mortgage companies, real estate investment trusts, state and local departments. credit agencies, state and local retirement funds, noninsured pension funds, credit unions, and 3. Includes savings banks and savings and loan associations. finance companies. 4. FmHA-guaranteed securities sold to the Federal Financing Bank were reallocated from SOURCE. Based on data from various institutional and government sources. Separation of FmHA mortgage pools to FmHA mortgage holdings in 1986:Q4 because of accounting nonfarm mortgage debt by type of property, if not reported directly, and interpolations and changes by the Farmers Home Administration. extrapolations, when required for some quarters, are estimated in part by the Federal Reserve. 5. Outstanding principal balances of mortgage-backed securities insured or guaranteed by Line 69 from Inside Mortgage Securities and other sources. the agency indicated. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • July 1999 1.55 CONSUMER CREDIT1 Millions of dollars, amounts outstanding, end of period 1998 1999 HHoollddeerr aanndd ttyyppee ooff ccrreeddiitt 11999977 11999988 Oct. Nov. Dec. Jan. Feb.' Mar. Seasonally adjusted 1 Total 1,181,913 1,233,099 1,299,207 1,294,917 1,296,630 1,299,207 1,314,471 1,323,228 1,324,760 2 Automobile 392,321 413,369 447,013 437,820 442,430 447,013 454,096 459,078 462,860 3 Revolving 499,486 531,140 560,515 557,644 556,535 560,515 566,690 569,099 568,338 4 Other2 290,105 288,590 291,680 299,453 297,665 291,680 293,684 295,051 293,562 Not seasonally adjusted 5 Total 1,211,590 1,264,103 1,331,742 1,297,576 1,304,499 1,331,742 1,323,250 1,316,400 1,312,647 By major holder 6 Commercial banks 526,769 512,563 508,932 502,076 498,838 508,932 507,264 497,753 487,583 7 Finance companies 152,391 160,022 168,491 165,573 166,622 168,491 167,305 169,664 168,944 8 Credit unions 144,148 152,362 155,406 154,991 155,221 155,406 155,726 155,203 155,027 9 Savings institutions 44,711 47,172 51,611 50,966 51,625 51,611 52,047 52,482 52,916 10 Nonfinancial business3 77,745 78,927 74,877 65,962 66,615 74,877 70,950 67,972 67,143 11 Pools of securitized assets4 265,826 313,057 372,425 358,008 365,578 372,425 369,958 373,326 381,034 By major type of credit 12 Automobile 395,609 416,962 450,968 443,120 446,566 450,968 452,181 453,951 458,108 13 Commercial banks 157,047 155,254 158,072 156,788 157,126 158,072 160,273 159,922 159,333 14 Finance companies 86,690 87,015 103,094 97,637 98,954 103,094 102,822 104,987 104,652 15 Pools of securitized assets4 51,719 64,950 72,955 71,788 72,582 72,955 73,232 73,232 77,829 16 Revolving 522,860 555,858 586,528 556,006 559,211 586,528 575,675 569,111 562,812 17 Commercial banks 228,615 219,826 210,346 200,869 196,923 210,346 204,774 197,623 188,652 18 Finance companies 32,493 38,608 32,309 33,309 33,056 32,309 32,414 32,195 32,326 19 Nonfinancial business3 44,901 44,966 39,166 33,762 33,756 39,166 36,389 34,327 33,738 20 Pools of securitized assets4 188,712 221,465 272,327 258,139 265,311 272,327 269,918 272,444 275,444 21 Other 293,121 291,283 294,246 298,450 298,722 294,246 295,394 293,338 291,727 22 Commercial banks 141,107 137,483 140,514 144,419 144,789 140,514 142,217 140,208 139,598 23 Finance companies 33,208 34,399 33,088 34,627 34,612 33,088 32,069 32,482 31,966 24 Nonfinancial business3 32,844 33,961 35,711 32,200 32,859 35,711 34,561 33,645 33,405 25 Pools of securitized assets4 25,395 26,642 27,143 28,081 27,685 27,143 26,808 27,650 27,761 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 1999 IItteemm 11999966 11999977 11999988 Sept. Oct. Nov. Dec. Jan. Feb. Mar. INTEREST RATES Commercial banks2 1 48-month new car 9.05 9.02 8.72 n.a. n.a. 8.62 n.a. n.a. 8.34 n.a. 2 24-month personal 13.54 13.90 13.74 n.a. n.a. 13.75 n.a. n.a. 13.41 n.a. Credit card plan 3 All accounts 15.63 15.77 15.71 n.a. n.a. 15.69 n.a. n.a. 15.41 n.a. 4 Accounts assessed interest 15.50 15.57 15.59 n.a. n.a. 15.54 n.a. n.a. 14.73 n.a. Auto finance companies 5 New car 9.84 7.12 6.30 5.92 6.33 6.79 6.43 6.22 6.43 6.31 6 Used car 13.53 13.27 12.64 12.65 12.58 12.41 12.31 11.81 12.08 12.09 OTHER TERMS3 Maturity (months) 7 New car 51.6 54.1 52.1 53.1 53.1 52.8 52.2 52.1 53.4 53.0 8 Used car 51.4 51.0 53.5 54.2 54.2 54.3 54.2 56.0 55.9 56.0 Loan-to-value ratio 9 New car 91 92 92 93 92 91 91 92 92 91 10 Used car 100 99 99 101 100 100 100 99 99 99 Amount financed (dollars) 11 New car 16,987 18,077 19,083 19,028 19.199 19,590 19,734 19,628 19,304 19,339 12 Used car 12,182 12,281 12,691 12,731 12,914 13,112 13,202 13,497 13,604 13,653 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 A3 9 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS1 Billions of dollars; quarterly data at seasonally adjusted annual rates 1997 1998 1999 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr Q3 Q4 QL Q2 Q3 Q4r QL Nonfinancial sectors 1 Total net borrowing by domestic noniinancial sectors . . . 586.6r 575.7r 700.0r 693.1r 722.6r 812.7r 839.9r 906.1r 909.6r 843.6r 1,089.0 1,002.0 By sector and instrument 2 Federal government 256.1 155.9 144.4 145.0 23.1 30.3 40.8 -30.0 -70.9 -136.5 26.9 -119.2 3 Treasury securities 248.3 155.7 142.9 146.6 23.2 31.2 39.0 -27.6 -69.4 -136.1 14.7 -117.7 4 Budget agency securities and mortgages 7.8 .2 1.5 -1.6 -.1 -.9 1.7 -2.4 -1.4 -.4 12.2 -1.5 5 Nonfederal 330.5R 419.9R 555.6R 548.LR 699.5R 782.4R 799.21 936. LR 980.5R 980. LR 1,062.1 1,121.2 By instrument 6 Commercial paper 10.0 21.4 18.1 -.9 13.7 14.5 12.8 51.1 3.8 85.6 -43.0 64.4 7 Municipal securities and loans 74.8 -35.9 -48.2 2.6 71.4 88.9 103.2 116.7 100.1 83.6 87.0 67.9 8 Corporate bonds 75.2 23.3 73.3 72.5 90.7 122.9 74.4 157.2 160.8 87.1 123.8 155.0 9 Bank loans n.e.c 6.4 75.2 101.lr 62.lr 106.7R 29.5R 139.7R 1.5R 194.2R 127.5R 114.4 38.1 10 Other loans and advances -18.9 34.0 67.2 36.4 66.2 78.1 142.3 84.3 34.6 73.6R 106.7 118.6 11 Mortgages 122.3R 177.0R 205. LR 286.7R 298.2R 398.2R 289.0R 466.9R 420.7R 441.LR 609.1 550.9 12 Home 160.0R 183.3R 179.7R 243.01 235.8R 325.6R 199.3R 371.4R 310.4R 345.2R 444.1 420.4 13 Multifamily residential -5.1R -2.1R 7.6R 11.5R 10.8R 11.0R 18.5R 22.5R 21. LR I6.R 30.7 32.6 14 Commercial -33.6R -6.5R 16.2R 29.6R 48.4R 58.0R 68.3R 69.7R 83.4R 75.2R 127.2 94.8 1*> Farm 1.0 2.2 1.6 2.6 3.2 3.5 2.9 3.3R 5.9R 4.5R 7.2 3.1 16 Consumer credit 60.7 124.9 138.9 88.8 52.5 50.3 37.8 58.5R 66.3R 81.7R 64.1 126.2 By borrowing sector 17 Household 211.6R 316.1R 349.0R 346.01 326.6R 360.3R 293,4R 440.6R 453.LR 443366..0011 561.2 556.3 18 Nonfinancial business 52.7R 150.0R 258. LR 208.9R 316.8R 349.5R 413.5R 401.2R 448.5R 471.4R 425.5 498.1 19 Corporate 46.9R 142.4R 224.6R 120.4R 233.2R 256.0R 317.7R 296.8R 345.6R 368.1R 315.9 390.9 20 Nonfarm noncorporate 3.2 3.3 30.6 83.8R 77.4R 88.8R 86.5R 97.2R 95.9R 97.3R 103.1 101.7 71 Farm 2.6 4.4 2.9 4.8 6.2 4.7 9.2 7.2R 7.1R 6.0R 6.6 5.5 22 State and local government 66.2 -46.2 -51.5 -6.8 56.1 72.6 92.3 94.3 78.9 72.6 75.4 66.8 23 Foreign net borrowing in United States 69.8 -14.0 71.1 76.9 56.9 92.5 42.3 67.8 85.9 -28.0 -38.1 20.7 24 Commercial paper -9.6 -26.1 13.5 11.3 3.7 -11.6 .7 55.3 -25.5 6.2 -4.7 18.3 25 Bonds 82.9 12.2 49.7 55.8 46.7 100.3 32.4 14.3 107.5 -35.3 -32.9 2.0 26 Bank loans n.e.c .7 1.4 8.5 9.1 8.5 7.3 15.7 5.2 8.4 3.6 9.8 1.1 27 Other loans and advances -4.2 -1.5 -.5 .8 -2.0 -3.5 -6.5 -7.0 -4.4 -2.4 -10.3 -.7 28 Total domestic plus foreign 656.4r 561.7r 771.1r 770.0r 779.5r 905.2r 882.2r 973.9r 995.6r 815.6r 1,050.9 1,022.7 Financial sectors 29 Total net borrowing by financial sectors 294.4 468.4 456.5r 557.3r 652.0r 603.1r 988.3r 933.0r 987.5r l,055.5r 1,298.2 1,202.2 By instrument 30 Federal government-related 165.3 287.5 204.1 231.5 212.8 161.0 298.1 227.3 413.4 561.6 681.6 564.9 31 Government-sponsored enterprise securities 80.6 176.9 105.9 90.4 98.4 46.4 157.9 142.5 166.4 294.0 510.5 193.0 32 Mortgage pool securities 84.7 115.4 98.2 141.1 114.4 114.6 140.3 84.8 247.0 267.5 171.2 372.0 33 Loans from U.S. government .0 -4.8 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 34 Private 129.1 180.9 252.4R 325.8R 439.2R 442. LR 690.2R 705.7R 574.2R 493.9R 616.6 637.2 35 Open market paper -5.5 40.5 42.7 92.2 166.7 168.8 244.2 237.4 134.8 141.0 130.7 79.2 36 Corporate bonds 123.1 121.8 195.9R 176.9R 209.0R 203.8R 339.0R 350.3R 373.5R 169.8R 273.7 488.7 37 Bank loans n.e.c -14.4 -13.7 5.1R 20.9R 13.LR 25.3R 25.0R 76. LR -30.0R 61.2R 11.7 7.0 38 Other loans and advances 22.4 22.6 3.4 27.9 35.6 37.5 61.7 32.7 76.0 82.3 169.9 42.2 39 Mortgages 3.6 9.8 5.3R 7.9R 14.9R 6.7R 20. R 9.R 19.9R 39.6R 30.6 20.1 By borrowing sector 40 Commercial banking 13.4 20.1 22.5 13.0 46.1 32.5 6611..00 83.5 80.0 61.7 6666..33 3322..66 41 Savings institutions 11.3 12.8 2.6 25.5 19.7 22.3 41.7 10.6 31.2 63.7 103.2 58.0 47. Credit unions .2 .2 -.1 .1 .1 .2 .3 .5 .2 1.0 .4 1.5 43 Life insurance companies .2 .3 -.1 1.1 .2 .2 -.3 .0 -.6 1.6 1.8 3.3 44 Government-sponsored enterprises 80.6 172.1 105.9 90.4 98.4 46.4 157.9 142.5 166.4 294.0 510.5 193.0 45 Federally related mortgage pools 84.7 115.4 98.2 141.1 114.4 114.6 140.3 84.8 247.0 267.5 171.2 372.0 46 Issuers of asset-backed securities (ABSs) 85.4R 76.5R 142.4R 153.9R 200.71 225.0R 373.LR 281.8R 358.4R 291.0R 334.1 302.2 47 Finance companies -1.4 48.7 50.2 45.9 48.7 8.9 59.6 80.1 101.8 -14.0 4.3 76.0 48 Mortgage companies .0 -11.5 .4 12.4 -4.7 11.4 -17.4 49.2 -48.0 2.0 2.0 3.1 49 Real estate investment trusts (REITs) 1.7R 10.2R 4.5R 11.9R 39.6R 33.3r 66.(f 63.LR 64.4R 79.3R 44.0 26.4 50 Brokers and dealers 12.0 .5 -5.0 -2.0 8.1 -6.9 7.0 -1.0 20.0 -2.6 12.4 -31.2 51 Funding corporations 6.3 23.1 34.9 64.1 80.7 115.3 99.2 137.9 -33.3 10.1 48.1 165.3 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • July 1999 1.57 FUNDS RAISED IN US. CREDIT MARKETS1—Continued 1997 1998 1999 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999933 11999944 11999955 11999966 11999977 Q3 Q4 Q1 Q2 Q3 Q4r Q1 All sectors 52 Total net borrowing, all sectors 950.8r l,030.2r l,227.6r l,327.3r l,431.5r l,508.4r l,870.5r l,906.9r l,983.1r l,871.1r 2,349.1 2,224.9 53 Open market paper -5.1 35.7 74.3 102.6 184.1 171.7 257.7 343.8 113.1 232.7 83.0 161.9 54 U.S. government securities 421.4 448.1 348.5 376.5 235.9 191.3 338.9 197.3 342.5 425.1 708.5 445.7 55 Municipal securities 74.8 -35.9 -48.2 2.6 71.4 88.9 103.2 116.7 100.1 83.6 87.0 67.9 56 Corporate and foreign bonds 281.2 157.3 318.9' 305.2' 346.5' 427.1' 445.8' 521.9' 641.9' 221.6' 364.6 645.7 57 Bank loans n.e.c -7.2 62.9 114.7 92.1 128.2 62.2 180.5 82.8' 172.5' 192.3' 135.9 46.2 58 Other loans and advances -.8 50.3 70.2 65.1 99.8 112.1 197.5 110.0 106.1 153.4 266.3 160.1 59 Mortgages 125.9r 186.7r 210.4' 294.6' 313.1' 404.8' 309.1' 476.0' 440.5' 480.7' 639.7 571.1 60 Consumer credit 60.7 124.9 138.9 88.8 52.5 50.3 37.8 58.5' 66.3r 81.7' 64.1 126.2 Funds raised through mutual funds and corporate equities 61 Total net issues 429.7 125.2 144.3 228.9r 186.4 239.4 157.7 217.7r 276.8r -166.5r 46.8 124.9 62 Corporate equities 137.7 24.6 -3.1 -8.7' -78.8 -60.5 -103.3 -107.5 -115.9 -319.0 -196.7 -96.1 63 Nonfinancial corporations 21.3 -44.9 -58.3 -69.5' -114.4 -124.0 -143.3 -139.2 -129.1 -308.4 -491.3 -46.1 64 Foreign shares purchased by U.S. residents 63.4 48.1 50.4 60.0 41.3 64.3 -.3 13.6 4.0 -32.9 319.1 -33.0 65 Financial corporations 53.0 21.4 4.8 .8 -5.6 -.8 40.3 18.2 9.2 22.2 -24.6 -17.1 66 Mutual fund shares 292.0 100.6 147.4 237.6 265.1 299.9 261.0 325.2' 392.7' 152.5' 243.5 221.1 1. Data in this table also appear in the Board's Z. 1 (780) quarterly statistical release, tables F.2 through F.4. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A3 9 1.58 SUMMARY OF FINANCIAL TRANSACTIONS1 Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1997 1998 1999 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999933 11999944 11999955 11999966 11999977 Q3 Q4 Q1 Q2 Q3r Q4r Ql NET LENDING IN CREDIT MARKETS2 1 Total net lending in credit markets 950.8r l,030.2r l,227.6r l,327.3r l,431.5r l,508.4r l,870.5r l,906.9r l,983.1r 1,871.1 2,349.1 2,224.9 2 Domestic nonfederal nonfinancial sectors 38.3r 238. LR -99.r -30.0r — 125.9r — 175.5r 10.5r — 236.3r 394.3r 15.4 -326.7 190.5 Household — 2.3r 274.9r -3.7r 3.8" — 128.2r — 152.9r -18.01 —253.2" 295.2r -138.0 -426.0 123.0 4 Nonfinancial corporate business 9.1 17.7 -8.8 4.2r 2.7" 18.6r — 12.8r 4.2r — 61.0r 17.4 10.3 31.2 5 Nonfarm noncorporate business -1.1 .6 4.7 —4.3r -.6' — ,6r -.6" ,0r ,0r .0 .0 .0 6 State and local governments 32.6 -55.0 -91.4 —33.7r .1' —40.7" 42.0r 12.8r 160.1r 136.0 89.0 36.2 7 Federal government -18.4 -27.5 -.2 -7.7 4.9 3.3 9.0 15.5 12.8 13.9 11.8 18.2 8 Rest of the world 129.3 132.3 273.9 417.3 310.1 402.9 208.7 238.6 314.2 58.6 391.8 194.4 9 Financial sectors 801.6r 687.1" l,053.0r 947.8r l,242.4r l,277.6r l,642.4r 1,889. LR 1,261.8" 1,783.3 2,272.2 1,821.8 10 Monetary authority 36.2 31.5 12.7 12.3 38.3 22.9 52.9 27.4 7.7 48.3 .8 71.3 11 Commercial banking 142.2 163.4 265.9 187.5 324.3 226.2 464.9 292.9 136.1 242.7 554.9 52.1 1? U.S.-chartered banks 149.6 148.1 186.5 119.6 274.9 220.7 386.2 260.5 130.5 286.8 570.1 124.5 n Foreign banking offices in United States —9.8 11.2 75.4 63.3 40.2 4.6 58.2 11.6 18.1 -53.1 -24.2 -61.9 14 Bank holding companies .0 .9 -.3 3.9 5.4 -5.0 19.4 15.3 -17.6 6.0 -7.4 -6.0 n Banks in U.S.-affiliated areas 2.4 3.3 4.2 .7 3.7 5.8 1.1 5.5 5.1 2.9 16.4 -4.5 16 Savings institutions -23.3 6.7 -7.6 19.9 -4.7 -35.3 -2.0 10.8r -1.8 34.0 102.1 104.2 17 Credit unions 21.7 28.1 16.2 25.5 16.8 13.6 7.7 16.5 22.7 19.3 17.4 37.0 18 Bank personal trusts and estates 9.5 7.1 -8.3 -7.7 7.6 7.3 8.8 2.4 3.1 2.0 3.9 3.1 19 Life insurance companies 100.4 72.0 100.0 69.6 94.3 92.9 34.1 88.4r 62.6" 70.9 86.6 105.9 20 Other insurance companies 27.7 24.9 21.5 22.5 25.2 32.0 34.7 23.4 -1.5 -7.7 67.5 20.7 21 Private pension funds 50.2 46.1 56.0 52.3 65.5 64.6 79.5 74.5 130.1 95.6 174.4 60.7 22 State and local government retirement funds 22.7 22.3 27.5 45.9 36.6 79.1 9.5 80.7r 61.6" 50.9 48.0 52.1 23 Money market mutual funds 20.4 30.0 86.5 88.8 87.5 121.5 144.2 172.0 200.1 247.5 356.4 239.7 74 Mutual funds 159.5 -7.1 52.5 48.9 80.9 108.0 61.8 146.3r 155.7" 97.7 102.7 84.3 25 Closed-end funds 20.0 -3.7 10.5 4.7 -3.4 -3.4 -3.4 -2.4 -2.4 -2.4 -2.0 -2.0 26 Government-sponsored enterprises 87.8 117.8 86.7 84.2 94.3 55.6 158.5 198.9' 150.2r 264.0 430.0 158.4 27 Federally related mortgage pools 84.7 115.4 98.2 141.1 114.4 114.6 140.3 84.8 247.0 267.5 171.2 372.0 28 Asset-backed securities issuers (ABSs) 82.8r 69.4r 120.6r 123.6r 162.3r 162.4r 320.3r 222.1' 327.4r 245.5 311.1 284.7 29 Finance companies -20.9 48.3 49.9 18.4 21.9 68.3 -21.3 28.7 27.1 79.7 72.1 73.3 30 Mortgage companies .0 -24.0 -3.4 8.2 -9.1 82.9 -93.6 58.8 -56.4 4.5 6.0 10.0 31 Real estate investment trusts (REITs) .6 4.7 ,8r — .3r 9.1r 6.6r 15.6r 11.3r 13.1" 2.8 -13.7 -1.4 32 Brokers and dealers 14.8 -44.2 90.1 -15.7 14.9 18.0 71.7 245.8 -183.1 77.0 -209.1 86.1 33 Funding corporations -35.1 -16.2 -23.8 13.5r 54.8r 30.2r 134.8r 90.6r -30.4" -42.4 19.1 4.3 RELATION OF LIABILITIES TO FINANCIAL ASSETS 34 Net flows through credit markets 950.8r l,030.2r l,227.6r l,327.3r l,431.5r l,508.4r l,870.5r l,906.9r l,983.1r 1,871.1 2,349.1 2,224.9 Other financial sources 35 Official foreign exchange .8 -5.8 8.8 -6.3 .7 2.4 17.5 11..00 8.1 1111..44 88..66 --1177..44 36 Special drawing rights certificates .0 .0 2.2 -.5 -.5 .0 .0 .0 .0 .0 .0 -4.0 37 Treasury currency .4 .7 .6 .1 .0 1.3 -1.9 .3 .2 1.7 -2.3 .0 38 Foreign deposits -18.5 52.9 35.3 85.9 107.4 116.1 103.0 -45.3 89.0 87.3 36.8 72.2 39 Net interbank transactions 50.5 89.8 9.9 -51.6 -19.7 -25.0 79.8 — 124.8r 30.0" 49.8 -89.7 125.8 40 Checkable deposits and currency 117.3 -9.7 -12.7 15.8 41.5 -38.4 71.9 65.6 109.3 -61.7 80.7 79.8 41 Small time and savings deposits -70.3 -39.9 96.6 97.2 97.1 47.0 155.9 154.9 36.2 111.6 309.0 -1.2 42 Large time deposits -23.5 19.6 65.6 114.0 122.5 188.4 70.7 186.2 -16.5 81.5 119.2 -14.2 43 Money market fund shares 20.2 43.3 142.3 145.8 157.6 226.2 147.8 248.0 186.4 400.7 306.6 248.1 44 Security repurchase agreements 71.3 78.2 110.5 41.4 120.9 115.5 117.9 259.5 -113.6 228.6 -164.3 255.3 45 Corporate equities 137.7 24.6 -3.1 -8.7r -78.8 -60.5 -103.3 -107.5 -115.9 -319.0 -196.7 -96.1 46 Mutual fund shares 292.0 100.6 147.4 237.6 265.1 299.9 261.0 325.2r 392.7r 152.5 243.5 221.1 47 Trade payables 52.2 94.0 101.5 83.4r 100.4r 137.9r 146.9r 63.8r -58.0r 56.7 -97.1 73.0 48 Security credit 61.4 -.1 26.7 52.4 111.0 91.1 116.8 165.3 128.3 179.6 -39.6 -89.6 49 Life insurance reserves 37.1 35.5 45.8 44.5 54.3 63.9 37.4 49.3 53.3" 51.7 59.0 54.7 50 Pension fund reserves 267.4 259.6r 229.2r 244.3r 307.6r 338.lr 301.lr 262.2r 265.8" 278.8 318.7 280.2 51 Taxes payable 11.4 2.6 6.2 16.0" 16.8r 30.7r -,6r 8.5r -1.0r 36.0 8.2 12.2 52 Investment in bank personal trusts .9 17.8 4.0 -8.6 75.0 80.8 78.4 50.3 57.5 47.8 67.1 64.1 53 Noncorporate proprietors' equity 24. lr 53.6r 60.3r ,lr 6.7r 15.0r -43.7r -6.3r —5.4r -59.9 15.8 19.0 54 Miscellaneous 345.3r 241.3" 455.6r 521.5r 590. lr 122.1' 386.lr l,164.0r 294.2" 661.9 975.1 192.5 55 Total financial sources 2,328.5r 2,088.8r 2,760.3r 2,951.9r 3,507.3r 3,861.5r 3,813.3r 4,627.1r 3,323.7r 3,868.2 4,307.7 3,700.2 Liabilities not identified as assets (-) 56 Treasury currency -.2 -.2 -.5 -.9 -.6 .7 -2.4 -.2 -.3 1.1 -3.4 --11..22 57 Foreign deposits -5.7 43.0 25.1 59.6r 107.4 93.1' 147.9r —94.5r 144.3r 73.7 26.5 25.0 58 Net interbank liabilities 4.2 -2.7 -3.1 -3.3 -19.9 -50.0 -33.0 30.7 11.4 19.4 -49.0 54.3 6 5 0 9 T Se a c x u es r it p y a y re a p b u le r chase agreements 4 1 6 5 . . 4 8 6 1 9 6 . . 4 6 2 1 1 7 . . 1 5 20. , 4 5 r 6 1 5 8 . . 3 8 r 2 1 3 5 . . 9 2 19 1 0 1 . . 8 6 r 14 4 8 . . 4 7 r r -170 5 . . 5 3 " " 1 2 0 6 6 . . 4 0 - 1 3 7 .0 .3 19 3 8. . 9 4 61 Miscellaneous — 163.5r -192.8r -229.6r —50.2r —235.3r —54.9r -566.5r -62.0r -203.6' -91.8 -72.7 -503.9 Floats not included in assets ( —) 62 Federal government checkable deposits -1.5 -4.8 -6.0 .5 -2.7 10.0 -7.9 7.5 -41.7 24.1 20.4 -3.2 63 Other checkable deposits -1.3 -2.8 -3.8 -4.0 -3.9 -3.0 -5.0 -4.0 -3.0 -3.2 -2.1 -2.0 64 Trade credit -4.0 1.5 -11.7 —52.6r 8.5r 66.9" 46.4r 6.6r -148.8" -76.4 -49.6 -48.4 65 Total identified to sectors as assets 2,438.1r 2,161.7r 2,951.3r 2,981.8r 3,569.7r 3,758.8r 4,031.5r 4,589.9r 3,730.6r 3,788.8 4,423.2 3,977.3 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. F.l and F.