Federal Reserve Bulletin, 2000-08

Volume 86 • Number 8 • August 2000 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 539 MONETARY POLICY REPORT TO THE 569 STATEMENTS TO THE CONGRESS CONGRESS Laurence H. Meyer, member, Board of Gover- The impressive performance of the U.S. econ- nors, explains the rules recently proposed by omy persisted in the first half of 2000 with the Federal Reserve Board and the Department economic activity expanding at a rapid pace. of the Treasury to allow financial holding com- Overall rates of inflation were noticeably higher, panies to engage in merchant banking activities largely as a result of steep increases in energy under the Gramm-Leach-Bliley Act and states prices. The remarkable wave of new technolo- that the interim rule and the proposal would gies and the associated surge in capital invest- allow merchant banking to continue to develop ment have continued to boost potential supply along the lines already evident in the industry and to help contain price pressures at high levels and in the manner intended by the Congress, of labor resource use. At the same time, ris- while at the same time attempting to address the ing productivity growth—working through its boundaries between merchant banking and the effects on wealth and consumption, as well as mixing of banking and commerce. Further, he on investment spending—has been one of the testifies that the rule seeks responsibly to come important factors contributing to rapid increases to grips with the very real safety and soundness in aggregate demand that have exceeded even risks to an insured depository affiliate of both a the stepped-up increases in potential supply. financial holding company that engages in mer- Under such circumstances, and with the pool of chant banking and a bank holding company that available labor already at an unusually low level, invests in equities using existing authorities the continued expansion of aggregate demand in (Testimony before the Subcommittee on Capital excess of the growth in potential supply increas- Markets, Securities and Government Sponsored ingly threatened to set off greater price pres- Enterprises of the House Committee on Banking sures. Because price stability is essential to and Financial Services, June 7, 2000. Governor achieving maximum sustainable economic Meyer presented identical testimony before the growth, heading off these pressures has been Subcommittee on Financial Institutions and the critical to extending the extraordinary perfor- Subcommittee on Securities of the Senate Commance of the U.S. economy. To promote balance mittee on Banking, Housing, and Urban Affairs between aggregate demand and potential supply on June 13, 2000). and to contain inflation pressures, the Federal 577 Patrick M. Parkinson, Associate Director, Divi- Open Market Committee (FOMC) took addision of Research and Statistics, Board of Govertional firming actions this year, raising the nors, presents the Board's views on legislation benchmark federal funds rate 1 percentage point to modernize the Commodity Exchange Act between February and May. (CEA) and states that the Board continues to believe that legislation to modernize the CEA is essential if our derivatives markets are to 566 INDUSTRIAL PRODUCTION AND CAPACITY remain innovative and competitive internation- UTILIZATION FOR JUNE 2000 ally. He states further that although some diffi- Industrial production rose 0.2 percent in June, cult issues remain unresolved, the proposed to 144.6 percent of its 1992 average, after gains legislation (H.R. 4541) represents significant of 0.5 percent in May and 0.8 percent in April. progress (Testimony before the Subcommittee The rate of capacity utilization for total indus- on Risk Management, Research, and Specialty try edged down in June to 82.1 percent, a level Crops of the House Committee on Agriculture, about even with the 1967-99 average. June 14, 2000). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

579 Alan Greenspan, Chairman, Board of Gover- eral funds rate by Vi percentage point to a level nors, presents the Board's views on the Com- of 6V2 percent. The Committee also indicated modity Futures Modernization Act of 2000 that the economic risks remained weighted (S. 2697) and testifies that this bill reflects a toward rising inflation. remarkable consensus on the need for legal certainty for OTC derivatives and regulatory relief 593 LEGAL DEVELOPMENTS for U.S. futures exchanges, issues that have long Various bank holding company, bank service eluded resolution. He states further that these corporation, and bank merger orders; and pendprovisions are vitally important to the sounding cases. ness and competitiveness of our derivatives markets in what is an increasingly integrated and A1 FINANCIAL AND BUSINESS STATISTICS intensely competitive global economy (Testimony before the Committee on Agriculture, These tables reflect data available as of Nutrition, and Forestry of the Senate Committee June 28, 2000. on Banking, Housing, and Urban Affairs, June 21, 2000). A3 GUIDE TO TABULAR PRESENTATION A4 Domestic Financial Statistics 582 ANNOUNCEMENTS A42 Domestic Nonfinancial Statistics Federal Open Market Committee directive. A50 International Statistics Chairman Greenspan sworn in for fourth four- A63 GUIDE TO STATISTICAL RELEASES AND year term. SPECIAL TABLES Proposed revisions to the official staff commentary to Regulation E. A78 INDEX TO STATISTICAL TABLES Issuance of examination guidance on equity A80 BOARD OF GOVERNORS AND STAFF investment and merchant banking. Interagency request for comment on proposed A82 FEDERAL OPEN MARKET COMMITTEE AND standards for customer information security. STAFF; ADVISORY COUNCILS Joint agency issuance of revised suspicious A84 FEDERAL RESERVE BOARD PUBLICATIONS activity report form. Enforcement actions. A86 MAPS OF THE FEDERAL RESERVE SYSTEM Publication of the June 2000 update of the Bank A88 FEDERAL RESERVE BANKS, BRANCHES, Holding Company Supervision Manual. AND OFFICES 587 MINUTES OF THE MEETING OF THE FEDERAL OPEN MARKET COMMITTEE HELD ON MAY 16, 2000 At this meeting, the Committee voted to tighten reserve conditions sufficiently to raise the fed- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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

Monetary Policy Report to the Congress Report forwarded to the Congress on July 20, 2000 tighter monetary policy and rising interest rates in most other industrial countries. Perhaps partly reflecting firmer financial conditions, the incoming economic data since May have MONETARY POLICY AND THE suggested some moderation in the growth of aggre- ECONOMIC OUTLOOK gate demand. Nonetheless, labor markets remained The impressive performance of the U.S. economy tight at the time of the FOMC meeting in June, and it persisted in the first half of 2000 with economic was unclear whether the slowdown represented a activity expanding at a rapid pace. Overall rates of decisive shift to more sustainable growth or just a inflation were noticeably higher, largely as a result pause. The Committee left the stance of policy of steep increases in energy prices. The remarkable unchanged but saw the balance of risks to the ecowave of new technologies and the associated surge in nomic outlook as still weighted toward rising capital investment have continued to boost potential inflation. supply and to help contain price pressures at high levels of labor resource use. At the same time, rising productivity growth—working through its effects Monetary Policy, Financial Markets, on wealth and consumption, as well as on investment and the Economy over the First Half of 2000 spending—has been one of the important factors contributing to rapid increases in aggregate demand When the FOMC convened for its first two meetings that have exceeded even the stepped-up increases of the year, in February and March, economic condiin potential supply. Under such circumstances, and tions in the United States were pointing toward an with the pool of available labor already at an unusu- increasingly taut labor market as a consequence of ally low level, the continued expansion of aggregate a persistent imbalance between the growth rates of demand in excess of the growth in potential supply aggregate demand and potential aggregate supply. increasingly threatened to set off greater price pres- Reflecting the underlying strength in spending and sures. Because price stability is essential to achieving expectations of tighter monetary policy, market intermaximum sustainable economic growth, heading off est rates were rising, especially after the century date these pressures has been critical to extending the change passed without incident. But, at the same extraordinary performance of the U.S. economy. time, equity prices were still posting appreciable To promote balance between aggregate demand gains on net. Knowing that the two safety valves that and potential supply and to contain inflation pres- had been keeping underlying inflation from picking sures, the Federal Open Market Committee (FOMC) up until then—the economy's ability to draw on the took additional firming actions this year, raising the pool of available workers and to expand its trade benchmark federal funds rate 1 percentage point deficit on reasonable terms—could not be counted on between February and May. The tighter stance of indefinitely, the FOMC voted for a further tightening monetary policy, along with the ongoing strength of in monetary policy at both its February and its March credit demands, has led to less accommodative finan- meetings, raising the target for the overnight federal cial conditions: On balance, since the beginning of the funds rate 25 basis points on each occasion. In related year, real interest rates have increased, equity prices actions, the Board of Governors also approved have changed little after a sizable run-up in 1999, and quarter-point increases in the discount rate in both lenders have become more cautious about extending February and March. credit, especially to marginal borrowers. Still, house- The FOMC considered larger policy moves at its holds and businesses have continued to borrow at a first two meetings of 2000 but concluded that signifirapid pace, and the growth of M2 remained relatively cant uncertainty about the outlook for the expansion robust, despite the rise in market interest rates. The of aggregate demand in relation to that of aggregate favorable outlook for the U.S. economy has contrib- supply, including the timing and strength of the uted to a further strengthening of the dollar, despite economy's response to earlier monetary policy tight- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

540 Federal Reserve Bulletin • August 2000 Selected interest rates NOTE. The data are daily. Vertical lines indicate the days on which the horizontal axis are those on which either the FOMC held a scheduled meeting or Federal Reserve announced a change in the intended funds rate. The dates on the a policy action was announced. Last observations are for July 17, 2000. enings, warranted a more limited policy action. Still, spread market expectations of such an action. Even noting that there had been few signs that the rise in after taking into account its latest action, however, interest rates over recent quarters had begun to bring the FOMC saw the strength in spending and presdemand in line with potential supply, the Committee sures in labor markets as indicating that the balance decided in both instances that the balance of risks of risks remained tilted toward rising inflation. going forward was weighted mainly in the direction By the June FOMC meeting, the incoming data of rising inflation pressures. In particular, it was were suggesting that the expansion of aggregate debecoming increasingly clear that the Committee mand might be moderating toward a more sustainable would need to move more aggressively at a later pace: Consumers had increased their outlays for meeting if imbalances continued to build and infla- goods modestly during the spring; home purchases tion and inflation expectations, which had remained and starts appeared to have softened; and readings on relatively subdued until then, began to pick up.1 the labor market suggested that the pace of hiring Some readings between the March and May meet- might be cooling off. Moreover, much of the effects ings of the FOMC on labor costs and prices sug- on demand of previous policy firmings, including the gested a possible increase of inflation pressures. 50 basis point tightening in May, had not yet been Moreover, aggregate demand had continued to grow fully realized. Financial market participants interat a fast clip, and markets for labor and other preted signs of economic slowing as suggesting that resources were showing signs of further tightening. the Federal Reserve probably would be able to hold Financial market conditions had firmed in response to inflation in check without much additional policy these developments; the substantial rise in private firming. However, whether aggregate demand had borrowing rates between March and May had been moved decisively onto a more moderate expansion influenced by the buildup in expectations of more track was not yet clear, and labor resource utilization policy tightening as market participants recognized remained unusually elevated. Thus, although the the need for higher short-term interest rates. Given all FOMC decided to defer any policy action in June, it these circumstances, the FOMC decided in May to indicated that the balance of risks was still on the side raise the target for the overnight federal funds rate of rising inflation in the foreseeable future.2 50 basis points, to 6V2 percent. The Committee saw little risk in the more forceful action given the strong momentum of the economic expansion and wide- 2. At its June meeting, the FOMC did not establish ranges for growth of money and debt in 2000 and 2001. The legal requirement to establish and to announce such ranges had expired, and owing to uncertainties about the behavior of the velocities of debt and money, 1. At its March and May meetings, the FOMC took a number of these ranges for many years have not provided useful benchmarks for actions that were aimed at adjusting the implementation of monetary the conduct of monetary policy. Nevertheless, the FOMC believes that policy to actual and prospective reductions in the stock of Treasury the behavior of money and credit will continue to have value for debt securities. These actions are described in the discussion of U.S. gauging economic and financial conditions, and this report discusses financial markets. recent developments in money and credit in some detail. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 541 Economic Projections for 2000 and 2001 high, and given the rapid pace of technological change, firms will continue to exploit opportunities to The members of the Board of Governors and the implement more-efficient processes and to speed the Federal Reserve Bank presidents expect the current flow of information across markets. In such an envieconomic expansion to continue through next year, ronment, a further pickup in productivity growth is a but at a more moderate pace than the average over distinct possibility. However, a portion of the very recent quarters. For 2000 as a whole, the central rapid rise in measured productivity in recent quarters tendency of their forecasts for the rate of increase may be a result of the cyclical characteristics of this in real gross domestic product (GDP) is 4 percent to expansion rather than an indication of structural rates 4'/ percent, measured as the change between the of increase consistent with holding the level of 2 fourth quarter of 1999 and the fourth quarter of 2000. resource utilization unchanged. Current levels of Over the four quarters of 2001, the central tendency labor resource utilization are already unusually high. forecasts of real GDP are in the VA percent to To date, this has not led to escalating unit labor costs, 33A percent range. With this pace of expansion, the but whether such a favorable performance in the civilian unemployment rate should remain near its labor market can be sustained is one of the important recent level of 4 percent. Even with the moderation in uncertainties in the outlook. the pace of economic activity, the Committee mem- On the demand side, the adjustments in financial bers and nonvoting Bank presidents expect that infla- markets that have accompanied expected and actual tion may be higher in 2001 than in 1999, and the tighter monetary conditions may be beginning to Committee will need to be alert to the possibility that moderate the rise in domestic demand. As that profinancial conditions may need to be adjusted further cess evolves, the substantial impetus that household to balance aggregate demand and potential supply spending has received in recent years from rapid and to keep inflation low. gains in equity wealth should subside. The higher Considerable uncertainties attend estimates of cost of business borrowing and more-restrictive credit potential supply—both the rate of growth and the supply conditions probably will not exert substantial level of the economy's ability to produce on a sus- restraint on investment decisions, particularly as long tained non-inflationary basis. Business investment in as the costs and potential productivity payoffs of new new equipment and software has been exceptionally equipment and software remain attractive. The slowing in domestic spending will not be fully reflected in a more moderate expansion of domestic production. 1. Economic projections for 2000 and 2001 Some of the slowing will be absorbed in smaller Percent increases in imports of goods and services, and given Federal Reserve governors continued recovery in economic activity abroad, and Reserve Bank presidents IInnddiiccaattoorr AAddmmiinniissttrraattiioonn domestic firms are expected to continue seeing a Ranap Central boost to demand and to production from rising Ran§e tendency exports. 2000 Regarding inflation, FOMC participants believe CCCChhhhaaaannnnggggeeee,,,, ffffoooouuuurrrrtttthhhh qqqquuuuaaaarrrrtttteeeerrrr that the rise in consumer prices will be noticeably ttttoooo ffffoooouuuurrrrtttthhhh qqqquuuuaaaarrrrtttteeeerrrr!!!! NNNNoooommmmiiiinnnnaaaallll GGGGDDDDPPPP 6-7 Vi 6</4-6% 6.0 larger this year than in 1999 and that inflation will RRRReeeeaaaallll GGGGDDDDPPPP2222 3%-5 4-4!/2 3.9 PPPPCCCCEEEE pppprrrriiiicccceeeessss 2-2% 2'/2-2% 3.23 then drop back somewhat in 2001. The central tendency of their forecasts for the increase in the chain- AAAAvvvveeeerrrraaaaggggeeee lllleeeevvvveeeellll,,,, ffffoooouuuurrrrtttthhhh qqqquuuuaaaarrrrtttteeeerrrr type index for personal consumption expenditures CCCCiiiivvvviiiilllliiii rrrr aaaa aaaa nnnn tttteeee uuuunnnneeeemmmmppppllllooooyyyymmmmeeeennnntttt 4-414 About 4 4.1 is 2V2 percent to 23A percent over the four quarters of 2000 and 2 percent to 2xh percent during 2001. 2001 Shaping the contour of this inflation forecast is the CCCChhhhaaaannnnggggeeee,,,, ffffoooouuuurrrrtttthhhh qqqquuuuaaaarrrrtttteeeerrrr expectation that the direct and indirect effects of the ttttoooo ffffoooouuuurrrrtttthhhh qqqquuuuaaaarrrrtttteeeerrrr1111 NNNNoooommmmiiiinnnnaaaallll GGGGDDDDPPPP 5-6 Vi 5'/2-6 5.3 boost to domestic inflation this year from the rise in RRRReeeeaaaallll GGGGDDDDPPPP2222 2'/2-4 31/4-3% 3.2 PPPPCCCCEEEE pppprrrriiiicccceeeessss l%-3 2-2'/a 2.53 the price of world crude oil will be partly reversed next year if, as futures markets suggest, crude oil AAAAvvvveeeerrrraaaaggggeeee lllleeeevvvveeeellll,,,, ffffoooouuuurrrrtttthhhh qqqquuuuaaaarrrrtttteeeerrrr prices retrace this year's run-up by next year. None- CCCCiiiivvvviiiilllliiiiaaaannnn uuuunnnneeeemmmmppppllllooooyyyymmmmeeeennnntttt rrrraaaatttteeee 4.41/2 4-4'/4 4.2 theless, these forecasts show consumer price inflation in 2001 to have moved above the rates that prevailed 1. Change from average for fourth quarter of previous year to average for fourth quarter of year indicated. over the 1997-98 period. Such a trend, were it not to 2. Chain-weighted. show signs of quickly stabilizing or reversing, would 3. Projection for the consumer price index. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

542 Federal Reserve Bulletin • August 2000 pose a considerable risk to the continuation of the Change in PCE chain-type price index extraordinary economic performance of recent years. The economic forecasts of the FOMC are similar Percent, annual rate to those recently released by the Administration in its Mid-Session Review of the Budget. Compared with Ql the forecasts available in February, the Administration raised its projections for the increase in real GDP in 2000 and 2001 to rates that lie at the low end of the current range of central tendencies of Federal Reserve l l l i . ll policymakers. The Administration also expects that the unemployment rate will remain close to 4 percent. Like the FOMC, the Administration sees consumer price inflation rising this year and falling back in 2001. After accounting for the differences in the J L construction of the alternative measures of consumer 1994 1995 1996 1997 1998 1999 2000 prices, the Administration's projections of increases in the consumer price index (CPI) of 3.2 percent in 2000 and 2.5 percent in 2001 are broadly consistent with the Committee's expectations for the chain-type second half of 1999, were particularly robust, rising price index for personal consumption expenditures. at an annual rate of almost 10 percent in the first quarter. Underlying that surge in domestic spending were many of the same factors that had contributed ECONOMIC AND FINANCIAL DEVELOPMENTS to the considerable strength of outlays in the second IN 2000 half of 1999. The ongoing influence of substantial increases in real income and wealth continued to fuel The expansion of U.S. economic activity maintained consumer spending, and business investment, which considerable momentum through the early months of continues to be undergirded by the desire to take 2000 despite the firming in credit markets that has advantage of new, cost-saving technologies, was furoccurred over the past year. Only recently has the ther buoyed by an acceleration in sales and profits pace of real activity shown signs of having moderlate last year. Export demand posted a solid gain ated from the extremely rapid rate of increase that during the first quarter while imports rose even more prevailed during the second half of 1999 and the rapidly to meet booming domestic demand. The first quarter of 2000. Real GDP increased at an annual available data, on balance, point to another solid rate of 5Vi percent in the first quarter of 2000. Private increase in real GDP in the second quarter, although domestic final sales, which had accelerated in the they suggest that private household and business fixed investment spending likely slowed noticeably from the extraordinary first-quarter pace. Through Change in real GDP June, the expansion remained brisk enough to keep labor utilization near the very high levels reached at Percent, annual rate the end of 1999 and to raise the factory utilization rate to close to its long-run average by early spring. Inflation rates over the first half of 2000 were Ql elevated by an additional increase in the price of imported crude oil, which led to sharp hikes in retail energy prices early in the year and again around midyear. Apart from energy, consumer price infla- III I tion so far this year has been somewhat higher than during 1999, and some of that acceleration may be attributable to the indirect effects of higher energy I costs on the prices of core goods and services. Sustained strong gains in worker productivity 1994 1995 1996 1997 1998 1999 2000 have kept increases in unit labor costs minimal NOTE. In this chart and in subsequent charts that show the components of despite the persistence of a historically low rate of real GDP, changes are measured to the final quarter of the period indicated, from unemployment. the final quarter of the previous period. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 543 Change in real income and consumption In recent months, the rise in consumer spending has moderated considerably from the phenomenal Percent, annual rate pace of the first quarter, with much of the slowdown Q Disposable personal income in outlays for goods. At an annual rate of 17LA million units in the second quarter, light motor vehicles sold at a rate well below their first-quarter pace. Nonetheless, that level of sales is still historically high, and with prices remaining damped and automakers continuing to use incentives, consumers' assessments of the motor vehicle market continue to be positive. The information on retail sales for the April-to-June period indicate that consumer expenditures for other goods rose markedly slower in the second quarter than in the first quarter, at a pace well below the average rate of increase during the pre- 1994 1995 1996 1997 1998 1999 2000 ceding two years. In contrast, personal consumption expenditures for consumer services continued to rise The Household Sector relatively briskly in April and May. Real disposable personal income increased at an Consumer Spending annual rate of about 3 percent between December and May—slightly below the 1999 pace of 33/4 per- Consumer spending was exceptionally vigorous dur- cent. However, the impetus to spending from the ing the first quarter of 2000. Real personal consump- rapid rise in household net worth was still considertion expenditures rose at an annual rate of 13A per- able, labor markets remained tight, and confidence cent, the sharpest increase since early 1983. At that was still high. As a result, households continued to time, the economy was rebounding from a deep allow their spending to outpace their flow of current recession during which households had deferred income, and the personal saving rate, as measured in discretionary purchases. In contrast, the first-quarter the national income and product accounts, dropped surge in consumption came on the heels of two years further, averaging less than 1 percent during the first of very robust spending during which real outlays five months of the year. increased at an annual rate of more than 5 percent, After having boosted the ratio of household net and the personal saving rate dropped sharply. worth to disposable income to a record high in the Outlays for durable goods, which rose at a very first quarter, stock prices have fallen back, suggesting fast pace in 1998 and 1999, accelerated during the less impetus to consumer spending going forward. In first quarter to an annual rate of more than 24 percent. addition, smaller employment gains and the pickup in Most notably, spending on motor vehicles, which had climbed to a new high in 1999, jumped even further in the first quarter of 2000 as unit sales of light motor Wealth and saving vehicles soared to a record rate of 18.1 million units. In addition, households' spending on computing Ratio Percent equipment and software rebounded after the turn of the year; some consumers apparently had postponed their purchases of these goods in late 1999 before the century date change. Outlays for nondurable goods posted a solid increase of 53A percent in the first quarter, marked by a sharp upturn in spending on clothing and shoes. Spending for consumer services also picked up in the first quarter, rising at an annual rate of 5V2 percent. Spending was quite brisk for a number of non-energy consumer services, ranging from recreation and telephone use to brokerage fees. Also contributing to the acceleration was a rebound in outlays for energy services, which had declined in 1978 1982 1986 1990 1994 1998 late 1999, when weather was unseasonably warm. NOTE. The wealth-to-income ratio is the ratio of net worth of households to disposable personal income. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

544 Federal Reserve Bulletin • August 2000 energy prices have moderated the rise in real income lowest level in more than nine years. Survey responof late. Although these developments left some dents noted that, besides higher financing costs, imprint on consumer attitudes in June, households higher prices of homes were becoming a factor in remained relatively upbeat about their prospective their less positive assessment of market conditions. financial situation, according to the results of the Purchases of existing homes were little changed, University of Michigan Survey Research Center on balance, in April and May from the first-quarter (SRC) survey. However, they became a bit less posi- average; however, because these sales are recorded at tive about the outlook for business conditions and the time of closing, they tend to be a lagging indicasaw a somewhat greater likelihood of a rise in unem- tor of demand. Sales of new homes—a more current ployment over the coming year. indicator—fell back in April and May, and homebuilders reported that sales dropped further in June. Perhaps a sign that softer demand has begun to affect Residential Investment construction, starts of new single-family homes slipped to a rate of llA million units in May. That Housing activity stayed at a high level during the first level of new homebuilding, although noticeably half of this year. Homebuilders began the year with a slower than the robust pace that characterized the fall considerable backlog of projects that had developed and winter period, is only a bit below the elevated as the exceptionally strong demand of the previous level that prevailed throughout much of 1998, when year strained capacity. As a result, they maintained single-family starts reached their highest level in starts of new single-family homes at an annual rate of twenty years. Starts of multifamily housing units, 1.33 million units, on average, through April— which also had stepped up sharply in the first quarter matching 1999's robust pace. Households' demand of the year, to an annual rate of 390,000 units, settled for single-family homes was supported early in the back to a 340,000 unit rate in April and May. year by ongoing gains in jobs and income and the earlier run-up in wealth; those forces apparently were sufficient to offset the effects that higher mortgage Household Finance interest rates had on the affordability of new homes. Sales of new homes were particularly robust, setting Fueled by robust spending, especially early in the a new record by March; but sales of existing units year, the expansion of household debt remained brisk slipped below their 1999 high. As a result of the during the first half of 2000, although below the very continued strength in sales, the homeownership rate strong 1999 growth rate. Apparently, a favorable reached a new high in the first quarter. outlook for income and employment, along with ris- By the spring, higher mortgage interest rates were ing wealth, made households feel confident enough leaving a clearer mark on the attitudes of both con- to continue to spend and take on debt. Despite rising sumers and builders. The Michigan SRC survey mortgage and consumer loan rates, household debt reported that households' assessments of homebuy- increased at an annual rate of nearly 8 percent in the ing conditions dropped between April and June to the first quarter, and preliminary data point to a similar increase in the second quarter. Mortgage debt expanded at an annual rate of 7 per- Private housing starts cent in the first quarter, boosted by the high level of housing activity. Household debt not secured by Millions of units, annual rate real estate—including credit card balances and auto Ql loans—posted an impressive 10 percent gain in the Single-family / first quarter to help finance a large expansion in /W — 1.2 outlays for consumer durables, especially motor vehicles. The moderation in the growth of household debt this year has been driven primarily by its mortgage — .8 component: Preliminary data for the second quarter suggest that, although consumer credit likely deceler- Multifamily Q1 ated from the first quarter, it still grew faster than in / — 4 1999. Debt in margin accounts, which is largely a household liability and is not included in reported measures 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1988 1990 1992 1994 1996 1998 2000 of credit market debt, has declined, on net, in recent Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 545 Delinquency rates on household loans Change in real business fixed investment Percent Percent, annual rate ] Structures Ql I Equipment and software Credit card accounts — 5 at banks ^ 20 NQ1 — 4 uiuJjij 10 Auto loans at domestic — auto finance companies — 3 j -x Ql — 2 Mortgages 1 1 1 1 1 ! i i i i 1 T""~> QM 1988 1990 1992 1994 1996 1998 2000 1994 1995 1996 1997 1998 1999 2000 NOTE. Data on credit card delinquencies are from bank Call Reports; data on auto loan delinquencies are from the Big Three automakers; data on mortgage delinquencies are from the Mortgage Bankers Association. desire to take advantage of more-efficient technologies is diminishing. Real business fixed investment months, following a surge from late in the third surged at an annual rate of almost 24 percent in the quarter of 1999 through the end of March 2000. first quarter of the year, rebounding sharply from its There has been no evidence that recent downdrafts in lull at the end of 1999, when firms apparently postshare prices this year caused serious repayment probponed some projects because of the century date lems at the aggregate level that might pose broader change. In recent months, the trends in new orders systemic concerns. and shipments of nondefense capital goods suggest The combination of rapid debt growth and rising that demand has remained solid. interest rates has pushed the household debt-service Sustained high rates of investment spending have burden to levels not reached since the late 1980s. been a key feature shaping the current economic Nonetheless, with household income and net worth expansion. Business spending on new equipment and both having grown rapidly, and employment prossoftware has been propelled importantly by ongoing pects favorable, very few signs of worsening credit advances in computer and information technologies problems in the household sector have emerged, and that can be applied to a widening range of business commercial banks have reported in recent Federal processes. The ability of firms to take advantage of Reserve surveys that they remain favorably disposed these emerging developments has been supported by to make consumer installment and mortgage loans. the strength of domestic demand and by generally Indeed, financial indicators of the household sector favorable conditions in credit and equity markets. In have remained mostly positive: The rate of personal addition, because these high-technology goods can be bankruptcy filings fell in the first quarter to its lowest produced increasingly efficiently, their prices have level since 1996; delinquency rates on home mortcontinued to decline steeply, providing additional gages and auto loans remained low; and the delinincentive for rapid investment. The result has been a quency rate on credit cards edged down further, significant rise in the stock of capital in use by although it remained in the higher range that has businesses and an acceleration in the flow of services prevailed since the mid-1990s. However, delinquency from that capital as more-advanced vintages of equiprates may be held down, to some extent, by the surge ment replace older ones. The payoff from the proin new loan originations in recent quarters because longed period during which firms have upgraded newly originated loans are less likely to be delinquent their plant and equipment has increasingly shown than seasoned ones. through in the economy's improved productivity performance. The Business Sector Real outlays for business equipment and software shot up at an annual rate of nearly 25 percent in the Fixed Investment first quarter of this year. That jump followed a modest increase in the final quarter of 1999 and put The boom in capital spending extended into the first spending for business equipment and software back half of 2000 with few indications that businesses' on the double-digit uptrend that has prevailed Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

546 Federal Reserve Bulletin • August 2000 throughout the current economic recovery. Concerns ing on office buildings, other commercial facilities, about potential problems with the century date and industrial buildings recorded early this year change had the most noticeable effect on the patterns would seem to accord well with the overall strength of spending for computers and peripherals and for in aggregate demand. However, the fundamentals in communications equipment in the fourth and first this sector of the economy are mixed. Available inforquarters; expenditures for software were also mation suggests that property values for offices, retail affected, although less so. For these categories of space, and warehouses have been rising more slowly goods overall, the impressive resurgence in business than they were several years ago. However, office purchases early this year left little doubt that the vacancy rates have come down, which suggests that, underlying strength in demand for high-tech capital at least at an aggregate level, the office sector is not goods had been only temporarily interrupted by the overbuilt. The vacancy rate for industrial buildings century date change. Indeed, nominal shipments of has also fallen, but in only a few industries, such as office and computing equipment and of communi- semiconductors and other electronic components, are cation devices registered sizable increases over the capacity pressures sufficiently intense to induce sig- April-May period. nificant expansion of production facilities. In the first quarter, business spending on computers and peripheral equipment was up almost 40 percent from a year earlier—a pace in line with the trend of Inventory Investment the current expansion. Outlays for communications equipment, however, accelerated; the first-quarter The ratio of inventories to sales in many nonfarm surge brought the year-over-year increase in spend- industries moved lower early this year. Those firms ing to 35 percent, twice the pace that prevailed a year that had accumulated some additional stocks toward earlier. Expanding Internet usage has been driving the end of 1999 as a precaution against disruptions the need for new network architectures. In addition, related to the century date change seemed to have cable companies have been investing heavily in little difficulty working off those inventories after preparation for their planned entry into the markets the smooth transition to the new year. Moreover, the for residential and commercial telephony and broad- first-quarter surge in final demand may have, to some band Internet services. extent, exceeded businesses' expectations. In current- Demand for business equipment outside of the cost terms, non-auto manufacturing and trade estabhigh-tech area was also strong at the beginning of the lishments built inventories in April and May at a year. In the first quarter, outlays for industrial equip- somewhat faster rate than in the first quarter but still ment rose at a brisk pace for a third consecutive roughly in line with the rise in their sales. As a result, quarter as the recovery of the manufacturing sector the ratio of inventories to sales, at current cost, for from the effects of the Asian crisis gained momen- these businesses was roughly unchanged from the tum. In addition, investment in farm and construction first quarter. Overall, the ongoing downtrend in the machinery, which had fallen steadily during most of ratios of inventories to sales during the past several 1999, turned up, and shipments of civilian aircraft to years suggests that businesses increasingly are taking domestic customers increased. More recent data show a further rise in the backlog of unfilled orders placed with domestic firms for equipment and machinery Change in real nonfarm business inventories (other than high-tech items and transportation equip- Percent, annual rate ment), suggesting that demand for these items has been well maintained. However, business purchases of motor vehicles are likely to drop back in the second quarter from the very high level recorded at the beginning of the year. In particular, demand for heavy trucks appears to have been adversely affected by higher costs of fuel and shortages of drivers. Ql Real investment in private nonresidential struc- I.I tures jumped at an annual rate of more than 20 percent in the first quarter of the year after having declined in 1999. Both last year's weakness and this year's sudden and widespread revival are difficult to explain fully. Nonetheless, the higher levels of spend- 1994 1995 1996 1997 1998 1999 2000 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 547 advantage of new technologies and software to imple- Before-tax profits of nonfinancial corporations ment better inventory management. as a share of GDP The swing in inventory investment in the motor Percent vehicle industry has been more pronounced recently. Dealer stocks of new cars and light trucks were drawn down during the first quarter as sales climbed 14 to record levels. Accordingly, auto and truck makers kept assemblies at a high level through June in order to maintain ready supplies of popular models. Even though demand appears to have softened and inventories of a few models have backed up, scheduled assemblies for the third quarter are above the elevated level of the first half. Business Finance 1977 1980 1983 1986 1989 1992 1995 1998 2000 NOTE. Profits from domestic operations, with inventory valuation and capital consumption adjustments, divided by gross domestic product of nonfinancial The economic profits of nonfinancial U.S. corporacorporate sector. tions posted another solid increase in the first quarter. The profits that nonfinancial corporations earned on their domestic operations were 10 percent above the term sources of credit and less on the bond market, level of a year earlier; the rise lifted the share of although the funding mix has fluctuated widely profits in this sector's nominal output close to its in response to changing market conditions. After the 1997 peak. Nonetheless, with investment expanding passing of year-end, corporate borrowers returned to rapidly, businesses' external financing requirements, the bond market in volume in February and March, measured as the difference between capital expendi- but subsequent volatility in the capital market in tures and internally generated funds, stayed at a high April and May prompted a pullback. In addition, level in the first half of this year. Businesses' credit corporate bond investors have been less receptive to demands were also supported by cash-financed smaller, less liquid offerings, as has been true for merger and acquisition activity. Total debt of non- some time. financial businesses increased at a IOV2 percent clip In the investment-grade market, bond issuers have in the first quarter, close to the brisk pace of 1999, responded to investors' concerns about the interest and available information suggests that borrowing rate and credit outlook by shortening the maturities of remained strong into the second quarter. their offerings and by issuing more floating-rate secu- On balance, businesses have altered the composi- rities. In the below-investment-grade market, many tion of their funding this year to rely more on shorter- of the borrowers who did tap the bond market in Gross corporate bond issuance Billions of dollars • High yield Bi Investment grade J J A S O N DJ F M A MJ J A S O N DJ F M A MJ 1998 1999 2000 NOTE. Excludes unrated issues and issues sold abroad. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

548 Federal Reserve Bulletin • August 2000 Spreads of corporate bond yields Default rates on outstanding junk bonds over the ten-year swap rate Percentage points High yield J J A S O N DJ FMAMJ J A S O N DJ FMAMJ J 1. Year to date. 1998 1999 2000 SOURCE. Moody's Investors Service. NOTE. The data are daily. The spreads compare the yields on the Merrill Lynch AA, BBB, and 175 indexes with the ten-year swap rate from Bloomberg. Last observations are for July 17, 2000. banks have expanded briskly, even as a larger percentage of banks have reported in Federal Reserve surveys that they have been tightening standards and February and March did so by issuing convertible terms on such loans. bonds and other equity-related debt instruments. Sub- Underscoring lenders' concerns about the creditsequently, amid increased equity market volatility worthiness of borrowers, the ratio of liabilities of and growing investor uncertainty about the outlook failed businesses to total liabilities has increased furfor prospective borrowers, credit spreads in the corther so far this year, and the default rate on outstandporate bond market widened, and issuance in the ing junk bonds has risen further from the relatively below-investment-grade market dropped sharply in elevated level reached in 1999. Through midyear, April and May. Conditions in the corporate bond Moody's Investors Service has downgraded, on net, market calmed in late May and June, and issuance more debt in the nonfinancial business sector than it recovered to close to its first-quarter pace. has upgraded, although it has placed more debt on As the bond market became less hospitable in the watch for future upgrades than downgrades. spring, many businesses evidently turned to banks Commercial mortgage borrowing has also and to the commercial paper market for financing. expanded at a robust pace over the first half of 2000, Partly as a result, commercial and industrial loans at as investment in office and other commercial building strengthened. Extending last year's trend, borrowers Ratio of liabilities of failed nonfinancial firms have tapped banks and life insurance companies as to liabilities of all nonfinancial firms the financing sources of choice. Banks, in particular, have reported stronger demand for commercial real Percent, annual rate estate loans this year even as they have tightened standards a bit for approving such loans. In the market for commercial mortgage-backed securities, 1.2 yields have edged higher since the beginning of the year. The Government Sector Federal Government The incoming information regarding the federal budget suggests that the surplus in the current fiscal year 1989 1991 1993 1995 1997 1999 will surpass last year's by a considerable amount. 1. Year to date. Over the first eight months of fiscal year 2000—the SOURCE. Dun & Bradstreet. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 549 National saving as a share of nominal GNP saving that occurred over the same period. As a result, gross saving by households, businesses, and Percent governments has stayed above 18 percent of GNP since 1997, compared with I6V2 percent over the preceding seven years. The deeper pool of national saving, along with the continued willingness of for- Excluding federal saving — 20 eign investors to finance our current account deficit, remains an important factor in containing increases in V Q1 the cost of capital and sustaining the rapid expansion of domestic investment. With longer-run projections — N— 16 showing a rising federal government surplus over the next decade, this source of national saving could Total Ql continue to expand. 1 1 i 1 1 1 I 1 1 1 1 1 ! 1 1 1 1 1 1 1 The recent good news on the federal budget has 1982 1986 1990 1994 1998 been primarily on the receipts side of the ledger. NOTE. National saving comprises the gross saving of households, businesses, Nonwithheld tax receipts were very robust this and governments. spring. Both final payments on personal income tax liabilities for 1999 and final corporate tax payments period from October to May—the unified budget for 1999 were up substantially. So far this year, the recorded a surplus of about $120 billion, compared withheld tax and social insurance contributions on with $41 billion during the comparable period of this year's earnings of individuals have also been fiscal 1999. The Office of Management and Budget strong. As a result, federal receipts during the first and the Congressional Budget Office are now fore- eight months of the fiscal year were almost 12 percasting that, when the fiscal year closes, the unified cent higher than they were during the year-earlier surplus will be around $225 billion to $230 billion, period. $100 billion higher than in the preceding year. That While receipts have accelerated, federal expendioutcome would likely place the surplus at more than tures have been rising only a little faster than during 21/4 percent of GDP, which would exceed the most fiscal 1999 and continue to decline as a share of recent high of 1.9 percent, which occurred in 1951. nominal GDP. Nominal outlays for the first eight The swing in the federal budget from deficit to months of the current fiscal year were 5XA percent surplus has been an important factor in maintaining above the year-earlier period. Increases in discretionnational saving. The rise in federal saving as a per- ary spending have picked up a bit so far this year. In centage of gross national product from -3.5 percent particular, defense spending has been running higher in 1992 to 3.1 percent in the first quarter of this year in the wake of the increase in budget authority has been sufficient to offset the drop in personal enacted last year. The Congress has also boosted agricultural subsidies in response to the weakness in farm income. While nondiscretionary spending con- Federal receipts and expenditures as a share of nominal GDP tinues to be held down by declines in net interest payments, categories such as Medicaid and other Percent health programs have been rising more rapidly of late. — — 24 As measured by the national income and product Total expenditures accounts, real federal expenditures for consumption and gross investment dropped sharply early this year — 22 after having surged in the fourth quarter of 1999. These wide quarter-to-quarter swings in federal — 20 spending appear to have occurred because the Department of Defense speeded up its payments to vendors Total receipts — 18 before the century date change; actual deliveries of defense goods and services were likely smoother. On 1 1 1 1 I I 1 1 1 1 1 1 1 1 1 1 1 1 I 1 average, real defense spending in the fourth and first 1982 1986 1990 1994 1998 quarters was up moderately from the average level in NOTE. Data on receipts and expenditures are from the unified budget. Values fiscal 1999. Real nondefense outlays continued to for 2000 are current services estimates from the Mid-Session Review of the rise slowly. Budget by the Office of Management and Budget. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

550 Federal Reserve Bulletin • August 2000 Federal government debt held by the public soned, less liquid, debt securities with surplus cash, enabling it to issue more "on-the-run" securities. Percent of nominal GDP The Treasury noted that it would buy back as much as $30 billion this year. The first operation took place in March, and in May the Treasury announced a — — 60 schedule of two operations per month through __ — 50 the end of July of this year. Through midyear, the — Treasury has conducted eight buyback operations, redeeming a total of $15 billion. Because an impor- N. i —V 40 tant goal of the buyback program is to help forestall further increases in the average maturity of the Trea- — 30 sury's publicly held debt, the entire amount redeemed so far has corresponded to securities with remaining 1 1 1 1 1 1I 11 1 1 1 1 i1 11 11 1 1 1 1 11 I 11 11 1 1 II 1 1 1 1 1 1 1 1 1 maturities at the long end of the yield curve (at least 1959 1969 1979 1989 1999 fifteen years). NOTE. The data are annual and extend through 2000. Federal debt held by private investors is gross federal debt less debt held by federal government accounts and the Federal Reserve System. The value for 2000 is an estimate based on the Administration's June 26 Mid-Session Review of the Budget. State and Local Governments In the state and local sector, real consumption and With current budget surpluses coming in above investment expenditures registered another strong expectations and large surpluses projected to con- quarter at the beginning of this year. In part, the tinue for the foreseeable future, the federal govern- unseasonably good weather appears to have accomment has taken additional steps aimed at preserving a modated more construction spending than usually high level of liquidity in the market for its securities. occurs over the winter. However, some of the recent Expanding on efforts to concentrate its declining debt rise is an extension of the step-up in spending that issuance in fewer highly liquid securities, the Trea- emerged last year, when real outlays rose 5 percent sury announced in February its intention to issue only after having averaged around 3 percent for the pretwo new five- and ten-year notes and only one new ceding three years. Higher federal grants for highway thirty-year bond each year. The auctions of five- and construction have contributed to the pickup in spendten-year notes will remain quarterly, alternating ing. In addition, many of these jurisdictions have between new issues and smaller reopenings, and the experienced solid improvements in their fiscal condibond auctions will be semiannual, also alternating tions, which may be allowing them to undertake new between new and smaller reopened offerings. The spending initiatives. Treasury also announced that it was reducing the The improving fiscal outlook for state and local frequency of its one-year bill auctions from monthly governments has affected both the issuance and the to quarterly and cutting the size of the monthly quality of state and local debt. Borrowing by states two-year note auctions. In addition, the Treasury and municipalities expanded sluggishly in the first eliminated the April auction of the thirty-year half of this year. In addition to the favorable budgetinflation-indexed bond and indicated that the size of ary picture, rising interest rates have reduced the the ten-year inflation-indexed note offerings would demand for new capital financing and substantially be modestly reduced. Meanwhile, anticipation of limited refunding issuance. Credit upgrades have outeven larger surpluses in the wake of the surprising numbered downgrades by a substantial margin in the strength of incoming tax receipts so far in 2000 led state and local sector. the Treasury to announce, in May, that it was again cutting the size of the monthly two-year note auctions. The Treasury also noted that it is considering The External Sector additional changes in its auction schedule, including the possible elimination of the one-year bill auctions Trade and Current Account and a reduction in the frequency of its two-year note auctions. The deficits in U.S. external balances have continued Early in the year, the Treasury unveiled the details to get even larger this year. The current account of its previously announced reverse-auction, or debt deficit reached an annual rate of $409 billion in the buyback, program, whereby it intends to retire sea- first quarter of 2000, or 4LA percent of GDP, com- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 551 U.S. current account ciation. By market destination, U.S. exports to Canada, Mexico, and Europe increased the most. By Billions of dollars, annual rate product group, export expansion was concentrated in capital equipment, industrial supplies, and consumer goods. Preliminary data for April suggest that growth of real exports remained strong. 70 The quantity of imported goods and services con- 140 tinued to expand rapidly in the first quarter. The increase in imports, at an annual rate of 113A percent, — 210 was the same in the first quarter as in the second half of 1999 and reflected both the continuing strength of 280 U.S. domestic demand and the effects of past dollar — 350 appreciation on price competitiveness. Imports of Ql consumer goods, automotive products, semicon- 1994 1995 1996 1997 1998 1999 2000 ductors, telecommunications equipment, and other machinery were particularly robust. Data for April suggest that the second quarter got off to a strong pared with $372 billion and 4 percent in the second start. The price of non-oil goods imports rose at an half of 1999. Net payments of investment income annual rate of 13A percent in the first quarter, the were a bit less in the first quarter than in the second second consecutive quarter of sizable price increases half of last year owing to a sizable increase in income following four years of price declines; non-oil import receipts from direct investment abroad. Most of the prices in the second quarter posted only moderate expansion in the current account deficit occurred in increases. trade in goods and services. In the first quarter, the A number of developments affecting world oil deficit in trade in goods and services widened to an demand and supply led to a further step-up in the spot annual rate of $345 billion, a considerable expansion price of West Texas intermediate (WTI) crude this from the deficit of $298 billion recorded in the sec- year, along with considerable volatility. In the wake ond half of 1999. Trade data for April suggest that of the plunge of world oil prices during 1998, the the deficit may have increased further in the second Organization of Petroleum Exporting Countries quarter. (OPEC) agreed in early 1999 to production restraints U.S. exports of real goods and services rose at an that, by late in the year, restored prices to their 1997 annual rate of 6VA percent in the first quarter, follow- level of about $20 per barrel. Subsequently, contining a strong increase in exports in the second half of ued recovery of world demand, combined with some last year. The pickup in economic activity abroad that began in 1999 continued to support export demand and partly offset negative effects on price competi- Prices for oil and other commodities tiveness of U.S. products from the dollar's past appre- Index, January 1999 = 100 Dollars per barrel Oil Change in real imports and exports of goods and services ,—v — 30 Percent, annual rate 150 — ^ Q Imports H Exports 20 — 20 15 Non-oil commodities — 10 10 1 i i i t , , 1 Ql Q2 Q3 Q4 Ql Q2 Q3 1999 2000 NOTE. The oil price is the spot price of West Texas intermediate crude oil. The price for non-oil commodities is a weighted average of thirty-nine non-fuel primary-commodity prices from the International Monetary Fund. The data are monthly. The last observation for non-oil commodities is May; for oil, July 1994 1995 1996 1997 1998 1999 2000 average through July 12, 2000. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

552 Federal Reserve Bulletin • August 2000 supply disruptions, caused the WTI spot price to investment was associated with cross-border merger spike above $34 per barrel during March of this year, activity. the highest level since the Gulf War more than nine Capital inflows from foreign official sources in the years earlier. Oil prices dropped back temporarily in first quarter of this year were sizable—$20 billion, April, but in May and June the price of crude oil compared with $43 billion for all of 1999. As was the moved back up again, as demand was boosted further case last year, the increase in foreign official reserves by strong global economic activity and by rebuilding in the United States in the first quarter was concenof oil stocks. In late June, despite an announcement trated in a relatively few countries. Partial data for by OPEC that it would boost production, the WTI the second quarter of 2000 show a small official spot price reached a new high of almost $35 per outflow. barrel, but by early July the price had settled back to about $30 per barrel. The Labor Market Financial Account Employment and Labor Supply Capital flows in the first quarter of 2000 continued to The labor market in early 2000 continued to be reflect the relatively strong performance of the U.S. characterized by substantial job creation, a historieconomy and transactions associated with global cally low level of unemployment, and sizable corporate mergers. Foreign private purchases of U.S. advances in productivity that have held labor costs in securities remained brisk—well above the record check. The rise in overall nonfarm payroll employpace set last year. In addition, the mix of U.S. securi- ment, which totaled more than IV2 million over the ties purchased by foreigners in the first quarter first half of the year, was swelled by the federal showed a continuation of last year's trend toward government's hiring of intermittent workers to consmaller holdings of U.S. Treasury securities and duct the decennial census. Apart from that temporary larger holdings of U.S. agency and corporate securi- boost, which accounted for about one-fourth of the ties. Private-sector foreigners sold more than $9 bil- net gain in jobs between December and June, nonlion in Treasury securities in the first quarter while farm payroll employment increased an average of purchasing more than $26 billion in agency bonds. 190,000 per month, somewhat below the robust pace Despite a mixed performance of U.S. stock prices, of the preceding four years. foreign portfolio purchases of U.S. equities exceeded Monthly changes in private payrolls were uneven $60 billion in the first quarter, more than half of the at times during the first half the year, but, on balance, record annual total set last year. U.S. purchases of the pace of hiring, while still solid, appears to have foreign securities remained strong in the first quarter moderated between the first and second quarters. In of 2000. some industries, such as construction, the pattern Foreign direct investment flows into the United appears to have been exaggerated by unseasonably States were robust in the first quarter of this year as high levels of activity during the winter that accelerwell. As in the past two years, direct investment inflows have been elevated by the extraordinary level of cross-border merger and acquisition activity. Port- Net change in total nonfarm payroll employment folio flows have also been affected by this activity. Thousands of jobs, monthly average For example, in recent years, many of the largest acquisitions have been financed by swaps of equity in the foreign acquiring firm for equity in the U.S. firm being acquired. The Bureau of Economic Analy- Hiring for _ 400 the Census sis estimates that U.S. residents acquired $123 billion of foreign equities in this way last year. Separate data on market transactions indicate that U.S. residents made net purchases of Japanese equities but sold European equities. The latter sales likely reflect a rebalancing of portfolios after stock swaps. U.S. direct investment in foreign economies has also remained strong, exceeding $30 billion in the first quarter of 2000. Again, a significant portion of this 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 553 ated hiring that typically would have occurred in the beginning of 1997 to just over 4 percent at the the spring. After a robust first quarter, construction end of 1999. employment declined between April and June; on This year, the labor force participation rate ratchaverage, hiring in this industry over the first half of eted up sharply over the first four months of the year the year was only a bit slower than the rapid pace that before dropping back in recent months as employprevailed from 1996 to 1999. However, employment ment slowed. The spike in participation early this gains in the services industry, particularly in business year may have been a response to ready availability and health services, were smaller in the second quar- of job opportunities, but Census hiring may also have ter than in the first while job cutbacks occurred temporarily attracted some individuals into the workin finance, insurance, and real estate after four and force. On net, growth of labor demand and supply one-half years of steady expansion. Nonetheless, have been more balanced so far this year, and the strong domestic demand for consumer durables and unemployment rate has held near its thirty-year low business equipment, along with support for exports of 4 percent. At midyear, very few signs of a signififrom the pickup in economic activity abroad, led to a cant easing in labor market pressures have surfaced. leveling off in manufacturing employment over the Employers responding to various private surveys of first half of 2000 after almost two years of decline. business conditions report that they have been unable And, with consumer spending brisk, employment to hire as many workers as they would like because at retail establishments, although fluctuating widely skilled workers are in short supply and competition from month to month, remained generally on a solid from other firms is keen. Those concerns about hiring uptrend over the first half. have persisted even as new claims for unemployment The supply of labor increased slowly in recent insurance have drifted up from very low levels in the years relative to the demand for workers. The labor past several months, suggesting that some employers force participation rate was unchanged, on average, may be making workforce adjustments in response to at 67.1 percent from 1997 to 1999; that level was just slower economic activity. 0.6 percentage point higher than at the beginning of the expansion in 1990. The stability of the participation rate over the 1997-99 period was somewhat Labor Costs and Productivity surprising because the incentives to enter the workforce seemed powerful: Hiring was strong, real wages Reports by businesses that workers are in short supwere rising more rapidly than earlier in the expan- ply and that they are under pressure to increase sion, and individuals perceived that jobs were plenti- compensation to be competitive in hiring and retainful. However, the robust demand for new workers ing employees became more intense early this year. instead led to a substantial decline in unemployment, However, the available statistical indicators are proand the civilian jobless rate fell from 5XA percent at viding somewhat mixed and inconsistent signals of whether a broad acceleration in wage and benefit costs is emerging. Hourly compensation, as measured Measures of labor utilization by the employment cost index (ECI) for private nonfarm businesses, increased sharply during the first Percent quarter to a level more than AVi percent above a year earlier. Before that jump, year-over-year changes in the ECI compensation series had remained close to 3V2 percent for three years. However, an alternative measure of compensation per hour, calculated as part of the productivity and cost series, which has shown higher rates of increase than the ECI in recent years, slowed in the first quarter of this year. For the nonfarm business sector, compensation per hour in the — 3 first quarter was 4LA percent higher than a year earlier; in the first quarter of 1999, the four-quarter change was 5LA percent.3 1970 1975 1980 1985 1990 1995 2000 NOTE. The augmented unemployment rate is the number of unemployed plus 3. The figures for compensation per hour in the nonfinancial corpothose who are not in the labor force and want a job, divided by the civilian labor force plus those who are not in the labor force and want a job. The break in data rate sector are similar: an increase of about 4 percent for the year at January 1994 marks the introduction of a redesigned survey; data from that ending in the first quarter of this year compared with almost 5 Vi perpoint on are not directly comparable with those of earlier periods. cent for the year ending in the first quarter of 1999. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

554 Federal Reserve Bulletin • August 2000 Measures of the change in hourly compensation Change in output per hour for the nonfarm business sector Percent, Q4 to Q4 Percent, Q4 to Q4 6 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 NOTE. The ECI is for private industry excluding farm and household work- NOTE. The value for 2000:Q1 is the percent change from a year earlier. ers. Nonfarm compensation per hour is for the nonfarm business sector. pickup in benefit costs was associated with faster Part of the acceleration in the ECI in the first rates of increase in employer contributions to health quarter was the result of a sharp step-up in the wage insurance, and the first-quarter ECI figures indicated and salary component of compensation change. another step-up in this component of costs. Private While higher rates of straight-time pay were wide- survey information and available measures of prices spread across industry and occupational groups, the in the health care industry suggest that the upturn in most striking increase occurred in the finance, insur- the employer costs of health care benefits is assoance, and real estate industry where the year-over- ciated with both higher costs of health care and year change in wages and salaries jumped from about employers' willingness to offer attractive benefit 4 percent for the period ending in December 1999 to packages in order to compete for workers in a tight almost 8V2 percent for the period ending in March of labor market. Indeed, employers have been reporting this year. The sudden spike in wages in that sector that they are enhancing compensation packages with could be related to commissions that are tied directly a variety of benefits in order to hire and retain to activity levels in the industry and, thus, would not employees. Some of these offerings are included in represent a lasting influence on wage inflation. For the ECI; for instance, the ECI report for the first other industries, wages and salaries accelerated mod- quarter noted a pickup in supplemental forms of pay, erately, which might appear plausible in light of such as overtime and nonproduction bonuses, and in reports that employers are experiencing shortages of paid leave. However, other benefits cited by employsome types of skilled workers. However, the uptrend ers, including stock options, hiring and retention in wage inflation that surfaced in the first-quarter ECI bonuses, and discounts on store purchases, are not has not been so readily apparent in the monthly data measured in the ECI.4 The productivity and costs on average hourly earnings of production or nonsu- measure of hourly compensation may capture more pervisory workers, which are available through June. of the non-wage costs that employers incur, but even Although average hourly earnings increased at an for that series, the best estimates of employer comannual rate of 4 percent between December and June, pensation costs are available only after business the June level of hourly wages stood 33A percent reports for unemployment insurance and tax records higher than a year earlier, the same as the increase are tabulated and folded into the annual revisions of between June 1998 and June 1999. the national income and product accounts. While employers in many industries appear to have Because businesses have realized sizable gains in kept wage increases moderate, they may be facing worker productivity, compensation increases have greater pressures from rising costs of employee benefits. The ECI measure of benefit costs rose close to 4. Beginning with publication of the ECI for June 2000, the Bureau 3V2 percent during 1999, a percentage point faster of Labor Statistics plans to expand the definition of nonproduction than during 1998; these costs accelerated sharply bonuses in the ECI to include hiring and retention bonuses. These further in the first quarter of this year to a level payments are already included in the wage and salary measure underlying the data on compensation per hour calculated for the productiv- 5 V2 percent above a year earlier. Much of last year's ity and cost series. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 555 Change in unit labor costs for the nonfarm business sector 2. Alternative measures of price change Percent, annual rate Percent, Q4 to Q4 1997:Q4 1998:Q4 1999:Q4 Price measure to to to 1998:Q4 1999:Q4 2000:Q1 3.0 Chain-type 2.5 Gross domestic product 1.0 1.6 3.0 Gross domestic purchases .7 1.9 3.5 Personal consumption expenditures ... .9 2.0 3.5 2.0 Excluding food and energy 1.3 1.5 2.2 Fixed-weight — 1.5 Consumer price index 1.5 2.6 4.0 Excluding food and energy 2.4 2.1 2.3 — 1.0 NOTE. A fixed-weight index uses quantity weights from the base year to aggregate prices from each distinct item category. A chain-type index is the geometric average of two fixed-weight indexes and allows the weights to change each year. Changes are based on quarterly averages. 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 goods and services purchased by consumers, busi- NOTE. The value for 2000:Q1 is the percent change from a year earlier. nesses, and governments has been somewhat greater: The chain-type price index for gross domestic purnot generated significant pressure on overall costs of chases rose at an annual rate of 3'/2 percent in the first production. Output per hour in the nonfarm business quarter after having increased about 2 percent during sector posted another solid advance in the first quar- 1999 and just 3A percent during 1998. ter, rising to a level 33A percent above a year earlier The pass-through of the steep rise in the cost of and offsetting much of the rise in hourly compensa- imported crude oil that began in early 1999 and tion over the period. For nonfinancial corporations, continued into the first half of this year has been the the subset of the nonfarm business sector that principal factor in the acceleration of the prices of excludes types of businesses for which output is goods and services purchased. The effect of higher measured less directly, the 4 percent year-over- energy costs on domestic prices has been most apparyear increase in productivity held unit labor costs ent in indexes of prices paid by consumers. After unchanged. having risen 12 percent during 1999, the chain-type With the further robust increases in labor produc- price index for energy items in the price index for tivity recently, the average rise in output per hour in personal consumption expenditures (PCE) jumped at the nonfarm business sector since early 1997 has an annual rate of 35 percent in the first quarter of stepped up further to 3 percent from the 2 percent 2000; the first-quarter rise in the energy component pace of the 1995-97 period. What has been particu- of the CPI was similar. larly impressive is that the acceleration of pro- Swings in energy prices continued to have a noticeductivity in the past several years has exceeded the able effect on overall measures of consumer prices pickup in output growth over the period and, thus, does not appear to be simply a cyclical response to Change in consumer prices more rapidly rising demand. Rather, businesses are likely realizing substantial and lasting payoffs from Percent, Q4 to Q4 their investment in equipment and processes that I I Chain-type price index for PCE embody the technological advances of the past sev- H Consumer price index eral years. Ql Q2 Prices Rates of increase in the broader measures of prices — 2 moved up further in early 2000. After having accelerated from 1 percent during 1998 to IV2 percent last year, the chain-type price index for GDP—prices of goods and services that are produced domestically— 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 increased at an annual rate of 3 percent in the first NOTE. Consumer price index for all urban consumers. Values for 2000:Q1 quarter of this year. The upswing in inflation for and Q2 are percent changes from the previous quarter at an annual rate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

556 Federal Reserve Bulletin • August 2000 in the second quarter. After world oil prices dropped little below its first-quarter rate. After having risen back temporarily in the spring, the domestic price of just over 2 percent between the fourth quarter of 1998 motor fuel dropped in April and May, and consumer and the fourth quarter of 1999, the CPI excluding prices for energy, as measured by the CPI, retraced food and energy increased at an annual rate of some of the first-quarter increase. As a result, the 2 LA percent in the first quarter of 2000 and at a overall CPI was little changed over the two months. 23/ percent rate in the second quarter. In part, the rise 4 However, with prices of crude oil having climbed in core inflation likely reflects the indirect effects of again, the bounceback in prices of motor fuel led to higher energy costs on the prices of a variety of a sharp increase in the CPI for energy in June. In goods and services, although these effects are diffiaddition, with strong demand pressing against avail- cult to quantify with precision. Moreover, prices of able supplies, consumer prices of natural gas contin- non-oil imported goods, which had been declining ued to rise rapidly in the second quarter. In contrast to from late 1995 through the middle of last year, conthe steep rise in energy prices, the CPI for food has tinued to trend up early this year. risen slightly less than other non-energy prices so far The pickup in core inflation, as measured by the this year. CPI, has occurred for both consumer goods and ser- Higher petroleum costs also fed through into higher vices. Although price increases for nondurable goods producer costs for a number of intermediate materi- excluding food and energy moderated, prices of conals. Rising prices for inputs such as chemicals and sumer durables, which had fallen between 1996 and paints contributed importantly to the acceleration in 1999, were little changed, on balance, over the first the producer price index for intermediate materials half of this year. The CPI continued to register steep excluding food and energy from about 13A percent declines for household electronic goods and computduring 1999 to an annual rate of 3V2 percent over the ers, but prices of other types of consumer durables first half of this year. Upward pressure on input prices have increased, on net, so far this year. The rate of was also apparent for construction materials, although increase in the prices of non-energy consumer serthese have eased more recently. Prices of imported vices has also been somewhat faster; the CPI for industrial supplies also picked up early this year these items increased at an annual rate of 3V2 percent owing to higher costs of petroleum inputs. during the first two quarters of this year compared Core consumer price inflation has also been run- with a rise of 23/4 percent in 1999. Larger increases ning a little higher so far this year. The chain-type in the CPI measures of rent and of medical services price index for personal consumption expenditures have contributed importantly to this acceleration. other than food and energy increased at an annual Another factor has been a steeper rise in airfares, rate of 2LA percent in the first quarter compared with which have been boosted in part to cover the higher an increase of 1Vi percent during 1999. Based on the cost of fuel. monthly estimates of PCE prices in April and May, In addition to slightly higher core consumer price core PCE price inflation looks to have been just a inflation, the national income and product accounts measure of prices for private fixed investment goods shows that the downtrend in prices for business fixed investment items has been interrupted. Most Change in consumer prices excluding food and energy notably, declines in the prices of computing equip- Percent, Q4 to Q4 ment became much smaller in the final quarter of last year and the first quarter of this year. A series of dis- • Chain-type price index for PCE ruptions to the supply of component inputs to com- — M Consumer price index — 6 puting equipment has combined with exceptionally strong demand to cut the rate of price decline for computers, as measured by the chain-type price index, to an annual rate of 12 percent late last year and early this year—half the pace of the preceding three and one-half years. At the same time, prices of other types of equipment and software continued to be little changed, and the chain-type index for nonresidential structures investment remained on a moderate uptrend. In contrast, the further upward pressure 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 on construction costs at the beginning of the year NOTE. Consumer price index for all urban consumers. Values for 2000:Q1 continued to push the price index for residential and Q2 are percent changes from the previous quarter at an annual rate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 557 construction higher; after having accelerated from Selected Treasury rates, quarterly data 3 percent to 3V2 percent between 1998 and 1999, this index increased at an annual rate of 4LA percent in the Percent first quarter of 2000. Although actual inflation moved a bit higher over — ~ j — 14 the first half of 2000, inflation expectations have been — 12 little changed. Households responding to the Michigan SRC survey in June were sensitive to the adverse — Jj \J t ft Thirty-year — 10 J\ l aaL Treasury effect of higher energy prices on their real income but seemed to believe that the inflationary shock would aJM — 8 Q2 be short-lived. The median of their expected change i 6 in CPI inflation over the coming twelve months was JrYf lA / Five-year JC 1 2.9 percent. Moreover, they remained optimistic that «r * V » V l# ^ T hree-month T ~ r easury \ V / / — 4 Treasury inflation would remain at about that rate over 1 1 II i 1 1 1 1 II 11 II 1 1 1 1 1 II 1 1 1 II 1 t 1 1 1 II Mil the longer run, reporting a 2.8 percent median of 1964 1969 1974 1979 1984 1989 1994 1999 expected inflation during the next five to ten years. In NOTE. The twenty-year Treasury bond rate is shown until the first issuance both instances, their expectations are essentially the of the thirty-year Treasury bond in February 1977. Last observations are for 2000:Q2. same as at the end of 1999, although the year-ahead expectations are above the lower levels that had prevailed in 1997 and early 1998. this year, with short-term real rates having increased the most. Rising market interest rates and heightened U.S. Financial Markets uncertainties about corporate prospects, especially with regard to the high-tech sector, have occasionally Conditions in markets for private credit firmed on dampened flows in the corporate bond market and balance since the end of 1999. Against a backdrop of have weighed on the equity market, which has, at continued economic vitality in the United States and times, experienced considerable volatility. Through a tighter monetary policy stance, private borrowing mid-July, the broad-based Wilshire 5000 equity index rates are higher, on net, particularly those charged to was up approximately 3 percent for the year. riskier borrowers. In addition, banks have tightened terms and standards on most types of loans. Higher real interest rates—as measured based on inflation Interest Rates expectations derived from surveys and from yields on the Treasury's inflation-indexed securities— As the year began, with worries related to the century account for the bulk of the increase in interest rates date change out of the way, participants in the fixedincome market turned their attention to the signs of continued strength in domestic labor and product markets, and they quickly priced in the possibility of Selected Treasury rates, daily data a more aggressive tightening of monetary policy. Percent Both private and Treasury yields rose considerably. In the latter part of January, however, Treasury yields plummeted, especially those on longer-dated securities, as the announced details of the Treasury's debt buyback program and upwardly revised forecasts of federal budget surpluses led investors to focus increasingly on the prospects for a diminishing supply of Treasury securities. A rise in both nominal and inflation-indexed Treasury yields in response to strong economic data and tighter monetary policy in April and May was partly offset by supply factors and by occasional safe haven flows from the volatile equity market. Since late May, market interest rates J FMAMJ JASONDJ FMAMJ JASONDJ FMAMJ J have declined as market participants have interpreted 1998 1999 2000 the incoming economic data as evidence that mone- NOTE. Last observations are for July 17, 2000. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

558 Federal Reserve Bulletin • August 2000 Selected yield curves, July 17, 2000 Spread of BBB corporate yields Percent Percentage points /""""""interest rate swaps — 7.1 — jy— 2.5 Over ten-year Treasury yield — — 6.9 J — 2.0 — — 6.7 — Treasury securities — 6.5 — 1.5 — 6.3 a/" * \ Over ten-year swap rate — 6.1 r -w rJ — ^^ 5.9 — .5 — 5.7 1 I 1 1 1 1 1 I I 1 2 5 10 20 30 1998 1999 2000 Years to maturity NOTE. Last observations are for July 17, 2000. The data are daily. SOURCE. Swap rates are from the International Swaps and Derivatives Association, as reported by Reuters. eration in economic growth and expectations that the tary policy might not have to be tightened as much as economy will be on a sustainable, non-inflationary had been previously expected. On balance, while track, with little further monetary policy tightening. Treasury bill rates and yields on shorter-dated notes The disconnect between longer-term Treasury and have risen 15 to 80 basis points since the beginning private yields as a consequence of supply factors of the year, intermediate- and long-term Treasury in the Treasury market is distorting readings from yields have declined 5 to 55 basis points. In the yield spreads. For instance, taken at face value, the corporate debt market, by contrast, bond yields have spread of BBB corporate yields over the yield on the risen 10 to 70 basis points so far this year. ten-year Treasury note would suggest that conditions Forecasts of steep declines in the supply of longer- in the corporate bond market so far in 2000 are worse dated Treasuries have combined with tighter mone- than those during the financial market turmoil of tary policy conditions to produce an inverted Trea- 1998. In contrast, the spread of the BBB yield over sury yield curve, starting with the two-year maturity. the ten-year swap rate paints a very different picture, In contrast, yield curves elsewhere in the U.S. fixed- with spreads up this year but below their peaks in income market generally have not inverted. In the 1998. Although the swap market is still not as liquid interest rate swap market, for instance, the yield as the Treasury securities market, and swap rates are curve has remained flat to upward sloping for maturi- occasionally subject to supply-driven distortions, ties as long as ten years, and the same has been true such distortions have been less pronounced and more for yield curves for the most actively traded corporate short-lived than those affecting the Treasury securibonds.5 Nonetheless, private yield curves are flatter ties market of late, making swap rates a better benchthan usual, suggesting that, although supply consider- mark for judging the behavior of other corporate ations have played a potentially important role in the yields. inversion of the Treasury yield curve this year, inves- Aware that distortions to Treasury yields are likely tors' forecasts of future economic conditions have to become more pronounced as more federal debt is also been a contributing factor. In particular, private paid down, market participants have had to look for yield curves are consistent with forecasts of a mod- alternatives to the pricing and hedging roles traditionally played by Treasuries in U.S. financial markets. In addition to interest rate swaps, which have featured prominently in the list of alternatives to Treasuries, 5. A typical interest rate swap is an agreement between two parties debt securities issued by the three governmentto exchange fixed and variable interest rate payments on a notional principal amount over a predetermined period ranging from one to sponsored housing agencies—Fannie Mae, Freddie thirty years. The notional amount itself is never exchanged. Typically, Mac, and the Federal Home Loan Banks—have been the variable interest rate is the London Interbank Offered Rate used in both pricing and hedging. The three housing (LIBOR), and the fixed interest rate—called the swap rate—is determined in the swap market. The overall credit quality of market agencies have continued to issue a substantial volume participants is high, typically A or above; those entities with credit of debt this year in an attempt to capture benchmark ratings of BBB or lower are generally either rejected or required to status, and the introduction in March of futures and adopt credit-enhancing mechanisms, typically by posting collateral. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 559 options contracts based on five- and ten-year notes Major stock price indexes issued by Fannie Mae and Freddie Mac may help Index, June 30,1999 = 100 enhance the liquidity of the agency securities market. Nonetheless, the market for agency debt has been 220 affected by some uncertainty this year regarding the Nasdaq — 200 agencies' special relationship with the government. Both the Treasury and the Federal Reserve have suggested that it would be appropriate for the Congress to consider whether the special standing of these institutions continues to promote the public interest, and pending legislation would, among other things, restructure the oversight of these agencies and reexamine their lines of credit with the U.S. Treasury. The implementation of monetary policy, too, has had to adapt to the anticipated paydowns of marketable federal debt. Recognizing that there may be 1998 1999 2000 limitations on its ability to rely as much as previously NOTE. The data are daily. Last observations are for July 17, 2000. on transactions in Treasury securities to meet the reserve needs of depositories and to expand the supply of currency, the FOMC decided at its March 2000 result in a greater percentage of holdings of shortermeeting to facilitate until its first meeting in 2001 the term security issues than of longer-dated ones. The Trading Desk's ability to continue to accept a broader schedule ranges from 35 percent of an individual range of collateral in its repurchase transactions. The issue for Treasury bills to 15 percent for longer-term initial approvals to help expand the collateral pool bonds. These changes were announced to the public were granted in August 1999 as part of the Federal on July 5, replacing a procedure in which all matur- Reserve's efforts to better manage possible disrup- ing holdings were rolled over and in which coupon tions to financial markets related to the century date purchases were spread evenly across the yield curve. change. At the March 2000 meeting, the Committee also initiated a study to consider alternative asset classes Equity Prices and selection criteria that could be appropriate for the System Open Market Account (SOMA) should the Major equity indexes have posted small gains so far size of the Treasury securities market continue to this year amid considerable volatility. Fluctuations in decline. For the period before the completion and technology stocks have been particularly pronounced: review of such a study, the Committee discussed, at After having reached a record high in March— its May meeting, some changes in the management of 24 percent above its 1999 year-end value—the the System's portfolio of Treasury securities in an Nasdaq composite index, which is heavily weighted environment of decreasing Treasury debt. The toward technology shares, swung widely and by midchanges aim to prevent the System from coming to July was up 5 percent for the year. Given its surge in hold high and rising proportions of new Treasury the second half of 1999, the mid-July level of the debt issues. They will also help the SOMA to limit Nasdaq was about 60 percent above its mid-1999 any further lengthening of the average maturity of its reading. The broader S&P 500 and Wilshire 5000 portfolio while continuing to meet long-run reserve indexes have risen close to 3 percent since the beginneeds to the greatest extent possible through outright ning of the year and are up about 10 percent and purchases of Treasury securities.6 The SOMA will 13 percent, respectively, from mid-1999. cap the rollover of its existing holdings at Treasury Corporate earnings reports have, for the most part, auctions and will engage in secondary market pur- exceeded expectations, and projections of future chases according to a schedule that effectively will earnings continue to be revised higher. However, the increase in interest rates since the beginning of the year likely has restrained the rise in equity prices. In 6. The FOMC prefers a portfolio with a short average maturity addition, growing unease about the lofty valuations because the higher turnover rate of such a portfolio gives it greater flexibility to redeem securities in times of financial market stress, reached by technology shares and rising default rates which may require substantial decreases in the securities portfolio in the corporate sector may have given some invesover a relatively short period, such as during an acute banking crisis tors a better appreciation of the risks of holding that involves heavy lending through the discount window. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

560 Federal Reserve Bulletin • August 2000 stocks in general. Reflecting the uncertainty about debt have helped to ease the pressure on available the future course of the equity market, expected and savings and have facilitated the rapid expansion of actual volatilities of stock returns rose substantially nonfederal debt outstanding: The federal government in the spring. At that time, volatility implied by paid down $218 billion of debt over the first half of options on the Nasdaq 100 index surpassed even the 2000, compared with paydowns of $56 billion and elevated levels reached during the financial market $101 billion in the first six months of calendar years turmoil of 1998. 1998 and 1999 respectively. Higher volatility and greater investor caution had Depository institutions have continued to play an a marked effect on public equity offerings. The pace important role in meeting the strong demands for of initial public offerings has fallen off considerably credit by businesses and households. Adjusted for in recent months from its brisk first-quarter rate, with mark-to-market accounting rules, credit extended by some offerings being canceled or postponed and oth- commercial banks rose 11 VI percent in the first half ers being priced well short of earlier expectations. On of 2000. This advance was paced by a brisk expanthe other hand, households' enthusiasm for equity sion of loans, which grew at an annual rate of nearly mutual funds, especially those funds that invest in the 13 percent over this period. Bank credit increased in technology and international sectors, remains rela- part because some businesses sought bank loans as an tively high, although it appears to have faded some alternative to a less receptive corporate bond market. after the run-up in stock market volatility in the In addition, the underlying strength of household spring. Following a first-quarter surge, net inflows spending helped boost the demand for consumer and to stock funds moderated substantially in the second mortgage loans. Banks' holdings of consumer and quarter but still were above last year's average pace. mortgage loans were also supported by a slower pace of securitizations this year. In the housing sector, for instance, the rising interest rate environment has kept Debt and the Monetary Aggregates the demand for adjustable-rate mortgages relatively elevated, and banks tend to hold these securities on Debt and Depository Intermediation their books rather than securitize them. Banks have tightened terms and standards on loans The total debt of the U.S. household, government, further this year, especially in the business sector, and nonfinancial business sectors is estimated to have where some lenders have expressed concerns about a increased at close to a 5VZ percent annual rate in the more uncertain corporate outlook. Bank regulators first half of 2000. Outside the federal government have noted that depository institutions need to take sector, debt expanded at an annual rate of roughly particular care in evaluating lending risks to account 9 VI percent, buoyed by strength in household and for possible changes in the overall macroeconomic business borrowing. Continued declines in federal environment and in conditions in securities markets. Growth of domestic nonfinancial debt • Total P Federal • Nonfederal 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 NOTE. Total debt consists of the outstanding credit market debt of the U.S. of year indicated. Growth in the first half of 2000 is computed from average for government, state and local governments, households and nonprofit organiza- fourth quarter of 1999 to average for the second quarter of 2000 and expressed tions, nonfinancial businesses, and farms. Annual growth rates are computed at an annual rate. The growth rate for 2000:H1 is currently based on partially from average for fourth quarter of preceding year to average for fourth quarter estimated data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 561 M2 growth rate M3 growth rate Percent, annual rate Percent, annual rate 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 NOTE. M2 consists of currency, travelers checks, demand deposits, other NOTE. M3 consists of M2 plus large-denomination time deposits, balances checkable deposits, savings deposits (including money market deposit accounts), on institutional money market funds, RP liabilities (overnight and term), and small-denomination time deposits, and balances in retail money market funds. eurodollars (overnight and term). See note to the domestic nonfinancial debt See note to the domestic nonfinancial debt chart for details on the computation chart for details on the computation of growth rates. of growth rates. pace as in 1999—supported by the rapid expansion of The Monetary Aggregates nominal spending and income. M2 velocity—the ratio of nominal income to M2— Growth of the monetary aggregates over the first half has increased over the first half of this year, consisof 2000 has been buffeted by several special factors. tent with its historical relationship with the interest The unwinding of the buildups in liquidity that forgone ("opportunity cost") from holding M2. As occurred in late 1999 before the century date change usual, rates offered on many of the components of depressed growth in the aggregates early this year. M2 have not tracked the upward movement in market Subsequently, M2 rebounded sharply in anticipation interest rates, and the opportunity cost of holding M2 of outsized tax payments in the spring and then ran has risen. In response, investors have reallocated off as those payments cleared. On net, despite the some of their funds within M2 toward those compocumulative firming of monetary policy since June nents whose rates adjust more quickly—such as small 1999, M2 expanded at a relatively robust, 6 percent, time deposits—and have restrained flows into M2 in annual rate during the first half of 2000—the same favor of longer-term mutual funds and direct holdings of market instruments. M3 expanded at an annual rate of 9 percent in the M2 velocity and the opportunity cost of holding M2 first half of 2000, up from IV2 percent for all of 1999. Ratio scale Percentage points, ratio scale The robust expansion of bank credit underlies much of the acceleration in M3 this year. Depository institutions have issued large time deposits and other managed liabilities in volume to help fund the expansion of their loan and securities portfolios. In contrast, flows to institutional money funds slowed from the rapid pace of late 1999 after the heightened preference for liquid assets ahead of the century date change ebbed. As has been the case since 1994, depository institutions have continued to implement new retail sweep programs over the first half of 2000 in order to avoid having to hold non-interest-bearing reserve bal- 1978 1983 1988 1993 1998 ances with the Federal Reserve System. As a result, NOTE. The data are quarterly and are through 2000:Q1. The velocity of M2 is required reserve balances are still declining graduthe ratio of nominal gross domestic product to the stock of M2. The opportunity cost of M2 is a two-quarter moving average of the difference between the ally, adding to concerns that, under current procethree-month Treasury bill rate and the weighted-average return on assets dures, low balances might adversely affect the impleincluded in M2. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

562 Federal Reserve Bulletin • August 2000 mentation of monetary policy by eventually leading Higher oil prices bumped up broad measures of inflato increased volatility in the federal funds market. tion almost everywhere, but measures of core infla- The pending legislation that would allow the Federal tion edged up only modestly, if at all. Reserve to pay interest on balances held at Reserve Monetary conditions generally were tightened in Banks would likely lead to a partial unwinding over foreign industrial countries, as authorities removed time of the ongoing trend in retail sweep programs. stimulus by raising official rates. Yield curves in several key industrial countries tended to flatten, as interest rates on foreign long-term government secu- International Developments rities declined on balance after January, reversing an upward trend seen since the second quarter of 1999. In the first half of 2000, economic activity in foreign Yields on Japanese government long-term bonds economies continued the strong overall performance edged upward slightly, but at midyear still were only that was registered last year. With a few exceptions, about l3/4 percent. most emerging-market countries continued to show Concerns in financial markets at the end of last signs of solid recoveries from earlier recessions, supyear about potential disruptions during the century ported by favorable financial market conditions. date change dissipated quickly, and global markets in Average real GDP in the foreign industrial countries the early months of this year returned to the comparaaccelerated noticeably in the first half of this year tively placid conditions seen during most of 1999. after a mild slowdown in late 1999. The pickup Starting in mid-March, however, global financial reflected in large part better performance of Japanese markets were jolted by several episodes of increased domestic demand (although its sustainability has been volatility set off typically by sudden downdrafts in questioned) and further robust increases in Europe U.S. Nasdaq prices. At that time, measures of market and Canada. In many countries, economic slack risk for some emerging-market countries widened, diminished, heightening concern about inflation risks. but they later retraced most of these increases. The performances of broad stock market indexes in the industrial countries were mixed, but they generally Foreign interest rates tended to reflect their respective cyclical positions. Percent Stocks in Canada, France, and Italy, for example, Short-term (three-month) continued to make good gains, German stocks did U.K. interbank less well, and U.K. stocks slipped. Japanese shares ^ — Ml — 6 also were down substantially, even though the domestic economy showed some signs of firmer activity. In general, price volatility of foreign high-tech stocks or stock indexes weighted toward technology-intensive Euro-area interbank — 2 sectors was quite high and exceeded that of corresponding broader indexes. Japanese CD + The dollar continued to strengthen during most of — — 0 the first half of the year. It appeared to be supported mainly by continuing positive news on the perforj I i I I l mance of the U.S. economy, higher U.S. short-term interest rates, and for much of the first half, expectations of further tightening of monetary policy. Early in the year, the attraction of high rates of return on U.S. equities may have been an additional supporting factor, but the dollar maintained its upward trend even after U.S. stock prices leveled off near the end of the first quarter and then declined for a while. In June, the dollar eased back a bit against the currencies of some industrial countries amid signs that U.S. growth was slowing. Nevertheless, for the year so far, the dollar is up on balance about 53A percent against l i I 1 I i Ql Q2 Q3 Q4 Ql Q2 Q3 the major currencies; against a broader index of 1999 2000 trading-partner currencies, the dollar has appreciated NOTE. The data are weekly. Last observations are for the week ending about 33/ percent on balance. July 12, 2000. 4 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 563 Nominal U.S. dollar exchange rates area in the first half of 2000 was somewhat stronger than the brisk 3 percent pace recorded last year. First week 1999 = 100 Investment was robust, and indexes of both business and consumer sentiment registered record highs. The average unemployment rate in the area continued to move down to nearly 9 percent, almost a full percentage point lower than a year earlier. At the end of the first half, the euro-area broad measure of inflation, partly affected by higher oil prices, was above 2 percent, while core inflation had edged up to 1 LA percent. Variations in the pace of economic expansion and the intensity of inflation pressures across the region added to the complexity of the situation confronting ECB policymakers even though Germany X and Italy, two countries that had lagged the euro-area Selected bilateral rates average expansion of activity in recent years, showed signs that they were beginning to move ahead more rapidly. After having raised its refinancing rate 50 basis points in November 1999, the ECB followed with three 25-point increases in the first quarter and another 50-point increase in June. The ECB pointed to price pressures and rapid expansion of monetary aggregates as important considerations behind the moves. Compared with its fluctuations against the euro, , i i i I i i the dollar's value was more stable against the Japa- Ql Q2 Q3 Q4 Ql Q2 Q3 nese yen during the first half of 2000. In late 1999, 1999 2000 private domestic demand in Japan slumped badly, NOTE. The data are weekly. Indexes in the upper panel are trade-weighted even though the Bank of Japan continued to hold averages of the exchange value of the dollar against major currencies and against the currencies of a broad group of important U.S. trading partners. Last its key policy rate at essentially zero. Several times observations are for the week ending July 12, 2000. during the first half of this year, the yen experienced strong upward pressure, often associated with market The dollar has experienced a particularly large perceptions that activity was reviving and with specuswing against the euro. The euro started this year lation that the Bank of Japan soon might abandon its already down more than 13 percent from its value zero-interest-rate policy. This upward pressure was against the dollar at the time when the new European resisted vigorously by Japanese authorities on several currency was introduced in January 1999, and it occasions with sales of yen in foreign exchange marcontinued to depreciate during most of the first half kets. The Bank of Japan continued to hold overnight of 2000, reaching a record low in May. During this interest rates near zero through the first half of 2000. period, the euro seemed to be especially sensitive to The Japanese economy, in fact, did show signs of news and public commentary by officials about the stronger performance in the first half. GDP rose at an strength of the expansion in the euro area, the pace of annual rate of 10 percent in the first quarter, with economic reform, and the appropriate macroeco- particular strength in private consumption and investnomic policy mix. Despite a modest recovery in ment. Industrial production, which had made solid recent weeks, the euro still is down against the dollar gains last year, continued to expand at a healthy pace, almost 7 percent on balance for the year so far and and surveys indicated that business confidence had about 33A percent on a trade-weighted basis. picked up. Demand from the household sector was The euro's persistent weakness posed a challenge less robust, however, as consumer confidence was for authorities at the European Central Bank as they held back by historically high unemployment. A large sought to implement a policy stance consistent with and growing outstanding stock of public debt (estitheir official inflation objective (2 percent or less for mated at more than 110 percent of GDP) cast increasharmonized consumer prices) without threatening the ing doubt about the extent to which authorities might euro area's economic expansion. Supported in part be willing to use additional fiscal stimulus to boost by euro depreciation, economic growth in the euro demand. Even though some additional government Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

564 Federal Reserve Bulletin • August 2000 expenditure for coming quarters was approved in late Emerging markets 1999, government spending did not supply stimulus in the first quarter. With core consumer prices mov- First week 1999 = 100 ing down at an annual rate that reached almost 1 percent at midyear, deflation also remained a concern. Economic activity in Canada so far this year slowed a bit from its very strong performance in the second half of 1999, but it still was quite robust, generating strong gains in employment and reducing the remaining slack in the economy. The expansion was supported by both domestic demand and spillovers from the U.S. economy. Higher energy prices pushed headline inflation to near the top of the Bank of Canada's 1 percent to 3 percent target range; core inflation remained just below 1V2 percent. The Cana- Percentage points dian dollar weakened somewhat against the U.S. dol- EMBI+ spreads lar in the first half of the year even though the Bank of Canada raised policy interest rates 100 basis — 16 points, matching increases in U.S. rates. In the United Kingdom, the Bank of England continued a round of — 12 tightening that started in mid-1999 by raising official rates 25 basis points twice in the first quarter. After March, indications that the economy was slowing and that inflation pressures might be ebbing under the effect of the tighter monetary stance and strength of sterling—especially against the euro—allowed the Bank to hold rates constant. In recent months, sterling has depreciated on balance as official interest 1999 2000 rates have been raised in other major industrial NOTE. The data are weekly. EMBI+ (J.P. Morgan emerging market bond countries. index) spreads are stripped Brady-bond yield spreads over U.S. Treasuries. Last observations are for the week ending July 12, 2000. In developing countries, the strong recovery of economic activity last year in both developing Asia and Latin America generally continued into the first remained generally favorable, and the won came half of 2000. However, after a fairly placid period under upward pressure periodically in the first half of that extended into the first few months of this year, this year. Nonetheless, the acute financial difficulties financial market conditions in some developing coun- of Hyundai, Korea's largest industrial conglomerate, tries became more unsettled in the April-May period. highlighted the lingering effect on the corporate In some countries, exchange rates and equity prices and financial sectors of the earlier crisis and the need weakened and risk spreads widened, as increased for further restructuring. Economic activity in other political uncertainty interacted with heightened finan- Asian developing countries that experienced difficulcial market volatility and rising interest rates in ties in 1997 and 1998 (Thailand, Indonesia, Malaythe industrial countries. In general, financial markets sia, Singapore, and the Philippines) also continued now appear to be identifying and distinguishing those to firm this year, but at varying rates. Nonetheless, emerging-market countries with problems more financial market conditions have deteriorated in effectively than they did several years ago. recent months for some countries in the region. In emerging Asia, the strong bounceback of activ- In Indonesia and the Philippines, declines in equity ity last year from the crisis-related declines of 1998 prices and weakness in exchange rates appear to have continued into the first half of this year. Korea, which stemmed from heightened market concerns over recorded the strongest recovery in the region last year political instability and prospects for economic with real GDP rising at double-digit rates in every reform. Output in China increased at near doublequarter, has seen some moderation so far in 2000. digit annual rates in the second half of last year and However, with inventories still being rebuilt, unem- remained strong in the first half of this year, boosted ployment declining rapidly, and inflation showing mainly by surging exports. In Hong Kong, real GDP no signs of accelerating, macroeconomic conditions rose at an annual rate of more than 20 percent in the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary Policy Report to the Congress 565 first quarter of this year after a strong second half in cent, boosted by strong exports to the United States, 1999. Higher consumer confidence appears to have soaring private investment, and increased conboosted private consumption, and trade flows through sumer spending. Mexican equity prices and the Hong Kong, especially to and from China, have peso encountered some downward pressure in the increased. approach of the July 2 national election, but once the The general recovery seen last year in Latin election was perceived to be fair and the transition of America from effects of the emerging-market finan- power was under way, both recovered substantially. cial crisis extended into the first part of this year. In Argentina, the pace of recovery appears to have In Brazil, inflation was remarkably well contained, slackened in the early part of this year, as the governand interest rates were lowered, but unemployment ment's fiscal position and, in particular, its ability to has remained high. An improved financial situation meet the targets of its International Monetary Fund allowed the Brazilian government to repay most of program remained a focus of market concern. Heightthe funds obtained under its December 1998 interna- ened political uncertainty in Venezuela, Peru, Colomtional support package. However, Brazilian financial bia, and Ecuador sparked financial market pressures markets showed continued volatility this year, espe- in recent months in those countries, too. In January, cially at times of heightened market concerns over authorities in Ecuador announced a program of "dolthe status of fiscal reforms, and risk premiums wid- larization," in which the domestic currency would be ened in the first half of 2000 on balance. In Mexico, entirely replaced by U.S. dollars. The program, now activity has been strong so far this year. In the first in the process of implementation, appears to have quarter, real GDP surged at an annual rate of 11 per- helped stabilize financial conditions there. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

566 Industrial Production and Capacity Utilization for June 2000 Released for publication July 14 of mines and utilities picked up in the second quarter, while the growth of manufacturing output remained Industrial production rose 0.2 percent in June, after close to an annual rate of 7.0 percent for a third gains of 0.5 percent in May and 0.8 percent in April. consecutive quarter. The strength in manufacturing At 144.6 percent of its 1992 average, industrial pro- this year has principally come from the highduction in June was 5.8 percent higher than in technology industries (computers, semiconductors, June 1999. For the second quarter as a whole, the and communications equipment); excluding those total index increased at an annual rate of 7.0 percent, industries, manufacturing has increased at an annual up from a first-quarter pace of 6.5 percent. The output rate of only 1.0 percent since the fourth quarter of last Industrial production and capacity utilization Ratio scale, 1992 = 100 Percent of capacity Industrial production, market groups Ratio scale, 1992 = 100 Ratio scale, 1992 = 100 155 155 145 145 135 135 125 125 115 115 105 105 95 95 Ratio scale, 1992 = 100 Ratio scale, 1992 = 100 Equipment Materials Business 120 Durable goods 100 Defense and space 80 Nondurable goods and energy I I I I I L 1990 1992 1994 1996 1998 2000 1990 1992 1994 1996 1998 2000 All series are seasonally adjusted. Latest series, June. Capacity is an index of potential industrial production. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

567 Industrial production and capacity utilization, August 2000 Industrial production, index, 1992=100 Percentage change Category 2000 20001 June 1999 to Mar.r Apr/ May' June? Mar.r Apr.r May' June? June 2000 Total 142.4 143.5 144.3 144.6 .8 .5 .2 5.8 Previous estimate 142.6 143.6 144.2 .7 .4 Major market groups Products, total2 130.3 131.1 131.3 131.2 .2 .6 .2 -.1 3.5 Consumer goods ... 118.0 118.6 118.6 118.4 -.6 .5 .0 -.1 1.3 Business equipment 183.0 185.1 186.2 187.0 1.4 1.1 .6 .4 9.2 Construction supplies 139.0 139.5 138.3 137.0 1.0 .4 -.9 -1.0 3.3 Materials 163.1 164.9 166.6 167.8 1.2 1.1 1.0 .7 9.6 Major industry groups Manufacturing 148.4 149.3 150.0 150.5 .8 .6 .4 .3 6.4 Durable 184.6 186.7 188.4 189.7 1.5 1.1 .9 .7 10.2 Nondurable 113.6 113.6 113.4 113.2 -.2 .0 -.2 -.2 1.6 Mining 101.3 101.5 101.3 102.4 1.3 .2 -.2 1.1 5.5 Utilities 110.8 114.8 117.7 114.7 -3.9 3.6 2.5 -2.5 -2.3 Capacity utilization, percent MMMEEEMMMOOO CCCaaapppaaaccciiitttyyy,,, pppeeerrr--ccceeennntttaaagggeee 1999 2000 ccchhhaaannngggeee,,, AAvveerraaggee,, LLooww,, HHiigghh,, JJJuuunnneee 111999999999 11996677--9999 11998822 11998888--8899 tttooo June Mar.' Apr.' May' June>> JJJuuunnneee 222000000000 Total 82.0 71.1 85.4 80.5 81.7 82.1 82.2 82.1 3.8 Previous estimate 81.8 82.1 82.1 Manufacturing 81.1 69.0 85.7 79.6 81.1 81.3 81.3 81.3 4.2 Advanced processing 80.5 70.4 84.2 78.6 80.2 80.5 80.8 80.9 5.4 Primary processing . 82.4 66.2 88.9 82.7 83.7 83.8 83.3 82.8 1.7 Mining 87.3 80.3 88.0 80.7 84.7 85.0 84.9 85.9 -.9 Utilities 87.5 75.9 92.6 92.1 86.1 89.1 91.3 88.9 1.3 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. year. The rate of capacity utilization for total industry consumer goods edged up 0.1 percent, with solid edged down in June to 82.1 percent, a level about gains in the production of consumer chemicals and even with the 1967-99 average. paper products nearly offset by a decline in the output of clothing. The production of business equipment, which had MARKET GROUPS increased more than VA percent per month from January to April, increased only 0.4 percent in June The output of consumer goods edged down 0.1 per- after a 0.6 percent advance in May. The production of cent in June; an increase of 0.5 percent in the produc- high-technology equipment continued to rise strongly tion of durable consumer goods was more than offset in June: The production of information processing by a decline in the production of nondurables. The and related equipment increased 1.3 percent on the gain in the production of durable consumer goods strength of advances in the output of communications was the result of a 1.7 percent rebound in the output equipment and computers. The production index for of automotive products. In contrast, the output of the other equipment category also turned up sharply other consumer durable goods decreased 0.5 percent, because of a jump in the output of farm machinery as the production of goods for the home, such as and equipment. However, the output of transit equipappliances, furniture, and carpeting, fell again. The ment fell again in June because of a continued decline decline in nondurable consumer goods was concen- in the production of commercial aircraft and a reductrated in energy products; the demand for electricity tion in the production of medium and heavy trucks. by households, which had shot up in April and May, In addition, the production of industrial equipment fell back. The production of nondurable non-energy fell back 0.4 percent, largely reversing the gains in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

568 Federal Reserve Bulletin • August 2000 April and May; most of the decrease reflected a since the end of last year. The production of durable decline in the output of construction machinery. goods rose further, and the production of nondurable The production index for construction supplies fell goods declined again. Among durable goods, contin- 1.0 percent in June after having decreased 0.9 percent ued increases in the production of high-technology in May; for both months, declines in underlying goods accounted for most of the overall gain; howindustries were widespread. Since peaking in April, ever, output in some industries, such as primary metthe index for construction supplies has retraced more als and construction-related industries, has weakened than half of the increase posted earlier in the year. recently. The output of nondurables slipped another The output of materials was up 0.7 percent in June, a 0.2 percent, a move led by decreases in petroleum gain somewhat smaller than the average for the pre- refining and in the production of apparel and paper. ceding three months. The output of durable goods The factory operating rate, at 81.3 percent, was materials rose 1.2 percent, with another strong unchanged. The utilization rate for primaryincrease in the production of parts for equipment and processing industries decreased to 82.8 percent, and for consumer goods; however, the output of basic that for advanced-processing industries edged up, to metals fell again in June. The production of nondura- 80.9 percent. ble goods materials dropped 0.5 percent, and the The output of utilities fell back 2.5 percent followoutput of energy materials was unchanged. ing sharp gains in the preceding two months; the operating rate at utilities fell to 88.9 percent. Production at mines increased 1.1 percent after having INDUSTRY GROUPS fallen 0.2 percent in May; the utilization rate at mines rose to 85.9 percent. • Manufacturing output rose 0.3 percent in June, after having advanced an average of 0.6 percent per month Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

569 Statements to the Congress Statement by Laurence H. Meyer, Member, Board of analysis we reviewed in developing our proposals. Governors of the Federal Reserve System, before the Our initial proposal was based on a considerable Subcommittee on Capital Markets, Securities and amount of information and experience regarding the Government Sponsored Enterprises of the Committee current equity investment activities of securities firms on Banking and Financial Services, U.S. House of and large banking organizations. It would allow mer- Representatives, June 7, 2000 (Governor Meyer pre- chant banking to continue to develop along the lines sented identical testimony before the Subcommittee already evident in the industry and in the manner on Financial Institutions and the Subcommittee on intended by the Congress. At the same time, the rule Securities of the Committee on Banking, Housing, and proposal attempt to address the boundaries and Urban Affairs, U.S. Senate, June 13, 2000.) between merchant banking and the mixing of banking and commerce. And most important, the rule I appreciate the opportunity to explain the rules seeks responsibly to come to grips with the very real recently proposed by the Federal Reserve Board and safety and soundness risks to an insured depository the Department of the Treasury to allow financial institution affiliate of both a financial holding comholding companies to engage in merchant banking pany that engages in merchant banking and a bank activities under the Gramm-Leach-Bliley (GLB) holding company that invests in equities using exist- Act. I want to stress that part of what I'm about to ing authorities. discuss is only a proposal and that the rest is a rule that has been adopted only on an interim basis. The Board and the Treasury have requested comment SUMMARY OF THE INTERIM RULE AND from the public on both parts, and both are subject to CAPITAL PROPOSAL review and modification in light of those comments. Our experience has been that public comments are Let me first briefly explain what the Board and the generally very helpful, and we value the insight and Treasury have proposed. For the sake of brevity, I information they provide from practitioners, analysts, will sacrifice some detail. The notice published by other policymakers, and informed members of the the Board and the Treasury in the Federal Register public. The public comment period ended on May 22, explains the proposal in great detail.1 and the Board and the Treasury are analyzing those The GLB Act allows financial holding comcomments now. panies—which are bank holding companies whose As I'm sure you can appreciate, because we are in depository institutions meet specified capital, manthis evaluation phase, I do not know what final rules agement, and, for insured institutions, Community will be adopted. The staff is in the process of review- Reinvestment Act requirements—to acquire shares, ing and analyzing the comments, and both Treasury assets, or ownership interests in any type of nonfinanofficials and members of the Board are reserving cial company. Merchant banking authority represents judgment until we see both a summary of the full a broad exception to the central prohibition in the comments and the staff's analysis. At that time, the Bank Holding Company Act against the ownership Board will review the proposal and the interim rule of interests in nonfinancial firms. Moreover, this in light of the comments, and both are subject to new merchant banking authority is in addition to— revision. In addition, the Federal Financial Institu- and does not replace—the authority that bank holding tions Examination Council will be discussing bank companies have under other provisions of the Bank capital requirements on equity investments, a discus- Holding Company Act to engage in equity investsion that will, of course, be considered in the Board's ment activities. final decision on holding company capital require- The merchant banking authority included in the ments on these assets. With these caveats in mind, the GLB Act helped ensure a so-called two-way street Board nonetheless believes it would be useful not only to describe what the Board and the Treasury proposed but also to summarize the information and 1. 65 Federal Register 16,460, 16,480 (March 28, 2000). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

570 Federal Reserve Bulletin • August 2000 for securities firms that wish to affiliate with a bank for investments in private equity funds. The Board without being required to divest traditional business may approve a longer holding period on a case-bylines. Before the GLB Act, securities firms could not case basis. affiliate with a bank without terminating their mer- • Implements the GLB Act's restrictions on the chant banking activities. routine management or operation of a portfolio com- The GLB Act specifically authorizes the Board and pany by a financial holding company. The interim the Secretary of the Treasury to issue regulations rule contains several safe harbors and examples of implementing this new authority, including limita- routine management and explains the types of special tions that we jointly deem appropriate to protect circumstances in which routine management is depository institutions. The interim rule and capital permissible. proposal are the result of extensive discussions • Establishes recordkeeping and reporting requirebetween Board and Treasury officials. ments designed to enhance the ability of the financial Before making our proposal, the staff reviewed holding company and the Board to monitor the risks existing research and the staffs of the two agencies and exposures of merchant banking investments and jointly conducted interviews at several major securi- compliance by the financial holding company with ties firms and bank holding companies to gather the act's limitations on holding periods and routine information on how the merchant banking business management. These recordkeeping and reporting is conducted. We also called on our experience in requirements are general in design and largely could supervising the more restricted investment authori- be met by the types of records and reports ordinarily ties exercised by both member banks and bank hold- kept by companies engaged in merchant banking ing companies, including authority to make invest- activities. ments through small business investment companies, • Implements the restrictions in the GLB Act on authority to make investments overseas, and hold- the ability of a depository institution controlled by a ing company authority to make investments in up financial holding company to cross-market its prodto 5 percent of the voting shares and up to 25 percent ucts or services with a portfolio company it holds of the total equity of any company. Our proposal under its merchant banking authority. incorporates many of the best practices employed by • Adopts the presumption established by the GLB merchant banking professionals and banking organi- Act for applying the limits contained in section 23A zations and, we believe, would allow securities firms of the Federal Reserve Act on transactions between a to become financial holding companies while con- depository institution and its affiliates to transactions tinuing to conduct their merchant banking activities. between a depository institution and a portfolio The proposal is in two parts. The first is an interim company controlled by the same financial holding rule that contains the framework for defining and company. conducting merchant banking activities. The second is the capital proposal. As a transition measure, the interim rule also establishes two caps on the amount of merchant banking investments that a financial holding company may hold. The caps are high and apply only to invest- Interim Rule ments made under the new merchant banking authority. The first is that the total amount of a financial The interim rule is designed to implement the provi- holding company's merchant banking investments sions of the GLB Act that were enacted to prevent may not exceed the lesser of 30 percent of the finanmerchant banking activities from being no different cial holding company's tier 1 capital, or $6 billion. than a mixture of banking and commerce. It also The second cap applies to merchant banking investsupports the important objective of encouraging the ments other than investments made by the financial safe and sound exercise of this new merchant bank- holding company in private equity funds and is the ing authority. The interim rule lesser of 20 percent of tier 1 capital, or $4 billion. These caps do not apply to or limit in any way the • Provides guidance on the GLB Act's require- investments made by a financial holding company ment that merchant banking investments be held only under its other authorities, such as through small for a period long enough to enable the sale or disposi- business investment companies. Moreover, these caps tion of each investment on a reasonable basis. Gener- are really thresholds. The rule provides that a finanally, the rule permits a ten-year holding period for cial holding company may exceed these amounts direct investments and a fifteen-year holding period with approval from the Board. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 571 This approach allows the Board to monitor the company level and did not limit the Board's authority risk-management systems and exposure of financial to develop appropriate capital requirements for bank holding companies that devote a significant amount holding and financial holding companies. of resources to merchant banking. We view the caps as a safe and sound way to allow merchant banking activities to begin and fully expect to revisit the need Participation in the Equity Market by Banking for caps as we review the interim rule and the capital Organizations proposal. Before the enactment of the GLB Act, banking organizations were permitted to invest in equities to a Capital Proposal limited extent. For example, the Small Business Investment Act of 1958 permits banks, and the Bank Perhaps the most important, but also most controver- Holding Company Act permits their holding comsial, aspect of the proposal is the appropriate capital panies, to invest in certain small companies through treatment of equity investments for regulatory pur- their ownership of Small Business Investment Composes. This part has been proposed for comment but, panies (SBICs). Banking organizations also have unlike the portion I just described, has not been been authorized to match competition abroad by adopted. investing in foreign companies through their Our capital proposal would require bank holding Edge Act affiliates and subsidiaries, and, under the companies to maintain in equity form at least Bank Holding Company Act of 1956, bank holding 50 cents of capital for every dollar the consolidated companies can invest in up to 5 percent of the voting bank holding company invests in merchant banking- shares (and up to 25 percent of the total equity) of type investments. Under existing capital rules, a bank any company. All of these authorizations, however, holding company could hold only 4 cents of its own have involved limits in one form or another: on size equity capital—that is borrow 96 cents—for every or location of the individual portfolio companies, on dollar invested in equity securities. the proportion of each portfolio company acquired, The proposed capital treatment would apply at the or on aggregate holdings. holding company level on a consolidated basis to the The bulk of activity using these authorities has carrying value of investments made using the new involved private equity investments. The private merchant banking authority as well as to investments equity market is one in which transactions occur made in nonfinancial companies using other mer- largely in unregistered shares in private and public chant banking-like investment authority. companies. The market has grown quite rapidly in It is to this issue of the capital charge, our reasons recent years and in 1999 is estimated to have had at for proposing it, and its implications that I now turn. least $400 billion outstanding. The venture capital component, the equity financing of new firms, had outstandings of at least $125 billion. It focuses on seed capital for the creation of new companies or SAFETY AND SOUNDNESS equity needed for the continuation or growth of small firms. The non-venture private equity sector, the While safety and soundness sensitivities are reflected equity financing of middle-market firms and leverin several components of the proposed regulation, an aged buyouts, is considerably larger, with outstandimportant aspect of the proposal to address potential ings of about $275 billion. The contribution of a safety and soundness concerns is the new capital broad and deep private equity market to economic requirement. The Board's concern about the safety growth is considerable and its existence is critical to and soundness of banking organizations, of course, our nation's continued economic vibrancy. has to be balanced against other goals of the GLB Act, and we sought to do so. Nonetheless, this aspect of the proposal elicited the most comment and criticism. I believe, however, there can be little doubt Holding of Equities by Banking Organizations about either the importance of safety and soundness or the Board's authority and responsibility in this Banking organizations play a modest, but not insigarea. We note that, in its consideration of the financial nificant, role in the private equities market. Most modernization legislation, the Congress considered banking organizations in fact do not make use of their the appropriateness of capital standards at the holding existing authorities and, thus, do not participate in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

572 Federal Reserve Bulletin • August 2000 either the public or the private equities market. This The large banking organizations active in private may reflect the lack of expertise required to partici- equity investments have considerable experience and pate in such finance at most banking organizations, diversified portfolios. They have, by and large, been more traditional banking strategies, or the restrictions successful—with some reporting annual rates of and limits placed on their participation prior to the return in excess of 25 percent to 35 percent in recent passage of the GLB Act. years. For the most part, they also have been con- Most of the equity participation by banking organi- servative in recognizing gains on their investments, zations is concentrated in a small number of large discounting market valuations on traded equities to banking organizations, whose activities are focused reflect liquidation realities and often recognizing on the private equity market and, in some cases, increases in value on nontraded equities only by whose holdings account for a significant proportion actual sales or other events. No large aggregate losses of their capital and earnings. In keeping with the have been reported on the equity holdings of these small number of banking organization participants, banking organizations in recent years. Of course, the their share of the market is small—about 9 percent to past several years have also seen the longest eco- 10 percent of the private equities outstanding. Despite nomic expansion and largest and longest bull market their limited market share, the ten U.S. banking orga- in our history. Even in such an environment, hownizations with the largest commitment to equity ever, the unusual returns have been dominated by a investments have about doubled their holdings in small number of great successes, the so-called home the past five or so years, with aggregate investments runs of the private equity business. currently exceeding $30 billion at carrying values. The attraction of banking organizations to the high These holdings account for an estimated 90 percent returns and the growing buoyancy in stock prices— of holdings by all banking organizations of private especially for IPOs (initial public offerings)—has equities in nonfinancial firms. Seven of the ten largest matched the growth in the entire private equity marholders each held equities with carrying values in ket. More private equity financing, especially venture excess of $1 billion at the end of 1999; two held more capital financing, was accomplished in the past three than $8 billion. Carrying values at the largest holders years than in the previous thirty. In the fourth quarter were equal to 10 percent to 35 percent of their tier 1 of last year and the first quarter of 2000, almost as capital, and both realized and unrealized gains on much venture capital was invested as in total over the these holdings accounted for a growing share of previous four quarters ending in September. their earnings. Clearly at some large banking organizations, holdings of stock—mainly private equities— already were large and rising before merchant Risk and Equity Holdings banking was authorized by the GLB Act. As supervisors, equity investment by banking organizations Even with rising valuations, private equity is still the had clearly gotten our attention well before last most expensive form of finance available. Investors November. in private equity securities demand high expected Larger banking organizations generally employ all returns, ranging from 15 percent to 25 percent for of the various legal authorities available to them in mature firms seeking expansion capital to 60 percent making equity investments. In making investments in to 80 percent for early stage ventures. The high private equity funds and direct investments, banking hurdle rates for venture capital finance reflect the fact organizations generally use Bank Holding Company that the loss rates on individual deals are so high. A Act authorities, and several institutions have made review of venture capital investments over the past substantial international equity investments through four decades suggests that a fourth to a third of the their Edge Act affiliates. SBICs are also used substan- deals resulted in absolute losses, which is why we do tially by larger banking organizations and by some not see 60 percent to 80 percent returns on venture regional and smaller institutions. There are roughly capital portfolios. The high risks that such loss rates 100 SBICs affiliated with about sixty banking organi- imply are both the cause of the high issuer cost and zations. Although they account for only a third of the flip side of high average returns on a portfolio of all SBICs, they represent more than 60 percent of venture capital equities. In both cases they represent SBIC investments, about $5.25 billion out of a total risk compensation. of $8.75 billion. All SBICs—bank-related and High returns on aggregate venture capital investothers—account for about 7 percent of the venture ments rely on those "home runs" I referred to earlier capital market and about 2 percent of the total private to offset the "strikeouts," if I may use an analogy. equity market. Generally, about 20 percent of investments have been Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 573 "home runs" with extraordinary returns that offset little as 4 cents of equity for every dollar of risk the losses and mediocre returns of other investments. assets, although the average amount of equity actu- Evidence from 1,000 private equity partnerships ally held by all banks is about 9Vi percent of risk developed by the firm Venture Economics suggests assets. The largest U.S. banks and bank holding comthat over the entire period since 1969, investors panies have an equity to risk asset ratio (tier 1 ratio) received an average return of about a 20 percent of 7 percent to 9 percent. If assets contract in value annual rate but that these returns were boosted by the by these amounts, the entity is insolvent; indeed, explosive IPO market in the late 1990s, facilitating the Congress requires the agencies to begin steps exit from a record number of investments by the to close a bank when it becomes "critically underpartnerships. As with individual investments, "home capitalized," as defined by the Congress, which is runs" offset a substantial portion of "strikeouts." when the tangible equity capital to total asset ratio Median returns have averaged closer to 10 percent, of the bank falls to 2 percent. and roughly one-fifth of the individual venture capital A dollar contraction in asset values produces a partnerships have resulted in capital losses. dollar contraction in equity capital. Clearly, banking Returns to such partnerships have varied widely organizations have very little tolerance for risk—that over the years. Investors in more than 200 venture is, loss—because they hold such modest equity. Small capital partnerships formed in the early 1980s, when declines in asset values would eliminate large proporthe market was expanding rapidly, have received tions of their small equity base. only about a 5 percent to 8 percent annual return on The risk of equity investments with modest equity these investments. Nearly a quarter of these partner- capital backing is even greater when one considers ships resulted in losses to investors. In a survey, that, under generally accepted accounting principles, large long-term institutional private equity investors a firm engaged in equity investment is permitted to reported that they generally expect a long-run rate count as income a substantial portion of the increase of return on private equities of at least 15 percent, in the value of its equity investments, even if the firm as compared with 11 percent to 12 percent for public has not realized this profit by selling the securities. equities, but some report that they expect the standard This increase in value—even though unrealized and deviation of returns to be about twice as high— subject to decline—is then permitted to count as 32 percent versus 16 percent. A "standard deviation" capital for the firm and can be used to support growth is a common statistical measure of variation, and of the firm. In effect, under our current capital rules, a measures of variation are used by economists as banking organization could leverage these paper indicators of the degree of risk in an investment. gains twenty-five times. Any return (or losses) that banking organizations From an economic point of view, banks have been capture per dollar of portfolio equities held are multi- able to operate with a high degree of leverage because plied significantly relative to their own investment their creditors, depositors and others are comforted in this part of their business—both absolutely and by the safety net—government guarantees of certain relative to independent firms. That is, of course, the deposit liabilities and access to the discount window result of the higher degree of leverage at banking and payments and settlement systems—as well as organizations. Independent venture capital operations by supervision and regulation, which is intended to are generally unable to leverage their holdings to any ensure the safe and sound operation of the bank. In significant degree. the late 1980s and early 1990s, a large number of banks did in fact become insolvent because of credit losses, but historically a level of leverage that would be unacceptable in most other financial businesses Banking Organization Capital and has proved to be viable for banking organizations Risk Absorption with traditional banking assets. As in all businesses, the primary role of the capital of an organization is to absorb risk, that is, loss. Without equity capital, businesses would not be able to bor- Risk and Capital row funds to finance any assets, let alone risky assets, because losses would then fall on the creditors who Commenters do not generally disagree with the do not participate in the successes—the profits—of observation that venture capital equity assets are the firm. Insured depository institutions and bank riskier than the average banking organization asset. holding companies, however, are required to hold as Nor have they generally disagreed with one of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

574 Federal Reserve Bulletin • August 2000 very few, apparently immutable, laws of finance that, ties broker-dealers generally requires the firm to in the long run, the higher the nominal rate of return deduct from its regulatory capital 100 percent of the the greater the inherent risk of the asset. By greater carrying value of the firm's private equity investrisk, I mean the greater the variability of returns, and ments, a rule that induces these firms to shift their thus the larger probability of loss, for a portfolio of holdings to nonregulated affiliates. such assets. The thrust of the evidence the Board In view of their similarity, the Board did not disreviewed in developing its capital proposal, which I tinguish in its proposal the risk of a venture capital have described above, suggested that private equity investment made under the new merchant banking investments carry risks that greatly exceed those of authority from that made under other authorities. By average banking organization assets. Moreover, the and large, the nature of most major banking organiza- Board was concerned that the level of this higher tions' existing equity investments are similar to risk has become increasingly inconsistent with the those made by nonbank venture capitalists and are minimum requirements of the current Basel Capital similar to those likely to be made under merchant Accord, particularly as the amount of such invest- banking powers. The high average returns to these ments has risen sharply in an environment of sub- investments—by suggesting their riskiness (recall stantially rising equity valuations. Our review of the the iron law that high return means high risk)—also merchant banking authority brought this general issue suggested that we seek comment on the need for a to the fore for equity assets purchased under all higher commitment of equity capital for all portfolio authorities, not just the new merchant banking equity assets at banking organizations. authority. Consequently, we proposed a 50 percent capital As part of our review, supervisors and economists requirement on portfolio equity investments held from both the Federal Reserve and the Treasury, with under any authority at any location in a bank holding whom we share rulemaking authority on merchant company. This proposal is subject to review in light banking, met with banking organizations and securi- of public comments. ties firms active in the private equity business to review best practices. These interviews indicated that both sets of firms allocated very high levels of inter- Comments about the Capital Proposal nal or economic capital to their private equity business—between 25 and 100 percent, with the Indeed, as mentioned at the outset, the Board is now median above 50 percent. That is to say, the prac- reviewing and evaluating the comments on its protitioners' own experience and the resultant policy posals. My colleagues and I have not seen all of they followed internally was to assume that the risks the comments or heard the staff's evaluation of them. were such that they should presume they might lose We are not committed to any conclusion or decision all or a significant share of their investment and at this time. Nonetheless, the objectives of the subshould prepare for that eventuality. That practice committee, as I understand them, would not be met if seemed consistent with the evidence we reviewed, I did not try to highlight the major issues as they particularly given the current valuations placed on seem to be unfolding. Please keep in mind the caveequities relative to historical norms. ats I just noted as I try to do so. That practice was also consistent with the experience of those firms that provide the dominant volume of the private equity market investment. At Rating Agencies least 75 percent of the private equity funding is provided by independent firms that manage limited Each of the two major rating agencies—Standard & partnerships, raising funds from pension funds, Poor's and Moody's—has issued reports discussing endowments, foundations, corporations, and wealthy banking organizations' private equity activities since individuals. Their equity holdings are essentially the Board published its capital proposal. Standard & balanced dollar-for-dollar with the owner-investor's Poor's concluded that the proposed 50 percent own equity investment, with virtually no debt equity support appeared to be about right "if the financing. bank's portfolio is mature and diversified; less diver- We also looked at the practice of other government sified portfolios could need up to 100 percent." It agencies. The Small Business Administration limits also noted that the heavy regulatory claim on capital the subsidized borrowing of nonbank SBICs from it for banking organizations active in private equity to three times equity. In addition, the Securities and markets would have "no rating implications" Exchange Commission's net capital rule for securi- "because Standard & Poor's ha[s] historically alio- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 575 cated this level of capital" to the equity investment are aggressively promoting these efforts in discusactivities of banking organizations. sions with other G-10 countries at Basel. Moody's noted that venture capital activities are I remind you again that the Board has not dis- "capital-intensive" and that it believed "that it is cussed this particular comment yet, although similar prudent for venture capital activities to be funded issues have been raised in other discussions of capital with a high equity component. ... If the bank is more broadly. It may be better, as some commenters taking on significant fixed income obligations to fund suggest, to deal with all the capital issues at one time. an equity investment, we have further concerns." It However, we face a practical problem. Private equity concluded that "Moody's sees the recent Treasury holdings are large and growing rapidly now, and the and Fed proposal requiring U.S. banks to set aside restraints on further growth are being relaxed. Meancapital equal to 50 percent of a bank's venture capital while, practical reform of the Basel Accord is at least investments ... as being supportive of bank ratings." three years in the future. As the subcommittee knows, policymaking requires tradeoffs, and we are going to have to balance the facts and considerations I have just noted. Economic vs. Regulatory Capital In doing so, however, we must also consider another variable in our deliberations, namely the undermining In reviewing the capital proposal, the Board will have of the regulatory capital structure through so-called to consider a critical comment raised regarding the capital arbitrage. distinction between regulatory and economic capital. Essentially, the regulatory capital framework now All parties generally agree, as I have noted, that pri- groups or "buckets" all banking assets into four risk vate equity is a risky asset. There is, as I also noted, categories for determining their capital charge—with substantial evidence that, in general, both the firms most falling in the full-weight category that gets the engaged in private equity investing and the rating 4 percent minimum tier 1 charge mentioned earlier. agencies internally or analytically allocate at least as Banking organizations in recent years, however, have much capital to such assets as the Board has pro- developed methods to move off their balance sheets posed. That is, the economic capital applied to these those assets whose economic risk—as determined by assets for internal risk and other purposes already the market—implies an economic capital charge that exceeds the regulatory capital by a wide margin, a is less than the regulatory capital requirement. That margin that is not exceeded by our proposal. is, they have avoided a one-size-fits-all average regu- However, commenters have argued that there latory capital requirement whenever that charge is would be considerably less difficulty with the pro- above the market's risk evaluation on a specific set of posed regulatory capital treatment for equities if the assets, retaining those assets whose economic capital authorities permitted a regulatory capital treatment is equal to or higher than the regulatory requirement. for the rest of a banking organization's assets that The Federal Reserve and the other banking agenwas consistent with the "real" or economic risk on cies have not sought to block these transactions. those assets. This argument rests on the assumption Rather we have all recognized the market reality that that the regulatory capital on a significant volume of the current regulatory capital requirements imply banking organization assets exceeds their economic that banking organizations have two choices. The charge and that, therefore, the sum of a higher regula- first is to simply stop extending certain low-risk tory capital on equities and the existing regulatory credit because the regulatory capital requirement is capital on all other assets would exceed the total too high. The second choice is to extend such credits economic capital on all the assets. The commenters coupled with market transactions that, by equilibratthat have raised this issue have argued that the Fed- ing the amount of capital required with that consiseral Reserve has engaged in "cherry picking"— tent with the real economic risk, permit the credit picking out the risky assets for higher capital charge extension to be both safe and profitable. We have, in without providing relief for the lower-risk assets. short, permitted capital arbitrage whenever the bank- They have urged the Board to wait until there is ing organization can meet the market test. broader reform in the Basel Accord that would pre- Capital arbitrage means, however, that the resultant sumably address these concerns. The reforms under regulatory capital ratios for some banking organizaway in the accord are, in fact, seeking to make bank tions are biased upward. That is, the average retained regulatory capital charges more risk-sensitive and assets are, on average, more risky, and thus the same consistent with the "true" underlying economic risk capital ratio as before does not represent the same at individual institutions. The U.S. banking agencies degree of capital strength. Put differently, banking Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

576 Federal Reserve Bulletin • August 2000 organizations engaging in capital arbitrage have the potential impact of its capital proposal on the already removed from their balance sheets a large financing of small businesses through SBICs. An number of those assets whose economic capital important question is whether a higher regulatory charge is less than their regulatory capital require- capital charge would, in fact, significantly reduce ment. These banking organizations, that is to say, the commitment of banking organizations to SBIC have already engaged in a form of cherry picking to finance. Banks tell us they already have an internal lower their capital charges and thus have fewer low- capital hurdle at least as high as the proposed regularisk on-balance-sheet assets subject to full capital tory charge, and in applying the charge we undercharge. It is difficult to estimate the capital "savings" stand they make no distinction about the authority made by these institutions from capital arbitrage and under which, or where in the organization, the compare it to the potential "cost" of higher regula- shares are held. Moreover, a reduction in their tory capital on equities. The measured value of the investments—if it did occur—might not be a signifilatter may exceed the former. Nonetheless, capital cant factor in total venture capital finance for small arbitrage is surely one of the variables we will con- businesses because banking organization-related sider in the final decisionmaking process. SBICs account for only about 6 percent of all venture A related issue in interpreting distinctions between capital finance. Nonetheless, the comments require economic and regulatory capital is banking organiza- that we review the SBIC issue again. tions' desire for excess regulatory capital. It appears Any observer of the negotiations leading to enactclear that banking organizations want to hold a level ment of the GLB Act is aware of the importance of capital above the regulatory minimums, in part placed on both the "two-way street" and "Fed lite." to ensure that they can retain the imprimatur of Some commenters argued that the proposed capital being classified as "well-capitalized" in the event charge will make it difficult for securities firms to of losses, and in part to receive higher ratings from become financial holding companies by requiring the rating agencies and a lower cost of funds from that, as soon as they acquire a bank, they meet higher the market. Thus, commenters were not assuaged regulatory capital requirements on the equity investby the observation that even after the imposition ments already held by the firm. In developing the of the proposed capital charge on equities, all the proposal, however, we tried to carefully evaluate this banking organizations with significant equity hold- issue, including whether the internal capital charges ings that are now "well-capitalized" on a regula- securities firms told our staff they used represent a tory basis would remain so, and would have the calculation of the risks associated with equity investability to acquire additional equities and still remain ment activities or are just used for internal manage- "well-capitalized." Their focus and concern is the ment decisionmaking purposes but not for risk manreduction in the margin by which they would be agement. We will review this issue again in light of "well-capitalized." the comments. An area in which commenters have suggested that we may not have been consistent with our commit- Congressional Intent ment to "Fed-lite" is the quantitative limit or cap on aggregate holdings of equities by banking organiza- Several commenters have argued that the Board's tions. Our thinking, admittedly similar to our hisproposals are inconsistent with several stated con- torical stance, is to be cautious in new activities gressional objectives: (1) facilitating small business until we have become more comfortable with how venture capital equity finance, especially through banking organizations manage their positions. We SBICs; (2) permitting securities firms to become followed such an approach with section 20 affiliates. financial holding companies (the "two-way street"); Recall that merchant banking activities have been and (3) the desire to avoid imposing bank-like regula- authorized to begin while the capital rule is simply tion on the nonbanking activities of financial holding proposed. Thus, financial holding companies—twocompanies ("Fed-lite"). thirds of which are below $1 billion in consolidated As noted earlier, the Small Business Investment assets—could begin to acquire potentially large amounts of risky assets before being required to hold Act and the Bank Holding Company Act permit an appropriate amount of additional capital to support banks and bank holding companies to invest in and these investments. Moreover, we chose a cap that we operate SBICs with the special objective of easing felt was unlikely to bind on any present participant access to venture capital by smaller firms. Some any time soon and that, in any event, we could relieve commenters have argued that higher capital requireon a case-by-case basis if appropriate. Our objective ments may blunt this effort. The Board must evaluate Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 577 in the proposal was to err on the side of caution, The commenters raised important questions, and particularly for new participants, and to consider the Board will carefully evaluate them and modify its eliminating the cap in connection with the develop- proposal and interim rule where necessary and in the ment of a final capital rule. public interest. Statement by Patrick M. Parkinson, Associate Direc- ing professional counterparties, the PWG concluded tor, Division of Research and Statistics, Board of that regulation was unnecessary for these purposes Governors of the Federal Reserve System, before the because financial derivatives generally are not readily Subcommittee on Risk Management, Research, and susceptible to manipulation and because professional Specialty Crops of the Committee on Agriculture, U.S. counterparties can protect themselves against fraud House of Representatives, June 14, 2000 and unfair practices. Consequently, the PWG recommended that financial OTC derivatives transactions I am pleased to be here to present the Federal Reserve between professional counterparties be excluded Board's views on legislation to modernize the Com- from coverage of the CEA. Furthermore, it recommodity Exchange Act (CEA). The Board continues mended that these transactions between professional to believe that such legislation is essential. To be counterparties be excluded even if they are executed sure, the Commodity Futures Trading Commission through electronic trading systems. Finally, the PWG (CFTC) has recently proposed issuing regulatory recommended that transactions that were otherwise exemptions that would reduce legal uncertainty about excluded from the CEA should not fall within the the enforceability of over-the-counter (OTC) deriva- ambit of the act simply because they are cleared. The tives transactions and would conform the regulation PWG concluded that clearing should be subject to of futures exchanges to the realities of today's mar- government oversight but that such oversight need ketplace. These administrative actions by no means not be provided by the CFTC. Instead, for many obviate the need for legislation, however. The great- types of derivatives, oversight could be provided by est legal uncertainty affecting OTC derivatives is in the Securities and Exchange Commission (SEC), the the area of securities-based transactions, to which the Office of the Comptroller of the Currency (OCC), the CFTC's exemptive authority does not extend. Fur- Federal Reserve, or a foreign financial regulator that thermore, as events during the past few years have the appropriate U.S. regulator determines to have clearly demonstrated, regulatory exemptions carry satisfied its standards. the risk of amendment by future commissions. If our The provisions of H.R. 4541 that address OTC derivatives markets are to remain innovative and derivatives are generally consistent with the PWG's competitive internationally, they need the legal and conclusions and recommendations. However, the regulatory certainty that only legislation can provide. Board is troubled by a provision that might leave The Board commends this committee for intro- uncertainty about whether some electronic trading ducing comprehensive legislation (H.R. 4541) that systems for financial contracts between professional addresses these critical issues. In my remarks today counterparties were subject to the CEA. Specifically, I shall focus on the three principal areas that the restricting exclusions for transactions conducted on legislation covers: (1) OTC derivatives; (2) regula- electronic trading facilities to "bona fide" principaltory relief for U.S. futures exchanges; and (3) repeal to-principal transactions is unnecessary and undesirof the Shad-Johnson restrictions on the trading of able. This restriction could be construed to preclude single-stock futures. a counterparty from entering into "back-to-back" principal-to-principal transactions, that is, from using an excluded electronic trading system to hedge trans- OTC DERIVATIVES actions executed outside the trading system. We can In its November 1999 report, Over-the-Counter identify no public policy reason for precluding such Derivatives and the Commodity Exchange Act, the back-to-back transactions. Doing so would discour- President's Working Group on Financial Markets age the use of electronic trading systems and thereby (PWG) concluded that OTC derivatives transactions inhibit realization of the improvements in market should be subject to the CEA only if necessary to efficiency and transparency that such systems promachieve the public policy objectives of the act— ise to deliver. deterring market manipulation and protecting inves- In addition, H.R. 4541 does not require governtors against fraud and other unfair practices. In the ment oversight of clearing organizations for OTC case of financial derivatives transactions involv- derivatives, contrary to the recommendation of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

578 Federal Reserve Bulletin • August 2000 PWG. The Board continues to believe that such over- proposals recognize that the current "one-size-fitssight is appropriate and that alternatives to CFTC all" approach to regulation of futures exchanges is oversight should be provided. In this regard, the inappropriate, and they generally incorporate sound Board recommends incorporating into legislation the judgments regarding the degree of regulation needed provisions of H.R. 1161 (the bill that House Banking to achieve the CEA's purposes. Committee Chairman James A. Leach introduced in Furthermore, the Board generally supports codifi- April), which would enhance the Federal Reserve's cation of the CFTC's proposals so as to provide the authority to oversee clearing organizations that exchanges with greater certainty regarding future choose to be regulated as uninsured state member regulation. However, the Treasury Department is conbanks and would clarify the treatment of bank clear- cerned that the exempt board of trade provisions ing organizations (including those overseen by the might have unintended consequences that could OCC) in bankruptcy. reduce the effectiveness of the existing regulatory framework for the trading of government securities. It may be prudent, therefore, to limit the codification of the exempt board of trade provisions, at least so REGULATORY RELIEF FOR U.S. FUTURES that markets currently regulated under the Govern- EXCHANGES ment Securities Act of 1986 are not affected. This would allow the CFTC to address any unintended The PWG did not make specific recommendations consequences for the regulation of government secuabout the regulation of traditional exchange-traded rities by changing the terms of its exemptions. futures markets that use open outcry trading or that allow trading by retail investors. Nevertheless, it called for the CFTC to review the existing regulatory structures, particularly those applicable to financial SINGLE-STOCK FUTURES futures, to ensure that they remain appropriate in light of the objectives of the CEA. In February, the The PWG concluded that the current prohibition CFTC published a report by a staff task force that on single-stock futures (part of the Shad-Johnson provided a comprehensive review of its regulatory Accord) can be repealed if issues about the integrity framework and proposed sweeping changes to the of the underlying securities markets and regulatory existing regulatory structure. We understand that the arbitrage are resolved. The Board believes that these regulatory relief provisions of H.R. 4145 are intended issues can, and should, be resolved through negotiato codify these proposals. tions between the CFTC and the SEC. The Congress Using the same approach as the PWG, the CFTC should continue to urge the two agencies to settle has evaluated the regulation of futures exchanges in their remaining differences so that investors have the light of the public policy objectives of deterring opportunity to trade single-stock futures, both on market manipulation and protecting investors. When futures exchanges and on securities exchanges. contracts are not readily susceptible to manipulation If it would facilitate repeal of the prohibition, the and access to the exchange is limited to sophisticated Board is willing to accept regulatory authority over counterparties, the CFTC has proposed alternative levels of margin on single-stock futures, as provided regulatory structures that would eliminate unneces- in H.R. 4541, so long as the Board can delegate that sary regulatory burden and allow domestic exchanges authority to the CFTC, the SEC, or an Intermarket to compete more effectively with exchanges abroad Margin Board consisting of representatives of the and with the OTC markets. More generally, the CFTC three agencies. The Board understands that the purproposes to transform itself from a frontline regula- pose of such authority would be to preserve the tor, promulgating relatively rigid rules for exchanges, financial integrity of the contract market and thereby to an oversight agency, assessing exchanges' compli- prevent systemic risk and to ensure that levels of ance with more flexible core principles of regulation. margins on single-stock futures and options are con- The Board supports the general approach to regula- sistent. The Board would note that, for purposes of tion that was outlined in the CFTC's proposals. For preserving financial integrity and preventing syssome time the Board has been arguing that the regu- temic risk, margin levels on futures and options latory framework for futures trading, which was should be considered consistent, even if they are not designed for the trading of grain futures by the identical, if they provide similar levels of protection general public, is not appropriate for the trading of against defaults by counterparties, taking into account financial futures by large institutions. The CFTC's any differences in (1) the price volatility of the con- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 579 tracts, (2) the frequency with which margin calls are Act is essential. The Board appreciates this commitmade, or (3) the period of time within which margin tee's efforts to foster the consensus necessary to enact calls must be met. legislation. Although some difficult issues remain unresolved, H.R. 4541 represents significant progress toward that goal. CONCLUSION In conclusion, the Board continues to believe that legislation modernizing the Commodity Exchange Statement by Alan Greenspan, Chairman, Board of OTC DERIVATIVES Governors of the Federal Reserve System, before the Committee on Agriculture, Nutrition, and Forestry In its November 1999 report, Over-the-Counter and the Committee on Banking, Housing, and Urban Derivatives and the Commodity Exchange Act, the Affairs, U. S. Senate, June 21, 2000 President's Working Group on Financial Markets (PWG) concluded that OTC derivatives transactions I am pleased to be here to present the Federal Reserve should be subject to the CEA only if necessary to Board's views on the Commodity Futures Modern- achieve the public policy objectives of the act— ization Act of 2000 (S. 2697). My testimony today deterring market manipulation and protecting inveswill be largely identical to testimony that my col- tors against fraud and other unfair practices. In the league Patrick Parkinson delivered on behalf of the case of financial derivatives transactions involv- Board last week to the House Subcommittee on Risk ing professional counterparties, the PWG concluded Management, Research, and Specialty Crops.1 The that regulation was unnecessary for these purposes Board continues to believe that such legislation because financial derivatives generally are not readily modernizing the Commodity Exchange Act (CEA) is susceptible to manipulation and because professional essential. To be sure, the Commodity Futures Trading counterparties can protect themselves against fraud Commission (CFTC) has recently proposed issuing and unfair practices. Consequently, the PWG recomregulatory exemptions that would reduce legal uncer- mended that financial OTC derivatives transactions tainty about the enforceability of over-the-counter between professional counterparties be excluded (OTC) derivatives transactions and would conform from coverage of the CEA. Furthermore, it recomthe regulation of futures exchanges to the realities of mended that these transactions between professional today's marketplace. These administrative actions by counterparties be excluded even if they are executed no means obviate the need for legislation, however. through electronic trading systems. Finally, the PWG The greatest legal uncertainty affecting OTC deriva- recommended that transactions that were otherwise tives is in the area of securities-based transactions, excluded from the CEA should not fall within the to which the CFTC's exemptive authority does not ambit of the act simply because they are cleared. The extend. Furthermore, as events during the past few PWG concluded that clearing should be subject to years have clearly demonstrated, regulatory exemp- government oversight but that such oversight need tions carry the risk of amendment by future com- not be provided by the CFTC. Instead, for many missions. If our derivatives markets are to remain types of derivatives, oversight could be provided by innovative and competitive internationally, they need the Securities and Exchange Commission (SEC), the the legal and regulatory certainty that only legislation Office of the Comptroller of the Currency, the Fedcan provide. eral Reserve, or a foreign financial regulator that the appropriate U.S. regulator determines to have satis- In my remarks today I shall focus on three of the fied its standards. areas that the legislation covers: (1) OTC derivatives; (2) regulatory relief for U.S. futures exchanges; and The provisions of S. 2697 that address OTC deriva- (3) repeal of the Shad-Johnson restrictions on the tives are generally consistent with the PWG's contrading of single-stock futures. clusions and recommendations. The Federal Reserve Board is troubled, however, by a provision that might leave uncertainty about whether some electronic trading systems for financial contracts between pro- 1. See "Statement by Patrick M. Parkinson, Associate Director, Division of Research and Statistics, Board of Governors of the Fed- fessional counterparties were subject to the CEA. eral Reserve System, before the Subcommittee on Risk Management, Specifically, restricting exclusions for transactions Research, and Specialty Crops, Committee on Agriculture, U.S. House conducted on electronic trading facilities to "bona of Representatives, June 14, 2000," pp. 577-579 in this issue. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