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 • July 1999 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1 Billions of dollars, end of period 1997 1998 1999 11999966 Q3 Q4 Ql Q2 Q3 Q4r QI Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors 13,016.0r 13,716.0r 14,409.2r 15,130.2r 14,881.7r 15,130.2r 15,358.2r 15,547.0r 15,754.7r 16,067.3 16,325.9 By sector and instrument 2 Federal government 3.4y2.3 3,636.7 3,781.8 3,804.9 3,771.2 3,804.9 3,830.8 3,749.0 3,720.2 3,752.2 3,759.7 3 Treasury securities 3.465.6 3,608.5 3,755.1 3,778.3 3,745.1 3,778.3 3,804.8 3,723.4 3,694.7 3,723.7 3,731.6 4 Budget agency securities and mortgages 26.7 28.2 26.6 26.5 26.1 26.5 25.9 25.6 25.5 28.5 28.1 5 Nonfederal 9,523.7r 10,079.3r 10,627.4r ll,325.4r 11,110.5r ll,325.4r 1 l,527.4r 11,798. lr 12,034.6r 12,315.1 12,566.2 By instrument 6 Commercial paper 139.2 157.4 156.4 168.6 176.6 168.6 193.1 202.5 216.9 193.0 223.9 7 Municipal securities and loans 1,341.7 1,293.5 1,296.0 1,367.5 1,340.2 1,367.5 1,397.1 1,429.3 1,439.9 1,464.3 1,481.6 8 Corporate bonds 1,253.0 1,326.3 1,398.8 1,489.5 1,470.9 1,489.5 1,528.8 1,569.0 1,590.8 1,621.8 1,660.5 y Bank loans n.e.c 759.9 861.0r 923.lr l,029.8r 994.0r l,029.8r l,032.2r l,086.8r l,109.9r 1,139.2 1,151.5 10 Other loans and advances 669.6 736.9 773.2 839.5 802.9 839.5 866.1 873.5 886.1 914.2 949.7 11 Mortgages 4,376.4r 4,581.4r 4,868.2r 5,166.4r 5,099.0r 5,166.4r 5,274.2r 5,380.3r 5,504.4r 5,650.9 5,780.5 12 Home 3,332. lr 3,511.8r 3,721.2r 3,957.0r 3,912.1r 3,957.0r 4,040.9r 4,119.4r 4,219.5r 4,324.8 4,421.7 13 Multifamily residential 261.5r 269. lr 284.3r 295. r 290.4r 295.lr 300.7r 306.01 310.0r 317.7 325.8 14 Commercial 699.8r 716.0r 775.6r 824. lr 807.0r 824. r 841.5r 862.3r 881.lr 912.9 936.6 15 Farm 83.0 84.6 87.1 90.3 89.6 90.3 91.lr 92.6 93.7r 95.5 96.3 16 Consumer credit 983.9 1,122.8 1,211.6 1,264.1 1,226.7 1,264.1 1,236.0 1,256.8 l,286.6r 1,331.7 1,318.6 By borrowing sector 1/ Household 4,429. lr 4,783.0r 5,100.2r 5,429.5r 5,333.0r 5,429.5r 5,487.5r 5,608.2r 5,738.5r 5,902.3 5,987.8 18 Nonfinancial business 3,972.9r 4,226. lr 4,463.8r 4,116.4' 4,682.0r 4,776.4r 4,895.6r 5,019.0r 5,117.3r 5,213.0 5,360.8 iy Corporate 2,708.9r 2,928.6r 3,077.7r 3,306.7r 3,235.5r 3,306.7r 3,402.6r 3,496.7r 3,569.4r 3,638.2 3,762.0 20 Nonfarm noncorporate 1,121.8 1,152.4 l,236.1r 1,313.6r l,291.3r 1,313.6r l,337.9r l,361.8r l,385.5r 1,411.9 1,437.4 21 Farm 142.2 145.1 149.9 156.1 155.2 156.1 155.1 160.6 162.5 162.9 161.3 22 State and local government 1,121.7 1,070.2 1,063.4 1,119.5 1,095.5 1,119.5 1,144.3 1,170.8 1,178.8 1,199.8 1,217.6 23 Foreign credit market debt held in United States 370.8 441.9 518.8 569.6 557.7 569.6 584.1 606.6 600.2 591.6 596.2 24 Commercial paper 42.7 56.2 67.5 65.1 64.3 65.1 76.7 71.4 74.0 72.9 77.2 25 Bonds 242.3 291.9 347.7 394.4 386.3 394.4 398.0 424.9 416.0 407.8 408.3 26 Bank loans n.e.c 26.1 34.6 43.7 52.1 48.2 52.1 53.4 55.5 56.4 58.9 59.1 27 Other loans and advances 59.8 59.3 60.0 58.0 58.9 58.0 55.9 54.8 53.8 52.0 51.5 28 Total credit market debt owed by nonfinancial sectors, domestic and foreign 13,386.9r 14,158.0r 14,928.0r 15,699.9r 15,439.4r 15,699.9r 15,942.3r 16,153.6r 16,355.0r 16,658.9 16,922.1 Financial sectors 2y Total credit market debt owed by financial sectors 3,822.2 4,281.3r 4,838.6r 5,457.5r 5,214.2r 5,457.5r 5,685.7r 5,937.4r 6,206.2r 6,526.1 6,821.6 By instrument 30 Federal government-related 2,172.7 2,376.8 2,608.3 2,821.0 2,746.5 2,821.0 2,877.9 2,981.2 3,121.6 3,292.0 3,433.2 31 Government-sponsored enterpnse securities 700.6 806.5 896.9 995.3 955.8 995.3 1,030.9 1,072.5 1,146.0 1,273.6 1,321.8 32 Mortgage pool securities 1,472.1 1,570.3 1,711.4 1,825.8 1,790.7 1,825.8 1,847.0 1,908.7 1,975.6 2,018.4 2,111.4 33 Loans from U.S. government .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 34 Private 1,649.5 l,904.5r 2,230.4r 2,636.5r 2,467.7r 2,636.5r 2,807.9r 2,956.2r 3,084.6r 3,234.1 3,388.3 35 Open market paper 441.6 486.9 579.1 745.7 684.7 745.7 804.9 838.9 874.2 906.7 926.4 36 Corporate bonds 1,008.8 l,204.7r 1,381.5r l,557.5r l,477.3r l,557.5r 1,640.9r l,738.7r l,786.2r 1,849.4 1,967.2 37 Bank loans n.e.c 48.9 54.0r 74.9r 88.0r 80.9r 88.0r 106.3r 99.0r 113.9r 117.7 118.8 38 Other loans and advances 131.6 135.0 162.9 198.5 183.0 198.5 206.6 225.6 246.2 288.7 299.3 39 Mortgages 18.7 24. r 31.9r 46.8r 41.8r 46.8r 49. lr 54. lr 64.0r 71.6 76.6 By borrowing sector 40 Commercial banks 94.5 102.6 113.6 140.6 130.0 140.6 148.7 159.6 169.6 188.6 187.6 41 Bank holding companies 133.6 148.0 150.0 168.6 164.0 168.6 181.2 190.5 196.1 193.5 202.6 42 Savings institutions 112.4 115.0 140.5 160.3 149.8 160.3 162.9 170.7 186.6 212.4 226.9 43 Credit unions .5 .4 .4 .6 .5 .6 .7 .8 1.0 1.1 1.5 44 Life insurance companies .6 .5 1.6 1.8 1.9 1.8 1.8 1.6 2.0 2.5 3.3 45 Government-sponsored enterprises 700.6 806.5 896.9 995.3 955.8 995.3 1,030.9 1,072.5 1,146.0 1,273.6 1,321.8 46 Federally related mortgage pools 1,472.1 1,570.3 1,711.4 1,825.8 1,790.7 1,825.8 1,847.0 1,908.7 1,975.6 2,018.4 2,111.4 47 Issuers of asset-backed securities (ABSs) 570.1r 712.5r 866.4r l,078.2r 981.0r l,078.2r l,143.0r l,230.4r l,307.0r 1,394.6 1,464.2 48 Brokers and dealers 34.3 29.3 27.3 35.3 33.6 35.3 35.1 40.1 39.4 42.5 34.7 49 Finance companies 433.7 483.9 529.8 554.5 532.7 554.5 571.9 596.9 589.4 597.5 614.1 50 Mortgage companies 18.7 19.1 31.5 26.8 31.2 26.8 39.1 27.1 27.6 28.1 28.9 51 Real estate investment trusts (REITs) 40.0r 44.6r 56.5r 96. r 19.6' 96. lr 111.9r I28.0r 147.8r 158.8 165.4 52 Funding corporations 211.0 248.6 312.7 373.7 363.4 373.7 411.6 410.5 417.9 414.4 459.1 All sectors 53 Total credit market debt, domestic and foreign ... 17,209.1r 18,439.3r 19,766.6r 21,157.4r 20,653.6r 21,157.4r 21,628.0r 22,091.0r 22,561.1r 23,184.9 23,743.7 54 Open market paper 623.5 700.4 803.0 979.4 925.7 979.4 1,074.8 1,112.7 1,165.1 1,172.6 1,227.6 55 U.S. government securities 5,665.0 6,013.6 6,390.0 6,625.9 6,517.7 6,625.9 6,708.6 6,730.2 6,841.8 7,044.2 7,192.9 56 Municipal securities 1,341.7 1,293.5 1,296.0 1,367.5 1,340.2 1,367.5 1,397.1 1,429.3 1,439.9 1,464.3 1,481.6 57 Corporate and foreign bonds 2,504.0 2,822.9r 3,128.lr 3,44l.5r 3,334.5r 3,441.5r 3,567.7r 3,732.6r 3,793.lr 3,879.0 4,036.1 58 Bank loans n.e.c 834.9 949.6 1,041.7 1,169.8 1,123.1 1,169.8 l,191.9r l,241.3r l,280.3r 1,315.7 1,329.4 5y Other loans and advances 860.9 931.1 996.2 1,095.9 1,044.9 1,095.9 1,128.7 1,153.9 1,186.1 1,254.9 1,300.4 60 Mortgages 4,395. lr 4,605.5r 4,900. lr 5,213.2r 5,140.8r 5,213.2r 5,323.2r 5,434.3r 5,568.3r 5,722.5 5,857.1 61 Consumer credit 983.9 1,122.8 1,211.6 1,264.1 1,226.7 1,264.1 1,236.0 1,256.8 l,286.6r 1,331.7 1,318.6 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, tables L.2 through L.4. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A3 9 1.60 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES1 Billions of dollars except as noted, end of period 1997 1998 1999 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999944 11999955 11999966 11999977 Q3 Q4 Ql Q2 Q3' Q4' Ql CREDIT MARKET DEBT OUTSTANDING2 1 Total credit market assets 17,209.1R 18,439.3R 19,766.6R 21,157.4R 20,653.6R 21,LS7.4R 21,628.0R 22,091.0R 22,561.1 23,184.9 23,743.7 7 Domestic nonfederal nonfinancial sectors 3,031.0r 2,890.6r 2,900.7' 2,724.8' 2,710.6' 2,724.8' 2,662.1' 2,718.7' 2,739.1 2,686.4 2,733.4 Household l,974.3r l,929.3r 1,982.7' 1,804.4' 1,814.5' 1,804.4' 1,759.6' 1,786.8' 1,769.5 1,673.9 1,727.6 4 Nonfinancial corporate business 289.2 280.4 275.2' 278.0' 265.1' 278.0' 259.1' 245.4' 251.2 270.7 257.2 Nonfarm noncorporate business 37.6 42.3 38.0' 37.4r 37.5' 37.4' 37.4' 37.4' 37.4 37.4 37.4 6 State and local governments 729.9 638.6 604.8r 605.0' 593.5' 605.0' 606.0' 649.1' 681.1 704.4 711.2 7 Federal government 203.4 203.2 195.5 200.4 198.2 200.4 204.3 207.5 210.9 213.9 218.5 8 Rest of the world 1,216.0 1,530.3 1,933.8 2,259.0 2,196.4 2,259.0 2,324.0 2,401.2 2,416.4 2,509.8 2,563.6 Financial sectors 12,758.7r 13,815.2r 14,736.6' 15,973.2' 15,548.4' 15,973.2' 16,437.6' 16,763.6' 17,194.7 17,774.8 18,228.1 10 Monetary authority 368.2 380.8 393.1 431.4 412.7 431.4 433.8 440.3 446.5 452.5 466.0 11 Commercial banking 3,254.3 3,520.1 3,707.7 4,031.9 3,912.9 4,031.9 4,093.3 4,136.4 4,195.7 4,337.1 4,340.2 17 U.S.-chartered banks 2,869.6 3,056.1 3,175.8 3,450.7 3,351.9 3,450.7 3,505.0' 3,543.6 3,616.2 3,761.3 3,782.9 N Foreign banking offices in United States 337.1 412.6 475.8 516.1 501.0 516.1 517.9 525.6 510.1 504.2 488.1 14 Bank holding companies 18.4 18.0 22.0 27.4 22.5 27.4 31.2 26.8 28.3 26.5 25.0 15 Banks in U.S.-affiliated areas 29.2 33.4 34.1 37.8 37.5 37.8 39.2 40.4 41.1 45.2 44.1 16 Savings institutions 920.8 913.3 933.2 928.5 929.0 928.5 931.2' 930.8' 939.3 964.8 990.8 17 Credit unions 246.8 263.0 288.5 305.3 303.9 305.3 306.7 315.1 320.5 324.2 330.7 18 Bank personal trusts and estates 248.0 239.7 232.0 239.5 237.3 239.5 240.1 240.9 241.4 242.4 243.1 19 Life insurance companies 1,487.5 1,587.5 1,657.0 1,751.3 1,746.7 1,751.3 1,777.3' 1,793.2' 1,810.6 1,828.4 1,858.9 70 Other insurance companies 446.4 468.7 491.2 515.3 506.6 515.3 521.1 520.8 518.9 535.7 540.9 71 Private pension funds 660.9 716.9 769.2 834.7 814.8 834.7 853.4 885.9 909.8 953.4 968.6 77 State and local government retirement funds 455.8 483.3 529.2 565.8 562.0 565.8 582.2' 600.2 613.1 626.1 635.1 73 Money market mutual funds 459.0 545.5 634.3 721.9 678.7 721.9 775.0 815.9 869.9 965.9 1,036.2 74 Mutual funds 718.8 771.3 820.2 901.1 890.4 901.1 940.0' 979.1' 1,005.9 1,026.7 1,049.9 75 Closed-end funds 86.0 96.4 101.1 97.7 98.5 97.7 97.1 96.5 95.9 95.4 94.9 76 Government-sponsored enterprises 663.3 750.0 807.9 902.2 862.5 902.2 951.4' 989.4' 1,055.4 1,163.0 1,202.0 77 Federally related mortgage pools 1,472.1 1,570.3 1,711.4 1,825.8 1,790.7 1,825.8 1,847.0 1,908.7 1,975.6 2,018.4 2,111.4 78 Asset-backed securities issuers (ABSs) 532.8r 653.4r 777.0' 939.3' 855.3' 939.3' 989.3' 1,068.9' 1,134.2 1,216.0 1,281.2 79 Finance companies 476.2 526.2 544.5 566.4 564.4 566.4 572.0 579.0 592.7 618.4 635.4 30 Mortgage companies 36.5 33.0 41.2 32.1 55.5 32.1 46.8 32.7 33.8 35.3 37.8 31 Real estate investment trusts (REITs) 13.3 14. lr 13.8' 22.9' 19.0' 22.9' 25.7' 29.0' 29.7 26.3 25.9 37 Brokers and dealers 93.3 183.4 167.7 182.6 164.7 182.6 244.0 198.3 217.5 165.2 186.8 33 Funding corporations 107.5 86.3 99.8' 149.9' 120.9' 149.9' 179.0' 173.2' 162.4 160.5 171.9 RELATION OF LIABILITIES TO FINANCIAL ASSETS 34 Total credit market debt 17,209.1R 18,439.3R 19,766.6R 21,157.4R 20,653.6R 21,157.4R 21,628.0R 22,091.0R 22,561.1 23,184.9 23,743.7 Other liabilities 35 Official foreign exchange 53.2 63.7 53.7 48.9 46.1 48.9 48.2 50.1 54.5 60.1 5533..66 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 8.2 37 Treasury currency 17.6 18.2 18.3 18.3 18.7 18.3 18.4 18.4 18.8 18.3 18.3 38 Foreign deposits 373.9 418.8 516.1 619.4 597.8 619.4 608.1 630.4 652.2 661.4 679.4 39 Net interbank liabilities 280.1 290.7 240.8 219.4 189.0 219.4 177.9' 189.2' 196.5 187.6 206.5 40 Checkable deposits and currency 1,242.0 1,229.3 1,245.1 1,286.6 1,234.2 1,286.6 1,259.4 1,321.0 1,282.7 1,335.1 1,313.3 41 Small time and savings deposits 2,183.2 2,279.7 2,377.0 2,474.1 2,438.8 2,474.1 2,525.2 2,530.8 2,553.5 2,627.0 2,639.3 4^ Large time deposits 411.2 476.9 590.9 713.4 696.1 713.4 760.9 754.0 776.5 806.0 803.4 43 Money market fund shares 602.9 745.3 891.1 1,048.7 1,005.1 1,048.7 1,130.7 1,153.7 1,249.7 1,334.2 1,416.0 44 Security repurchase agreements 549.5 660.0 701.5 822.4 797.7 822.4 891.0 861.5 919.8 875.0 941.2 45 Mutual fund shares 1,477.3 1,852.8 2,342.4 2,989.4 2,973.6 2,989.4 3,339.3' 3,438.4' 3,137.3 3,610.0 3,763.3 46 Security credit 279.0 305.7 358.1 469.1 431.8 469.1 505.3 540.6 579.0 577.5 550.2 47 Life insurance reserves 520.3 566.2 610.6 665.0 655.6 665.0 677.3 690.6' 703.5 718.3 731.9 48 Pension fund reserves 5,057.5 5,821.1 6,567.8 7,680.9 7,556.4' 7,680.9 8,246.8 8,344.4' 7,805.4 8,724.2 8,873.0 49 Trade payables 1,140.6 1,242.2 1,325.6' 1,426.0' 1,362.5' 1,426.0' 1,409.3' 1,400.5' 1,414.4 1,417.3 1,402.5 50 Taxes payable 101.4 107.6 123.6' 140.4r 143.4' 140.4' 151.2' 143.5' 154.3 153.3 165.5 51 Investment in bank personal trusts 699.4 803.0 871.7 1,082.8 1,058.9 1,082.8 1,179.5' 1,204.9' 1,118.9 1.274.2 1,317.0 52 Miscellaneous 5,292.2r 5,656.0r 6,144.2' 6,800.8' 6,787.7' 6,800.8' 7,039.7' 7,094.8' 7,370.9 7,287.2 7,350.5 53 Total liabilities 37,498.7R 40,986.5R 44,754.6R 49,672.1R 48,656.2R 49,672.1R 51,605.3R 52,466.9R 52,558.3 54,860.6 55,976.5 Financial assets not included in liabilities (+) 54 Gold and special drawing rights 21.1 22.1 21.4 21.1 21.0 21.1 21.2 21.0 2211..22 21.6 2200..77 55 Corporate equities 6,237.9 8,331.3 10,062.4 12,776.0 12,649.4 12,776.0 14,397.6 14,556.1 12,758.4 15,437.7 15,970.3 56 Household equity in noncorporate business 3,410.5r 3,658.3r 3,865.2' 4,214.9' 4,142.3' 4,214.9' 4,231.1' 4,268.5' 4,291.6 4,315.1 4,314.3 Liabilities not identified as assets (—) 57 Treasury currency -5.4 -5.8 -6.7 -7.3 -6.7 -7.3 -7.4 -7.4 -7.2 -8.0 --88..33 58 Foreign deposits 325.4 360.2 431.4' 534.6' 501.8' 534.6' 511.0' 547.1' 565.5 572.2 578.4 59 Net interbank transactions -6.5 -9.0 -10.6 -32.2 -22.1 -32.2 -21.2 -17.1 -15.4 -27.2 -11.2 60 Security repurchase agreements 67.8 85.3 85.9r 151.2 113.0' 151.2 191.8' 144.0' 180.8 171.5 224.0 61 48.8 62.4 76.7' 93.5' 88.2' 93.5' 89.1' 94.7' 101.5 103.8 96.5 62 Miscellaneous — l,106.4r — 1,460.3r -1,706.6' -1,913.0' -1,461.4' -1,913.0' -1,895.2' -1,916.3' -1,921.8 -2,201.6 -2,340.3 Floats not included in assets (—) 63 Federal government checkable deposits 3.4 3.1 -1.6 -8.1 -7.8 -8.1 -10.4 -16.1 -12.0 -3.9 --77..22 64 Other checkable deposits 38.0 34.2 30.1 26.2 19.5 26.2 21.4 24.2 15.7 23.1 18.9 65 Trade credit -245.9 -257.6 -310.1' -312.7' -396.2' -312.7' -364.0' -413.2' -438.8 -379.7 -445.4 66 Total identified to sectors as assets 48,048.8R 54,185.8R 60,115.1R 68,151.9R 66,640.6R 68,151.9R 71,740.0R 72,872.7R 71,161.2 76,384.8 78,176.5 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. L.l and L.5. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • July 1999 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures Monthly data seasonally adjusted, and indexes 1992=100, except as noted 1998 1999 MMeeaassuurree 11999966 11999977 11999988 Aug. Sept. Oct. Nov. Dec. Jan. Feb.' Mar.' Apr. 1 Industrial production1 119.5 126.8 131.3 132.4 131.9 132.4 132.2 132.3 132.3 132.5 133.2 134.0 Market groupings 2 Products, total 114.4 119.6 123.5 124.9 124.1 124.9 124.5 124.4 124.5 124.6 125.0 125.5 3 Final, total 115.5 121.1 125.4 126.8 126.0 126.7 126.1 125.9 125.8r 126.0 126.3 126.7 4 Consumer goods 111.3 114.1 115.2 116.1 114.8 115.2 114.8 114.9 115.2' 115.5 115.3 116.0 5 Equipment 122.7 133.9 144.2 146.0 146.2 147.5 146.5 145.6 145.0' 144.9 146.1 145.9 6 Intermediate 110.9 115.2 118.0 119.1 118.3 119.0 119.3 119.8 120.3' 120.2 120.9 121.5 7 Materials 127.8 138.2 144.0 144.4 144.4 144.5 144.6 145.2 144.9 145.3 146.5 147.9 Industry groupings 8 Manufacturing 121.4 129.7 135.1 135.7 135.2 136.1 136.4 136.7 136.4' 136.9 137.5 138.4 9 Capacity utilization, manufacturing (percent)2. . 81.4 82.0 80.8 80.7 80.1 80.3 80.1 80.0 79.5' 79.5 79.6 79.8 10 Construction contracts3 130.9 142.8' 154.2' 159.0' 153.0 153.0' 159.0' 161.0 162.0' 153.0 149.0 147.0 11 Nonagricultural employment, total4 117.3 120.3 123.4 123.8 123.9 124.1 124.4 124.7 124.9 125.2 125.2 125.5 12 Goods-producing, total 2.4 2.4 2.3 102.4 102.3 102.2 102.1 102.4 102.3 102.4 102.1 102.0 13 Manufacturing, total 97.4 98.2 98.5 98.4 98.4 98.1 97.8 97.7 97.6 97.3 97.1 97.0 14 Manufacturing, production workers 98.6 99.6 99.6 99.1 99.3 99.0 98.6 98.5 98.4 98.1 97.9 97.7 15 Service-producing 123.1 126.5 130.1 130.6 130.9 131.1 131.5 131.8 132.1 132.5 132.6 133.0 16 Personal income, total 165.2 174.5 183.3 184.2 184.8 185.6 187.2 187.1 188.3 189.1 189.7 190.6 17 Wages and salary disbursements 159.8 171.2 182.6 184.1 184.6 185.7 186.7 187.6 189.0 190.1 190.4 191.5 18 Manufacturing 135.7 144.7 151.1 151.3 152.1 151.8 151.6 151.7 152.4' 152.7 152.9 153.5 19 Disposable personal income5 164.0 171.7 178.6 179.4 179.9 180.7 182.4 182.1 183.4' 184.2 184.9 185.8 20 Retail sales5 159.6 166.9 175.1' 174.9 175.6 177.7 178.9 180.9 183.3 186.4 186.5 186.6 Prices6 21 Consumer (1982-84=100) 156.9 160.5 163.0 163.4 163.6 164.0 164.0 163.9 164.3 164.5 165.0 166.2 22 Producer finished goods (1982= 100) 131.3 131.8 130.7 130.7 130.6 131.4 130.9 131.1' 131.5 130.9 131.2 131.8 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 Reserve Bulletin, vol. 83 (February 6. Based on data not seasonally adjusted. Seasonally adjusted data for changes in the price 1997), pp. 67-92, and the references cited therein. For details about the construction of indexes can be obtained from the U.S. Department of Labor, Bureau of Labor Statistics, individual industrial production series, see "Industrial Production: 1989 Developments and Monthly Labor Review. Historical Revision," Federal Reserve Bulletin, vol. 76 (April 1990), pp. 187-204. NOTE. Basic data (not indexes) for series mentioned in notes 4 and 5, and indexes for series 2. Ratio of index of production to index of capacity. Based on data from the Federal mentioned in notes 3 and 6, can also be found in the Survey of Current Business. Reserve, DRI McGraw-Hill, U.S. Department of Commerce, and other sources. 