580 Federal Reserve Bulletin • August 2000 fide" principal-to-principal transactions is unneces- "one-size-fits-all" approach to regulation of futures sary and undesirable. This restriction could be con- exchanges is inappropriate, and they generally incorstrued to preclude a counterparty from entering into porate sound judgments regarding the degree of regu- "back-to-back" principal-to-principal transactions, lation needed to achieve the CEA's purposes. that is, from using an excluded electronic trading Furthermore, the Board generally supports codifisystem to hedge transactions executed outside the cation of the CFTC's proposals so as to provide the trading system. We can identify no public policy exchanges with greater certainty regarding future reason for precluding such back-to-back transactions. regulation. However, the Treasury Department is con- Doing so would discourage the use of electronic cerned that the exempt board of trade provisions trading systems and thereby inhibit realization of the might have unintended consequences that could improvements in market efficiency and transparency reduce the effectiveness of the existing regulatory that such systems promise to deliver. framework for the trading of government securities. To facilitate expeditious passage of legislation, it thus may be prudent to limit the codification of the exempt board of trade provisions, at least so that markets REGULATORY RELIEF FOR U.S. FUTURES currently regulated under the Government Securities EXCHANGES Act of 1986 are not affected. In such a scenario, the The PWG did not make specific recommendations CFTC could address any unintended consequences about the regulation of traditional exchange-traded for the regulation of government securities by changfutures markets that use open outcry trading or that ing the terms of its exemptions. allow trading by retail investors. Nevertheless, it called for the CFTC to review the existing regulatory structures, particularly those applicable to financial SINGLE-STOCK FUTURES futures, to ensure that they remain appropriate in light of the objectives of the CEA. In February, the The PWG concluded that the current prohibition CFTC published a report by a staff task force that on single-stock futures (part of the Shad-Johnson provided a comprehensive review of its regulatory Accord) can be repealed if issues about the integrity framework and proposed sweeping changes to the of the underlying securities markets and regulatory existing regulatory structure. We understand that the arbitrage are resolved. The Board believes that regulatory relief provisions of S. 2697 are intended to S. 2697 provides an appropriate framework for codify these proposals. resolving these issues. Such instruments should be Using the same approach as the PWG, the CFTC allowed to trade on futures exchanges or on securihas evaluated the regulation of futures exchanges in ties exchanges, with primary regulatory authority light of the public policy objectives of deterring assigned to the CFTC or the SEC respectively. Howmarket manipulation and protecting investors. When ever, the bill recognizes that the SEC should have contracts are not readily susceptible to manipulation authority over some aspects of trading of these prodand access to the exchange is limited to sophisticated ucts on futures exchanges. The scope of the SEC's counterparties, the CFTC has proposed alternative authority can, and should, be resolved through negoregulatory structures that would eliminate unneces- tiations between the CFTC and the SEC. The Consary regulatory burden and allow domestic exchanges gress should continue to urge the two agencies to to compete more effectively with exchanges abroad settle their remaining differences so that investors and with the OTC markets. More generally, the CFTC have the opportunity to trade single-stock futures. proposes to transform itself from a frontline regula- If it would facilitate repeal of the prohibition, tor, promulgating relatively rigid rules for exchanges, the Federal Reserve Board is willing to accept regulato an oversight agency, assessing exchanges' compli- tory authority over levels of margin on single-stock ance with more flexible core principles of regulation. futures, as provided in S. 2697, so long as the Board The Federal Reserve Board supports the general can delegate that authority to the CFTC, the SEC, or approach to regulation that was outlined in the an Intermarket Margin Board consisting of represen- CFTC's proposals. For some time the Board has been tatives of the three agencies. The Board understands arguing that the regulatory framework for futures that the purpose of such authority would be to pretrading, which was designed for the trading of grain serve the financial integrity of the contract market futures by the general public, is not appropriate for and thereby prevent systemic risk and to ensure that the trading of financial futures by large institutions. levels of margins on single-stock futures and options The CFTC's proposals recognize that the current are consistent. The Board would note that, for pur- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 581 poses of preserving financial integrity and preventing relief for U.S. futures exchanges, issues that have systemic risk, margin levels on futures and options long eluded resolution. These provisions are vitally should be considered consistent, even if they are not important to the soundness and competitiveness of identical, if they provide similar levels of protection our derivatives markets in what is an increasingly against defaults by counterparties, taking into account integrated and intensely competitive global economy. any differences in (1) the price volatility of the con- The Federal Reserve Board trusts that remaining tracts, (2) the frequency with which margin calls are differences regarding single-stock futures and the made, or (3) the period of time within which margin potential application of the securities laws to OTC calls must be met. derivatives can be resolved quickly and that this important piece of legislation can be expedited through this Congress. • CONCLUSION This bill reflects a remarkable consensus on the need for legal certainty for OTC derivatives and regulatory Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

582 Announcements FEDERAL OPEN MARKET COMMITTEE for which we are all grateful. It seems clear that it is the result of a convergence of a number of forces: a great DIRECTIVE entrepreneurial spirit; stunning technological innovations; well-managed businesses; hardworking and productive The Federal Open Market Committee at its meeting men and women in our work force; expanding markets for on June 28, 2000, decided to maintain the existing our goods and services; a complete commitment to fiscal stance of monetary policy, keeping its target for the discipline; and of course, a Federal Reserve that has made independent, professional, and provably wise judgments federal funds rate at 6V2 percent. about our monetary policy. Recent data suggest that the expansion of aggre- Since I took office seven years ago, one of the hallmarks gate demand may be moderating toward a pace closer of our economic strategy has been a respect for the indeto the rate of growth of the economy's potential to pendence and the integrity of the Federal Reserve. I have produce. Although core measures of prices are rising always believed the best way for the Executive Branch to work with the Fed is to let the Chairman and the members slightly faster than a year ago, continuing rapid do their jobs independently, while we do our job—to advances in productivity have been containing costs promote fiscal discipline, to open markets, to invest in and holding down underlying price pressures. people and technologies. Nonetheless, signs that growth in demand is mov- That has given us strong economic growth with low ing to a sustainable pace are still tentative and pre- inflation and low unemployment. Thanks to the hard work of the American people, we now enjoy the longest peaceliminary, and the utilization of the pool of available time expansion in our history. In February, it will become workers remains at an unusually high level. the longest economic expansion ever. With productivity In these circumstances, and against the background high, inflation low and real wages rising, it is more than the of its long-term goals of price stability and sustain- stock markets which have boomed. This has helped ordinary people all over America. able economic growth and of the information cur- We have a 30-year low in unemployment, a 32-year low rently available, the Committee believes the risks in welfare, a 20-year low in poverty rates, the lowest continue to be weighted mainly toward conditions African-American and Hispanic unemployment rates ever that may generate heightened inflation pressures in recorded, the lowest female unemployment rate in the foreseeable future. 40 years, the lowest single-parent household poverty in 46 years. Clearly, wise leadership from the Fed has played a very large role in our strong economy. That is why, today, I am CHAIRMAN ALAN GREENSPAN SWORN IN FOR pleased to announce my decision to renominate Alan FOURTH FOUR-YEAR TERM Greenspan as Chairman of the Federal Reserve Board. For the past 12 years, Chairman Greenspan has guided the Federal Reserve with a rare combination of technical Alan Greenspan took the oath of office on June 20, expertise, sophisticated analysis, and old-fashioned com- 2000, as Chairman of the Board of Governors of the mon sense. His wise and steady leadership has inspired Federal Reserve System for a fourth four-year term. confidence, not only here in America, but all around the On January 4, 2000, President Clinton announced the world. I believe the productive, but appropriate relationship that renomination of Dr. Greenspan as Board Chairman. our administration has enjoyed with the Fed has helped The appointment was confirmed by the Senate on America play a critical and leading role in dealing with the February 3, 2000, and the oath of office was adminis- Asian financial crisis and many of the other things that we tered in Dr. Greenspan's office by Vice Chairman have faced over the last seven years. Roger W. Ferguson, Jr. Dr. Greenspan originally took Chairman Greenspan's leadership has always been crucial to these successes. With his help, we were able, also, office on August 11, 1987. The text of President last year to enact historic financial reform legislation, Clinton's January 2000 announcement follows: repealing Glass-Steagall and modernizing our financial systems for the 21st century. He was also, I think it's worth THE PRESIDENT:—You're supposed to stand over noting, one of the very first in his profession to recognize here today. This is the only time I'm interfering with the the power and impact of new technologies on the new independence of the Fed. (Laughter.) You have to come economy, how they changed all the rules and all the over here. possibilities. In fact, his devotion to new technologies has Good morning. Ladies and gentlemen, the United States been so significant, I've been thinking of taking Alan.com is enjoying an extraordinary amount of economic success, public; then, we can pay the debt off even before 2015. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

583 On a more serious note, let me say again—this Chair- The commentary is intended to help financial instiman's leadership has been good not just for the American tutions comply with Regulation E when they offer economy and the mavens of finance on Wall Street, it has electronic fund transfer services to consumers. been good for ordinary Americans. Even though my staff makes sure that I never give Chairman Greenspan advice, they have not been able to stop me from asking him for his ISSUANCE OF GUIDANCE ON EQUITY advice. So I would also like to thank him for the many INVESTMENT AND MERCHANT BANKING conversations we've had over the last seven years in our ongoing attempt to understand this amazing and everchanging economy. The Federal Reserve Board on June 22, 2000, issued Finally, I would like to thank him for his willingness to examination guidance identifying sound practices for serve another term. After these years of distinguished equity investment and merchant banking. public service and at a pinnacle of success, he could be The guidance, contained in a supervisory letter— forgiven if he were willing to walk away to a more lei- SR 00-09 (SPE)~sent to Federal Reserve bank surely and, doubtless, more financially lucrative life. His continued devotion to public service should be a cause of examiners and supervisors, as well as banking organicelebration in this country and around the world, and it's zations supervised by the Federal Reserve, codifies something for which I am very grateful. and supplements existing supervisory practices. Mr. Chairman? "While equity investments in non-financial com- CHAIRMAN GREENSPAN:—Mr. President, I first panies can contribute substantially to earnings, such wish to express my deep appreciation to you for the confidence that you've shown in me over the years. And I look investments, like other rapidly growing and highly forward to Senate consideration. profitable business lines, can entail significant mar- The Federal Reserve has been a remarkable institution ket, liquidity and other risks," wrote Richard Spillenwith which to work, and, as I've indicated to you inside, I kothen, director of the Board's Division of Banking must say I've enjoyed every minute of it. It's really been Supervision and Regulation. an extraordinary challenge, and especially for an economist who likes to get into the nitty-gritty of every statistic "Sound investment and risk management practices you've ever seen. and strong capital positions are critical elements in My colleagues and I have been very appreciative of your the prudent conduct of these activities," he wrote. support of the Fed over the years, and your commitment to The guidance advises supervisors to encourage fiscal discipline, which, as you know, and indeed have banking institutions to make appropriate public disindicated, has been instrumental in achieving what in a few weeks, as you pointed out, will be the longest economic closures relevant to their equity investments, includexpansion in the nation's history. ing accounting techniques and valuation methods Your economic policy staff has been exceptional, in my used, realized and unrealized gains and losses, and view. I've especially enjoyed working with Lloyd Bentsen, insights regarding the potential performance of Bob Rubin, and now Larry Summers. These are all superb investments under alternative market conditions. human beings, as well as first-rate professionals. The same goes for the rest of your economic advisors, Mr. Presi- Merchant banking and equity investment have dent—Gene Sperling, and Martin Baily and his colleagues. emerged as an increasingly important source of earn- Again, Mr. President, thank you. I look forward to ings at some institutions, and the Gramm-Leachworking with you in the future. And I must say you have Bliley Act enacted in November provides additional been a good friend to America's central bank. Thank you, merchant banking authority for financial holding sir. THE PRESIDENT:—Thank you. companies. Supervisory letters are the Federal Reserve's primary means of communicating key policy direc- PROPOSED ACTIONS tives to its examiners, supervisory staff, and the banking industry. Supervisory letters can be viewed The Federal Reserve Board on June 23, 2000, pubon the Board's web site at www.federalreserve.gov/ lished proposed revisions to the Regulation E (Elecboarddocs/srletters. tronic Fund Transfers) Official Staff Commentary, which applies and interprets the requirements of the regulation. Comments are due by August 31, 2000. INTERAGENCY REQUEST FOR COMMENT ON The proposed revisions provide guidance on elec- PROPOSED STANDARDS FOR CUSTOMER tronic check conversion transactions that occur, for INFORMATION SECURITY example, when a check is scanned at point of sale for information to initiate an electronic debit from a The Board of Governors of the Federal Reserve consumer's account. Additional guidance is provided System, the Federal Deposit Insurance Corporation, on electronic authorizations permitting recurring deb- the Office of the Comptroller of the Currency, and its from a consumer's account, as well as other issues. the Office of Thrift Supervision jointly requested Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

584 Federal Reserve Bulletin • August 2000 on June 21, 2000, comment on a proposed rule with the security standards, and report to the board on establishing standards for safeguarding confidential the overall status of the program. customer information. The proposed rule would The agencies seek comments on various aspects of implement section 501 (b) of the Gramm-Leach- the proposal, including its effect on community banks Bliley Act (GLBA). Comments will be accepted until that operate with more limited resources and that may August 25, 2000. have a different risk profile than larger banks. Com- The law requires the agencies to establish stan- ments are also sought on whether the final standards dards for financial institutions relating to administra- should be guidelines or regulations. tive, technical, and physical safeguards for customer records and information. These safeguards are intended to ensure the security and confidentiality AGENCIES ISSUE REVISED SUSPICIOUS of customer records and information, protect against ACTIVITY REPORT FORM any anticipated threats or hazards to the security or integrity of these records, and protect against unau- The five federal financial institutions supervisory thorized access to or use of these records or informa- agencies—the Board of Governors of the Federal tion that would result in substantial harm or inconve- Reserve System, the Federal Deposit Insurance Cornience to a customer. poration, the National Credit Union Administration, The proposed rule would provide that financial the Office of the Comptroller of the Currency, and the institutions establish an information security program Office of Thrift Supervision, together with the Finanthat would require them to (1) identify and assess cial Crimes Enforcement Network (FinCEN)—issued the risks that may threaten customer information; on June 19, 2000, a newly revised Suspicious Activ- (2) develop a written plan containing policies and ity Report (SAR) form. procedures to manage and control these risks; Beginning immediately, financial institutions and (3) implement and test the plan; and (4) adjust the organizations that are currently required to report plan on a continuing basis to account for changes suspicious activity pursuant to the existing regulain technology, the sensitivity of customer informa- tions of the federal financial institutions supervisory tion, and internal or external threats to information agencies and FinCEN may use the new SAR form security. to make these reports. Financial institutions and orga- The proposed rule outlines specific factors that nizations may continue to use the existing SAR form banks should consider in implementing a security while their procedures and systems are updated to program. Among other factors, banks should evaluate make use of the new SAR form. However, no vertheir controls on access to customer information and sions of the SAR form—other than the new SAR their policies for encrypting customer information form that is being issued—will be accepted after while it is being transmitted or stored on networks to December 31, 2000. which unauthorized persons may have access. The revisions to the SAR form reflect comments Financial institutions should test, on a regular from filers and users on how to make the SAR form basis, key controls, systems, and procedures to con- easier to complete and to provide more useful and firm that they meet the objectives of their security timely information. Consistent with this goal, several programs. The proposed guidelines suggest that tests revisions have been made to the new SAR form being should be conducted by independent third parties or issued. In addition to modifying the layout of the by staff independent of those who develop or main- SAR form for easier use, the agencies have made the tain the security program. The agencies seek com- following changes: ment on the need for specific types of tests, such as penetration or intrusion detection tests. • Added a check box for "Computer Intrusion" to The proposed rule also outlines responsibilities of Part III, "Suspicious Activity Information," in recogdirectors and management of financial institutions in nition of the need to obtain more specific information overseeing the protection of customer information. with regard to computer-related suspicious activity. An institution's board of directors should approve Along with the addition of the check box in Part III, written information on security policies and pro- a specific definition of "Computer Intrusion" has grams, and oversee management's efforts to develop, been added to the "When to Make a Report" instrucimplement, and maintain an effective information tions at number 2 security program. Management should evaluate the • Deleted the two sections requiring witness and effect of changing business arrangements, such as preparer information and have replaced these secmergers and joint ventures, document compliance tions with Part IV, "Contact for Assistance" Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 585 • Replaced the requirements to provide the name • Producing a magnetic tape of SAR forms (using and address of any law-enforcement authorities con- revised specifications obtained from the Detroit Comtacted with regard to the suspicious activity being puting Center) and mailing them to the Detroit Comreported with Part III, "Suspicious Activity Informa- puting Center tion," items 40 through 44, to include check boxes • Completing (if none of the above options is for the law-enforcement agencies contacted and to available) the paper version of the SAR and mailing list the names and telephone numbers of law- it to the Detroit Computing Center, as set forth in the enforcement personnel contacted SAR instructions. • Deleted the requirement to identify whether an SAR is an "Initial Report," "Corrected Report," or For any questions about the newly issued SAR "Supplemental Report." Instead, filers will be form, financial institutions and organizations should required only to identify when an SAR is being filed contact their primary federal regulator or FinCEN. to correct a prior SAR. Specific instructions on filing an SAR to correct a prior report have been added in the "How to Make a Report" instructions at num- ENFORCEMENT ACTIONS ber 3. The Federal Reserve Board on June 23, 2000, announced the issuance of an order of prohibition Along with the issuance of the new SAR form, against Lawrence Michaelessi, a former employee guidance for completing SAR forms has been preand institution-affiliated party of the Rochester pared and is being distributed with the new SAR Branch of The Bank of New York, New York, form. The guidance provides valuable information on New York. the preparation and filing of SAR forms. Mr. Michaelessi, without admitting to any allega- In addition to the new SAR form, new software tions, consented to the issuance of the order based on has been developed and is available to assist in the his apparent unsafe and unsound practices and violapreparation and filing of SAR forms. The new SAR tions of law in connection with his embezzlement of software and new SAR form are available on the funds from The Bank of New York. web sites of the federal financial institutions super- The Federal Reserve Board on June 23, 2000, visory agencies and FinCEN. The web site addresses announced the execution of a written agreement by are (1) the Board of Governors of the Federal Reserve and among Banco Bilbao Vizcaya Argentaria, S.A., System: www.federalreserve.gov; (2) the Federal Madrid, Spain; Banco Bilbao Vizcaya, S.A. Miami Deposit Insurance Corporation: www.fdic.gov; Agency, Miami, Florida; Banco Bilbao Vizcaya, S.A. (3) the National Credit Union Administration: New York Branch, New York, New York; the Federal www.ncua.gov; (4) the Office of the Comptroller of Reserve Bank of Atlanta; the Federal Reserve Bank the Currency: www.occ.treas.gov; (5) the Office of of New York; the New York State Banking Depart- Thrift Supervision: www.ots.treas.gov; and (6) Finment; and the State of Florida Department of Bank- CEN: www.treas.gov/fincen. Each of these web sites ing and Finance. will have available the new SAR form, the guidance for the SAR form, and the new SAR software or instructions on how to obtain these materials from PUBLICATION OF THE JUNE 2000 UPDATE other web sites. TO THE BANK HOLDING COMPANY With the issuance of the new SAR form and SAR SUPERVISION MANUAL software, financial institutions and organizations will be able to file the new form with the following The June 2000 update to the Bank Holding Company procedures: Supervision Manual, Supplement No. 18, has been published and is now available. The Manual comprises the Federal Reserve System's bank holding • Using the new SAR software to complete the company supervisory and inspection guidance. The SAR form, saving it on a diskette, and mailing it to supplement includes new or revised supervisory the Detroit Computing Center, as set forth in the SAR information and examiner guidance on the following instructions topics: • Using the new SAR software to complete the 1. Financial Holding Companies (FHCs). New super- SAR form, printing a paper version of the completed visory guidance is provided for U.S. bank holding compa- SAR form, and mailing it to the Detroit Computing nies (BHCs) and qualifying foreign banks that desire to Center, as set forth in the SAR instructions become FHCs, as authorized by the Gramm-Leach-Bliley Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

586 Federal Reserve Bulletin • August 2000 Act (GLB Act). This section includes acquisition, control, (2) when a high-quality senior risk position in the reference and other requirements with respect to engaging in portfolio is retained, or (3) when a first-loss position is activities that the Board deems "financial in nature." See retained. Minimum conditions are included for sponsoring SR letter 00-01. The general and more detailed sections institutions wishing to obtain the synthetic securitization include the following: capital treatment for type two transactions. See SR letter 99-32. 4. Nonbanking Activities of Bank Holding Companies. • Written declaration requirements for becoming an General and more detailed sections describe nonbanking FHC activities approved for BHCs that are not FHCs, under • "Well managed" and "well capitalized" standards section 4(a)(2) or under section 4(c)(8) of the BHC Act and resources required for certification as an FHC pursuant to the Board's Regulation Y or Board order. The • Activities deemed to be "financial in nature" under GLB Act prohibits the approval of any new nonbanking section 4(k)(4) of the BHC Act and therefore permissible activities under these provisions by regulation or order. for FHCs—these include activities previously determined The general section describes the current sixty-day notice to be closely related to banking, either by regulation or procedure for BHCs, as well as changes resulting from order issued under section 4(c)(8), activities that are usual the GLB Act. New nonbanking activity summaries are in conducting banking or other services abroad under secprovided for activities that were approved for BHCs by tion 4(c)(13) or by interpretation in section 211.5(d) of Board order before the passage of the GLB Act. They are Regulation K, and activities determined by statute to be (1) operating a securities exchange and (2) acting as a financial in nature certification authority for digital signatures. • Divestiture requirements with respect to impermis- 5. Nonbank Banks. Section 4(f) of the BHC Act was sible activities that are acquired together with permissible amended by section 107 of the GLB Act. Cross marketing, activities growth, and certain activity limitations and other provi- • Applicable notice procedures. sions were eliminated to allow BHCs to affiliate with securities firms and insurance companies. The general 2. Retained Interests. Retained interests arise from overdraft prohibitions of section 4(f)(3) of the BHC Act assets sold to a securitization vehicle that, in turn, issues are discussed for controlled subsidiary banks of grandfathbonds to investors. Supervisory concerns exist about the ered holding companies of nonbank banks (those existing methods and models that are used to value these interests on March 5, 1987), including when certain overdrafts are and the difficulties involved in managing the risk of such permissible. volatile assets. Generally accepted accounting principles (GAAP) require recognition of an immediate gain (or loss) A more detailed summary of changes is included on the sale of assets by recording its retained interest at with the update package. The Manual and updates, fair value. The fair value of retained interests should including pricing information, are available from be supported by verifiable documentation. See SR letter 99-37. Publications Services, Mail Stop 127, Board of Gov- 3. Credit Derivatives. Supervisory guidance is provided ernors of the Federal Reserve System, Washington, on the risk-based capital treatment for credit derivatives DC 20551 (or charge by facsimile: 202-728-5886). that are used to synthetically replicate collateralized loan The Manual is also available on the Board's pubobligations (CLOs). The capital treatment for three differlic web site at www.federalreserve.gov/boarddocs/ ent synthetic CLO transactions is discussed: (1) when the entire amount of the referenced portfolio is hedged, supmanual/. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

587 Minutes of the Meeting of the Federal Open Market Committee Held on May 16, 2000 A meeting of the Federal Open Market Committee Messrs. Madigan and Slifman, Associate Directors, was held in the offices of the Board of Governors of Divisions of Monetary Affairs and Research and Statistics respectively, Board of Governors the Federal Reserve System in Washington, D.C., on Tuesday, May 16, 2000, at 9:00 a.m. Messrs. Oliner and Whitesell, Assistant Directors, Divisions of Research and Statistics and Present: Monetary Affairs respectively, Board of Mr. Greenspan, Chairman Governors Mr. McDonough, Vice Chairman Mr. Broaddus Ms. Low, Open Market Secretariat Assistant, Mr. Ferguson Division of Monetary Affairs, Board of Mr. Gramlich Governors Mr. Guynn Mr. Jordan Mr. Kelley Messrs. Rives and Stone, First Vice Presidents, Mr. Meyer Federal Reserve Banks of St. Louis and Mr. Parry Philadelphia respectively Mr. Hoenig, Ms. Minehan, Messrs. Moskow Messrs. Hakkio, Hunter, Lacker, Lang, and Poole, Alternate Members of the Rasche, Rolnick, and Rosenblum, Senior Federal Open Market Committee Vice Presidents, Federal Reserve Banks of Kansas City, Chicago, Richmond, Philadelphia, St. Louis, Minneapolis, Messrs. McTeer and Stern, Presidents of the and Dallas respectively Federal Reserve Banks of Dallas and Minneapolis respectively Messrs. Bentley and Kopcke, Vice Presidents, Federal Reserve Banks of New York and Mr. Kohn, Secretary and Economist Boston respectively Mr. Bernard, Deputy Secretary Ms. Fox, Assistant Secretary Mr. Gillum, Assistant Secretary By unanimous vote, the minutes of the meeting Mr. Mattingly, General Counsel of the Federal Open Market Committee held on Mr. Baxter, Deputy General Counsel March 21, 2000, were approved. Ms. Johnson, Economist The Manager of the System Open Market Account Mr. Prell, Economist reported on recent developments in foreign exchange markets. There were no open market operations Mr. Beebe, Ms. Cumming, Messrs. Eisenbeis, in foreign currencies for the System's account in the Howard, Lindsey, Reinhart, Simpson, period since the previous meeting, and thus no vote Sniderman, and Stockton, Associate Economists was required of the Committee. The Manager also reported on developments in Mr. Fisher, Manager, System Open Market Account domestic financial markets and on System open market transactions in government securities and federal agency obligations during the period March 21, 2000, Mr. Winn, Assistant to the Board, Office of Board Members, Board of Governors through May 15, 2000. The Committee ratified these transactions by unanimous vote. With Mr. Broaddus dissenting, the Committee Mr. Ettin, Deputy Director, Division of Research and Statistics, Board of Governors voted to extend for one year beginning in mid- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

588 Federal Reserve Bulletin • August 2000 December 2000 the reciprocal currency ("swap") hiring of census workers, but gains in private employarrangements with the Bank of Canada and the Bank ment were very large over the two months. Job of Mexico. The arrangement with the Bank of Can- growth in retail trade and services was robust, and ada is in the amount of $2 billion equivalent and that employment in manufacturing and construction with the Bank of Mexico in the amount of $3 billion trended higher. The civilian unemployment rate equivalent. Both arrangements are associated with dropped in April to 3.9 percent, a thirty-year low. the Federal Reserve's participation in the North Industrial production accelerated in April after a American Framework Agreement, which was estab- strong gain in the first quarter. Manufacturing, notalished in 1994. Mr. Broaddus dissented because he bly in high-tech industries, led the way, but growth believed that the swap lines existed primarily to in mining and utilities also was sizable. The pickup facilitate foreign exchange market intervention, and in manufacturing lifted the factory operating rate he was opposed to such intervention for the reasons further, and capacity utilization in April was about he had expressed at the February meeting. equal to its long-term average. The Manager discussed some aspects of a sug- Consumer spending increased very rapidly in the gested approach to the management of the System's first quarter but apparently decelerated early in the portfolio over coming quarters prior to the Commit- second quarter. Nominal retail sales were down tee's receipt and review of an ongoing study relating slightly in April after brisk gains in February and to the conduct of open market operations in a period March. Sales slumped at durable goods stores and of substantial declines in outstanding Treasury debt. changed little at nondurable goods outlets. However, During that interim, the management of the System the underlying trend in spending remained strong as a portfolio should try to satisfy a number of objectives: result of robust expansion of disposable incomes, the keeping the maturity of the portfolio from lengthen- large accumulated gains in household wealth, and ing materially; meeting long-run reserve needs to the very positive consumer sentiment. extent possible through outright purchases of Trea- Residential housing activity stayed at an elevated sury securities without distorting the yield curve or level in April; total private housing starts edged impairing the liquidity of the market; and concentrat- higher while starts of multifamily units partially ing expansion of the System portfolio in "off-the- reversed a sharp drop in March. Sales of both new run" securities in the secondary market to help to and existing single-family homes rose in March (latmaintain liquid markets in benchmark securities. It est data). The persisting strong demand for housing was important to announce a strategy that would during a period of rising mortgage rates apparently allow market participants to take the System's opera- was being underpinned by the rapid growth of jobs tions into account as they adapted to the declining and the accumulated gains in stock market wealth. Treasury debt levels. While no specific blueprint Business fixed investment was up sharply in the could be given at this point regarding future Desk first quarter after a sluggish performance late last operations, the members encouraged the Manager to year. The pickup encompassed both durable equipdiscuss his plans with Treasury officials. ment and software and nonresidential structures. The Committee then turned to a discussion of the Shipments of computing and communications equipeconomic and financial outlook and the implementa- ment surged following the century rollover, and shiption of monetary policy over the intermeeting period ments of other non-aircraft capital goods recorded ahead. an unusually large rise as well. Moreover, the recent The information reviewed at this meeting sug- strength in orders for many types of equipment gested that economic growth had remained rapid pointed to further advances in capital spending in through early spring. Consumer spending and busi- coming months. Expenditures for nonresidential ness fixed investment were still trending upward structures, which had turned up last autumn, rose strongly, and housing demand was holding at a high rapidly in the first quarter; unusually favorable level. Industrial production and nonfarm payrolls weather over the two quarters likely was a contributwere expanding briskly in response to burgeoning ing factor. The upturn in nonresidential building domestic demand, but the strength of demand was activity was spread broadly across the major types also showing through in the form of rising imports. of structures. Labor markets continued to be very tight, and some The pace of accumulation of manufacturing and measures of labor costs and price inflation showed trade inventories slowed somewhat in the first quarter signs that they might be picking up. following a sizable buildup in late 1999, and the Employment surged in March and April. Part of aggregate inventory-sales ratio edged down from an the pickup resulted from a step-up in government already very low level. Stockbuilding by manufactur- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 589 ers and merchant wholesalers picked up slightly in slightly faster rate in April than in March, and the the first quarter, but stocks remained at low levels in increase for the twelve months ended in April was relation to sales. By contrast, inventory investment larger than for the previous twelve-month period. slowed among retailers. Part of this slowdown might At its meeting on March 21, 2000, the Committee have involved a liquidation of precautionary stocks adopted a directive that called for a slight tightening built up in anticipation of the century date change. of conditions in reserve markets consistent with an The inventory-sales ratio in this sector was at a increase of lA percentage point in the federal funds historically lean level. rate to an average of about 6 percent. The members The U.S. trade deficit in goods and services reached saw substantial risks of rising pressures on labor and another a new high in February as the value of other resources and of higher inflation, and they imports rose sharply further and the value of exports agreed that the tightening action would help bring the changed little. For the January-February period, the growth of aggregate demand into better alignment moderate rise in exports and the sharp increase in with the sustainable expansion of aggregate supply. imports from fourth-quarter levels were spread across They also noted that even with this additional firming most major trade categories. The available informa- the risks were still weighted mainly in the direction tion suggested that economic expansion remained of rising inflation pressures and that more tightening robust in most foreign industrial economies. The might be needed. recent decline in the exchange value of the euro was Open market operations during the intermeeting spurring economic activity in the euro area, and period were directed toward implementing the Canada was benefiting from spillovers from the U.S. desired slightly tighter pressure on reserve positions, economy. For the Japanese economy, which had been and the federal funds rate averaged very close to the notable exception among the foreign industrial the Committee's 6 percent target. The Committee's economies, there were indications of some strength- action and its announcement were widely anticipated ening of aggregate demand during the first five and had little initial effect on financial markets. Later months of the year. Economic activity in the develop- in the week, however, market interest rates moved ing countries also continued to pick up. Key South up in response to the release of the minutes of the American countries were recovering from recent February meeting and the mention therein of some recessions, while several Asian emerging-market sentiment for a larger policy tightening than had countries were settling into growth at more sustain- been undertaken. Subsequently, interest rates fell as able rates. stock prices tumbled over the first half of April, Recent information suggested that price inflation when investors seemed to revise downward their might be picking up slightly and only partly as a assessments of equity valuations, especially those of direct result of increases in energy prices. Although more speculative technology shares that previously consumer prices were unchanged in April, they had risen considerably. Interest rates more than recorded sizable step-ups in February and March; reversed those declines, however, when stock prices moreover, while the rise in core consumer prices over began to level out and incoming data suggested that the twelve months ended in April was the same as the aggregate demand continued to expand faster than change in the year-earlier twelve-month period, core potential supply and that wage and price developconsumer price inflation was up slightly in the ments were becoming more worrisome. On balance March-April period compared with other recent over the intermeeting period, private interest rates months. At the producer level, prices of finished moved up appreciably while Treasury yields goods other than food and energy edged higher in increased somewhat less. Most major indexes of March and April, but the increase over the twelve equity prices declined significantly over the intermonths ended in February was a little smaller than meeting period. the rise over the preceding twelve months. With In foreign exchange markets, the trade-weighted regard to labor costs, the employment cost index for value of the dollar appreciated considerably over the hourly compensation of private industry workers intermeeting period against a basket of major currenregistered a larger advance in the first quarter than cies, reflecting in part the larger intermeeting increase in previous quarters, and the rate of increase in com- in U.S. long-term yields relative to rates in most pensation over the year ended in March was substan- foreign industrial countries. The dollar's rise against tially larger than the rise over the year-earlier period. the euro was sizable, but the dollar also made moder- Faster growth in benefits accounted for more than ate gains against the British pound, the Japanese yen, half of the acceleration. Average hourly earnings of and the Canadian dollar. The dollar also appreciated production or nonsupervisory workers grew at a somewhat against the currencies of a group of other Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

590 Federal Reserve Bulletin • August 2000 important trading partners, notably the Mexican peso undermine the economy's remarkable performance. and the Brazilian real. Adding to concerns about heightened inflation pres- Growth of M2 picked up further in April from its sures was statistical and anecdotal evidence that already strong pace in March, as households boosted could be read as suggesting that underlying inflation their liquid balances to meet higher-than-usual levels already was beginning to pick up. Unit costs, howof final payments on 1999 taxes. In contrast, M3 ever, were still remarkably subdued, and members growth slowed considerably in April after a robust saw no developments at this stage that might augur a March advance. From the fourth quarter of 1999 sharp near-term deterioration in price inflation. through April, M2 and M3 expanded at rates well In their assessment of business conditions across above the upper ends of their annual ranges for 2000. the country, members commented on continuing Total domestic nonfinancial debt continued to expand indications of robust economic activity in all regions at a pace in the upper portion of its range. and widely increasing pressures on labor and other The staff forecast prepared for this meeting contin- resources. Indeed, economic activity appeared to ued to suggest that the expansion would gradually have grown appreciably further from already elevated moderate from its currently elevated pace to a rate levels in numerous parts of the country, although the around, or perhaps a little below, the growth of the latest regional data and anecdotal reports provided economy's estimated potential. The expansion of scattered indications that business conditions might domestic final demand increasingly would be held be starting to soften in some areas. In this regard, back by the anticipated waning of positive wealth members referred to the emergence of slightly more effects associated with earlier large gains in equity cautious attitudes on the part of some business execuprices and by higher interest rates. As a result, the tives concerning the prospects for their industries. growth of spending on consumer durables and houses With respect to developments in key expenditure was expected to slow; in contrast, however, overall sectors of the economy, growth in consumer spendbusiness investment in equipment and software was ing was expected to slow from the exceptional pace projected to remain robust, partly because of the of the first quarter, though still likely to be relatively upward trend in replacement demand, especially for robust. Retail sales had edged lower in April, but computers and software. In addition, continued solid members commented that it was too early to gauge economic growth abroad was expected to boost the whether this softening was a harbinger of a more growth of U.S. exports for some period ahead. Core moderate trend. Consumer sentiment had remained price inflation was projected to rise noticeably over upbeat in the context of an extended period of sizable the forecast horizon, partly as a result of higher expansion in employment and incomes and the sharp import prices and some firming of gains in nominal rise in stock market prices over the course of recent labor compensation in persistently tight labor mar- years. Some members observed that the slightly less kets that would not be fully offset by productivity ebullient consumer behavior recently might have growth. been influenced to some extent by the volatility and In the Committee's review of current and prospec- downward movement in the stock market over the tive economic and financial developments, members course of the past several weeks. Higher financing focused on persisting indications that aggregate costs probably were also beginning to play a role. demand was expanding more rapidly than potential Looking ahead, the experience of recent years amply supply and that pressures on labor and other producer demonstrated the difficulty of forecasting the perforresources were continuing to increase. While there mance of the stock market. The failure of further were tentative signs that the growth of demand might large increases to materialize, should that occur, be moderating in some key sectors of the economy, would over time imply a more neutral or even a such as retail sales and housing, clear-cut evidence negative net impact from wealth once the positive of any significant deceleration in the rapid growth effects of the earlier advance had played themselves of aggregate demand was lacking. Bond yields and out, but the latter would take some time. other financial conditions had firmed to some extent The same background factors were likely to govern recently, but those adjustments had been influenced the prospective behavior of housing activity. The by the buildup in market expectations of more mone- evidence of a downturn in homebuilding was still tary policy tightening. In the absence of further quite marginal, but some anecdotal reports suggested monetary restraint, any slowing over coming quar- that higher mortgage rates were starting to exert a ters was not viewed as likely to be sufficient to retarding influence on housing demand. Even so, avert increasing pressures on the economy's already members continued to identify areas of remarkable strained resources and rising inflation rates that would strength across the nation, and overall housing con- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 591 struction remained at an elevated level. On the ments in productivity, and more business firms assumption of further growth in jobs and incomes appeared to be attempting or considering increases in in line with current forecasts and absent markedly their selling prices to maintain or improve their profit higher mortgage financing costs, housing activity margins. However, their ability to set higher prices, might reasonably be expected to settle at a level a bit or at least to raise them significantly, continued to be below recent highs. severely constrained by the persistence of strong Business investment spending retained strong competition across much of the economy. Indeed, upward momentum, though it had exhibited an examples of successful efforts to mark up prices, uneven growth pattern in recent quarters that impor- which tended to be concentrated in products using tantly reflected Y2K effects. Looking ahead, further oil-related inputs, were still the exception. Even so, rapid growth was expected in spending for business the members believed that the risks of acceleration equipment and software in light of likely ongoing in core prices were now appreciably higher given efforts to hold down costs by substituting capital current trends in aggregate demand, pressures on embodying advanced technology for scarce labor resources, and developments in foreign economies. resources. Recent order trends and rising capacity In the Committee's discussion of policy for the utilization rates were consistent with this expectation. intermeeting period ahead, all the members endorsed Expenditures on nonresidential structures and other a proposal to tighten reserve conditions sufficiently construction generally had strengthened in recent to raise the federal funds rate by V2 percentage point months, and members expected them to be well to a level of 6V2 percent. A more forceful policy maintained in part because of heavy spending on move than the 25 basis point increases that had been roads and other public projects by state and local implemented since mid-1999 was desirable in light governments. of the extraordinary and persisting strength of overall The foreign trade sector of the economy was demand, exceeding even the increasingly rapid projected to provide less of a safety valve for the growth of potential supply, and the attendant indicaaccommodation of domestic demand going forward. tions of growing pressures in already tight markets Although a number of foreign nations continued to for labor and other resources. The strength in demand face political and economic problems, the strengthen- might itself be, at least in part, the result of the ing economies of many U.S. trading partners would ongoing acceleration of productivity, with the latter tend to limit the availability of excess foreign pro- feeding back on demand through higher equity prices duction capacity to help meet the growth in U.S. and profitable investment opportunities. Financial demand. At the same time, foreign demand for U.S. markets seemed to have recognized the need for real goods and services would be expanding, thereby add- interest rates to rise further under these circuming to demand pressures on U.S. producer resources, stances, and while market assessments were not other things equal. In the latter regard, several mem- always correct, the evidence suggested that a more bers mentioned anecdotal evidence of growing export substantial tightening at this meeting was needed demand for a variety of domestic products. to limit inflation pressures. The members saw little In their discussion of the outlook for inflation, the risk in a relatively aggressive policy move, given the members focused on statistical and anecdotal indica- strong momentum of the expansion and widespread tions of further tightening of labor resources, accel- market expectations of such a move. The greater risk eration in some measures of labor compensation, and to the economic expansion at this point was for early signs of a possible upturn in underlying price policy to be too sluggish in adjusting, thereby allowinflation. Data on employment, reinforced by anec- ing inflationary disturbances and dislocations to dotal commentary from around the country, contin- build. A 50 basis point adjustment was more likely to ued to provide evidence of extremely tight labor help forestall a rise in inflationary expectations that, markets, which at least in some parts of the country at least in the opinion of some members, already appeared to have tightened further since early in the showed signs of worsening. A widespread view that year. Business contacts spoke of spending a great the Federal Reserve would take whatever steps were deal of time and expense to attract and retain workers needed to hold down inflation over time probably had while concomitantly persisting in efforts to improve contributed to the persistence of subdued long-run the productivity of their operations to accommodate inflation expectations during an extended period burgeoning growth in demand in the face of labor when rapidly rising demand was pressing on limited force constraints. There were more reports that rising supply resources. Today's policy move would underwages and benefits and increasing costs of nonlabor gird such relatively benign expectations and help inputs could no longer be fully offset by improve- ensure the success of the Committee's policy. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

592 Federal Reserve Bulletin • August 2000 The members agreed that the balance of risks its long-run objectives, the Committee in the immediate sentence that would be included in the press state- future seeks conditions in reserve markets consistent with ment to be released shortly after this meeting should increasing the federal funds rate to an average of around 6V2 percent. indicate, as it had for other recent meetings, that even after today's tightening action the members believed The vote also encompassed approval of the senthe risks would remain tilted toward rising inflation. tence below for inclusion in the press statement to be This view of the risks was based primarily on the released shortly after the meeting: persisting momentum of aggregate demand growth and the unusually high level of labor resource utiliza- Against the background of its long-run goals of price tion. At the same time, a number of the members stability and sustainable economic growth and of the inforcommented that they did not want to prejudge the mation currently available, the Committee believes the potential extent or pace of future policy tightening risks are weighted mainly toward conditions that may and that the Committee should continue to assess the generate heightened inflation pressure in the foreseeable need for further policy moves in the light of evolving future. economic conditions to be reviewed on a meeting-by- Votes for this action: Messrs. Greenspan, McDonough, meeting basis. Broaddus, Ferguson, Gramlich, Guynn, Jordan, Kelley, At the conclusion of this discussion, the Commit- Meyer, and Parry. Votes against this action: None. tee voted to authorize and direct the Federal Reserve Bank of New York, until it was instructed otherwise, It was agreed that the next meeting of the Comto execute transactions in the System Account in mittee would be held on Tuesday-Wednesday, accordance with the following domestic policy June 27-28, 2000. directive: The meeting adjourned at 1:05 p.m. The Federal Open Market Committee seeks mone- Donald L. Kohn tary and financial conditions that will foster price stability and promote sustainable growth in output. To further Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

593 Legal Developments ORDERS ISSUED UNDER BANK HOLDING COMPANY Banco Comercial, with consolidated assets of $62 bil- ACT lion, is the largest banking organization in Portugal.2 Atlantico, a Banco Comercial subsidiary, operates internation- Orders Issued Under Section 3 of the Bank Holding ally through numerous branches and agencies, including a Company Act state-licensed branch in New York, New York, and a state-licensed agency in Miami, Florida. Through their Banco Comercial Portugues, S.A. subsidiaries and affiliates, Banco Comercial and Atlantico Oporto, Portugal also engage in and outside Portugal in a variety of nonbanking activities, including asset management, real estate Banco Portugues do Atlantico, S.A. and equipment leasing, and investment banking. Oporto, Portugal Competitive and Convenience and Needs Considerations BCP-IF S.G.P.S., Lda Lisbon, Portugal Section 3 of the BHC Act prohibits the Board from approving a proposal that would result in a monopoly. The BHC BPA Internacional, S.G.P.S. Sociedade Unipessoal Act also prohibits the Board from approving a proposed Lda acquisition that would substantially lessen competition or Funchal, Madeira, Portugal tend to create a monopoly in any relevant banking market, unless the anticompetitive effects of the proposal clearly Banco Portugues do Atlantico (USA), Inc. are outweighed in the public interest by the probable effect Newark, New Jersey of the proposal in meeting the convenience and needs of the community to be served.3 Order Approving Formation of Bank Holding Companies Consummation of the proposed transaction would result and Acquisition of a Bank in the establishment of a de novo bank in the relevant banking market and thereby would increase the number of Banco Comercial Portugues, SA. ("Banco Comercial"), alternative sources of banking products and services avail- Banco Portugues do Atlantico, SA. ("Atlantico"), BCP-IF able to customers. In addition, the Board previously has S.G.P.S., Lda, BPA Internacional, S.G.P.S. Sociedade Uni- noted that the establishment of a de novo bank enhances pessoal Lda, and Banco Portugues do Atlantico (USA), competition in affected banking markets and reflects posi- Inc. ("BPA-USA") (collectively, "Applicants"), have re- tively on competitive considerations in an application unquested the Board's approval under section 3(a)(1) of the der section 3 of the BHC Act.4 Moreover, there is no Bank Holding Company Act ("BHC Act") (12 U.S.C. evidence that the proposed transaction would create or § 1842(a)(1)) to become bank holding companies by ac- further a monopoly or lessen competition in any relevant quiring up to 100 percent of the voting shares of BPABank, banking market. Accordingly, the Board concludes that National Association, Newark, New Jersey ("Bank"), a consummation of the proposal would not have a signifide novo national bank to be established by Atlantico.1 cantly adverse effect on competition or on the concentra- BPA-USA would be the direct parent company of Bank. tion of banking resources in any relevant banking market Notice of the application, affording interested persons an and that competitive considerations are consistent with opportunity to comment, has been published (64 Federal approval.5 Register 53,390 (1999)). The time for filing comments has expired, and the Board has considered the application and all comments received in light of the factors enumerated in 2. Asset and ranking data are as of January 1, 2000, adjusted to section 3 of the BHC Act. reflect transactions recently consummated by Banco Comercial, and use exchange rates then in effect. 3. 12 U.S.C. § 1842(c)(1). 4. See Canadian Imperial Bank of Commerce, 85 Federal Reserve Bulletin 733 (1999); see also Wilson Bank Holding Company, 82 Federal Reserve Bulletin 568 (1996). 1. Banco Comercial recently has consummated mergers with other 5. On consummation of the proposal, New Jersey will be the home Portuguese banking organizations and is in the process of completing state of Applicants and Bank for purposes of the BHC Act. The an internal corporate reorganization. Banco Comercial has provided proposed transaction therefore is not barred by section 3(d) of the the Board with assurances that the acquisition of Bank by the resulting BHC Act. See 12 U.S.C. §§ 1841(o)(4), 1842(d). New York is Atlantiorganization will be done in compliance with the BHC Act. c's home state for purposes of the International Banking Act ("IBA") Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

594 Federal Reserve Bulletin • August 2000 The BHC Act also requires the Board to consider the In addition, section 3 of the BHC Act requires the Board effect of the transaction on the convenience and needs of to determine that a foreign bank has provided adequate the communities to be served, and the Board has reviewed assurances that it will make available to the Board such the information presented by Banco Comercial related to information on its operations and activities and those of its the convenience and needs factor. The Board concludes, affiliates that the Board deems appropriate to determine based on all the facts of record, that the considerations and enforce compliance with the BHC Act.8 The Board has relating to the convenience and needs of the communities reviewed the restrictions on disclosure in relevant jurisdicto be served are consistent with approval. tions in which Banco Comercial and Atlantico operate and has communicated with relevant government authorities Financial, Managerial, and Supervisory Considerations concerning access to information. In addition, Banco Comercial and Atlantico have committed to make available to The BHC Act requires the Board to consider the financial the Board such information on the operations of Banco and managerial resources and future prospects of the com- Comercial, Atlantico, and any of their affiliates that the panies and banks involved in a bank acquisition proposal. Board deems necessary to determine and enforce compli- In assessing the financial and managerial strength of Banco ance with the BHC Act, the IBA, and other applicable Comercial, Atlantico, and their affiliates, the Board has federal law. Banco Comercial and Atlantico also have reviewed information provided by Applicants, confidential committed to cooperate with the Board to obtain any supervisory and examination information, and publicly re- waivers or exemptions that may be necessary to enable ported and other financial information. The capital ratios of Banco Comercial and Atlantico to make such information Banco Comercial and Atlantico exceed the minimum lev- available to the Board. In light of these commitments, the els that would be required under the Basle Capital Accord Board concludes that Banco Comercial and Atlantico have and are considered equivalent to the capital ratios that provided adequate assurances of access to any appropriate would be required of a U.S. banking organization. In light information that the Board may request. Based on these of these and all the facts of record, the Board concludes and all the facts of record, the Board concludes that the that the financial and managerial resources and future supervisory factors it is required to consider are consistent prospects of Applicants and Bank are consistent with ap- with approval. proval. Section 3 of the BHC Act also provides that the Board Conclusion may not approve an application involving a foreign bank unless the bank is "subject to comprehensive supervision Based on the foregoing, and in light of all the facts of or regulation on a consolidated basis by the appropriate record, the Board has determined that the application authorities in the bank's home country."6 The home coun- should be, and hereby is, approved.9 The Board's approval try supervisor of Banco Comercial is the Bank of Portugal. specifically is conditioned on compliance by Banco Comer- In approving applications under the BHC Act and the IBA, cial and Atlantico with all the commitments made in conthe Board has determined that other Portuguese banks were nection with this application and on the Board's receiving subject to comprehensive consolidated supervision by the access to information on the operations or activities of Bank of Portugal.7 In this case, the Board finds that the Banco Comercial, Atlantico, and any of their affiliates that Bank of Portugal supervises Banco Comercial in substan- the Board deems to be appropriate to determine and entially the same manner as it supervises those other banks. force compliance by Banco Comercial, Atlantico, and their Based on this finding and all the facts of record, the Board affiliates with applicable federal statutes. If any restrictions concludes that Banco Comercial is subject to comprehen- on access to information on the operations or activities of sive supervision on a consolidated basis by their home Banco Comercial, Atlantico, and their affiliates subsecountry supervisor. quently interfere with the Board's ability to obtain information to determine and enforce compliance by Banco Comercial, Atlantico, or their affiliates with applicable federal and the Board's Regulation K. See 12 U.S.C. § 3101 et seq. and 12 statutes, the Board may require or, when appropriate, rec- C.F.R. § 211 et seq. ommend to the Office of the Comptroller of the Currency, 6. 12 U.S.C. § 1842(c)(3)(B). Under Regulation Y, the Board uses termination of any of Banco Comercial's or Atlantico's the standards enumerated in Regulation K to determine whether a foreign bank that has applied under section 3 of the BHC Act is direct or indirect activities in the United States. All the subject to consolidated home country supervision. See 12 C.F.R. commitments and conditions on which the Board has relied § 225.13(a)(4). Regulation K provides that a foreign bank will be in reaching its decision are deemed to be conditions imconsidered to be subject to comprehensive supervision or regulation posed in writing by the Board in connection with its on a consolidated basis if the Board determines that the bank is findings and decision and, as such, may be enforced in supervised and regulated in such a manner that its home country supervisor receives sufficient information on the worldwide operations proceedings under applicable law. of the bank, including its relationship to any affiliates, to assess the bank's overall financial condition and its compliance with law and regulation. See 12 C.F.R. 211.24(c)(1). 8. See 12 U.S.C. § 1842(c)(3)(A). 7. See Banco Espirito Santo, et.al., 86 Federal Reserve Bulletin 418 9. In a separate action, the Board today approved under the IBA the (2000); see also Caixa Geral de Depositos S.A., 85 Federal Reserve application of Banco Comercial to establish a representative office in Bulletin 11A (1999). Miami, Florida. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 595 This transaction shall not be consummated before the States.1 Compass operates banks in Alabama, Arizona, fifteenth calendar day after the effective date of this order, Colorado, Florida, New Mexico, and Texas. Compass is and the proposal may not be consummated later than three the sixth largest banking organization in Arizona, controlmonths after the effective date of this order, unless such ling $1.1 billion in deposits, representing approximately period is extended for good cause by the Federal Reserve 2.7 percent of total deposits in insured depository institu- Bank of New York, acting pursuant to delegated authority. tions in the state ("state deposits").2 By order of the Board of Governors, effective June 30, Founders is the twelfth largest banking organization in 2000. Arizona, controlling deposits of $302.5 million, representing less than 1 percent of state deposits. After consumma- Voting for this action: Chairman Greenspan, Vice Chairman Fergu- tion of the proposal, Compass would become the fifth son, and Governors Kelley and Gramlich. Absent and not voting: largest banking organization in Arizona, controlling depos- Governor Meyer. its of $1.4 billion, representing approximately 3.4 percent of state deposits. ROBERT DEV. FRIERSON Associate Secretary of the Board Interstate Analysis Section 3(d) of the BHC Act allows the Board to approve Compass Banc shares, Inc. an application by a bank holding company to acquire Birmingham, Alabama control of a bank located in a state other than the home state of the bank holding company if certain conditions are Compass Bank met.3 For purposes of the BHC Act, the home state of Birmingham, Alabama Compass is Alabama,4 and Compass proposes to acquire Founders Bank in Arizona.5 All the conditions for an interstate acquisition enumerated in section 3(d) are met in Order Approving Acquisition of a Bank Holding this case.6 In light of all the facts of record, the Board is Company and Merger of Banks permitted to approve the proposal under section 3(d) of the BHC Act. Compass Bancshares, Inc. ("Compass"), a bank holding company within the meaning of the Bank Holding Com- Competitive Considerations pany Act ("BHC Act"), has requested the Board's approval under section 3 of the BHC Act (12 U.S.C. § 1842) The BHC Act and the Bank Merger Act prohibit the Board to acquire all the voting shares of Founders Bancorp, Inc., from approving a proposal if it would result in or be in ("Founders"), and thereby to acquire its wholly owned furtherance of a monopoly. These acts also prohibit the subsidiary, Founders Bank of Arizona ("Founders Bank"), Board from approving a proposal if the effect of the proboth in Scottsdale, Arizona. Compass Bank, a subsidiary posal may be substantially to lessen competition in any bank of Compass, also has requested the Board's approval relevant market unless the Board finds that the anticompetiunder section 18(c) of the Federal Deposit Insurance Act tive effects of the proposed transaction are clearly out- (the "Bank Merger Act") (12 U.S.C. § 1828(c)) to merge with Founders Bank and to retain and operate branches at the current locations of Founders Bank's offices as listed in 1. All asset data are as of March 31, 2000. All deposit data are as of Appendix A. June 30, 1999. Notice of the proposal, affording interested persons an 2. In this context, depository institutions include commercial banks, savings banks, and savings associations. opportunity to submit comments, has been published 3. See 12 U.S.C. 1842(d). (65 Federal Register 25,329 (2000)) in accordance with 4. A bank holding company's home state is that state in which the the Board's Rules of Procedure (12 C.F.R. 262.3(b)). As total deposits of all banking subsidiaries of such company were the required by the Bank Merger Act, notice of the proposal largest on July 1, 1966, or the date on which the company became a bank holding company, whichever is later. 12 U.S.C. § 1841(o)(4)(C). also has been published in relevant newspapers, and re- 5. For purposes of section 3(d), the Board considers a bank to be ports on the competitive effects of the bank merger have located in the states in which the bank is chartered, headquartered, or been requested from the United States Attorney General, operates a branch. See 12 U.S.C. §§ 1841(o)(4)-(7), and 1842(d)(1)(A) the Office of the Comptroller of the Currency ("OCC"), and (d)(2)(B). and the Federal Deposit Insurance Corporation ("FDIC"). 6. Compass is adequately capitalized and adequately managed, as defined by applicable law. 12 U.S.C. § 1842(d)(1)(A). Founders Bank The time for filing comments has expired, and the Board has been in existence and operated for more than the minimum period has considered the proposal and all comments received in of time required by applicable state law. 12 U.S.C. § 1842(d)(1)(B); light of the factors set forth in the BHC Act and the Bank Ariz. Rev. Stat. Ann. § 6-324 (five years). On consummation of the Merger Act. proposal, Compass would control less than 10 percent of the total amount of deposits of insured depository institutions in the United Compass, with total consolidated assets of $18.5 billion, States, and less than 30 percent of the deposits held by insured is the forty-third largest commercial banking organization depository institutions in Arizona. 12 U.S.C. § 1842(d)(2); Ariz. Rev. in the United States, controlling less than 1 percent of the Stat. Ann. § 6-328. All other requirements of section 3(d) of the BHC total assets of insured commercial banks in the United Act would be met on consummation of the proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

596 Federal Reserve Bulletin • August 2000 weighed in the public interest by the probable effect of the increase for Arizona as a whole. In 1999, per capita and transaction in meeting the convenience and needs of the median household income were higher in the market than community to be served.7 in non-metropolitan statistical areas in Arizona as a whole. Compass and Founders compete directly in the Payson, Since 1996, five banking organizations have entered the Phoenix, and Prescott banking markets, all in Arizona.8 Payson banking market, three (including Compass Bank) Consummation of the proposal would be consistent with by branching and two (including Founders Bank) by acquithe Department of Justice Merger Guidelines ("DOJ sition.12 Two organizations have entered the market in the Guidelines")9 and Board precedent in the Phoenix and past year. Prescott banking markets.10 The Justice Department reviewed the proposal and ad- In the Payson banking market, Compass is the third vised the Board that consummation of the proposal would largest of seven banking organizations, and controls depos- not likely have any significantly adverse competitive efits of $31.7 million, representing approximately 15.9 per- fects in the Payson banking market or any other relevant cent of total deposits in insured depository institutions in banking market. The FDIC and OCC have not objected to the market ("market deposits").11 Founders is the fifth the proposal. largest banking organization in the market and controls Based on all the facts of record, and for the reasons deposits of $13.4 million, representing approximately discussed in this order, the Board concludes that consum- 6.7 percent of market deposits. On consummation of the mation of the proposal is not likely to result in any signifiproposal, Compass would become the second largest bank- cantly adverse effects on competition or on the concentraing organization in the market with deposits of $45.1 tion of banking resources in the Payson banking market or million, representing approximately 22.6 percent of market any other relevant market. In this light, the competitive deposits. The HHI would increase by 212 points to 2756. factors are consistent with approval. In reviewing the competitive effects of this proposal, the Board has considered that several factors appear to miti- Other Considerations gate the likely effect of the proposal on competition in the Payson banking market. Six depository institutions would The BHC Act and the Bank Merger Act require the Board, remain in the market after consummation of the proposal, in acting on an application, to consider the financial and including four large multistate banking organizations other managerial resources and future prospects of the compathan Compass, and three of these organizations would each nies and banks involved, the convenience and needs of the have market shares of more than 15 percent. The Payson communities to be served, and certain supervisory factors. banking market also has characteristics that make it attrac- The Board has reviewed these factors in light of the record, tive for entry. The market's population has increased 52 including supervisory reports of examination assessing the percent since 1990, significantly more than the 30 percent financial and managerial resources of the organizations and financial information provided by Compass. Based on all the facts of record, the Board concludes that the financial and managerial resources and the future prospects of Com- 7. 12 U.S.C. §§ 1842(c)(1)(B) and 1828(c)(5)(B). pass and Compass Bank are consistent with approval, as 8. The Payson banking market is defined as the northwest corner of Gila County, and includes all banking offices in Payson and Pine. The are the other supervisory factors the Board must consider Phoenix banking market is defined as the Phoenix-Mesa Metropolitan under section 3 of the BHC Act. In addition, considerations Statistical Area. The Prescott banking market is defined as Central related to the convenience and needs of the communities to Yavapai County and includes all banking offices in Chino Valley, be served, including the records of performance of the Mayer, Prescott, and Prescott Valley. institutions under the Community Reinvestment Act, are 9. Under the revised DOJ Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger Herfindahl- consistent with approval of the proposal. Hirschman Index ("HHI") is above 1800 is considered highly concentrated. The Department of Justice has informed the Board that a bank Conclusion merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the postmerger HHI is at least 1800 and the merger increases the HHI by more Based on the foregoing, and in light of all the facts of than 200 points. The Department of Justice has stated that the higher record, the Board has determined that the applications in than normal HHI thresholds for screening bank mergers for anticomthis case should be, and hereby are, approved. The Board's petitive effects implicitly recognize the competitive effect of limitedpurpose lenders and other nondepository financial entities. approval is specifically conditioned on compliance by 10. The competitive effects of the proposal in these banking markets Compass with all the commitments made in connection are summarized in Appendix B. The data are based on calculations in with these applications. For purposes of this action, the which the deposits of thrift institutions are included at 50 percent. The commitments and conditions relied on by the Board in Board previously has indicated that thrift institutions have become, or reaching its decision are deemed to be conditions imposed have the potential to become, significant competitors of commercial banks. See Midwest Financial Group, 75 Federal Reserve Bulletin in writing by the Board in connection with its findings and 386 (1989); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Thus, the Board has regularly included thrift deposits in the calculation of market share on a 50-percent weighted basis. See, e.g., First Hawaiian, Inc., 11 Federal Reserve Bulletin 52 (1991). 11. Deposit data for this market are adjusted to include branches 12. During this period, the market has become less concentrated as opened after June 30, 1999. measured by the HHI. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 597 decision and, as such, may be enforced in proceedings National Commerce Bancorporation under applicable law. Memphis, Tennessee The proposed acquisitions shall not be consummated before the fifteenth calendar day after the effective date of Order Approving Merger of Bank Holding Companies this order, or more than three months after the effective date of this order, unless such period is extended for good National Commerce Bancorporation ("National Comcause by the Board or by the Federal Reserve Bank of merce"), a bank holding company within the meaning of Atlanta, acting pursuant to delegated authority. the Bank Holding Company Act ("BHC Act"), has re- By order of the Board of Governors, effective June 30, quested the Board's approval under section 3 of the BHC 2000. Act (12 U.S.C. § 1842) to merge with CCB Financial Corporation ("CCB Financial"), and thereby acquire Cen- Voting for this action: Chairman Greenspan, Vice Chairman Fergu- tral Carolina Bank and Trust Company ("CCB Bank"), son, and Governors Kelley and Gramlich. Absent and not voting: both of Durham, North Carolina.1 Governor Meyer. Notice of the proposal, affording interested persons an opportunity to submit comments, has been published ROBERT DEV. FRIERSON (65 Federal Register 24,959 (2000)). The time for filing Associate Secretary of the Board comments has expired, and the Board has considered the proposal in light of the factors set forth in section 3 of the Appendix A BHC Act. Branches of Compass Bank to be established at National Commerce, with total consolidated assets of Founders Bank's current offices in Arizona: $6.8 billion, is the 105th largest commercial banking organization in the United States, controlling less than 1 per- 1. 104 East Highway 260, Pay son. cent of the total assets of insured commercial banks in the 2. 21640 North 19th Avenue, Phoenix. United States.2 National Commerce operates subsidiary 3. 923 East Gurley Street, Prescott. depository institutions in Tennessee, North Carolina, Geor- 4. 7335 East Doubletree Ranch Road, Scottsdale. gia, Virginia, West Virginia, Arkansas, and Mississippi. 5. 15685 North Greenway-Hayden Loop, Suite 100-A, The depository institution controlled by National Com- Scottsdale. merce is the 22nd largest depository institution in North 6. 23305 North Pima Road, Scottsdale. Carolina, controlling deposits of $335.4 million, represent- 7. 19202 R.H. Johnson Boulevard, Sun City. ing less than 1 percent of total deposits in depository 8. 9915 West Bell Road, Sun City. institutions in the state.3 9. 12026 North 111th Avenue, Youngtown. CCB Financial, with total consolidated assets of $8.2 billion, is the 91st largest commercial banking organi- Appendix B zation in the United States, controlling less than 1 percent Summary of Market Structure of the total assets of insured commercial banks in the United States. CCB Financial operates subsidiary deposi- Phoenix banking market. Compass is the eleventh largest tory institutions in North Carolina and South Carolina.4 banking organization in the market, controlling deposits CCB Bank is the seventh largest depository institution in of approximately $222.5 million, representing less than North Carolina, controlling deposits of $5.5 billion, repre- 1 percent of market deposits. Founders is the ninth largest senting approximately 5.4 percent of total deposits in debanking organization in the market, controlling deposits of pository institutions in the state. approximately $281.3 million, representing 1 percent of After consummation of the proposal, National Commarket deposits. After consummation of the proposal, merce would become the 62nd largest commercial banking Compass would become the sixth largest banking organiza- organization in the United States, with total consolidated tion in the market, controlling deposits of approximately assets of $15 billion, representing less than 1 percent of $503.8 million, representing 1.8 percent of market depos- total banking assets. National Commerce would control the its. The HHI would increase by 2 points to 2282. Prescott banking market. Compass is the ninth largest 1. Under the proposal, National Commerce would merge with CCB banking organization in the market, controlling deposits of Financial, with National Commerce as the surviving corporation. approximately $14.8 million, representing 1.5 percent of National Commerce also has requested the Board's approval to hold and exercise an option to acquire up to 19.9 percent of CCB Finanmarket deposits. Founders is the eleventh largest banking cial's voting shares. This option would expire on consummation of the organization in the market, controlling deposits of approxi- proposed merger. mately $7.8 million, representing less than 1 percent of 2. All asset data are as of December 31, 1999, and all deposit data market deposits. After consummation of the proposal, areas of June 30, 1999. Compass would become the eighth largest banking organi- 3. In this context, depository institutions include commercial banks, savings banks, and savings associations. zation in the market, controlling deposits of approximately 4. American Federal Bank, F.S.B., Greenville, South Carolina, a $22.6 million, representing 2.3 percent of market deposits. subsidiary of CCB Financial, would be merged into CCB Bank before The HHI would increase by 2 points to 1886. consummation of the proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