2.11 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT Thousands of persons; monthly data seasonally adjusted 1998 1999 CCaatteeggoorryy 11999966 11999977 11999988 Sept. Oct. Nov. Dec. Jan. Feb.' Mar.' Apr. HOUSEHOLD SURVEY DATA1 1 Civilian labor force2 133,943 136,297 137,673 138,081 138,116 138,193 138,547 139,347 139,271 138,816 139,091 Employment 2 Nonagricultural industries3 123,264 126,159 128,085 128,348 128,300 128,765 129,304 130,097 129,817 129,752 129,685 3 Agriculture 3,443 3,399 3,378 3,470 3,558 3,348 3,222 3,299 3,328 3,281 3,384 Unemployment 4 Number 7,236 6,739 6,210 6,263 6,258 6,080 6,021 5,950 6,127 5,783 6,022 5 Rate (percent of civilian labor force) 5.4 4.9 4.5 4.5 4.5 4.4 4.3 4.3 4.4 4.2 4.3 ESTABLISHMENT SURVEY DATA 6 Nonagricultural payroll employment4 119,608 122,690 125,833 126,363 126,527 126,804 127,118 127,335 127,670 127,677 127,911 7 Manufacturing 18,495 18,657 18,716 18,692 18,633 18,573 18,559 18,534 18,478 18,449 18,420 8 Mining 580 592 575 568 564 560 557 547 539 537 531 9 Contract construction 5,418 5,686 5,965 5,981 6,012 6,051 6,153 6,170 6,249 6,196 6,204 10 Transportation and public utilities 6,253 6,395 6,551 6,579 6,595 6,604 6,627 6,644 6,653 6,665 6,687 11 Trade 28,079 28,659 29,299 29,454 29,453 29,549 29,594 29,662 29,772 29,754 29,831 12 Finance 6,911 7,091 7,341 7,393 7,417 7,441 7,458 7,488 7,495 7,501 7,524 13 Service 34,454 36,040 37,525 37,768 37,905 38,040 38,148 38,245 38,377 38,446 38,577 14 Government 19,419 19,570 19,862 19,928 19,948 19,986 20,022 20,045 20,107 20,129 20,137 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 1999 1998 1999 1998 1999 SSeerriieess Q2 Q3 Q4 Qir Q2 Q3 Q4 Ql Q2 Q3 Q4 Qir Output (1992= 100) Capacity (percent of 1992 output) Capacity utilization rate (percent)2 1 Total industry 131.3 131.6 132.3 132.7 159.6 161.5 163.4 165.1 82.3 81.5 80.9 80.3 2 Manufacturing 134.7 134.8 136.4 137.0 165.8 168.1 170.3 172.2 81.2 80.2 80.1 79.5 3 Primary processing3 121.1 120.2 120.6 121.7 144.0 145.1 146.1 146.9 84.1 82.9 82.5 82.9 4 Advanced processing4 141.4 142.1 144.4 144.6 176.4 179.2 182.0 184.5 80.2 79.3 79.3 78.4 Durable goods 156.1 157.9 161.2 162.0 193.9 197.5 201.2 204.4 80.5 79.9 80.1 79.2 6 Lumber and products 116.4 117.7 119.2 121.9 143.0 143.9 144.9 145.8 81.4 81.8 82.3 83.6 7 Primary metals 125.3 122.4 119.3 119.8 142.0 143.2 144.4 145.4 88.3 85.5 82.6 82.4 8 Iron and steel 124.0 118.7 112.9 115.2 142.8 144.6 146.5 147.9 86.9 82.1 77.0 77.9 9 Nonferrous 127.0 126.8 126.9 125.2 140.8 141.3 141.7 142.1 90.1 89.7 89.6 88.1 10 Industrial machinery and equipment 203.0 207.9 211.7 213.8 234.7 242.9 251.6 259.6 86.5 85.6 84.1 82.3 11 Electrical machinery 282.8 292.7 304.8 311.1 366.6 381.6 396.6 411.0 77.1 76.7 76.9 75.7 12 Motor vehicles and parts 135.3 137.2 148.5 147.4 183.9 184.9 186.0 186.7 73.6 74.2 79.8 79.0 13 Aerospace and miscellaneous transportation equipment . . 106.1 106.6 105.8 103.2 127.5 128.0 128.5 128.8 83.2 83.3 82.4 80.2 14 Nondurable goods 112.7 111.3 111.4 111.8 136.6 137.5 138.4 139.1 82.5 80.9 80.5 80.4 15 Textile mill products 113.2 112.1 110.2 108.2 134.9 135.1 135.2 135.2 83.9 83.0 81.5 80.0 16 Paper and products 115.0 115.0 114.3 116.2 131.6 132.5 133.4 134.2 87.4 86.8 85.7 86.6 17 Chemicals and products 116.9 114.4 114.0 114.2 148.0 148.9 149.7 150.3 79.0 76.8 76.1 76.0 18 Plastics materials 127.5 128.4 131.9 130.5 140.7 141.9 143.2 144.4 90.6 90.5 92.1 90.4 19 Petroleum products 112.0 112.7 111.9 116.3 116.5 116.8 117.1 117.4 96.1 96.5 95.6 99.1 ?0 Mining 105.3 103.6 100.7 97.8 119.9 120.1 120.6 120.9 87.8 86.2 83.5 80.8 ?1 Utilities 115.6 119.6 112.9 114.2 126.2 126.5 126.7 126.9 91.6 94.6 89.2 90.0 22 Electric 118.3 121.2 116.7 115.8 123.8 124.0 124.3 124.5 95.6 97.7 93.9 93.1 1973 1975 Previous cycle5 Latest cycle6 1998 1998 1999 High Low High Low High Low Apr. Nov. Dec. Jan.r Feb/ Mar/ Apr.P Capacity utilization rate (percent)2 1 Total industry 89.2 72.6 87.3 71.1 85.4 78.1 82.6 80.8 80.7 80.4 80.2 80.4 80.6 2 Manufacturing 88.5 70.5 86.9 69.0 85.7 76.6 81.7 80.1 80.0 79.5 79.5 79.6 79.8 3 Primary processing3 91.2 68.2 88.1 66.2 88.9 77.7 84.6 82.4 82.9 83.0 82.8 82.7 83.0 4 Advanced processing4 87.2 71.8 86.7 70.4 84.2 76.1 80.7 79.4 79.0 78.2 78.4 78.5 78.8 5 Durable goods 89.2 68.9 87.7 63.9 84.6 73.1 81.1 80.0 79.8 79.3 79.1 79.3 79.6 6 Lumber and products 88.7 61.2 87.9 60.8 93.6 75.5 81.4 81.6 83.6 83.8 83.4 83.5 83.2 7 Primary metals 100.2 65.9 94.2 45.1 92.7 73.7 90.0 82.2 81.9 83.2 81.4 82.6 82.0 8 Iron and steel 105.8 66.6 95.8 37.0 95.2 71.8 89.1 74.9 77.9 79.1 76.1 78.4 76.9 9 Nonferrous 90.8 59.8 91.1 60.1 89.3 74.2 91.2 91.3 87.0 88.3 88.0 88.0 88.5 10 Industrial machinery and equipment 96.0 74.3 93.2 64.0 85.4 72.3 86.5 83.9 83.6 82.5 82.3 82.1 81.9 11 Electrical machinery 89.2 64.7 89.4 71.6 84.0 75.0 77.7 76.8 76.5 76.0 75.5 75.7 76.7 12 Motor vehicles and parts 93.4 51.3 95.0 45.5 89.1 55.9 76.7 80.0 78.7 77.9 79.2 79.8 81.6 13 Aerospace and miscellaneous transportation equipment 78.4 67.6 81.9 66.6 87.3 79.2 83.0 82.3 81.5 80.1 80.2 80.2 7788..00 14 Nondurable goods 87.8 71.7 87.5 76.4 87.3 80.7 82.9 80.7 80.6 80.1 80.5 80.4 80.6 15 Textile mill products 91.4 60.0 91.2 72.3 90.4 77.7 84.0 80.5 80.9 80.9 81.2 78.1 80.2 16 Paper and products 97.1 69.2 96.1 80.6 93.5 85.0 87.8 84.2 86.2 86.7 86.8 86.3 8866..88 17 Chemicals and products 87.6 69.7 84.6 69.9 86.2 79.3 79.7 76.6 76.1 74.9 76.2 76.8 7777..11 18 Plastics materials 102.0 50.6 90.9 63.4 97.0 74.8 91.7 94.1 93.1 88.2 91.7 91.2 90.2 19 Petroleum products 96.7 81.1 90.0 66.8 88.5 85.1 96.9 96.3 96.0 99.5 99.1 98.6 97.1 20 Mining 94.3 88.2 96.0 80.3 88.0 87.0 88.2 83.8 82.0 81.5 80.8 80.2 80.2 ?1 Utilities 96.2 82.9 89.1 75.9 92.6 83.4 89.5 87.3 88.2 90.5 88.5 90.9 91.5 22 Electric 99.0 82.7 88.2 78.9 95.0 87.1 93.1 92.2 92.6 93.4 91.6 94.2 94.8 1. Data in this table appear in the Board's G.17 (419) monthly statistical release. The data 3. Primary processing includes textiles; lumber; paper; industrial chemicals; synthetic are also available on the Board's web site, http://www.federalreserve.gov/releases/gl7. The materials; fertilizer materials; petroleum products; rubber and plastics; stone, clay, and glass; latest historical revision of the industrial production index and the capacity utilization rates primary metals; and fabricated metals. was released in November 1998. The recent annual revision is described in an article in the 4. Advanced processing includes foods; tobacco; apparel; furniture and fixtures; printing January 1999 issue of the Bulletin. For a description of the methods of estimating industrial and publishing; chemical products such as drugs and toiletries; agricultural chemicals; leather production and capacity utilization, see "Industrial Production and Capacity Utilization: and products; machinery; transportation equipment; instruments; and miscellaneous manufac- 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

A42 Domestic Nonfinancial Statistics • July 1999 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data seasonally adjusted 1992 1998 1999 1998 GGrroouupp por- avg. tion Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan.r Feb.r Mar.r Apr.p Index (1992 = 100) MAJOR MARKETS 1 Total index 100.0 131.3 131.3 131.9 130.6 130.5 132.4 131.9 132.4 132.2 132.3 132.3 132.5 133.2 134.0 2 Products 60.5 123.5 124.0 124.5 123.6 123.3 124.9 124.1 124.9 124.5 124.4 124.5 124.6 125.0 125.5 3 Final products 46.3 125.4 126.2 126.6 125.5 124.7 126.8 126.0 126.7 126.1 125.9 125.8 126.0 126.3 126.7 4 Consumer goods, total 29.1 115.2 116.4 116.8 115.1 114.0 116.1 114.8 115.2 114.8 114.9 115.2 115.5 115.3 116.0 5 Durable consumer goods 6.1 135.7 136.9 138.3 130.7 124.6 140.1 137.4 140.5 138.9 139.8 141.5 143.4 141.5 144.5 6 Automotive products 2.6 132.9 134.6 136.8 121.7 107.3 141.7 136.4 141.1 139.6 139.8 141.7 141.2 139.5 142.4 7 Autos and trucks 1.7 137.8 141.3 143.5 118.2 92.8 151.4 143.4 150.6 149.1 147.7 149.4 149.4 147.3 151.5 8 Autos, consumer .9 109.2 107.4 108.4 93.8 75.8 124.4 128.3 119.9 113.7 115.5 111.7 107.0 109.7 112.1 9 Trucks, consumer .7 166.2 173.8 177.1 142.2 110.0 178.9 161.1 181.0 183.2 179.1 185.2 188.9 183.0 188.9 10 Auto parts and allied goods .... .9 125.0 123.7 126.0 125.4 125.6 127.6 125.9 127.4 125.9 128.2 130.5 129.3 128.2 129.2 11 Other 3.5 137.8 138.8 139.4 137.8 138.7 138.5 138.0 139.7 137.9 139.5 141.0 144.9 142.8 145.9 12 Appliances, televisions, and air conditioners 1.0 206.2 203.4 202.7 199.9 207.8 209.4 209.9 215.2 222.5 226.0 229.6 241.7 236.1 238.6 13 Carpeting and furniture .8 117.1 115.9 119.1 117.0 117.3 116.7 116.3 120.3 117.5 116.8 120.7 123.1 116.3 121.8 14 Miscellaneous home goods 1.6 114.7 118.2 117.9 117.1 115.9 115.3 114.5 113.6 109.5 111.4 110.9 112.6 114.2 116.1 15 Nondurable consumer goods 23.0 110.1 111.4 111.5 111.2 111.2 110.3 109.3 109.1 109.0 108.9 108.9 108.8 109.0 109.2 16 Foods and tobacco 10.3 109.0 110.2 110.8 108.5 108.5 107.5 106.9 108.0 109.6 109.6 110.0 110.1 109.9 109.6 17 Clothing 2.4 97.8 99.9 98.8 98.8 98.4 97.7 97.1 95.4 94.5 94.6 93.4 92.8 91.4 91.9 18 Chemical products 4.5 120.5 123.2 122.5 122.8 122.2 119.0 118.0 117.2 119.3 118.7 115.3 117.8 118.7 120.3 19 Paper products 2.9 105.8 106.2 105.7 105.3 106.3 106.6 105.9 105.2 104.1 103.6 102.0 101.0 99.7 99.8 20 Energy 2.9 112.2 111.5 112.5 118.2 118.4 120.1 116.8 115.0 106.5 107.1 113.3 110.3 113.7 113.0 21 Fuels .8 110.5 111.6 110.9 111.4 112.9 112.1 108.3 108.4 109.1 109.6 112.2 113.3 111.8 109.7 22 Residential utilities 2.1 112.3 111.0 112.9 121.2 120.7 123.7 120.7 117.8 104.5 105.2 113.3 108.1 114.2 114.2 23 Equipment 17.2 144.2 143.6 144.2 144.1 143.9 146.0 146.2 147.5 146.5 145.6 145.0 144.9 146.1 145.9 24 Business equipment 13.2 163.5 162.2 163.1 163.6 163.5 166.6 167.4 169.0 168.1 167.9 167.3 167.2 168.3 168.9 25 Information processing and related 5.4 209.9 206.0 209.2 210.3 211.8 213.1 217.3 219.0 219.7 220.8 222.0 222.1 225.4 229.3 26 Computer and office equipment 1.1 646.0 601.5 620.6 638.6 654.6 671.6 693.6 716.7 745.2 759.9 777.0 787.3 806.2 820.2 27 Industrial 4.0 140.0 139.4 138.1 142.9 144.2 142.3 139.5 141.6 139.9 141.3 139.9 137.8 137.7 138.7 28 Transit 2.5 133.7 133.6 135.5 128.2 121.9 141.6 140.1 141.6 140.5 139.6 137.6 136.4 136.3 135.0 29 Autos and trucks 1.2 124.6 123.4 125.1 108.6 91.7 136.9 135.6 136.1 136.4 136.0 134.8 133.0 131.7 134.8 30 Other 1.3 138.9 140.8 139.6 141.7 146.6 132.6 140.9 141.1 138.5 131.7 131.5 140.3 141.9 136.6 31 Defense and space equipment 3.3 75.7 75.9 76.0 75.8 76.1 76.5 75.5 76.4 75.7 74.6 74.4 74.9 75.5 74.0 32 Oil and gas well drilling .6 134.7 147.6 147.1 136.7 131.9 127.7 123.4 119.4 115.2 103.2 99.2 97.4 104.2 97.2 33 Manufactured homes .2 149.2 148.0 149.0 146.1 151.1 145.7 147.8 150.9 154.6 156.6 159.1 154.1 152.8 151.0 34 Intermediate products, total 14.2 118.0 117.3 118.2 118.0 119.1 119.1 118.3 119.0 119.3 119.8 120.3 120.2 120.9 121.5 35 Construction supplies 5.3 127.2 125.4 126.6 126.1 128.5 128.0 126.9 128.4 129.6 131.0 132.4 131.7 131.5 132.0 36 Business supplies 8.9 112.6 112.5 113.3 113.2 113.6 113.8 113.3 113.5 113.2 113.3 113.1 113.4 114.6 115.3 37 Materials 39.5 144.0 143.1 143.6 141.8 141.9 144.4 144.4 144.5 144.6 145.2 144.9 145.3 146.5 147.9 38 Durable goods materials 20.8 176.4 174.5 175.4 171.7 171.8 177.4 177.7 178.8 179.9 180.4 180.1 180.4 182.7 184.9 39 Durable consumer parts 4.0 144.0 144.4 147.9 131.9 129.7 149.6 147.7 146.2 145.6 144.8 141.9 145.8 149.1 151.0 40 Equipment parts 7.6 277.4 266.9 268.6 271.0 274.1 278.0 282.7 287.0 289.9 292.6 293.2 293.0 296.9 302.7 41 Other 9.2 129.0 130.3 129.6 128.3 128.1 128.3 127.7 128.4 129.3 129.3 129.8 128.8 129.9 130.5 42 Basic metal materials 3.1 121.2 123.5 123.0 120.1 120.2 121.9 118.2 118.3 117.3 116.3 118.4 116.5 117.6 117.6 43 Nondurable goods materials 8.9 113.5 114.4 114.1 113.9 114.1 113.1 112.0 111.7 112.2 112.5 112.0 113.0 113.1 113.2 44 Textile materials 1.1 108.7 110.5 111.0 110.2 110.1 107.7 107.6 108.8 103.0 102.5 99.0 99.6 100.0 100.4 45 Paper materials 1.8 116.0 116.3 115.5 117.3 117.3 116.4 115.0 115.8 112.7 114.7 116.5 115.8 116.6 117.6 46 Chemical materials 3.9 114.5 116.2 115.6 114.8 114.6 113.6 111.8 111.1 113.7 113.0 112.8 114.0 114.6 114.4 47 Other 2.1 111.5 110.9 111.2 110.6 111.7 111.6 111.5 110.4 113.2 114.4 112.5 114.8 113.0 113.2 48 Energy materials 9.7 103.5 103.8 104.3 104.8 104.8 104.4 105.2 103.7 101.5 102.6 102.6 102.4 102.4 103.5 49 Primary energy 6.3 101.2 101.3 101.0 101.8 102.9 101.2 102.3 102.6 99.8 100.3 100.4 100.5 98.8 100.1 50 Converted fuel materials 3.3 108.1 108.6 110.8 110.7 108.6 110.7 110.9 106.1 104.9 107.2 107.1 106.0 109.3 110.3 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.1 131.3 131.3 131.8 131.2 131.6 132.1 131.7 132.1 131.9 132.1 132.0 132.3 133.0 133.7 52 Total excluding motor vehicles and parts 95.1 130.8 130.9 131.3 131.2 131.7 131.3 131.0 131.5 131.4 131.7 131.7 131.8 132.4 133.1 53 Total excluding computer and office equipment 98.2 127.1 127.3 127.7 126.4 126.2 128.0 127.4 127.8 127.4 127.5 127.4 127.6 128.2 128.9 54 Consumer goods excluding autos and trucks . 27.4 113.9 115.1 115.3 114.8 114.9 114.3 113.2 113.4 113.0 113.2 113.4 113.7 113.6 114.1 55 Consumer goods excluding energy 26.2 115.5 117.0 117.3 114.7 113.5 115.7 114.6 115.3 115.8 115.8 115.4 116.1 115.5 116.4 56 Business equipment excluding autos and trucks 12.0 167.9 166.7 167.4 170.0 171.8 169.9 171.0 172.7 171.6 171.5 170.9 171.1 172.5 172.8 57 Business equipment excluding computer and office equipment 12.1 142.4 142.3 142.6 142.7 142.2 144.8 145.1 146.2 144.6 144.1 143.1 142.9 143.5 143.8 58 Materials excluding energy 29.8 156.7 155.5 156.0 153.4 153.6 156.9 156.7 157.3 158.2 158.6 158.2 158.8 160.3 161.8 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A43 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1—Continued 1992 Group c S o I d C e p p r o o r - - 1 a 9 v 9 g 8 . tion Apr. May June July Aug. Sept Jan.r Feb/ Mar/ Apr/ Index (1992 = 100) MAJOR INDUSTRIES 59 Total index 100.0 131.3 131.3 131.9 130.6 130.5 132.4 131.9 132.4 132.2 132.3 132.3 132.5 133.2 134.0 60 Manufacturing 85.4 135.1 134.9 135.4 133.7 133.6 135.7 135.2 136.1 136.4 136.7 136.4 136.9 137.5 138.4 61 Primary processing 26.5 120.7 121.5 121.4 120.2 120.7 120.6 119.3 120.1 120.3 121.3 121.8 121.6 121.8 122.2 62 Advanced processing 58.8 142.1 141.6 142.3 140.4 139.9 143.3 143.2 144.2 144.6 144.4 143.8 144.6 145.4 146.5 63 Durable goods 45.0 157.5 156.2 157.2 154.8 154.4 159.8 159.6 161.2 161.0 161.5 161.4 161.7 162.8 164.2 64 Lumber and products 24 2.0 117.0 116.1 116.4 116.7 117.5 118.5 117.0 118.0 118.3 121.4 122.0 121.7 122.0 121.8 65 Furniture and fixtures 25 1.4 121.4 121.0 120.6 122.0 120.8 120.1 121.6 124.5 123.6 122.9 122.5 124.6 125.7 127.1 66 Stone, clay, and glass products 32 2.1 126.2 124.0 124.5 123.5 125.4 127.0 126.6 128.3 130.5 131.6 133.5 132.2 131.4 133.0 67 Primary metals 33 3.1 123.8 127.5 126.5 122.1 122.6 124.4 120.1 120.6 118.7 118.6 120.7 118.3 120.3 119.6 68 Iron and steel 331,2 1.7 121.1 126.7 125.5 119.8 120.2 122.5 113.4 114.4 109.7 114.6 116.7 112.6 116.3 114.2 69 Raw steel 331PT .1 115.7 122.4 121.9 116.0 118.3 120.3 112.6 109.7 100.2 102.0 106.6 106.6 109.1 107.7 70 Nonferrous 333-6,9 1.4 127.0 128.4 127.6 124.9 125.4 126.7 128.1 128.0 129.3 123.4 125.4 125.1 125.1 126.0 71 Fabricated metal products .. 34 5.0 127.3 127.8 128.7 128.0 127.8 126.3 126.2 126.9 127.7 128.7 127.6 126.7 127.2 127.9 72 Industrial machinery and equipment 35 8.0 203.7 200.6 202.5 205.8 209.0 207.0 207.7 211.2 211.1 212.7 212.3 213.8 215.2 216.4 73 Computer and office equipment 357 1.8 649.1 605.4 623.9 641.4 657.0 673.6 695.5 718.5 746.9 761.6 778.9 789.4 807.9 823.1 74 Electrical machinery 36 7.3 291.9 280.8 282.0 285.5 289.4 290.8 297.7 302.4 304.8 307.3 308.7 310.1 314.4 322.3 75 Transportation equipment. . . 37 9.5 123.0 123.3 125.2 114.2 108.2 130.3 127.6 128.4 127.1 125.6 124.0 125.3 125.9 126.1 76 Motor vehicles and parts . 371 4.9 141.1 140.8 144.1 121.1 107.6 154.2 149.9 150.2 148.8 146.6 145.3 147.8 149.2 152.6 77 Autos and light trucks . 371PT 2.6 128.5 130.9 132.7 110.1 86.9 142.0 136.5 140.4 138.1 137.3 137.9 137.0 135.9 139.6 78 Aerospace and miscellaneous transportation equipment 372-6,9 4.6 104.9 105.7 106.3 106.3 107.1 106.9 105.8 106.9 105.7 104.8 103.2 103.2 103.3 100.4 79 Instruments 38 5.4 113.0 113.0 113.8 112.4 112.6 113.0 114.2 114.6 114.1 113.9 114.3 113.9 114.6 115.4 80 Miscellaneous 39 1.3 117.7 120.1 119.1 118.5 118.5 117.7 117.0 115.9 114.1 115.4 114.8 115.9 116.8 118.4 81 Nondurable goods 40.4 111.9 113.0 113.0 112.0 112.1 111.3 110.6 110.9 111.6 111.7 111.3 112.0 112.0 112.4 82 Foods 20 9.4 109.6 110.3 110.7 109.2 109.0 107.9 107.7 109.1 111.3 111.1 112.0 112.2 111.8 111.8 83 Tobacco products 21 1.6 106.0 109.8 111.5 104.7 106.0 107.0 104.2 101.9 99.8 100.0 96.9 97.1 97.7 96.2 84 Textile null products 22 1.8 112.2 113.3 114.5 112.0 113.2 111.8 111.2 112.4 108.8 109.4 109.3 109.7 105.6 108.4 85 Apparel products 23 2.2 99.2 101.0 100.4 100.5 100.1 99.2 98.3 97.3 95.5 95.3 94.1 93.8 93.4 94.0 86 Paper and products 26 3.6 115.0 115.2 115.0 114.9 115.9 115.3 113.9 115.4 112.3 115.3 116.2 116.5 116.0 116.9 87 Printing and publishing .... 27 6.7 105.1 105.5 105.6 105.5 105.4 104.9 104.6 104.2 105.4 105.1 103.6 103.7 104.1 104.4 88 Chemicals and products .... 28 9.9 115.5 117.7 116.9 116.2 115.7 114.3 113.3 113.1 114.7 114.0 112.5 114.5 115.6 116.1 89 Petroleum products 29 1.4 112.0 112.8 111.5 111.6 113.4 114.1 110.7 110.4 112.8 112.5 116.7 116.3 115.9 114.9 90 Rubber and plastic products . 30 3.5 132.6 133.2 133.1 132.4 132.7 132.2 132.6 133.4 135.0 136.0 135.4 136.2 137.0 138.1 91 Leather and products 31 .3 75.3 76.3 75.8 74.5 75.3 74.0 73.5 72.8 74.3 73.0 70.9 70.5 69.9 69.7 92 Mining 6.9 104.0 105.7 105.4 104.7 104.6 103.7 102.4 102.0 101.1 99.0 98.5 97.7 97.0 97.1 93 Metal 10 .5 110.0 106.9 108.5 108.0 105.7 109.0 106.4 113.6 110.7 108.3 110.1 108.4 104.5 106.3 94 Coal 12 1.0 109.7 107.2 106.0 110.4 112.8 109.7 115.8 110.8 108.6 114.5 107.7 109.1 103.4 107.2 95 Oil and gas extraction 13 4.8 99.6 102.9 102.4 100.4 100.0 99.2 96.8 96.8 94.2 91.0 91.5 91.0 91.7 91.0 96 Stone and earth minerals 14 .6 124.7 123.3 124.4 125.6 125.4 124.3 120.3 118.8 132.1 125.6 126.9 121.9 121.2 120.0 97 Utilities 7.7 113.9 112.8 115.2 118.7 118.3 120.2 120.3 116.5 110.6 111.8 114.7 112.3 115.5 116.2 98 Electric 491,493PT 6.2 117.2 115.2 118.9 121.0 119.8 121.2 122.6 120.3 114.6 115.2 116.2 114.1 117.3 118.1 99 Gas 492.493PT 1.6 101.9 102.0 98.3 108.4 111.7 115.7 109.7 98.7 92.0 96.0 108.4 104.3 107.1 107.7 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 80.5 134.7 134.6 134.9 134.5 135.1 134.6 134.4 135.3 135.7 136.2 136.0 136.3 136.9 137.6 101 Manufacturing excluding computer and office equipment 83.6 130.2 130.2 130.6 128.8 128.6 130.6 130.0 130.8 130.9 131.1 130.8 131.2 131.7 132.4 102 Computers, communications equipment, and semiconductors 5.9 515.6 482.7 490.7 502.9 511.8 522.5 538.3 552.1 562.8 571.2 576.6 580.7 593.1 609.3 103 Manufacturing excluding computers and semiconductors 81.1 120.1 120.9 121.1 119.2 118.9 120.6 119.9 120.4 120.4 120.5 120.1 120.5 120.8 121.4 104 Manufacturing excluding computers, communications equipment, and semiconductors 79.5 118.5 119.3 119.5 117.5 117.2 119.0 118.1 118.7 118.8 118.9 118.5 118.9 119.2 119.6 Gross value (billions of 1992 dollars, annual rates) Major Markets 105 Products, total 2,001.9 2,489.8 2,489.8 2,498.5 2,470.3 2,454.6 2,525.1 2,501.0 2,519.7 2,511.6 2,513.9 2,527.3 2,527.7 2,530.9 2,540.8 106 Final 1,552.1 1,958.0 1,961.6 1,966.1 1,938.2 1,915.6 1,985.9 1,966.4 1,982.3 1,973.4 1,972.7 1,982.5 1,983.9 1,984.0 1,990.4 107 Consumer goods 1,049.6 1,212.3 1,224.8 1,225.2 1,201.8 1,185.0 1,227.4 1,208.2 1,217.1 1,212.6 1,215.0 1,227.4 1,229.6 1,225.0 1,231.3 108 Equipment 502.5 746.9 739.9 744.2 740.1 734.3 762.5 762.7 769.8 765.2 762.0 758.8 758.0 763.1 763.0 109 Intermediate 449.9 533.6 529.7 533.6 532.6 538.4 540.3 535.7 538.7 539.1 541.9 545.4 544.6 547.3 550.6 1. Data in this table appear in the Board's G.17 (419) monthly statistical release. The data Historical Revision and Recent Developments," Federal Reserve Bulletin, vol. 83 (February are also available on the Board's web site, http://www.federalreserve.gov/releases/gl7. The 1997), pp. 67-92, and the references cited therein. For details about the construction of latest historical revision of the industrial production index and the capacity utilization rates individual industrial production series, see "Industrial Production: 1989 Developments and was released in November 1998. The recent annual revision is described in an article in the Historical Revision," Federal Reserve Bulletin, vol. 76 (April 1990), pp. 187-204. January 1999 issue of the Bulletin. For a description of the methods of estimating industrial 2. Standard industrial classification. production and capacity utilization, see "Industrial Production and Capacity Utilization: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • July 1999 2.14 HOUSING AND CONSTRUCTION Monthly figures at seasonally adjusted annual rates except as noted 1998 1999 IItteemm 11999966 11999977 11999988 June July Aug. Sept. Oct. Nov. Dec. Jan.r Feb.r Mar. Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 1,426 1,441 1,604 1,53 lr 1,626r 1,670r l,569r l,726r l,688r l,708r 1,778 1,738 1,654 2 One-family 1,070 1,062 1,184 l,143r l,191r l,202r l,171r l,210r 1,254r 1,296r 1,279 1,306 1,242 3 Two-family or more 356 379 421 388r 435r 468r 398r 516r 434r 412r 499 432 412 4 Started 1,477 1,474 1,617 1,626 1,719 1,615 1,576 1,698 1,654 1,750 1,820 1,752 1,751 5 One-family 1,161 1,134 1,271 1,274 1,306 1,264 1,251 1,298 1,375 1,383 1,393 1,380 1,398 6 Two-family or more 316 340 346 352 413 351 325 400 279 367 427 372 353 7 Under construction at end of period1 819 834 935 930 938 939 946 968 971 999 1,011 1,032 1,035 8 One-family 584 570 638 639 642 644 648 659 667 688 697 712 716 9 Two-family or more 235 264 297 291 296 295 298 309 304 311 314 320 319 10 Completed 1,406 1,406 1,473 1,480 1,549 1,517 1,459 1,455 1,600 1,440 1,648 1,530 1,723 11 One-family 1,123 1,120 1,158 1,169 1,230 1,183 1,184 1,164 1,254 1,150 1,292 1,250 1,378 12 Two-family or more 283 285 315 311 319 334 275 291 346 290 356 280 345 13 Mobile homes shipped 361 354 372 362 380 368 369 352 389 382 390 381 383 Merchant builder activity in one-family units 14 Number sold 757 804 886 909 883 836 861 903 985 958r 908 890 909 15 Number for sale at end of period1 326 287 300 286 283 285 289 293 292 295 296 298 302 Price of units sold (thousands of dollars)2 16 Median 140.0 146.0 152.5r 148.0 149.9 154.9 155.0 154.5 151.0 152.5r 152.5 155.4 153.0 17 Average 166.4 176.2 181.9 175.9 179.8 186.5 182.7 182.8 178.6 183.3r 182.0 187.8 188.8 EXISTING UNITS (one-family) 18 Number sold 4,196r 4,381r 4,970r 5,080r 5,170r 4,810r 4,960r 4,940r 5,020r 5,340r 5,060 5,140 5,420 Price of units sold (thousands of dollars)2 19 Median 115.8r 121.8r 128.4r 131.3r 131.9r 130.8r 129.4r 128.1r 129.4r 128.5r 130.3 128.1 129.6 20 Average 141.8r 150.5r 159.1r 164.6r 164.9r 162.0r 158.9r 157.7r 159.9r 159.6r 162.8 159.6 162.3 Value of new construction (millions of dollars)3 CONSTRUCTION 21 Total put in place 581,813 618,051 654,528 650341 658,673 663,300 670,133 668,287 670,996 679,428 691,050 704,564 708,084 22 Private 444,743 470,969 508,539 503,592 511,514 516,601 521,050 523,642 525,453 531,004 537,969 546,446 549,543 23 Residential 255,570 265,536 295,586 291,907 299,300 300,612 304,993 306,264 307,259 311,529 317,630 319,884 326,312 24 Nonresidential 189,173 205,433 212,953 211,685 212,214 215,989 216,057 217,378 218,194 219,475 220,339 226,562 223,231 25 Industrial buildings 32,563 31,417 30,340 30,067 28,616 32,302 30,300 29,246 30,011 28,971 28,659 30,399 28,785 26 Commercial buildings 75,722 83,727 88,131 88,480 88,310 86,243 87,553 90,986 93,644 96,033 94,365 97,532 96,796 27 Other buildings 30,637 37,382 38,111 37,334 37,406 38,305 38,309 37,538 37,793 39,149 38,380 39,758 38,738 28 Public utilities and other 50,252 52,906 56,371 55,804 57,882 59,139 59,895 59,608 56,746 55,322 58,935 58,873 58,912 29 Public 137,070 147,082 145,989 146,749 147,159 146,699 149,083 144,644 145,544 148,425 153,080 158,118 158,541 30 Military 2,639 2,625 2,725 2,659 3,325 3,187 2,325 2,568 2,502 2,608 2,060 2,781 2,364 31 Highway 41,326 45,246 44,742 44,541 43,809 44,291 45,719 45,166 43,721 44,269 50,434 52,265 54,283 32 Conservation and development 5,926 5,628 5,529 5,989 5,475 5,442 5,904 5,146 5,643 5,539 5,859 6,361 6,120 33 Other 87,179 93,583 92,993 93,560 94,550 93,779 95,135 91,764 93,678 96,009 94,727 96,711 95,774 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 A43 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data except as noted Change from 12 Change from 3 months earlier Change from 1 month earlier months earlier (annual rate) IIInnndddeeexxx llleeevvveeelll,,, IIIttteeemmm 1998' 1999r 1998 1999 AAAppprrr... 11999988 11999999 111999999999 111 AApprr.. AApprr.. June Sept. Dec. Mar. Dec. Jan. Feb. Mar. Apr. CONSUMER PRICES2 (1982-84=100) 1 All items 1.4 2.3 2.2 1.5 2.0 1.5 .1 .1 .1 .2 .7 166.2 7 Food 2.0 2.3 2.3 2.5 2.8 1.7 .1 .5 .1 -.2 .1 163.4 3 Energy items -7.4 3.0 -3.4 -9.0 -5.1 5.8 -1.1 -.2 .0 1.6 66..11 105.0 4 All items less food and energy 2.1 2.2 2.6 2.3 2.5 .9 .3 .1 .1 .1 ..44 176.8 Commodities .2 .8 1.7 1.1 2.5 -3.0 .6 .0 -.4 -.3 .6 144.9 6 Services 3.0 2.8 2.8 3.0 2.5 2.7 .2 .2 .2 .3 .4 195.0 PRODUCER PRICES (1982=100) 7 Finished goods -.9 1.1 -.3 .6 2.2 .9 ,5r ,4r -.4 .2 .5 131.8 8 Consumer foods -.4 -.4 -.6 1.8 .3 2.1 ,0r 1.5r -1.4 .4 -.9 133.2 9 Consumer energy -8.7 1.5 -3.1 -9.2 -8.9 6.8 — 1.8r 1.4r -1.0 1.2 5.1 75.8 10 Other consumer goods 1.4 2.7 1.4 3.0 8.3 -.5 1.8r -.1 -.1 .1 .0 151.3 11 Capital equipment -.6 .0 -1.2 .9 .3 -.3 -.1 -.1 .1 .0 .0 137.7 Intermediate materials 12 Excluding foods and feeds -1.1 -1.2 -1.6 -2.2 -4.5 .7 -,7r .2' -.4 .3 .7 122.3 13 Excluding energy -.1 -1.4 -1.2 -1.8 -2.7 -.9 -.2' -A' -.2 .1 .2 132.2 Crude materials 14 Foods -9.3 -9.5 -3.3 -19.6 -7.0 4.1 -4.3r 5.3r -2.8 -1.3 -2.5 95.8 15 Energy -4.8 -8.5 -14.6 -25.3 13.5 -16.9 —4.0r —2.8r -7.4 6.1 8.5 66.5 16 Other -5.6 -12.7 -5.8 -19.9 -24.3 1.2 - 1.7r .R 1.1 -.8 -1.1 128.9 1. Not seasonally adjusted. SOURCE. US. 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

A42 Domestic Nonfinancial Statistics • July 1999 2.16 GROSS DOMESTIC PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1998 1999 AAccccoouunntt 11999966 11999977 11999988 Ql Q2 Q3 Q4 Ql GROSS DOMESTIC PRODUCT 1 Total 7,661.6 8,110.9 8,511.0 8,384.2 8,440.6 8,537.9 8,681.2 8,799.7 By source 2 Personal consumption expenditures 5,215.7 5,493.7 5,807.9 5,676.5 5,773.7 5,846.7 5,934.8 6,049.2 3 Durable goods 643.3 673.0 724.7 705.1 720.1 718.9 754.5 771.2 4 Nondurable goods 1,539.2 1,600.6 1,662.4 1,633.1 1,655.2 1,670.0 1,691.3 1,735.6 5 Services 3,033.2 3,220.1 3,420.8 3,338.2 3,398.4 3,457.7 3,488.9 3,542.4 6 Gross private domestic investment 1,131.9 1,256.0 1,367.1 1,366.6 1,345.0 1,364.4 1,392.4 1,415.9 / Fixed investment 1,099.8 1,188.6 1,307.8 1,271.1 1,305.8 1,307.5 1,346.7 1,376.1 8 Nonresidential 787.9 860.7 938.2 921.3 941.9 931.6 957.9 971.1 9 Structures 216.9 240.2 246.9 245.0 245.4 246.2 250.9 253.2 10 Producers' durable equipment 571.0 620.5 691.3 676.3 696.6 685.4 706.9 717.9 11 Residential structures 311.8 327.9 369.6 349.8 363.8 375.8 388.9 405.0 12 Change in business inventories 32.1 67.4 59.3 95.5 39.2 57.0 45.7 39.8 13 Nonfarm 24.5 63.1 52.7 90.5 31.5 49.3 39.3 36.1 14 Net exports of goods and services -91.2 -93.4 -151.2 -123.7 -159.3 -165.5 -156.2 -203.1 15 Exports 873.8 965.4 959.0 973.3 949.6 936.2 976.8 958.1 16 Imports 965.0 1,058.8 1,110.2 1,097.1 1,108.9 1,101.7 1,133.0 1,161.2 17 Government consumption expenditures and gross investment 1,405.2 1,454.6 1,487.1 1,464.9 1,481.2 1,492.3 1,510.2 1,537.7 18 Federal 518.4 520.2 520.6 511.6 520.7 519.4 530.7 536.9 19 State and local 886.8 934.4 966.5 953.3 960.4 972.9 979.5 1,000.8 By major type of product 20 Final sales, total 7,629.5 8,043.5 8,451.6 8,288.7 8,401.3 8,480.9 8,635.5 8,759.9 21 Goods 2,780.3 2,911.2 3,044.7 3,005.8 3,025.3 3,029.0 3,118.8 3,145.7 22 Durable 1,228.8 1,310.1 1,391.0 1,376.9 1,380.8 1,373.0 1,433.1 1,429.0 23 Nondurable 1,551.6 1,601.0 1,653.7 1,628.8 1,644.4 1,655.9 1,685.7 1,716.7 24 Services 4,179.5 4,414.1 4,641.0 4,538.4 4,619.5 4,678.5 4,727.7 4,795.4 25 Structures 669.7 718.3 765.9 744.6 756.6 773.5 789.0 818.8 26 Change in business inventories 32.1 67.4 59.3 95.5 39.2 57.0 45.7 39.8 27 Durable goods 20.8 33.6 25.2 49.9 4.5 19.5 27.0 18.1 28 Nondurable goods 11.4 33.8 34.1 45.6 34.7 37.5 18.7 21.7 MEMO 29 Total GDP in chained 1992 dollars 6,994.8 7,269.8 7,551.9 7,464.7 7,498.6 7,566.5 7,677.7 7,754.7 NATIONAL INCOME 30 Total 6,256.0 6,646.5 6,994.7 6,875.0 6,945.5 7,032.3 7,126.0 7,251.0 31 Compensation of employees 4,409.0 4,687.2 4,981.0 4,882.8 4,945.2 5,011.6 5,084.3 5,163.9 32 Wages and salaries 3,640.4 3,893.6 4,153.9 4,065.9 4,121.6 4,181.1 4,246.8 4,314.5 33 Government and government enterprises 640.9 664.2 689.3 679.5 685.8 692.7 699.2 711.6 34 Other 2,999.5 3,229.4 3,464.6 3,386.4 3,435.8 3,488.4 3,547.6 3,603.0 35 Supplement to wages and salaries 768.6 793.7 827.1 816.8 823.5 830.5 837.5 849.4 36 Employer contributions for social insurance 381.7 400.7 420.1 414.1 417.9 422.1 426.5 434.7 37 Other labor income 387.0 392.9 406.9 402.8 405.7 408.4 411.0 414.7 38 Proprietors' income1 527.7 551.2 577.2 564.2 571.7 576.1 596.9 601.0 39 Business and professional1 488.8 515.8 548.5 536.8 544.0 550.9 562.2 575.5 40 Farm' 38.9 35.5 28.7 27.4 27.7 25.2 34.7 25.5 41 Rental income of persons2 150.2 158.2 162.6 158.3 161.0 163.6 167.5 168.9 42 Corporate profits' 750.4 817.9 824.6 829.2 820.6 827.0 821.7 853.5 43 Profits before tax3 680.2 734.4 717.8 719.1 723.5 720.5 708.1 738.4 44 Inventory valuation adjustment -1.2 6.9 14.5 25.3 7.8 11.7 13.4 10.4 45 Capital consumption adjustment 71.4 76.6 92.3 84.9 89.4 94.8 100.2 104.7 46 Net interest 418.6 432.0 449.3 440.5 447.1 454.0 455.6 463.6 1. With inventory valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.48. 2. With capital consumption adjustment. SOURCE. U.S. Department of Commerce, Survey of Current Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A43 2.17 PERSONAL INCOME AND SAVING Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1998 1999 AAccccoouunntt 11999966 11999977 11999988 Qi Q2 Q3 Q4 Ql PERSONAL INCOME AND SAVING 1 Total personal income 6,425.2 6,784.0 7,126.1 7,003.9 7,081.9 7,160.8 7,257.9 7,350.7 2 Wage and salary disbursements 3,631.1 3,889.8 4,149.9 4,061.9 4,117.6 4,177.1 4,242.8 4,314.5 3 Commodity-producing industries 909.0 975.0 1,026.9 1,019.0 1,023.2 1,028.0 1,037.4 1,047.0 4 Manufacturing 674.6 719.5 751.5 750.4 750.8 750.9 754.1 759.0 Distributive industries 823.3 879.8 939.6 918.9 932.2 945.8 961.5 969.9 6 Service industries 1,257.9 1,370.8 1,494.0 1,444.5 1,476.4 1,510.6 1,544.6 1,586.0 7 Government and government enterprises 640.9 664.2 689.3 679.5 685.8 692.7 699.2 711.6 8 Other labor income 387.0 392.9 406.9 402.8 405.7 408.4 411.0 414.7 9 Proprietors' income1 527.7 551.2 577.2 564.2 571.7 576.1 596.9 601.0 10 Business and professional1 488.8 515.8 548.5 536.8 544.0 550.9 562.2 575.5 11 38.9 35.5 28.7 27.4 27.7 25.2 34.7 25.5 17 Rental income of persons2 150.2 158.2 162.6 158.3 161.0 163.6 167.5 168.9 13 Dividends 248.2 260.3 263.1 261.6 262.1 263.0 265.7 268.8 14 Personal interest income 719.4 747.3 764.8 757.0 763.0 769.2 769.9 770.2 15 Transfer payments 1,068.0 1,110.4 1,149.0 1,139.0 1,145.8 1,152.9 1,158.3 1,175.7 16 Old age survivors, disability, and health insurance benefits 538.0 565.9 586.5 581.6 585.0 589.0 590.6 598.0 17 LESS: Personal contributions for social insurance 306.3 326.2 347.4 340.9 345.1 349.5 354.1 363.2 18 EQUALS: Personal income 6,425.2 6,784.0 7,126.1 7,003.9 7,081.9 7,160.8 7,257.9 7,350.7 19 LESS: Personal tax and nontax payments 890.5 989.0 1,098.3 1,066.8 1,092.9 1,108.4 1,124.9 1,135.9 20 EQUALS: Disposable personal income 5,534.7 5,795.1 6,027.9 5,937.1 5,988.9 6,052.4 6,133.1 6,214.7 21 LESS: Personal outlays 5,376.2 5,674.1 6,000.2 5,864.0 5,963.3 6,039.8 6,133.6 6,249.8 22 EQUALS: Personal saving 158.5 121.0 27.7 73.0 25.6 12.6 -.6 -35.0 MEMO Per capita (chained 1992 dollars) 73 Gross domestic product 26,335.7 27,136.2 27,938.9 27,718.8 27,783.0 27,972.1 2288,,229999..88 2288,,550099..88 24 Personal consumption expenditures 17,893.0 18,340.9 19,065.0 18,771.1 19,007.8 19,156.3 19,336.4 19,606.8 25 Disposable personal income 18,989.0 19,349.0 19,790.0 19,632.0 19,719.0 19,829.0 19,980.0 20,141.0 26 Saving rate (percent) 2.9 2.1 .5 1.2 .4 .2 .0 -.6 GROSS SAVING 27 Gross saving 1,274.5 1,406.3 1,468.0 1,482.5 1,448.5 1,474.5 1,466.6 1,498.5 28 Gross private saving 1,114.5 1,141.6 1,090.4 1,130.1 1,079.0 1,078.7 1,073.7 1,062.0 79 Personal saving 158.5 121.0 27.7 73.0 25.6 12.6 -.6 -35.0 30 Undistributed corporate profits1 262.4 296.7 305.4 312.0 300.9 304.8 303.9 322.1 31 Corporate inventory valuation adjustment -1.2 6.9 14.5 25.3 7.8 11.7 13.4 10.4 Capital consumption allowances 37 452.0 477.3 500.6 492.5 497.8 503.1 550088..99 551144..88 33 Noncorporate 232.3 242.8 252.7 248.6 250.7 254.2 257.5 260.1 34 Gross government saving 160.0 264.7 377.6 352.4 369.4 395.7 392.9 436.5 35 Federal -39.6 49.5 142.5 128.7 143.9 161.6 135.8 180.9 36 Consumption of fixed capital 70.6 70.6 69.7 69.9 69.5 69.6 70.0 69.5 37 Current surplus or deficit (-), national accounts -110.3 -21.1 72.8 58.8 74.4 92.0 65.8 111.4 38 State and local 199.7 215.2 235.2 223.7 225.6 234.2 257.1 255.5 39 Consumption of fixed capital 77.1 81.1 85.0 83.5 84.3 85.4 86.6 87.5 40 Current surplus or deficit (-), national accounts 122.6 134.1 150.2 140.2 141.3 148.7 170.5 168.1 41 Gross investment 1,242.3 1,350.5 1,391.5 1,428.4 1,362.7 1,372.5 1,402.4 1,407.5 47 Gross private domestic investment 1,131.9 1,256.0 1,367.1 1,366.6 1,345.0 1,364.4 1,392.4 1,415.9 43 Gross government investment 229.7 235.4 237.0 237.4 232.5 239.7 238.3 255.1 44 Net foreign investment -119.2 -140.9 -212.6 -175.6 -214.8 -231.6 -228.3 -263.6 45 Statistical discrepancy -32.2 -55.8 -76.5 -54.1 -85.7 -102.0 -64.2 -91.0 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 • July 1999 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data seasonally adjusted except as noted1 1997 1998 IItteemm ccrreeddiittss oorr ddeebbiittss 11999966 11999977 11999988 Q4 Q1 Q2 Q3 Q4P 1 Balance on current account -134,915 -155,215 -233,448 -45,043 -47,018 -56,971 -65,694 -63,765 2 Merchandise trade balance" -191,337 -197.954 -247,985 -49,839 -56,033 -64,778 -64,899 -62,275 3 Merchandise exports 611,983 679,325 671,055 174,284 171,190 164,543 163,414 171,908 4 Merchandise imports -803,320 -877,279 -919,040 -224,123 -227,223 -229,321 -228,313 -234,183 5 Military transactions, net 4,684 6.781 4,072 1,103 1,527 1,043 829 673 6 Other service transactions, net 78,079 80,967 74,799 20,277 19,134 19,500 17,573 18,592 7 Investment income, net 14,236 -5.318 -22,479 -4,247 -2,218 -3,346 -9,165 -7,754 8 U.S. government grants -15,023 -12,090 -12,492 -5,213 - 2,266 -2,063 -2,663 -5,500 9 U.S. government pensions and other transfers -4,442 -4,193 -4,304 -1,069 -1,073 -1,073 -1,080 -1,078 10 Private remittances and other transfers -21,112 -23,408 -25,059 -6,055 -6,089 -6,254 -6,289 -6,423 11 Change in U.S. government assets other than official reserve assets, net (increase, —) -708 174 -836 29 -388 -433 174 -189 12 Change in U.S. official reserve assets (increase. —) 6,668 -1,010 -6,784 -4,524 -444 -1,945 -2,026 -2,369 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) 370 -350 -149 -150 -182 72 188 -227 15 Reserve position in International Monetary Fund -1,280 -3,575 -5,118 -4,221 -85 -1,031 -2,078 -1,924 16 Foreign currencies 7,578 2,915 -1,517 -153 -177 -986 -136 -218 17 Change in U.S. private assets abroad (increase, —) -374,761 -477,666 -297,765 -118,946 -45,193 -107,786 -58,543 -86,240 18 Bank-reported claims3 -91.555 -147,439 -31,040 -27,539 3,074 -24,615 -31,996 22,497 19 Nonbank-reported claims -86,333 -120,403 -45,440 -47,907 -6,596 -14,327 -20,320 20 U.S. purchases of foreign securities, net -115,801 -87,981 -89,352 -8,030 -6,973 -27,878 17,056 -71,557 21 U.S. direct investments abroad, net -81,072 -121,843 -131,933 -35,470 -34,698 -40,966 -23,283 -32,983 22 Change in foreign official assets in United States (increase, +) 127,344 15,817 -22,112 -26,979 11,324 -10,274 -46,347 23,185 23 U.S. Treasury securities 115,671 -7.270 -9,946 -24,578 11,336 -20,318 -32,811 31,847 24 Other U.S. government obligations 5,008 4,334 6,332 86 2,610 254 1,906 1,562 25 Other U.S. government liabilities4 -362 -2.521 -2,506 -244 -1,059 -422 -264 -761 26 Other U.S. liabilities reported by U.S. banks3 5,704 21.928 -12,515 -3,250 -607 9,380 -12,684 -8,604 27 Other foreign official assets5 1,323 -654 -3,477 1,007 -956 832 -2,494 -859 28 Change in foreign private assets in United States (increase. +) 436,013 717,624 564,594 247,470 84,313 175,241 145,089 159,951 29 U.S. bank-reported liabilities' 16,478 148.059 42,568 89,643 -50,497 37,670 76,993 -21,598 30 U.S. nonbank-reported liabilities 39,404 107.779 43,803 47,390 32,707 18,040 11,875 31 Foreign private purchases of U.S. Treasury securities, net 154,996 146.710 48,060 35,301 -1,701 26,916 -1,438 24,283 32 U.S. currency flows 17,362 24.782 16,622 9,900 746 2,349 7,277 6,250 33 Foreign purchases of other U.S. securities, net 130,151 196,845 217,312 36,783 77.019 71,017 20,041 49,235 34 Foreign direct investments in United States, net 77,622 93,449 196,229 28,453 26,039 19,249 30,341 120,600 35 Allocation of special drawing rights 0 0 0 0 0 0 0 0 36 Discrepancy -59,641 -99,724 -3,649 -52,007 -2,594 2,168 27,347 -30,573 37 Due to seasonal adjustment 3,528 6,769 2,024 -10,195 1,399 38 Before seasonal adjustment -59,641 -99.724 -3,649 -55,535 -9,363 144 37,542 -31,972 MEMO Changes in official assets 39 U.S. official reserve assets (increase, —) 6,668 -1.010 -6,784 -4,524 -444 -1,945 -2,026 -2,369 40 Foreign official assets in United States, excluding line 25 (increase, +) 127,706 18,338 -19,606 -26,735 12,383 -9,852 -46,083 23,946 41 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22) 14,911 10,822 -1,282 -968 -494 -9,647 3,598 1. Seasonal factors are not calculated for lines 12-16, 18-20, 22-34, and 38^10. 4. Associated primarily with military sales contracts and other transactions arranged with 2. Data are on an international accounts basis. The data differ from the Census basis data, or through foreign official agencies. shown in table 3.11, for reasons of coverage and timing. Military exports are excluded from 5. Consists of investments in U.S. corporate stocks and in debt securities of private merchandise trade data and are included in line 5. corporations and state and local governments. 3. Reporting banks include all types of depository institutions as well as some brokers and SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current dealers. Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A51 3.11 U.S. FOREIGN TRADE1 Millions of dollars; monthly data seasonally adjusted 1998 1999 IItteemm 11999966 11999977 11999988 Sept. Oct. Nov. Dec. Jan. Feb.r Mar.p 1 Goods and services, balance -108,574 -110,207 -169,288 -14,595 -13,963 -15,165 -14,055 -16,808 -19,146 -19,698 2 Merchandise -191,337 -197,955 -248,159 -20,914 -20,280 -21,669 -20,499 -23,259 -25,934 -26,456 3 Services 82,763 87,748 78,871 6,319 6,317 6,504 6,444 6,451 6,788 6,758 4 Goods and services, exports 850,775 937,593 931,026 77,443 80,415 78,942 77,873 77,082 76,799 77,520 5 Merchandise 611,983 679,325 670,641 55,912 58,246 57,110 56,133 55,168 54,357 54,881 6 Services 238,792 258,268 260,385 21,531 22,169 21,832 21,740 21,914 22,442 22,639 7 Goods and services, imports -959,349 -1,047,799 -1,100,314 -92,038 -94,378 -94,107 -91,928 -93,890 -95,945 -97,218 8 Merchandise -803,320 -877,279 -918,800 -76,826 -78,526 -78,779 -76,632 -78,427 -80,291 -81,337 9 Services -156,029 -170,520 -181,514 -15,212 -15,852 -15,328 -15,296 -15,463 -15,654 -15,881 1. Data show monthly values consistent with quarterly figures in the U.S. balance of SOURCE. FT900, U.S. Department of Commerce, Bureau of the Census and Bureau of payments accounts. Economic Analysis. 3.12 U.S. RESERVE ASSETS Millions of dollars, end of period 1998 1999 AAsssseett 11999955 11999966 11999977 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr.P 1 Total 85,832 75,090 69,954 75,66 79,183 77,683 81,755 80,675 75,322 74,359 73,694 2 Gold stock, including Exchange Stabilization Fund1 11,050 11,049 11,050 11,044 11,041 11,041 11,041 11,046 11,048 11,049 11,049 3 Special drawing rights2-3 11,037 10,312 10,027 10,106 10,379 10,393 10,603 10,465 9,474 9,682 9,634 4 Reserve position in International Monetary Fund2 14,649 15,435 18,071 21,644 22,278 22,049 24,111 24,129 24,283 23,231 23,054 5 Foreign currencies4 49,096 38,294 30,809 32,882 35,485 34,200 36,001 35,035 30,517 30,397 29,957 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 BANKS' Millions of dollars, end of period 1998 1999 AAsssseett 11999955 11999966 11999977 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr.p 1 Deposits 386 167 457 347 154 211 167 233 200 166 260 Held in custody 2 U.S. Treasury securities2 522,170 638,049 620,885 578,403 588,768 08,060 607,574 612,670 615,139 610,649 606,662 3 Earmarked gold3 11,702 11,197 10,763 10,457 10,403 10,355 10,343 10,343 10,347 10,347 10,340 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 • July 1999 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1998 1999 IItteemm 11999966 11999977 Sept. Oct. Nov. Dec. Jan. Feb. Mar.P 1 Total1 756,533 776,505 732,527r 744,974r 751,523r 757,934 762,236 761,013 768,107 By type 2 Liabilities reported by banks in the United States 113,098 135,384 131,048r 134,644r 125,173r 123,915 121,834 125,275 124,581 3 U.S. Treasury bills and certificates3 198,921 148,301 128,146 128,598 133,702 134,141 136,840 135,471 141,941 U.S. Treasury bonds and notes 4 Marketable 384,045 428,004 406,009 415,010 426,853 432,127 434,601 430,902 427,626 Nonmarketable4 5,968 5,994 6,350 5,997 6,035 6,074 6,113 6,151 6,191 6 U.S. securities other than U.S. Treasury securities5 54,501 58,822 60,974 60,725 59,760 61,677 62,848 63,214 67,768 By area 7 Europe1 246,983 252,289 247.302 259,698 261,028 256,026 258,298 256,164 253,808 8 Canada 38,723 36,177 33,598 34,644 36,885 36,715 37,471 38,462 39,611 9 Latin America and Caribbean 79,949 96,942 79,164 77,469 76,800r 79,417 73,986 75,986 72,828 10 Asia 403,265 400,144 383,08 lr 385,523r 389,359 398,717 405,425 404,111 414,933 11 Africa 7,242 9,981 11,584 10,976 10,084 10,059 10,144 9,838 9,906 12 Other countries 6,457 7,058 3,884r 2,750r 3,453 3,086 2,998 2,538 3,107 1. Includes the Bank for International Settlements. Venezuela, beginning December 1990, 3C-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 1994 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 1998 IItteemm 11999955 11999966 11999977 Mar. June Sept. Dec. 1 Banks' liabilities 109,713 103,383 117,524 100,708 87,889 92,934 101,125 2 Banks' claims 74,016 66,018 83,038 82,209 68.286 67,901 74,013 3 Deposits 22,696 22,467 28,661 28,127 27,387 27.293 41,846 4 Other claims 51,320 43,551 54,377 54,082 40,899 40,608 32,167 5 Claims of banks' domestic customers' 6,145 10,978 8,191 7,926 7,354 8,453 29,975 1. Data on claims exclude foreign currencies held by U.S. monetary authorities. 2. Assets owned by customers of the reporting bank located in the United States that represent claims on foreigners held by reporting banks for the accounts of the domestic customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A53 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1 Payable in U.S. dollars Millions of dollars, end of period 1998 1999 IItteemm 11999966 11999977 11999988 Sept.' Oct. Nov. Dec. Jan. Feb. Mar.p BY HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners 1,162,148 l,283,027r l,346,827r 1,350,504 l,372,288r 1,346,457' l,346,827r l,332,425r l,340,770r 1,337,974 2 Banks' own liabilities 758,998 882,980r 884,529r 917,550 911,548' 880,919' 884,529' 872,307' 880,160' 873,062 3 Demand deposits 27,034 31,344r 29,341 33,547 32,071 32,104 29,341 33,039 31,905' 31,530 4 Time deposits2 186,910 198,546 151,589 174,183 158,664 149,787' 151,589 147,456 153,182' 151,831 5 Other3 143,510 168,011 140,753 165,471 153,388' 143,441' 140,753 145,309 161,955' 157,104 6 Own foreign offices4 401,544 485,079 562,846r 544,349 567,425' 555,587' 562,846' 546,503' 533,118r 532,597 7 Banks' custodial liabilities5 403,150 400,047 462,298 432,954 460,740 465,538 462,298 460,118 460,610' 464,912 8 U.S. Treasury bills and certificates6 236,874 193,239 183,490 160,598 168,764 182,917 183,490 185,231 184,851 192,799 9 Other negotiable and readily transferable instruments7 72,011 93,641 141,103 142,180 151,239 142,399 141,103 137,428 134,109 133,352 10 Other 94,265 113,167 137,705 130,176 140,737 140,222 137,705 137,459 141,650' 138,761 11 Nonmonetary international and regional organizations8 . . 13,972 11,690 11,833 15,481 12,929' 13,307' 11,833 13,839 19,706' 15,037 12 Banks' own liabilities 13,355 11,486 10,850 14,128 11,763' 12,367' 10,850 12,829 18,949' 14,321 13 Demand deposits 29 16 172 408 97 234 172 62 407' 194 14 Time deposits" 5,784 5,466 5,793 5,763 5,418 5,802 5,793 6,161 7,215' 6,556 15 Other3 7,542 6,004 4,885 7,957 6,248" 6,331' 4,885 6,606 11,327' 7,571 16 Banks' custodial liabilities5 617 204 983 1,353 1,166 940 983 1,010 757 716 17 U.S. Treasury bills and certificates6 352 69 636 435 509 570 636 623 549 548 18 Other negotiable and readily transferable instruments7 265 133 347 818 657 370 347 387 207 168 19 Other 0 2 0 100 0 0 0 0 1 0 20 Official institutions' 312,019 283,685 258,056 259,194 263,242' 258,875" 258,056 258,674 260,746 266,522 21 Banks' own liabilities 79,406 102,028 79,149 84,979 84,784" 79,491' 79,149 76,044 77,262 76,834 22 Demand deposits 1,511 2,314 2,787 3,607 3,325 2,744 2,787 3,666 2,850 3,393 23 Time deposits2 33,336 41,396 28,947 27,745 26,148 25,700' 28,947 24,176 25,988 23,840 24 Other3 44,559 58,318 47,415 53,627 55,311' 51,047 47,415 48,202 48,424 49,601 25 Banks' custodial liabilities5 232,613 181,657 178,907 174,215 178,458" 179,384 178,907 182,630 183,484 189,688 26 U.S. Treasury bills and certificates6 198,921 148,301 134,141 128,146 128,598 133,702 134,141 136,840 135,471 141,941 27 Other negotiable and readily transferable instruments7 33,266 33,151 44,092 45,512 49,555' 45,213 44,092 45,202 47,213 47,174 28 Other 426 205 674 557 305 469 674 588 800 573 29 Banks10 694,835 815,247r 885,442' 876,912 899,258' 885,929' 885,442' 866,186' 854,523' 851,582 30 Banks' own liabilities 562,898 641,447r 676,208r 688,431 691,075' 673,648' 676,208' 658,114' 648,149' 648,591 31 Unaffiliated foreign banks 161,354 156,368r 113,362 144,082 123,650' 118,061 113,362 111,611 115,031' 115,994 32 Demand deposits 13,692 16,767r 14,072 15,799 15,802 15,119 14,072 15,327 15,335 13,985 33 Time deposits2 89,765 83,433 46,273 71,600 56,193 51,352 46,273 46,745 46,745' 49,149 34 Other3 57,897 56,168 53,017 56,683 51,655' 51,590 53,017 49,539 52,951 52,860 35 Own foreign offices4 401,544 485,079 562,846' 544,349 567,425' 555,587' 562,846' 546,503' 533,118' 532,597 36 Banks' custodial liabilities5 131,937 173,800 209,234 188,481 208,183' 212,281 209,234 208,072 206,374 202,991 37 U.S. Treasury bills and certificates6 23,106 31,915 35,544 21,563 27,556 35,213 35,544 35,325 34,472 36,737 38 Other negotiable and readily transferable instruments7 17,027 35,393 45,102 44,990 48,376' 45,132 45,102 44,087 40,108 37,304 39 Other 91,804 106,492 128,588 121,928 132,251 131,936 128,588 128,660 131,794 128,950 40 Other foreigners 141,322 172,405 191,496 198,917 196,859 188,346 191,496 193,726 205,795' 204,833 41 Banks' own liabilities 103,339 128,019 118,322 130,012 123,926 115,413 118,322 125,320 135,800' 133,316 42 Demand deposits 11,802 12,247 12,310 13,733 12,847 14,007 12,310 13,984 13,313' 13,958 43 Time deposits2 58,025 68,251 70,576 69,075 70,905 66,933 70,576 70,374 73,234' 72,286 44 Other3 33,512 47,521 35,436 47,204 40,174 34,473 35,436 40,962 49,253 47,072 45 Banks' custodial liabilities5 37,983 44,386 73,174 68,905 72,933 72,933 73,174 68,406 69,995' 71,517 46 U.S. Treasury bills and certificates6 14,495 12,954 13,169 10,454 12,101 13,432 13,169 12,443 14,359 13,573 47 Other negotiable and readily transferable instruments7 21,453 24,964 51,562 50,860 52,651 51,684 51,562 47,752 46,581 48,706 48 Other 2,035 6,468 8,443 7,591 8,181 7,817 8,443 8,211 9,055' 9,238 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 14,573 16,083 27,026 27,455 29,996' 28,858' 27,026 25,858 23,341 23,035 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 • July 1999 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States'—Continued 1998 1999 IItteemm 11999966 11999977 11999988 Sept. Oct. Nov. Dec. Jan. Feb. Mar.p AREA 50 Total, all foreigners 1,162,148 l,283,027r l,346,827r l,350,504r l,372,288r l,346,457r l,346,827r l,332,425r l,340,770r 1,337,974 51 Foreign countries 1,148,176 l,271,337r l,334,994r l,335,023r l,359,359r l,333,150r l,334,994r l,318,586r l,321,064r 1,322,937 52 Europe 376,590 419,672R 427,367 450,652R 451,350 449,567 427,367 429,636 436,330R 418,896 33 Austria 5,128 2,717 3,178 3,137 2,799 2,824 3.178 2,902 3,070 3,274 54 Belgium and Luxembourg 24,084 41,007 42.818 33,934 39,911 42.014 42,818 38,897 41,594 41,468 35 Denmark 2,565 1,514 1,437 1,578 1,813 1,675 1,437 1,200 1,826 1,992 3b Finland 1,958 2,246 1,862 1,181 1,193 1,706 1.862 1,989 1,643 1,800 3/ France 35,078 46,607 44,616 50,405 47,348 48,155R 44,616 44,444 47,617R 47,932 38 Germany 24,660 23,737 21,357 25,821R 22,024 22,606 21,357 20,315 23,111 23,746 39 Greece 1,835 1,552 2.066 2,544 2.901 2.444 2,066 2,195 2,509 2,447 60 Italy 10,946 11,378 7,103 9,183 7,124 6,378 7,103 6,155 6,684 5,743 61 Netherlands 11,110 7,385 10,793 8,066 7.251 9,298 10,793 10,580 14,792 12,273 62 Norway 1,288 317 710 688 1,149 797 710 1,065 1,102 1,022 63 Portugal 3,562 2,262 3,235 2,292 2,377 2,400 3,235 2,543 2,225 2,237 64 Russia 7,623 7,968 2.439 3,085 3,735 2,698 2.439 2,231 2,438 2,500 63 Spain 17,707 18,989 15,775 20,485 26,569 27,017 15,775 12,843 13.457 9,315 66 Sweden 1,623 1,628 3,027 3,285 3,257 3,857 3,027 3,132 2,918 2,193 67 Switzerland 44,538 39,023 50,654 48,393 47,332 50,167 50,654 59,871 60,348R 47,874 68 Turkey 6,738 4,054 4.286 4,264 4,105 3,842 4,286 5,105 5,045 5,639 69 United Kingdom 153,420 181,904 181.554 204,970R 202.536 195,113R 181,554 177,240 173,542R 175,769 7 7 1 0 O Y t u h g e o r s l E av u i r a o 1 p 1 e and other former U.S.S.R.12 22,5 2 2 0 1 6 25,1 2 4 3 5 9 R 30, 2 1 5 9 8 9 27, 2 0 5 8 3 8 27,5 36 6 2 4 26,3 27 0 1 5 30,1 25 9 8 9 36, 2 6 7 5 5 4 32,1 28 2 7 2 31,4 2 3 3 5 7 72 Canada 38,920 28,341 30,212 28,701 31,278 29,249 30,212 29,725 28,019 31,788 73 Latin America and Caribbean 467,529 536,393 554,734r 561,373r 576,008R 545,454r 554,734r 540,664r 538,465r 551,708 74 Argentina 13,877 20,199 19,013 18,384 17,706 18,892 19,013 17,175 18,245r 16,891 / 3 Bahamas 88,895 112,217 118.085 124,249 128,893 115,598 118,085 121,606 118,727 119,209 76 Bermuda 5,527 6,911 6,839 7,920 7,247 7,241 6,839 8,969 8,370 7,514 II Brazil 27,701 31,037 15,800 18,453 17,308 13,370 15,800 12,268 12,913 13,841 78 British West Indies 251,465 276,418 302,472r 298,567r 310,229r 298,422r 302,472r 287,308r 285,676r 300,103 79 Chile 2,915 4,072 5,010 5,725 5,598 4,778 5,010 5,188 5,189 5,058 80 Colombia 3,256 3,652 4,616 4,475 4,888 4,124 4,616 4,535 4,462 4,636 81 Cuba 21 66 62 62 57 63 62 64 62r 63 82 Ecuador 1,767 2,078 1,573 1,540 1,679 1,510 1,573 1,525 1.513 1,606 83 Guatemala 1,282 1,494 1,332 1,241 1,232 1,204 1,332 1,224 l,338r 1,392 84 Jamaica 628 450 539 541 578 524 539 565 542 551 83 Mexico 31,240 33,972 37.148 35,682r 38,058 36,720 37,148 35,965 35,891 36,622 86 Netherlands Antilles 6,099 5,085 5,010 8,588 6,255 6,009 5,010 5,681 8,406 7,256 87 Panama 4,099 4,241 3,864 3,826 3,793 3,774 3,864 4,499 4,401 4,196 88 Peru 834 893 840 843 799 814 840 864 828 810 89 Uruguay 1,890 2,382 2,486 2,276 2,223 2,240r 2,486 2,380 2,274 2,378 90 Venezuela 17,363 21,601 19,894 19,180 19,662 19,631 19,894 20,250 19,354 19,149 91 Other 8,670 9,625 10,151 9,821 9,803 10,540 10,151 10,598 10,274r 10,433 92 249,083 269,379 307,140 275,755r 228844,,444411 293,584 330077,,114400 330011,,445544 330022,,552200rr 330055,,446677 China 93 Mainland 30,438 18,252 13,041 18.525r 15,814 13,784 13,041 14,854 15,345 13,996 94 Taiwan 15,995 11,840 12,708 12,080 12,802 12,361 12,708 10,980 12,211 13,183 93 Hong Kong 18,789 17,722 20,898 16,627 16,508 16,739 20,898 22,844 25,509 27,589 96 India 3,930 4,567 5,250 5,144 5,337 5,089 5,250 5,279 5,241 6,189 97 Indonesia 2,298 3,554 8,282 5.470 5,671 6,247 8,282 7,909 6,172 6,675 98 Israel 6,051 6,281 7.749 5,984 4,781 8,106 7,749 7,287 7,598 8,246 99 Japan 117,316 143,401 168,236 142,767 156,340 164,311 168,236 161,207 161,073 161,887 100 Korea (South) 5,949 13,060 12,454 12,979r 12,505 12,396 12,454 12,446 9,990 11,127 101 Philippines 3,378 3,250 3,324 2,712 2,539 2,849 3,324 2,318 2,482 2,362 102 Thailand 10,912 6,501 7,359 6,664 7,134 6,788 7,359 7,300 6,590 6,588 103 Middle Eastern oil-exporting countries13 16.285 14,959 15,609 16,627 14,718 16,370 15,609 14,655 16,157r 15,453 104 Other 17,742 25,992 32,230 30,176 30,292 28,544 32,230 34,375 34,152r 32,172 105 Africa 8,116 10,347 8,905 11,098 9,749 8,889 8,905 9,110 8,658 8,465 106 Egypt 2,012 1,663 1,339 1,616 1,288 1,498 1,339 1,856 1,902 1,758 10/ Morocco 112 138 97 88 78 75 97 98 73 85 108 South Africa 458 2,158 1,522 2,658 2,358 1,659 1,522 1,308 1,343 1,258 109 Zaire 10 10 5 6 7 12 5 6 13 9 110 Oil-exporting countries14 2,626 3,060 3,088 3,727 3,291 3,017 3,088 2,989 2,737 2,772 111 Other 2,898 3,318 2,854 3,003 2,727 2,628 2,854 2,853 2,590 2,583 112 Other 7,938 7,205 6,636 7,444 6,533 6,407 6,636 7,997 7,072 6,613 113 Australia 6,479 6,304 5,495 6,427 5,372 5,180 5,495 6,854 5,550 5,582 114 Other 1,459 901 1,141 1.017 1,161 1,227 1,141 1,143 1,522 1,031 115 Nonmonetary international and regional organizations . . 13,972 11,690 11,833 15,481r 12,929r 13,307r 11,833 13,839 19,706r 15,037 116 International15 12,099 10,517 10,221 13,048r 10,638r 1 l,398r 10,221 11,787 17.079r 12,545 117 Latin American regional16 1,339 424 594 803 1,008 598 594 917 1,411 1,394 118 Other regional17 534 749 1,018 1,630 1,283 1,311 1,018 1,135 1,216 1,098 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 inclt ded in "Other Europe." 14. Comprises Algeria, Gabon, Libya, and Nigeria. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A55 3.18 BANKS' OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States1 Payable in U.S. Dollars Millions of dollars, end of period 1998 1999 AArreeaa oorr ccoouunnttrryy 11999966 11999977 11999988 Sept. Oct. Nov. Dec. Jan. Feb.r Mar.p 1 Total, all foreigners 599,925 708,225 734,794 768,481r 749,546r 757,183r 734,794 718,269r 712,950 695,242 2 Foreign countries 597,321 705,762 731,176 763,159r 744,156r 751,875r 731,176 713,263r 707,524 690,622 3 Europe 165,769 199,880 233,480 234,967 224,661 228,924 233,480 225,892 230,424 226,769 4 Austria 1,662 1,354 1,043 1,849 2,358 2,311 1,043 2,634 1,824 2,759 Belgium and Luxembourg 6,727 6,641 7,187 8,200 9,245 7,409 7,187 5,599 7,073 5,573 6 Denmark 492 980 2,383 1,059 1,768 2,524 2,383 1,816 1,656 1,619 1 Finland 971 1,233 1,070 1,073 1,149 1,050 1,070 963 1,233 1,351 8 France 15,246 16,239 15,251 17,077 16,307 18,881 15,251 18,575 18,583 15,192 9 Germany 8,472 12,676 15,922 15,375 15,121 17,997 15,922 15,115 16,362 16,910 10 Greece 568 402 575 373 415 510 575 533 637 554 1 1 Italy 6,457 6,230 7,283 6,510 7,153 6,544 7,283 6,168 5,714 6,044 1? Netherlands 7,117 6,141 5,734 4,803 5,230 5,686 5,734 5,828 6,048 6,675 13 Norway 808 555 827 640 662 385 827 645 561 596 14 Portugal 418 777 669 975 885 679 669 584 888 1,205 IS Russia 1,669 1,248 789 920 883 760 789 742 724 972 16 Spain 3,211 2,942 5,735 7,980 6,051 5,234 5,735 4,560 4,260 3,041 17 Sweden 1,739 1,854 4,223 4,319 4,508 5,087 4,223 4,338 4,664 4,439 18 Switzerland 19,798 28,846 46,880 55,798 43,337 45,858 46,880 46,122 50,905 51,672 19 Turkey 1,109 1,558 1,982 1,900 1,848 1,915 1,982 1,796 1,870 2,077 20 United Kingdom 85,234 103,143 106,358 97,436 98,746 97,072 106,358 98,959 97,431 97,324 21 Yugoslavia2 115 52 53 53 53 53 53 53 54 54 22 Other Europe and other former U.S.S.R.3 3,956 7,009 9,516 8,627 8,942 8,969 9,516 10,862 9,937 8,712 23 Canada 26,436 27,189 47,212 41,165 37,316 44,830 47,212 42,925 40,801 41,266 74 Latin America and Caribbean 274,153 343,730 342,081 373,237 368,394 368,212 342,081 344,347r 340,673 325,524 Argentina 7,400 8,924 9,553 8,777 9,087 9,225 9,553 9,713 10,184 10,398 76 Bahamas 71,871 89,379 96,455 86,867 88,923 91,171 96,455 93,000 91,104 88,639 77 Bermuda 4,129 8,782 4,969 10,610 6,585 5,702 4,969 5,547 6,028 4,091 78 Brazil 17,259 21,696 16,193 19,073 17,614r 17,771r 16,193 15,616 15,357 15,423 79 British West Indies 105,510 145,471 153,269 182,757 183,152r 179,253r 153,269 158,010r 155,326 146,683 30 Chile 5,136 7,913 8,261 8,345 8,549 8,824 8,261 8,232 8,085 8,074 31 Colombia 6,247 6,945 6,523 6,813 6,764 6,639 6,523 6,433 6,462 6,220 37 Cuba 0 0 0 0 0 0 0 0 0 0 33 Ecuador 1,031 1,311 1,400 1.458 1,444 1,351 1,400 1,403 1,341 1,219 34 Guatemala 620 886 1,127 1,166 947 1,483 1,127 1,107 1,255 1,053 35 Jamaica 345 424 239 305 330 299 239 333 602 318 36 Mexico 18,425 19,428 21,143 20,677 22,039 22,483 21,143 21,128 21,564 20,532 37 Netherlands Antilles 25,209 17,838 6,779 10,294 7,323 7,696 6,779 7,403 6,571 6,666 38 Panama 2,786 4,364 3,584 4,226 4,011 3,864 3,584 3,549 3,390 3,320 39 Peru 2,720 3,491 3,260 3,829 3,706 3,618 3,260 3,364 3,353 3,232 40 Uruguay 589 629 1,126 955 958 1,040 1,126 997 934 838 41 Venezuela 1,702 2,129 3,089 2,638 2,689 2,788 3,089 3,312 3,684 3,502 42 Other 3,174 4,120 5,111 4,447 4,273 5,005 5,111 5,200 5,433 5,316 43 Asia 122,478 125,092 98,650 104,668r 104,784r 100,77 r 98,650 90,840 86,502 88,080 China 44 Mainland 1,401 1,579 1,311 1,380 2,275 2,488 1,311 2,691 2,400 3,403 45 Taiwan 1,894 922 1,041 1,031 1,079 957 1,041 728 778 1,331 46 Hong Kong 12,802 13,991 9,082 10,548 8,244 8,238 9,082 8,332 6,785 7,994 47 India 1,946 2,200 1,440 1,823 1,582 1,533 1,440 1,483 1,529 1,701 48 Indonesia 1,762 2,651 1,954 2,162r 2,047r 2,072r 1,954 1,948 2,110 1,897 49 Israel 633 768 1,166 941 1,504 916 1,166 833 774 1,082 50 Japan 59,967 59,549 46.712 52,213 52,904 48,406 46,712 41,817 39,141 39,972 51 Korea (South) 18,901 18,162 8,238 9,823 9,733 8,947 8,238 8,679 8,479 9,134 57 Philippines 1,697 1,689 1,465 1,280 1,128 1,619 1,465 1,310 1,589 1,540 53 Thailand 2,679 2,259 1,806 2,129 1,952 1,895 1,806 1,759 1,708 1,720 54 Middle Eastern oil-exporting countries4 10,424 10,790 16,145 12,681 13,531 15,077 16,145 14,328 12,831 12,167 55 Other 8,372 10,532 8,290 8,657 8,805 8,623 8,290 6,932 8,378 6,139 56 2,776 3,530 3,122 3,012 2,785 2,611 3,122 2,899 3,087 2,938 57 247 247 257 272 322 259 257 302 264 260 58 Morocco 524 511 372 390 405 390 372 378 361 422 59 South Africa 584 805 643 694 665 704 643 802 933 798 60 Zaire 0 0 0 0 0 0 0 0 0 0 61 Oil-exporting countries5 420 1,212 936 787 533 454 936 516 625 325 62 Other 1,001 755 914 869 860 804 914 901 904 1,133 63 Other 5,709 6,341 6,631 6.110 6,216 6,527 6,631 6,360 6,037 6,045 64 Australia 4,577 5,300 6,167 5,783 5,809 6,008 6,167 5,866 5,367 5,638 65 Other 1,132 1,041 464 327 407 519 464 494 670 407 66 Nonmonetaiy international and regional organizations6. . . 2,604 2,463 3,618 5,322 5,390 5,308r 3,618 5,006r 5,426 4,620 1. Reporting banks include all types of depository institutions as well as some brokers and 4. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab dealers. Emirates (Trucial States). 2. Since December 1992, has excluded Bosnia, Croatia, and Slovenia. 5. Comprises Algeria, Gabon, Libya, and Nigeria. 3. Includes the Bank for International Settlements. Since December 1992, has included all 6. Excludes the Bank for International Settlements, which is included in "Other Europe." parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, and Slovenia. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A56 International Statistics • July 1999 3.19 BANKS' OWN AND DOMESTIC CUSTOMERS' CLAIMS ON FOREIGNERS Reported by Banks in the United States1 Payable in U.S. Dollars Millions of dollars, end of period 1998R 1999 TTyyppee ooff ccllaaiimm 11999966 11999977 11999988 Sept. Oct. Nov. Dec. Jan.1 Feb.r Mar.p 1 Total 743,919 852,852 875,332 926,532 875,332 2 Banks' claims 599,925 708,225 734,794 768,481 749,546 757,183 734,794 718,269 712,950 695,242 3 Foreign public borrowers 22,216 20,581 23,540 26,428 28,164 27,063 23,540 30,269 31,514 34,913 4 Own foreign offices' 341,574 431,685 484,356 486,452 476,973 487,641 484,356 459,017 461,685 451,769 5 Unaffiliated foreign banks 113,682 109,230 105,732 108,426 108,524 117,919 105,732 106,557 102,596 94,055 6 Deposits 33,826 30,995 26,808 30,301 25,988 33,774 26,808 30,558 29,400 25,044 7 Other 79,856 78,235 78,924 78,125 82,536 84,145 78,924 75,999 73,196 69,011 8 All other foreigners 122,453 146,729 121,166 147,175 135,885 124,560 121,166 122,426 117,155 114,505 9 Claims of banks' domestic customers3 143,994 144,627 140,538 158,051 140,538 10 Deposits 77,657 73,110 78,167 89,602 78,167 11 Negotiable and readily transferable instruments4 51,207 53,967 48,848 53,512 48,848 12 Outstanding collections and other claims 15,130 17,550 13,523 14,937 13,523 MEMO 13 Customer liability on acceptances 10,388 9,624 4,519 6,068 4,519 14 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States5 39,661 33,816 39,978 25,093 34,265 32,888 39,978 38,941 39,055 33,038 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 States1 Payable in U.S. Dollars Millions of dollars, end of period 1998 MMaattuurriittyy,, bbyy bboorrrroowweerr aanndd aarreeaa22 11999955 11999966 11999977 Mar. June Sept. Dec.P 1 Total 224,932 258,106 276,550 285,590 292,788 281,136 250,366 By borrower 2 Maturity of one year or less 178,857 211,859 205,781 214,779 211,347 208,374 186,422 3 Foreign public borrowers 14,995 15,411 12,081 16,874 16,997 14,613 13,675 4 All other foreigners 163,862 196,448 193,700 197,905 194,350 193,761 172,747 5 Maturity of more than one year 46,075 46,247 70,769 70,811 81,441 72,762 63,944 6 Foreign public borrowers 7,522 6,790 8,499 11,285 10,688 10,926 9,838 7 All other foreigners 38,553 39,457 62,270 59,526 70,753 61,836 54,106 By area Maturity of one year or less 8 Europe 55,622 55,690 58,294 69,150 73,787 68,996 68,708 9 Canada 6,751 8,339 9,917 9,297 8,766 8,953 11,125 10 Latin America and Caribbean 72,504 103,254 97,207 101,070 99,611 99,646 81,454 11 Asia 40,296 38,078 33,964 28,751 23,570 22,330 18,035 12 Africa 1,295 1,316 2,211 2,227 1,116 1,762 1,835 13 All other3 2,389 5,182 4,188 4,284 4,497 6,687 5,265 Maturity of more than one year 14 Europe 4,995 6,965 13,240 15,118 15,606 15,395 15,055 15 Canada 2,751 2,645 2,525 2,765 2,571 2,982 3,140 16 Latin America and Caribbean 27,681 24,943 42,049 39,363 47,969 39,138 33,340 17 Asia 7,941 9,392 10,235 10,806 12,630 12,173 10,039 18 Africa 1,421 1,361 1,236 1,254 1,259 1,170 1,233 19 Mother3 1,286 941 1,484 1,505 1,406 1,904 1,137 1. Reporting banks include all types of depository institutions as well as some brokers and 2. Maturity is time remaining until maturity. dealers. 3. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A57 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. and Foreign Offices of U.S. Banks1 Billions of dollars, end of period 1996 1997 1998 AArreeaa oorr ccoouunnttrryy 11999944 11999955 Dec. Mar. June Sept. Dec. Mar. June Sept. Dec. 1 Total 499.5 551.9 645.3 647.6 678.8 711.0 719.3r 739.1 749.0r 724.3r 687.5r ~> G-10 countries and Switzerland 191.2 206.0 228.3 231.4 250.0 247.8 242.8 249.0 275,2r 258.3r 247.0 3 Belgium and Luxembourg 7.2 13.6 11.7 14.1 9.4 11.4 11.0 11.2 13.1 10.9 13.1 4 19.1 19.4 16.6 19.7 17.9 20.2 15.4 15.5 20.5 19.9 18.0 5 24.7 27.3 29.8 32.1 34.1 34.7 28.6 25.5 28.8r 28.9 30.7 6 11.8 11.5 16.0 14.4 20.2 19.3 15.5 19.7 19.5 17.9 11.3 7 Netherlands 3.6 3.7 4.0 4.5 6.4 7.2 6.2 7.3 8.3 8.1 7.7 8 Sweden 2.7 2.7 2.6 3.4 3.6 4.1 3.3 4.8 3.1 2.1 2.2 9 Switzerland 5.1 6.7 5.3 6.0 5.4 4.8 7.2 5.6 6.9 7.4 8.2 in United Kingdom 85.8 82.4 104.7 99.2 110.6 108.3 113.4 120.1 134.9' 124.91 114.9 11 10.0 10.3 14.0 16.3 15.7 15.1 13.7 13.5 16.5 15.5 16.7 12 Japan 21.1 28.5 23.7 21.7 26.8 22.6 28.6 25.8 23.7 22.7 24.1 13 Other industrialized countries 45.7 50.2 65.7 66.4 71.7 73.8 64.5 74.3 72. lr 71.3T 67.7 14 Austria 1.1 .9 1.1 1.9 1.5 1.7 1.5 1.7 1.9 2.1 1.4 15 Denmark 1.3 2.6 1.5 1.7 2.8 3.7 2.4 2.0 2.1 2.8 2.1 16 Finland .9 .8 .8 .7 1.4 1.9 1.3 1.5 1.4 1.6 1.4 17 4.5 5.7 6.7 6.3 6.1 6.2 5.1 6.1 5.8 5.7 5.9 18 Norway 2.0 3.2 8.0 5.3 4.7 4.6 3.6 4.0 3.4 3.2r 3.2 19 Portugal 1.2 1.3 .9 1.0 1.1 1.4 .9 .7 1.3 1.0 1.3 70 Spain 13.6 11.6 13.2 14.4 15.4 13.9 11.7 16.5 15.2r 17.5 13.5 71 Turkey 1.6 1.9 2.7 2.8 3.4 4.4 4.5 4.9 6.5 5.2 4.8 77 Other Western Europe 3.2 4.7 4.7 6.3 5.5 6.1 8.2 9.9 9.6 10.3 10.4 73 South Africa 1.0 1.2 2.0 1.9 1.9 1.9 2.2 3.7 5.0 3.7 3.5 24 Australia 15.4 16.4 24.0 24.4 27.8 28.0 23.1 23.2 20.0 18.2 20.3 7S OPEC2 24.1 22.1 19.7 21.8 22.3 22.9 26.0 25.7 25.3 25.8 26.9 76 Ecuador .5 .7 1.1 1.1 .9 1.2 1.3 1.3 1.2 1.2 1.2 77 Venezuela 3.7 2.7 2.4 1.9 2.1 2.2 2.5 3.3 3.2 3.1 3.2 78 Indonesia 3.8 4.8 5.2 4.9 5.6 6.5 6.7 5.5 5.1 4.7 4.7 79 Middle East countries 15.3 13.3 10.7 13.2 12.5 11.8 14.4 14.3 15.5 16.1 16.9 30 African countries .9 .6 .4 .7 1.2 1.1 1.2 1.4 .3 .8 1.0 31 Non-OPEC developing countries 96.0 112.6 130.3 128.1 140.6 137.0 138.7 147.4 144.4 139.7r 140.9r Latin America 37 11.2 12.9 14.3 14.3 16.4 17.1 18.4 19.3 20.2 22.3 22.3 33 Brazil 8.4 13.7 20.7 22.0 27.3 26.1 28.6 32.4 29.9 24.9r 24.2r 34 Chile 6.1 6.8 7.0 6.8 7.6 8.0 8.7 9.0 9.1 8.5 8.3 35 Colombia 2.6 2.9 4.1 3.7 3.3 3.4 3.4 3.3 3.6 3.4 3.2 36 18.4 17.3 16.2 17.2 16.6 16.4 17.4 17.7 17.9 18.4 18.4 37 .5 .8 1.6 1.6 1.4 1.8 2.0 2.1 2.2 2.2 2.2 38 Other 2.7 2.8 3.3 3.4 3.4 3.6 4.1 4.0 4.4 4.6 5.4 Asia China 39 Mainland 1.1 1.8 2.5 2.7 3.6 4.3 3.2 4.2 3.9 2.8 3.0 40 9.2 9.4 10.3 10.5 10.6 9.7 9.0 11.7 11.3 12.1 12.8 41 India 4.2 4.4 4.3 4.9 5.3 4.9 4.9 5.0 4.9 5.3 5.3 47 Israel .4 .5 .5 .6 .8 1.0 .7 .7 .9 ..99 11..11 43 Korea (South) 16.2 19.1 21.5 14.6 16.3 16.2 15.6 16.2 14.5 1122..99 1133..66 44 Malaysia 3.1 4.4 6.0 6.5 6.4 5.6 5.1 4.5 4.7 5.0 5.6 45 Philippines 3.3 4.1 5.8 6.0 7.0 5.7 5.7 5.0 5.4 4.7 5.1 46 Thailand 2.1 4.9 5.7 6.8 7.3 6.2 5.4 5.5 4.9 5.3 4.6 47 Other Asia 4.7 4.5 4.1 4.3 4.7 4.5 4.3 4.2 3.7 3.1 2.9 Africa 48 Egypt .3 .4 .7 .9 1.1 .9 .9 1.0 1.5 11..77 11..33 49 Morocco .6 .7 .7 .6 .7 .7 .6 .6 .6 .5 .5 50 Zaire .0 .0 .1 .0 .0 .0 .0 .0 .0 .0 .0 51 Other Africa3 .8 .9 .9 .9 .9 .9 .8 1.1 .8 1.1 1.0 57 Eastern Europe 2.7 4.2 6.9 8.9 7.1 9.8 9.1 12.0 10.9 6.0 5.2 53 Russia4 .8 1.0 3.7 3.5 4.2 5.1 5.1 7.5 6.8 2.8 2.2 54 Other 1.9 3.2 3.2 5.4 2.9 4,7 4.0 4.6 4.1 3.2 3.1 55 Offshore banking centers 72.9 99.2 134.7 131.3 129.6 138.9 139.0r 129.3 125.5r 118.6 90.8r 56 10.2 11.0 20.3 20.9 16.1 19.8 23.3r 29.2 24.7r 28.9 33.0r 57 Bermuda 8.4 6.3 4.5 6.7 7.9 9.8 9.8 9.0 9.3 10.4 4.5 58 Cayman Islands and other British West Indies 21.4 32.4 37.2 32.8 35.1 45.7 43.4 24.9 33.9 27.4 12.3 59 Netherlands Antilles 1.6 10.3 26.1 19.9 15.8 21.7 14.6 14.0 10.5 6.0 2.6 60 Panama5 1.3 1.4 2.0 2.0 2.6 2.1 3.1 3.2 3.3 4.0 3.8 61 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 .2 .1 67 Hong Kong, China 20.0 25.0 27.9 30.8 35.2 27.2 32.2 33.8 30.0 30.6 23.2 63 Singapore 10.1 13.1 16.7 17.9 16.7 12.7 12.7 15.0 13.5 11.1 11.1 64 Other" .1 .1 .1 .1 .3 .1 .1 .1 .2 .2 .2 65 Miscellaneous and unallocated7 66.9 57.6 59.6 59.6 57.6 80.8 99.1 101.3 95.7r 104.5 109.0r 1. The banking offices covered by these data include U.S. offices and foreign branches of 2. Organization of Petroleum Exporting Countries, shown individually; other members of U.S. banks, including U.S. banks that are subsidiaries of foreign banks. Offices not covered OPEC (Algeria, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, and United include U.S. agencies and branches of foreign banks. Beginning March 1994, the data include Arab Emirates); and Bahrain and Oman (not formally members of OPEC). large foreign subsidiaries of U.S. banks. The data also include other types of U.S. depository 3. Excludes Liberia. Beginning March 1994 includes Namibia. institutions as well as some types of brokers and dealers. To eliminate duplication, the data 4. As of December 1992, excludes other republics of the former Soviet Union. are adjusted to exclude the claims on foreign branches held by a U.S. office or another foreign 5. Includes Canal Zone. branch of the same banking institution. 6. Foreign branch claims only. These data are on a gross claims basis and do not necessarily reflect the ultimate country 7. Includes New Zealand, Liberia, and international and regional organizations. risk or exposure of U.S. banks. More complete data on the country risk exposure of U.S. banks are available in the quarterly Country Exposure Lending Survey published by the Federal Financial Institutions Examination Council. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A58 International Statistics • July 1999 3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States Millions of dollars, end of period 1997 1998 TTyyppee ooff lliiaabbiilliittyy,, aanndd aarreeaa oorr ccoouunnttrryy 11999955 11999966 11999977 Sept. Dec. Mar. June Sept. Dec.p 1 Total 46,448 61,782 60,037 55,891 60,037 58,040 51,433 49,278 46,553 2 Payable in dollars 33,903 39,542 41.956 39,746 41,956 42,258 40,026 38,409 36,651 3 Payable in foreign currencies 12,545 22,240 18,081 16,145 18,081 15,782 11,407 10,869 9,902 By type 4 Financial liabilities 24,241 33,049 29,532 26,461 29,532 28,050 22,322 19,331 19,255 5 Payable in dollars 12,903 11,913 13,043 11,487 13,043 13,568 11,988 9,812 10,371 6 Payable in foreign currencies 11,338 21,136 16,489 14,974 16,489 14,482 10,334 9,519 8,884 7 Commercial liabilities 22,207 28,733 30.505 29,430 30,505 29,990 29,111 29,947 27,298 8 Trade payables 11,013 12,720 10,904 10,885 10,904 10,107 9,537 10,276 10,961 9 Advance receipts and other liabilities 11,194 16,013 19,601 18,545 19,601 19,883 19,574 19,671 16,337 10 Payable in dollars 21,000 27,629 28,913 28,259 28,913 23,690 28,038 28,597 26,280 11 Payable in foreign currencies 1,207 1,104 1,592 1,171 1,592 1,300 1,073 1,350 1,018 By area or country Financial liabilities 12 Europe 15,622 23,179 19,657 18,019 19,657 20,307 15,468 12,905 12,589 13 Belgium and Luxembourg 369 632 186 89 186 127 75 150 79 14 France 999 1,091 1,684 1,334 1,684 1,795 1,699 1,457 1,097 IS Germany 1,974 1,834 2,018 1,730 2,018 2,578 2,441 2,167 2,063 16 Netherlands 466 556 494 507 494 472 484 417 1,406 17 Switzerland 895 699 776 645 776 345 189 179 155 18 United Kingdom 10,138 17,161 12,737 12,165 12,737 1 ?, 145 8,765 6,610 5,980 19 Canada 632 1,401 2.392 651 2,392 1,045 539 389 693 20 Latin America and Caribbean 1,783 1,668 1,386 1,067 1,386 965 1,320 11,,335511 1,495 21 Bahamas 59 236 141 10 141 17 6 11 7 22 Bermuda 147 50 229 64 229 86 49 73 101 23 Brazil 57 78 143 52 143 91 76 154 152 24 British West Indies 866 1,030 604 669 604 517 845 834 957 2S Mexico 12 17 26 76 26 21 51 23 59 26 Venezuela 2 1 1 1 1 1 1 1 2 27 Asia 5,988 6,423 5,394 6,239 5,394 5,024 4,315 4,005 3,785 28 Japan 5,436 5,869 5,085 5,725 5,085 4,767 3,869 3,754 3,612 29 Middle Eastern oil-exporting countries' 27 25 32 23 32 23 0 0 0 30 Africa 150 38 60 33 60 33 29 31 28 31 Oil-exporting countries" 122 0 0 0 0 0 0 0 0 32 All other3 66 340 643 452 643 676 651 650 665 Commercial liabilities 33 Europe 7,700 9,767 10,228 9,343 10,228 9,951 9.987 11,010 10,032 34 Belgium and Luxembourg 331 479 666 703 666 565 557 623 278 35 France 481 680 764 782 764 840 612 740 920 36 Germany 767 1,002 1,274 945 1,274 1,068 1.219 1,408 1,394 37 Netherlands 500 766 439 452 439 443 485 440 429 38 Switzerland 413 624 375 400 375 407 349 507 499 39 United Kingdom 3,568 4,303 4,086 3,829 4,086 4,041 3,743 4,286 3,697 40 Canada 1,040 1,090 1,175 1,150 1,175 1,347 1,206 1,504 1,390 41 Latin America and Caribbean 1,740 2,574 2,176 2,224 2,176 2,051 2,285 11,,884400 1,619 42 Bahamas 1 63 16 38 16 27 14 4488 14 43 Bermuda 205 297 203 180 203 174 209 168 198 44 Brazil 98 196 220 233 220 249 246 256 152 45 British West Indies 56 14 12 23 12 5 27 5 10 46 Mexico 416 665 565 562 565 520 557 511 347 47 Venezuela 221 328 261 322 261 219 196 230 202 48 Asia 10,421 13,422 14,966 14,628 14,966 14,672 13,611 13,538 12,322 49 Japan 3.315 4,614 4.500 4,553 4,500 4,372 3,995 3,779 3,808 50 Middle Eastern oil-exporting countries' 1,912 2,168 .3,111 2,984 3,111 3,138 3,194 3,582 2,851 51 Africa 619 1,040 874 929 874 833 921 810 794 52 Oil-exporting countries2 254 532 408 504 408 376 354 372 393 53 Other3 687 840 1,086 1,156 1,086 ! ,136 1,101 1,245 1,141 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 1997 1998 TTyyppee ooff ccllaaiimm,, aanndd aarreeaa oorr ccoouunnttrryy 11999955 11999966 11999977 Sept. Dec. Mar. June Sept. Dec.1' 1 Total 52,509 65,897 68,128 70,506 68,128 71,004 63,202 67,976 77,543 2 Payable in dollars 48.711 59,156 62,173 64,144 62,173 65,359 57,601 62,034 72,263 3 Payable in foreign currencies 3,798 6,741 5,955 6,362 5,955 5,645 5,601 5,942 5,280 By type 4 Financial claims 27,398 37,523 36,959 41,805 36,959 40,301 32,355 37,262 46,324 5 Deposits 15,133 21,624 22,909 23,951 22,909 20,863 14,762 15,406 30,192 6 Payable in dollars 14,654 20,852 21,060 22,392 21,060 19,155 13,084 13,374 28,549 7 Payable in foreign currencies 479 772 1,849 1,559 1,849 1,708 1,678 2,032 1,643 8 Other financial claims 12,265 15,899 14,050 17,854 14,050 19,438 17,593 21,856 16,132 9 Payable in dollars 10,976 12,374 11,806 14,795 11,806 16,981 14,918 19,867 14,124 10 Payable in foreign currencies 1,289 3,525 2,244 3,059 2,244 2,457 2,675 1,989 2,008 1 1 Commercial claims 25,111 28,374 31,169 28,701 31,169 30,703 30,847 30,714 31,219 12 Trade receivables 22,998 25,751 27,536 25,110 27,536 26,888 26,764 26,330 27,211 13 Advance payments and other claims 2,113 2,623 3,633 3,591 3,633 3,815 4,083 4,384 4,008 14 Payable in dollars 23,081 25,930 29,307 26,957 29,307 29,223 29,599 28,793 29,590 15 Payable in foreign currencies 2,030 2,444 1,862 1,744 1,862 1,480 1,248 1,921 1,629 By area or country Financial claims 16 Europe 7,609 11,085 14,999 15.608 14,999 14,187 14,105 14,473 12,362 17 Belgium and Luxembourg 193 185 406 360 406 378 518 496 661 18 France 803 694 1,015 1,112 1,015 902 810 1,140 863 19 Germany 436 276 427 352 427 393 290 359 379 20 Netherlands 517 493 677 764 677 911 975 867 875 21 Switzerland 498 474 434 448 434 401 403 409 414 22 United Kingdom 4,303 7,922 10,337 11,000 10,337 9,289 9,639 9,849 7,765 23 Canada 2,851 3,442 3,313 4,279 3,313 4,688 3,020 4,090 2,502 24 Latin America and Caribbean 14,500 20,032 15,543 19,176 15,543 18,207 11,967 15,758 27,714 25 Bahamas 1,965 1,553 2,308 2,442 2,308 1,316 1,306 2,105 403 26 Bermuda 81 140 108 190 108 66 48 63 39 27 Brazil 830 1,468 1,313 1,501 1,313 1,408 1,394 710 835 28 British West Indies 10,393 15,536 10,462 12,957 10,462 13,551 7,349 10,960 24,388 29 Mexico 554 457 537 508 537 967 1,089 1,122 1,245 30 Venezuela 32 31 36 15 36 47 57 50 55 31 1,579 2,221 2,133 2,015 2,133 2.174 2,376 2,121 3.026 32 Japan 871 1,035 823 999 823 791 886 928 1,194 33 Middle Eastern oil-exporting countries' 3 22 11 15 11 9 12 13 9 34 Africa 276 174 319 174 319 325 155 157 160 35 Oil-exporting countries2 5 14 15 16 15 16 15 16 16 36 All other3 583 569 652 553 652 720 732 663 560 Commercial claims 37 Europe 9,824 10,443 12,120 10,486 12,120 12,854 12,882 13,029 13,249 .38 Belgium and Luxembourg 231 226 328 331 328 232 216 219 238 39 France 1,830 1,644 1,796 1,642 1,796 1,939 1,955 2,098 2,172 40 Germany 1,070 1,337 1,614 1,395 1,614 1,670 1,757 1,502 1,822 41 Netherlands 452 562 597 573 597 534 492 463 467 4? Switzerland 520 642 554 381 554 476 418 546 484 43 United Kingdom 2,656 2,946 3,660 2,904 3,660 4,828 4,664 4,681 4,769 44 Canada 1,951 2,165 2,660 2,649 2,660 2,882 2,779 2,291 2,595 45 Latin America and Caribbean 4,364 5,276 5,750 5,028 5,750 5,481 6,082 5,773 6,328 46 Bahamas 30 35 27 22 27 13 12 39 24 47 Bermuda 272 275 244 128 244 238 359 173 536 48 Brazil 898 1,303 1,162 1,101 1,162 1,128 1,183 1,062 992 49 British West Indies 79 190 109 98 109 88 110 91 137 50 Mexico 993 1,128 1,392 1,219 1,392 1,302 1,462 1,356 1,574 51 Venezuela 285 357 576 418 576 441 585 566 401 5? 