598 Federal Reserve Bulletin • August 2000 seventh largest depository institution in North Carolina, ("market deposits") controlled by each competitor in the with deposits of $5.9 billion, representing approximately markets,9 the concentration level of market deposits and 5.8 percent of total deposits in depository institutions in the the increase in this level as measured by the Herfindahlstate. Hirschman Index ("HHI"),10 attractiveness for entry, and other characteristics. Interstate Analysis Consummation of the proposal would be consistent with Board precedent and the DO J Guidelines in the Section 3(d) of the BHC Act allows the Board to approve Greensboro-High Point and Raleigh banking markets.11 an application by a bank holding company to acquire Each of these banking markets would remain moderately control of a bank located in a state other than the home concentrated after consummation of the proposal and nustate of such bank holding company if certain conditions merous competitors would remain in each market relative are met.5 For purposes of the BHC Act, the home state of to the size of the market. National Commerce is Tennessee, and National Commerce Consummation of the proposal in the Durham banking proposes to acquire CCB Bank, which is located in North market would exceed the DOJ Guidelines as measured by Carolina and South Carolina. All the conditions for an the HHI. National Commerce controls the seventh largest interstate acquisition enumerated in section 3(d) are met in depository institution in the Durham banking market, conthis case.6 In light of all the facts of record, the Board is trolling deposits of $146.8 million, representing approxipermitted to approve the proposal under section 3(d) of the mately 3.7 percent of market deposits. CCB Financial BHC Act. controls the largest depository institution in the Durham banking market, controlling deposits of $1.3 billion, repre- Competitive Factors senting approximately 33.5 percent of market deposits. On consummation of the proposal, National Commerce would Section 3 of the BHC Act prohibits the Board from approv- control the largest depository institution in the Durham ing a proposal that would result in a monopoly or be in banking market, with approximately $1.5 billion of deposfurtherance of a monopoly. Section 3 also prohibits the its, representing 37.2 percent of market deposits. Concen- Board from approving a proposal that would substantially tration in the market, as measured by the HHI, would lessen competition in any relevant banking market unless increase 246 points to 2055. the anticompetitive eifects of the proposal in that banking In evaluating the competitive effects of the proposal in market are clearly outweighed in the public interest by the the Durham banking market, the Board has considered probable effect of the proposal in meeting the convenience several factors. After consummation of the proposal, 15 and needs of the community to be served.7 depository institutions would remain in the market, includ- National Commerce and CCB Financial compete di- ing six other multistate bank holding companies. Three of rectly in the Greensboro-High Point, Raleigh, and Durham these multistate bank holding companies would each conbanking markets, all in North Carolina.8 The Board has trol over 10 percent of market deposits and two other carefully reviewed the competitive eifects of the proposal multistate bank holding companies would each control in each of these banking markets in light of all the facts of over 5 percent of market deposits. In addition, the attracrecord, including the number of competitors that would tiveness for entry into the Durham banking market is remain, the share of total deposits in depository institutions 9. Market share data are based on calculations that include the 5. See 12 U.S.C. § 1842(d). A bank holding company's home state deposits of thrift institutions, which include savings banks and savings is the state in which the total deposits of all banking subsidiaries of associations, weighted at 50 percent. The Board previously has indisuch company were the largest on July 1, 1966, or the date on which cated that thrift institutions have become, or have the potential to the company became a bank holding company, whichever is later. become, significant competitors of commercial banks. See, e.g., Mid- 12 U.S.C. § 1841(o)(4)(C). west Financial Group, 75 Federal Reserve Bulletin 386 (1989); Na- 6. 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and (B). tional City Corporation, 70 Federal Reserve Bulletin 743 (1984). National Commerce meets the capital and managerial requirements Thus, the Board regularly has included thrift deposits in the calculaestablished under applicable law. On consummation, National Com- tion of market share on a 50-percent weighted basis. See, e.g., First merce would control less than 10 percent of the total amount of Hawaiian, Inc., 11 Federal Reserve Bulletin 52 (1991). deposits of insured depository institutions in the United States and less 10. Under the Department of Justice Merger Guidelines ("DOJ than 30 percent of total deposits held by insured depository institu- Guidelines"), 49 Federal Register 26,923 (June 29, 1984), a market in tions in North Carolina, the state in which National Commerce and which the post-merger HHI is more than 1800 is considered to be CCB Financial both operate insured depository institutions. All other highly concentrated. The Department of Justice has informed the requirements under section 3(d) of the BHC Act, including applicable Board that a bank merger or acquisition generally will not be chalstate age limitations, would be met on consummation of the proposal. lenged (in the absence of other factors indicating anticompetitive 7. See 12 U.S.C. § 1842(c). effects) unless the post-merger HHI is at least 1800 and the merger 8. The Greensboro-High Point banking market is defined as the increases the HHI by more than 200 points. The Department of Justice Greensboro-Highpoint Ranally Metropolitan Area ("RMA") and the has stated that the higher than normal HHI thresholds for screening non-RMA portions of Davidson and Randolph Counties. The Raleigh bank mergers for anticompetitive effects implicitly recognize the banking market is defined as the Raleigh RMA, and the non-RMA competitive effects of limited-purpose lenders and other nondeposiportions of Franklin, Johnston, Wake, and Harnett Counties. The tory financial institutions. Durham banking market is defined as the Durham RMA and the 11. The competitive effects of the proposal in these banking markets non-RMA portions of Durham, Orange, and Chatham Counties. are summarized in the Appendix. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 599 demonstrated by the entry of two depository institutions needs of the communities to be served and the CRA into the banking market since 1999, one through de novo records of performance of the institutions involved in light entry and one by acquisition. of all the facts of record.12 The Department of Justice has reviewed the proposal, As provided in the CRA, the Board has evaluated the including its effect on competition in the Durham banking convenience and needs factor in light of examinations of market, and advised the Board that consummation of the the CRA performance records of the relevant depository proposal would not likely have a significantly adverse institutions by the appropriate federal financial supervisory competitive effect in any banking market. The Office of the agency.13 National Bank of Commerce, the lead depository Comptroller of the Currency ("OCC") and the Federal institution of National Commerce, received a "satisfacto- Deposit Insurance Corporation ("FDIC") have been af- ry" rating at its most recent CRA performance examinaforded an opportunity to comment and have not objected to tion by the OCC, as of July 1998.14 CCB Bank received a consummation of the proposal. "satisfactory" rating at its most recent CRA performance Based on these and all other facts of record, the Board examination by the FDIC, as of January 2000.15 concludes that consummation of the proposal would not result in any significantly adverse effects on competition or on the concentration of banking resources in the Durham 12. The Board received one letter filed after the close of the banking market. For the reasons explained above, the comment period on the application from thirteen community organiza- Board also has concluded that consummation of the pro- tions and churches in North Carolina. The letter included comments posal would not likely have a significantly adverse effect on the record of mortgage and community development lending to on competition or on the concentration of banking re- low- and moderate-income ("LMI") and minority borrowers of National Commerce's subsidiary depository institutions and the lack of sources in the other banking markets in which National branches of National Bank of Commerce, Memphis, Tennessee, in Commerce and CCB Financial both compete or any other LMI areas. In addition, the letter included comments on the level of relevant banking market. qualified investments made by the subsidiary depository institutions of National Commerce and CCB Financial and the impact of the loss of CCB Financial's corporate headquarters in North Carolina. The Financial, Managerial, and Other Supervisory Factors letter also commented on the possible loss of jobs resulting from consummation of the proposal and concerns about the promotion of Section 3 of the BHC Act also requires that the Board minority employees and use of minority vendors by National Comconsider the financial and managerial resources and future merce and CCB Financial. Several of these comments relate to factors prospects of the companies and banks involved in a pro- that are not within the statutory factors that the Board is permitted to consider under section 3 of the BHC Act. See, e.g., First Security posal and certain other supervisory factors. The Board has Corporation, 86 Federal Reserve Bulletin 122, 132 n.56 (2000); carefully considered the financial and managerial resources Community Capital Bancshares, Inc., 85 Federal Reserve Bulletin and future prospects of National Commerce, CCB Finan- 444, 445 n.3 (1999). A public meeting or hearing on the proposal was cial, and their respective subsidiary banks and other super- also requested. Section 3 of the BHC Act requires the Board to hold a visory factors in light of all the facts of record, including public hearing on an application only on a timely written recommendation of denial from the appropriate supervisory authority for the reports of examination, other confidential supervisory inbank to be acquired. The Board has not received such a recommendaformation assessing the financial and managerial resources tion in this case. The Board has accumulated a significant record on of the organizations, and financial information provided by the proposal, including reports of examination, supervisory informa- National Commerce. The Board notes that National Com- tion, and public reports and information. In light of the record accumumerce and CCB Financial and their subsidiary depository lated and based on all the facts of record, the Board has determined that a public meeting or hearing is not required or otherwise warranted institutions currently are well capitalized and are expected in this case. to remain so on consummation of the proposal. Based on 13. The Interagency Questions and Answers Regarding Community these and all other facts of record, the Board concludes that Reinvestment provides that an institution's most recent CRA perforthe financial and managerial resources and future prospects mance evaluation is an important and often controlling factor in the of National Commerce, CCB Financial, and their subsid- consideration of an institution's CRA record because it represents a detailed evaluation of the institution's overall record of performance iary banks are consistent with approval, as are the other under the CRA by its appropriate federal banking supervisor. supervisory factors that the Board must consider under 64 Federal Register 23,618 and 23,641 (1999). section 3 of the BHC Act. 14. The other subsidiary depository institutions of National Commerce also have received "satisfactory" ratings at their most recent CRA performance examinations. NBC Bank, FSB, Memphis, Tennes- Convenience and Needs Factor see, received a "satisfactory" rating from the Office of Thrift Supervision ("OTS"), as of July 1998; First Market Bank, FSB, Memphis, In acting on a proposal under section 3 of the BHC Act, the Tennessee, received a "satisfactory" rating from the OTS, as of July 1998; and Hillsborough Savings Bank, Inc., SSB, Hillsborough, North Board is required to consider the effect of the proposal on Carolina, which National Commerce acquired on April 11, 2000, the convenience and needs of the communities to be received a "satisfactory" rating from the Federal Deposit Insurance served. The Board has long held that consideration of the Corporation, as of August 1998. NBC Bank, FSB, Knoxville, Tennesconvenience and needs factor includes a review of the see ("NBC-Knoxville"), which was merged into National Bank of Commerce on May 9, 2000, received a "satisfactory" rating from the records of the relevant depository institutions under the OTS, as of July 1998. Community Reinvestment Act (12 U.S.C. § 2901 et seq.) 15. American Federal Bank received a "satisfactory" rating from ("CRA"). Accordingly, the Board has carefully considered the OTS at its most recent CRA performance examination, as of the effect of the proposed merger on the convenience and August 1999. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

600 Federal Reserve Bulletin • August 2000 National Commerce has indicated that CCB Bank would also commended the bank for offering innovative or flexicontinue in operation after consummation of the proposal ble lending programs, including flexible mortgage proand that National Commerce would use the strengths of the grams. In 1998 and 1999, CCB Bank made 4,621 loans CRA programs of National Commerce and CCB Financial under these programs totaling $401 million. at all of its subsidiary depository institutions. Conse- Examiners favorably noted that CCB Bank made 163 quently, the Board has considered the CRA performance community development loans totaling $21 million in 1998 records of the subsidiary depository institutions of National and 1999. Examiners also indicated that the bank made a Commerce and CCB Financial in evaluating the proposal. significant level of community development investments, Examiners at the most recent CRA performance exami- including making more than $500,000 in qualified donanation of National Bank of Commerce indicated that the tions to LMI individuals and families in its assessment residential real estate lending and small business lending of areas. Examiners described CCB Bank's delivery of retail the bank reflected a reasonable penetration in LMI geogra- banking services as outstanding. In connection with the phies and an adequate distribution of loans to LMI borrow- CRA performance evaluation, examiners noted that the ers that were reportable under the Home Mortgage Disclo- current compliance examination of CCB Bank did not sure Act.16 Examiners favorably noted two flexible lending reveal any substantive violations of the fair lending laws programs designed to deliver real estate loans to LMI and regulations. individuals. The affordable mortgage program offers mort- In its review of the convenience and needs factor under gages that feature lower downpayments and flexible debt the BHC Act, the Board has carefully considered the entire ratios to qualified borrowers. During the evaluation period, record. Based on all the facts of record, the Board conthe bank made 50 loans totaling $2.5 million under this cludes that considerations relating to the convenience and program. The first mortgage refinance program offers mort- needs factor, including the CRA performance records of gages with lower downpayments, flexible loan-to-value the relevant insured depository institutions, are consistent ratios, no application or origination fees, and no private with approval of the proposal. mortgage insurance to qualified borrowers. Between February 1998 and June 1998, the bank made 192 loans under Conclusion this program totaling $17 million.17 In addition, examiners indicated that National Bank of Based on the foregoing, and in light of all the facts of Commerce made qualified community development loans record, the Board has determined that the application totaling $4.9 million during the evaluation period to pro- should be, and hereby is, approved. The Board's approval vide affordable housing to LMI individuals. Examiners is specifically conditioned on compliance by National also indicated that National Bank of Commerce made an Commerce with all the commitments made in connection adequate number of qualified investments in its assessment with the application and on the receipt by National Comareas during the examination period. Examiners stated that merce of all necessary approvals from state regulators. For the bank's delivery of retail banking services was reason- purposes of this action, the commitments and conditions ably accessible to LMI individuals through the bank's relied on by the Board in reaching its decision are deemed branch network in grocery stores. Examiners also indicated to be conditions imposed in writing by the Board in conthat a fair lending examination was conducted concurrently nection with its findings and decision and, as such, may be with the CRA performance examination and did not detect enforced in proceedings under applicable law. any evidence of discriminatory or other illegal credit prac- The acquisition of CCB Financial shall not be consumtices. mated before the fifteenth calendar day following the effec- Examiners at the most recent CRA performance exami- tive date of this order, or later than three months after the nation of CCB Bank stated that the bank responded well to effective date of this order, unless such period is extended community credit needs as evidenced by the level of lend- for good cause by the Board or by the Federal Reserve ing inside the bank's assessment area. CCB Bank origi- Bank of St. Louis, acting pursuant to delegated authority. nated 87 percent of its mortgage loans and 89 percent of By order of the Board of Governors, effective June 19, the dollar volume of mortgage loans in its assessment areas 2000. in 1998 and 1999. Examiners indicated that CCB Bank demonstrated good geographic distribution of lending Voting for this action: Chairman Greenspan, Vice Chairman Ferguthroughout its assessment areas and had a good distribution son, and Governors Kelley, Meyer, and Gramlich. of loans to borrowers with different incomes. Examiners ROBERT DEV. FRIERSON Associate Secretary of the Board 16. The 1998 examination of National Bank of Commerce reviewed the bank's activities from July 31, 1996, through June 30, 1998. During this period, the bank's assessment area consisted of portions of Appendix the Memphis and Jackson Metropolitan Statistical Areas and portions Summary of Market Structure of Bradley County, all in Tennessee. 17. NBC-Knoxville operated branches in Tennessee, North Caro- Greensboro-High Point: National Commerce is the 17th lina, Mississippi, and Georgia. Examiners noted that the lending activity of NBC-Knoxville reflected an adequate responsiveness to the largest depository institution in the market, controlling credit needs of the bank's assessment areas. deposits of $51.9 million, representing approximately Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 601 less than 1 percent of market deposits. CCB Financial is proposal and all comments received in light of the factors the third largest depository institution in the market, set forth in the FRA and the BHC Act. controlling deposits of $831.6 million, representing ap- Popular, with total consolidated assets of $25.5 billion is proximately 10.1 percent of market deposits. After the the 35th largest commercial banking organization in the proposed merger, National Commerce would become United States, controlling less than 1 percent of total assets the third largest depository institution in the market, of insured commercial banks in the United States.1 Popular controlling deposits of $883.4 million, representing ap- operates depository institutions and branches in California, proximately 10.7 percent of market deposits. The HHI Florida, Illinois, New York, New Jersey, Texas, Puerto would increase 13 points to 1130 and 24 other competi- Rico, the U.S. Virgin Islands, and the British Virgin Istors would remain in the market. lands. Popular is the 126th largest commercial banking Raleigh: National Commerce is the tenth largest depository organization in Florida, controlling deposits of $114.1 milinstitution in the market, controlling deposits of $128.8 lion, representing less than 1 percent of total deposits in million, representing approximately 1.6 percent of mar- depository institutions in the state.2 Bank's de novo entry ket deposits. CCB Financial is the sixth largest deposi- into the Orlando, Florida, banking market would enhance tory institution in the market, controlling deposits of competition in that market.3 Based on all the facts of $659.3 million, representing approximately 8.1 percent record, the Board concludes that consummation of the of market deposits. After the proposed merger, National proposal would not have a significantly adverse effect on Commerce would become the sixth largest depository competition or on the concentration of banking resources institution in the market, controlling deposits of approx- in any relevant banking market and that competitive conimately $788.1 million, representing approximately 9.7 siderations are consistent with approval. percent of market deposits. The HHI would increase 26 Section 3(d) of the BHC Act allows the Board to appoints to 1251 and 21 other competitors would remain prove an application by a bank holding company to acquire in the market. control of a bank located in a state other than the home state of the bank holding company if certain conditions are met.4 For purposes of the BHC Act, the home state of Popular, Inc. Popular is New York, and Bank would be located in Hato Rey, Puerto Rico Florida. All the conditions for an interstate acquisition enumerated in section 3(d) of the BHC Act are met in this Popular International Bank case.5 In view of all the facts of record, the Board is Hato Rey, Puerto Rico permitted to approve the proposal under section 3(d) of the BHC Act. Popular North America, Inc. The Board has carefully considered the financial and Mount Laurel, New Jersey managerial resources and future prospects of Popular and Bank and other supervisory factors, in light of all the facts Banco Popular, National Association of record. As part of this consideration, the Board has Orlando, Florida reviewed relevant reports of examination and other super- Order Approving the Acquisition of a Bank and Establishment of a Branch and an Agreement 1. Asset and ranking data are as of December 31, 1999. Corporation 2. Deposit data are as of June 30, 1999. In this context, depository institutions include commercial banks, savings banks, and savings Popular, Inc., Popular International Bank, and Popular associations. 3. The Orlando, Florida, banking market is defined as Orange, North America, Inc., (collectively "Popular"), bank hold- Osceola, and Seminole Counties; the Western half of Volusia County; ing companies within the meaning of the Bank Holding and the towns of Clermont and Groveland in Lake County. Company Act ("BHC Act"), have requested the Board's 4. See 12 U.S.C. § 1842(d). A bank holding company's home state approval under section 3 of the BHC Act (12 U.S.C. is that state in which the total deposits of all banking subsidiaries of § 1842) to acquire Banco Popular, National Association, the company were the largest on July 1, 1966, or on the date on which the company became a bank holding company, whichever is later. Orlando, Florida ("Bank"), a de novo national bank. 12 U.S.C. § 1841(o)(4)(C). Bank also has applied under section 211.4 of Regula- 5. See 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A). tion K (12 C.F.R. 211.4) to establish an agreement corpora- Popular is adequately capitalized and adequately managed, as defined tion under section 25 of the Federal Reserve Act (12 U.S.C. in the BHC Act. Popular has operated banking offices in Florida since 1997, and the Florida Department of Banking and Finance has indi- §§ 601-604a) ("FRA"). In addition, Bank has applied cated that this transaction would comply with applicable Florida law. under section 25 of the FRA and section 211.3 of Regula- See Fla. Stat. Ann. § 658.295 (West 1999). See also Letter from tion K (12 C.F.R. 211.3) to establish a foreign branch in Richard T. Donelan, Chief Banking Counsel, Department of Banking Culebra, Puerto Rico. and Finance, State of Florida, to Donald J. Toumey, Esq., counsel for Popular (September 14, 1999). On consummation of the proposal, Notice of the proposal, affording interested persons an Popular would control less than 10 percent of the total amount of opportunity to submit comments, has been published deposits in insured depository institutions in the United States. All (64 Federal Register 47,191 (1999)). The time for filing other requirements of section 3(d) of the BHC Act also would be met comments has expired, and the Board has considered the on consummation of the proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

602 Federal Reserve Bulletin • August 2000 visory information prepared by the Federal Reserve Bank The acquisition of Bank shall not be consummated beof New York and other federal banking supervisory agen- fore the fifteenth calendar day after the effective date of cies, including Popular's compliance with the Currency this order, or later than three months after the effective date and Foreign Transactions Reporting Act and related regula- of this order, and Bank shall be open for business within tions.6 six months after the effective date of this order, unless such The Board also has considered other aspects of the period is extended for good cause by the Board or by the financial condition and resources of Popular and other Federal Reserve Bank of New York, acting pursuant to aspects of their managerial resources. The Board notes that delegated authority. the bank holding companies and their subsidiary banks are By order of the Board of Governors, effective June 5, well capitalized and are expected to remain so after con- 2000. summation of the proposal. Based on all the facts of record, the Board concludes that considerations relating to Voting for this action: Chairman Greenspan and Governors Kelley, the financial and managerial resources and future prospects Meyer, and Gramlich. Absent and not voting: Vice Chairman Ferguof Popular, and its subsidiaries are consistent with approval son. of the proposal. ROBERT DEV. FRIERSON Considerations relating to the convenience and needs of Associate Secretary of the Boardthe community, including the performance records of Popular's subsidiary banks under the Community Reinvest- Wells Fargo & Company ment Act ("CRA") (12 U.S.C. § 2901 et seq.), and other San Francisco, California supervisory factors that the Board must consider under section 3 of the BHC Act also are consistent with approval. Order Approving Acquisition of a Bank Holding Bank has applied to establish Popular Insurance, Inc. Company ("PII"), an agreement corporation under section 25 of the FRA. Based on all the facts of record, the Board concludes Wells Fargo & Company ("Wells Fargo"), a bank holding that the financial and managerial resources of Popular are company within the meaning of the Bank Holding Comconsistent with the establishment of this corporation. Acpany Act ("BHC Act"), has requested the Board's apcordingly, the Board finds that the establishment of PII by proval under section 3 of the BHC Act (12 U.S.C. § 1842) Popular is consistent with the FRA and Regulation K. to acquire all the voting shares of National Bancorp of Bank also has applied pursuant to section 25 of the FRA Alaska ("National Bancorp") and thereby acquire National and section 211.3 of Regulation K (12 C.F.R. 211.3) to Bank of Alaska ("Alaska Bank"), both of Anchorage, establish a branch in Culebra, Puerto Rico. The Board has Alaska. concluded, based on all the facts of record, that the finan- Notice of the proposal, affording interested persons an cial and managerial resources and future prospects of the opportunity to submit comments, has been published institutions involved as well as other factors it is required (65 Federal Register 20,168 (2000)). The time for filing to consider when reviewing an application to establish a comments has expired, and the Board has considered the branch under section 25 of the FRA are consistent with proposal and all comments received in light of the factors approval. set forth in section 3 of the BHC Act. Based on the foregoing, and in light of all the facts of Wells Fargo, with total consolidated assets of approxirecord, the Board has determined that the applications mately $222 billion, is the seventh largest commercial should be, and hereby are, approved. Approval of the banking organization in the United States.1 Wells Fargo applications is specifically conditioned on compliance by operates a large network of banking and nonbanking sub- Popular with all the commitments made in connection with sidiaries and operates banks in 21 western and midwestern the proposal and with the conditions stated or referred to in states, but does not have a subsidiary bank in Alaska. this order. National Bancorp, with total consolidated assets of approximately $3 billion, operates in the States of Alaska and Washington. National Bancorp is the largest banking orga- 6. 31 U.S.C. § 5311 et seq. On March 9, 2000, Popular's subsidiary bank, Banco Popular de Puerto Rico, Hato Rey, Puerto Rico ("Banco nization in Alaska, controlling deposits of $2.1 billion, Popular"), entered into a written agreement (the "Written Agree- representing approximately 45.2 percent of total deposits ment"), pursuant to section 8 of the Federal Deposit Insurance Act in depository institutions in the state ("state deposits").2 (12 U.S.C. § 1818), to address the deficiencies in its anti-money On consummation of the proposal, Wells Fargo would laundering programs. See Written Agreements Approved by Federal Reserve Banks, 86 Federal Reserve Bulletin 351 (2000). In response become the largest banking organization in Alaska. to the Written Agreement, Banco Popular, with the assistance of In the State of Washington, Wells Fargo is the fifth independent auditors, conducted a review of its anti-money laundering largest banking organization, controlling deposits of policies and submitted a report to the Board on the adequacy of its procedures and a plan designed to ensure full compliance with all applicable anti-money laundering laws and regulations. In reviewing this proposal, the Board has considered this report and the steps 1. Asset and ranking data are as of March 31, 2000. already taken by Banco Popular to ensure compliance with anti- 2. Deposit data are as of June 30, 1999. In this context, depository money laundering laws and the Written Agreement and will continue institutions include commercial banks, savings banks, and savings to monitor Banco Popular's ongoing efforts in this area. associations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 603 $2 billion, representing approximately 3.4 percent of state banking market ("Seattle banking market").7 Wells Fargo deposits. National Bancorp is the 103rd largest banking is the fifth largest depository institution in the Seattle organization, controlling $2 million in deposits, represent- banking market, controlling deposits of $1.5 billion, repreing less than 1 percent of state deposits. On consummation senting approximately 4.9 percent of total deposits of deof the proposal, Wells Fargo would remain the fifth largest pository institutions in the market ("market deposits").8 banking organization in the state. National Bancorp is the 55th largest depository institution in the market, controlling deposits of $2 million, represent- Interstate Analysis ing less than 1 percent of market deposits. On consummation of the proposal, Wells Fargo would remain the fifth Section 3(d) of the BHC Act allows the Board to approve largest depository institution in the Seattle banking market, an application by a bank holding company to acquire controlling deposits of $1.5 billion, representing approxicontrol of a bank located in a state other than the home mately 4.9 percent of market deposits. The concentration state of such bank holding company provided that certain of market deposits in the market, as measured by the conditions are met.3 For purposes of the BHC Act, the Herfindahl-Hirschman Index ("HHI") would remain unhome state of Wells Fargo is California, and Wells Fargo changed at 1675 and would be consistent with approval proposes to acquire a bank in Alaska that operates a branch under the Department of Justice Merger Guidelines ("DOJ in the State of Washington.4 All the conditions for an Guidelines") and the Board's precedent.9 interstate acquisition enumerated in section 3(d) are met in Several commenters asserted that Wells Fargo's acquisithis case.5 In light of all the facts of record, the Board is tion of National Bancorp would have an adverse effect on permitted to approve the proposal under section 3(d) of the competition in home mortgage and consumer finance lend- BHC Act. ing in Alaska, because several nondepository institution affiliates of Wells Fargo provide these products in Alaska. Competitive Considerations The Board concludes that this contention does not accurately reflect the competitive effects of a proposal by a The BHC Act prohibits the Board from approving an banking organization to acquire a bank. As stated previapplication under section 3 of the BHC Act if the proposal ously by the Board, the appropriate product market for would result in a monopoly or would be in furtherance of analyzing the competitive effects of a proposal to acquire a any attempt to monopolize the business of banking. The bank is the complete cluster of banking products and BHC Act also prohibits the Board from approving a pro- services provided by banks, and not submarkets for indiposed combination that would substantially lessen compe- vidual products or services.10 On this basis, and for the tition or tend to create a monopoly in any relevant banking reasons discussed above, the Board concludes that this market, unless the Board finds that the anticompetitive effects of the proposal are clearly outweighed in the public interest by the probable effects of the proposal in meeting 7. The Seattle banking market is defined as the Seattle-Tacoma the convenience and needs of the community to be served.6 Ranally Metropolitan Area and the towns of Camano City and Eaton- Wells Fargo and National Bancorp own depository insti- ville, Washington. tutions that compete directly in the Seattle, Washington, 8. Market share data are as of June 30, 1999. 9. Under the DOJ Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger HHI is more than 1000 and less than 1800 is considered to be moderately concentrated. The Department of Justice has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other 3. A bank holding company's home state is that state in which the factors indicating anticompetitive effects) unless the post-merger HHI total deposits of all banking subsidiaries of such company were the is at least 1800 and the merger increases the HHI by more than 200 largest on July 1, 1966, or on the date on which the company became points. The Department of Justice has stated that the higher than a bank holding company, whichever is later. 12 U.S.C. normal HHI thresholds for screening bank mergers for anticompeti- § 1841(o)(4)(C). tive effects implicitly recognize the competitive effects of limited- 4. For purposes of section 3(d), the Board considers a bank to be purpose lenders and other nondepository financial entities. located in the states in which the bank is chartered or headquartered or 10. For bank mergers and acquisitions, the Board and the courts operates a branch. See 12 U.S.C. §§ 1841(o)(4)-(7) and 1842(d)(1)(A) have recognized consistently that the appropriate product market for and (d)(2)(B). analyzing the competitive effects of a transaction is the cluster of 5. See 12 U.S.C. §§ 1842(d)(1)(A) and (B) and 1842(d)(2)(A) and products (various kinds of credit) and services (such as checking (B). Wells Fargo is adequately capitalized and adequately managed, as accounts and trust administration) offered by banking institutions. See defined by applicable law. Alaska Bank has been in existence and Chemical Banking Corporation, 82 Federal Reserve Bulletin 239 operated continuously for the minimum period of time required under (1996); United States v. Philadelphia National Bank, 374 U.S. 321, applicable state law. See Alaska Stat. Ann. § 06.05.570 (Lexis 2000) 357 (1963). According to the Supreme Court, the clustering of bank- (three years). On consummation of the proposal, Wells Fargo would ing products and services facilitates convenient access to these prodcontrol less than 10 percent of the total amount of deposits of insured ucts and services and vests the cluster with economic significance depository institutions in the United States and less than 30 percent of beyond the individual products and services that constitute the cluster. total deposits held by insured depository institutions in Washington, See United States v. Phillipsburg National Bank, 399 U.S. 350, 361 where Wells Fargo and National Bancorp both operate branches of (1969). Several studies support the conclusion that households coninsured depository institutions. All other requirements under section tinue to seek this cluster of services. See Elliehausen and Wolken, 3(d) of the BHC Act would be met on consummation of the proposal. Banking Markets and the Use of Financial Services by Households, 6. 12 U.S.C. § 1842(c). 78 Federal Reserve Bulletin 169 (1992). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

604 Federal Reserve Bulletin • August 2000 proposal would not have a significantly adverse effect on inadequate records of meeting the banking and credit needs competition in any relevant banking market. of the communities they serve.15 The Board also has considered that, even under the framework suggested by the commenters, the level of A. CRA Performance Examinations market share, number of competitors, and characteristics of the home mortgage and consumer finance lending markets As provided in the CRA, the Board has evaluated the indicate that the proposal would not likely have a signifi- records of Wells Fargo and National Bancorp in serving the cantly adverse effect on competition in either of these convenience and needs of their communities in light of markets. An analysis of these factors is included in the examinations by the appropriate federal supervisors of the Appendix. CRA performance records of their respective subsidiary depository institutions. An institution's most recent CRA Convenience and Needs Considerations performance review is a particularly important consideration in the applications process because it represents a In acting on a proposal under section 3 of the BHC Act, the detailed on-site evaluation of the institution's overall Board is required to consider the effect of the proposal on record of performance under the CRA by the appropriate the convenience and needs of the community to be served federal supervisory agency.16 Wells Fargo's lead bank, and take into account the records of the relevant depository Wells Fargo Bank, NA, San Francisco, California ("Wells institutions under the Community Reinvestment Act Fargo Bank"), received an "outstanding" rating in its most ("CRA").11 The CRA requires the federal financial super- recent CRA examination by its primary federal banking visory authorities to encourage financial institutions to help supervisory agency, the Office of the Comptroller of the meet the credit needs of local communities in which they Currency ("OCC"), as of June 8, 1998.17 National Banoperate, consistent with their safe and sound operation, and corp's only bank subsidiary, Alaska Bank, also received an requires the appropriate federal supervisory authority to "outstanding" rating in its most recent CRA examination take into account an institution's record of meeting the by the OCC, as of March 8, 1999. credit needs of its entire community, including low- and Wells Fargo has stated that it would adopt and continue moderate-income ("LMI") neighborhoods, in evaluating all of Alaska Bank's CRA programs designed to meet the bank expansion proposals. The Board has carefully consid- credit needs of rural Alaskans. Wells Fargo also has repreered the convenience and needs factor and the CRA perfor- sented that, after a transition period, it would apply its own mance records of the subsidiary depository institutions of marketing program, which includes initiatives for meeting Wells Fargo and National Bancorp in light of all the facts the convenience and needs of the communities it serves, to of record, including public comments on the proposal. Alaska Bank. Comments on the proposal were submitted by several community groups and individuals. Some commenters ex- 1. CRA Performance Record of Wells Fargo Bank Lending pressed concern that Wells Fargo would close branches and Test. Wells Fargo Bank received an examination rating of fail to provide adequate service to National Bancorp's "outstanding" for its lending activities. Examiners stated customers in sparsely populated or remote areas of Alaska, that the bank's lending record was strong and based on including Alaskan Native communities. Other commenters innovative underwriting of small business loans that enquestioned whether Wells Fargo's experience serving rural abled it to penetrate most segments of the small business areas and Native American reservations elsewhere in the community, an excellent level of community development United States prepared it to address the unique banking lending, and good penetration in LMI communities and needs of residents of remote areas of Alaska.12 among LMI borrowers. During the review period, which Several commenters also asserted, based in part on their included 1996, 1997, and the first quarter of 1998, Wells analyses of data filed under the Home Mortgage Disclosure Fargo Bank made approximately 239,000 small business Act ("HMDA"),13 that Wells Fargo's record of housingrelated lending inside and outside Alaska indicated disparities between the organization's treatment of white and minority loan applicants, including the origination of subprime loans.14 These commenters alleged that Wells has stated that as trustee it has no knowledge of or control over the credit criteria of the bond issuer. Fargo and, to a lesser extent, National Bancorp, have 15. According to some commenters, Wells Fargo and National Bancorp improperly excluded Alaskan Natives in their conventional housing-related lending. 11. 12 U.S.C. §2901 etseq. 16. The Interagency Questions and Answers Regarding Community 12. One commenter criticized NBA for its alleged practice of Reinvestment (64 Federal Register 23,641 (1999)) provides that a requiring collateral in excess of the loan amount when securing loans CRA examination is an important and often controlling factor in the in remote communities. Wells Fargo has indicated that it is investigat- consideration of an institution's CRA record. ing the allegations, that its own collateral requirements apply uni- 17. Wells Fargo Bank operates in California, where it derives formly in urban and rural areas, and that it regularly extends credit to 81 percent of its deposits, and eight other western states. The bank isolated tribal borrowers without such a requirement. accounts for 45 percent of the total consolidated assets of Wells Fargo. 13. 12 U.S.C. § 2801 et seq. As of March 31, 2000, Wells Fargo subsidiary banks with "outstand- 14. Wells Fargo also was criticized for its association as bond ing" ratings in their most recent CRA examinations accounted for indenture trustee for certain unaffiliated subprime lenders. Wells Fargo 84 percent of the organization's total consolidated assets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 605 loans, totaling $9.3 billion.18 Ninety-two percent of these women- and minority-owned small businesses. Wells Fargo loans were in amounts less than $100,000, with an average Bank also took a leading role in developing and promoting loan amount of $39,000, and 26 percent were made to the Capital Access Program, a partnership of state governbusinesses located in LMI census tracts. The bank origi- ment and private lenders created to increase the availability nated 149 community development loans, totaling approxi- of credit to small business borrowers through guaranty mately $651 million. Wells Fargo Bank made 6,862 resi- fund arrangements. dential mortgage loans, or 36 percent of all such loans it Investment Test. Wells Fargo Bank received an "outmade, totaling $240 million, to LMI borrowers. In the standing" examination rating for its investment activities. aggregate, the bank made 25 percent by number and 27 The examination report stated that Wells Fargo Bank expercent by dollar amount of its small business, community hibited strong levels of community development investdevelopment, and residential mortgage loans in LMI cen- ments, especially in California, Arizona, and Washington, sus tracts. where the bank made 83 percent by number and 76 percent Examiners found that Wells Fargo Bank had a strong by dollar volume of its total investments. Overall, the bank lending record in California, the bank's primary geo- made approximately 2,400 qualifying investments, totaling graphic market, based on a large volume of community more than $227 million. Examiners noted that, for many development lending to support low-income and very low- community development projects in California, Wells income housing development and a large volume of small Fargo Bank was either the first, the largest, or the only business loans in LMI areas. In California, the bank origi- investor. Through its affordable housing investments, Wells nated 99 community development loans, totaling $469 Fargo Bank helped create more than 6,500 housing units million, including 64 loans to affordable housing projects for LMI households. The bank also invested almost $26 to create more than 4,300 LMI housing units.19 The bank million in regional and national organizations addressing also made more than 198,000 small business loans, totaling affordable housing and small business credit needs in the approximately $8 billion, in the state. Wells Fargo Bank's bank's assessment areas. In addition, Wells Fargo Bank market share of small business loans in LMI areas ex- contributed more than $21 million to governmentceeded its market share of small business loans in its subsidized programs, nonprofit developers, and social serassessment area overall, and the bank made a larger propor- vice groups. tion of its small business loans in LMI areas than the Service Test. Wells Fargo Bank received an examination proportion of small businesses in its assessment area to be rating of "high satisfactory" for its retail banking services found in LMI areas.20 in its CRA assessment areas. Examiners reported that, The examination report also stated that, for more than during the review period, Wells Fargo Bank's service delivten years, Wells Fargo Bank has provided financing, in- ery systems were reasonably accessible to individuals of cluding complex arrangements using low-income housing different income levels and often were located in popular tax credits ("LIHTC"), for affordable housing projects.21 shopping areas that were accessible by public transporta- Examiners commended Wells Fargo Bank for its assistance tion.22 to these transactions and also cited the volume and com- Wells Fargo Bank used a variety of formats for its plexity of financing packages in which Wells Fargo Bank branches, but the formats it used most frequently offered participated. the full array of the bank's products and services. Accord- Examiners also commented favorably on Wells Fargo ing to the examination report, Wells Fargo Bank main- Bank's record of innovation in small business lending. tained branch hours that were reasonable and convenient to During the review period, Wells Fargo Bank developed LMI communities and individuals, including Saturday new loan products, including a low-documentation small hours at most branches. business loan, and marketing programs focused on under- The report stated that Wells Fargo Bank offered a variety served groups of small business customers, including of loan and deposit products through its branch network and also maintained alternative delivery systems, including 24-hour telephone banking, internet banking, and banking 18. In this context, "small business loans" means loans in amounts by mail. Wells Fargo Bank offered products and services less than $1 million. Wells Fargo Bank also made 33 percent of its such as no-fee checking accounts for individuals, basic small business loans to businesses with gross annual revenues less small business checking, ATM-based international remitthan $1 million ("loans to small businesses"). 19. In rural areas, Wells Fargo Bank provided $7.3 million of tance services, and home mortgage loan centers in LMI construction financing for 81 affordable single-family housing units in communities. a very low-income community of farm workers and extended a $1.5 Examiners found that Wells Fargo Bank had a satisfacmillion line of credit to a nonprofit developer of self-help housing in tory record of branch openings and closings. The bank's an area with a large population of farm workers. branch closure policy provided for local management to 20. Commenters expressed concern that Wells Fargo's lending policies and practices developed outside Alaska would not take local needs and conditions fully into account. Wells Fargo has stated that all decisions about small business models, risks, and pricing strategies 22. One commenter alleged that Wells Fargo failed to hire addiwould be made in Alaska. tional community development loan officers to serve LMI and pre- 21. In 2000, Wells Fargo Bank committed to make a $6 million dominately minority communities despite Wells Fargo's indication in LIHTC investment to provide affordable single-family rental housing a previous transaction that it would do so. Wells Fargo has indicated in in rural areas to Native Americans. this case that it has achieved those hiring goals. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

606 Federal Reserve Bulletin • August 2000 review the impact of any proposed branch closing, and ties in its assessment areas, and a severe shortage of branch closings during the review period did not adversely affordable housing in those areas, Alaska Bank had no affect the accessibility of the bank's delivery systems. significant gaps in its lending activities. In fact, Alaska During the review period, the bank opened 78 branches, or Bank's market share of home purchase and home improve- 17 percent of all its new branches, in LMI communities, ment lending in LMI communities in rural areas was larger and installed seven off-site ATMs in LMI communities. than its overall market share for these types of loans. The bank retained 22 branches in LMI areas that were Alaska Bank also originated or purchased 3,415 small experiencing low growth and profitability to ensure ade- business loans, totaling $254.6 million.25 quate service in these communities. Wells Fargo Bank also Alaska Bank used flexible underwriting procedures conclosed 63 branches, or 25 percent of all branches that it sistent with safe and sound lending practices to help meet closed, in LMI communities.23 Wells Fargo has indicated the credit needs of LMI home buyers and small businesses to the Board that it does not intend to close any rural in its assessment area. Alaska Bank participated in eight branches of Alaska Bank or reduce Alaska Bank's array of flexible lending programs, including a U.S. Department of services to rural areas. Agriculture ("USDA") rural development program, a U.S. Department of Housing and Urban Development program 2. Alaska Bank's CRA Performance Record focused to assist Native American and Alaskan Native Examiners commended Alaska Bank for its responsiveness borrowers, state-sponsored housing finance programs, a to the lending, investment, and service needs of businesses partnership with Anchorage Neighborhood Housing Serand individuals throughout its service area, including LMI vices, and a proprietary consumer loan program.26 individuals. Alaska Bank received high ratings for offering Investment Test. Alaska Bank received a rating of "high a range of residential loan products and for meeting the satisfactory" on the investment test of its CRA examinacredit needs of communities in a state whose geography tion. The examination report stated that Alaska Bank had a posed significant challenges. Examiners stated that Alaska favorable record of investing and making grants in commu- Bank received its "outstanding" rating in large part be- nities in its assessment area. The bank made approximately cause of its performance in the rural portion of its assess- $20.8 million in qualified investments, including $279,000 ment area, which constitutes all the state outside the An- in grants and donations to community housing and develchorage MSA. opment organizations. The bank also assisted a rural mu- Lending Test. Alaska Bank had a strong record of lend- nicipality in a complex bond transaction that raised ing to individuals and businesses throughout its assessment $18 million to provide construction financing for two rural area, including those in LMI communities. According to health clinics and an administrative center to serve lowexaminers, Alaska Bank made a high volume of residential income communities. mortgage, consumer, community development, and small Service Test. Alaska Bank received an "outstanding" business loans, particularly home improvement and home examination rating for providing retail banking services to refinancing loans. During the review period, which ex- its assessment areas. Examiners stated that the bank was a tended from 1997 through 1998, the institution made ap- leader in providing community development services proximately 11,000 home purchase, rehabilitation, and refi- throughout the state.27 In addition, 70 percent of Alaska nance loans, totaling more than $1 billion, and 20 loans, Bank's branches and 64 percent of its ATMs were located totaling $39 million, to support the development of afford- outside the Anchorage MSA. In the Anchorage MSA, able housing and other community revitalization projects.24 although only approximately 26 percent of the population The examination report noted that Alaska Bank was the were LMI individuals, almost half of Alaska Bank's leader in home mortgage originations in each of its assess- branches were located in LMI census tracts. Nineteen of ment areas and had an excellent system for distributing home purchase and home improvement loans to borrowers 25. Examiners also noted that Alaska Bank had the largest portfolio at various income levels in rural communities. Despite the of consumer loans in the state, which was particularly significant inclusion of large rural regions with low population densibecause such loans in rural areas often helped to provide equipment and supplies needed for subsistence-level occupations. 26. Under the Alaska Housing Finance Corporation ("AHFC") Tax-Exempt First-Time Home Buyers Program, featuring reduced 23. Section 42 of the Federal Deposit Insurance Act (12 U.S.C. § interest rates and down payments, and the AHFC Interest Rate Reduc- 183 lr-1), as implemented by the Joint Policy Statement Regarding tion for Low-Income Borrowers Program, featuring reduced interest Branch Closings (64 Federal Register 34,844 (1999)), requires that a rates determined by the borrower's income, the bank made 832 loans, bank provide its customers and the appropriate federal supervisory totaling $75.8 million. In 1999, the bank made 369 loans, totaling agency with at least 90 days notice before the date of the proposed $36.3 million. Alaska Bank was the first bank in Alaska to be certified branch closing and the general public with at least 30 days notice. The under a USDA partial guarantee program for small business loans and bank also is required to provide reasons and other supporting data for loans to nonprofit organizations in small rural communities, and made the closure, consistent with the institution's written policy for branch 23 loans, totaling $22 million, under this program during the review closings. The law does not authorize federal regulators to prevent period. closing of any branch. 27. For example, Alaska Bank entered into a partnership with the 24. Funded projects included the development of 24 housing units Arctic Development Council to plan and promote regional economic for very low-income households, the purchase of a power generation development in the North Slope borough and participated in several system for a subsistence-level fishing village, and the purchase of a consortia to expand affordable housing opportunities in areas outside primary health care center to serve native villages. Anchorage. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 607 the bank's branches maintained Saturday business hours. tions for mobile home financing made by white and Alas- Alaska Bank did not close any branches during the review kan Native applicants. Examiners concluded that Alaska period. Bank complied with fair lending laws and found no evi- Alaska Bank also operated 122 ATMs within its assess- dence of disparate treatment. Examiners found no violament area, 55 of which were deposit-taking facilities. Ex- tions of fair lending laws by Alaska Bank and also deteraminers found that the ATM distribution was reasonable mined that the bank had satisfactory procedures in place to for both the Anchorage MSA and the rural regions in the ensure compliance with federal fair lending laws. bank's assessment area. Examiners noted that the geography of Alaska presented C. HMDA Data major obstacles for Alaska Bank and other Alaskan banking organizations, including high transportation and com- The Board also has considered carefully the lending munication costs, particularly in remote areas; lack of a records of Wells Fargo and National Bancorp in light of developed infrastructure; a fragmented population; and comments regarding 1998 HMDA data for certain subsidfragile economic conditions. To meet these challenges, iaries of the organizations. In general, the HMDA data Alaska Bank developed alternative products and service indicate good penetration by both organizations of all delivery systems, including telephone loan origination pro- geographic areas they serve, including LMI areas, and of grams, internet banking, and banking by mail.28 Alaska groups of borrowers at all income levels. The data also Bank's Community Agent Program assigned five employ- reflect, however, certain disparities in the rates of loan ees to remote village locations to provide basic banking applications, originations, and denials by racial group.30 services and financial education to residents and ongoing The Board is concerned when the record of an institution advice to the bank about the credit needs of the villages. indicates such disparities in lending and believes that all Alaska Bank also offered bilingual services through a banks are obligated to ensure that their lending practices network of employees throughout the bank who spoke are based on criteria that ensure not only safe and sound Chinese, Tagalog, Korean, Russian, Spanish, and Yupik. lending but also equal access to credit by creditworthy The bank also created a Yupik-language loan application applicants regardless of their race. The Board recognizes, for use in branches in southwest Alaskan villages. however, that HMDA data alone provide an incomplete The bank offered a range of home-buying and financial measure of an institution's lending in its community, beeducation classes at locations in the Anchorage MSA. cause these data cover only a few categories of housing- More than 500 prospective homeowners, 50 percent of related lending. HMDA data, moreover, provide only limwhom were LMI individuals, attended the program during ited information about the covered loans.31 HMDA data, the review period. Alaska Bank also supported and subsi- therefore, have limitations that make them an insufficient dized affordable housing programs and groups throughout basis, absent other information, for concluding that an its assessment area.29 institution has not adequately assisted in meeting its community's credit needs or has engaged in illegal lending B. Fair Lending Records discrimination. Because of the limitations of HMDA data, the Board has 1. Wells Fargo Bank considered these data carefully in light of other informa- OCC examiners analyzed Wells Fargo Bank's compliance tion, including examination reports that provide an on-site with federal fair lending laws. The examination included a evaluation of the compliance by the subsidiary banks of sampling of residential home improvement and automobile National Bancorp and Wells Fargo with fair lending laws loans and a review of fair housing complaints registered and the overall lending and community development activagainst the bank. ities of the banks. As discussed, examiners found compli- Examiners found no evidence of prohibited discrimina- ance with fair lending laws at the most recent examinations tion or illegal credit practices at Wells Fargo Bank in the of the subsidiary depository institutions of Wells Fargo and underwriting of home improvement and automobile loans. National Bancorp. The Board also has considered the Examiners reported that the bank's loan review process HMDA data in light of the overall lending records of Wells and training of employees were adequate to ensure compli- Fargo and National Bancorp. Both organizations have ance with federal fair lending laws and that the bank records that demonstrate strong CRA performance and the complied with fair lending laws and regulations. provision of substantial assistance in meeting the credit needs of their communities. 2. Alaska Bank Examiners evaluated Alaska Bank's compliance with federal fair lending laws by reviewing a sample of applica- 30. For example, in certain MS As, Wells Fargo's denial rate for African-American applicants for home mortgage loans is higher than its denial rate for white applicants. 28. Although the area outside the Anchorage MSA provided 42 31. The data, for example, do not account for the possibility that an percent of the bank's deposits, it accounted for 67 percent of the institution's outreach efforts may attract a larger proportion of marginbank's loans and 61 percent of its lending by dollar volume. ally qualified applicants than other institutions attract and do not 29. For example, Alaska Bank provided free loan servicing for provide a basis for an independent assessment of the creditworthiness loans originated by Habitat for Humanity. of applicants. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

608 Federal Reserve Bulletin • August 2000 D. Conclusion on Convenience and Needs Analysis that have been considered carefully by the Board in acting on the proposal. Commenters' requests fail to demonstrate In reviewing the proposal's effect on the convenience and why their comments do not present their views adequately needs of the communities to be served by the combined and fail to identify disputed issues of fact that are material organization, the Board has considered carefully all facts to the Board's decision that would be clarified by a public of record, including the public comments received, re- meeting or hearing or to indicate the additional material sponses to comments, and reports of examinations of the issues that would be brought forward by other members of CRA performance of the institutions involved. Based on a the public. Commenters also have not demonstrated, in review of the entire record, and for the reasons discussed view of the substantial record in this case, the need to above, the Board concludes that convenience and needs extend the public comment period. For these reasons, and considerations, including CRA performance records of the based on all the facts of record, the Board has determined subsidiary depository institutions of Wells Fargo and Na- that a public meeting or hearing and an extension of the tional Bancorp, are consistent with approval. public comment period are not required or warranted in this case. Accordingly, the requests for a public meeting or Financial, Managerial, and Other Supervisory Factors hearing and an extension of the comment period are denied. The Board's approval of the proposal is specifically The BHC Act also requires the Board, in acting on an conditioned on compliance by Wells Fargo with all the application, to consider the financial and managerial re- commitments made in connection with the proposal. These sources and future prospects of the companies and banks commitments and conditions are deemed to be conditions involved in a proposal, and certain other supervisory fac- imposed in writing by the Board in connection with its tors. The Board has carefully considered the financial and findings and decisions and, as such, may be enforced in managerial resources and future prospects of Wells Fargo proceedings under applicable law. and National Bancorp and their respective subsidiary de- The acquisition may not be consummated before the pository institutions, and other supervisory factors in light fifteenth calendar day after the effective date of this order, of all the facts of record, including confidential reports of or later than three months after the effective date of this examination and other supervisory information received order, unless such period is extended for good cause by the from the primary federal supervisors of the organizations. Board or by the Federal Reserve Bank of San Francisco, Based on these and other facts of record, the Board acting pursuant to delegated authority. concludes that considerations relating to the financial and By order of the Board of Governors, effective June 21, managerial resources and future prospects of Wells Fargo, 2000. National Bancorp, and their respective subsidiaries are consistent with approval of the proposal, as are the other Voting for this action: Chairman Greenspan, Vice Chairman Fergusupervisory factors that the Board must consider under son, and Governors Kelley and Meyer. Absent and not voting: Governor Gramlich. section 3 of the BHC Act. JENNIFER J. JOHNSON Conclusion Secretary of the Board Based on the foregoing, the Board has determined that the Appendix application should be, and hereby is, approved.32 Com- Competitive Analysis of Individual Banking Products menters also allege that public meetings or hearings are necessary to present the views of residents of remote native Home mortgage lending. The Board has determined previvillages in which English is not spoken fluently. Under its ously that the geographic market for home mortgage lendrules, the Board may, in its discretion, hold a public meeting is local.1 The Anchorage, Alaska, MSA is the only area ing or hearing on an application to acquire a bank if a of Alaska for which all home mortgage lenders are remeeting or hearing is necessary or appropriate to clarify quired to report lending data under the HMDA. Based on factual issues related to the application and to provide an 1998 HMDA data, National Bancorp originated 18.2 peropportunity for testimony. 12 C.F.R. § 225.16(e). The cent of all home mortgage loans made in the Anchorage Board has considered carefully the commenters' requests MSA, and Wells Fargo originated 5.4 percent of all such in light of all the facts of record. In the Board's view, loans. Were an HHI constructed for home mortgage lendcommenters have had ample opportunity to submit their ing in the Anchorage MSA, consummation of the proposal views, and have submitted written substantial comments would increase the HHI by 195 points to 1247, and the market for home mortgage lending would remain moderately concentrated. During 1999, Wells Fargo closed all its 32. Commenters requested that the Board hold a public meeting or home mortgage lending offices in Anchorage. Accordingly, hearing on the proposal and extend the public comment period. Section 3(b) of the BHC Act does not require the Board to hold a the competitive effects of the proposal in the Anchorage 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 1. See Norwest Corporation, 82 Federal Reserve Bulletin 683 such a recommendation from the appropriate supervisory authorities. (1996) ("Norwest Order"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 609 MSA apparently would be smaller than indicated by the the proposal on consumer lending are not expected to be HHI.2 significantly adverse. Outside the Anchorage MSA, HMDA data are not a reliable basis for calculating the market share of home Orders Issued Under Section 4 of the Bank Holding mortgage lenders, because in non-MSA areas only larger Company Act depository institutions are required to report. For example, in the borough of Juneau, Alaska, where Wells Fargo has Northern Star Financial, Inc. its only home mortgage lending office in the state, there are Mankato, Minnesota five commercial banks, of which the second and fifth largest are not HMDA reporters. There also are more than Order Denying the Acquisition of a Savings Association 30 home mortgage lenders in the borough of Juneau that are not banks. In addition, barriers to entry into home Northern Star Financial, Inc. ("Northern Star"), a bank mortgage lending in the borough appear to be low. The holding company within the meaning of the Bank Holding competitive effects of the proposal on home mortgage Company Act ("BHC Act"), has requested the Board's lending in the borough of Juneau, therefore, are not ex- approval under sections 4(c)(8) and 4(j) of the BHC Act pected to be significantly adverse. (12 U.S.C. §§ 1843(c)(8) and 1843(j)) and section 225.24 The Wells Fargo home mortgage lending office in Ju- of the Board's Regulation Y (12 C.F.R. 225.24) to acquire neau does not serve areas outside the borough of Juneau to all the voting shares of First Federal Holding Company of a significant degree.3 Wells Fargo serves Alaska outside Morris, Inc. ("First Federal"), and thereby acquire First Juneau through a variety of remote delivery channels, Federal Savings Bank ("First Federal Savings"), Morris, including mortgage brokers, national telephone centers, Minnesota. solicitation of affinity groups and existing customers, cor- Notice of the proposal, affording interested persons an porate relocation services, and the internet. These delivery opportunity to submit comments has been published (65 channels do not use marketing strategies focused on geo- Federal Register 5873 (2000)). The time for filing comgraphic markets, and their loan pricing is not based on ments has expired, and the Board has considered the notice local market conditions.4 The number and dollar volume of and all comments received in light of the factors set forth home mortgage loans made by Wells Fargo through these in section 4 of the BHC Act. delivery channels is less than 1 percent of all such loans Northern Star's banking subsidiary, Northern Star Bank, made by Wells Fargo in Alaska. In the less populated or Mankato, Minnesota ("Bank"), is the 417th largest deposmore inaccessible areas of Alaska, therefore, Wells Fargo itory institution in Minnesota, controlling deposits of $6.9 participates only in a submarket of remotely delivered million, representing less than 1 percent of the total deposhome mortgage lending that is regional or national in scope its in depository institutions in the state ("state deposits").1 and for which barriers to entry are low. Consummation of First Federal Savings is the 174th largest depository instituthe proposal would not have a significantly adverse effect tion in Minnesota, controlling deposits of $48.3 million, on competition in this submarket. representing less than 1 percent of state deposits. Consumer lending. The market for consumer lending Section 4(j) of the BHC Act requires that, in reviewing a includes many competitors of depository institutions, in- proposal to acquire a savings association,2 the Board concluding credit card companies, consumer finance compa- sider whether the acquisition "can reasonably be expected nies, and seller financing affiliates of commercial firms, to produce benefits to the public .. . that outweigh possible that operate on a regional or national level. Many local adverse effects, such as undue concentration of resources, competitors of depository institutions also exist, including decreased or unfair competition, conflicts of interest, or credit unions in particular and smaller consumer finance unsound banking practices."3 The Board's rules and longcompanies, and Wells Fargo's market share is small. For standing practice provide that the evaluation of possible example, at year end 1999, Wells Fargo's consumer fi- public benefits and adverse effects must include an evaluanance subsidiary, Norwest Financial, Inc., had approxi- tion of the financial and managerial resources of the notifimately $32.3 million of loans and sales finance contracts cant, including its subsidiaries and any company to be booked at its three offices in the Anchorage MSA, while acquired, and the effect of the proposed transaction on Alaska USA Federal Credit Union, Anchorage, Alaska, the those resources, as well as an evaluation of the managelargest credit union in the Anchorage MSA, held $659 ment expertise, internal-control and risk-management sysmillion of non-mortgage loans. The competitive effects of tems, and capital of the notificant4 1. State and market data are as of June 30, 1999. In this context, depository institutions include commercial banks, savings banks, and 2. Barriers to entry also appear to be low. There are six depository savings associations. institutions in the Anchorage MSA, but 199 lenders reported under the 2. The Board previously has determined by regulation that operating HMDA that they received mortgage loan applications from the MSA a savings association is closely related to banking for purposes of in 1998. section 4(c)(8) of the BHC Act. 12 C.F.R. 225.28(b)(4)(ii). 3. In 1999, the office originated 268 loans, totaling $42.5 million, of 3. 12 U.S.C. § 1843(j)(2)(A). which 215, totaling $34.8 million, were made in the borough. 4. 12 C.F.R. 225.26(b). In assessing notices by small bank holding 4. See Norwest Order at 683 n.8. companies, the Board will take into account a full range of financial Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

610 Federal Reserve Bulletin • August 2000 In connection with its review of the factors under section it could have adverse effects on competition. The Board 4 of the BHC Act in this case, the Board has carefully also has considered the CRA performance records of Bank reviewed the financial and managerial resources of North- and First Federal Savings and the other factors required ern Star, First Federal, and their respective subsidiaries and under section 4(j)(2)(A) of the BHC Act. While these the effect the transaction would have on those resources. factors are consistent with approval, the Board concludes Northern Star contends that consummation of this pro- that they do not outweigh the adverse considerations disposal can reasonably be expected to result in public bene- cussed above. fits that justify approval. In particular, Northern Star points For these reasons and based on all the facts of record, the out that Bank is currently well capitalized and that this Board has determined that the proposal does not meet the proposal includes an exchange of stock and a stock offering statutory requirements for approval under section 4 of the that would raise a significant amount of additional capital BHC Act that the notice should be and hereby is, denied. for both Bank and First Federal Savings, which in turn By order of the Board of Governors, effective June 26, would provide a source of funds to increase earning assets. 2000. Northern Star also asserts that the proposal would bring additional management to Northern Star, and expand its Voting for this action: Chairman Greenspan, Vice Chairman Fergumarket and potential new business opportunities. son, and Governors Kelley, Meyer, and Gramlich. The Board has carefully considered all the facts of record, including relevant examination reports, information JENNIFER J. JOHNSON Secretary of the Board obtained from other federal and state banking authorities, other confidential supervisory information, and information provided by the management of Northern Star. This ORDERS ISSUED UNDER BANK MERGER ACT proposal represents a substantial expansion by a bank holding company that is considerably smaller than the The Chase Manhattan Bank company to be acquired, and is located in a community New York, New York more than 100 miles from Bank. Bank began operations in January 1999, has had poor earnings, and has never met its Order Approving the Merger of Banks earnings projections. The Board has considered the challenge that integrating the two organizations would pose, The Chase Manhattan Bank, ("Chase-NY "), a state memthe history of current management, the earnings projecber bank, has applied under section 18(c) of the Federal tions, and the history of Northern Star's management in Deposit Insurance Act (12 U.S.C. § 1828(c)) ("Bank achieving earnings projections. Management is working to Merger Act") to acquire Chase Bank of Texas, National improve earnings and an expansion by Northern Star at this Association, Houston, Texas ("Chase-TX"), through time, in particular the acquisition of an institution that is merger and to retain and operate branches at the current substantially larger than and distant from Bank, would locations of the Chase-TX branches.1 divert Northern Star's management from effectively attend- Notice of the application, affording interested persons an ing to the management of Bank. Based on this review, the opportunity to submit comments, has been given in accor- Board concludes that the financial and managerial redance with the Bank Merger Act and the Board's Rules of sources at this time are not consistent with approval of the Procedure (12 C.F.R. 262.3(b)). As required by the Bank proposed expansion by Northern Star. The Board believes Merger Act, reports on the competitive effects of the that the potential benefits of consummation of this promerger were requested from the United States Attorney posal, which are speculative and could be achieved in other General and the other federal banking agencies. The time ways, would not outweigh the adverse effects in this case. for filing comments has expired, and the Board has consid- Northern Star and First Federal do not compete directly ered the application and all the facts of record in light of in any banking market. Consummation of the proposal the factors set forth in the Bank Merger Act. would not result in any significantly adverse effects on Chase-NY and Chase-TX are wholly owned subsidiaries competition in any relevant banking market. On the other of The Chase Manhattan Corporation, New York, New hand, there are no facts that indicate that the effects of this York, ("Chase"). Chase is the third largest commercial proposal on competition in any relevant market would banking organization in the United States, with $391.5 result in public benefits that would outweigh the potential billion in total assets.2 Chase-NY is the largest depository adverse effects discussed above. As noted above, to the institution in New York, controlling deposits of $97.7 extent this expansionary proposal distracts the attention of billion, representing 23.3 percent of the total deposits in the management of Northern Star from focusing on Bank, depository institutions in the state. Chase-TX is the second largest depository institutions in Texas, controlling deposits of $18.5 billion, representing 8.9 percent of the total and other information about the notificant and its current and proposed subsidiaries, including the recent trend and stability of earnings, past and prospective growth, and the record and competency of management. See Appendix C to Regulation Y (12 C.F.R. Part 225, Appendix C). See also The Cedar Vale Bank Holding Company, 75 Federal 1. These branches are listed in the Appendix. Reserve Bulletin 257 (1990). 2. Asset data are as of March 31, 2000. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 611 deposits in depository institutions in the state.3 This pro- proposal would not have a significantly adverse effect on posal represents a reorganization of Chase's existing bank- competition or on the concentration of banking resources ing operations. in any relevant banking market and that competitive considerations are consistent with approval. Interstate Analysis In reviewing the convenience and needs factors, the Board has carefully considered the effect of the proposal on Section 102 of the Riegle-Neal Interstate Banking and the convenience and needs of the communities to be served Branching Efficiency Act of 1994 ("Riegle-Neal Act") in light of all the facts of record, including the records of authorizes a bank to merge with another bank under certain performance of the depository institutions of Chase under conditions unless, before June 1, 1997, the home state of the Community Reinvestment Act ("CRA"). The Board one of the banks involved in the transaction adopted a law also has carefully reviewed the lending records of expressly prohibiting merger transactions involving out-of- Chase-NY and Chase-TX, the policies and programs destate banks.4 The Riegle-Neal Act also authorizes the ac- signed to ensure compliance with the fair lending laws, quiring bank to retain and operate, as a main office or recent data provided by Chase's depository institutions in branch, any bank offices of the acquired bank.5 regulatory reports, and confidential supervisory informa- New York and Texas have enacted legislation allowing tion on the lending activities and policies governing those interstate mergers between banks located in their states and activities. In addition, the Board has considered public and out-of-state banks pursuant to the provisions of the Riegle- confidential supervisory information provided by other ap- Neal Act. Chase-NY has notified the appropriate state propriate agencies on the lending and CRA activities of Chase-TX and Chase-NY. Based on this review and all the banking agencies regarding its proposal to consolidate its facts of record, the Board concludes that considerations banking operations and has provided a copy of its Bank relating to the convenience and needs factors are consistent Merger Act application to all the relevant state agencies. In with approval of the proposal. light of the foregoing, it appears that the proposal complies with the requirements of the Riegle-Neal Act.6 Based on the foregoing and all the facts of record, the Board has determined that the application should be, and Other Factors hereby is, approved. Approval of the application is specifically conditioned on compliance by the banks with all the The Bank Merger Act requires the Board to consider the commitments made in connection with this proposal and financial and managerial resources and future prospects of with the conditions stated or referred to in this order. For the institutions involved, and the convenience and needs of purposes of this action, the commitments and conditions the communities to be served. The Board has reviewed relied on in reaching this decision are conditions imposed these factors in light of the facts of record, including in writing by the Board and, as such, may be enforced in supervisory reports of examination assessing the financial proceedings under applicable law. and managerial resources of Chase-NY and Chase-TX, and The merger may not be consummated before the fifinformation provided by the banks. Based on all the facts teenth calendar day after the effective date of this order, or of record, the Board concludes that the financial and mana- later than three months after the effective date of this order, gerial resources and future prospects of Chase-NY and unless such period is extended for good cause by the Board Chase-TX are consistent with approval of the proposal. or by the Federal Reserve Bank of New York, acting The Board has also considered likely effects of the pursuant to delegated authority. proposal on competition. As noted above, the proposal By order of the Board of Governors, effective June 14, represents the reorganization of two banks that have been 2000. affiliates for a number of years. Based on all the facts of record, the Board concludes that consummation of the Voting for this action: Chairman Greenspan, Vice Chairman Ferguson, and Governors Kelley, Meyer, and Gramlich. 3. In this context, depository institutions include commercial banks, ROBERT DEV. FRIERSON savings banks, and savings associations. All banking data are as of Associate Secretary of the Board June 30, 1999. 4. 12 U.S.C. § 1831u. Appendix 5. 12 U.S.C. § 1831u(d)(l). 6. See 12 U.S.C. § 1831u. Chase-NY is adequately capitalized and Branch offices of Chase Bank of Texas, National adequately managed, as defined in the Riegle-Neal Act. The New Association to be acquired by Chase Manhattan York and Texas Departments of Banking have indicated that this Bank transaction would comply with applicable New York and Texas law. See NY Banking Law, Art. 5-C, § 225; Tex. Fin. Code Ann §§ 202.001, 203.003. Chase-TX has been in existence and operation 908 W. McDermott Drive, Allen, TX for the minimum amount of time required by Texas law. See Tex. Fin. 4828 S. Cooper Street, Arlington, TX Code Ann. § 203.005. On consummation of the proposal, Chase-NY 700 W. Arkansas Lane, Arlington, TX would control less than 10 percent of the total amount of deposits in 500 E. Border Street, Arlington, TX insured institutions in the United States. All other requirements of the section 102 of the Riegle-Neal Act would also be met on consumma- 1000 E. 41st Street, Austin, TX tion of the proposal. 2711 W. Anderson Lane, Austin, TX Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

612 Federal Reserve Bulletin • August 2000 7805 Clock Tower Drive, Austin, TX 1200 Clear Lake City Boulevard, Houston, TX 7301 N. FM 620, Austin, TX 500 Dallas Street, Houston, TX 13776 N. Highway 183, Austin, TX 1001 Fannin Street, Houston, TX 700 Lavaca Street, Austin, TX 6560 Fannin Street, Houston, TX 12222 Research Boulevard, Austin, TX 7505 Fannin Street, Houston, TX 6600 So Mopac Expressway, Austin, TX 616 FM 1960 Road West, Houston, TX 2224 Walsh Tarlton Lane, Austin, TX 4205 FM 1960 Road West, Houston, TX 6330 West Loop South, Bellaire, TX 6910 FM 1960 Road West, Houston, TX 12400 W. Highway 71, Bee Cave, TX 13103 FM 1960 Road West, Houston, TX 2300 Boca Chica Boulevard, Brownsville, TX 9130 N. Freeway, Houston, TX 1475 W. Ruben M. Torres Boulevard, Brownsville, TX 3203 SW. Freeway, Houston, TX 1801 Hebron Parkway East, Carrollton, TX 11550 Fuqua Street, Houston, TX 190 E. Whitestone (Highway 1431), Cedar Park, TX 4600 Highway 6 North, Houston, TX 5000 Colleyville Boulevard, Colleyville, TX 3201 Kirby Drive, Houston, TX 1320 W. Davis Street, Conroe, TX 6510 W. Little York Road, Houston, TX 1103 1-45 North, Conroe, TX 1605 Lockwood Drive, Houston, TX 9409 Garland Road, Dallas, TX 8799 N. Loop East, Houston, TX 6251 Greenville Avenue, Dallas, TX 711 Louisiana Street, Houston, TX 2325 Gus Thomasson Road, Dallas, TX 712 Main Street, Houston, TX 6517 Hillcrest Avenue, Dallas, TX 12401 S. Post Oak Road, Houston, TX 4435 S. Lancaster Road, Dallas, TX 5177 Richmond Avenue, Houston, TX 12750 Merit Drive, Dallas, TX 4265 San Felipe Road, Houston, TX 10715 Preston Road, Dallas, TX 5847 San Felipe Road, Houston, TX 13101 Preston Road, Dallas, TX 6200 Highway 6 South, Houston, TX 5050 Quorum Drive, Dallas, TX 600 Travis Street, Houston, TX 2200 Ross Avenue, Dallas, TX 2900 Wesleyan Street, Houston, TX 2777 N. Stemmons Freeway, Dallas, TX 10218 Westheimer Road, Houston, TX 2945 Walnut Hill Lane, Dallas, TX 10411 Westheimer Road, Houston, TX 2223 S. Zang Boulevard, Dallas, TX 580 Westlake Park Boulevard, Houston, TX 5760 Alameda Avenue, El Paso, TX 11806 Wilcrest Boulevard, Houston, TX 9601 Gateway Boulevard West, El Paso, TX 2900 Woodridge Street, Houston, TX 1533 N. Lee Trevino Drive, El Paso, TX 19747 U.S. Highway 59 North, Humble, TX 201 E. Main Drive, El Paso, TX 160 W. 1st Street, Humble, TX 7598 N. Mesa, El Paso, TX 860 Airport Freeway, Hurst, TX 2829 Montana Avenue, El Paso, TX 111 E. Irving Boulevard, Irving, TX 11391 Montwood Drive, El Paso, TX 545 E. John Carpenter Freeway, Irving, TX 135 Shadow Mountain Drive, El Paso, TX 7825 N. MacArthur Boulevard, Irving, TX 5209 Wren Avenue, El Paso, TX 400 South Mason Road, Katy, TX 12875 Josey Lane, Farmers Branch, TX 1075 Kingwood Drive, King wood, TX 2501 FM 3040, Flower Mound, TX 2611 Lake Houston Parkway, Kingwood, TX 3217 E. California Parkway, Fort Worth, TX 925 W. Main Street, Lewisville, TX 4809 Camp Bowie Boulevard, Fort Worth, TX 200 S. 10th Street, McAllen, TX 201 Main Street-Chase Tower, Fort Worth, TX 5601 N. 10th Street, McAllen, TX 611 S. Friendswood Drive, Friendswood, TX 4990 El Dorado Parkway, McKinney, TX 4998 Preston Road, Frisco, TX 1030 Andrews Highway, Midland, TX 3200 Broadway Boulevard, Garland, TX 153 Landa Street, New Braunfels, TX 3445 W. Buckingham Road, Garland, TX 111 W. San Antonio Street, New Braunfels, TX 700 East Main Street, Grand Prairie, TX 620 N. Grant Street, Odessa, TX 1514 W. Tyler, Harlingen, TX 3933 Fairmont Parkway, Pasadena, TX 9309 Katy Freeway, Houston, TX 4004 Legacy Drive, Piano, TX 545 W. 19th Street, Houston, TX 5976 W. Parker Road, Piano, TX 5207 Airline Drive, Houston, TX 1517 Preston Road, Piano, TX 5445 Almeda Road, Houston, TX 100 N. Central Expressway, Richardson, TX 2475 Bay Area Boulevard, Houston, TX 920 N. IH 35, Round Rock, TX 9709 Bellaire Boulevard, Houston, TX 16900 RR620, Round Rock, TX 7545 Bellfort Street, Houston, TX 7959 Fredricksburg Road, San Antonio, TX 6671 W. Bellfort Street, Houston, TX 512 Highland Boulevard, San Antonio, TX 11222 S. Belt Drive, Houston, TX 1020 N.E. Loop 410, San Antonio, TX 9525 Bissonnet Street, Houston, TX 1700 E. Southlake Boulevard, Southlake, TX Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 613 25025 Interstate 45 North, Spring, TX additional standards set forth in the IBA and Regula- 2430 State Highway 6, Sugar Land, TX tion K.2 8201 Kuykendahl Road, The Woodlands, TX As noted above, Bank engages directly in the business of 4755 W. Panther Creek Drive, The Woodlands, TX banking outside the United States through its banking operations in Portugal and elsewhere. Bank also has provided the Board with the information necessary to assess ORDERS ISSUED UNDER INTERNATIONAL BANKING the application through submissions that address the rele- ACT vant issues. With respect to home country supervision of Bank, the Banco Comercial Portugues, S.A. Board has considered the following information. The Bank Oporto, Portugal of Portugal, the central bank of Portugal, is the principal supervisory authority of Bank. The Board previously has Order Approving Establishment of a Representative determined, in connection with applications involving other Office Portuguese banks, that those banks were subject to comprehensive consolidated supervision by the Bank of Portugal.3 Banco Comercial Portugues, S.A. ("Bank"), Oporto, Por- Bank is supervised by the Bank of Portugal in substantially tugal, a foreign bank within the meaning of the Interna- the same manner as those other banks. Based on this tional Banking Act ("IBA"), has applied under section finding and all the facts of record, the Board concludes that 10(a) of the IBA (12 U.S.C. § 3107(a)) to establish a Bank is subject to comprehensive supervision on a consolrepresentative office in Miami, Florida. The Foreign Bank idated basis by its home country supervisor. Supervision Enhancement Act of 1991 ("FBSEA"), which The Board has taken into account the additional stanamended the IBA, provides that a foreign bank must obtain dards set forth in the IBA and in Regulation K.4 The Bank the approval of the Board to establish a representative of Portugal has granted Bank approval to establish the office in the United States. proposed office. With respect to the financial and manage- Notice of the application, affording interested persons an rial resources of Bank, taking into consideration Bank's opportunity to submit comments, has been published in a record of operations in its home country, its overall finannewspaper of general circulation in Miami (The Miami cial resources, and its standing with its home country Herald, January 12, 2000). The time for filing comments supervisor, the Board has determined that financial and has expired, and all comments have been considered. managerial considerations are consistent with approval. In Bank, with consolidated assets of $62 billion, is the addition, Bank appears to have the experience and capacity largest banking organization in Portugal. Bank's subsid- to support the proposed office and has established controls iary, Banco Portugues do Atlantico, S.A. ("Atlantico"), and procedures in the branch to ensure compliance with Oporto, Portugal, operates internationally through numer- applicable U.S. law, as well as controls and procedures for ous branches and agencies, including a state-licensed its worldwide operations generally. branch in New York, New York, and a state-licensed With respect to access to information, the Board has agency in Miami, Florida. Through subsidiaries and affili- reviewed the restrictions on disclosure in relevant jurisdicates, Bank and Atlantico also engage in a variety of non- tions in which Bank operates and has communicated with banking activities in and outside Portugal, including asset relevant government authorities about access to informamanagement, real estate and equipment leasing, and invest- tion. Bank has committed to make available to the Board ment banking. such information on the operations of Bank and any affili- In acting on an application to establish a representative ate of Bank that the Board deems necessary to determine office, the IBA and Regulation K provide that the Board and enforce compliance with the IBA, the Bank Holding shall take into account whether the foreign bank engages Company Act, and other applicable federal law. To the directly in the business of banking outside of the United extent that the provision of such information may be pro- States and has furnished to the Board the information it needs to assess the application adequately. The Board also shall take into account whether the foreign bank and any (iii) Obtain information on the dealings with and relationship foreign bank parent is subject to comprehensive supervi- between the bank and its affiliates, both foreign and domestic; (iv) Receive from the bank financial reports that are consolidated sion or regulation on a consolidated basis by its home on a worldwide basis, or comparable information that permits country supervisor.1 The Board may take into account analysis of the bank's financial condition on a worldwide consolidated basis; (v) Evaluate prudential standards, such as capital adequacy and risk asset exposure, on a worldwide basis. These are indicia 1. See 12 U.S.C. § 3107(a)(2); 12 C.F.R. 211.24(d)(2). In assessing of comprehensive consolidated supervision; no single factor this standard, the Board considers, among other factors, the extent to is essential and other elements may inform the Board's which the home country supervisors: determination. (i) Ensure that the bank has adequate procedures for monitoring 2. See 12 U.S.C. § 3105(d)(3) and (4); 12 C.F.R. 211.24(c)(2). and controlling its activities worldwide; 3. See Banco Espirito Santo, S.A., 86 Federal Reserve Bulletin 418 (ii) Obtain information on the condition of the bank and its (2000); Caixa Geral de Depdsitos S.A., 85 Federal Reserve Bulletin subsidiaries and offices through regular examination reports, 774 (1999). audit reports, or otherwise; 4. See 12 U.S.C. § 3105(d)(3) and (4); 12 C.F.R. 211.24(c)(2). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

614 Federal Reserve Bulletin • August 2000 hibited or impeded by law or otherwise, Bank has commit- interfere with the Board's ability to determine and enforce ted to cooperate with the Board to obtain any necessary compliance by Bank or its affiliates with applicable federal consents or waivers that might be required from third statutes, the Board may require or recommend termination parties in connection with disclosure of certain informa- of any of Bank's direct or indirect activities in the United tion. In addition, subject to certain conditions, the Bank of States. Approval of this application also is specifically Portugal may share information on Bank's operations with conditioned on Bank's compliance with the commitments other supervisors, including the Board. In light of these made in connection with this application and with the commitments and other facts of record, and subject to the conditions in this order.6 The commitments and conditions condition described below, the Board has concluded that referred to above are conditions imposed in writing by the Bank has provided adequate assurances of access to any Board in connection with its decision and may be enforced necessary information the Board may request. in proceedings against Bank, its offices, and its affiliates On the basis of all the facts of record, and subject to the under applicable law. commitments made by Bank, as well as the terms and By order of the Board of Governors, effective June 30, conditions set forth in this order, the Board has determined 2000. that Bank's application to establish a representative office in Miami should be, and hereby is, approved.5 Should any Voting for this action: Chairman Greenspan, Vice Chairman Fergurestrictions on access to information on the operations or son, and Governors Kelley and Gramlich. Absent and not voting: Governor Meyer. activities of Bank or any of its affiliates subsequently ROBERT DEV. FRIERSON Associate Secretary of the Board 6. The Board's authority to approve the establishment of the proposed office parallels the continuing authority of the State of Florida 5. In a separate action, the Board today approved under section 3 of to license offices of a foreign bank. The Board's approval of this the Bank Holding Company Act the application of Bank and certain of application does not supplant the authority of the State of Florida or its its subsidiaries, including Atlantico, to become bank holding compa- agent, the Florida Department of Banking and Finance, to license the nies with respect to BPABank National Association, Newark, New proposed office of Bank in accordance with any terms or conditions Jersey. that the Florida Department of Banking and Finance may impose. APPLICATIONS APPROVED UNDER BANK HOLDING COMPANY ACT By the Secretary of the Board Recent applications have been approved by the Secretary of the Board as listed below. Copies are available upon request to the Freedom of Information Office, Office of the Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Section 3 Applicant(s) Bank(s) Effective Date Fulton Financial Corporation, Skylands Financial Corporation, June 29, 2000 Lancaster, Pennsylvania Hackettstown, New Jersey Skylands Community Bank, Hackettstown, New Jersey Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 615 APPLICATIONS APPROVED UNDER BANK HOLDING COMPANY ACT By Federal Reserve Banks Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to the Reserve Banks. Section 3 Applicant(s) Bank(s) Reserve Bank Effective Date The Bancorp.com, Inc., TB.com Bank, Philadelphia May 22, 2000 Wilmington, Delaware Wilmington, Delaware Bankoelwein, Inc., Community Bank of Oelwein, Chicago June 15, 2000 Oelwein, Iowa Oelwein, Iowa Castle Creek Capital Partners Fund State National Bancshares, Inc., San Francisco June 14, 2000 Ha, LP, Lubbock, Texas Rancho Santa Fe, California Castle Creek Capital Partners Fund lib, LP, Rancho Santa Fe, California Central Financial Corporation, Premier Bancshares, Inc., Kansas City June 21, 2000 Hutchinson, Kansas Jefferson City, Missouri Citizens Financial Corporation, The Citizens State Bank of Cortez, Kansas City June 6, 2000 Cortez, Colorado Cortez, Colorado City Savings Bancshares, Inc., City Savings Bank & Trust Company, Atlanta June 12, 2000 DeRidder, Louisiana DeRidder, Louisiana CommerceFirst Bancorporation, CommerceFirst Bank, Richmond June 2, 2000 Inc., Annapolis, Maryland Annapolis, Maryland Community Investment Group, Ltd., The Havana National Bank, Chicago June 7, 2000 Havana, Illinois Havana, Illinois Cortez Investment Company, Citizens Financial Corporation, Kansas City June 6, 2000 Cortez, Colorado Cortez, Colorado Downing Partnership, L.P., Ellis State Bank, Kansas City June 21, 2000 Ellis, Kansas Ellis, Kansas Eggemeyer Advisory Corp., Independent Bankshares, Inc., San Francisco June 14, 2000 Rancho Sante Fe, California Abilene, Texas WJR Corp., First State Bank, N.A., Rancho Santa Fe, California Abilene, Texas Castle Creek Capital, LLC, State National Bancshares, Inc., Ranch Santa Fe, California Lubbock, Texas Castle Creek Capital Partners Fund I, LP, Rancho Santa Fe, California Castle Creek Capital Partners Fund Ha, LP, Rancho Santa Fe, California Castle Creek Capital Partners Fund lib, LP, Ranch Santa Fe, California Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

616 Federal Reserve Bulletin • August 2000 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Eggemeyer Advisory Corp., State National Bancshares, Inc., San Francisco June 14, 2000 Rancho Sante Fe, California Lubbock, Texas, WJR Corp., Castle Creek Capital Partners Fund I, Rancho Santa Fe, California LP, Castle Creek Capital, LLC, Rancho Santa Fe, California Ranch Santa Fe, California Castle Creek Capital Partners Fund Ha, LP, Rancho Santa Fe, California Castle Creek Capital Partners Fund lib, LP, Rancho Santa Fe, California Enterbank Holdings, Inc., Commercial Guaranty Bancshares, Inc., St. Louis June 5, 2000 Clayton, Missouri Overland Park, Kansas The Capital Company, Overland Park, Kansas eOneBanc Corp., First Alliance Bank and Trust Company, Boston May 25, 2000 Manchester, New Hampshire Manchester, New Hampshire Firstbank Corporation, Firstbank-St. Johns, Chicago May 26, 2000 Alma, Michigan St. Johns, Michigan First Banks, Inc., Bank of Ventura, St. Louis June 5, 2000 St. Louis, Missouri Ventura, California First Central Bancshares, Inc., First Central Bank of Monroe County, Atlanta June 9, 2000 Lenoir City, Tennessee Sweetwater, Tennessee First Security Group, Inc., First Central Bank of Monroe County, Atlanta June 9, 2000 Chattanooga, Tennessee Sweetwater, Tennessee FNB Financial Services, Inc., FNB Lockney, Kansas City May 31, 2000 Durant, Oklahoma Lockney, Texas Frontier Financial Corporation, Liberty Bay Financial Corporation, San Francisco May 24, 2000 Everett, Washington Poulsbo, Washington North Sound Bank, Poulsbo, Washington Home Town Banking Corporation, Walton Bank & Trust Co., Atlanta June 7, 2000 Monroe, Georgia Monroe, Georgia G.A.C., Inc., Gateway National Bank of St. Louis, St. Louis June 5, 2000 St. Louis, Missouri St. Louis, Missouri Greater Bay Bancorp, Bank of Santa Clara, San Francisco June 14, 2000 Palo Alto, California Santa Clara, California Island Bancorp, Inc., The Edgartown National Bank, Boston May 25, 2000 Edgartown, Massachusetts Edgartown, Massachusetts Keene Bancorp, Inc., 401(k) Keene Bancorp, Inc., Dallas May 1, 2000 Employee Stock Ownership Plan Keene, Texas & Trust, Keene, Texas Landmark Financial Group, Inc., Leland National Bancorp, Inc., Chicago June 7, 2000 Belvidere, Illinois Leland, Illinois LNB National Bank, Leland, Illinois Ledyard Bancorporation, Inc., State Bank of Ledyard, Iowa Chicago June 8, 2000 Ledyard, Iowa Mahaska Investment Company Mahaska Investment Company, Chicago June 2, 2000 ESOP, Oskaloosa, Iowa Oskaloosa, Iowa Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 617 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Minnwest Corporation, Minnwest Bank Sioux Falls, Minneapolis June 12, 2000 Minnetonka, Minnesota Sioux Falls, South Dakota Monmouth Community Bancorp, Community Bancorp, New York May 31, 2000 Long Branch, New Jersey Monmouth Community Bank, Long Branch, New Jersey Murphy-Payne Investments, Ltd., Carthage State Bancshares, Inc., Dallas June 6, 2000 Tyler, Texas Carthage, Texas NASB Shares, Inc., North American State Bank, Minneapolis June 7, 2000 Belgrade, Minnesota Belgrade, Minnesota Borgerding Insurance Agency, Inc., Belgrade, Minnesota North Georgia Community Financial North Georgia National Bank, Atlanta June 5, 2000 Partners, Inc. Calhoun, Georgia Calhoun, Georgia Northwest Bancorporation, Inc., Redstone Bancorporation, Inc., Dallas June 20, 2000 Houston, Texas Houston, Texas Pacific Capital Bancorp, San Benito Bank, San Francisco June 12, 2000 Santa Barbara, California Hollister, California Pacific Capital Bancorp, Los Robles Bancorp, San Francisco June 12, 2000 Santa Barbara, California Thousand Oaks, California Los Robles Bank, Thousand Oaks, California Popular, Inc., Aurora National Bank, New York JJuunnee 66,,^^22000000 Hato Rey, Puerto Rico Aurora, Illinois Popular International Bank, Inc., Hato Rey, Puerto Rico Popular North America, Inc., Heritage Bancorp, Inc., Atlanta June 19, 2000 Mount Laurel, New Jersey Hutto, Texas Regions Financial Corporation, Texas Heritage Bank, Birmingham, Alabama Hutto, Texas SI Bancorp, Inc., Savings Institute, Boston May 30, 2000 Willimantic, Connecticut Willimantic, Connecticut Speed Bankshares, L.P., Great Southern Capital Corporation, Atlanta June 2, 2000 Meridian, Mississippi Meridian, Mississippi The State Bank Hoxie Employee Prairie State Bancshares, Kansas City June 7, 2000 Stock Ownership Plan, Hoxie, Kansas Hoxie, Kansas State National Bancshares, Inc. Independent Bankshares, Inc., Dallas June 15, 2000 Lubbock, Texas Abilene, Texas Sterling Financial Corporation, Hanover Bancorp, Inc., Philadelphia June 8, 2000 Lancaster, Pennsylvania Hanover, Pennsylvania Synovus Financial Corp., Pointpathbank, N.A., Atlanta June 6, 2000 Columbus, Georgia Columbus, Georgia Three Rivers Bankshares, Inc., Fort Gibson Bancshares, Inc., Kansas City June 15, 2000 Fort Gibson, Oklahoma Fort Gibson, Oklahoma Union Bancshares, MHC, USB Bankshares, Inc., Chicago June 14, 2000 Freeport, Illinois Freeport, Illinois Union Savings Bank, Freeport, Illinois USB Bankshares, Inc., Union Savings Bank, Chicago June 14, 2000 Freeport, Illinois Freeport, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

618 Federal Reserve Bulletin • August 2000 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Vail Banks, Inc., Estes Bank Corporation, Kansas City June 5, 2000 Vail, Colorado Estes Park, Colorado Valley Capital Corporation, State Capital Corporation, St. Louis June 20, 2000 Greenwood, Mississippi Brookhaven, Mississippi State Bank and Trust Company, Brookhaven, Mississippi Wells Fargo & Co., 1st Choice Financial Corp., San Francisco May 24, 2000 San Francisco, California Greeley, Colorado 1st Choice Bank, Greeley, Colorado Wyoming National Bancorporation, Wyoming National Bank, Kansas City June 7, 2000 Inc., Riverton, Wyoming Riverton, Wyoming Section 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Area Bancshares Corporation, Area Trust Company, St. Louis June 6, 2000 Owensboro, Kentucky Owensboro, Kentucky First State Bancshares, Inc., LexBanc Corporation, Cleveland June 9, 2000 Middlesboro, Kentucky Lexington, Kentucky Lexington, Bank, FSB, Lexington, Kentucky Heartland Bancshares, Inc., Union Small Business Alliance, Inc., Chicago June 15, 2000 Lenox, Iowa Lenox, Iowa Lima Bancshares, Inc., East Dubuque Bancshares, Inc., St. Louis June 14, 2000 Lima, Illinois East Dubuque, Illinois East Dubuque Savings Bank, East Dubuque, Illinois National Bank of Greece, S.A. Newbrook Group LLC, New York June 20, 2000 Athens, Greece London, England NBG International Limited, Newbrook Group LLC, London, England London, England Newbrook Capital Management, Inc., London, England Newbrook Capital Management LLC, London, England Newbrook Securities LLC, London, England National Commerce Bancorporation, FMT Holding Company, St. Louis June 20, 2000 Memphis, Tennessee Memphis, Tennessee First Mercantile Trust Company, Memphis, Tennessee Central Trust Co., Memphis, Tennessee FMT Technologies Co., Memphis Tennessee First Mercantile Capital Management, Inc., Memphis, Tennessee First Merc.com, Memphis, Tennessee Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 619 Section 4—Continued Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Private Bancorp, Inc., The PrivateBank, Chicago June 14, 2000 Chicago, Illinois St. Louis, Missouri SVB&T Corporation, Independent Bankers Life Reinsurance St. Louis June 15, 2000 French Lick, Indiana Company of Indiana, Ltd., Phoenix, Arizona Washington Trust Bancorp, Inc. Phoenix Investment Management Boston June 2, 2000 Westerly, Rhode Island Company, Inc., Providence, Rhode Island 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) Reserve Bank Effective Date Old Kent Bank, Grand Premier Trust and Investment, June 29, 2000 Grand Rapids, Michigan Inc., National Association, Freeport, Illinois 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 Banco Popular North America, Aurora National Bank, New York June 6, 2000 New York, New York Aurora, Illinois Bank of Orange County, CalWest Bank, San Francisco May 25, 2000 Fountain Valley, California Torrance, California Effingham State Bank, Centralia Savings Bank St. Louis June 6, 2000 Effingham, Illinois Centralia, Illinois F&M Bank-Highlands, Wachovia Bank, National Association, Richmond June 15, 2000 Covington, Virginia Winston-Salem, North Carolina F&M Bank-Massanutten, Wachovia Bank, National Association, Richmond June 15, 2000 Harrisonburg, Virginia Winston-Salem, North Carolina, F&M Bank-Winchester, Wachovia Bank, National Association, Winchester, Virginia Winston-Salem, North Carolina First Liberty Bank and Trust, Mellon Bank, N.A., Philadelphia May 15,2000 Jermyn, Pennsylvania Pittsburgh, Pennsylvania Mid State Bank, The Anchor Bank, Richmond June 5, 2000 Newberry, South Carolina Myrtle Beach, South Carolina Carolina First Bank, Greenville, South Carolina Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

620 Federal Reserve Bulletin • August 2000 By Federal Reserve Banks—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Pinnacle Bank, National Bank of Commerce Trust & Kansas City June 9, 2000 Papillion, Nebraska Savings Association-NBC Parkway Branch, Lincoln, Nebraska Peoples Bank and Trust Company, First National Bank of Southwestern, San Francisco June 13, 2000 Sunman, Indiana Ohio Hamilton, Ohio Santa Barbara Bank & Trust, Santa Barbara, California Los Robles Bank, Thousand Oaks, California WestStar Bank, United Valley Bank, Kansas City June 5, 2000 Vail, Colorado Estes Park, Colorado PENDING CASES INVOLVING THE BOARD OF GOVERNORS This list of pending cases does not include suits against the Sheriff Gerry Ali v. U.S. State Department, No. 99-7438 (C.D. Federal Reserve Banks in which the Board of Governors is not Cal., filed July 21, 1999). Action relating to impounded named a party. bank drafts. Kerr v. Department of the Treasury, No. 99-16263 (9th Cir., filed April 28, 1999). Appeal of dismissal of action chal- Mann v. Greenspan, No. CIV-00-754-C (W.D. Okl., filed lenging income taxation and Federal Reserve notes. April 18, 2000). Employment discrimination action by employee of Federal Reserve bank. On May 10, 2000, the Sedgwick v. Board of Governors, No. Civ. 99-0702 (D. Ariplaintiff voluntarily dismissed the Board as a party. zona, filed April 14, 1999). Action under Federal Tort Claims Act alleging violation of bank supervision require- Bettersworth v. Board of Governors, No. 00-50262 (5th Cir., ments. The Board filed a motion to dismiss on June 15, filed April 14, 2000). Appeal of district court's dismissal of 1999. Privacy Act claims. Hunter v. Board of Governors, No. 1:98CV02994 (ESH) Hunter v. Board of Governors, No. 00-CV-735 (ESH) (D.D.C., (D.D.C., filed December 9, 1998). Action under the Freefiled April 5, 2000). Action claiming retaliation for whistledom of Information Act, the Privacy Act, and the first blowing activity. amendment. On April 26, 2000, the court granted the Albrecht v. Board of Governors, No. 00-CV-317 (CKK) Board's motion to dismiss or for summary judgment. (D.D.C., filed February 18, 2000). Action challenging the Folstad v. Board of Governors, No. 00-1056 (6th Cir., filed funding of the retirement plan for certain Board employees. January 14, 2000). Appeal of district court order granting Board of Governors v. Interfinancial Services, Ltd., No. 00-75 summary judgment to the Board in a Freedom of Informa- (RCL) (D.D.C., filed February 9, 2000). Action to enforce tion Act case. administrative subpoena issued by the Board. On June 20, Fraternal Order of Police v. Board of Governors, No. 2000, the court granted the Board's petition to enforce and 1:98CV03116 (WBB)(D.D.C„ filed December 22, 1998). ordered production of the requested documents. Declaratory judgment action challenging Board labor prac- Toland v. Internal Revenue Service, Federal Reserve System, tices. On February 26, 1999, the Board filed a motion to et al., No. CV-S-99-1769-JBR-RJJ (D. Nevada, filed Dedismiss the action. cember 29, 1999). Challenge to income taxation and Fed- Board of Governors v. Carrasco, No. 98 Civ. 3474 (LAK) eral Reserve notes. On February 16, 2000, the government (S.D.N.Y., filed May 15, 1998). Action to freeze assets of filed a motion to dismiss the action. individual pending administrative adjudication of civil Irontown Housing Corp. v. Board of Governors, No. 99-9549 money penalty assessment by the Board. On May 26, 1998, (10th Cir., filed December 27, 1999). Petition for review of the court issued a preliminary injunction restraining the Board order dated December 13, 1999, approving the transfer or disposition of the individual's assets and appointmerger of Zions Bancorporation with First Security Corpoing the Federal Reserve Bank of New York as receiver for ration. those assets. Following entry of the Board's order requiring Artis v. Greenspan, No. 1:99CV02073 (EGS) (D.D.C., filed restitution, 85 Federal Reserve Bulletin 142 (1998), the August 3, 1999). Employment discrimination action. court granted the Board's motion for judgment in the asset Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 621 freeze action and authorized a judicial sale of the seized Michaelessi, a former employee and institution-affiliated property. party of the Rochester Branch of The Bank of New York, New York, New York. Board of Governors v. Pharaon, No. 98-6101 (2d Cir., filed May 4, 1998). Appeal and cross-appeal of district court order granting in part and denying in part the Board's motion for summary judgment seeking prejudgment interest WRITTEN AGREEMENTS APPROVED BY FEDERAL and a statutory surcharge in connection with a civil money RESERVE BANKS penalty assessed by the Board. On February 24, 1999, the court granted the Board's appeal and denied the cross- Banco Bilbao Vizcaya Argentaria, S.A. appeal, and remanded the matter to the district court for Madrid, Spain determination of prejudgment interest due to the Board. The Federal Reserve Board announced on June 23, 2000, the execution of a Written Agreement by and among FINAL ENFORCEMENT ORDERS ISSUED BY THE BOARD Banco Bilbao Vizcaya Argentaria, S.A., Madrid, Spain; OF GOVERNORS Banco Bilbao Vizcaya, S.A. Miami Agency, Miami, Flor- Lawrence Michaelessi ida; Banco Bilbao Vizcaya, S.A. New York Branch, New New York, New York York, New York; the Federal Reserve Bank of Atlanta; the Federal Reserve Bank of New York; the New York State The Federal Reserve Board announced on June 14, 2000, Banking Department; and the State of Florida Department the issuance of an Order of Prohibition against Lawrence of Banking and Finance. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

622 Federal Reserve Bulletin • August 2000 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 measures A29 U.S. government securities dealers— A5 Reserves of depository institutions and Reserve Bank Positions and financing credit A30 Federal and federally sponsored credit A6 Reserves and borrowings—Depository agencies—Debt outstanding institutions Securities Markets and Corporate Finance Policy Instruments A31 New security issues—Tax-exempt state and local A7 Federal Reserve Bank interest rates governments and corporations A8 Reserve requirements of depository institutions A3 2 Open-end investment companies—Net sales A9 Federal Reserve open market transactions and assets A32 Corporate profits and their distribution Federal Reserve Banks A32 Domestic finance companies—Assets and liabilities 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 A35 Mortgage debt outstanding A12 Aggregate reserves of depository institutions and monetary base A13 Money stock and debt measures Consumer Credit A3 6 Total outstanding Commercial Banking Institutions— A36 Terms Assets and Liabilities A15 All commercial banks in the United States Flow of Funds A16 Domestically chartered commercial banks A17 Large domestically chartered commercial banks A37 Funds raised in U.S. credit markets A19 Small domestically chartered commercial banks A39 Summary of financial transactions A20 Foreign-related institutions A40 Summary of credit market debt outstanding A41 Summary of financial assets and liabilities Financial Markets DOMESTIC NONFINANCIAL STATISTICS All Commercial paper and bankers dollar 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 All 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 • August 2000 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 TABLES A52 Liabilities to, and claims on, foreigners A53 Liabilities to foreigners A64 Assets and liabilities of commercial banks, A55 Banks' own claims on foreigners March 31, 2000 A56 Banks' own and domestic customers' claims on A66 Terms of lending at commercial banks, May 2000 foreigners A72 Assets and liabilities of U.S. branches and A56 Banks' own claims on unaffiliated foreigners agencies of foreign banks, March 31, 2000 A57 Claims on foreign countries—Combined A76 Pro forma balance sheet and income statements domestic offices and foreign branches for priced service operations, March 31, 2000 Reported by Nonbanking Business A78 INDEX TO STATISTICAL TABLES 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 GNMA Government National Mortgage Association e Estimated GDP Gross domestic product n.a. Not available HUD Department of Housing and Urban P Preliminary Development r Revised (Notation appears on column heading IMF International Monetary Fund when about half of the figures in that column 10 Interest only are changed.) IPCs Individuals, partnerships, and corporations * Amounts insignificant in terms of the last decimal IRA Individual retirement account place shown in the table (for example, less than MMDA Money market deposit account 500,000 when the smallest unit given is millions) MSA Metropolitan statistical area 0 Calculated to be zero NOW Negotiable order of withdrawal Cell not applicable OCD Other checkable deposit ATS Automatic transfer service OPEC Organization of Petroleum Exporting Countries BIF Bank insurance fund OTS Office of Thrift Supervision CD Certificate of deposit PMI Private mortgage insurance CMO Collateralized mortgage obligation PO Principal only CRA Community Reinvestment Act of 1977 REIT Real estate investment trust FFB Federal Financing Bank REMIC Real estate mortgage investment conduit FHA Federal Housing Administration RHS Rural Housing Service 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 G-10 Group of Ten GENERAL INFORMATION In many of the tables, components do not sum to totals because of include not fully guaranteed issues) as well as direct obligarounding. tions of the Treasury. Minus signs are used to indicate (1) a decrease, (2) a negative "State and local government" also includes municipalities, figure, or (3) an outflow. special districts, and other political subdivisions. "U.S. government securities" may include guaranteed issues of U.S. government agencies (the flow of funds figures also Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A4 Domestic Nonfinancial Statistics • August 2000 1.10 RESERVES, MONEY STOCK, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted1 1999 2000 2000 MMoonneettaarryy oorr ccrreeddiitt aaggggrreeggaattee Q2 Q3r Q4r Qlr Jan.r Feb.r Mar.r Apr. May Reserves of depository institutions2 1 Total -9.1' -16.1 -3.4 1.8 39.4 -41.1 -34.1 13.8 12.8 2 Required -9.2' -16.0 -4.5 .0 19.4 -16.6 -37.8 16.0 18.7 3 Nonborrowed -9.9' -17.9 -3.0 2.4 38.2 -34.0 -36.2 10.2 11.1 4 Monetary base3 9.2' 9.0 20.4 4.2 1.6 -37.6 -4.7 2.7 2.1 Concepts of money and debt4 5 Ml 2.1 -1.8 4.8 .4 -3.7 -14.7 6.9 4.4 -12.3 6 M2 6.0 5.3 5.1 6.0 6.2 3.1 9.4 10.3 -1.0 7 M3 6.0 5.0 10.1 10.5 8.2 3.3 13.4 7.8 3.7 8 Debt 7.1r 6.2 6.4 5.9 6.1 4.5 7.1 5.4 n.a. Nontransaction components 9 In M25 7.3 7.6 5.3 7.8 9.3 8.6 10.2 12.1 2.5 10 In M3 only6 5.9 4.0 23.7 22.4 13.4 3.8 23.5 1.5 15.4 Time and savings deposits Commercial banks 11 Savings, including MMDAs 10.7 10.6 4.2 3.6 2.4 12.8 6.5 14.8 -2.7 12 Small time7 -2.1r 2.1 7.0 9.1 8.1 10.1 10.6 17.7 13.3 13 Large time8,9 -.9 .3 38.6 22.6 8.4 3.5 13.7 32.7 9.1 Thrift institutions 14 Savings, including MMDAs 14.5 13.3 -3.3 -1.4 -4.0 6.4 7.2 -8.0 10.7 15 Small time7 -6.3 -3.2 5.0 6.4 9.0 3.0 3.7 -1.8 8.1 16 Large time8 -4.3r 1.6 6.0 18.2 36.7 8.9 1.3 -6.3 -15.2 Money market mutual funds 17 Retail 11.4r 8.2 10.5 18.7 27.9 4.3 19.7 19.1 -3.9 18 Institution-only 14.1 9.3 21.4 23.5 31.8 -11.5 45.1 -1.3 17.3 Repurchase agreements and Eurodollars 19 Repurchase agreements10 -1.2 9.1 12.8 17.5 -19.0 50.3 -12.9 -17.7 24.0 20 Eurodollars10 21.7 -9.7 13.3 29.2 17.3 -30.0 65.0 -55.1 30.6 Debt components4 21 Federal -2.3 -.3 -4.3 -4.4 -4.4 -12.1 3.1 -5.5 n.a. 22 Nonfederal 9.8r 8.0 9.4 8.7 8.9 8.9 8.1 8.2 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 2000 2000 Mar. Apr. May Apr. 19 Apr. 26 May 3 May 10 May 17 May 24 May 31 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 555,405 560,803 558,972 559,654 563,987 568,537 560,589 556,395 552,655 560,284 U.S. government securities 2 Bought outright—System account3 501,572 505,256 507,413 507,438 507,391 506,650 507,745 508,353 507,682 506,191 3 Held under repurchase agreements 0 0 0 0 0 0 0 0 0 0 Federal agency obligations 4 Bought outright 150 143 140 140 140 140 140 140 140 140 5 Held under repurchase agreements 0 0 0 0 0 0 0 0 0 0 6 Repurchase agreements—triparty4 20,177 19,920 17,303 16,624 20,477 26,499 17,093 14,323 11,116 20,913 7 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 8 Adjustment credit 94 181 99 55 81 157 63 66 154 46 9 Seasonal credit 70 117 280 103 133 179 216 260 324 356 10 Special Liquidity Facility credit 7 0 0 0 0 0 0 0 0 0 11 Extended credit 0 0 0 0 0 0 0 0 0 0 12 Float 102 303 404 238 590 216 587 -360 1,140 196 13 Other Federal Reserve assets 33,233 34,884 33,333 35,056 35,176 34,696 34,746 33,614 32,099 32,442 14 Gold stock 11,048 11,048 11,048 11,048 11,048 11,048 11,048 11,048 11,048 11,048 15 Special drawing rights certificate account 6,200 5,733 5,200 5,771 5,200 5,200 5,200 5,200 5,200 5,200 16 Treasury currency outstanding 28,889 29,080 29,194 29,083 29,122 29,162 29,176 29,190 29,204 29,218 ABSORBING RESERVE FUNDS 17 Currency in circulation ... . 563,591 564,570 565,667 564,850 564,346 564,410 564,699 565,052 564,792 568,367 18 Reverse repurchase agreements—triparty . . . 0 0 0 0 0 0 0 0 0 0 19 Treasury cash holdings 165 196 198 198 201 203 205 205 204 177 Deposits, other than reserve balances, with Federal Reserve Banks 20 Treasury 5,344 8,395 7,060 6,778 12,417 14,439 9,068 5,424 5,114 4,880 21 Foreign 96 106 95 91 90 127 86 121 78 82 22 Service-related balances and adjustments .. 6,866 6,836 6,836 6,775 6,802 6,804 6,967 6,858 6,786 6,746 23 Other 201 272 250 274 297 268 261 254 253 217 2 2 4 5 O R t e h s e e r r v F e e d b e a r la al n c R es e s w er i v th e F li e a d b e il r i a ti l e s R e a s n e d r v c e a p B it a a n l ks v5 1 6 9 , , 2 07 0 1 8 1 6 9 , , 9 35 3 7 2 1 8 6 , ,2 0 6 4 5 4 1 7 9 , , 3 2 2 6 1 9 1 5 9 , ,2 9 4 6 1 4 1 9 8 , , 0 6 7 2 7 2 1 6 8 , , 6 1 1 1 1 6 1 8 5 , ,2 6 9 2 1 9 1 5 5 , , 5 3 4 3 0 9 1 9 5 , , 9 3 2 5 5 6 End-of-month figures Wednesday figures Mar. Apr. May Apr. 19 Apr. 26 May 3 May 10 May 17 May 24 May 31 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 559,809 566,553 566,932 567,423 583,512 574,307 558,160 553,915 555,216 566,932 U.S. government securities2 2 Bought outright—System account3 501,708 506,695 506,744 508,029 507,776 507,137 508,459 507,916 509,115 506,744 3 Held under repurchase agreements 0 0 0 0 0 0 0 0 0 0 Federal agency obligations 4 Bought outright 150 140 140 140 140 140 140 140 140 140 5 Held under repurchase agreements 0 0 0 0 0 0 0 0 0 0 6 Repurchase agreements—triparty4 23,745 24,905 26,395 23,775 39,780 32,515 14,175 14,620 12,530 26,395 7 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 8 Adjustment credit 157 78 88 86 123 46 45 146 128 88 9 Seasonal credit 79 162 344 119 162 212 234 285 356 344 10 Special Liquidity Facility credit 0 0 0 0 0 0 0 0 0 0 11 Extended credit 0 0 0 0 0 0 0 0 0 0 12 Float -213 -237 840 112 184 -125 234 -1,089 634 840 13 Other Federal Reserve assets 34,183 34,810 32,381 35,162 35,348 34,381 34,873 31,897 32,313 32,381 14 Gold stock 11,048 11,048 11,048 11,048 11,048 11,048 11,048 11,048 11,048 11,048 15 Special drawing rights certificate account 6,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 16 Treasury currency outstanding 20,003 29,162 29,218 29,083 29,122 29,162 29,176 29,190 29,204 29,218 ABSORBING RESERVE FUNDS 17 Currency in circulation .. . . 563,200 563,640 570,064 565,586 565,332 565,492 566,060 565,677 566,599 570,069 18 Reverse repurchase agreements—triparty . . . 0 0 0 0 0 0 0 0 0 0 19 Treasury cash holdings 174 203 140 201 203 205 205 207 183 140 Deposits, other than reserve balances, with Federal Reserve Banks 20 Treasury 4,357 15,868 5,445 5,672 29,444 8,027 9,769 4,923 4,942 5,445 21 Foreign 125 142 110 137 79 71 72 126 76 110 22 Service-related balances and adjustments .. 7,066r 6,804 6,746 6,775 6,802 6,804 6,967 6,858 6,786 6,746 23 Other 188 251 226 276 276 263 263 260 249 226 24 Other Federal Reserve liabilities and capital . 19,752 18,558 15,271 18,961 18,906 18,266 14,986 15,009 15,019 15,271 25 Reserve balances with Federal Reserve Banks' 11,198 6,498 14,390 15,146 7,843 20,588 5,263 6,294 6,814 14,390 1. Amounts of cash held as reserves are shown in table 1.12, line 2. 4. Cash value of agreements arranged through third-party custodial banks. These agree- 2. Includes securities loaned—fully guaranteed by U.S. government securities pledged ments are collateralized by U.S. government and federal agency securities. with Federal Reserve Banks—and excludes securities sold and scheduled to be bought back 5. Excludes required clearing balances and adjustments to compensate for float, under matched sale-purchase transactions. 3. Includes compensation that adjusts for the effects of inflation on the principal of inflation-indexed securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A6 Domestic NonfinancialS tatistics • August 2000 1.12 RESERVES AND BORROWINGS Depository Institutions1 Millions of dollars Prorated monthly averages of biweekly averages RReesseerrvvee ccllaassssiiffiiccaattiioonn 1997 1998 1999 1999r 2000 Dec. Dec.r Dec.' Nov. Dec. Jan.r Feb/ Mar.r Apr. May 1 Reserve balances with Reserve Banks2 10,664 9,026 5,263 6,283 5,263 5,169 5,078 6,515 7,078 7,660 2 Total vault cash3 44,742 44,294 60,630 50,830 60,630 74,015 63,764 48,946 46,453 44,632 3 Applied vault cash4 37,255 36,183 36,392 34,688 36,392 39,063 37,017 33,227 33,507 33,895 4 Surplus vault cash5 7,486 8,111 24,238 16,142 24,238 34,952 26,747 15,719 12,946 10,737 5 Total reserves6 47,919r 45,209 41,655 40,970 41,655 44,232 42,095 39,742 40,584 41,555 6 Required reserves 46,235 43,695 40,347 39,641 40,347 42,207 40,982 38,533 39,433 40,590 7 Excess reserve balances at Reserve Banks7 1,685 1,514 1,308 1,330 1,308 2,025 1,113 1,209 1,152 965 8 Total borrowing at Reserve Banks 324 117 320 236 320 374 108 179 304 362 9 Adjustment 245 101 179 157 179 296 45 101 184 86 10 Seasonal 79 15 67 71 67 31 44 71 120 276 11 Special Liquidity Facility8 0 0 74 7 74 46 19 7 0 0 12 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 2000 Jan. 26r Feb. 9r Feb. 23r Mar. 8r Mar. 22r Apr. 5r Apr. 19 May 3r May 17 May 31 1 Reserve balances with Reserve Banks2 4,543 4,156 5,176 6,234 6,245 7,186 6,715 7,491 7,614 7,743 2 Total vault cash3 75,869 80,833 58,800 49,743 48,706 48,613 47,144r 44,592 44,114 45,158 3 Applied vault cash4 40,024 40,353 36,272 33,751 32,862 33,330 32,885 34,378 33,227 34,459 4 Surplus vault cash5 35,845 40,480 22,528 15,992 15,844 15,283 14,259r 10,214 10,887 10,699 5 Total reserves6 44,567 44,509 41,448 39,985 39,107 40,516 39,600 41,869 40,841 42,202 6 Required reserves 43,177 43,361 40,279 39,054 38,011 38,883 38,516 40,849 39,929 41,196 7 Excess reserve balances at Reserve Banks7 1,390 1,148 1,169 931 1,095 1,632 1,083 1,019 912 1,006 8 Total borrowing at Reserve Banks 224 114 100 119 207 189 368 276 303 440 9 Adjustment 180 62 35 44 133 104 264 120 65 100 10 Seasonal 28 27 48 61 67 85 104 156 238 340 11 Special Liquidity Facility8 17 25 17 15 7 0 0 12 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. Borrowing at the discount window under the terms and conditions established for the those banks and thrift institutions that are not exempt from reserve requirements. Dates refer Century Date Change Special Liquidity Facility in elfect from October 1, 1999 through to the maintenance periods in which the vault cash can be used to satisfy reserve require- April 7, 2000. ments. 9. Consists of borrowing at the discount window under the terms and conditions estab- 4. All vault cash held during the lagged computation period by "bound" institutions (that lished for the extended credit program to help depository institutions deal with sustained is, those whose required reserves exceed their vault cash) plus the amount of vault cash liquidity pressures. Because there is not the same need to repay such borrowing promptly as applied during the maintenance period by "nonbound" institutions (that is, those whose vault with traditional short-term adjustment credit, the money market elfect of extended credit is cash exceeds their required reserves) to satisfy current reserve requirements. similar to that of nonborrowed reserves. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A7 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per year Current and previous levels Adjustment credit Seasonal credit2 Extended credit" Federal Reserve Bank On On On 7/7/00 7/7/00 7/7/00 Boston 5/16/00 6/15/00 New York . . . 5/19/00 Philadelphia . 5/18/00 Cleveland . .. 5/16/00 Richmond . .. 5/16/00 Atlanta 5/17/00 Chicago 5/17/00 St. Louis 5/18/00 Minneapolis . 5/18/00 Kansas City . . 5/17/00 Dallas 5/17/00 San Francisco 5/16/00 Range of rates for adjustment credit in recent years4 Range (or F.R. Bank Range (or F.R. Bank Range (or F.R. Bank level)—All of 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 1982—Oct. 12 9.5-10 9.5 1994—May 17 3-3.5 3.5 13 9.5 9.5 18 3.5 3.5 1978—Jan. 9 6-6.5 6.5 Nov. 22 9-9.5 9 Aug. 16 3.5-4 4 20 6.5 6.5 26 9 9 18 4 4 May 11 6.5-7 7 Dec. 14 8.5-9 9 Nov. 15 4-4.75 4.75 12 7 7 15 8.5-9 8.5 17 4.75 4.75 July 3 7-7.25 7.25 17 8.5 8.5 10 7.25 7.25 1995—Feb. 1 4.75-5.25 5.25 Aug. 21 7.75 7.75 1984—Apr. 9 8.5-9 9 9 5.25 5.25 Sept. 22 8 8 13 9 9 Oct. 16 8-8.5 8.5 Nov. 21 8.5-9 8.5 1996—Jan. 31 5.00-5.25 5.00 20 8.5 8.5 26 8.5 8.5 Feb. 5 5.00 5.00 Nov. 1 8.5-9.5 9.5 Dec. 24 8 8 3 9.5 9.5 1998—Oct. 15 4.75-5.00 4.75 1985—May 20 7.5-8 7.5 16 4.75 4.75 1979—July 20 10 10 24 7.5 7.5 Nov. 17 4.50-4.75 4.50 Aug. 17 10-10.5 10.5 19 4.50 4.50 20 10.5 10.5 1986—Mar. 7 7-7.5 7 Sept. 19 10.5-11 11 10 7 7 1999—Aug. 24 4.50-4.75 4.75 21 11 11 Apr. 21 6.5-7 6.5 26 4.75 4.75 Oct. 8 11-12 12 23. 6.5 6.5 Nov. 16 4.75-5.00 4.75 10 12 12 July 11 6 6 18 5.00 5.00 Aug. 21 5.5-6 5.5 1980—Feb. 15 12-13 13 22 5.5 5.5 2000—Feb. 2 5.00-5.25 5.25 19 13 13 4 5.25 5.25 May 29 12-13 13 1987—Sept. 4 5.5-6 6 Mar. 21 5.25-5.50 5.50 30 12 12 11 6 6 23 5.50 5.50 June 13 11-12 11 May 16 5.50-6.00 5.50 16 11 11 1988—Aug. 9 6-6.5 6.5 19 6.00 6.00 July 28 10-11 10 11 6.5 6.5 29 10 10 IInn eeffffeecctt JJuullyy 77,, 22000000 6.00 6.00 Sept. 26 11 11 1989—Feb. 24 6.5-7 7 Nov. 17 12 12 27 7 7 Dec. 5 12-13 13 8 13 13 1990—Dec. 19 6.5 6.5 1981—May 5 13-14 14 1991—Feb. 1 6-6.5 6 14 14 4 6 6 Nov. 2 13-14 13 Apr. 30 5.5-6 5.5 6 13 13 May 2 5.5 5.5 Dec. 4 12 12 Sept. 13 5-5.5 5 17 5 5 1982—July 20 11.5-12 11.5 Nov. 6 4.5-5 4.5 23 11.5 11.5 7 4.5 4.5 Aug. 2 11-11.5 11 Dec. 20 3.5-1.5 3.5 3 11 11 24 3.5 3.5 16 10.5 10.5 27 10-10.5 10 1992—July 2 3-3.5 3 30 10 10 7 3 3 1. Available on a short-term basis to help depository institutions meet temporary needs for of the Federal Reserve Bank, this time period may be shortened. Beyond this initial period, a funds that cannot be met through reasonable alternative sources. The highest rate established flexible rate somewhat above rates charged on market sources of funds is charged. The rate for loans to depository institutions may be charged on adjustment credit loans of unusual size ordinarily is reestablished on the first business day of each two-week reserve maintenance that result from a major operating problem at the borrower's facility. period, but it is never less than the discount rate applicable to adjustment credit plus 50 basis 2. Available to help relatively small depository institutions meet regular seasonal needs for points. funds that arise from a clear pattern of intrayearly movements in their deposits and loans and 4. For earlier data, see the following publications of the Board of Governors: Banking and that cannot be met through special industry lenders. The discount rate on seasonal credit takes Monetary Statistics, 1914-1941, and 1941-1970; and the Annual Statistical Digest, 1970into account rates charged by market sources of funds and ordinarily is reestablished on the 1979. first business day of each two-week reserve maintenance period; however, it is never less than In 1980 and 1981, the Federal Reserve applied a surcharge to short-term adjustment-credit the discount rate applicable to adjustment credit. borrowings by institutions with deposits of $500 million or more that had borrowed in 3. May be made available to depository institutions when similar assistance is not successive weeks or in more than four weeks in a calendar quarter. A 3 percent surcharge was reasonably available from other sources, including special industry lenders. Such credit may in effect from Mar. 17, 1980, through May 7, 1980. A surcharge of 2 percent was reimposed be provided when exceptional circumstances (including sustained deposit drains, impaired on Nov. 17, 1980; the surcharge was subsequently raised to 3 percent on Dec. 5, 1980, and to access to money market funds, or sudden deterioration in loan repayment performance) or 4 percent on May 5, 1981. The surcharge was reduced to 3 percent effective Sept. 22, 1981, practices involve only a particular institution, or to meet the needs of institutions experiencing and to 2 percent effective Oct. 12, 1981. As of Oct. 1, 1981, the formula for applying the difficulties adjusting to changing market conditions over a longer period (particularly at times surcharge was changed from a calendar quarter to a moving thirteen-week period. The of deposit disintermediation). The discount rate applicable to adjustment credit ordinarily is surcharge was eliminated on Nov. 17, 1981. charged on extended-credit loans outstanding less than thirty days; however, at the discretion Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Nonfinancial Statistics • August 2000 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1 Type of deposit Net transaction accounts 1 $0 million-$44.3 million3. 12/30/99 2 More than $44.3 million4 . 12/30/99 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 30, 1999, for depository institutions that report include commercial banks, savings banks, savings and loan associations, credit unions, weekly, and with the period beginning January 20, 2000, for institutions that report quarterly, agencies and branches of foreign banks, and Edge Act corporations. the exemption was raised from $4.9 million to $5.0 million. 2. Transaction accounts include all deposits against which the account holder is permitted 4. The reserve requirement was reduced from 12 percent to 10 percent on to make withdrawals by negotiable or transferable instruments, payment orders of with- Apr. 2, 1992, for institutions that report weekly, and on Apr. 16, 1992, for institutions that drawal, or telephone or preauthorized transfers for the purpose of making payments to third report quarterly. persons or others. However, accounts subject to the rules that permit no more than six 5. For institutions that report weekly, the reserve requirement on nonpersonal time deposits preauthorized, automatic, or other transfers per month (of which no more than three may be with an original maturity of less than 1 Vi years was reduced from 3 percent to 1 Vi percent for by check, draft, debit card, or similar order payable directly to third parties) are savings the maintenance period that began Dec. 13, 1990, and to zero for the maintenance period that deposits, not transaction accounts. began Dec. 27, 1990. For institutions that report quarterly, the reserve requirement on 3. The Monetary Control Act of 1980 requires that the amount of transaction accounts nonpersonal time deposits with an original maturity of less than 1 x/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 lVi 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 30, 1999, 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 20, 2000, 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 $46.5 million to $44.3 million. deposits with an original maturity of less than 1 Vi years (see note 5). Under the Garn-St Germain Depository Institutions Act of 1982, the Board adjusts the amount of reservable liabilities subject to a zero percent reserve requirement each year for the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A9 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS1 Millions of dollars 1999 2000 TTyyppee ooff ttrraannssaaccttiioonn aanndd mmaattuurriittyy 11999977 11999988 11999999 Oct. Nov. Dec. Jan. Feb. Mar. Apr. U.S. TREASURY SECURITIES2 Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 9,147 3,550 0 0 0 0 0 0 0 22,,229944 ? Gross sales 0 0 0 0 0 0 0 0 0 0 Exchanges 435,907 450,835 464,218 35,844 36,882 42,468 37,029 38,607 48,459 37,141 4 For new bills 435,907 450,835 464,218 35,844 36,882 42,468 37,029 38,607 48,459 37,141 5 Redemptions 0 2,000 0 0 0 0 0 0 198 779 Others within one year 6 Gross purchases 5,549 6,297 11,895 0 964 1,450 0 0 0 0 7 Gross sales 0 0 0 0 0 0 0 0 0 0 8 Maturity shifts 41,716 46,062 50,590 3,831 6,675 3,936 3,566 6,877 5,034 0 9 Exchanges -27,499 -49,434 -53.315 -368 -10,150 -2,175 -4,360 -6,688 -3,515 0 10 Redemptions 1,996 2,676 1,429 170 0 0 390 0 0 568 One to five years 11 Gross purchases 20,080 12,901 19,731 0 1,014 3,514 160 0 740 1,723 1? Gross sales 0 0 0 0 0 0 0 0 0 0 N Maturity shifts -37,987 -37,777 -44,032 -3,831 -3,685 -3,936 -3,566 -5,210 -5,034 0 14 Exchanges 20,274 37,154 42,604 0 8,015 2,175 4,045 4,348 3,515 0 Five to ten years 15 Gross purchases 3,449 2,294 4,303 0 0 581 809 0 489 993300 16 Gross sales 0 0 0 0 0 0 0 0 0 0 17 Maturity shifts -1,954 -5,908 -5,841 0 -2,273 0 0 -949 0 0 18 Exchanges 5,215 7,439 7,583 0 2,135 0 316 1,170 0 0 More than ten years 19 Gross purchases 5,897 4,884 9,428 0 925 1,257 1,069 0 330 0 70 Gross sales 0 0 0 0 0 0 0 0 0 0 21 Maturity shifts -1,775 -2,377 —717 0 -717 0 0 -717 0 0 22 Exchanges 2,360 4,842 3,139 374 0 0 0 1,170 0 0 All maturities 23 Gross purchases 44,122 29,926 45,357 0 2,903 6,802 2,038 0 1,559 4,947 74 Gross sales 0 0 0 0 0 0 0 0 0 0 25 Redemptions 1,996 4,676 1,429 170 0 0 390 0 198 1,347 Matched transactions 76 Gross purchases 3,577,954 4,395,430 4,395,998 332,708 317,537 488,845 492,277 340,127 401,404 336,103 27 Gross sales 3,580,274 4,399,330 4,414,253 330,856 318,294 510,605 471,663 339,585 401,841 334,751 Repurchase agreements 28 Gross purchases 810,485 512,671 281,599 100 00 00 00 00 00 00 29 Gross sales 809,268 514,186 301,273 7,707 0 0 0 0 0 0 30 Net change in U.S. Treasury securities 41,022 19,835 5,999 -5,924 2,146 -14,959 22,262 542 923 4,952 FEDERAL AGENCY OBLIGATIONS Outright transactions 31 Gross purchases 0 0 0 0 0 00 00 00 00 00 37 Gross sales 0 25 0 0 0 0 0 0 0 0 33 Redemptions 1,540 322 157 50 7 0 6 25 0 10 Repurchase agreements 34 Gross purchases 160,409 284,316 360,069 9,636 00 00 00 00 00 00 35 Gross sales 159,369 276,266 370,772 24,092 0 0 0 0 0 0 36 Net change in federal agency obligations -500 7,703 -10,859 -14,506 -7 0 -6 -25 0 -10 Reverse repurchase agreements 37 Gross purchases 0 0 00 00 00 00 00 00 00 00 38 Gross sales 0 0 0 0 0 0 0 0 0 0 Repurchase agreements 39 Gross purchases 0 0 304,989 68,061 81,350 155,578 61,345 8822,,999988 6611,,223300 7799,,558855 40 Gross sales 0 0 164,349 45,501 54,470 64,378 178,880 81,335 62,253 78,425 41 Net change in triparty obligations 0 0 140,640 22,560 26,880 91,200 -117,535 1,663 -1,023 1,160 42 Total net change in System Open Market Account... 40,522 27,538 135,780 2,130 29,019 76,241 -95,279 2,180 -100 6,102 1. Sales, redemptions, and negative figures reduce holdings of the System Open Market 2. Transactions exclude changes in compensation for the effects of inflation on the principal Account; all other figures increase such holdings. of inflation-indexed securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic NonfinancialS tatistics • August 2000 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements1 Millions of dollars Wednesday End of month Account 2000 2000 May 3 May 10 May 17 May 24 May 31 Mar. 31 Apr. 30 May 31 Consolidated condition statement ASSETS 1 Gold certificate account 11,048 11,048 11,048 11,048 11,048 11,048 11,048 11,048 2 Special drawing rights certificate account 5,200 5,200 5,200 5,200 5,200 6,200 5,200 5,200 3 Coin 553 572 588 574 599 483 569 599 Loans 4 To depository institutions 258 280 431 484 431 236 240 431 5 Other 0 0 0 0 0 0 0 0 6 Acceptances held under repurchase agreements 0 0 0 0 0 0 0 0 Triparty Obligations 7 Repurchase agreements—triparty2 32,515 14,175 14,620 12,530 26,395 23,745 24,905 26,395 Federal agency obligations' 8 Bought outright 140 140 140 140 140 150 140 140 9 Held under repurchase agreements 0 0 0 0 0 0 0 0 10 Total U.S. Treasury securities3 507,137 508,459 507,916 509,115 506,744 501,708 506,695 506,744 11 Bought outright4 507,137 508,459 507,916 509,115 506,744 501,708 506,695 506,744 12 Bills 200,342 201,653 200,571 201,758 198,323 197,038 199,905 198,323 13 Notes 221,030 221,038 222,560 222,569 223,631 219,082 221,027 223,631 14 Bonds 85,765 85,768 84,785 84,788 84,791 85,588 85,763 84,791 15 Held under repurchase agreements 0 0 0 0 0 0 0 0 16 Total loans and securities 540,050 523,053 523,107 522,269 533,710 525,839 531,981 533,710 17 Items in process of collection 8,110 8,382 7,866 7,179 11,985 4,904 5,935 11,985 18 Bank premises 1,393 1,394 1,395 1,394 1,400 1,381 1,393 1,400 Other assets 19 Denominated in foreign currencies5 15,043 15,047 15,051 15,056 15,246 15,803 15,075 15,246 20 All other6 18,090 18,375 15,510 15,872 15,707 16,988 18,526 15,707 21 Total assets 599,488 583,072 579,766 578,592 594,896 582,647 589,727 594,896 LIABILITIES 22 Federal Reserve notes 537,088 537,660 537,283 538,151 541,590 534,854 535,249 541,590 23 Reverse repurchase agreements—triparty2 0 0 0 0 0 0 0 0 24 Total deposits 35,978 22,967 19,872 18,524 27,416 22,866 29,741 27,416 25 Depository institutions 27,616 12,863 14,563 13,258 21,634 18,196 13,480 21,634 26 U.S. Treasury—General account 8,027 9,769 4,923 4,942 5,445 4,357 15,868 5,445 27 Foreign—Official accounts 71 72 126 76 110 125 142 110 28 Other 263 263 260 249 226 188 251 226 29 Deferred credit items 8,156 7,459 7,602 6,897 10,619 5,175 6,178 10,619 30 Other liabilities and accrued dividends7 4,818 4,813 4,744 4,734 4,752 5,016 4,931 4,752 31 Total liabilities 586,040 572,899 569,500 568,306 584,377 567,911 576,100 584,377 CAPITAL ACCOUNTS 32 Capital paid in 6,755 6,765 6,765 6,777 6,781 6,744 6,752 6,781 33 Surplus 6,283 2,566 2,594 2,639 2,679 6,431 6,259 2,679 34 Other capital accounts 410 842 906 870 1,058 1,561 617 1,058 35 Total liabilities and capital accounts 599,488 583,072 579,766 578,592 594,896 582,647 589,727 594,896 MEMO 36 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 37 Federal Reserve notes outstanding (issued to Banks) 782,353 781,394 780,420 779,181 777,900 788,805 783,126 777,900 38 LESS: Held by Federal Reserve Banks 245,265 243,734 243,137 241,030 236,310 253,951 247,877 236,310 39 Federal Reserve notes, net 537,088 537,660 537,283 538,151 541,590 534,854 535,249 541,590 Collateral held against notes, net 40 Gold certificate account 11,048 11,048 11,048 11,048 11,048 11,048 11,048 11,048 41 Special drawing rights certificate account 5,200 5,200 5,200 5,200 5,200 6,200 5,200 5,200 42 Other eligible assets 0 0 0 0 0 0 0 0 43 U.S. Treasury and agency securities 520,840 521,412 521,034 521,785 525,342 517,606 519,001 525,342 44 Total collateral 537,088 537,660 537,283 538,151 541,590 534,854 535,249 541,590 1. Some of the data in this table also appear in the Board's H.4.1 (503) weekly statistical 5. Valued monthly at market exchange rates. release. For ordering address, see inside front cover. 6. Includes special investment account at the Federal Reserve Bank of Chicago in Treasury 2. Cash value of agreements arranged through third-party custodial banks. bills maturing within ninety days. 3. Face value of the securities. 7. Includes exchange-translation account reflecting the monthly revaluation at market 4. Includes securities loaned—fully guaranteed by U.S. Treasury securities pledged with exchange rates of foreign exchange commitments. Federal Reserve Banks—and includes compensation that adjusts for the effects of inflation on the principal of inflation-indexed securities. Excludes securities sold and scheduled to be 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 2000 2000 May 3 May 10 May 17 May 24 May 31 Mar. 31 Apr. 30 May 31 1 Total loans 258 280 432 484 431 236 240 440 2 Within fifteen days' 92 96 404 454 311 203 178 402 3. Sixteen days to ninety days 166 184 27 31 120 33 63 38 4. 91 days to 1 year 0 0 0 0 0 0 0 0 5 Total U.S. Treasury securities2 507,137 508,459 507,916 509,115 506,744 501,708 506,693 506,744 6 Within fifteen days' 17,346 19,237 17,492 20,887 15,491 3,674 6,882 15,491 7 Sixteen days to ninety days 107,052 105,999 105,363 108,146 105,584 114,085 117,248 105,584 8 Ninety-one days to one year 137,874 138,345 138,892 133,902 139,209 141,215 137,144 139,209 9 One year to five years 124,338 124,340 125,253 125,254 125,525 123,170 124,898 125,525 10 Five years to ten years 52,391 52,397 53,422 53,428 53,435 51,438 52,387 53,435 11 More than ten years 68,137 68,140 67,494 67,497 67,500 68,127 68,135 67,500 12 Total federal agency obligations 140 140 140 140 140 150 140 140 13 Within fifteen days' 0 0 0 0 0 10 0 0 14 Sixteen days to ninety days 0 0 0 0 0 0 0 0 15 Ninety-one days to one year 10 10 10 10 10 10 10 10 16 One year to five years 10 10 10 10 10 10 10 10 17 Five years to ten years 120 120 120 120 120 120 120 120 18 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 • August 2000 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 1999r 2000 11999966 11999977 11999988 11999999 IItteemm DDeecc.. DDeecc.. DDeecc..rr DDeecc..rr Oct. Nov. Dec. Jan.r Feb.r Mar.r Apr. May Seasonally adjusted AADDJJUUSSTTEEDD FFOORR CCHHAANNGGEESS IINN RREESSEERRVVEE RREEQQUUIIRREEMMEENNTTSS22 11 TToottaall rreesseerrvveess33 50.17r 46.87r 45.19 41.74 41.34 41.56 41.74 43.11 41.64 40.45 40.92 41.35 22 NNoonnbboorrrroowweedd rreesseerrvveess44 50.02r 46.54 45.07 41.42 41.06 41.33 41.42 42.74 41.53 40.27 40.62 40.99 33 NNoonnbboorrrroowweedd rreesseerrvveess pplluuss eexxtteennddeedd ccrreeddiitt55 50.02r 46.54 45.07 41.42 41.06 41.33 41.42 42.74 41.53 40.27 40.62 40.99 44 RReeqquuiirreedd rreesseerrvveess 48.76r 45.18 43.68 40.43 40.19 40.23 40.43 41.09 40.52 39.24 39.77 40.39 55 MMoonneettaarryy bbaassee66 451.62r 479.17r 512.75 591.19 557.85 569.43 591.19 591.97 573.42 571.16 572.45 573.44 Not seasonally adjusted 6 Total reserves7 51.45 48.01 45.31 41.89 40.94 41.20 41.89 44.23 42.10 39.75 40.60 41.58 7 Nonborrowed reserves 51.30 47.69 45.19 41.57 40.65 40.96 41.57 43.86 41.99 39.58 40.30 41.21 8 Nonbonrowed reserves plus extended credit5 51.30 47.69 45.19 41.57 40.65 40.96 41.57 43.86 41.99 39.58 40.30 41.21 9 Required reserves8 50.04 46.33 43.80 40.58 39.79 39.87 40.58 42.20 40.99 38.55 39.45 40.61 10 Monetary base9 456.63 484.98 518.27 600.63 555.70 572.01 600.63 596.90 571.79 570.03 571.09 572.54 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS10 11 Total reserves11 51.17 47.92 45.21 41.66 40.73 40.97 41.66 44.23 42.10 39.74 40.58 41.56 12 Nonborrowed reserves 51.02 47.60 45.09 41.33 40.45 40.74 41.33 43.86 41.99 39.56 40.28 41.19 13 Nonborrowed reserves plus extended credit5 51.02 47.60 45.09 41.33 40.45 40.74 41.33 43.86 41.99 39.56 40.28 41.19 14 Required reserves 49.76 46.24 43.70 40.35 39.58 39.64 40.35 42.21 40.98 38.53 39.43 40.59 15 Monetary base12 463.40 491.79 525.06 607.93 562.68 578.98 607.93 604.63 579.13 576.92 577.91 579.38 16 Excess reserves13 1.42 1.69 1.51 1.31 1.15 1.33 1.31 2.03 1.11 1.21 1.15 .97 17 Borrowings from the Federal Reserve .16 .32 .12 .32 .28 .24 .32 .37 .11 .18 .30 .36 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 eifect 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 2000 1996 1997 1998 1999 IItteemm Dec. Dec. Dec. Dec.r Feb.r Mar.r Apr. May Seasonally adjusted Measures2 1 Ml 1,081.1 1,073.9 1,097.4 1,122.9 1,105.7 1,112.1 1,116.2 1,104.8 2 M2 3,822.9 4,041.9r 4,396.8r 4,655.4 4,691.2 4,728.1 4,768.5 4,764.7 3 M3 4,952.4 5,403.2r 5,996.7r 6,477.0 6,538.9 6,611.9 6,654.8 6,675.2 4 Debt 14,443.9r 15,234.7r 16,282.9r 17,381.1 17,536.0 17,639.2 17,718.7 n.a. MI components 5 Currency3 394.3 424.8 459.5 515.5 518.4 517.3 518.2 519.6 6 Travelers checks4 8.3 8.1 8.2 8.3 8.1 8.2 8.2 8.3 7 Demand deposits5 402.3 395.3 379.3 355.2 338.1 343.0 341.9 334.4 8 Other checkable deposits6 276.1 245.8 250.3 244.0 241.2 243.7 248.0 242.5 Nontransaction components 9 In M27 2,741.8 2,967.9r 3,299.4r 3,532.5 3,585.5 3,615.9 3,652.3 3,659.8 10 In M3 only8 1,129.5 1,361.3 1,599.9 1,821.5 1,847.7 1,883.9 1,886.3 1,910.5 Commercial banks 11 Savings deposits, including MMDAs 904.0 1,020.5 1,184.8 1,285.7 1,302.0 1,309.1 1,325.2 1,322.2 12 Small time deposits9 593.3 625.4 626.1 634.7 644.4 650.1 659.7 667.0 13 Large time deposits10, 11 413.9 488.3 539.3 614.4 620.5 627.6 644.7 649.6 Thrift institutions 14 Savings deposits, including MMDAs 366.6 376.6 413.8 448.7 449.6 452.3 449.3 453.3 15 Small time deposits9 353.6 342.8 325.6 320.5 323.7 324.7 324.2 326.4 16 Large time deposits10 78.3 85.6 88.9 91.5 95.0 95.1 94.6 93.4 Money market mutual funds 17 Retail 524.4 602.8r 749.2r 842.9 865.6 879.8 893.8 890.9 18 Institution-only 312.0 380.8 518.4 607.4 617.5 640.7 640.0 649.2 Repurchase agreements and Eurodollars 19 Repurchase agreements12 210.7 256.0 300.8 334.7 343.2 339.5 333344..55 334411..22 20 Eurodollars12 114.6 150.7 152.6 173.5 171.6 180.9 172.6 177.0 Debt components 21 Federal debt 3,781.3 3,800.3 3,750.8 3,659.5 3,609.4 3,618.8 33,,660022..33 n.a. 22 Nonfederal debt 10,662.6r 11,434.4r 12,532.2r 13,721.7 13,926.6 14,020.4 14,116.4 n.a. Not seasonally adjusted Measures2 23 Ml 1,105.1 1,097.7 1,121.3 1,147.4 1,097.2 1,108.9 1,125.0 1,098.7 24 M2 3,845.2r 4,065.0r 4,422.0r 4,683.7 4,689.4 4,749.0 4,814.1 4,736.6 25 M3 4,973.4 5,427.2r 6,026.3r 6,512.0 6,558.4 6,645.4 6,698.8 6,653.2 26 Debt 14,440.5r 15,231.8r 16,279.8r 17,380.2 17,505.1 17,620.2 17,689.3 n.a. Ml components 27 Currency3 397.9 428.9 464.1 521.2 517.5 517.4 551188..66 551199..22 28 Travelers checks4 8.6 8.3 8.4 8.4 8.3 8.3 8.3 8.4 29 Demand deposits5 419.9 412.4 395.9 371.2 331.7 338.5 344.4 329.2 30 Other checkable deposits6 278.8 248.2 252.8 246.7 239.8 244.6 253.6 241.9 Nontransaction components 31 In M27 2,740.0 2,967.4r 3,300.7r 3,536.3 3,592.1 3,640.1 3,689.1 33,,663377..88 32 In M3 only8 1,128.2 1,362.2 1,604.3 1,828.3 1,869.0 1,896.4 1,884.8 1,916.7 Commercial banks 33 Savings deposits, including MMDAs 903.3 1,020.4 1,186.0 1,288.5 1,294.6 1,311.8 1,341.5 1,317.4 34 Small time deposits9 592.7 625.3 626.5 635.5 647.0 652.1 660.4 664.6 35 Large time deposits10, 11 413.2 487.2 537.8 612.6 616.0 627.8 644.5 654.3 Thrift institutions 36 Savings deposits, including MMDAs 366.3 376.5 414.2 449.7 447.1 453.2 454.9 451.7 37 Small time deposits9 353.2 342.8 325.8 321.0 325.0 325.7 324.5 325.3 38 Large time deposits10 78.1 85.4 88.6 91.2 94.3 95.1 94.5 94.1 Money market mutual funds 39 Retail 524.3 660022..33rr 748. r 841.6 878.5 897.3 990077..88 878.8 40 Institution-only 315.6 386.7 527.9 618.9 640.6 650.5 640.2 644.5 Repurchase agreements and Eurodollars 41 Repurchase agreements12 205.7 250.5 295.4 330.0 345.1 342.2 333333..11 345.3 42 Eurodollars12 115.7 152.3 154.5 175.6 173.0 180.8 172.5 178.5 Debt components 43 Federal debt 3,787.9 3,805.8 3,754.9 3,663.1 3,605.4 3,633.6 3,597.2 n.a. 44 Nonfederal debt 10,652.6r 1 l,426.0r 12,524.9r 13,717.1 13,899.7 13,986.5 14,092.1 n.a. Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic NonfinancialS tatistics • August 2000 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 1999 1999r 2000 2000 Mayr Nov. Dec. Jan.r Feb.r Mar/ Apr.' May May 10 May 17 May 24 May 31 Seasonally adjusted Assets 1 Bank credit 4,516.2 4,687.9 4,763.5 4,786.5 4,820.1 4,858.1 4,904.4 4,970.1 4,956.7 4,963.4 4,983.7 4,989.6 2 Securities in bank credit 1,191.2 1,243.0 1,263.5 1,266.2 1,267.6 1,275.6 1,283.9 1,301.9 1,300.7 1,299.9 1,307.1 1,302.3 3 U.S. government securities 801.8 799.0 803.9 811.4 813.6 811.9 809.8 811.1 808.2 810.9 815.9 811.8 4 Other securities 389.4 444.1 459.6 454.7 453.9 463.7 474.1 490.8 492.4 489.0 491.2 490.5 5 Loans and leases in bank credit2 . . . 3,325.0 3,444.9 3,500.0 3,520.3 3,552.6 3,582.4 3,620.5 3,668.2 3,656.0 3,663.6 3,676.6 3,687.3 6 Commercial and industrial 957.6 998.0 1,003.3 1,012.5 1,021.4 1,030.5 1,039.3 1,059.9 1,057.4 1,062.5 1,061.4 1,062.4 7 Real estate 1,361.3 1,432.6 1,469.1 1,486.4 1,504.1 1,521.1 1,541.4 1,562.9 1,555.2 1,561.1 1,567.5 1,572.8 8 Revolving home equity 105.6 100.7 102.0 104.3 106.5 109.1 112.9 115.7 115.0 115.5 116.1 116.6 9 Other 1,255.6 1,331.8 1,367.1 1,382.1 1,397.6 1,411.9 1,428.5 1,447.2 1,440.2 1,445.6 1,451.4 1,456.2 10 Consumer 493.3 483.5 491.0 497.0 501.7 504.8 508.7 513.0 510.3 513.0 513.4 515.9 11 Security3 128.1 133.6 153.1 143.1 142.3 142.5 143.3 144.5 143.9 139.7 144.3 151.9 12 Other loans and leases 384.8 397.2 383.4 381.3 383.0 383.6 387.8 387.9 389.2 387.2 390.0 384.3 13 Interbank loans 224.9 224.9 229.4 225.1 235.8 237.1 238.1 242.5 243.2 252.1 235.4 239.8 14 Cash assets4 260.6 274.6 287.6 286.2 284.1 277.5 287.4 279.8 277.7 278.2 267.4 288.2 15 Other assets5 343.8 368.8 379.1 405.5 412.6 400.3 401.7 411.7 408.9 410.2 417.4 415.4 16 Total assets6 5,286.6 5,497.0 5,599.8 5,644.2 5,693.8 5,713.9 5,772.1 5,844.2 5,826.5 5,843.8 5,843.8 5,873.1 Liabilities 17 Deposits 3,381.4 3,481.8 3,524.5 3,541.1 3,558.8 3,575.8 3,626.9 3,632.4 3,627.0 3,626.6 3,623.0 3,654.1 18 Transaction 649.9 624.9 630.2 626.4 624.6 625.5 625.4 628.7 615.9 623.0 633.9 651.7 19 Nontransaction 2,731.6 2,856.9 2,894.4 2,914.6 2,934.3 2,950.2 3,001.5 3,003.7 3,011.1 3,003.6 2,989.0 3,002.5 20 Large time 729.6 801.8 828.2 841.0 847.7 854.3 875.8 881.8 886.8 878.0 879.6 880.5 21 Other 2,002.0 2,055.1 2,066.2 2,073.7 2,086.6 2,095.9 2,125.7 2,121.9 2,124.3 2,125.6 2,109.4 2,121.9 22 Borrowings 1,002.2 1,059.8 1,116.6 1,134.0 1,130.5 1,151.3 1,185.4 1,197.4 1,207.4 1,198.5 1,191.3 1,191.6 23 From banks in the U.S 321.5 349.9 347.1 360.0 365.1 373.2 374.3 380.1 379.4 389.0 372.2 379.7 24 From others 680.8 709.9 769.5 774.0 765.4 778.2 811.2 817.2 828.0 809.5 819.1 811.9 25 Net due to related foreign offices 202.9 223.9 221.1 229.8 233.9 233.1 223.8 249.4 222.9 249.7 250.4 276.8 26 Other liabilities 268.4 297.7 302.3 290.3 295.5 289.5 289.4 312.3 313.2 316.3 312.3 310.8 27 Total liabilities 4,855.0 5,063.1 5,164.6 5,195.2 5,218.7 5,249.7 5,325.5 5,391.6 5,370.5 5391.2 5377.0 5,4333 28 Residual (assets less liabilities)7 431.6 433.8 435.2 449.0 475.0 464.2 446.6 452.6 456.0 452.7 466.9 439.8 Not seasonally adjusted Assets 29 Bank credit 4,511.6 4,715.4 4,795.8 4,810.7 4,823.1 4,852.2 4,905.0 4,962.2 4,951.7 4,955.9 4,963.7 4,984.6 30 Securities in bank credit 1,192.3 1,256.9 1,273.6 1,274.7 1,271.7 1,277.1 1,285.7 1,299.5 1,300.4 1,297.0 1,300.9 1,300.8 31 U.S. government securities 807.7 801.8 806.0 813.2 817.6 818.9 818.4 816.4 814.7 816.2 818.8 817.1 32 Other securities 384.6 455.1 467.7 461.5 454.1 458.2 467.3 483.1 485.7 480.9 482.1 483.7 33 Loans and leases in bank credit2 .. . 3,319.3 3,458.5 3,522.2 3,536.0 3,551.4 3,575.2 3,619.2 3,662.7 3,651.4 3,658.9 3,662.8 3,683.8 34 Commercial and industrial 960.4 1,001.8 1,005.3 1,010.0 1,022.1 1,034.4 1,046.3 1,062.8 1,061.4 1,066.0 1,061.1 1,063.8 35 Real estate 1,359.6 1,439.0 1,473.9 1,490.4 1,501.1 1,516.3 1,537.0 1,560.3 1,554.2 1,558.8 1,563.6 1,569.9 36 Revolving home equity 105.3 101.1 102.4 104.6 106.2 108.1 112.0 115.3 114.5 115.1 115.7 116.2 37 Other 1,254.3 1,337.9 1,371.6 1,385.8 1,394.8 1,408.2 1,425.0 1,445.1 1,439.7 1,443.8 1,448.0 1,453.6 38 Consumer 492.8 482.2 496.5 504.2 503.8 503.2 507.6 512.6 509.8 512.9 513.1 515.2 39 Security3 126.0 135.8 157.8 147.2 143.8 141.5 143.9 143.0 142.2 138.4 141.6 150.2 40 Other loans and leases 380.5 399.8 388.7 384.2 380.7 379.8 384.4 384.0 383.8 382.8 383.4 384.7 41 Interbank loans 223.9 229.0 234.9 225.9 237.3 243.0 245.0 242.4 241.2 251.8 230.6 244.5 42 Cash assets4 258.4 283.6 307.5 300.4 284.7 269.0 284.4 277.6 265.5 267.1 255.1 314.3 43 Other assets5 346.8 365.7 379.1 404.1 415.1 404.0 405.7 415.5 415.1 411.2 414.2 424.4 44 Total assets6 5,281.9 5,534.1 5,657.4 5,6823 5,701.4 5,709.1 5,780.8 5,837.7 5,813.7 5,826.0 5,803.7 5,907.7 Liabilities 45 Deposits 3,368.2 3,509.6 3,566.9 3,554.4 3,557.7 3,579.7 3,644.9 3,617.8 3,608.6 3,605.4 3,581.7 3,667.9 46 Transaction 640.2 633.1 662.9 637.9 617.6 618.4 634.0 619.4 597.1 609.9 605.0 669.2 47 Nontransaction 2,728.0 2,876.5 2,903.9 2,916.5 2,940.2 2,961.2 3,010.8 2,998.4 3,011.5 2,995.5 2,976.8 2,998.8 48 Large time 727.3 811.9 843.2 852.0 860.4 862.8 875.3 878.1 884.4 873.0 875.6 875.5 49 Other 2,000.6 2,064.6 2,060.8 2,064.5 2,079.8 2,098.4 2,135.5 2,120.3 2,127.1 2,122.5 2,101.1 2,123.3 50 Borrowings 1,010.4 1,067.7 1,125.8 1,152.5 1,134.4 1,146.3 1,183.6 1,206.9 1,219.0 1,208.6 1,196.6 1,198.9 51 From banks in the U.S 322.0 353.3 352.0 363.9 366.7 373.0 375.5 380.9 380.3 389.2 371.4 380.3 52 From others 688.3 714.4 773.8 788.7 767.7 773.3 808.1 826.0 838.7 819.4 825.2 818.6 53 Net due to related foreign offices .... 202.1 227.9 227.4 233.4 248.3 236.7 213.1 249.8 221.7 246.7 259.5 278.3 54 Other liabilities 267.4 298.7 304.5 291.7 297.8 290.1 288.2 310.9 312.3 314.7 310.3 309.5 55 Total liabilities 4,848.0 5,103.9 5,224.6 5,232.0 5,238.2 5,252.8 5,329.8 5,385.4 5,361.7 5375.4 5,348.2 5/454.6 56 Residual (assets less liabilities)7 433.9 430.3 432.8 450.3 463.1 456.3 450.9 452.3 452.0 450.6 455.4 453.1 MEMO 57 Revaluation gains on off-balance-sheet items8 84.3 100.8 104.1 102.4 104.9 105.3 104.7 117.5 119.1 121.0 117.5 111.5 58 Revaluation losses on off-balancesheet items8 85.8 99.7 102.4 100.9 104.4 102.3 103.5 117.3 118.3 121.4 117.7 111.4 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Financial Statistics • August 2000 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 1999 1999r 2000 2000 Mayr Nov. Dec. Jan.r Feb.r Mar.1" Apr/ May May 10 May 17 May 24 May 31 Seasonally adjusted Assets 1 Bank credit 3,978.6 4,149.4 4,215.2 4,239.3 4,280.2 4.314.7 4,337.0 4,389.1 4,374.7 4,387.3 4,400.9 4,405.9 2 Securities in bank credit 997.5 1,050.7 1,061.2 1,065.8 1,076.4 1,081.4 1,083.3 1,095.2 1,094.4 1,095.5 1,097.4 1,096.2 3 U.S. government securities 715.2 720.5 723.2 730.9 738.3 734.5 731.0 732.2 730.9 733.6 733.9 732.3 4 Other securities 282.3 330.2 338.0 334.9 338.0 346.9 352.3 362.9 363.5 361.9 363.5 363.8 5 Loans and leases in bank credit2 2,981.1 3,098.7 3,154.0 3,173.5 3,203.9 3.233.2 3,253.7 3,293.9 3,280.3 3,291.8 3,303.5 3,309.8 6 Commercial and industrial 755.5 801.7 809.9 817.6 824.7 832.3 837.5 852.3 850.5 855.1 852.4 854.3 7 Real estate 1,341.7 1,415.2 1,452.1 1,469.0 1,486.4 1,503.0 1,523.0 1,544.2 1,536.8 1,542.4 1,548.6 1,553.9 8 Revolving home equity 105.6 100.7 102.0 104.3 106.5 109.1 112.9 115.7 115.0 115.5 116.1 116.6 y Other 1,236.1 1,314.5 1,350.2 1,364.7 1,379.8 1.393.8 1,410.1 1,428.5 1,421.8 1,426.9 1,432.5 1,437.3 10 Consumer 493.3 483.5 491.0 497.0 501.7 504.8 508.7 513.0 510.3 513.0 513.4 515.9 11 Security3 75.5 68.3 86.1 76.5 75.7 76.2 65.7 63.9 63.0 61.9 65.3 66.1 12 Other loans and leases 315.2 329.9 314.9 313.5 315.3 317.0 318.8 320.5 319.7 319.4 323.8 319.6 13 Interbank loans 198.4 199.7 199.9 196.2 203.2 208.8 208.9 210.9 208.6 216.5 207.6 212.3 14 Cash assets4 223.1 225.8 234.1 230.7 229.6 225.7 235.5 231.8 229.8 229.5 219.5 241.2 15 Other assets5 308.4 333.9 342.5 367.0 374.5 361.3 362.0 370.9 367.9 371.4 374.3 374.6 16 Total assets6 4,649.9 4,849.9 4,932.2 4,974.5 5,028.9 5,051.6 5,084.2 5,143.0 5,121.4 5,144.9 5,142.5 5,174.5 Liabilities 17 Deposits 3,066.7 3,126.5 3,150.4 3,160.2 3,178.2 3.192.7 3,233.3 3,244.0 3,227.8 3,240.3 3,239.1 3,276.2 18 Transaction 639.1 614.5 619.6 615.6 613.5 614.2 614.3 617.3 604.5 612.0 622.2 639.7 19 Nontransaction 2,427.6 2,511.9 2,530.7 2,544.6 2,564.7 2,578.5 2,619.0 2,626.8 2,623.4 2,628.3 2,616.9 2,636.4 20 Large time 427.9 459.5 467.8 473.6 480.1 485.4 496.2 507.5 502.3 505.9 509.7 516.1 21 Other 1,999.7 2,052.4 2,063.0 2,071.0 2,084.6 2,093.1 2,122.7 2,119.3 2,121.1 2,122.4 2,107.1 2,120.3 22 Borrowings 826.3 873.8 935.1 954.1 954.3 973.2 984.5 991.5 1,000.9 998.1 984.2 980.7 23 From banks in the U.S 299.6 323.8 322.6 340.3 346.8 353.6 353.6 362.5 360.5 372.7 357.6 359.2 24 From others 526.8 550.1 612.5 613.8 607.5 619.6 630.9 629.0 640.5 625.4 626.6 621.5 25 Net due to related foreign offices .... 123.3 178.9 182.0 194.2 207.1 213.2 208.9 229.3 208.5 226.7 233.5 246.9 26 Other liabilities 209.0 230.5 232.9 220.3 224.0 220.2 218.7 235.1 236.1 236.5 232.3 238.7 27 Total liabilities 4,225.4 4,409.7 4,500.4 4,528.8 4,563.6 4,599.3 4,645.4 4,699.9 4,673.4 4,701.6 4,689.2 4,742.4 28 Residual (assets less liabilities)7 424.5 440.1 431.8 445.7 465.3 452.3 438.8 443.1 448.0 443.4 453.3 432.1 Not seasonally adjusted Assets 29 Bank credit 3,980.7 4,164.3 4,237.5 4,255.8 4,279.0 4,310.2 4,343.8 4,389.5 4,377.4 4,389.2 4,392.2 4,407.1 30 Securities in bank credit 1,000.3 1,055.1 1,067.6 1,070.4 1,079.2 1,085.8 1,088.7 1,095.8 1,096.1 1,096.6 1,095.3 1,096.8 31 U.S. government securities 720.0 721.8 723.9 732.1 742.2 741.7 738.9 736.5 736.0 738.4 736.4 736.7 32 Other securities 280.3 333.3 343.7 338.3 337.0 344.1 349.9 359.2 360.2 358.2 359.0 360.1 33 Loans and leases in bank credit2 2,980.5 3,109.2 3,170.0 3,185.4 3,199.8 3,224.4 3,255.1 3,293.8 3,281.2 3,292.5 3,296.9 3,310.3 34 Commercial and industrial 762.2 802.6 808.3 813.6 822.9 834.6 846.3 859.4 858.6 862.6 857.5 859.8 35 Real estate 1,340.1 1,421.6 1,457.0 1,472.8 1,483.0 1,498.0 1,518.7 1,541.7 1,535.8 1,540.2 1,544.8 1,551.0 36 Revolving home equity 105.3 101.1 102.4 104.6 106.2 108.1 112.0 115.3 114.5 115.1 115.7 116.2 37 Other 1,234.8 1,320.5 1,354.6 1,368.2 1,376.8 1,390.0 1,406.6 1,426.4 1,421.3 1,425.1 1,429.2 1,434.7 38 Consumer 492.8 482.2 496.5 504.2 503.8 503.2 507.6 512.6 509.8 512.9 513.1 515.2 39 Security3 73.6 71.0 90.3 80.1 77.4 74.9 66.2 62.5 61.5 61.0 62.9 64.3 40 Other loans and leases 311.8 331.8 317.9 314.6 312.6 313.7 316.3 317.6 315.5 315.9 318.6 320.0 41 Interbank loans 197.4 203.8 205.4 197.0 204.7 214.7 215.7 210.7 206.6 216.2 202.8 217.0 42 Cash assets4 221.8 231.8 249.7 242.6 230.8 218.3 234.8 230.8 219.3 219.8 208.9 267.4 43 Other assets5 311.8 330.8 340.3 364.1 375.1 363.7 366.7 375.3 373.9 372.7 372.3 384.7 44 Total assets6 4,653.3 4,871.5 4,973.3 5,001.0 5,031.1 5,048.0 5,102.1 5,146.7 5,117.7 5,138.2 5,116.5 5,216.5 Liabilities 45 Deposits 3,052.4 3,151.6 3,184.2 3,166.7 3,170.1 3,190.4 3,250.2 3,228.6 3,208.5 3,219.7 3,196.5 3,288.9 46 Transaction 629.8 622.6 651.8 626.9 606.6 607.4 623.3 608.4 586.3 599.4 593.9 657.4 47 Nontransaction 2,422.6 2,529.0 2,532.4 2,539.7 2,563.5 2,583.0 2,626.9 2,620.2 2,622.2 2,620.3 2,602.6 2,631.5 48 Large time 424.2 466.7 474.0 479.2 486.7 487.1 493.8 502.2 497.5 500.2 503.9 510.6 49 Other 1,998.4 2,062.3 2,058.4 2,060.5 2,076.7 2,096.0 2,133.1 2,117.9 2,124.7 2,120.1 2,098.7 2,120.9 50 Borrowings 834.5 881.7 944.3 972.6 958.2 968.2 982.7 1,001.0 1,012.6 1,008.1 989.6 988.0 51 From banks in the U.S 300.2 327.2 327.6 344.2 348.3 353.5 354.9 363.2 361.4 372.8 356.8 359.8 52 From others 534.3 554.5 616.7 628.4 609.9 614.7 627.8 637.8 651.1 635.3 632.8 628.2 53 Net due to related foreign offices .... 126.7 181.2 183.0 195.5 219.1 216.2 202.9 234.0 212.2 227.5 247.2 252.0 54 Other liabilities 209.0 230.5 233.1 220.0 224.4 220.6 219.3 235.1 236.4 236.4 232.2 238.5 55 Total liabilities 4,222.7 4,445.0 4,544.6 4,554.7 4,571.8 4,595.4 4,655.1 4,698.6 4,669.7 4,691.7 4,665.4 4,767.4 56 Residual (assets less liabilities)7 430.6 426.5 428.7 446.3 459.3 452.6 447.1 448.1 448.0 446.5 451.1 449.0 MEMO 57 Revaluation gains on off-balance-sheet items8 50.1 59.8 64.5 62.7 64.8 66.0 65.4 72.7 73.8 74.2 72.5 69.8 58 Revaluation losses on off-balancesheet items8 52.0 59.8 63.9 61.9 64.4 64.1 65.1 73.0 73.7 74.5 73.1 70.5 59 Mortgage-backed securities9 335.5 348.2 347.8 348.5 353.1 354.3 358.9 357.4 357.8 357.2 356.3 358.2 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities A17 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued C. Large domestically chartered commercial banks Billions of dollars Monthly averages Wednesday figures AAAccccccooouuunnnttt 1999 1999r 2000 2000 Mayr Nov. Dec. Jan.r Feb.r Mar.r Apr.r May May 10 May 17 May 24 May 31 Seasonally adjusted Assets 1 Bank credit 2,491.1 2,583.4 2,637.5 2,637.1 2,659.3 2,680.5 2,696.2 2,734.3 2,728.4 2,731.2 2,742.3 2,743.4 2 Securities in bank credit 560.0 602.9 614.6 613.4 619.7 626.6 629.7 640.1 640.8 640.0 640.7 640.7 3 U.S. government securities 391.4 391.2 396.4 397.4 400.4 398.9 397.4 399.1 398.3 399.6 399.8 400.0 4 Trading account 22.1 18.8 20.1 21.0 22.1 21.0 21.9 24.1 22.6 25.3 24.6 24.5 5 Investment account 369.4 372.4 376.3 376.4 378.2 377.9 375.5 375.0 375.7 374.3 375.2 375.5 6 Other securities 168.6 211.7 218.2 216.0 219.4 227.7 232.4 241.0 242.5 240.3 240.8 240.7 7 Trading account 67.8 82.4 87.1 81.8 86.2 91.5 93.3 101.7 104.0 101.6 100.4 100.7 8 Investment account 100.8 129.3 131.1 134.1 133.1 136.2 139.0 139.3 138.4 138.8 140.4 140.0 9 State and local government . 25.1 26.5 26.6 26.9 27.0 27.2 27.7 28.0 27.8 28.0 28.0 28.0 10 Other 75.7 102.8 104.6 107.3 106.1 109.0 111.3 111.4 110.6 110.8 112.4 112.0 11 Loans and leases in bank credit2 . . . 1,931.0 1,980.4 2,022.9 2,023.7 2,039.6 2,053.9 2,066.5 2,094.2 2,087.6 2,091.3 2,101.6 2,102.6 12 Commercial and industrial 562.2 591.1 597.6 600.6 604.8 608.4 611.7 623.8 623.1 626.6 623.5 624.7 13 Bankers acceptances 1.0 1.1 1.1 1.1 1.0 1.0 1.1 1.1 1.1 1.1 1.1 1.1 14 Other 561.2 589.9 596.5 599.5 603.8 607.4 610.6 622.7 621.9 625.5 622.3 623.6 15 Real estate 745.5 775.8 806.4 813.3 820.4 828.3 842.9 855.3 851.7 853.4 858.3 860.7 16 Revolving home equity 76.4 69.9 70.7 72.1 73.7 75.6 78.9 81.1 80.7 81.0 81.4 81.8 17 Other 669.1 705.9 735.8 741.2 746.7 752.7 764.0 774.2 771.0 772.4 776.8 778.9 18 Consumer 303.4 289.2 292.6 294.1 298.1 300.0 3(M.O 306.0 305.0 306.0 305.7 307.2 19 Security3 70.9 62.8 80.8 71.4 70.5 70.8 60.0 58.6 57.7 56.5 60.2 60.8 20 Federal funds sold to and repurchase agreements with broker-dealers 53.9 44.5 60.9 50.3 47.2 48.9 38.3 39.3 37.3 3377..66 4400..22 4433..33 21 Other 17.0 18.4 19.9 21.1 23.3 22.0 21.7 19.3 20.4 18.9 20.1 17.6 22 State and local government 11.9 12.5 12.6 12.7 12.8 13.0 13.1 13.0 13.0 13.0 13.0 13.0 23 Agricultural 9.3 10.2 10.3 10.5 10.7 10.7 10.8 10.8 10.8 10.8 10.8 10.8 24 Federal funds sold to and repurchase agreements with others 11.3 12.5 12.0 11.4 11.5 11.5 11.8 11.9 11.8 11.7 1122..11 1122..11 25 All other loans 96.9 96.3 79.3 78.3 79.4 79.7 79.6 80.9 80.8 79.4 84.2 79.1 26 Lease-financing receivables 119.6 130.0 131.3 131.3 131.3 131.3 132.7 133.8 133.6 133.8 133.8 134.2 27 Interbank loans 146.4 147.0 147.4 143.9 149.4 155.4 148.6 154.2 151.8 158.6 152.2 156.1 28 Federal funds sold to and repurchase agreements with commercial banks 91.6 77.5 75.1 69.1 76.4 80.2 77.1 83.5 80.8 85.9 83.6 85.7 29 Other 54.8 69.5 72.2 74.8 73.0 75.2 71.5 70.7 71.0 72.7 68.6 70.4 30 Cash assets4 155.4 155.8 160.8 160.9 160.9 157.1 166.7 160.3 159.0 158.1 150.0 166.8 31 Other assets5 236.0 253.0 260.3 281.9 291.1 278.1 277.2 282.4 280.0 281.1 284.4 287.1 32 Total assets6 2,989.5 3,099.9 3,166.5 3,185.0 3,2223 3,232.8 3,250.2 3,292.6 3,280.5 3,2903 3,290.1 3,314.9 Liabilities 33 Deposits 1,745.4 1,745.5 1,757.9 1,751.9 1,758.8 1,764.3 1,790.5 1,794.4 1,785.7 1,790.1 1,790.5 1,815.7 34 Transaction 366.5 341.7 348.4 339.7 336.4 335.9 335.3 337.9 329.1 335.0 341.3 353.4 35 Nontransaction 1,378.9 1,403.8 1,409.5 1,412.3 1,422.4 1,428.5 1,455.1 1,456.4 1,456.6 1,455.1 1,449.2 1,462.3 36 Large time 233.7 254.1 260.3 263.0 265.6 267.6 276.3 284.8 281.4 282.9 286.2 291.4 37 Other 1,145.2 1,149.7 1,149.2 1,149.2 1,156.8 1,160.9 1,178.8 1,171.6 1,175.2 1,172.2 1,163.0 1,170.9 38 Borrowings 645.0 674.1 729.8 734.3 732.5 744.3 753.4 754.2 767.5 760.8 745.4 738.7 39 From banks in the U.S 216.1 238.1 238.3 251.3 257.1 260.4 264.2 269.7 270.4 278.4 264.4 264.7 40 From others 428.9 436.0 491.5 483.0 475.4 483.9 489.1 484.4 497.1 482.5 480.9 474.0 41 Net due to related foreign offices 118.3 174.4 177.5 189.1 201.9 207.8 203.5 223.3 202.3 220.6 227.5 241.3 42 Other liabilities 178.9 197.4 199.4 185.8 187.7 185.7 185.0 199.8 201.1 201.1 196.3 203.5 43 Total liabilities 2,687.5 2,791.4 2,864.6 2,861.1 2,880.9 2,902.2 2,932.4 2,971.7 2,956.6 2,972.7 2,959.7 2,999.2 44 Residual (assets less liabilities)7 301.9 308.5 301.9 323.9 341.4 330.6 317.8 320.9 323.9 317.6 330.4 315.7 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Financial Statistics • August 2000 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued C. Large domestically chartered commercial banks—Continued Monthly averages Wednesday figures AAAccccccooouuunnnttt 1999 1999r 2000 2000 Mayr Nov. Dec. Jan.r Feb/ Mar.r Apr.r May May 10 May 17 May 24 May 31 Not seasonally adjusted Assets 45 Bank credit 2,485.9 2,598.6 2,659.4 2,659.9 2,670.8 2,682.2 2,699.7 2,727.9 2,723.5 2,725.7 2,726.3 2,739.1 46 Securities in bank credit 558.7 609.0 621.5 619.7 625.8 630.0 630.7 636.9 637.6 637.3 635.0 638.8 47 U.S. government securities 392.8 394.3 397.7 400.1 406.7 404.8 402.0 400.1 399.3 401.2 399.0 402.0 48 Trading account 20.8 19.9 20.0 21.7 23.2 22.0 22.1 22.6 20.4 24.4 22.5 23.9 49 Investment account 372.0 374.3 377.7 378.4 383.5 382.8 379.9 377.5 378.8 376.8 376.5 378.1 50 Mortgage-backed securities . . 248.2 247.9 247.7 247.5 253.4 253.2 251.6 248.8 248.9 248.4 247.8 249.8 51 Other 123.8 126.4 130.0 130.9 130.2 129.7 128.3 128.7 129.9 128.4 128.7 128.3 52 One year or less 24.9 24.2 25.5 26.4 30.7 32.6 32.4 34.4 35.0 34.1 34.7 34.5 53 One to five years 57.4 61.4 62.3 62.0 58.9 56.9 55.7 55.8 55.4 56.0 55.8 56.4 54 More than five years . . . 41.5 40.9 42.2 42.5 40.6 40.1 40.2 38.5 39.6 38.4 38.2 37.4 55 Other securities 165.9 214.8 223.8 219.6 219.1 225.1 228.7 236.8 238.3 236.1 236.0 236.8 56 Trading account 67.8 82.4 87.1 81.8 86.2 91.5 93.3 101.7 104.0 101.6 100.4 100.7 57 Investment account 98.1 132.3 136.7 137.7 132.9 133.7 135.4 135.1 134.3 134.5 135.6 136.1 58 State and local government . . 25.0 26.8 26.8 27.1 27.2 27.3 27.7 27.9 27.8 27.9 28.0 28.0 59 Other 73.1 105.6 109.9 110.6 105.7 106.4 107.7 107.2 106.6 106.7 107.6 108.1 60 Loans and leases in bank credit2 . . 1,927.2 1,989.6 2,037.9 2,040.2 2,044.9 2,052.2 2,069.0 2,091.1 2,085.9 2,088.4 2,091.3 2,100.3 61 Commercial and industrial 566.4 593.0 596.4 597.5 604.1 610.7 618.3 628.2 628.3 631.3 626.0 627.9 62 Bankers acceptances 1.0 1.1 1.1 1.1 1.0 1.0 1.1 1.1 1.1 1.1 1.1 1.1 63 Other 565.4 591.8 595.3 596.5 603.1 609.6 617.2 627.1 627.2 630.2 624.9 626.8 64 Real estate 743.2 780.2 811.9 819.5 821.7 826.6 840.0 852.5 850.9 850.9 853.5 857.5 65 Revolving home equity 76.1 70.0 70.8 72.4 73.6 74.8 78.2 80.8 80.2 80.6 81.1 81.6 66 Other 404.3 428.9 455.2 457.4 457.4 460.0 466.9 474.6 474.6 473.7 474.5 477.0 67 Commercial 262.9 281.3 285.8 289.6 290.8 291.8 294.9 297.2 296.1 296.5 297.9 299.0 68 Consumer 302.9 287.4 295.7 300.7 301.1 300.3 303.8 305.6 304.5 305.5 305.2 306.6 69 Security3 68.9 65.6 85.0 75.1 72.2 69.5 60.5 57.2 56.2 55.6 57.9 59.0 70 Federal funds sold to and repurchase agreements with broker-dealers .... 51.4 47.6 64.8 54.7 49.7 47.3 38.3 37.2 35.6 35.9 36.9 40.7 71 Other 17.5 18.0 20.2 20.4 22.5 22.2 22.2 20.0 20.6 19.7 21.0 18.3 72 State and local government .... 11.8 12.7 12.7 12.7 12.8 12.9 12.9 12.9 12.9 12.9 12.9 12.9 73 Agricultural 9.2 10.3 10.4 10.5 10.4 10.4 10.6 10.7 10.6 10.7 10.7 10.7 74 Federal funds sold to and repurchase agreements with others 11.3 12.5 12.0 11.4 11.5 11.5 11.8 11.9 11.8 11.7 12.1 12.1 75 All other loans 93.8 99.2 83.0 79.2 77.8 77.4 77.7 78.2 77.0 76.2 79.2 79.4 76 Lease-financing receivables .... 119.6 128.7 130.9 133.5 133.3 132.9 133.4 133.9 133.7 133.7 133.8 134.3 77 Interbank loans 149.4 146.2 148.4 144.5 149.7 158.2 153.8 158.0 152.5 162.7 153.7 163.9 78 Federal funds sold to and repurchase agreements with commercial banks 92.3 78.6 76.7 70.6 76.0 82.3 79.8 84.1 79.2 86.7 81.5 89.5 79 Other 57.1 67.6 71.8 73.9 73.7 75.9 74.0 73.9 73.2 76.0 72.1 74.3 80 Cash assets4 154.4 158.8 172.1 171.5 162.5 151.7 166.6 159.6 151.2 150.9 142.0 186.5 81 Other assets5 240.3 248.6 258.7 281.0 292.6 280.6 281.1 287.7 286.2 285.6 285.7 295.3 82 Total assets6 2,990.6 3,112.7 3,199.1 3,218.4 3,2373 3,234.4 3,262.9 3,294.5 3,274.7 3,286.2 3,269.0 3346.0 Liabilities 83 Deposits 1,731.4 1,759.6 1,782.9 1,763.3 1,759.2 1,764.1 1,800.2 1,779.6 1,766.1 1,772.6 1,756.4 1,821.9 84 Transaction 359.8 346.2 369.7 349.4 332.9 331.3 342.5 331.6 315.2 327.2 321.3 365.1 85 Nontransaction 1,371.6 1,413.4 1,413.2 1,413.9 1,426.2 1,432.8 1,457.7 1,448.0 1,451.0 1,445.4 1,435.0 1,456.8 86 Large time 229.9 261.3 266.5 268.6 272.2 269.2 273.9 279.5 276.7 277.2 280.4 285.9 87 Other 1,141.6 1,152.1 1,146.7 1,145.3 1,154.0 1,163.5 1,183.9 1,168.6 1,174.3 1,168.2 1,154.7 1,170.8 88 Borrowings 652.3 680.7 736.5 754.4 740.6 745.3 755.2 762.3 777.4 768.4 749.4 746.2 89 From banks in the U.S 217.2 241.0 241.8 255.8 261.2 263.7 267.8 271.0 272.3 278.7 264.0 266.1 90 From nonbanks in the U.S 435.1 439.6 494.7 498.6 479.4 481.6 487.3 491.3 505.1 489.7 485.4 480.1 91 Net due to related foreign offices . . . 121.7 176.7 178.6 190.4 213.9 210.8 197.5 228.0 206.0 221.4 241.2 246.4 92 Other liabilities 178.9 197.4 199.4 185.8 187.7 185.7 185.0 199.8 201.1 201.1 196.3 203.5 93 Total liabilities 2,6843 2,814.4 2,8973 2,893.9 2,901.4 2,905.9 2,937.9 2,969.7 2,950.7 2,963.5 2,943.2 3,017.9 94 Residual (assets less liabilities)7 .... 306.3 298.4 301.7 324.5 335.9 328.4 325.0 324.8 324.0 322.7 325.8 328.1 MEMO 95 Revaluation gains on off-balancesheet items8 50.1 59.8 64.5 62.7 64.8 66.0 65.4 72.7 73.8 74.2 72.5 69.8 96 Revaluation losses on off-balancesheet items8 52.0 59.8 63.9 61.9 64.4 64.1 65.1 73.0 73.7 74.5 73.1 70.5 97 Mortgage-backed securities® 275.7 285.8 285.9 285.6 289.0 289.2 291.2 288.2 288.3 287.8 287.1 289.3 98 Pass-through securities 181.2 190.7 191.7 191.7 195.2 195.3 198.6 197.0 196.5 196.8 196.0 198.7 99 CMOs, REMICs, and other mortgage-backed securities . . 94.5 95.1 94.2 93.8 93.8 93.9 92.6 91.2 91.9 91.0 91.2 90.6 100 Net unrealized gains (losses) on available-for-sale securities10 . . . .6 -5.8 -6.0 -7.4 -7.8 -7.3 -8.4 -9.3 -9.2 -9.5 -9.4 -9.1 101 Offshore credit to U.S. residents11 . . . 37.7 24.8 24.0 23.2 23.6 24.1 24.4 23.5 23.8 23.7 23.7 22.3 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities A19 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued D. Small domestically chartered commercial banks Billions of dollars Monthly averages Wednesday figures Account 1999 1999r 2000 2000 Mayr Nov. Dec. Jan.r Feb.r Mar.r Apr.r May May 10 May 17 May 24 May 31 Seasonally adjusted Assets 1 Bank credit 1,487.5 1,566.0 1,577.7 1,602.3 1,620.9 1,634.2 1,640.8 1,654.8 1,646.3 1,656.1 1,658.6 1,662.6 2 Securities in bank credit 437.4 447.8 446.5 452.4 456.6 454.8 453.6 455.1 453.6 455.6 456.7 455.4 3 U.S. government securities 323.8 329.3 326.8 333.5 338.0 335.6 333.6 333.2 332.6 334.0 334.0 332.3 4 Other securities 113.7 118.5 119.7 118.9 118.7 119.2 119.9 121.9 121.0 121.6 122.7 123.1 5 Loans and leases in bank credit2 1,050.1 1,118.2 1,131.2 1,149.8 1,164.3 1,179.4 1,187.2 1,199.7 1,192.7 1,200.5 1,201.9 1,207.1 6 Commercial and industrial 193.3 210.7 212.3 217.0 219.9 223.8 225.9 228.5 227.4 228.5 228.9 229.6 7 Real estate 596.2 639.5 645.7 655.7 666.0 674.7 680.1 688.9 685.1 689.0 690.3 693.1 8 Revolving home equity 29.3 30.9 31.3 32.2 32.9 33.5 34.0 34.5 34.3 34.5 34.6 34.8 9 Other 567.0 608.6 614.4 623.5 633.1 641.1 646.1 654.3 650.8 654.5 655.7 658.3 10 Consumer 189.8 194.3 198.5 202.9 203.7 204.8 204.7 206.9 205.3 207.0 207.7 208.7 11 Security3 4.7 5.4 5.3 5.1 5.2 5.4 5.7 5.3 5.3 5.3 5.1 5.3 12 Other loans and leases 66.1 68.3 69.4 69.2 69.5 70.7 70.8 70.1 69.6 70.7 69.9 70.4 13 Interbank loans 52.0 52.7 52.6 52.3 53.8 53.4 60.3 56.7 56.8 57.9 55.4 56.2 14 Cash assets4 67.7 70.0 73.3 69.8 68.7 68.6 68.9 71.4 70.8 71.4 69.5 74.5 15 Other assets5 72.4 81.0 82.1 85.1 83.4 83.2 84.8 88.5 87.9 90.3 90.0 87.5 16 Total assets6 1,660.4 1,750.0 1,765.7 1,789.5 1,806.6 1,818.9 1,834.0 1,850.4 1,840.8 1,854.6 1,8523 1,859.6 Liabilities 17 Deposits 1,321.3 1,381.0 1,392.5 1,408.3 1,419.4 1,428.3 1,442.8 1,449.7 1,442.1 1,450.2 1,448.6 1,460.4 18 Transaction 272.6 272.8 271.2 275.9 277.1 278.3 279.0 279.3 275.4 276.9 280.9 286.3 19 Nontransaction 1,048.8 1,108.1 1,121.3 1,132.4 1,142.3 1,150.0 1,163.8 1,170.3 1,166.8 1,173.2 1,167.7 1,174.1 20 Large time 194.3 205.4 207.5 210.6 214.6 217.8 219.9 222.7 220.8 223.0 223.5 224.7 21 Other 854.5 902.8 913.8 921.8 927.8 932.2 943.9 947.6 945.9 950.3 944.1 949.4 22 Borrowings 181.3 199.8 205.3 219.8 221.8 229.0 231.2 237.3 233.4 237.2 238.9 242.0 23 From banks in the U.S 83.5 85.7 84.3 89.0 89.7 93.3 89.4 92.7 90.1 94.3 93.2 94.5 24 From others 97.9 114.1 121.0 130.8 132.1 135.7 141.8 144.6 143.4 142.9 145.7 147.5 25 Net due to related foreign offices .... 5.0 4.5 4.5 5.1 5.3 5.4 5.3 6.0 6.2 6.1 6.0 5.6 26 Other liabilities 30.1 33.1 33.6 34.5 36.3 34.6 33.6 35.3 35.0 35.4 36.0 35.2 27 Total liabilities 1,537.8 1,618.4 1,635.7 1,667.6 1,682.8 1,697.2 1,713.0 1,728.2 1,716.8 1,728.9 1,729.4 1,7433 28 Residual (assets less liabilities)7 122.6 131.6 130.0 121.9 123.9 121.7 121.1 122.2 124.1 125.7 122.9 116.4 Not seasonally adjusted Assets 29 Bank credit 1,494.9 1,565.7 1,578.1 1,595.9 1,608.2 1,628.1 1,644.2 1,661.6 1,653.8 1,663.4 1,666.0 1,668.0 30 Securities in bank credit 441.6 446.1 446.1 450.7 453.4 455.8 458.0 458.9 458.5 459.3 460.3 458.0 31 U.S. government securities 327.2 327.5 326.2 332.0 335.5 336.9 336.9 336.4 336.7 337.2 337.3 334.7 32 Other securities 114.3 118.6 119.9 118.8 117.9 119.0 121.1 122.4 121.8 122.1 123.0 123.3 33 Loans and leases in bank credit2 1,053.3 1,119.6 1,132.0 1,145.2 1,154.9 1,172.2 1,186.2 1,202.7 1,195.3 1,204.1 1,205.7 1,210.0 34 Commercial and industrial 195.7 209.6 211.9 216.1 218.8 223.9 228.1 231.1 230.3 231.3 231.4 232.0 35 Real estate 596.9 641.4 645.1 653.3 661.3 671.5 678.7 689.1 685.0 689.4 691.3 693.5 36 Revolving home equity 29.2 31.1 31.5 32.2 32.7 33.3 33.9 34.5 34.3 34.5 34.6 34.7 37 Other 567.6 610.3 613.6 621.2 628.7 638.2 644.8 654.7 650.7 654.9 656.8 658.8 38 Consumer 190.0 194.8 200.8 203.5 202.7 202.9 203.8 207.0 205.3 207.3 207.9 208.6 39 Security3 4.7 5.4 5.3 5.1 5.2 5.4 5.7 5.3 5.3 5.3 5.1 5.3 40 Other loans and leases 66.1 68.5 69.0 67.2 66.8 68.5 69.9 70.1 69.4 70.7 69.9 70.7 41 Interbank loans 48.0 57.6 56.9 52.5 55.0 56.5 61.9 52.7 54.1 53.4 49.1 53.2 42 Cash assets4 67.4 73.0 77.6 71.2 68.3 66.6 68.2 71.2 68.1 69.0 66.9 81.0 43 Other assets5 71.5 82.2 81.7 83.1 82.5 83.1 85.6 87.6 87.8 87.1 86.6 89.5 44 Total assets6 1,66Z7 1,758.7 1,7743 1,782.6 1,793.8 1,813.7 1,8393 1,852.2 1,843.0 1,852.0 1,847.5 1,870.5 Liabilities 45 Deposits 1,321.1 1,392.0 1,401.3 1,403,4 1,410.9 1,426.3 1,450.0 1,448.9 1,442.4 1,447.1 1,440.1 1,467.0 46 Transaction 270.0 276.4 282.0 277.5 273.6 276.1 280.8 276.8 271.1 272.2 272.6 292.3 47 Nontransaction 1,051.0 1,115.5 1,119.3 1,125.8 1,137.2 1,150.3 1,169.2 1,172.1 1,171.2 1,174.9 1,167.6 1,174.8 48 Large time 194.3 205.4 207.5 210.6 214.6 217.8 219.9 222.7 220.8 223.0 223.5 224.7 49 Other 856.8 910.2 911.8 915.2 922.7 932.4 949.2 949.4 950.4 951.9 944.1 950.0 50 Borrowings 182.2 201.1 207.8 218.2 217.6 222.9 227.5 238.7 235.2 239.7 240.2 241.8 51 From banks in the U.S 83.0 86.2 85.8 88.4 87.1 89.8 87.0 92.2 89.2 94.1 92.8 93.7 52 From others 99.2 114.9 122.0 129.8 130.5 133.1 140.5 146.5 146.0 145.6 147.4 148.1 53 Net due to related foreign offices .... 5.0 4.5 4.5 5.1 5.3 5.4 5.3 6.0 6.2 6.1 6.0 5.6 54 Other liabilities 30.1 33.1 33.7 34.2 36.7 34.9 34.3 35.3 35.3 35.2 35.9 35.0 55 Total liabilities 1,538.4 1,630.7 1,6473 1,660.8 1,670.4 1,689.5 1,717.1 1,728.9 1,719.0 1,728.2 1,7212 1,749.5 56 Residual (assets less liabilities)7 124.3 128.1 127.0 121.8 123.4 124.2 122.1 123.3 124.0 123.8 125.3 121.0 MEMO 57 Mortgage-backed securities9 59.8 62.4 61.9 62.9 64.1 65.2 67.6 69.2 69.4 69.4 69.2 68.8 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Financial Statistics • August 2000 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued E. Foreign-related institutions Billions of dollars Monthly averages Wednesday figures Account 1999 1999r 2000 2000 Mayr Nov. Dec. Jan.r Feb. Mar.r Apr/ May May 10 May 17 May 24 May 31 Seasonally adjusted Assets 1 Bank credit 537.6 538.5 548.3r 547.1 539.9 543.4 567.4 581.0 582.0 576.1 582.8 583.7 2 Securities in bank credit 193.8 192.3 202.3 200.4 191.2 194.2 200.6 206.7 206.3 204.3 209.7 206.1 3 U.S. government securities 86.6 78.5 80.7 80.5 75.3 77.4 78.8 78.9 77.3 77.3 82.0 79.5 4 Other securities 107.2 113.9 121.6 119.8 115.9 116.8 121.8 127.9 129.0 127.0 127.7 126.6 5 Loans and leases in bank credit2 . . . 343.8 346.2 345.9 346.8 348.7 349.2 366.8 374.3 375.7 371.8 373.1 377.6 6 Commercial and industrial 202.1 196.2 193.4 194.9 196.7 198.2 201.8 207.7 206.9 207.3 209.0 208.1 7 Real estate 19.5 17.3 17.0 17.4 17.7 18.1 18.5 18.7 18.4 18.7 18.9 19.0 8 Security3 52.6 65.4 67.1 66.6 66.6 66.3 77.6 80.6 80.8 77.9 79.0 85.7 9 Other loans and leases 69.6 67.3 68.5 67.8 67.7 66.6 69.0 67.3 69.5 67.8 66.2 64.7 10 Interbank loans 26.5 25.2 29.5 28.9 32.6 28.3 29.3 31.6 34.6 35.6 27.8 27.4 11 Cash assets4 37.5 48.8 53.5 55.4 54.5 51.8 51.8 48.1 47.9 48.7 47.9 47.0 12 Other assets5 35.4 34.8 36.6 38.6 38.2 39.1 39.7 40.8 41.0 38.8 43.1 40.8 13 Total assets6 636.7 647.1 667.6r 669.7 664.8 6623 687.9 7013 705.2 698.9 701.4 6983 Liabilities 14 Deposits 314.7 355.3 374.2 380.8 380.6 383.1 393.6 388.4 399.2 386.4 383.9 378.0 15 Transaction 10.8 10.4 10.5 10.8 11.1 11.3 11.1 11.5 11.4 11.0 11.7 11.9 16 Nontransaction 303.9 345.0 363.6 370.0 369.5 371.8 382.5 376.9 387.8 375.3 372.2 366.0 17 Borrowings 175.9 186.0 181.5 180.0 176.2 178.1 200.9 205.9 206.5 200.4 207.0 210.9 18 From banks in the U.S 21.9 26.1 24.4 19.7 18.3 19.5 20.7 17.7 18.9 16.3 14.6 20.5 19 From others 154.0 159.8 157.1 160.2 157.9 158.6 180.3 188.2 187.6 184.1 192.4 190.4 20 Net due to related foreign offices 79.6 45.0 39.1 35.6 26.8 19.9 14.9 20.1 14.4 23.0 17.0 29.9 21 Other liabilities 59.4 67.2 69.4r 70.0 71.5 69.2 70.7 77.2 77.0 79.8 80.0 72.2 22 Total liabilities 629.7 653.4 664.2r 6663 655.1 6503 680.2 691.7 697.1 689.6 687.8 690.9 23 Residual (assets less liabilities)7 7.1 -6.3 3.4 3.3 9.7 11.9 7.8 9.6 8.1 9.3 13.5 7.6 Not seasonally adjusted Assets 24 Bank credit 530.9 551.1 558.3r 554.9 544.1 542.0 561.1 572.6 574.4 566.8 571.5 577.5 25 Securities in bank credit 192.0 201.8 206. lr 204.3 192.5 191.3 197.0 203.7 204.2 200.4 205.6 204.1 26 U.S. government securities 87.6 80.0 82.1 81.1 75.4 77.2 79.5 79.9 78.7 77.8 82.5 80.4 27 Trading account 19.2 8.5 6.7 7.9 7.4 9.5 12.0 12.5 11.2 10.7 15.3 13.1 28 Investment account 68.5 71.5 75.4 73.2 68.1 67.7 67.5 67.3 67.5 67.1 67.1 67.3 29 Other securities 104.4 121.8 124.0r 123.2 117.0 114.0 117.5 123.9 125.5 122.6 123.1 123.6 30 Trading account 62.6 80.3 80.7 78.2 74.3 71.8 74.8 81.3 82.8 80.4 80.4 80.9 31 Investment account 41.8 41.5 43.2 45.0 42.8 42.3 42.7 42.6 42.7 42.2 42.7 42.7 32 Loans and leases in bank credit2 . . . 338.9 349.3 352.2 350.7 351.6 350.7 364.1 368.9 370.1 366.4 365.9 373.5 33 Commercial and industrial 198.2 199.2 197.0 196.4 199.2 199.9 200.0 203.4 202.8 203.4 203.6 204.0 34 Real estate 19.5 17.4 16.9 17.6 18.0 18.3 18.3 18.7 18.4 18.6 18.8 18.9 35 Security3 52.5 64.8 67.5 67.0 66.4 66.5 77.6 80.5 80.7 77.4 78.6 85.9 36 Other loans and leases 68.7 67.9 70.8 69.6 68.1 66.1 68.2 66.4 68.3 66.9 64.8 64.7 37 Interbank loans 26.5 25.2 29.5 28.9 32.6 28.3 29.3 31.6 34.6 35.6 27.8 27.4 38 Cash assets4 36.6 51.8 57.8 57.8 53.9 50.7 49.6 46.8 46.2 47.3 46.2 46.9 39 Other assets5 35.0 34.9 38.7 40.0 40.1 40.3 39.0 40.2 41.2 38.5 42.0 39.7 40 Total assets6 628.7 662.6 684.C 6813 6703 661.1 678.7 691.0 696.0 687.8 687.1 691.2 Liabilities 41 Deposits 315.7 358.0 382.6 387.7 387.7 389.3 394.7 389.3 400.1 385.7 385.2 379.0 42 Transaction 10.4 10.5 11.1 11.0 11.0 11.1 10.7 11.0 10.8 10.5 11.1 11.8 43 Nontransaction 305.4 347.5 371.5 376.7 376.7 378.2 384.0 378.2 389.3 375.2 374.1 367.2 44 Borrowings 175.9 186.0 181.5 180.0 176.2 178.1 200.9 205.9 206.5 200.4 207.0 210.9 45 From banks in the U.S 21.9 26.1 24.4 19.7 18.3 19.5 20.7 17.7 18.9 16.3 14.6 20.5 46 From others 154.0 159.8 157.1 160.2 157.9 158.6 180.3 188.2 187.6 184.1 192.4 190.4 47 Net due to related foreign offices .... 75.3 46.7 44.3 37.9 29.1 20.5 10.2 15.9 9.5 19.2 12.4 26.3 48 Other liabilities 58.4 68.2 71.5r 71.7 73.5 69.5 68.9 75.8 75.9 78.3 78.1 71.0 49 Total liabilities 6253 658.8 680.0" 6773 666.4 657.4 674.8 686.8 692.0 683.6 682.8 687.2 50 Residual (assets less liabilities)7 3.3 3.8 4.1 4.0 3.9 3.7 3.9 4.1 4.0 4.2 4.3 4.0 MEMO 51 Revaluation gains on off-balance-sheet items8 34.2 41.0 39.6r 39.7 40.1 39.3 39.3 44.7 45.3 46.9 44.9 41.7 52 Revaluation losses on off-balancesheet items8 33.7 39.9 38.6r 39.0 40.0 38.2 38.4 44.3 44.6 46.9 44.6 40.9 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities A21 NOTES TO TABLE 1.26 NOTE. Tables 1.26, 1.27, and 1.28 have been revised to reflect changes in the Board's H.8 group that contained the acquired bank and put into past data for the group containing the statistical release, "Assets and Liabilities of Commercial Banks in the United States." Table acquiring bank. Balance sheet data for acquired banks are obtained from Call Reports, and a 1.27, "Assets and Liabilities of Large Weekly Reporting Commercial Banks," and table 1.28, ratio procedure is used to adjust past levels. "Large Weekly Reporting U.S. Branches and Agencies of Foreign Banks," are no longer 2. Excludes federal funds sold to, reverse RPs with, and loans made to commercial banks being published in the Bulletin. Instead, abbreviated balance sheets for both large and small in the United States, all of which are included in "Interbank loans." domestically chartered banks have been included in table 1.26, parts C and D. Data are both 3. Consists of reverse RPs with brokers and dealers and loans to purchase and carry merger-adjusted and break-adjusted. In addition, data from large weekly reporting U.S. securities. branches and agencies of foreign banks have been replaced by balance sheet estimates of all 4. Includes vault cash, cash items in process of collection, balances due from depository foreign-related institutions and are included in table 1.26, part E. These data are break- institutions, and balances due from Federal Reserve Banks. adjusted. 5. Excludes the due-from position with related foreign offices, which is included in "Net The not-seasonally-adjusted data for all tables now contain additional balance sheet items, due to related foreign offices." which were available as of October 2, 1996. 6. Excludes unearned income, reserves for losses on loans and leases, and reserves for 1. Covers the following types of institutions in the fifty states and the District of transfer risk. Loans are reported gross of these items. Columbia: domestically chartered commercial banks that submit a weekly report of condition 7. This balancing item is not intended as a measure of equity capital for use in capital (large domestic); other domestically chartered commercial banks (small domestic); branches adequacy analysis. On a seasonally adjusted basis this item reflects any differences in the and agencies of foreign banks, and Edge Act and agreement corporations (foreign-related seasonal patterns estimated for total assets and total liabilities. institutions). Excludes International Banking Facilities. Data are Wednesday values or pro 8. Fair value of derivative contracts (interest rate, foreign exchange rate, other commodity and rata averages of Wednesday values. Large domestic banks constitute a universe; data for equity contracts) in a gain/loss position, as determined under FASB Interpretation No. 39. small domestic banks and foreign-related institutions are estimates based on weekly samples 9. Includes mortgage-backed securities issued by U.S. government agencies, U.S. and on quarter-end condition reports. Data are adjusted for breaks caused by reclassifications government-sponsored enterprises, and private entities. of assets and liabilities. 10. Difference between fair value and historical cost for securities classified as available- The data for large and small domestic banks presented on pp. A17-19 are adjusted to for-sale under FASB Statement No. 115. Data are reported net of tax effects. Data shown are remove the estimated effects of mergers between these two groups. The adjustment for restated to include an estimate of these tax effects. mergers changes past levels to make them comparable with current levels. Estimated 11. Mainly commercial and industrial loans but also includes an unknown amount of credit quantities of balance sheet items acquired in mergers are removed from past data for the bank extended to other than nonfinancial businesses. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic NonfinancialS tatistics • August 2000 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING A. Commercial Paper Millions of dollars, seasonally adjusted, end of period Year ending December 1999 2000 IItteemm 1995 1996 1997 1998 1999 Nov. Dec. Jan. Feb. Mar. Apr. 1 All issuers 674,904 775,371 966,699 1,163,303 1,403,023 1,369,100 1,403,023 1,407,789 1,428,605 1,449,143 1,465,697 Financial companies' 2 Dealer-placed paper, total2 275,815 361,147 513,307 614,142 786,643 802,194 786,643 821,870 835,140 849,198 860,843 3 Directly placed paper, total3 210,829 229,662 252,536 322,030 337,240 299,777 337,240 299,599 298,603 302,885 294,328 4 Nonfinancial companies4 188,260 184,563 200,857 227,132 279,140 267,128 279,140 286,319 294,863 297,060 310,526 1. Institutions engaged primarily in commercial, savings, and mortgage banking; sales, 3. As reported by financial companies that place their paper directly with investors. personal, and mortgage financing; factoring, finance leasing, and other business lending; 4. Includes public utilities and firms engaged primarily in such activities as communicainsurance underwriting; and other investment activities. tions, construction, manufacturing, mining, wholesale and retail trade, transportation, and 2. Includes all financial-company paper sold by dealers in the open market. services. B. Bankers Dollar Acceptances1 Millions of dollars, not seasonally adjusted, year ending September2 Item 1996 1997 1998 1999 1 Total amount of reporting banks' acceptances in existence 25,832 25,774 14,363 10,094 2 Amount of other banks' eligible acceptances held by reporting banks 709 736 523 461 3 Amount of own eligible acceptances held by reporting banks (included in item 1) 7,770 6,862 4,884 4,261 4 Amount of eligible acceptances representing goods stored in, or shipped between, foreign countries (included in item 1) 9,361 10,467 5,413 3,498 1. Includes eligible, dollar-denominated bankers acceptances legally payable in the United 2. Data on bankers dollar acceptances are gathered from approximately 55 institutions; States. Eligible acceptances are those that are eligible for discount by Federal Reserve Banks; includes U.S. chartered commerical banks (domestic and foreign offices), U.S. branches and that is, those acceptances that meet the criteria of Paragraph 7 of Section 13 of the Federal agencies of foreign banks, and Edge and agreement corporations. The reporting group is Reserve Act (12 U.S.C. §372). revised every year. 1.33 PRIME RATE CHARGED BY BANKS Short-Term Business Loans1 Percent per year Date of change Rate Period Av r e a r t a e g e Period Av r e a r t a e g e Period Av r e a r t a e g e 1997—Jan. 1 8.25 1997 8.44 1998—Jan 8.50 1999—Jan 7.75 Mar. 26 8.50 1998 8.35 Feb 8.50 Feb 7.75 1999 .... 8.00 Mar. 8.50 Mar 7.75 1998—Sept. 30 8.25 Apr 8.50 Apr. 7.75 Oct. 16 8.00 1997—Jan 8.25 May 8.50 May 7.75 Nov. 18 7.75 Feb 8.25 June 8.50 June 7.75 Mar 8.30 July 8.50 July 8.00 1999—July 1 8.00 Apr. 8.50 Aug 8.50 Aug 8.06 Aug. 25 8.25 May 8.50 Sept 8.49 Sept 8.25 Nov. 17 8.50 June 8.50 Oct 8.12 Oct 8.25 July 8.50 Nov 7.89 Nov 8.37 2000—Feb. 3 8.75 Aug 8.50 Dec 7.75 Dec 8.50 Mar. 22 9.00 Sept 8.50 MMaayy 1177 9.50 Oct 8.50 2000—Jan. 8.50 Nov 8.50 Feb 8.73 Dec 8.50 Mar 8.83 Apr 9.00 May 9.24 June 9.50 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 2000 2000, week ending IItteemm 11999977 11999988 11999999 Feb. Mar. Apr. May Apr. 28 May 5 May 12 May 19 May 26 MONEY MARKET INSTRUMENTS 1 Federal funds1'2'3 5.46 5.35 4.97 5.73 5.85 6.02 6.27 5.97 6.06 5.96 6.16 6.50 2 Discount window borrowing2,4 5.00 4.92 4.62 5.24 5.34 5.50 5.71 5.50 5.50 5.50 5.50 5.93 Commercial paper•3'5,6 Nonfinancial 3 1-month 5.57 5.40 5.09 5.76 5.93 6.02 6.40 6.06 6.24 6.37 6.47 6.48 4 2-month 5.57 5.38 5.14 5.81 5.96 6.06 6.47 6.11 6.33 6.45 6.52 6.54 5 3-month 5.56 5.34 5.18 5.87 6.00 6.11 6.54 6.17 6.41 6.54 6.59 6.61 Financial 6 1-month 5.59 5.42 5.11 5.78 5.94 6.03 6.41 6.05 6.25 6.39 6.49 6.49 7 2-month 5.59 5.40 5.16 5.84 5.98 6.07 6.50 6.13 6.36 6.47 6.55 6.57 8 3-month 5.60 5.37 5.22 5.90 6.03 6.15 6.57 6.23 6.43 6.57 6.63 6.64 Commercial paper (historical) 3,5,7 9 1-month 5.54 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 10 3-month 5.58 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 11 6-month 5.62 n.a. 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 5.44 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 13 3-month 5.48 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 14 6-month 5.48 n.a. 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 5.54 5.39 5.24 5.94 6.06 6.19 6.60 6.23 6.39 6.61 6.67 6.67 16 6-month 5.57 5.30 5.30 6.11 6.22 6.32 6.76 6.37 6.56 6.75 6.81 6.86 Certificates of deposit, secondary market3,10 17 1-month 5.54 5.49 5.19 5.83 6.01 6.10 6.49 6.17 6.35 6.48 6.55 6.55 18 3-month 5.62 5.47 5.33 6.01 6.14 6.28 6.71 6.36 6.57 6.69 6.75 6.77 19 6-month 5.73 5.44 5.46 6.26 6.36 6.50 6.94 6.58 6.79 6.90 7.00 7.01 20 Eurodollar deposits, 3-month3,11 5.61 5.45 5.31 6.02 6.13 6.25 6.70 6.33 6.56 6.67 6.74 6.78 U.S. Treasury bills Secondary market3,5 71 3-month 5.06 4.78 4.64 5.55 5.69 5.66 5.79 5.62 5.74 5.94 5.86 5.73 77 6-month 5.18 4.83 4.75 5.72 5.85 5.81 6.10 5.79 5.96 6.15 6.17 6.11 23 1-year 5.32 4.80 4.81 5.84 5.86 5.80 5.94 5.82 5.89 6.01 6.01 5.89 Auction high3,5,12 74 3-month 5.07 4.81 4.66 5.57 5.72 5.67 5.92 5.62 5.78 6.02 6.07 5.81 75 6-month 5.18 4.85 4.76 5.75 5.85 5.82 6.12 5.75 5.94 6.15 6.25 6.13 26 1-year 5.36 4.85 4.78 5.91 5.84 n.a. n.a. n.a. n.a. n.a. n.a. n.a. U.S. TREASURY NOTES AND BONDS Constant maturities13 77 1-year 5.63 5.05 5.08 6.22 6.22 6.15 6.33 6.19 6.24 6.38 6.40 6.28 78 2-year 5.99 5.13 5.43 6.61 6.53 6.40 6.81 6.53 6.76 6.86 6.89 6.77 79 3-year 6.10 5.14 5.49 6.65 6.53 6.36 6.77 6.49 6.72 6.82 6.84 6.72 30 5-year 6.22 5.15 5.55 6.68 6.50 6.26 6.69 6.42 6.66 6.74 6.74 6.65 31 7-year 6.33 5.28 5.79 6.72 6.51 6.27 6.69 6.41 6.65 6.75 6.75 6.66 37 10-year 6.35 5.26 5.65 6.52 6.26 5.99 6.44 6.15 6.40 6.50 6.49 6.42 33 20-year 6.69 5.72 6.20 6.54 6.38 6.18 6.55 6.28 6.48 6.61 6.59 6.54 34 30-year 6.61 5.58 5.87 6.23 6.05 5.85 6.15 5.95 6.10 6.20 6.19 6.14 Composite 35 More than 10 years (long-term) 6.67 5.69 6.14 6.49 6.33 6.14 6.49 6.24 6.42 6.55 66..5533 6.48 STATE AND LOCAL NOTES AND BONDS Moody's series14 36 5.32 4.93 5.28 5.88 5.68 5.60 5.87 5.71 5.79 5.92 5.89 5.89 37 Baa 5.50 5.14 5.70 6.35 6.19 6.18 6.53 6.32 6.42 6.56 6.58 6.55 38 Bond Buyer series15 5.52 5.09 5.43 6.00 5.83 5.75 6.00 5.82 5.93 6.02 6.05 6.01 CORPORATE BONDS 39 Seasoned issues, all industries16 7.54 6.87 7.45 7.96 7.99 7.98 8.41 8.07 8.26 8.45 8.50 8.43 Rating group 40 7.27 6.53 7.05 7.68 7.68 7.64 7.99 7.70 7.87 8.04 8.07 8.00 41 Aa 7.48 6.80 7.36 7.82 7.83 7.82 8.24 7.91 8.09 8.28 8.33 8.26 47 A 7.54 6.93 7.53 8.02 8.07 8.07 8.49 8.16 8.35 8.54 8.59 8.52 43 Baa 7.87 7.22 7.88 8.29 8.37 8.40 8.90 8.51 8.74 8.93 9.02 8.95 MEMO Dividend-price ratio17 44 Common stocks 1.77 1.49 1.25 1.21 1.18 1.14 1.17 1.14 1.17 1.20 1.14 1.18 NOTE. Some of the data in this table also appear in the Board's H.15 (519) weekly and 9. Representative closing yields for acceptances of the highest-rated money center banks. G.13 (415) monthly statistical releases. For ordering address, see inside front cover. 10. An average of dealer offering rates on nationally traded certificates of deposit. 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. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 Domestic NonfinancialS tatistics • August 2000 1.36 STOCK MARKET Selected Statistics 1999 2000 IInnddiiccaattoorr 11999977 11999999 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Prices and trading volume (averages of daily figures) Common stock prices (indexes) 1 New York Stock Exchange (Dec. 31, 1965 = 50) 456.99 550.65 619.52 607.87 599.04 634.22 638.17 634.07 606.03 622.28 646.82 640.07 2 Industrial 574.97 684.35 775.29 769.47 753.94 791.41 808.28 814.73 767.08 790.35 822.76 814.75 3 Transportation 415.08 468.61 491.62 462.33 450.13 474.78 461.04 456.35 398.69 384.39 406.14 411.50 4 Utility 143.87 190.52 284.82 237.71 285.16 502.58 511.78 485.82 482.30 509.59 502.78 487.17 5 Finance 424.84 516.65 530.97 493.37 490.92 539.20 510.99 495.23 471.65 491.29 524.05 523.22 6 Standard & Poor's Corporation (1941-43 = 10)' 873.43 1,085.50 1,327.33 1,318.17 1,300.01 1,390.99 1,428.68 1,425.59 1,388.88 1,442.21 1,461.36 1,418.48 7 American Stock Exchange (Aug. 31, 1973 = 50)2 628.34 682.69 770.90 788.74 786.96 819.60 838.24 878.73 910.00 1,014.03 918.77 917.76 Volume of trading (thousands of shares) 8 New York Stock Exchange 523,254 666,534 799,554 772,627 882,422 866,281 884,141 1,058,021 1,032,791 1,124,097 1,047,960 893,896 9 American Stock Exchange 24,390 28,870 32,629 32,540 35,762 33,330 41,076 47,530 51,134 59,449 63,054 44,146 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers' 126,090 140,980 228,530 179,316 182,272 206,280 228,530 243,490 265,210 278,530 251,700 240,660 Free credit balances at brokers4 11 Margin accounts5 31,410 40,250 55,130 47,125 51,040 49,480 55,130 57,800 56,470 65,020 65,930 66,170 12 Cash accounts 52,160 62,450 79,070 62,810 61,085 68,200 79,070 75,760 79,700 85,530 76,190 73,500 Margin requirements (percent of market value and effective date)6 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. In July 1976 a financial group, composed of banks and insurance companies, was added 6. Margin requirements, stated in regulations adopted by the Board of Governors pursuant to the group of stocks on which the index is based. The index is now based on 400 industrial to the Securities Exchange Act of 1934, limit the amount of credit that can be used to stocks (formerly 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and purchase and carry "margin securities" (as defined in the regulations) when such credit is 40 financial. collateralized by securities. Margin requirements on securities are the difference between the 2. On July 5, 1983, the American Stock Exchange rebased its index, effectively cutting market value (100 percent) and the maximum loan value of collateral as prescribed by the previous readings in half. Board. Regulation T was adopted effective Oct. 15, 1934; Regulation U, effective May 1, 3. Since July 1983, under the revised Regulation T, margin credit at broker-dealers has 1936; Regulation G, effective Mar. 11, 1968; and Regulation X, effective Nov. 1, 1971. included credit extended against stocks, convertible bonds, stocks acquired through the On Jan. 1, 1977, the Board of Governors for the first time established in Regulation T the exercise of subscription rights, corporate bonds, and government securities. Separate report- initial margin required for writing options on securities, setting it at 30 percent of the current ing of data for margin stocks, convertible bonds, and subscription issues was discontinued in market value of the stock underlying the option. On Sept. 30, 1985, the Board changed the April 1984. required initial margin, allowing it to be the same as the option maintenance margin required 4. Free credit balances are amounts in accounts with no unfulfilled commitments to by the appropriate exchange or self-regulatory organization; such maintenance margin rules brokers and are subject to withdrawal by customers on demand. must be approved by the Securities and Exchange Commission. 5. Series initiated in June 1984. 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 1999 2000 11999977 11999988 11999999 Dec. Jan. Feb. Mar. Apr. May U.S. budget1 1 Receipts, total 1,579,292 1,721,798 1,827,454 201,196 189,478 108,675 135,582 295,148 146,002 2 On-budget 1,187,302 1,305,999 1,382,986 162,772 143,838 71,090 94,586 244,662 107,469 3 Off-budget 391,990 415,799 444,468 38,424 45,640 37,585 40,996 50,486 38,533 4 Outlays, total 1,601,235 1,652,552 1,702,940 168,114 127,326 150,409 170,962 135,651 149,612 5 On-budget 1,290,609 1,335,948 1,382,262 165,504 97,451 118,340 137,864 105,742 114,829 6 Off-budget 310,626 316,604 320,778 2,611 29,875 32,069 33,099 29,909 34,783 7 Surplus or deficit (—), total -21,943 69,246 124,414 33,081 62,152 -41,734 -35,380 159,497 -3,611 8 On-budget -103,307 -29,949 724 -2,732 46,387 -47,250 -43,278 138,920 -7,360 9 Off-budget 81,364 99,195 123,690 35,813 15,765 5,516 7,897 20,577 3,750 Source of financing (total) 10 Borrowing from the public 38,171 -51,211 -88,304 35,749 -83,985 17,131 39,746 -112,667 -53,755 11 Operating cash (decrease, or increase (-)) 604 4,743 -17,580 -77,248 20,592 40,773 -22,808 -47,787 69,470 12 Other2 -16,832 -22,778 -18,530 8,418 1,241 -16,170 18,442 957 -12,104 MEMO 13 Treasury operating balance (level, end of period) 43,621 38,878 56,458 83,327 62,735 21,962 44,770 92,557 23,087 14 Federal Reserve Banks 7,692 4,952 6,641 28,402 6,119 5,004 4,357 15,868 5,445 15 Tax and loan accounts 35,930 33,926 49,817 54,925 56,615 16,958 40,413 76,689 17,642 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: US. Department of the Treasury, Monthly Treasury Statement of International Monetary Fund (IMF); loans to the IMF; other cash and monetary assets; Receipts and Outlays of the U.S. Government; fiscal year totals: U.S. Office of Management accrued interest payable to the public; allocations of SDRs; deposit funds; miscellaneous and Budget, Budget of the U.S. Government. liability (including checks outstanding) and asset accounts; seigniorage; increment on gold; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic NonfinancialS tatistics • August 2000 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS1 Millions of dollars Fiscal year Calendar year SSSooouuurrrccceee ooorrr tttyyypppeee 1998 1999 2000 11999988 11999999 HI H2 HI H2 Mar. Apr. May RECEIPTS 1 All sources 1,721,798 1,827,454 922,630 825,057 966,045 892,266 135,582 295,148 146,002 2 Individual income taxes, net 828,586 879,480 447,514 392,332 481,907r 425,451 44,789 184,237 63,687 3 Withheld 646,483 693,940 316,309 339,144 351,068 372,012 75,161 56,113 65,946 4 Nonwithheld 281,527 308,185 219,136 65,204 240,278 68,302 7,855 155,452 23,349 5 Refunds 99,476 122,706 87,989 12,032 109,467 14,841 38,239 2277,,334433 2255,,661199 Corporation income taxes 6 Gross receipts 213,008 216,324 109,353 104,163 106,861 110,111 27,546 30,256 7,427 7 Refunds 24,593 31,645 14,220 14,250 17,092 13,996 3,273 2,562 1,654 8 Social insurance taxes, and contributions, net . . . 571,831 611,833 312,713 268,466 324,831 292,551 53,329 68,022 60,394 y Employment taxes and contributions2 540,014 580,880 293,520 256,142 306,235 280,059 52,565 65,095 49,212 10 Unemployment insurance 27,484 26,480 17,080 10,121 16,378 10,173 317 2,557 10,778 11 Other net receipts' 4,333 4,473 2,112 2,202 2,216 2,319 447 370 403 12 Excise taxes 57,673 70,414 29,922 33,366 31,015 34,262 5,722 5,934 5,391 13 Customs deposits 18,297 18,336 8,546 9,838 8,440 10,287 1,681 1,503 1,598 14 Estate and gift taxes 24,076 27,782 12,971 12,359 14,915 14,001 2,379 4,243 2,480 15 Miscellaneous receipts4 32,658 34,929 15,829 18,735 15,140 19,569 3,412 3,515 6,678 OUTLAYS 16 All types 1,652,552 1,702,940 815,884 877,414 817,227 882,795 170,962 135,651 149,612 17 National defense 268,456 274,873 129,351 140,196 134,414 149,820 29 Ml' 21,305 23,640 18 International affairs 13,109 15,243 4,610 8,297 6,879 8,530 859 2,190 764 19 General science, space, and technology 18,219 18,125 9,426 10,142 9,319 10,089 1,725 1,530 1,686 20 Energy 1,270 912 957 699 797 -90 -737 135 -167 21 Natural resources and environment 22,396 23,970 10,051 12,671 10,351 12,100 1,872 1,711 1,839 22 Agriculture 12,206 23,011 2,387 16,757 9,803 20,887 1,588 1,196 615 23 Commerce and housing credit 1,014 2,649 -2,483 4,046 -1,629 7,353 699 -1 1,063 24 Transportation 40,332 42,531 16,196 20,836 17,082 22,972 3,739 3,178 3,892 25 Community and regional development 9.720 11,870 4,863 6,972 5,368 7,135 11,,222211 11,,556611 1,047 26 Education, training, employment, and social services 54,919 56,402 25,928 27,762 29,003 27,532 6,656 4,496 5,143 27 Health 131,440 141,079 65,053 67,838 69,320 74,490 14,333 12,421 12,532 28 Social security and Medicare 572.047 580,488 286,305 316,809 261,146 295,030 54,344 46,309 52,741 29 Income security 233,202 237,707 125,196 109,481 126,552 113,504 29,211 17,801 19,342 30 Veterans benefits and services 41,781 43,212 19,615 22,750 20,105 23,412 5,957R 2,189 4,028 31 Administration of justice 22,832 25,924 11,287 12,041 13,149 13,459 2,647 2,066 2,616 32 General government 13,444 15,771 6,139 9,136 6,641 7,006 1,942 1,010 1,201 33 Net interest5 243,359 229,735 122,345 116,954 116,655 112,420 19,002 19,403 21,325 34 Undistributed offsetting receipts6 -47,194 -40,445 -21,340 -25,793 -17,724 -22,850 -3,270 -2,849 -3,697 1. Functional details do not sum to total outlays for calendar year data because revisions to 4. Deposits of earnings by Federal Reserve Banks and other miscellaneous receipts. monthly totals have not been distributed among functions. Fiscal year total for receipts and 5. Includes interest received by trust funds. outlays do not correspond to calendar year data because revisions from the Budget have not 6. Rents and royalties for the outer continental shelf, U.S. government contributions for been fully distributed across months. employee retirement, and certain asset sales. 2. Old-age, disability, and hospital insurance, and railroad retirement accounts. SOURCE. Fiscal year totals: U.S. Office of Management and Budget, Budget of the U.S. 3. Federal employee retirement contributions and civil service retirement and Government, Fiscal Year 2001; 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 1998 1999 2000 IItteemm Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 1 Federal debt outstanding 5,573 5,578 5,556 5,643 5,681 5,668 5,685 5,805 5,802 2 Public debt securities 5,542 5,548 5,526 5,614 5,652 5,639 5,656 5,776 5,773 3 Held by public 3,872 3,790 3,761 3,787 3,795 3,685 3,667 3,716 3,688 4 Held by agencies 1,670 1,758 1,766 1,827 1,857 1,954 1,989 2,061 2,085 5 Agency securities 31 30 29 29 29 29 29 29 28 6 Held by public 26 26 26 29 28 28 28 28 28 7 Held by agencies 5 4 4 1 1 1 1 1 0 8 Debt subject to statutory limit 5,457 5,460 5,440 5,530 5,566 5,552 5,568 5,687 5,687 9 Public debt securities 5,456 5,460 5,439 5,530 5,566 5,552 5,568 5,687 5,686 10 Other debt1 0 0 0 0 0 0 0 0 0 MEMO 11 Statutory debt limit 5,950 5,950 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 1999 2000 TTyyppee aanndd hhoollddeerr 11999966 11999977 11999988 11999999 Q2 Q3 Q4 Q1 1 Total gross public debt 5,323.2 5,502.4 5,614.2 5,776.1 5,638.8 5,656.3 5,776.1 5,773.4 By type 2 Interest-bearing 5,317.2 5,494.9 5,605.4 5,766.1 5,629.5 5,647.2 5,766.1 5,763.8 3 Marketable 3,459.7 3,456.8 3,355.5 3,281.0 3,248.5 3,233.0 3,281.0 3,261.2 4 Bills 777.4 715.4 691.0 737.1 647.8 653.2 737.1 753.3 5 Notes 2,112.3 2,106.1 1,960.7 1,784.5 1,868.5 1,828.8 1,784.5 1,732.6 6 Bonds 555.0 587.3 621.2 643.7 632.5 643.7 643.7 653.0 7 Inflation-indexed notes and bonds1 n.a. 33.0 50.6 68.2 59.9 67.6 68.2 74.7 8 Nonmarketable2 1,857.5 2,038.1 2,249.9 2,485.1 2,381.0 2,414.2 2,485.1 2,502.6 9 State and local government series 101.3 124.1 165.3 165.7 172.6 168.1 165.7 161.9 10 Foreign issues3 37.4 36.2 34.3 31.3 30.9 31.0 31.3 28.8 11 Government 47.4 36.2 34.3 31.3 30.9 31.0 31.3 28.8 12 Public .0 .0 .0 .0 .0 .0 .0 .0 13 Savings bonds and notes 182.4 181.2 180.3 179.4 180.0 180.0 179.4 178.6 14 Government account series4 1,505.9 1,666.7 1,840.0 2,078.7 1,967.5 2,005.2 2,078.7 2,103.3 15 Non-interest-bearing 6.0 7.5 8.8 10.0 9.3 9.0 10.0 9.60 By holder5 16 U.S. Treasury and other federal agencies and trust funds 1,497.2 1,655.7 1,826.8 2,060.6 1,953.6 1,989.1 2,060.6 2,085.4 17 Federal Reserve Banks 410.9 451.9 471.7 477.7 493.8 496.5 477.7 501.7 18 Private investors 3,431.2 3,414.6 3,334.0 3,233.9 3,199.2r 3,175.4r 3,233.9 3,182.8 19 Depository institutions 296.6 300.3 237.3 245.1 240.6 239.3r 245.1 n.a. 20 Mutual funds 315.8 321.5 343.2 350.9 335.4 336.9r 350.9 n.a. 21 Insurance companies 214.1 176.6 144.5 136.2 142.5 138.6r 136.2 n.a. 22 State and local treasuries6 257.0 239.3 269.3 266.8 279.1 271.6 266.8 n.a. Individuals 23 Savings bonds 187.0 186.5 186.7 186.5 186.6 186.2r 186.5 185.3 24 Pension funds 392.7 421.0 434.7 445.1 449.1 444.8r 445.1 n.a. 25 Private 189.2 204.1 218.1 232.8 226.6 228.3 232.8 n.a. 26 State and Local 203.5 216.9 216.6 212.3 222.5 216.5r 212.3 n.a. 27 Foreign and international7 1,102.1 1,241.6 1,278.7 1,268.8 1,258.6 1,281.3 1,268.8 1,274.0 28 Other miscellaneous investors6'8 665.9 527.9 439.6 334.5 307.3r 276.7r 334.5 n.a. 1. The U.S. Treasury first issued inflation-indexed securities during the first quarter of 1997. 7. Includes nonmarketable foreign series treasury securities and treasury deposit funds. 2. Includes (not shown separately) securities issued to the Rural Electrification Administra- Excludes treasury securities held under repurchase agreements in custody accounts at the tion, depository bonds, retirement plan bonds, and individual retirement bonds. Federal Reserve Bank of New York. 3. Nonmarketable series denominated in dollars, and series denominated in foreign cur- 8. Includes individuals, government-sponsored enterprises, brokers and dealers, bank rency held by foreigners. personal trusts and estates, corporate and noncorporate businesses, and other investors. 4. Held almost entirely by U.S. Treasury and other federal agencies and trust funds. SOURCE. U.S. Treasury Department, data by type of security, Monthly Statement of the 5. Data for Federal Reserve Banks and U.S. government agencies and trust funds are actual Public Debt of the United States; data by holder, Treasury Bulletin. holdings; data for other groups are Treasury estimates. 6. In March 1996, in a redefinition of series, fully defeased debt backed by nonmarketable federal securities was removed from "Other miscellaneous investors" and added to "State and local treasuries." The data shown here have been revised accordingly. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic NonfinancialS tatistics • August 2000 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions1 Millions of dollars, daily averages 2000 2000, week ending IItteemm Feb. Mar. Apr. Apr. 5 Apr. 12 Apr. 19 Apr. 26 May 3 May 10 May 17 May 24 May 31 OUTRIGHT TRANSACTIONS2 By type of security 1 U.S. Treasury bills 31,065 33,838 27,907 34,575 26,377 27,818 26,445 24,872 19,335 22,827 21,223 29,554 Coupon securities, by maturity 2 Five years or less 111166,,661155 102,265 114,115 133,292 110,349 118,971 91,814 127,230 113,583 114,737 125,687 100,865 3 More than five years 87,516 65,123 69,668 81,807 83,550 71,056 46,844 58,932 69,457 60,045 50,707 51,980 4 Inflation-indexed 937 1,022 1,201 1,527 833 1,331 1,043 1,623 915 600 656 670 Federal agency 5 Discount notes 5533,,667799 56,650 58,111 54,853 49,733 58,531 65,757 67,597 63,775 79,742 59,625 60,053 Coupon securities, by maturity 6 One year or less 999999 11,,331100 11,,222200 1,530 1,112 1,221 1,149 1,166 1,039 1,531 933 502 7 More than one year, but less than or equal to five years 8,722 7,906 9,675 10,884 10,409 8,343 8,950 10,802 7,107 7,638 10,215 8,139 8 More than five years 7,723 8,816 8,295 11,601 10,955 7,192 4,031 7,971 6,275 8,649 6,827 4,907 9 Mortgage-backed 67,758 59,390 72,104 60,795 119,830 55,177 42,864 70,554 89,251 68,603 41,711 36,075 By type of counterparty With interdealer broker 10 U.S. Treasury 122,906 101,083 108,736 125,501 118,917 113,062 81,173 102,449 104,819 100,706 97,750 88,357 11 Federal agency 7,958 8,127 9,029 10,661 10,176 9,524 6,385 7,766 8,057 8,949 8,495 6,338 12 Mortgage-backed 27,071 22,089 26,543 23,420 40,455 19,714 20,368 25,873 31,154 27,020 19,995 14,940 With other 13 U.S. Treasury 113,227 101,164 104,155 125,700 102,191 106,115 84,973 110,209 98,472 97,503 100,523 94,713 14 Federal agency 63,165 66,554 68,271 68,207 62,034 65,762 73,502 79,770 70,139 88,611 69,105 67,262 15 Mortgage-backed 40,687 37,301 45,561 37,375 79,375 35,463 22,495 44,681 58,096 41,583 21,716 21,135 FUTURES TRANSACTIONS3 By type of deliverable security 16 U.S. Treasury bills 0 0 0 0 0 0 0 0 0 n.a. 0 n.a. Coupon securities, by maturity 17 Five years or less 6,293 4,022 2,667 3,192 3,248 2,276 1,426 3,885 3,650 3,836 6,878 5,916 18 More than five years 21,702 15,073 15,366 17,244 18,521 15,026 11,143 13,956 17,140 13,349 12,706 16,539 19 Inflation-indexed 0 0 0 0 0 0 0 0 0 0 00 00 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 n.a. 0 0 0 0 0 0 23 More than five years 0 19 56 39 43 79 n.a. 55 43 67 160 158 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 2266 Five years or less 1,397 1,490 1,608 2,206 1,538 1,073 1,337 2,765 1,872 2,043 2,264 1,021 27 More than five years 5,601 3,565 4,256 4,571 4,195 3,835 4,275 4,951 5,405 3,977 3,808 4,329 28 Inflation-indexed 0 0 0 0 0 0 0 0 0 0 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 n.a. n.a. n.a. n.a. 0 n.a. n.a. n.a. n.a. 32 More than five years 0 0 0 n.a. n.a. n.a. 0 n.a. n.a. 0 n.a. n.a. 33 Mortgage-backed 776 856 686 1,141 731 511 386 927 1,058 1,205 1,188 921 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 corpus. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A29 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Millions of dollars 2000 2000, week ending Feb. Mar. Apr. Apr. 5 Apr. 12 Apr. 19 Apr. 26 May 3 May 10 May 17 May 24 Positions2 NET OUTRIGHT POSITIONS3 By type of security 1 U.S. Treasury bills 2,930 8,065 6,568 16,864 16,392 6,150 -2,464 -6,953 -4,737 -8,719 -5,988 Coupon securities, by maturity 2 Five years or less -37,515 -28,507 -28,803 -20,890 -27,548 -30,888 -27,331 -39,815 -40,347 -51,585 -42,019 3 More than five years -22,779 -20,433 -18,591 -21,368 -18,772 -17,765 -15,731 -21,250 -23,905 -24,238 -21,221 4 Inflation-indexed 3,197 2,612 2,192 2,334 2,451 2,208 1,979 1,908 1,821 2,141 1,837 Federal agency 5 Discount notes 37,602 32,628 28,299 29,022 29,220 22,763 31,357 30,118 24,144 27,046 26,524 Coupon securities, by maturity 6 One year or less 9,710 12,553 15,284 14,631 15,933 15,774 14,911 14,759 14,726 14,390 10,273 7 More than one year, but less than or equal to five years 5,852 3,418 894 679 -583 972 1,497 2,555 106 1,630 7,487 8 More than five years 4,106 2,753 3,316 3,010 2,659 3,710 3,802 3,306 2,763 1,481 2,096 9 Mortgage-backed 15,723 20,966 27,631 25,867 26,812 26,682 29,546 29,580 25,367 23,584 12,753 NET FUTURES POSITIONS4 By type of deliverable security 10 U.S. Treasury bills n.a. 0 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 11 Five years or less 14,668 13,382 13,480 11,796 12,895 13,071 13,724 16,900 18,598 19,996 16,145 12 More than five years -2,067 -7,040 -2,131 -5,602 -1,525 -1,769 -2,107 470 1,024 3,293 2,537 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 n.a. n.a. 0 n.a. 0 0 0 0 17 More than five years 0 -11 -40 -22 17 -105 -59 -13 -145 -123 -125 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 -2,684 -101 74 -184 311 -208 172 302 818 -395 205 21 More than five years 2,770 5,265 6,471 7,261 6,161 6,728 7,002 4,645 3,685 4,163 549 22 Inflation-indexed 0 0 0 0 0 0 0 0 0 0 0 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 n.a. n.a. 139 n.a. n.a. n.a. 80 242 273 374 n.a. 26 More than five years n.a. 91 70 102 88 29 n.a. n.a. 184 182 778 27 Mortgage-backed 2,728 1,261 52 324 -769 -316 455 1,091 1,299 1,102 655 Financing5 Reverse repurchase agreements 28 Overnight and continuing 301,114 289,942 298,607 299,001 283,522 312,370 292,747 310,680 297,306 328,312 295,751 29 Term 711,031 818,513 792,459 729,113 775,840 796,484 820,733 844,198 884,511 718,663 768,550 Securities borrowed 30 Overnight and continuing 261,280 261,482 280,029 271,340 268,638 278,064 289,386 297,888 297,278 316,172 307,579 31 Term 98,511 103,451 112,178 105,653 111,331 111,587 116,685 114,967 114,545 101,483 103,676 Securities received as pledge 32 Overnight and continuing 1,632 2,008 1,890 1,890 n.a. n.a. n.a. n.a. 1,686 1,810 n.a. 33 Term n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Repurchase agreements 34 Overnight and continuing 729,491 715,903 732,319 736,338 728,373 736,302 728,756 733,463 716,480 762,432 711,311 35 Term 580,824 695,275 682,363 613,835 660,868 693,987 713,667 730,516 766,886 592,722 655,885 Securities loaned 36 Overnight and continuing 10,660 8,550 7,750 7,554 7,456 8,093 7,796 7,830 7,676 8,546 8,773 37 Term 6,087 7,671 7,738 6,762 6,300 7,263 9,595 9,053 9,923 8,810 8,977 Securities pledged 38 Overnight and continuing 51,230 58,304 61,754 62,868 58,139 61,451 65,493 60,672 59,059 63,031 60,489 39 Term 7,232 6,848 7,132 7,317 7,269 7,019 7,118 6,880 7,040 4,846 5,138 Collateralized loans 40 Total 16,629 15,816 22,002 23,853 24,565 23,185 19,188 18,054 21,471 8,955 18,053 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

A30 Domestic NonfinancialS tatistics • August 2000 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1999 2000 AAggeennccyy 11999966 11999977 11999988 11999999 Nov. Dec. Jan. Feb. Mar. 1 Federal and federally sponsored agencies 925,823 1,022,609 1,296,477 1,616,492 n.a. 1,616,492 1,620,814 1,635,828 1,644,276 2 Federal agencies 29,380 27,792 26,502 26,376 28,218 26,376 26,277 26,168 26,231 3 Defense Department1 6 6 6 6 6 6 6 6 6 4 Export-Import Bank2'3 1,447 552 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5 Federal Housing Administration4 84 102 205 126 126 126 126 155 168 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 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 8 Tennessee Valley Authority 27,853 27,786 26,496 26,370 28,212 26,370 26,271 26,162 26,225 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 896,443 994,817 1,269,975 1,590,116 n.a. 1,590,116 1,594,537 1,609,660 1,618,045 11 Federal Home Loan Banks 263,404 313,919 382,131 529,005 502,842 529,005 522,692 527,835 535,284 12 Federal Home Loan Mortgage Corporation 156,980 169,200 287,396 360,711 357,317 360,711 372,586 380,660 378,006 13 Federal National Mortgage Association 331,270 369,774 460,291 547,619 540,364 547,619 544,360 547,100 557,543 14 Farm Credit Banks8 60,053 63,517 63,488 68,883 67,654 68,883 69,082 69,147 67,154 15 Student Loan Marketing Association9 44,763 37,717 35,399 41,988 44,402 41,988 43,762 42,723 38,089 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 Corporation11 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 58,172 49,090 44,129 42,152 42,843 42,152 40,753 40,182 39,306 Lending to federal and federally sponsored agencies 2 2 0 1 E Po x s p t o a r l t- S I e m r p v o ic r e t 6 Bank3 n 1 . , a 4 . 3 1 n.a. 5 52 F 1 F 1 F 1 F 1 F 1 F 1 F 1 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 3 4 T U e n n it n e e d s s S e t e a t V es a l R le a y i l A w u a t y h o A r s it s y o ciation6 n n . . a a . . n n . . a a . . •1 T 1 T I i 1 i I I T 1 Other lendingu 25 Farmers Home Administration 18,325 13,530 9,500 6,665 6,775 6,665 6,565 6,515 6,350 26 Rural Electrification Administration 16,702 14,898 14,091 14,085 14,025 14,085 13,958 14,016 13,152 27 Other 21,714 20,110 20,538 21,402 22,043 21,402 20,230 19,651 19,804 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 1999 2000 TTyyppee ooff ii oo ss rr ss uu uu ee ss ee oo rr iissssuueerr,, 11999977 11999988 11999999 Oct. Nov. Dec. Jan. Feb. Mar. Apr. May 1 All issues, new and refunding1 214,694 262,342 215,427 17,497 17,428 14,751 8,969 10,905 16,780 14,233 14,136 By type of issue 2 General obligation 69,934 87,015 73,308 4,183 4,996 3,715 3,454 4,473 5,008 4,598 6,051 3 Revenue 134,989 175,327 142,120 13,314 12,433 11,035 5,516 6,433 11,773 9,635 8,086 By type of issuer 4 State 18,237 23,506 16,376 1,753 929 834 863 1,730 1,570 1,371 1,102 5 Special district or statutory authority2 134,919 178,421 152,418 12,186 12,613 10,640 5,784 7,414 11,098 10,229 9,639 6 Municipality, county, or township 70,558 60,173 46,634 3,557 3,886 3,277 2,322 1,761 4,112 2,633 3,396 7 Issues for new capital 135,519 160,568 161,065 14,908 14,084 11,475 8,009 9,382 13,508 12,029 12,481 By use of proceeds 8 Education 31,860 36,904 36,563 2,049 2,732 3,095 2,189 2,548 3,436 2,484 3,662 9 Transportation 13,951 19,926 17,394 1,674 892 1,201 1,064 723 2,723 768 1,778 10 Utilities and conservation 12,219 21,037 15,098 1,176 1,893 1,008 588 115 1,086 729 537 11 Social welfare 27,794 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 12 Industrial aid 6,667 8,594 9,099 726 668 707 89 647 747 762 585 13 Other purposes 35,095 42,450 47,896 4,509 5,213 3,141 2,885 2,804 2,426 3,903 3,557 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 1999 2000 TTyyppee ooff iissssuuee,, ooffffeerriinngg,, 11999977 11999988 11999999 oorr iissssuueerr Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 All issues1 929,256 1,128,491 1,072,866 82,414 58,613 85,016 50,805 55,714 85,679 113,093r 61,793 2 Bonds2 811,376 1,001,736 941,298 75,807 47,103 61,033 42,477 44,220 63,391 96,148 40,941 By type of offering 3 Sold in the United States 708,188 923,771 818,683 65,679 37,721 53,908 36,488 30,784 56,727 87,603 36,724 4 Sold abroad 103,188 77,965 122,615 10,128 9,382 7,125 5,989 13,436 6,664 8,545 4,217 MEMO 5 Private placements, domestic n.a. n.a. n.a. 1,640 1,632 1,237 3,241 967 65 n.a. n.a. By industry group 6 Nonfinancial 222,603 307,935 293,963 20,655 13,990 24,283 14,614 14,599 26,598 28,086 8,060 7 Financial 588,773 693,801 647,335 55,151 33,112 36,750 27,863 29,620 36,792 68,062 32,881 8 Stocks3 117,880 126,755 131,568 6,607 11,510 23,983 8,328 11,494 22,288 16,945r 20,852 By type of offering 9 Public 117,880 126,755 131,568 6,607 11,510 23,983 8,328 11,494 22,288 16,945r 20,852 10 Private placement4 55,450 78,850 86,300 7,192 7,192 7,192 7,192 n.a. n.a. n.a. n.a. By industry group 11 Nonfinancial 60,386 74,113 110,284 5,647 10,961 22,611 7,450 9,247 21,796 15,679r 16,593 f2 Financial 57,494 52,642 21,284 960 549 1,372 878 2,247 492 1,266 4,259 1. Figures represent gross proceeds of issues maturing in more than one year; they are the 2. Monthly data include 144(a) offerings. principal amount or number of units calculated by multiplying by the offering price. Figures 3. Monthly data cover only public offerings. exclude secondary offerings, employee stock plans, investment companies other than closed- 4. Data are not available. end, intracorporate transactions, and Yankee bonds. Stock data include ownership securities SOURCE. Securities Data Company and the Board of Governors of the Federal Reserve issued by limited partnerships. System. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A32 Domestic NonfinancialS tatistics • August 2000 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Assets1 Millions of dollars 1999 2000 IItteemm 11999988 11999999 Oct. Nov. Dec. Jan. Feb. Mar. Apr/ May 1 Sales of own shares2 1,461,430 1,791,894 140,738 155,490 185,898 226,251 237,861 269,118 202,248 172,628 2 Redemptions of own shares 1,217,022 1,621,987 124,052 143,688 178,855 204,380 197,423 243,194 176,671 163,034 3 Net sales3 244,408 169,906 16,686 11,801 7,042 21,871 40,438 25,924 25,577 9,595 4 Assets4 4,173,531 5,233,191 4,705,746 4,874,733 5,233,191 5,114,482 5,375,874 5,606,254 5,391,187 5,232,267 5 Cash5 191,393 219,189 225,762 214,751 219,189 222,729 231,480 221,623 254,819 260,543 6 Other 3,982,138 5,014,002 4,479,985 4,659,982 5,014,002 4,891,753 5,144,394 5,384,630 5,136,368 4,971,724 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 1998 1999 2000 AAccccoouunntt 11999977 11999988 11999999 Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql 1 Profits with inventory valuation and capital consumption adjustment 838.5 848.4 892.7 849.4 846.8 839.0 886.9 880.5 884.1 919.4 953.9 2 Profits before taxes 795.9 781.9 848.5 792.0 780.1 766.7 818.1 835.8 853.8 886.3 923.7 3 Profits-tax liability 238.3 240.2 259.4 241.1 244.3 235.6 248.0 254.4 259.4 275.7 288.7 4 Profits after taxes 557.6 541.7 589.1 550.9 535.8 531.0 570.1 581.4 594.3 610.6 635.0 5 Dividends 333.7 348.6 364.7 347.3 348.4 352.2 356.4 361.5 367.3 373.5 380.0 6 Undistributed profits 223.9 193.1 224.4 203.6 187.4 178.8 213.7 219.9 227.0 237.1 255.0 7 Inventory valuation 7.4 20.9 -13.0 13.6 19.8 20.8 13.3 -13.6 -26.7 -24.9 -26.7 8 Capital consumption adjustment 35.3 45.6 57.2 43.8 46.9 51.6 55.5 58.2 57.0 58.0 56.9 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 1998 1999 2000 AAccccoouunntt 11999977 11999988 11999999rr Q3 Q4 Ql Q2 Q3 Q4 Ql ASSETS 1 Accounts receivable, gross2 663.3 711.7 811.5 687.6 711.7 733.8 756.5 776.3 811.5 848.8 2 Consumer 256.8 261.8 279.8 254.0 261.8 261.7 269.2 271.0 279.8 285.5 3 Business 318.5 347.5 405.2 335.1 347.5 362.8 373.7 383.0 405.2 434.6 4 Real estate 87.9 102.3 126.5 98.5 102.3 109.2 113.5 122.3 126.5 128.8 5 LESS: Reserves for unearned income 52.7 56.3 53.5 52.4 56.3 52.9 53.4 54.0 53.5 53.9 6 Reserves for losses 13.0 13.8 13.5 13.2 13.8 13.4 13.4 13.6 13.5 14.0 7 Accounts receivable, net 597.6 641.6 744.6 622.0 641.6 667.6 689.7 708.6 744.6 780.9 8 All other 312.4 337.9 406.3 313.7 337.9 363.3 373.2 368.5 406.3 412.5 9 Total assets 910.0 979.5 1,150.9 935.7 979.5 1,030.8 1,062.9 1,077.2 1,150.9 1,193.4 LIABILITIES AND CAPITAL 10 Bank loans 24.1 26.3 35.1 24.9 26.3 24.8 25.1 27.0 35.1 30.7 11 Commercial paper 201.5 231.5 227.9 226.9 231.5 222.9 231.0 205.3 227.9 229.7 Debt 12 Owed to parent 64.7 61.8 123.8 58.3 61.8 64.6 65.4 84.5 123.8 145.2 13 Not elsewhere classified 328.8 339.7 397.0 337.6 339.7 366.7 383.1 396.2 397.0 410.0 14 All other liabilities 189.6 203.2 222.7 185.4 203.2 220.3 226.1 216.0 222.7 241.6 15 Capital, surplus, and undivided profits 101.3 117.0 144.5 103.6 117.0 131.5 132.2 148.2 144.5 136.2 16 Total liabilities and capital 910.0 979.5 1,150.9 936.6 979.5 1,030.8 1,062.9 1,077.2 1,150.9 1,193.4 1. Includes finance company subsidiaries of bank holding companies but not of retailers 2. Before deduction for unearned income and losses. Excludes pools of securitized assets, and banks. Data are amounts carried on the balance sheets of finance companies; securitized pools are not shown, as they are not on the books. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Market and Corporate Finance A33 1.52 DOMESTIC FINANCE COMPANIES Owned and Managed Receivables1 Billions of dollars, amounts outstanding 1999 2000 TTyyppee ooff ccrreeddiitt 11999977 11999988 11999999 Nov. Dec. Jan. Feb. Mar. Apr? Seasonally adjusted 1 Total 810.5 875.8 993.9 984.8 993.9 1,022.4 1,032.2 l,054.1r 1,073.2 2 Consumer 327.9 352.8 385.3 385.2 385.3 391.7 395.5 396.7r 398.2 3 Real estate 121.1 131.4 154.7 152.7 154.7 159.1 162.3 167.9 173.1 4 Business . 361.5 391.6 453.9 446.9 453.9 471.6 474.4 489.4 501.9 Not seasonally adjusted 5 Total 818.1 884.0 1,003.2 986.3 1,003.2 1,022.4 1,031.9 l,057.0r 1,073.4 6 Consumer 330.9 356.1 388.8 386.5 388.8 391.1 392.3 392.8r 394.6 7 Motor vehicles loans 87.0 103.1 114.7 111.6 114.7 117.6 121.3 121.1 120.9 8 Motor vehicle leases 96.8 93.3 98.3 99.1 98.3 99.3 100.7 101.7 102.8 9 Revolving2 38.6 32.3 33.8 30.5 33.8 34.4 32.9 31.5 31.9 10 Other3 34.4 33.1 33.1 33.2 33.1 33.0 32.7 31.lr 31.4 Securitized assets4 11 Motor vehicle loans 44.3 54.8 71.1 74.6 71.1 69.6 67.8 71.2 72.1 12 Motor vehicle leases 10.8 12.7 9.7 10.0 9.7 9.5 9.2 8.8 8.5 13 Revolving .0 8.7 10.5 10.2 10.5 10.4 10.4 10.3 10.1 14 Other 19.0 18.1 17.7 17.4 17.7 17.4 17.3 17.1 16.8 15 Real estate 121.1 131.4 154.7 152.7 154.7 159.1 162.3 167.9 173.1 16 One- to four-family 59.0 75.7 88.3 89.4 88.3 91.1 91.7 90.4 93.6 17 Other 28.9 26.6 38.3 37.1 38.3 38.6 38.4 38.4 39.0 Securitized real estate assets4 18 One- to four-family 33.0 29.0 28.0 25.9 28.0 29.2 32.0 38.9 40.2 19 Other .2 .1 .2 .2 .2 .2 .2 .2 0.2 20 Business 366.1 396.5 459.6 447.1 459.6 472.2 477.4 496.3 505.7 21 Motor vehicles 63.5 79.6 87.8 85.4 87.8 87.9 89.6 90.2 93.6 22 Retail loans 25.6 28.1 33.2 33.7 33.2 33.3 33.7 32.3 32.7 23 Wholesale loans5 27.7 32.8 34.7 32.6 34.7 34.6 35.8 37.9 38.9 24 Leases 10.2 18.7 19.9 19.2 19.9 20.1 20.1 19.9 22.0 25 Equipment 203.9 198.0 221.9 211.2 221.9 222.3 225.1 238.0 243.1 26 Loans 51.5 50.4 52.2 49.1 52.2 51.9 52.8 54.9 55.6 27 Leases 152.3 147.6 169.7 162.1 169.7 170.4 172.3 183.1 187.5 28 Other business receivables6 51.1 69.9 95.5 98.2 95.5 99.6 101.4 106.4 107.0 Securitized assets4 29 Motor vehicles 33.0 29.2 31.5 30.6 31.5 31.5 31.0 31.5 32.3 30 Retail loans 2.4 2.6 2.9 3.0 2.9 2.9 2.8 3.2 3.1 31 Wholesale loans 30.5 24.7 26.4 25.6 26.4 26.5 26.1 25.9 26.8 32 Leases .0 1.9 2.1 2.0 2.1 2.1 2.1 2.4 2.4 33 Equipment 10.7 13.0 14.6 14.0 14.6 22.8 22.5 22.0 21.7 34 Loans 4.2 6.6 7.9 7.4 7.9 16.1 15.9 15.4 15.2 35 Leases 6.5 6.4 6.7 6.6 6.7 6.7 6.6 6.5 6.5 36 Other business receivables6 4.0 6.8 8.4 7.7 8.4 8.1 7.7 8.3 8.0 NOTE. This table has been revised to incorporate several changes resulting from the before deductions for unearned income and losses. Components may not sum to totals benchmarking of finance company receivables to the June 1996 Survey of Finance Compa- because of rounding. nies. In that benchmark survey, and in the monthly surveys that have followed, more detailed 2. Excludes revolving credit reported as held by depository institutions that are subsidiarbreakdowns have been obtained for some components. In addition, previously unavailable ies of finance companies. data on securitized real estate loans are now included in this table. The new information has 3. Includes personal cash loans, mobile home loans, and loans to purchase other types of resulted in some reclassification of receivables among the three major categories (consumer, consumer goods such as appliances, apparel, boats, and recreation vehicles. real estate, and business) and in discontinuities in some component series between May and 4. Outstanding balances of pools upon which securities have been issued; these balances June 1996. are no longer carried on the balance sheets of the loan originator. Includes finance company subsidiaries of bank holding companies but not of retailers and 5. Credit arising from transactions between manufacturers and dealers, that is, floor plan banks. Data in this table also appear in the Board's G.20 (422) monthly statistical release. For financing. ordering address, see inside front cover. 6. Includes loans on commercial accounts receivable, factored commercial accounts, and 1. Owned receivables are those carried on the balance sheet of the institution. Managed receivable dealer capital; small loans used primarily for business or farm purposes; and receivables are outstanding balances of pools upon which securities have been issued; these wholesale and lease paper for mobile homes, campers, and travel trailers. balances are no longer carried on the balance sheets of the loan originator. Data are shown Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A34 Domestic NonfinancialS tatistics • August 2000 1.53 MORTGAGE MARKETS Mortgages on New Homes Millions of dollars except as noted 1999 2000 IItteemm 11999977 11999988 11999999 Nov. Dec. Jan. Feb. Mar. Apr. May Terms and yields in primary and secondary markets PRIMARY MARKETS Terms1 1 Purchase price (thousands of dollars) 180.1 195.2 210.7 220.8 216.3 223.7 216.9 226.0 224.2 232.2 2 Amount of loan (thousands of dollars) 140.3 151.1 161.7 167.0 167.2 169.9 165.6 170.7 170.2 176.3 3 Loan-to-price ratio (percent) 80.4 80.0 78.7 77.4 78.6 77.9 78.4 77.7 77.9 78.0 4 Maturity (years) 28.2 28.4 28.8 29.0 29.0 29.1 29.1 29.0 29.1 29.2 5 Fees and charges (percent of loan amount)2 1.02 .89 .77 .73 .71 .75 .71 .68 .68 .71 Yield (percent per year) 6 Contract rate1 7.57 6.95 6.94 7.13 7.18 7.34 7.43 7.49 7.52 7.44 7 Effective rate1'3 7.73 7.08 7.06 7.24 7.28 7.45 7.54 7.60 7.63 7.55 8 Contract rate (HUD series)4 7.76 7.00 7.45 7.79 7.95 8.21 8.20 8.19 8.29 8.26 SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (Section 203)5 7.89 7.04 7.74 8.06 8.55 8.56 8.53 8.35 8.33 8.58 10 GNMA securities6 7.26 6.43 7.03 7.37 7.58 7.84 7.96 7.79 7.64 8.06 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 316,678 414,515 523,941 518,337 523,941 527,977 535,096 538,751 539,181 545,803 12 FHA/VA insured 31,925 33,770 55,318 52,632 55,318 57,369 58,294 58,451 58,899 59,140 13 Conventional 284,753 380,745 468,623 465,705 468,623 470,608 476,802 480,300 480,282 486,663 14 Mortgage transactions purchased (during period) 70,465 188,448 195,210 14,683 11,416 9,035 11,484 8,801 6,257 12,872 Mortgage commitments (during period) 15 Issued7 69,965 193,795 187,948 12,050 9,931 9,130 9,811 10,051 12,524 10,450 16 To sell8 1,298 1,880 5,900 381 1,592 1,287 612 1,954 1,340 1,594 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)8 17 Total 164,421 255,010 324,443 323,027 324,443 325,914 328,598 336,338 339,207 347,370 18 FHA/VA insured 177 785 1,836 1,848 1,836 1,806 1,719 2,521 1,987 3,116 19 Conventional 164,244 254,225 322,607 321,179 322,607 324,108 326,879 333,817 337,220 344,254 Mortgage transactions (during period) 20 Purchases 117,401 267,402 239,793 11,869 9,335 12,942 6,747 9,323 8,393 15,741 21 Sales 114,258 250,565 233,031 11,129 8,589 12,764 6,424 8,569 8,077 15,261 22 Mortgage commitments contracted (during period)9 120,089 281,899 228,432 10,501 11,587 8,341 7,156 10,122 8,750 13,807 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 1999 2000 TTyyppee ooff hhoollddeerr aanndd pprrooppeerrttyy 11999966 11999977 11999988 Ql Q2 Q3 Q4 Ql 1 All holders 4,877,536r 5,211,286r 5,736,638r 5,876,132r 6,029,340r 6,238,187r 6,387,651r 6,503,518 By type of property 2 One- to four-family residences 3,718,723r 3,970,848' 4,355,376' 4,447,543' 4,561,061' 4,692,093' 4,788,204' 4,862,061 3 Multifamily residences 289,186r 302,517' 330,551' 341,889' 349,310' 359,904' 373,514' 382,602 4 Nonfarm, nonresidential 782,493r 847,623' 954,205' 989,302' 1,019,331' 1,084,794' 1,122,968' 1,154,354 5 Farm 87,134 90,299 96,506 97,398' 99,638' 101,396' 102,965' 104,501 By type of holder 6 Major financial institutions 1,981,886' 2,083,981' 2,194,813 2,202,218' 2,242,431' 2,321,356' 2,393,684' 2,460,338 7 Commercial banks2 1,145,389 1,245,315 1,337,217 1,336,733 1,361,365 1,418,819 1,495,717 1,547,038 8 One- to four-family 677,603 745,510 797,492' 782,446' 790,372' 827,291' 879,676' 904,710 9 Multifamily 45,451 49,670 54,116' 58,036' 60,529' 63,964' 67,591' 72,431 10 Nonfarm, nonresidential 397,452 423,148 456,574' 466,738' 479,929' 496,246' 516,611' 537,224 11 Farm 24,883 26,986 29,035 29,513 30,536 31,320 31,839 32,673 12 Savings institutions3 628,335 631,826' 643,957 646,510 656,518 676,346 668,634 680,745 13 One- to four-family 513,712 520,782' 533,918' 534,898' 544,962' 560,622' 549,072' 560,046 14 Multifamily 61,570 59,540' 56,821' 56,759' 55,016' 57,282' 59,138' 57,759 15 Nonfarm, nonresidential 52,723 51,150' 52,801' 54,417' 56,096' 57,983' 59,948' 62,447 16 Farm 331 354 417 435 443 459 475 493 17 Life insurance companies 208,162' 206,840' 213,640 218,975' 224,548' 226,190' 229,333' 232,555 18 One- to four-family 6,977 7,187 6,590 6,953' 7,292' 7,432' 5,935' 6,137 19 Multifamily 30,750 30,402 31,522 31,515' 31,800' 31,998' 32,592' 32,983 20 Nonfarm, nonresidential 160,315' 158,779' 164,004 168,795' 173,495' 174,571' 177,817' 179,949 21 Farm 10,120 10,472 11,524 11,712' 11,961' 12,189' 12,989' 13,486 22 Federal and related agencies 295,192 286,167 292,636 288,176 288,038 320,850' 320,105' 318,240 23 Government National Mortgage Association 2 8 7 6 8 8 7 7 24 One- to four-family 2 8 7 6 8 8 7 7 25 Multifamily 0 0 0 0 0 0 0 0 26 Farmers Home Administration4 41,596 41,195 40,851 40,691 40,766 73,705 73,871 72,899 27 One- to four-family 17,303 17,253 16,895 16,777 16,653 16,583 16,506 16,456 28 Multifamily 11,685 11,720 11,739 11,731 11,735 11,745 11,741 11,732 29 Nonfarm, nonresidential 6,841 7,370 7,705 7,769 7,943 41,068 41,355 40,509 30 Farm 5,768 4,852 4,513 4,413 4,435 4,308 4,268 4,202 31 Federal Housing and Veterans' Administrations 6,244 3,821 3,674 3,538 3,490 3,889 3,712' 3,773 32 One- to four-family 3,524 1,767 1,849 1,713 1,623 2,013 1,851' 1,826 33 Multifamily 2,719 2,054 1,825 1,825 1,867 1,876 1,861' 1,947 34 Resolution Trust Corporation 0 0 0 0 0 0 0 0 35 One- to four-family 0 0 0 0 0 0 0 0 36 Multifamily 0 0 0 0 0 0 0 0 37 Nonfarm, nonresidential 0 0 0 0 0 0 0 0 38 Farm 0 0 0 0 0 0 0 0 39 Federal Deposit Insurance Corporation 2,431 724 361 315 189 163 152 98 40 One- to four-family 365 109 54 47 28 24 23 15 41 Multifamily 413 123 61 54 32 28 26 17 42 Nonfarm, nonresidential 1,653 492 245 214 129 111 103 67 43 Farm 0 0 0 0 0 0 0 0 44 Federal National Mortgage Association 168,813 161,308 157,675 157,185 155,637 153,172' 151,500' 150,312 45 One- to four-family 155,008 149,831 147,594 147,063 145,033 142,982 141,195 139,986 46 Multifamily 13,805 11,477 10,081 10,122 10,604 10,190' 10,305' 10,326 47 Federal Land Banks 29,602 30,657 32,983 33,128 33,666 34,218 34,187' 34,142 48 One- to four-family 1,742 1,804 1,941 1,949 1,981 2,013 2,012' 2,009 49 Farm 27,860 28,853 31,042 31,179 31,685 32,205 32,175' 32,133 50 Federal Home Loan Mortgage Corporation 46,504 48,454 57,085 53,313 54,282 55,695 56,676 57,009 51 One- to four-family 41,758 42,629 49,106 44,140 43,574 44,010 44,321 43,384 52 Multifamily 4,746 5,825 7,979 9,173 10,708 11,685 12,355 13,625 53 Mortgage pools or trusts5 2,040,848' 2,239,350' 2,589,764' 2,715,196' 2,810,119 2,891,187' 2,954,836' 3,000,462 54 Government National Mortgage Association 506,246' 536,879 537,446 543,280 553,196 569,038 582,307' 589,385 55 One- to four-family 494,064' 523,225 522,498 527,886 537,287 552,670 565,233' 571,699 56 Multifamily 12,182 13,654 14,948 15,395 15,909 16,368 17,074 17,686 57 Federal Home Loan Mortgage Corporation 554,260 579,385 646,459 687,179 718,085 738,581 749,081 757,106 58 One- to four-family 551,513 576,846 643,465 684,240 714,844 735,088 744,619 752,607 59 Multifamily 2,747 2,539 2,994 2,939 3,241 3,493 4,462 4,499 60 Federal National Mortgage Association 650,780 709,582 834,518 881,815 911,435 938,484 960,883 975,815 61 One- to four-family 633,210 687,981 804,205 849,513 877,863 903,531 924,941 938,898 62 Multifamily 17,570 21,601 30,313 32,302 33,572 34,953 35,942 36,917 63 Farmers Home Administration4 3 2 1 1 1 0 0 0 64 One- to four-family 0 0 0 0 0 0 0 0 65 Multifamily 0 0 0 0 0 0 0 0 66 Nonfarm, nonresidential 0 0 0 0 0 0 0 0 67 Farm 3 2 1 1 1 0 0 0 68 Private mortgage conduits 329,559' 413,502' 571,340' 602,921' 627,402' 645,084' 662,565' 678,156 69 One- to four-family6 258,800' 316,400' 412,700' 430,653 447,938 455,276 462,600 471,390 70 Multifamily 16,369' 21,591' 34,323' 37,736' 39,435' 40,936' 42,628' 43,835 71 Nonfarm, nonresidential 54,390' 75,511' 124,317' 134,532' 140,029' 148,873' 157,337' 162,930 72 Farm 0 0 0 0 0 0 0 0 73 Individuals and others7 559,609 601,788' 659,425' 670,542' 688,753' 704,794' 719,026' 724,478 74 One- to four-family 363,143 379,516' 417,063' 419,258' 431,603' 442,550' 450,213' 452,891 75 Multifamily 69,179 72,320' 73,829' 74,302' 74,863' 75,386' 77,799' 78,846 76 Nonfarm, nonresidential 109,119 131,173' 148,559' 156,836' 161,711' 165,943' 169,796' 171,228 77 Farm 18,169 18,779 19,974 20,145' 20,577' 20,916' 21,218' 21,513 1. Multifamily debt refers to loans on structures of five or more units. 6. Includes securitized home equity loans. 2. Includes loans held by nondeposit trust companies but not loans held by bank trust 7. Other holders include mortgage companies, real estate investment trusts, state and local departments. credit agencies, state and local retirement funds, noninsured pension funds, credit unions, and 3. Includes savings banks and savings and loan associations. finance companies. 4. FmHA-guaranteed securities sold to the Federal Financing Bank were reallocated from SOURCE. Based on data from various institutional and government sources. Separation of FmHA mortgage pools to FmHA mortgage holdings in 1986:Q4 because of accounting nonfarm mortgage debt by type of property, if not reported directly, and interpolations and changes by the Farmers Home Administration. extrapolations, when required for some quarters, are estimated in part by the Federal Reserve. 5. Outstanding principal balances of mortgage-backed securities insured or guaranteed by Line 69 from Inside Mortgage Securities and other sources. the agency indicated. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A36 Domestic NonfinancialS tatistics • August 2000 1.55 CONSUMER CREDIT1 Millions of dollars, amounts outstanding, end of period 1999 2000 HHoollddeerr aanndd ttyyppee ooff ccrreeddiitt 11999977 11999988 11999999 Nov. Dec. Jan. Feb. Mar. Apr.P Seasonally adjusted 1 Total 1,234,461 1,301,023 1,393,657 1,382,727 1,393,657 1,409,387 1,418,756 1,429,431 1,438,201 2 Revolving 531,163 560,504 595,610 588,972 595,610 603,782 608,523 615,510 622,005 3 Nonrevolving2 703,297 740,519 798,047 793,755 798,047 805,605 810,233 813,921 816,197 Not seasonally adjusted 4 Total 1,264,103 1,331,742 1,426,151 1,389,747 1,426,151 1,419,258 1,413,585 1,416,228 1,425,998 By major holder 5 Commercial banks 512,563 508,932 499,758 480,763 499,758 498,589 499,148 497,120 502,679 6 Finance companies 160,022 168,491 181,573 175,296 181,573 184,887 186,896 183,705 184,050 7 Credit unions 152,362 155,406 167,921 165,951 167,921 168,109 168,209 169,487 171,257 8 Savings institutions 47,172 51,611 61,527 61,035 61,527 60,674 59,821 58,968 59,472 9 Nonfinancial business 78,927 74,877 80,311 70,286 80,311 76,048 73,509 72,908 72,979 10 Pools of securitized assets3 313,057 372,425 435,061 436,416 435,061 430,951 426,002 434,040 435,561 By major type of credit4 11 Revolving 555,858 586,528 623,245 592,022 623,245 614,528 609,387 609,086 615,138 12 Commercial banks 219,826 210,346 189,352 172,345 189,352 185,451 186,379 184,901 188,691 13 Finance companies 38,608 32,309 33,814 30,512 33,814 34,352 32,885 31,456 31,928 14 Credit unions 19,552 19,930 20,641 19,582 20,641 20,175 19,941 19,764 19,929 15 Savings institutions 11,441 12,450 15,838 15,046 15,838 15,551 15,263 14,975 15,291 16 Nonfinancial business 44,966 39,166 42,783 36,002 42,783 39,746 37,918 37,430 37,418 17 Pools of securitized assets3 221,465 272,327 320,817 318,535 320,817 319,253 317,001 320,560 321,881 18 Nonrevolving 708,245 745,214 802,906 797,725 802,906 804,730 804,198 807,142 810,860 19 Commercial banks 292,737 298,586 310,406 308,418 310,406 313,138 312,769 312,219 313,988 20 Finance companies 121,414 136,182 147,759 144,784 147,759 150,535 154,011 152,249 152,122 21 Credit unions 132,810 135,476 147,280 146,369 147,280 147,934 148,268 149,723 151,328 22 Savings institutions 35,731 39,161 45,689 45,989 45,689 45,123 44,558 43,993 44,181 23 Nonfinancial business 33,961 35,711 37,528 34,284 37,528 36,302 35,591 35,478 35,561 24 Pools of securitized assets3 91,592 100,098 114,244 117,881 114,244 111,698 109,001 113,480 113,680 1. The Board's series on amounts of credit covers most short- and intermediate-term credit 3. Outstanding balances of pools upon which securities have been issued; these balances extended to individuals, excluding loans secured by real estate. Data in this table also appear are no longer carried on the balance sheets of the loan originator. in the Board's G.19 (421) monthly statistical release. For ordering address, see inside front 4. Totals include estimates for certain holders for which only consumer credit totals are cover. available. 2. Comprises motor vehicle loans, mobile home loans, and all other loans that are not included in revolving credit, such as loans for education, boats, trailers, or vacations. These loans may be secured or unsecured. 1.56 TERMS OF CONSUMER CREDIT1 Percent per year except as noted 1999 2000 IItteemm 11999977 11999988 11999999 Oct. Nov. Dec. Jan. Feb. Mar. Apr. INTEREST RATES Commercial banks2 1 48-month new car 9.02 8.72 8.44 n.a. 8.66 n.a. n.a. 8.88 n.a. n.a. 2 24-month personal 13.90 13.74 13.39 n.a. 13.52 n.a. n.a. 13.76 n.a. n.a. Credit card plan 3 All accounts 15.77 15.71 15.21 n.a. 15.13 n.a. n.a. 15.47 n.a. n.a. 4 Accounts assessed interest 15.57 15.59 14.81 n.a. 14.77 n.a. n.a. 14.32 n.a. n.a. Auto finance companies 5 New car 7.12 6.30 66..6666 77..0077 7.44 7.32 7.18 7.34 6.76 6.38 6 Used car 13.27 12.64 12.60 13.28 13.27 13.28 12.95 13.27 13.45 13.52 OTHER TERMS3 Maturity (months) 7 New car 54.1 52.1 52.7 53.2 53.9 53.4 52.9 52.7 53.1 53.8 8 Used car 51.0 53.5 55.9 55.8 55.8 55.6 57.0 57.1 57.1 57.1 Loan-to-value ratio 9 New car 92 92 92 92 91 91 91 92 93 93 10 Used car 99 99 99 100 99 99 98 98 99 98 Amount financed (dollars) 11 New car 18,077 19,083 19,880 20,335 20,517 20,699 20,503 20,206 20,395 20,542 12 Used car 12,281 12,691 13,642 13,613 13,777 13,970 13,809 13,697 13,666 13,871 1. The Board's series on amounts of credit covers most short- and intermediate-term credit 2. Data are available for only the second month of each quarter, extended to individuals. Data in this table also appear in the Board's G.19 (421) monthly 3. At auto finance companies, statistical release. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A37 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS1 Billions of dollars; quarterly data at seasonally adjusted annual rates 1998 1999 2000 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999944 Q3 Q4 Q1 Q2 Q3 Q4 Ql Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors ... 568.0 712.0 732.5 805.5 1,038.1 909.0 1,087.1 1,287.7 889.1 1,180.9 1,123.7 956.6 By sector and instrument 2 Federal government 155.8 144.4 145.0 23.1 -52.6 -113.5 -54.1 -75.2 -112.2 -83.1 -14.3 -204.0 Treasury securities 155.7 142.9 146.6 23.2 -54.6 -113.1 -66.3 -73.7 -112.8 -83.2 -14.3 -201.9 4 Budget agency securities and mortgages .2 1.5 -1.6 -.1 2.0 -.4 12.2 -1.5 .6 .0 .0 -2.1 5 Nonfederal 412.2 567.6 587.5 782.4 1,090.7 1,022.5 1,141.3 1,363.0 1,001.3 1,264.0 1,138.0 1,160.6 By instrument 6 Commercial paper 21.4 18.1 -.9 13.7 24.4 85.6 -43.0 58.3 -2.6 49.8 44.0 36.4 7 Municipal securities and loans -35.9 -48.2 2.6 71.4 96.8 82.9 89.6 100.7 48.0 77.0 47.0 19.3 8 Corporate bonds 23.3 91.1 116.3 150.5 218.7 108.0 193.2 274.0 287.6 202.8 155.2 189.0 9 Bank loans n.e.c 75.2 103.7 70.5 106.5 108.2 107.8 120.9 70.0 22.2 112.8 125.8 104.5 10 Other loans and advances 34.0 67.2 33.5 69.1 74.3 77.7 102.5 153.9 -14.5 79.0 56.2 172.0 11 Mortgages 169.3 196.7 276.9 318.7 500.6 480.9 608.1 575.4 599.2 666.4 600.4 496.4 P Home 183.4 180.4 242.2 251.9 383.3 389.8 441.3 413.9 428.1 491.3 398.0 338.0 n Multifamily residential -3.7 5.9 9.5 8.4 18.8 11.1 26.3 35.3 33.4 45.9 48.1 33.8 14 Commercial -12.7 8.9 22.7 55.2 92.3 74.6 131.9 122.6 128.7 122.1 151.8 120.7 15 Farm 2.2 1.6 2.6 3.2 6.2 5.5 8.6 3.6 9.0 7.0 2.5 3.9 16 Consumer credit 124.9 138.9 88.8 52.5 67.6 79.6 69.9 130.5 61.4 76.2 109.5 143.1 By borrowing sector 17 Household 313.6 348.5 347.3 332.9 476.9 477.7 530.4 543.7 511.6 660000..99 515.5 550022..55 18 Nonfinancial business 144.8 270.6 247.0 393.4 533.5 474.7 535.8 731.8 454.0 606.2 591.5 643.5 IP Corporate 137.2 237.1 158.4 272.3 416.0 358.4 413.4 628.4 355.2 470.9 463.6 518.8 7.0 Nonfarm noncorporate 3.3 30.6 83.8 115.0 109.8 109.0 114.8 96.8 99.8 125.7 122.0 111.0 71 Farm 4.4 2.9 4.8 6.2 7.7 7.3 7.5 6.6 -1.0 9.5 5.9 13.8 22 State and local government -46.2 -51.5 -6.8 56.1 80.3 70.0 75.1 87.4 35.7 57.0 31.0 14.6 73 Foreign net borrowing in United States -13.9 71.1 77.2 57.6 33.6 -19.6 -38.9 17.0 -36.8 62.2 15.6 114.2 74 Commercial paper -26.1 13.5 11.3 3.7 7.8 6.2 -4.7 18.0 -27.5 41.1 33.6 56.8 75 Bonds 12.2 49.7 55.8 47.2 25.1 -27.2 -34.2 .9 -12.6 29.4 -17.2 39.1 76 Bank loans n.e.c 1.4 8.5 9.1 8.5 6.7 3.6 9.8 .9 5.6 -6.6 2.3 15.4 27 Other loans and advances -1.4 -.5 1.0 -1.8 -6.0 -2.2 -9.7 -2.8 -2.3 -1.6 -3.0 2.9 28 Total domestic plus foreign 554.1 783.1 809.7 863.1 1,071.6 889.4 1,048.3 1,304.7 852.3 1,243.1 1,139.3 1,070.8 Financial sectors 29 Total net borrowing by financial sectors 468.4 453.9 545.8 653.7 1,073.9 1,067.9 1,296.9 1,199.2 1,016.1 1,075.2 1,061.2 596.0 By instrument 30 Federal government-related 287.5 204.1 231.5 212.8 470.9 555.8 673.3 592.2 578.9 653.0 543.9 225533..88 31 Government-sponsored enterprise securities 176.9 105.9 90.4 98.4 278.3 294.0 510.5 193.0 304.7 407.1 367.9 106.9 32 Mortgage pool securities 115.4 98.2 141.1 114.5 192.6 261.7 162.8 399.2 274.3 245.9 176.0 146.9 33 Loans from U.S. government -4.8 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 34 180.9 249.8 314.4 440.9 603.0 512.1 623.6 607.0 437.2 422.3 517.3 342.3 35 Open market paper 40.5 42.7 92.2 166.7 161.0 141.0 130.7 78.3 57.8 89.8 478.9 130.2 36 Corporate bonds 121.8 195.9 173.8 210.5 296.9 189.0 280.1 475.9 263.2 182.1 -34.0 164.1 37 Bank loans n.e.c -13.7 2.5 12.6 13.2 30.1 60.2 12.4 -8.8 10.5 -6.2 -52.7 6.6 38 Other loans and advances 22.6 3.4 27.9 35.6 90.2 82.3 169.9 41.6 117.9 147.2 121.8 34.3 39 Mortgages 9.8 5.3 7.9 14.9 24.8 39.6 30.6 20.1 -12.3 9.4 3.2 7.0 By borrowing sector 40 Commercial banking 20.1 22.5 13.0 46.1 72.9 61.7 66.3 31.1 72.7 111111..33 5533..88 5566..55 41 Savings institutions 12.8 2.6 25.5 19.7 52.2 63.7 103.2 58.0 58.6 55.2 20.2 25.9 47 Credit unions .2 -.1 .1 .1 .6 1.0 .4 1.5 1.4 2.8 3.3 -2.9 43 Life insurance companies .3 -.1 1.1 .2 .7 1.6 1.8 3.3 3.0 1.1 -4.4 -.7 44 Government-sponsored enterprises 172.1 105.9 90.4 98.4 278.3 294.0 510.5 193.0 304.7 407.1 367.9 106.9 45 Federally related mortgage pools 115.4 98.2 141.1 114.5 192.6 261.7 162.8 399.2 274.3 245.9 176.0 146.9 46 Issuers of asset-backed securities (ABSs) 76.5 142.4 150.8 202.2 321.4 305.8 333.9 285.5 309.2 224.6 116.7 161.4 47 Finance companies 48.7 50.2 45.9 48.7 43.0 -12.0 17.8 71.2 88.4 -22.6 112.6 44.3 48 Mortgage companies -11.5 -2.2 4.1 -4.6 1.6 2.3 3.0 -4.6 5.1 -6.1 6.2 -3.0 49 Real estate investment trusts (REITs) 10.2 4.5 11.9 39.6 62.7 79.3 44.0 25.6 -19.7 7.9 11.3 11.5 50 Brokers and dealers .5 -5.0 -2.0 8.1 7.2 -2.6 12.4 -31.1 -17.4 16.9 -37.3 44.4 51 Funding corporations 23.1 34.9 64.1 80.7 40.7 11.2 40.9 166.5 -63.8 31.2 234.8 5.0 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic NonfinancialS tatistics • August 2000 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS1—Continued 1998 1999 2000 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999944 11999955 11999966 11999977 11999988 Q3 Q4 Ql Q2 Q3 Q4 Ql All sectors 52 Total net borrowing, all sectors 1,022.5 1,237.0 1,355.6 1,516.8 2,145.5 1,957.2 2,345.2 2,503.9 1,868.5 2,318.3 2,200.5 1,666.9 53 Open market paper 35.7 74.3 102.6 184.1 193.1 232.7 83.0 154.6 27.7 180.6 556.5 223.4 54 U.S. government securities 448.1 348.5 376.5 235.9 418.3 442.3 619.1 517.0 466.8 569.8 529.6 49.8 55 Municipal securities -35.9 -48.2 2.6 71.4 96.8 82.9 89.6 100.7 48.0 77.0 47.0 19.3 56 Corporate and foreign bonds 157.3 336.7 345.8 408.2 540.7 269.8 439.1 750.7 538.2 414.3 104.1 392.2 57 Bank loans n.e.c 62.9 114.7 92.1 128.2 145.0 171.6 143.0 62.1 38.3 100.0 75.3 126.5 58 Other loans and advances 50.4 70.1 62.5 102.8 158.5 157.8 262.7 192.7 101.1 224.6 175.0 209.2 59 Mortgages 179.0 202.0 284.8 333.6 525.4 520.5 638.7 595.5 587.0 675.8 603.6 503.4 60 Consumer credit 124.9 138.9 88.8 52.5 67.6 79.6 69.9 130.5 61.4 76.2 109.5 143.1 Funds raised through mutual funds and corporate equities 61 Total net issues 113.4 131.5 209.1 165.6 76.5 -166.6 -3.5 153.3 163.5 102.9 148.0 427.2 62 Corporate equities 12.8 -16.0 -28.5 -99.6 -198.1 -340.0 -228.3 -99.9 -47.3 -20.4 -26.5 106.3 63 Nonfinancial corporations -44.9 -58.3 -69.5 -114.4 -267.0 -308.4 -491.3 -52.1 -338.4 -128.4 -55.0 62.8 64 Foreign shares purchased by U.S. residents 48.1 50.4 60.0 42.0 77.8 -32.8 317.4 -33.4 270.9 108.4 45.2 63.0 65 Financial corporations 9.6 -8.1 -19.0 -27.1 -8.9 1.1 -54.5 -14.5 20.2 -.3 -16.7 -19.5 66 Mutual fund shares 100.6 147.4 237.6 265.1 274.6 173.4 224.8 253.3 210.9 123.2 174.5 320.9 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, tables F.2 through F.4. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A3 9 1.58 SUMMARY OF FINANCIAL TRANSACTIONS1 Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1998 1999 2000 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999944 11999955 11999966 11999977 11999988 Q3 Q4 Ql Q2 Q3 Q4 Ql NET LENDING IN CREDIT MARKETS2 1 Total net lending in credit markets 1,022.5 1,237.0 1,355.6 1,516.8 2,145.5 1,957.2 2,345.2 2,503.9 1,868.5 2,318.3 2,200.5 1,666.9 2 Domestic nonfederal nonfinancial sectors 223.4 -98.4 12.0 -43.7 74.7 88.8 -261.5 423.3 397.8 195.4 14.6 -120.5 Household 260.2 -3.0 60.3 -29.0 -73.8 -142.2 -439.7 246.4 288.3 186.3 20.7 -170.9 4 Nonfinancial corporate business 17.7 -8.8 -10.2 -12.7 14.0 15.2 36.4 42.0 25.0 52.2 -9.5 36.0 5 Nonfarm noncorporate business .6 4.7 -4.3 -2.1 .1 .1 .1 2.8 1.2 .8 1.4 2.6 6 State and local governments -55.0 -91.4 -33.7 .1 134.5 215.7 141.7 132.2 83.3 -43.9 2.0 11.9 7 Federal government -27.4 -.2 -7.4 5.1 13.5 13.8 11.7 17.0 6.9 11.4 3.2 7.1 8 Rest of the world 132.3 273.9 414.4 310.7 249.3 60.8 390.7 253.3 37.4 382.2 141.3 338.9 9 Financial sectors 694.1 1,061.7 936.6 1,244.6 1,808.1 1,793.8 2,204.3 1,810.3 1,426.4 1,729.4 2,041.4 1,441.4 10 Monetary authority 31.5 12.7 12.3 38.3 21.1 41.6 3.5 71.8 62.4 34.1 -65.7 112.2 11 Commercial banking 163.4 265.9 187.5 324.3 305.2 250.1 531.5 68.9 135.4 435.5 593.1 382.4 12 U.S.-chartered banks 148.1 186.5 119.6 274.9 312.0 309.2 540.2 134.1 231.5 410.7 494.2 417.6 13 Foreign banking offices in United States 11.2 75.4 63.3 40.2 -11.9 -68.1 -12.1 -54.9 -105.7 30.6 49.7 1.9 14 Bank holding companies .9 -.3 3.9 5.4 -.9 6.0 -7.4 -6.0 .4 -12.4 42.6 -42.5 11 Banks in U.S.-affiliated areas 3.3 4.2 .7 3.7 6.0 2.9 10.7 -4.4 9.2 6.6 6.6 5.4 16 Savings institutions 6.7 -7.6 19.9 -4.7 36.3 17.9 113.3 102.7 88.8 60.9 22.3 39.1 17 Credit unions 28.1 16.2 25.5 16.8 19.0 21.0 16.0 34.7 32.1 29.6 13.5 44.8 18 Bank personal trusts and estates 7.1 -8.3 -7.7 -25.0 -12.8 -16.0 -13.5 -7.6 -8.4 -8.6 -9.1 -9.5 19 Life insurance companies 72.0 100.0 69.6 104.8 76.9 65.6 86.0 72.1 63.4 38.4 22.5 75.9 20 Other insurance companies 24.9 21.5 22.5 25.2 20.4 -7.7 67.6 -19.7 26.7 -14.4 -7.7 .1 21 Private pension funds 46.1 56.0 52.3 65.5 118.6 95.5 174.4 60.6 150.1 45.4 131.0 62.1 22 State and local government retirement funds 30.9 33.6 37.3 63.8 66.0 68.7 49.5 76.5 27.3 38.5 59.8 -13.2 23 Money market mutual funds 30.0 86.5 88.8 87.5 244.0 255.5 353.1 227.6 -92.6 232.1 360.8 222.1 24 Mutual funds -7.1 52.5 48.9 80.9 124.8 92.9 103.5 103.0 119.9 -18.8 -11.7 -70.6 25 Closed-end funds -3.7 10.5 4.7 -2.9 4.5 4.5 4.5 3.1 3.1 3.1 3.1 3.1 26 Government-sponsored enterprises 117.8 86.7 84.2 94.3 260.8 264.7 429.5 157.2 259.2 287.5 234.1 100.4 27 Federally related mortgage pools 115.4 98.2 141.1 114.5 192.6 261.7 162.8 399.2 274.3 245.9 176.0 146.9 78 Asset-backed securities issuers (ABSs) 69.4 120.6 120.5 163.8 281.7 260.3 310.9 267.9 292.4 216.1 86.9 140.8 29 Finance companies 48.3 49.9 18.4 21.9 51.9 79.5 75.3 92.2 79.6 94.7 113.1 141.3 30 Mortgage companies -24.0 -3.4 8.2 -9.1 3.2 4.5 6.0 -9.1 10.2 -12.1 12.3 -6.0 31 Real estate investment trusts (REITs) -.7 1.4 4.4 20.2 -5.1 -11.3 -40.8 1.7 -2.2 -2.7 -7.0 -16.3 32 Brokers and dealers -44.2 90.1 -15.7 14.9 6.8 146.0 -226.1 88.0 -193.7 16.3 -33.7 169.2 33 Funding corporations -17.8 -21.2 14.0 49.8 -7.9 -101.5 -2.8 19.5 98.4 8.0 347.6 -83.3 RELATION OF LIABILITIES TO FINANCIAL ASSETS 34 Net flows through credit markets 1,022.5 1,237.0 1,355.6 1,516.8 2,145.5 1,957.2 2,345.2 2,503.9 1,868.5 2,318.3 2,200.5 1,666.9 Other financial sources 35 Official foreign exchange -5.8 8.8 -6.3 .7 6.6 8.9 8.6 -14.0 -5.4 --88..55 --77..00 ..88 36 Special drawing rights certificates .0 2.2 -.5 -.5 .0 .0 .0 -4.0 .0 -4.0 -4.0 ..00 37 Treasury currency .7 .6 .1 .0 .0 1.7 -2.3 .0 2.1 2.0 -4.1 2.2 38 Foreign deposits 52.9 35.3 85.9 106.8 -.2 84.9 -131.9 127.7 99.3 55.1 -12.9 52.0 39 Net interbank transactions 89.8 10.0 -51.6 -19.7 -32.3 44.7 -118.7 49.9 90.9 -35.9 -62.9 -100.6 40 Checkable deposits and currency -9.7 -12.7 15.8 41.5 47.6 -24.9 72.8 61.1 10.1 141.0 394.3 -224.2 41 Small time and savings deposits -39.9 96.6 97.2 97.1 152.4 144.7 281.2 -68.0 100.0 141.9 3.6 113.8 42 Large time deposits 19.6 65.6 114.0 122.5 92.1 81.8 104.4 -5.9 42.6 105.2 379.2 121.1 43 Money market fund shares 43.3 142.3 145.8 157.6 285.5 367.9 313.1 204.9 100.5 180.3 516.7 217.5 44 Security repurchase agreements 78.2 110.5 41.4 120.9 91.3 274.8 -181.8 253.3 -27.9 114.6 346.7 275.4 45 Corporate equities 12.8 -16.0 -28.5 -99.6 -198.1 -340.0 -228.3 -99.9 -47.3 -20.4 -26.5 106.3 46 Mutual fund shares 100.6 147.4 237.6 265.1 274.6 173.4 224.8 253.3 210.9 123.2 174.5 320.9 47 Trade payables 120.0 128.9 114.8 130.5 27.4 58.8 -61.9 139.9 241.2 218.1 96.9 168.3 48 Security credit -.1 26.7 52.4 111.0 103.3 149.5 -25.7 -66.6 139.9 29.5 271.3 517.5 49 Life insurance reserves 35.5 45.8 44.5 59.3 53.3 51.7 59.0 40.8 75.6 65.5 52.4 49.2 50 Pension fund reserves 254.4 235.4 247.6 304.4 303.9 296.2 349.6 272.4 293.4 271.9 311.8 287.9 51 Taxes payable 2.6 6.2 16.0 15.6 11.8 27.0 7.8 -7.6 42.4 -3.1 24.4 .5 52 Investment in bank personal trusts 17.8 4.0 -8.6 -56.3 -48.0 -51.2 -48.8 -32.0 -25.9 -34.3 -32.3 -40.4 53 Noncorporate proprietors' equity 43.0 35.7 -2.3 -44.4 -45.6 -102.2 -7.9 -7.9 8.9 -66.2 -15.8 -29.7 54 Miscellaneous 250.7 451.1 504.5 481.6 816.8 854.2 668.3 184.6 1,189.7 356.1 501.0 475.0 55 Total financial sources 2,088.9 2,761.5 2,975.5 3,311.1 4,087.9 4,059.2 3,627.4 3,786.0 4,409.3 3,950.3 5,107.9 3,980.3 Liabilities not identified as assets (—) 56 Treasury currency -.2 -.5 -.9 -.6 -.7 1.1 -3.4 -1.5 .6 .2 --66..33 ..66 57 Foreign deposits 43.0 25.1 59.6 105.6 -8.1 70.3 -157.4 61.8 86.2 9.5 32.4 -8.5 58 Net interbank liabilities -2.7 -3.1 -3.3 -19.9 3.4 22.3 -52.8 58.7 -1.7 -1.0 -39.8 34.5 59 Security repurchase agreements 67.7 20.2 4.5 62.2 54.1 153.8 -11.1 209.3 62.4 48.0 -192.6 571.0 60 Taxes payable 16.6 21.1 22.8 26.8 18.0 28.7 19.6 -14.8 5.8 1.6 -3.1 -16.5 61 Miscellaneous -146.4 -204.8 -70.7 -63.8 -47.4 -14.4 -4.9 -411.4 -430.5 -460.4 -131.6 -392.7 Floats not included in assets (—) 62 Federal government checkable deposits -4.8 -6.0 .5 -2.7 2.6 32.4 14.0 -1.8 -41.4 23.0 -9.5 28.8 63 Other checkable deposits -2.8 -3.8 -4.0 -3.9 -3.1 -3.6 -1.8 -1.9 -1.0 -.5 .1 .8 64 Trade credit 27.4 15.6 -21.2 -29.3 -42.0 -73.3 -44.3 40.8 -15.5 93.8 60.3 .4 65 Total identified to sectors as assets 2,091.1 2,897.9 2,988.3 3,236.7 4,111.2 3,841.8 3,869.3 3,846.8 4,744.3 4,236.0 5,398.0 3,761.8 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. El and F.5. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Nonfinancial Statistics • August 2000 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1 Billions of dollars, end of period 1998 1999 2000 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999955 11999966 11999977 11999988 Q3 Q4 Ql Q2 Q3 Q4 Ql Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors 13,723.8 14,456.3 15,260.3 16,298.4 15,967.4 16,298.4 16,613.9 16,791.8 17,113.5 17,453.5 17,686.5 By sector and instrument 2 Federal government 3,636.7 3,781.8 3,804.9 3,752.2 3,720.2 3,752.2 3,759.7 3,651.7 3,632.7 3,681.0 3,653.5 3 Treasury securities 3,608.5 3,755.1 3,778.3 3,723.7 3,694.7 3,723.7 3,731.6 3,623.4 3,604.5 3,652.8 3,625.8 4 Budget agency securities and mortgages 28.2 26.6 26.5 28.5 25.5 28.5 28.1 28.3 28.3 28.3 27.8 5 Nonfederal 10,087.1 10,674.6 11,455.5 12,546.2 12,247.2 12,546.2 12,854.2 13,140.1 13,480.7 13,772.5 14,033.0 By instrument 6 Commercial paper 157.4 156.4 168.6 193.0 216.9 193.0 223.9 232.4 239.3 230.3 260.8 7 Municipal securities and loans 1,293.5 1,296.0 1,367.5 1,464.3 1,439.9 1,464.3 1,491.0 1,510.0 1,518.6 1,532.5 1,539.2 8 Corporate bonds 1,344.1 1,460.4 1,610.9 1,829.6 1,781.3 1,829.6 1,898.1 1,970.0 2,020.7 2,059.5 2,106.7 9 Bank loans n.e.c 863.6 934.1 1,040.5 1,148.8 1,120.6 1,148.8 1,165.2 1,178.5 1,202.9 1,231.5 1,256.8 10 Other loans and advances 736.9 770.4 839.5 913.8 886.8 913.8 957.4 953.5 967.1 982.8 1,030.4 11 Mortgages 4,568.8 4,845.7 5,164.4 5,665.0 5,515.2 5,665.0 5,799.4 5,955.4 6,162.0 6,309.9 6,422.8 12 Home 3,510.4 3,718.8 3,970.7 4,354.0 4,245.9 4,354.0 4,446.5 4,559.7 4,689.6 4,786.8 4,860.2 13 Multifamily residential 265.5 278.7 287.1 305.9 299.3 305.9 315.0 323.3 334.8 346.9 355.3 14 Commercial 708.4 761.1 816.4 908.7 875.7 908.7 940.5 972.8 1,036.2 1,074.2 1,104.4 15 Farm 84.6 87.1 90.3 96.5 94.4 96.5 97.4 99.6 101.4 102.0 103.0 16 Consumer credit 1,122.8 1,211.6 1,264.1 1,331.7 1,286.6 1,331.7 1,319.3 1,340.4 1,370.1 1,426.2 1,416.2 By borrowing sector 17 Household 4,782.8 5,104.9 5,441.9 5,920.1 5,761.5 5,920.1 6,000.0 6,142.4 6,308.8 6,464.4 6,532.8 18 Nonfinancial business 4,234.1 4,506.2 4,894.1 5,426.2 5,306.9 5,426.2 5,631.0 5,759.4 5,929.5 6,055.5 6,242.1 19 Corporate 2,936.6 3,120.2 3,386.8 3,801.5 3,712.2 3,801.5 3,983.3 4,083.1 4,220.0 4,314.4 4,472.9 20 Nonfarm noncorporate 1,152.4 1,236.1 1,351.1 1,460.9 1,431.6 1,460.9 1,485.2 1,510.2 1,540.9 1,572.0 1,599.9 21 Farm 145.1 149.9 156.1 163.8 163.1 163.8 162.4 166.1 168.6 169.1 169.4 22 State and local government 1,070.2 1,063.4 1,119.5 1,199.8 1,178.8 1,199.8 1,223.2 1,238.2 1,242.4 1,252.5 1,258.1 23 Foreign credit market debt held in United States 441.4 518.7 570.1 603.7 612.8 603.7 607.8 598.2 614.7 618.2 646.6 24 Commercial paper 56.2 67.5 65.1 72.9 74.0 72.9 77.2 70.1 81.8 89.2 101.6 25 Bonds 291.9 347.7 394.9 420.0 428.6 420.0 420.2 417.1 424.4 420.1 429.9 26 Bank loans n.e.c 34.6 43.7 52.1 58.9 56.4 58.9 59.1 60.5 58.8 59.4 63.3 27 Other loans and advances 58.8 59.8 58.0 52.0 53.8 52.0 51.3 50.5 49.7 49.5 51.8 28 Total credit market debt owed by nonfinancial sectors, domestic and foreign 14,165.3 14,975.0 15,830.5 16,902.1 16,580.2 16,902.1 17,221.7 17,390.0 17,728.2 18,071.8 18,333.1 Financial sectors 29 Total credit market debt owed by financial sectors 4,278.8 4,824.6 5,445.2 6,519.1 6,199.5 6,519.1 6,809.0 7,073.3 7,346.9 7,607.0 7,745.5 By instrument 30 Federal government-related 2,376.8 2,608.3 2,821.1 3,292.0 3,121.7 3,292.0 3,434.1 3,580.7 3,745.9 3,884.0 3,940.8 31 Government-sponsored enterprise securities 806.5 896.9 995.3 1,273.6 1,146.0 1,273.6 1,321.8 1,398.0 1,499.8 1,591.7 1,618.5 32 Mortgage pool securities 1,570.3 1,711.4 1,825.8 2,018.4 1,975.7 2,018.4 2,112.3 2,182.7 2,246.1 2,292.3 2,322.3 33 Loans from U.S. government .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 34 Private 1,901.9 2,216.3 2,624.1 3,227.1 3,077.8 3,227.1 3,374.9 3,492.6 3,601.1 3,723.0 3,804.7 35 Open market paper 486.9 579.1 745.7 906.7 874.2 906.7 926.4 940.9 963.4 1,082.9 1,115.7 36 Corporate bonds 1,204.7 1,378.4 1,555.9 1,852.8 1,790.2 1,852.8 1,968.6 2,042.8 2,091.2 2,074.6 2,112.6 37 Bank loans n.e.c 51.4 64.0 77.2 107.2 103.2 107.2 104.1 106.8 105.2 92.9 93.6 38 Other loans and advances 135.0 162.9 198.5 288.7 246.2 288.7 299.1 328.6 365.4 395.8 404.4 39 Mortgages 24.1 31.9 46.8 71.6 64.0 71.6 76.6 73.6 75.9 76.7 78.5 By borrowing sector 40 Commercial banks 102.6 113.6 140.6 188.6 169.6 188.6 187.5 202.7 224.2 230.0 242.2 41 Bank holding companies 148.0 150.0 168.6 193.5 196.1 193.5 202.6 205.5 211.9 219.3 221.4 42 Savings institutions 115.0 140.5 160.3 212.4 186.6 212.4 226.9 241.6 255.4 260.4 266.9 43 Credit unions .4 .4 .6 1.1 1.0 1.1 1.5 1.8 2.5 3.4 2.6 44 Life insurance companies .5 1.6 1.8 2.5 2.0 2.5 3.3 4.0 4.3 3.2 3.0 45 Government-sponsored enterprises 806.5 896.9 995.3 1,273.6 1,146.0 1,273.6 1,321.8 1,398.0 1,499.8 1,591.7 1,618.5 46 Federally related mortgage pools 1,570.3 1,711.4 1,825.8 2,018.4 1,975.7 2,018.4 2,112.3 2,182.7 2,246.1 2,292.3 2,322.3 47 Issuers of asset-backed securities (ABSs) 712.5 863.3 1,076.6 1,398.0 1,310.9 1,398.0 1,463.1 1,539.9 1,599.1 1,632.0 1,665.8 48 Brokers and dealers 29.3 27.3 35.3 42.5 39.4 42.5 34.8 30.4 34.6 25.3 36.4 49 Finance companies 483.9 529.8 554.5 597.5 589.4 597.5 614.4 639.2 628.5 659.9 670.4 50 Mortgage companies 16.5 20.6 16.0 17.7 16.9 17.7 16.5 17.8 16.3 17.8 17.1 51 Real estate investment trusts (REITs) 44.6 56.5 96.1 158.8 147.8 158.8 165.2 160.3 162.2 165.1 167.9 52 Funding corporations 248.6 312.7 373.7 414.4 417.9 414.4 459.1 449.5 462.0 506.6 510.9 All sectors 53 Total credit market debt, domestic and foreign ... 18,444.0 19,799.6 21,275.7 23,421.2 22,779.6 23,421.2 24,030.7 24,463.3 25,075.1 25,678.8 26,078.6 54 Open market paper 700.4 803.0 979.4 1,172.6 1,165.1 1,172.6 1,227.6 1,243.3 1,284.5 1,402.4 1,478.1 55 U.S. government securities 6,013.6 6,390.0 6,626.0 7,044.3 6,841.9 7,044.3 7,193.8 7,232.4 7,378.6 7,565.0 7,594.3 56 Municipal securities 1,293.5 1,296.0 1,367.5 1,464.3 1,439.9 1,464.3 1,491.0 1,510.0 1,518.6 1,532.5 1,539.2 57 Corporate and foreign bonds 2,840.7 3,186.5 3,561.7 4,102.4 4,000.0 4,102.4 4,286.9 4,429.9 4,536.2 4,554.2 4,649.2 58 Bank loans n.e.c 949.6 1,041.7 1,169.8 1,314.9 1,280.3 1,314.9 1,328.3 1,345.7 1,366.9 1,383.8 1,413.6 59 Other loans and advances 930.6 993.1 1,095.9 1,254.4 1,186.8 1,254.4 1,307.8 1,332.6 1,382.2 1,428.1 1,486.6 60 Mortgages 4,592.9 4,877.7 5,211.2 5,736.7 5,579.2 5,736.7 5,876.0 6,029.0 6,237.9 6,386.6 6,501.3 61 Consumer credit 1,122.8 1,211.6 1,264.1 1,331.7 1,286.6 1,331.7 1,319.3 1,340.4 1,370.1 1,426.2 1,416.2 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 A41 1.60 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES1 Billions of dollars except as noted, end of period 1998 1999 2000 Transaction category or sector 1995 1996 1997 11999988 Q3 Q4 QL Q2 Q3 Q4 QL CREDIT MARKET DEBT OUTSTANDING2 1 Total credit market assets 18,444.0 19,799.6 21,275.7 23,421.2 22,779.6 23,421.2 24,030.7 24,463.3 25,075.1 25,678.8 26,078.6 7 Domestic nonfederal nonfinancial sectors 2,846.3 2,903.6 2,816.2 2,862.6 2,911.9 2,862.6 2,953.6 3,006.2 3,064.9 3,118.0 3,072.7 Household 1,885.0 1,990.6 1,917.9 1,815.8 1,927.2 1,815.8 1,885.2 1,907.8 1,962.7 1,998.8 1,963.6 4 Nonfinancial corporate business 280.4 270.2 257.5 271.5 245.2 271.5 259.8 266.7 283.2 298.9 285.5 5 Nonfarm noncorporate business 42.3 38.0 35.9 35.9 35.9 35.9 36.6 36.9 37.1 37.5 38.1 6 State and local governments 638.6 604.8 605.0 739.4 703.6 739.4 772.1 794.8 781.9 782.8 785.4 1 Federal government 202.7 195.3 200.4 213.9 210.9 213.9 218.1 219.8 255.6 256.4 259.7 8 Rest of the world 1,531.1 1,926.6 2,256.8 2,534.3 2,412.2 2,534.3 2,601.8 2,609.8 2,706.2 2,737.9 2,826.5 9 Financial sectors 13,863.9 14,774.1 16,002.3 17,810.4 17,244.6 17,810.4 18,257.1 18,627.5 19,048.5 19,566.5 19,919.7 10 Monetary authority 380.8 393.1 431.4 452.5 446.5 452.5 466.0 485.1 489.3 478.1 501.9 11 Commercial banking 3,520.1 3,707.7 4,031.9 4,335.7 4,195.7 4,335.7 4,338.4 4,383.4 4,488.3 4,644.0 4,724.7 17 U.S.-chartered banks 3,056.1 3.175.8 3,450.7 3,761.2 3,616.2 3,761.2 3,782.9 3,847.6 3,944.3 4,078.9 4,171.2 13 Foreign banking offices in United States 412.6 475.8 516.1 504.2 510.1 504.2 487.8 465.7 475.3 484.1 481.9 14 Bank holding companies 18.0 22.0 27.4 26.5 28.3 26.5 25.0 25.1 22.0 32.7 22.0 15 Banks in U.S. affiliated areas 33.4 34.1 37.8 43.8 41.1 43.8 42.7 45.0 46.7 48.3 49.7 16 Savings institutions 913.3 933.2 928.5 964.8 939.3 964.8 990.8 1,011.4 1,030.8 1,033.4 1,044.0 17 Credit unions 263.0 288.5 305.3 324.2 320.5 324.2 330.2 341.0 348.5 351.7 360.1 18 Bank personal trusts and estates 239.7 232.0 207.0 194.1 197.5 194.1 192.2 190.1 188.0 185.7 183.3 19 Life insurance companies 1,587.5 1,657.0 1,751.1 1,828.0 1,810.6 1,828.0 1,853.5 1,869.6 1,880.4 1,881.7 1,903.8 7.0 Other insurance companies 468.7 491.2 515.3 535.7 518.8 535.7 530.8 537.5 533.9 532.0 532.0 21 Private pension funds 716.9 769.2 834.7 953.4 909.8 953.4 968.5 1,006.0 1,017.4 1,050.1 1,065.7 2.2 State and local government retirement funds 531.0 568.2 632.0 698.0 685.7 698.0 717.2 724.0 733.6 748.6 745.3 73 Money market mutual funds 545.5 634.3 721.9 965.9 869.9 965.9 1,036.2 1,001.8 1,049.7 1,147.8 1,217.1 74 Mutual funds 771.3 820.2 901.1 1,025.9 1,005.9 1,025.9 1,050.8 1,083.8 1,083.1 1,074.0 1,055.0 75 Closed-end funds 96.4 101.1 98.3 102.8 101.7 102.8 103.6 104.3 105.1 105.9 106.7 26 Government-sponsored enterprises 750.0 807.9 902.2 1,163.0 1,055.4 1,163.0 1,201.9 1,267.0 1,338.6 1,397.5 1,422.2 27 Federally related mortgage pools 1,570.3 1,711.4 1,825.8 2,018.4 1,975.7 2,018.4 2,112.3 2,182.7 2,246.1 2,292.3 2,322.3 78 Asset-backed securities issuers (ABSs) 653.4 773.9 937.7 1,219.4 1,138.1 1,219.4 1,280.1 1,352.7 1,409.8 1,435.3 1,463.9 29 Finance companies 526.2 544.5 566.4 618.4 592.7 618.4 639.9 660.9 678.2 713.3 747.0 30 Mortgage companies 33.0 41.2 32.1 35.3 33.8 35.3 33.0 35.6 32.5 35.6 34.1 31 Real estate investment trusts (REITs) 26.0 30.4 50.6 45.5 55.7 45.5 45.9 45.3 44.7 42.9 38.8 37 Brokers and dealers 183.4 167.7 182.6 189.4 245.9 189.4 211.4 162.9 167.0 158.6 200.9 33 Funding corporations 87.4 101.4 146.5 140.0 145.7 140.0 154.4 182.2 183.5 258.1 250.9 RELATION OF LIABILITIES TO FINANCIAL ASSETS 34 Total credit market debt 18,444.0 19,799.6 21,275.7 23,421.2 22,779.6 23,421.2 24,030.7 24,463.3 25,075.1 25,678.8 26,078.6 Other liabilities 35 Official foreign exchange 63.7 53.7 48.9 60.1 54.5 60.1 53.6 50.9 52.1 50.1 49.4 36 Special drawing rights certificates 10.2 9.7 9.2 9.2 9.2 9.2 8.2 8.2 7.2 6.2 6.2 37 18.2 18.3 18.3 18.3 18.8 18.3 18.3 18.8 19.3 18.3 18.8 38 Foreign deposits 418.8 516.1 618.8 639.9 651.7 639.9 671.8 696.6 710.4 707.2 720.2 39 Net interbank liabilities 290.7 240.8 219.4 189.0 198.9 189.0 182.0 203.5 196.0 197.4 152.7 40 Checkable deposits and currency 1,229.3 1,245.1 1,286.6 1,334.2 1,282.3 1,334.2 1,311.4 1,354.1 1,354.9 1,485.8 1,393.5 41 Small time and savings deposits 2,279.7 2,377.0 2,474.1 2,626.5 2,553.8 2,626.5 2,637.6 2,644.6 2,665.9 2,670.9 2,728.5 42 Large time deposits 476.9 590.9 713.4 805.5 776.5 805.5 804.3 809.0 837.5 935.8 966.1 43 Money market fund shares 745.3 891.1 1,048.7 1,334.2 1,249.7 1,334.2 1,416.0 1,398.1 1,449.6 1,584.8 1,671.2 44 Security repurchase agreements 660.0 701.5 822.4 913.7 960.5 913.7 980.3 970.8 999.3 1,085.4 1,157.0 45 Mutual fund shares 1,852.8 2,342.4 2,989.4 3,610.5 3,137.3 3,610.5 3,758.4 4,049.1 3,932.1 4,552.4 4,751.9 46 305.7 358.1 469.1 572.3 573.6 572.3 552.7 589.3 593.2 665.9 792.7 47 Life insurance reserves 566.2 610.6 665.0 718.3 703.5 718.3 730.9 749.8 766.2 779.3 791.6 48 Pension fund reserves 5,766.9 6,642.6 7,895.8 9,097.6 8,123.6 9,097.6 9,275.8 9,731.4 9,479.4 10,386.8 10,395.6 49 Trade payables 1,698.0 1,812.8 1,943.3 1,970.7 1,958.4 1,970.7 1,972.9 2,032.7 2,092.8 2,144.7 2,153.7 50 Taxes payable 107.6 123.6 139.2 151.0 153.3 151.0 157.9 160.5 163.6 165.0 174.2 51 Investment in bank personal trusts 803.0 871.7 942.5 1,001.0 908.6 1,001.0 1,012.5 1,059.8 998.3 1,116.6 1,135.2 52 Miscellaneous 5,645.8 6,017.1 6,333.6 6,868.7 6,806.7 6,868.7 6,843.5 6,954.3 6,965.4 6,821.6 7,169.1 53 Total liabilities 41,382.7 45,222.6 49,913.2 55,341.8 52,900.6 55,341.8 56,418.8 57,944.8 58,358.3 61,053.1 62,306.1 Financial assets not included in liabilities ( + ) 54 Gold and special drawing rights 22.1 21.4 21.1 21.6 21.2 21.6 20.7 20.8 21.3 21.4 21.4 55 Corporate equities 8,495.7 10,255.8 13,181.4 15,413.4 13,121.2 15,413.4 15,893.6 17,018.0 16,008.3 18,876.7 19,557.9 56 Household equity in noncorporate business 3,672.2 3,878.2 4,149.8 4,387.2 4,322.3 4,387.2 4,442.5 4,499.8 4,557.5 4,602.6 4,639.6 Liabilities not identified as assets ( — ) 57 Treasury currency -5.8 --66..77 --77..33 -8.0 -7.2 -8.0 -8.4 -8.2 -8.2 -9.7 -9.6 58 Foreign deposits 360.2 431.4 532.9 545.9 564.1 545.9 561.4 582.9 585.3 593.4 591.3 59 Net interbank transactions -9.0 -10.6 -32.2 -27.0 -15.4 -27.0 -11.3 -10.6 -13.0 -25.0 -13.7 60 Security repurchase agreements 86.4 90.9 153.0 207.2 216.7 207.2 263.5 275.4 293.9 238.9 386.0 61 Taxes payable 62.4 76.7 92.3 101.5 100.4 101.5 88.9 110.2 92.5 93.1 82.8 62 -1,241.8 -1,692.7 -2,075.3 -2,659.9 -2,338.1 -2,659.9 -2,882.3 -2,998.6 -3,375.9 -3,717.7 -3,554.4 Floats not included in assets (—) 63 Federal government checkable deposits 3.1 -1.6 -8.1 -3.9 -12.0 -3.9 -7.2 -12.4 -10.2 -9.9 -6.5 64 Other checkable deposits 34.2 30.1 26.2 23.1 15.7 23.1 18.9 22.1 14.5 22.3 18.7 65 Trade credit 198.2 176.7 137.0 94.3 31.3 94.3 48.7 29.2 49.7 139.2 83.9 66 Total identified to sectors as assets 54,084.9 60,283.8 68,447.0 76,890.6 71,809.7 76,890.6 78,703.5 81,493.2 81,316.7 87,229.1 88,946.4 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 • August 2000 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures Monthly data seasonally adjusted, and indexes 1992=100, except as noted 1999 2000 MMeeaassuurree 11999977 11999988 11999999 Sept. Oct. Nov. Dec. Jan. Feb.1 Mar.r Apr. Mayp 1 Industrial production1 127.1 132.4 137.1 138.1 139.1 139.4 140.1 141.1 141.6 142.6 143.6 144.2 Market groupings 2 Products, total 119.6 123.7 126.5 127.6 128.5 128.0 128.5 129.7 130.1 130.5 131.2 131.4 3 Final, total 121.1 125.4 128.0 129.1 130.2 129.8 130.3 131.6 131.8 132.2 133.1 133.5 4 Consumer goods 115.1 116.2 116.9 117.1 118.2 117.6 118.1 118.8 118.7 118.5 119.1 119.0 5 Equipment 132.1 142.7 148.9 150.2 151.2 151.4 151.8 154.2 155.0 156.6 158.1 159.4 6 Intermediate 115.3 118.8 122.1 122.6 123.2 122.4 123.1 123.7 124.8 125.0 125.0 124.8 7 Materials 139.0 146.5 154.8 155.7 156.8 158.8 159.7 160.5 161.2 163.2 164.9 166.0 Industry groupings 8 Manufacturing 130.1 136.4 142.3 142.9 144.2 145.0 145.6 146.7 147.2 148.3 149.3 149.7 9 Capacity utilization, manufacturing (percent)2. . 82.4 80.9 79.8 79.7 80.2 80.3 80.3 80.7 80.7 81.0 81.3 81.2 10 Construction contracts3 144.lr 160.9r 176.9r 173.0 173.0 175.0 173.0r 173.0 177.0 188.0 177.0 169.0 11 Nonagricultural employment, total4 120.3 123.4 126.2 126.8r 127.0r 127.3r 127.5r 127.9r 128.0 128.5 128.9 129.1 12 Goods-producing, total 101.2 102.7 102.3 103.2r 103.3r 103.5r 103.6r 104. lr 103.9 104.3 104.2 104.0 13 Manufacturing, total 98.3 98.8 97.0 97.3r 913' 97.3r 913' 97.4r 97.2 97.3 97.3 97.2 14 Manufacturing, production workers 99.6 99.8 97.8 98. r 98.lr 98.lr 98.r 98.2r 98.0 97.9 98.0 97.9 15 Service-producing 126.5 130.0 133.8 134.31" 134.6r 134.9r 135.2r 135.5r 135.7 136.2 136.8 137.1 16 Personal income, total 175.4 185.7 196.6 198.1 200.5 201.3 201.9 203.3 204.0 205.4 206.8 17 Wages and salary disbursements 171.3 184.4 197.0 199.5 200.7 201.3 202.6 204.4 205.0 206.3 208.2 n.a. 18 Manufacturing 144.6 152.4 156.9 158.6 159.7 158.8 158.8 160.2 160.9 161.2 163.2 n.a. 19 Disposable personal income5 172.9 181.7 191.9 193.0 195.6 196.4 196.7 198.0r 198.6 200.0 201.3 n.a. 20 Retail sales5 169.8 178.4r 194.5r 197.9r 198.8r 200.8r 204.0r 205.5r 208.3 209.3 208.1 207.4 Prices6 21 Consumer (1982-84=100) 160.5 163.0 166.6 167.9 168.2 168.3 168.3 168.7 169.7 171.1 171.2 171.3 22 Producer finished goods (1982=100) 131.8 130.7 133.0 134.7 135.1 134.9 134.9 134.7 136.0 137.0 137.0 137.5 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 1999. The recent annual revision is described in an article in the 4. Based on data from the U.S. Department of Labor, Employment and Earnings. Series March 2000 issue of the Bulletin. For a description of the methods of estimating industrial covers 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, U.S. Department of Commerce, and other sources. 2.11 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT Thousands of persons; monthly data seasonally adjusted 1999r 2000 CCaatteeggoorryy 11999977 11999988 11999999 Oct. Nov. Dec. Jan.r Feb.r Mar.r Apr. Mayp HOUSEHOLD SURVEY DATA1 1 Civilian labor force2 136,297 137,673 139,368 139,697 139,834 140,108 114400,,991100 114411,,116655 140,867 114411,,223300 114400,,448899 Employment 2 Nonagricultural industries3 126.159 128,085 130,207 130,702 130,788 131,141 131,850 131,954 131,801 132,351 131,417 3 Agriculture 3.399 3,378 3,281 3,238 3,310 3,279 3,371 33,,440088 33,,335599 33,,335555 33,,229988 Unemployment 4 Number 6,739 6,210 5,880 5,757 5,736 5,688 5,689 5,804 5,708 5,524 5,774 5 Rate (percent of civilian labor force) 4.9 4.5 4.2 4.1 4.1 4.1 4.0 4.1 4.1 3.9 4.1 ESTABLISHMENT SURVEY DATA 6 Nonagricultural payroll employment4 122,690 125,826 128,616 129,523 129,788 130,038 130,387 130,482 131,009 131,423 131,654 7 Manufacturing 18,675 18,772 18,431 18,484 18,484 18,479 18,495 18,473 18,476 18,486 18,469 8 Mining 596 590 535 529 527 530 530 533 536 539 538 9 Contract construction 5,691 5,985 6,273 6,470 6,516 6,552 6,652 6,618 6,726 6,692 6,663 10 Transportation and public utilities 6,408 6,600 6,792 6,875 6,898 6,911 6,925 6,937 6,953 6,973 6,962 11 Trade 28,614 29,127 29,792 29,836 29,882 29,938 29,978 29,989 30,060 30,254 30,183 12 Finance 7,109 7,407 7,632 7,599 7,604 7,613 7,612 7,624 7,621 7,611 7,607 13 Service 36,040 37,526 39,000 39,482 39,606 39,707 39,844 39,914 40,090 40,203 40,220 14 Government 19,557 19,819 20,161 20,248 20,271 20,308 20,351 20,394 20,547 20,665 21,012 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 1999 2000 1999 2000 1999 2000 SSeerriieess Q2 Q3 Q4 Qlr Q2 Q3 Q4 Qlr Q2 Q3 Q4 Qlr Output (1992=100) Capacity (percent of 1992 output) Capacity utilization rate (percent)2 1 Total industry 136.1 137.7 139.5 141.8 169.2 170.7 172.3 173.8 80.5 80.7 81.0 81.6 2 Manufacturing 140.9 142.5 144.9 147.4 176.9 178.7 180.6 182.4 79.6 79.7 80.3 80.8 3 Primary processing3 122.5 123.4 125.4 126.0 148.2 149.0 149.8 150.4 82.7 82.8 83.7 83.7 4 Advanced processing4 150.5 152.5 155.2 158.7 191.4 193.7 196.1 198.7 78.6 78.7 79.1 79.9 Durable goods 170.8 174.4 177.4 182.4 214.2 217.6 221.0 224.8 79.8 80.2 80.3 81.2 6 Lumber and products 122.5 120.5 120.6 121.1 146.3 147.4 148.4 149.0 83.7 81.7 81.2 81.2 7 Primary metals 125.1 128.7 130.9 132.4 148.5 149.3 150.1 150.7 84.2 86.2 87.2 87.8 8 Iron and steel 121.4 126.6 129.1 130.9 150.0 151.3 152.5 153.5 80.9 83.7 84.6 85.3 9 Nonferrous 129.6 131.2 133.3 134.2 146.8 147.0 147.2 147.5 88.3 89.3 90.5 91.0 10 Industrial machinery and equipment 227.9 232.3 239.9 252.4 275.5 285.3 295.8 306.1 82.7 81.4 81.1 82.5 11 Electrical machinery 374.6 400.9 419.0 458.2 482.0 498.5 514.6 537.2 77.7 80.4 81.4 85.3 12 Motor vehicles and parts 150.6 153.3 154.7 155.2 184.8 184.9 185.0 185.7 81.5 82.9 83.6 83.6 13 Aerospace and miscellaneous transportation equipment 95.9 93.8 89.9 87.7 126.6 126.2 125.8 125.2 75.7 74.3 71.5 70.0 14 Nondurable goods 111.6 111.5 113.4 113.7 139.5 139.9 140.3 140.5 80.0 79.7 80.9 80.9 15 Textile mill products 111.1 111.6 111.4 111.3 131.5 131.6 131.8 131.9 84.5 84.8 84.5 84.4 16 Paper and products 115.1 116.0 117.9 117.1 134.5 135.3 136.1 136.6 85.6 85.7 86.6 85.7 17 Chemicals and products 116.3 117.0 121.8 121.7 150.4 150.7 151.0 151.4 77.3 77.6 80.7 80.4 18 Plastics materials 123.5 124.2 132.3 134.0 137.2 138.4 139.6 140.8 90.0 89.7 94.8 95.2 19 Petroleum products 114.1 114.6 114.1 115.9 122.2 122.7 123.1 123.4 93.3 93.4 92.7 93.9 ?0 Mining 97.1 98.2 99.5 100.4 120.3 120.2 120.2 119.8 80.7 81.7 82.8 83.8 71 Utilities 116.6 118.4 113.2 114.4 127.3 127.8 128.2 128.6 91.6 92.7 88.3 88.9 22 Electric 118.9 120.8 116.5 116.0 125.2 125.6 126.1 126.6 95.0 96.2 92.4 91.6 1973 1975 Previous cycle5 Latest cycle6 1999 1999 2000 High Low High Low High Low May Dec. Jan. Feb.r Mar.r Apr. Mayp Capacity utilization rate (percent)2 1 Total industry 89.2 72.6 87.3 71.1 85.4 78.1 80.5 81.1 81.4 81.5 81.8 82.1 82.1 2 Manufacturing 88.5 70.5 86.9 69.0 85.7 76.6 79.7 80.3 80.7 80.7 81.0 81.3 81.2 3 Primary processing3 91.2 68.2 88.1 66.2 88.9 77.7 82.7 83.9 83.9 83.7 83.6 83.9 83.5 4 Advanced processing4 87.2 71.8 86.7 70.4 84.2 76.1 78.7 79.2 79.7 79.7 80.2 80.4 80.5 5 Durable goods 89.2 68.9 87.7 63.9 84.6 73.1 79.7 80.3 81.0 80.9 81.6 81.9 82.0 6 Lumber and products 88.7 61.2 87.9 60.8 93.6 75.5 84.7 81.6 82.0 81.3 80.4 80.2 80.1 7 Primary metals 100.2 65.9 94.2 45.1 92.7 73.7 83.5 88.3 88.2 86.9 88.4 88.6 88.1 8 Iron and steel 105.8 66.6 95.8 37.0 95.2 71.8 80.1 86.1 85.4 84.1 86.3 86.0 85.7 9 Nonferrous 90.8 59.8 91.1 60.1 89.3 74.2 87.6 91.0 91.7 90.3 90.9 91.8 91.1 10 Industrial machinery and equipment 96.0 74.3 93.2 64.0 85.4 72.3 82.9 80.7 81.8 82.5 83.1 83.3 83.0 11 Electrical machinery 89.2 64.7 89.4 71.6 84.0 75.0 77.4 82.0 84.0 84.9 86.9 88.0 88.3 12 Motor vehicles and parts 93.4 51.3 95.0 45.5 89.1 55.9 81.5 82.5 84.5 82.6 83.6 83.6 84.1 13 Aerospace and miscellaneous transportation equipment 78.4 67.6 81.9 66.6 87.3 79.2 75.8 71.4 70.6 69.9 69.6 69.2 69.3 14 Nondurable goods 87.8 71.7 87.5 76.4 87.3 80.7 80.2 81.0 80.8 81.0 80.8 80.8 80.6 15 Textile mill products 91.4 60.0 91.2 72.3 90.4 77.7 84.4 83.5 84.5 84.0 84.7 85.3 84.6 16 Paper and products 97.1 69.2 96.1 80.6 93.5 85.0 85.2 86.3 85.7 85.3 86.1 87.2 86.4 17 Chemicals and products 87.6 69.7 84.6 69.9 86.2 79.3 77.8 81.3 80.4 80.8 79.9 79.8 79.4 18 Plastics materials 102.0 50.6 90.9 63.4 97.0 74.8 90.5 94.9 91.9 102.4 91.3 92.4 91.6 19 Petroleum products 96.7 81.1 90.0 66.8 88.5 85.1 93.4 93.3 91.8 93.7 96.2 95.2 95.8 70 Mining 94.3 88.2 96.0 80.3 88.0 87.0 81.0 82.8 83.1 83.5 84.9 85.3 85.7 ?1 Utilities 96.2 82.9 89.1 75.9 92.6 83.4 91.1 88.4 89.2 89.7 87.9 90.1 91.3 22 Electric 99.0 82.7 88.2 78.9 95.0 87.1 94.6 92.6 91.8 91.7 91.4 93.3 94.9 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 1999. The recent annual revision is described in an article in the 4. Advanced processing includes foods; tobacco; apparel; furniture and fixtures; printing March 2000 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

A44 Domestic Nonfinancial Statistics • August 2000 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data seasonally adjusted 1992 1999 2000 GGrroouupp p p r o o r - - 1 a 9 v 9 g 9 . tion May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb/ Mar/ Apr. Mayp Index (1992 = 100) MAJOR MARKETS 1 Total index 100.0 137.1 136.2 136.6 137.4 137.7 138.1 139.1 139.4 140.1 141.1 141.6 142.6 143.6 144.2 2 Products 60.5 126.5 126.8 126.8 126.9 127.6 127.6 128.5 128.0 128.5 129.7 130.1 130.5 131.2 131.4 3 Final products 46.3 128.0 128.2 128.3 128.6 129.5 129.1 130.2 129.8 130.3 131.6 131.8 132.2 133.1 133.5 4 Consumer goods, total 29.1 116.9 116.8 117.0 116.8 117.6 117.1 118.2 117.6 118.1 118.8 118.7 118.5 119.1 119.0 5 Durable consumer goods 6.1 152.6 152.8 154.0 153.4 155.5 153.5 157.4 154.4 155.7 158.9 156.4 156.9 159.3 158.7 6 Automotive products 2.6 144.7 145.4 147.4 143.7 150.6 145.5 147.9 146.2 144.4 149.1 145.4 146.0 148.7 148.5 7 Autos and trucks 1.7 151.8 153.2 157.5 148.9 162.9 152.8 155.1 154.3 148.7 155.0 150.7 151.9 156.1 155.4 8 Autos, consumer .9 102.6 99.9 101.8 102.4 105.0 105.5 103.9 107.2 99.8 105.4 105.0 103.1 107.4 108.7 9 Trucks, consumer .7 202.4 207.4 214.2 197.2 221.6 201.9 207.8 203.6 199.0 206.3 198.3 202.3 206.7 204.3 10 Auto parts and allied goods .... .9 133.9 133.6 132.5 135.3 132.8 134.4 136.7 133.8 137.1 139.6 136.9 136.6 137.3 137.6 11 Other 3.5 158.6 158.3 158.8 161.1 158.7 159.7 165.0 160.7 164.9 166.6 165.4 165.8 167.9 166.8 12 Appliances, televisions, and air conditioners 1.0 324.3 311.1 319.0 329.9 319.0 326.3 363.1 348.4 357.6 361.6 362.8 366.7 370.3 369.4 13 Carpeting and furniture .8 121.7 121.0 121.0 124.1 122.1 124.1 124.8 117.4 123.0 126.9 122.6 123.7 127.5 126.8 14 Miscellaneous home goods 1.6 114.7 117.2 116.2 115.9 115.4 114.4 114.8 115.0 116.7 116.6 116.6 115.9 116.5 115.3 15 Nondurable consumer goods 23.0 108.7 108.4 108.4 108.3 108.9 108.7 109.3 109.1 109.5 109.7 110.0 109.7 110.0 110.0 16 Foods and tobacco 10.3 107.3 107.7 107.3 106.7 106.5 106.2 106.8 107.3 107.4 107.6 107.9 107.8 107.9 107.8 17 Clothing 2.4 90.6 90.2 90.2 89.2 90.1 89.9 89.4 90.6 89.1 89.3 89.6 89.2 89.8 88.9 18 Chemical products 4.5 121.8 120.5 120.2 119.4 122.7 120.9 123.1 126.0 126.5 125.8 125.1 125.9 125.6 125.0 19 Paper products 2.9 102.3 100.3 101.5 102.0 103.2 104.7 106.3 105.1 103.1 104.3 104.5 103.0 103.2 103.8 20 Energy 2.9 114.0 114.7 115.3 118.6 116.6 117.6 114.5 106.7 112.0 113.0 114.8 113.4 115.3 116.8 21 Fuels .8 111.3 110.9 109.9 111.1 110.0 112.0 112.4 110.1 111.7 108.4 111.5 114.8 113.1 114.3 22 Residential utilities 2.1 115.0 116.1 117.4 121.7 119.3 119.7 114.9 104.3 111.6 114.6 115.8 112.1 115.7 117.5 23 Equipment 17.2 148.9 148.4 148.3 149.3 150.5 150.2 151.2 151.4 151.8 154.2 155.0 156.6 158.1 159.4 24 Business equipment 13.2 171.6 171.2 171.2 172.6 173.9 173.7 174.8 175.0 175.5 179.4 180.6 182.7 184.8 186.0 25 Information processing and related 5.4 248.6 244.3 248.2 253.8 259.9 261.3 265.6 266.7 270.1 277.9 281.2 286.0 290.9 296.8 26 Computer and office equipment 1.1 840.1 805.8 830.2 851.9 892.8 926.9 950.5 970.0 985.6 1,015.3 1,059.5 1,094.5 1,126.1 1,156.4 27 Industrial 4.0 135.3 135.3 133.7 135.4 133.6 133.9 134.9 134.6 135.0 138.4 140.1 139.7 140.2 140.1 28 Transit 2.5 126.9 128.9 128.2 127.5 128.1 124.0 122.3 121.2 118.5 119.9 117.6 117.0 116.9 116.6 29 Autos and trucks 1.2 131.4 131.2 132.2 131.2 135.3 132.0 133.4 134.2 127.8 134.3 134.0 133.9 135.3 136.6 30 Other 1.3 131.4 134.0 130.2 123.8 123.2 126.4 125.1 127.5 128.1 126.8 128.6 137.0 141.4 137.4 31 Defense and space equipment 3.3 74.4 75.2 74.6 74.5 74.7 73.6 73.7 73.0 72.4 70.6 69.7 69.8 69.3 70.1 32 Oil and gas well drilling .6 106.8 99.8 100.1 102.0 107.1 111.3 115.7 121.3 124.3 125.5 129.9 130.6 132.2 139.6 33 Manufactured homes .2 155.2 161.3 158.9 151.5 151.3 144.4 142.6 139.3 138.3 135.4 129.6 129.3 125.5 124.5 34 Intermediate products, total 14.2 122.1 122.3 121.7 121.5 121.7 122.6 123.2 122.4 123.1 123.7 124.8 125.0 125.0 124.8 35 Construction supplies 5.3 133.4 132.9 132.6 133.2 132.9 134.1 135.4 134.3 134.9 136.4 137.5 138.6 138.7 137.9 36 Business supplies 8.9 115.3 116.1 115.3 114.6 115.1 115.8 115.9 115.2 116.0 116.1 117.2 116.8 116.8 117.1 37 Materials 39.5 154.8 151.7 153.1 155.0 154.6 155.7 156.8 158.8 159.7 160.5 161.2 163.2 164.9 166.0 38 Durable goods materials 20.8 198.9 194.3 197.2 200.3 199.9 202.