7,312 8,376 8,713 8,576 8,713 7,638 7,367 7,190 7,194 53 Japan 1,870 2,003 1,976 2,048 1,976 1,713 1,757 1,789 1,681 54 Middle Eastern oil-exporting countries' 974 971 1,107 987 1,107 987 1,127 967 1,131 55 Africa 654 746 680 764 680 613 657 740 712 56 Oil-exporting countries" 87 166 119 207 119 122 116 128 165 57 Other3 1,006 1,368 1,246 1,198 1,246 1,235 1,080 1,691 1,141 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 • July 1999 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1999 1998 1999 Transaction, and area or country 1997 1998 J M an ar .- . Sept. Oct. Nov. Dec. Jan. Feb. Mar.p U.S. corporate securities STOCKS 1 Foreign purchases 1,097,958 1,596,255 495,283 137,418 145,588 126,571 138,942 155,819 159,570r 179,894 2 Foreign sales 1,028,361 1,542,099 484,278 147,891 142,831 119,042 134,306 152,303 154,968 177,007 3 Net purchases, or sales (-) 69,597 54,156 11,005 -10,473 2,757 7,529 4,636 3,516 4,602r 2,887 4 Foreign countries 69,754 54,536 10,991 -10,430 2,754 7,546 4,634 3,502 4,602r 2,887 5 Europe 62,688 72,349 19,014 2,182 -249 4,406 2,441 6,048 6,403r 6,563 6 France 6,641 6,099 1,561 85 360 50 -614 537 -175 1,199 7 Germany 9,059 10,609 2,387 1,281 68 372 -189 1,035 872 480 8 Netherlands 3,831 8,326 2,145 876 1,009 1,816 332 86 956 1,103 9 Switzerland 7,848 6,269 2,123 -307 -1,974 -420 -314 -10 582 1,551 10 United Kingdom 22,478 24,336 7,301 700 632 1,902 3,154 3,893 2,833r 575 11 Canada -1,406 -4,766 1,699 -195 -507 -201 -976 728 248 723 12 Latin America and Caribbean 5,203 781 -3,973 -11,766 2,058 3,691 3,088 -1,279 -1,279 -1,415 13 Middle East1 383 -1,082 210 148 -177 -334 -219 152 -240 298 14 Other Asia 2,072 -12,554 -6,193 -678 1,823 -8 155 -2,306 -630 -3,257 13 Japan 4,787 -1,407 -2,885 519 597 822 141 -616 -344 -1,925 16 Africa 472 624 120 -98 -217 41 16 22 11 87 17 Other countries 342 -816 114 -23 23 -49 129 137 89 -112 18 Nonmonetary international and regional organizations -157 -380 14 -43 3 -17 2 14 0 0 BONDS2 19 Foreign purchases 610,116 905,272 217,826 100,186 108,678 81,943 58,884 66,585 74,368r 76,873 20 Foreign sales 475,958 727,866 161,914 92,663 105,437 60,480 41,141 53,759 55,946 52,209 21 Net purchases, or sales (—) 134,158 177,406 55,912 7,523 3,241 21,463 17,743 12,826 18,422r 24,664 22 Foreign countries 133,595 177,749 56,074 7,473 3,230 22,433 17,665 12,825 18,381r 24,868 23 Europe 71,631 127,932 29,425 12,323 12,062 16,717 9,099 2,857 13,842r 12,726 24 France 3.300 3,390 291 184 701 235 -170 145 124 22 23 Germany 2,742 4,381 1,856 268 -135 435 217 398 1,268 190 26 Netherlands 3,576 3,490 807 275 704 64 996 60 329 418 2/ Switzerland 187 4,856 1,210 1,003 -50 251 -36 403 535 272 28 United Kingdom 54,134 97,683 20,108 9,760 10,182 13,777 6,863 703 10,243r 9,162 29 Canada 6,264 6,077 1,215 443 292 558 184 100 475 640 30 Latin America and Caribbean 34,733 24,731 13,642 -2,927 -11,135 2,295 2,688 6,382 2,057 5,203 31 Middle East1 2,155 4,994 2,609 -58 2 835 2,472 1,436 314 859 32 Other Asia 16,996 12,679 8,603 -1,847 1,185 1,904 3,152 2,032 1,439 5,132 33 Japan 9,357 8,381 1,315 -713 1,624 1,194 2,238 561 165 589 34 Africa 1,005 190 567 -61 55 24 16 40 266 261 33 Other countries 811 1,146 13 -400 769 100 54 -22 -12 47 36 Nonmonetary international and regional organizations 563 -343 -162 50 11 -970 78 1 41 -204 Foreign securities 37 Stocks, net purchases, or sales ( —) -40,942 8,503 8,240 6,107 8,046 -2,729 841 3,308r 3,083r 1,849 38 Foreign purchases 756,015 940,678 247,070 89,496 90,407 70,402 69,578 77,93 lr 73,941 95,198 39 Foreign sales 796,957 932,175 238,830 83,389 82,361 73,131 68,737 74,623r 70,858r 93,349 40 Bonds, net purchases, or sales (-) -48,171 -18,957 -495 3,384 15,980 -918 -4,684 -2,304 — 20r 1,829 41 Foreign purchases 1,451,704 1,335,314 198,164 152,881 102,202 55,573 56,845 56,072 66,198r 75,894 42 Foreign sales 1,499,875 1,354,271 198,659 149,497 86,222 56,491 61,529 58,376 66,218r 74,065 43 Net purchases, or sales (—), of stocks and bonds ... -89,113 -10,454 7,745 9,491 24,026 -3,647 -3,843 l,004r 3,063r 3,678 44 Foreign countries -88,921 -10,125 7,388 9,492 24,119 -3,641 -3,683 883r 2,787r 3,718 45 Europe -29,874 11,139 20,683 6,007 10,792 2,326 3,072 406r 6,429r 13,848 46 Canada -3,085 -1,163 -717 -1,118 946 562 -4,828 -310 -551 144 47 Latin America and Caribbean -25,258 -12,860 -491 1,214 4,585 -4,074 -19 2,355 726r -3,572 48 Asia -25,123 -3,326 -12,057 3,550 6,699 -2,064 -1,489 -1,558 -3,344 -7,155 49 Japan -10,001 -1,663 -10,499 2,239 6,134 -2,390 -1,882 141 -3,390 -7,250 50 Africa -3,293 -1,411 -19 -163 4 -56 5 22 -25 -16 51 Other countries -2,288 -2,504 -11 2 1,093 -335 -424 -32 -448 469 52 Nonmonetary international and regional organizations -192 -329 357 -1 -93 -6 -160 121 276 -40 1. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, 2. Includes state and local government securities and securities of U.S. government Saudi Arabia, and United Arab Emirates (Trucial States). agencies and corporations. Also includes issues of new debt securities sold abroad by U.S. corporations organized to finance direct investments abroad. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Holdings and Transactions A61 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions1 Millions of dollars; net purchases, or sales (—) during period 1999 1998 1999 AArreeaa oorr ccoouunnttrryy 11999977 11999988 Jan.- Sept. Oct. Nov. Dec. Jan. Feb. Mar.p Mar. 1 Total estimated 184,171 46,677 -17,256 -5,270 -2,193 25,456 10,549 -4,165 -14,623 1,532 2 Foreign countries 183,688 44,208 -16,527 -5,261 -2,855 25,556 9,426 -4,107 -14,182 1,762 .3 Europe 144,921 21,586 -5,604 -2,771 -9,869 5,475 8,077 1,519 -7,354 231 4 Belgium and Luxembourg 3,427 3,805 -79 113 -606 510 2,148 -229 204 -54 5 Germany 22,471 148 377 894 1,171 307 -556 -268 217 428 6 Netherlands 1,746 -5,533 1,960 -579 1,543 -1,156 898 2,347 -584 197 7 Sweden -465 1,486 321 -330 193 586 581 163 -228 386 8 Switzerland 6,028 5,240 -3,581 363 2,811 531 175 -2,171 47 -1,457 9 United Kingdom 98,253 12,120 -4,985 2,217 -13,168 3,207 3,074 718 -5,721 18 10 Other Europe and former U.S.S.R 13,461 4,320 383 -5,449 -1,813 1,490 1,757 959 -1,289 713 11 Canada -811 572 -389 -663 -1,188 3,694 614 -1,729 1,127 213 12 Latin America and Caribbean -2,554 -3,735 -10,558 -1,233 -491 1,961 -3,817 -5,621 -6,037 1,100 13 Venezuela 655 59 1 6 -35 327 108 -17 463 -445 14 Other Latin America and Caribbean -549 9,450 -6,573 2,982 -1,288 -5,411 -165 -1,979 -2,024 -2,570 15 Netherlands Antilles -2,660 -13,244 -3,986 -4,221 832 7,045 -3,760 -3,625 -4,476 4,115 16 39,567 27,383 -509 -207 7,756 13,632 4,347 2,310 -2,216 -603 17 Japan 20,360 13,048 -4,569 128 1,233 7,311 3,750 -2,134 -1,124 -1,311 18 Africa 1,524 751 -41 81 87 145 16 17 -6 -52 19 Other 1,041 -2,349 574 -468 850 649 189 -603 304 873 20 Nonmonetary international and regional organizations 483 2,469 -729 -9 662 -100 1,123 -58 -441 -230 21 International 621 1,502 -654 -288 645 -19 1,084 -77 -371 -206 22 Latin American regional 170 199 -1 -5 0 -6 2 3 1 -5 MEMO 23 Foreign countries 183,688 44,208 -16,527 -5,261 -2,855 25,556 9,426 -4,107 -14,182 1,762 24 Official institutions 43,959 4,123 -4,501 -10,304 9,001 11,843 5,274 2,474 -3,699 -3,276 25 Other foreign 139,729 40,085 -12,026 5,043 -11,856 13,713 4,152 -6,581 -10,483 5,038 Oil-exporting countries 26 Middle East2 7,636 -16,554 6,051 -5,837 -276 233 -2,442 4,080 -618 2,589 27 Africa3 -12 2 0 0 0 0 0 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 • July 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 1999 IItteemm 11999966 11999977 11999988 Dec. Jan. Feb. Mar. Apr. May Exchange Rates COUNTRY/CURRENCY UNIT 1 Australia/dollar2 78.28 74.37 62.91 61.82 63.20 63.99 63.08 64.20 .6628 2 Austria/schilling 10.589 12.206 12.379 11.746 n.a. n.a. n.a. n.a. n.a. 3 Belgium/franc 30.97 35.81 36.31 34.44 n.a. n.a. n.a. n.a. n.a. 4 Brazil/real 1.0051 1.0779 1.1605 1.2052 1.5120 1.926] 1.9057 1.7025 1.6853 5 Canada/dollar 1.3638 1.3849 1.4836 1.5433 1.5194 1.4977 1.5176 1.4881 1.4611 6 China, P.R./yuan 8.3389 8.3193 8.3008 8.2780 8.2789 8.2755 8.2792 8.2792 8.2785 7 Denmark/krone 5.8003 6.6092 6.7030 6.3531 6.4194 6.6379 6.8287 6.9475 6.9925 8 European Monetary Union/euro3 n.a. n.a. n.a. n.a. 1.1591 1.1203 1.0886 1.0701 1.0630 9 Finland/markka 4.5948 5.1956 5.3473 5.0769 n.a. n.a. n.a. n.a. n.a. 10 France/franc 5.1158 5.8393 5.8995 5.5981 n.a. n.a. n.a. n.a. n.a. 11 Germany/deutsche mark 1.5049 1.7348 1.7597 1.6698 n.a. n.a. n.a. n.a. n.a. 12 Greece/drachma 240.82 273.28 295.70 280.43 278.91 287.41 296.36 304.26 305.96 13 Hong Kong/dollar 7.7345 7.7431 7.7467 7.7471 7.7486 7.749(' 7.7493 7.7495 7.7531 14 India/rupee 35.51 36.36 41.36 42.59 42.55 42.53 42.52 42.80 42.86 15 Ireland/pound2 159.95 151.63 142.48 148.76 n.a. n.a. n.a. n.a. n.a. 16 Italy/lira 1.542.76 1,703.81 1,736.85 1,653.23 n.a. n.a. n.a. n.a. n.a. 17 Japan/yen 108.78 121.06 130.99 117.07 113.29 116.67 119.47 119.77 122.00 18 Malaysia/ringgit 2.5154 2.8173 3.9254 3.8014 3.8000 3.8000 3.8000 3.8000 3.8000 19 Mexico/peso 7.600 7.918 9.152 9.907 10.128 10.006 9.732 9.430 9.395 70 Netherlands/guilder 1.6863 1.9525 1.9837 1.8816 n.a. n.a. n.a. n.a. n.a. 71 New Zealand/dollar' 68.77 66.25 53.61 52.23 53.88 54.35 53.45 54.27 .5530 77 Norway/krone 6.4594 7.0857 7.5521 7.6050 7.4532 7.7240 7.8151 7.7750 7.7496 23 Portugal/escudo 154.28 175.44 180.25 171.19 n.a. n.a. n.a. n.a. n.a. 74 Singapore/dollar 1.4100 1.4857 1.6722 1.6515 1.6791 1.7004 1.7292 1.7134 1.7122 75 South Africa/rand 4.3011 4.6072 5.5417 5.9030 5.9931 6.1146 6.2136 6.1186 6.1809 76 South Korea/won 805.00 947.65 1,400.40 1,213.22 1,175.11 1,188.84 1,229.72 1,209.96 1,197.92 77 Spain/peseta 126.68 146.53 149.41 142.08 n.a. n.a. n.a. n.a. n.a. 78 Sri Lanka/rupee 55.289 59.026 65.006 68.117 68.630 69.070 69.570 69.588 70.581 79 Sweden/krona 6.7082 7.6446 7.9522 8.0716 7.8188 7.9532 8.2144 8.3293 8.4432 30 Switzerland/franc 1.2361 1.4514 1.4506 1.3604 1.3856 1.4272 1.4660 1.4971 1.5078 31 Taiwan/dollar 27.468 28.775 33.547 32.337 32.300 32.564 33.165 32.965 32.791 37 Thailand/baht 25.359 31.072 41.262 36.276 36.622 37.137 37.557 37.631 37.051 33 United Kingdom/pound2 156.07 163.76 165.73 167.08 164.98 162.76 162.13 160.89 1.6154 34 Venezuela/bolivar 417.19 488.39 548.39 565.89 569.80 577.32 580.06 587.79 596.48 Indexes3 NOMINAL 35 G-10 (March 1973= 100)4 87.34 96.38 98.85 94.61 n.a. n.a. n.a. n.a. n.a. 36 Broad (January 1997 = 100)' 97.43 104.47 116.25 114.56 114.68 116.37 117.80 117.15 116.91 37 Major currencies (March 1973= 100)6 85.23 91.85 96.52 93.40 92.37 93.76 95.69 95.76 95.79 38 Other important trading partners (January 1997 = 100)7 98.25 104.67 125.70 126.80 128.98 130.83 131.03 129.24 128.55 REAL 39 Broad (March 1973=100)' 85.99 90.59 98.46 95.93r 95.61r 96.69r 98.08r 96.91r 96.65 40 Major currencies (March 1973= 100)6 85.88 93.24 98.36 95.48r 94.9 LR 96.40r 98.401" 98.71r 98.64 41 Other important trading partners (March 1973 = 100)7 92.52 93.61 105.83 103.61 103.62r 104.19r 104.81r 101.52r 100.99r 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 widelj 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—List Published Semiannually, with Latest Bulletin Reference Issue Page Anticipated schedule of release dates for periodic releases December 1998 A72 SPECIAL TABLES—Data Published Irregularly, with Latest Bulletin Reference Title and Date Issue Page Assets and liabilities of commercial banks March 31, 1998 August 1998 A64 June 30, 1998 November 1998 A64 September 30, 1998 February 1999 A64 December 31, 1998 May 1999 A64 Terms of lending at commercial banks May 1998 August 1998 A67 August 1998 November 1998 A66 November 1998 February 1999 A66 February 1999 May 1999 A66 Assets and liabilities of U.S. branches and agencies of foreign banks March 31, 1998 August 1998 A72 June 30, 1998 November 1998 A72 September 30, 1998 February 1999 A72 December 31, 1998 May 1999 A72 Pro forma balance sheet and income statements for priced service operations June 30, 1998 October 1998 A64 September 30, 1998 January 1999 A64 March 31, 1999 July 1999 A64 Residential lending reported under the Home Mortgage Disclosure Act 1995 September 1996 A68 1996 September 1997 A68 1997 September 1998 A68 Disposition of applications for private mortgage insurance 1996 September 1997 A76 1997 September 1998 A72 Small loans to businesses and farms 1997 September 1998 A76 Community development lending reported under the Community Reinvestment Act 1997 September 1998 A79 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 Special Tables • July 1999 4.31 PRO FORMA FINANCIAL STATEMENTS FOR FEDERAL RESERVE PRICED SERVICES A. Pro forma balance sheet Millions of dollars Item Mar. 31, 1999 Mar. 31, 1998 Short-term assets (Note 1) Imputed reserve requirement on clearing balances 671.3 610.7 Investment in marketable securities 6,041.7 5,496.3 Receivables 73.4 68.5 Materials and supplies 4.1 4.6 Prepaid expenses 29.8 24.3 Items in process of collection 4,406.3 5,892.3 Total short-term assets 11,226.7 12,096.8 Long-term assets (Note 2) 404.7 391.8 Furniture and equipment 143.1 130.8 Leases and leasehold improvements 29.5 25.4 Prepaid pension costs 459.3 366.4 Total long-term assets 1.036.5 914.4 Total assets 12,263.1 13,011.2 Short-term liabilities Clearing balances and balances arising from early credit of uncollected items 6,192.0 7,381.2 Deferred-availability items 4,927.3 4,618.1 Short-term debt 107.4 97.4 Total short-term liabilities 11,226,7 12,096.8 Long-term liabilities Obligations under capital leases .0 .0 Long-term debt 214.7 191.8 Postretirement/postemployment benefits obligation 219.3 207.7 Total long-term liabilities 434.1 399.5 Total liabilities 11,660.7 12,496.3 Equity 602.4 514.9 Total liabilities and equity (Note 3) 12,263.1 13,011.2 NOTE. Components may not sum to totals because of rounding. The priced services financial statements consist of these tables and the accompanying notes. B. Pro forma income statement Millions of dollars Item Quarter ending Mar. 31, 1999 Quarter ending Mar. 31, 1998 Revenue from services provided to depository institutions (Note 4) 203.1 195.1 Operating expenses (Note 5) 170.4 162.9 Income from operations 32.8 32.3 Imputed costs (Note 6) Interest on float 5.4 5.4 Interest on debt 4.6 4.3 Sales taxes 2.2 2.0 FDIC insurance .8 13.1 .0 11.7 Income from operations after imputed costs 19.7 20.6 Other income and expenses (Note 7) Investment income on clearing balances 81.9 93.5 Earnings credits (70.5) 11.4 (84.0) 9.5 Income before income taxes 31.1 30.1 Imputed income taxes (Note 8) 10.0 9.7 Net income 21.2 20.4 MEMO Targeted return on equity (Note 9) 17.3 15.7 NOTE. Components may not sum to totals because of rounding. The priced services financial statements consist of these tables and the accompanying notes. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A65 NOTES TO FINANCIAL STATEMENTS FOR FEDERAL RESERVE PRICED SERVICES (1) SHORT-TERM ASSETS (6) IMPUTED COSTS The imputed reserve requirement on clearing balances held at Reserve Banks by depository Imputed costs consist of interest on float, interest on debt, sales taxes, and the FDIC institutions reflects a treatment comparable to that of compensating balances held at corre- assessment. Interest on float is derived from the value of float to be recovered, either spondent banks by respondent institutions. The reserve requirement imposed on respondent explicitly or through per-item fees, during the period. Float costs include costs for checks, balances must be held as vault cash or as nonearning balances maintained at a Reserve Bank; book-entry securities, noncash collection, ACH, and funds transfers. thus, a portion of priced services clearing balances held with the Federal Reserve is shown as Interest is imputed on the debt assumed necessary to finance priced-service assets. The required reserves on the asset side of the balance sheet. The remainder of clearing balances is sales taxes and FDIC assessment that the Federal Reserve would have paid had it been a assumed to be invested in three-month Treasury bills, shown as investment in marketable private-sector firm are among the components of the PSAF (see note 3). securities. Float costs are based on the actual float incurred for each priced service, multiplied by the Receivables are (1) amounts due the Reserve Banks for priced services and (2) the share of appropriate federal funds rate. Other imputed costs are allocated among priced services suspense-account and difference-account balances related to priced services. according to the ratio of operating expenses less shipping expenses for each service to the Materials and supplies are the inventory value of short-term assets. total expenses for all services less the total shipping expenses for all services. Prepaid expenses include salary advances and travel advances for priced-service personnel. The following list shows the daily average recovery of float (before converting to float Items in process of collection is gross Federal Reserve cash items in process of collection costs) by the Reserve Banks for the first quarter of 1999 and 1998 in millions of dollars: (CIPC) stated on a basis comparable to that of a commercial bank. It reflects adjustments for intra-System items that would otherwise be double-counted on a consolidated Federal 1999 1998 Reserve balance sheet; adjustments for items associated with non-priced items, such as those collected for government agencies; and adjustments for items associated with providing fixed Total float 486.0 758.7 availability or credit before items are received and processed. Among the costs to be Unrecovered float (516.1) (10.7) recovered under the Monetary Control Act is the cost of float, or net CIPC during the period Float subject to recovery 1,002.1 769.4 (the difference between gross CIPC and deferred-availability items which is the portion of Sources of float recovery gross CIPC that involves a financing cost), valued at the federal funds rate. Income on clearing balances 98.9 76.6 As-of adjustments 531.8 376.4 Direct charges 245.2 141.4 (2) LONG-TERM ASSETS Per-item fees 126.2 175.0 Consists of long-term assets used solely in priced services, the priced-services portion of long-term assets shared with nonpriced services, and an estimate of the assets of the Board of Unrecovered float includes float generated by services to government agencies and by other Governors used in the development of priced services. Effective Jan. 1, 1987, the Reserve central bank services. Float recovered through income on clearing balances is the result of the Banks implemented the Financial Accounting Standards Board's Statement of Financial increase in investable clearing balances; the increase is produced by a deduction for float for Accounting Standards No. 87, Employers' Accounting for Pensions (SFAS 87). Accordingly, cash items in process of collection, which reduces imputed reserve requirements. The income the Federal Reserve Banks recognized credits to expenses of $21.9 million in the first quarter on clearing balances reduces the float to be recovered through other means. As-of adjustments of 1999 and $16.2 million in the first quarter of 1998, and corresponding increases in this are memorandum adjustments to an institution's reserve or clearing position to recover float asset account. incurred by the institution. Direct charges are billed to the institution for float incurred when an institution chooses to close on a normal business day and for float incurred on interterritory check transportation. Float recovered through direct charges is valued at cost using the federal (3) LIABILITIES AND EQUITY funds rate and charged directly to an institution's account. Float recovered through per-item fees is valued at the federal funds rate and has been added to the cost base subject to recovery Under the matched-book capital structure for assets that are not "self-financing," short-term in the first quarter of 1999. assets are financed with short-term debt. Long-term assets are financed with long-term debt and equity in a proportion equal to the ratio of long-term debt to equity for the fifty largest bank holding companies, which are used in the model for the private-sector adjustment factor (7) OTHER INCOME AND EXPENSES (PSAF). The PSAF consists of the taxes that would have been paid and the return on capital that would have been provided had priced services been furnished by a private-sector firm. Consists of imputed investment income on clearing balances and the actual cost of earnings Other short-term liabilities include clearing balances maintained at Reserve Banks and credits. Investment income on clearing balances represents the average coupon-equivalent deposit balances arising from float. Other long-term liabilities consist of obligations on capital yield on three-month Treasury bills applied to the total clearing balance maintained, adjusted leases. for the effect of reserve requirements on clearing balances. Expenses for earnings credits granted to depository institutions on their clearing balances are derived by applying the average federal funds rate to the required portion of the clearing balances, adjusted for the net (4) REVENUE effect of reserve requirements on clearing balances. Revenue represents charges to depository institutions for priced services and is realized from each institution through one of two methods; direct charges to an institution's account or (8) INCOME TAXES charges against its accumulated earnings credits. Imputed income taxes are calculated at the effective tax rate derived from the PSAF model (see note 3). (5) OPERATING EXPENSES (9) RETURN ON EQUITY Operating expenses consist of the direct, indirect, and other general administrative expenses of the Reserve Banks for priced services plus the expenses for staff members of the Board of Represents the after-tax rate of return on equity that the Federal Reserve would have earned Governors working directly on the development of priced services. The expenses for Board had it been a private business firm, as derived from the PSAF model (see note 3). This amount staff members were $.85 million in the first quarter of 1999 and $0.7 million in the first is adjusted to reflect the recovery of automation consolidation costs of $3.3 million for first quarter of 1998. The credit to expenses under SFAS 87 (see note 2) is reflected in operating quarter of 1999 and $2.6 million for the first quarter of 1998. The Reserve Banks plan to expenses. recover these amounts, along with a finance charge, by the end of 1999. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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

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

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

A69 ROGER W. FERGUSON, JR. EDWARD M. GRAMLICH OFFICE OF DIVISION OF RESERVE BANK OPERATIONS STAFF DIRECTOR FOR MANAGEMENT AND PAYMENT SYSTEMS STEPHEN R. MALPHRUS, Staff Director LOUISE L. ROSEMAN, Director PAUL W. BETTGE, Assistant Director JOHN R. WEIS, Adviser KENNETH D. BUCKLEY, Assistant Director MANAGEMENT DIVISION JACK DENNIS, JR., Assistant Director JOSEPH H. HAYES, JR., Assistant Director STEPHEN J. CLARK, Associate Director, Finance Function 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 GEORGE M. LOPEZ, Assistant Director DONALD L. ROBINSON, Assistant Inspector General DAVID L. WILLIAMS, Assistant Director DIVISION OF INFORMATION TECHNOLOGY RICHARD C. STEVENS, Director MARIANNE M. EMERSON, Deputy Director TILLENA G. CLARK, 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 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

70 Federal Reserve Bulletin • July 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,Vice 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

A71 CONSUMER ADVISORY COUNCIL YVONNE S. SPARKS STRAUTHER, St. Louis, Missouri, Chairman DWIGHT GOLANN, Boston, Massachusetts, Vice Chairman LAUREN ANDERSON, New Orleans, Louisiana JOHN C. LAMB, Sacramento, California WALTER J. BOYER, Garland, Texas ANNE S. LI, Trenton, New Jersey WAYNE-KENT A. BRADSHAW, LOS Angeles, California MARTHA W. MILLER, Greensboro, North Carolina MALCOLM M. BUSH, Chicago, Illinois DANIEL W. MORTON, Columbus, Ohio MARY ELLEN DOMEIER, New ULM, Minnesota 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, St. Paul, Minnesota ROSE M. GARCIA, Las Cruzes, New Mexico MARILYN ROSS, Omaha, Nebraska VINCENT J. GIBLIN, West Caldwell, New Jersey ROBERT G. SCHWEMM, Lexington, Kentucky KARL A S. IRVINE, Cincinnati, Ohio DAVID J. SHIRK, Eugene, Oregon WILLIE M. JONES, Boston, Massachusetts GAIL M. SMALL, Lame Deer, Montana JANET C. KOEHLER, Ponte Vedra, Florida GARY S. WASHINGTON, Chicago, Illinois GWENN S. KYZER, Allen, Texas ROBERT L. WYNN, II, Madison, Wisconsin 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

72 Federal Reserve Bulletin • July 1999 Federal Reserve Board Publications For ordering assistance, write PUBLICATIONS SERVICES, Rates for subscribers outside the United States are as follows MS-127, Board of Governors of the Federal Reserve System, and include additional air mail costs: Washington, DC 20551, or telephone (202) 452-3244, or FAX Federal Reserve Regulatory Service, $250.00 per year. (202) 728-5886. You may also use the publications order Each Handbook, $90.00 per year. form available on the Board's World Wide Web site FEDERAL RESERVE REGULATORY SERVICE FOR PERSONAL (http://www.federalreserve.gov). When a charge is indicated, pay- COMPUTERS. CD-ROM; updated monthly. ment should accompany request and be made payable to the Standalone PC. $300 per year. Board of Governors of the Federal Reserve System or may be Network, maximum 1 concurrent user. $300 per year. ordered via Mastercard, Visa, or American Express. Payment from Network, maximum 10 concurrent users. $750 per year. foreign residents should be drawn on a U.S. bank. Network, maximum 50 concurrent users. $2,000 per year. Network, maximum 100 concurrent users. $3,000 per year. Subscribers outside the United States should add $50 to cover BOOKS AND MISCELLANEOUS PUBLICATIONS additional airmail costs. THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNCTIONS. THE FEDERAL RESERVE ACT AND OTHER STATUTORY PROVISIONS 1994. 157 pp. AFFECTING THE FEDERAL RESERVE SYSTEM, as amended ANNUAL REPORT, 1997. through October 1998. 723 pp. $20.00 each. ANNUAL REPORT: BUDGET REVIEW, 1999. 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 States, its possessions, Canada, and Mexico. Elsewhere, The Federal Open Market Committee $35.00 per year or $.80 each. Federal Reserve Bank Board of Directors Federal Reserve Banks REGULATIONS OF THE BOARD OF GOVERNORS OF THE FEDERAL 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. Federal Reserve Regulatory Service. Four vols. (Contains all four Handbooks plus substantial additional material.) $200.00 per year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A73 STAFF STUDIES: Only Summaries Printed in the 162. EVIDENCE ON THE SIZE OF BANKING MARKETS FROM MORT- BULLETIN GAGE LOAN RATES IN TWENTY CITIES, by Stephen A. Rhoades. February 1992. 11 pp. Studies and papers on economic and financial subjects that are of 164. THE 1989-92 CREDIT CRUNCH FOR REAL ESTATE, BY general interest. Requests to obtain single copies of the full text or JAMES T. FERGUS AND JOHN L. GOODMAN, JR. JULY 1993. to be added to the mailing list for the series may be sent to 20 PP. Publications Services. 167. A SUMMARY OF MERGER PERFORMANCE STUDIES IN BANK- ING, 1980-93, AND AN ASSESSMENT OF THE "OPERATING Staff Studies 1-158, 161, 163, 165, 166, and 168-169 are out of PERFORMANCE" AND "EVENT STUDY" METHODOLOGIES, print. by Stephen A. Rhoades. July 1994. 37 pp. 170. THE COST OF IMPLEMENTING CONSUMER FINANCIAL REGU- 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUBSIDI- LATIONS: AN ANALYSIS OF EXPERIENCE WITH THE TRUTH ARIES OF BANK HOLDING COMPANIES, by Nellie Liang and IN SAVINGS ACT, by Gregory Elliehausen and Barbara R. Donald Savage. February 1990. 12 pp. Lowrey, December 1997. 17 pp. 160. BANKING MARKETS AND THE USE OF FINANCIAL SER- 171. THE COST OF BANK REGULATION: A REVIEW OF THE EVI- VICES BY SMALL AND MEDIUM-SIZED BUSINESSES, by DENCE, by Gregory Elliehausen, April 1998. 35 pp. Gregory E. Elliehausen and John D. Wolken. September 1990. 35 pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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

A75 1-A 2-B 3-C 4-D 5-E Ml-. Pittsburgh Baltimore MD NY fI /CI VAM VT wv NT inati •Charloik' Bull .ilo MA ™ / NJ sc BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 6-F 7-G 8-H KY / IL ) IN f Louisville MO AR 1 -TN LA 1 * Jacksotwille • Memphis New Oilcans Little / Rock ( MlICS ATLANTA CHICAGO ST. LOUIS 9-1 MT ll ' M M— • Helena • " MINNEAPOLIS 10-J 12-L CO Omaha* • Us ^ • M O ' Denver NM Oklahoma C'it\ • KANSAS CITY 11-K NM A/ DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

76 Federal Reserve Bulletin • July 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 Barbara B.Henshaw Pittsburgh 15230 John T. Ryan, III Robert B. Schaub RICHMOND* 23219 Claudine B. Malone J. Alfred Broaddus, Jr. Jeremiah J. Sheehan Walter A. Varvel Baltimore 21203 Daniel R. Baker William J. Tignanelli1 Charlotte 28230 Joan H. Zimmerman Dan M. Bechter1 ATLANTA 30303 John F. Wieland Jack Guynn Paula Lovell Patrick K. Barron James M. McKee Birmingham 35283 V. Larkin Martin Fred R. Herr1 Jacksonville 32231 Marsha G. Rydberg James D. Hawkins1 Miami 33152 Mark T. Sodders James T. Curry III Nashville 37203 N. Whitney Johns Melvyn K. Purcell1 New Orleans 70161 R. Glenn Pumpelly Robert J. Musso1 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 Perine Beard 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. Gambs1 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, III1 San Antonio 78295 Bartell Zachry James L. Stull1 SAN FRANCISCO 94120 Gary G. Michael Robert T. Parry Nelson C. Rising John F. Moore Los Angeles 90051 Lonnie Kane Mark L. Mullinix1 Portland 97208 Nancy Wilgenbusch Raymond H. Laurence1 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

All Publications of Interest FEDERAL RESERVE CONSUMER CREDIT PUBLICATIONS The Federal Reserve Board publishes a series of Shop . . . The Card You Pick Can Save You Money brochures covering individual credit laws and topics, is designed to help consumers comparison shop when as pictured below. looking for a credit card. It contains the results of the Five brochures on the mortgage process are avail- Federal Reserve Board's survey of the terms of credit able: A Consumer's Guide to Mortgage Lock-Ins, card plans offered by credit card issuers throughout A Consumer's Guide to Mortgage Refinancings, A the United States. Because the terms can affect the Consumer's Guide to Mortgage Settlement Costs, amount an individual pays for using a credit card, the Home Mortgages: Understanding the Process and booklet lists the annual percentage rate (APR), annual Your Right to Fair Lending, and Looking for the Best fee, grace period, type of pricing (fixed or variable Mortgage: Shop, Compare, Negotiate. These bro- rate), and a telephone number for each card issuer chures were prepared in conjunction with the Federal surveyed. A Guide to Business Credit for Women, Home Loan Bank Board and in consultation with Minorities, and Small Businesses covers the credit other federal agencies and trade and consumer application process and points out sources of technigroups. The Board also publishes the Consumer cal assistance for small business loans. Handbook to Credit Protection Laws, a complete Up to 100 copies of consumer publications are guide to consumer credit protections. This forty-four- available free of charge from Publications Services, page booklet explains how to shop and obtain credit, Mail Stop 127, Board of Governors of the Federal how to maintain a good credit rating, and how to Reserve System, Washington, DC 20551. dispute unfair credit transactions. A Consumer's HOME MORTGAGES: Quids to Understanding the Process Mortgage and Your Right to Fair Lending Lock-ins iMJLCl Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

78 Federal Reserve Bulletin • July 1999 Publications of Interest FEDERAL RESERVE REGULATORY SERVICE To promote public understanding of its regulatory func- The Payment System Handbook deals with expedited tions, the Board publishes the Federal Reserve Regu- funds availability, check collection, wire transfers, and latory Service, a four-volume loose-leaf service con- risk-reduction policy. It includes Regulations CC, J, and taining all Board regulations as well as related statutes, EE, related statutes and commentaries, and policy interpretations, policy statements, rulings, and staff statements on risk reduction in the payment system. opinions. For those with a more specialized interest in For domestic subscribers, the annual rate is $200 for the Board's regulations, parts of this service are pub- the Federal Reserve Regulatory Service and $75 for lished separately as handbooks pertaining to monetary each handbook. For subscribers outside the United policy, securities credit, consumer affairs, and the pay- States, the price including additional air mail costs is ment system. $250 for the service and $90 for each handbook. These publications are designed to help those who The Federal Reserve Regulatory Service is also availmust frequently refer to the Board's regulatory materi- able on CD-ROM for use on personal computers. For a als. They are updated monthly, and each contains cita- standalone PC, the annual subscription fee is $300. For tion indexes and a subject index. network subscriptions, the annual fee is $300 for 1 con- The Monetary Policy and Reserve Requirements current user, $750 for a maximum of 10 concurrent Handbook contains Regulations A, D, and Q, plus users, $2,000 for a maximum of 50 concurrent users, related materials. and $3,000 for a maximum of 100 concurrent users. The Securities Credit Transactions Handbook con- Subscribers outside the United States should add $50 tains Regulations T, U, and X, dealing with exten- to cover additional airmail costs. For further informasions of credit for the purchase of securities, together tion, call (202) 452-3244. with related statutes, Board interpretations, rulings, All subscription requests must be accompanied by a and staff opinions. Also included is the Board's list of check or money order payable to the Board of Goverforeign margin stocks. nors of the Federal Reserve System. Orders should be The Consumer and Community Affairs Handbook addressed to Publications Services, mail stop 127, Board contains Regulations B, C, E, M, Z, AA, BB, and DD, of Governors of the Federal Reserve System, Washingand associated materials. ton, DC 20551. GUIDE TO THE FLOW OF FUNDS ACCOUNTS Guide to the Flow of Funds Accounts explains in detail dures as seasonal adjustment, extrapolation, and how the U.S. financial flow accounts are prepared. The interpolation. accounts, which are compiled by the Division of The balance of the Guide contains explanatory tables Research and Statistics, are published in the Board's corresponding to the tables of financial flows data that quarterly Z.l statistical release, "Flow of Funds appeared in the September 1992 Z.l release. These Accounts, Flows and Outstandings." The Guide updates tables give, for each data series, the source of the data or and replaces Introduction to Flow of Funds, published the methods of calculation, along with annual data for in 1980. 1991 that were published in the September 1992 release. The 670-page Guide begins with an explanation of Guide to the Flow of Funds Accounts is available for the organization and uses of the flow of funds accounts $8.50 per copy from Publications Services, Board of and their relationship to the national income and Governors of the Federal Reserve System, Washington, product accounts prepared by the U.S. Department of DC 20551. Orders must include a check or money order, Commerce. Also discussed are the individual data in U.S. dollars, made payable to the Board of Governors series that make up the accounts and such proce- of the Federal Reserve System. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis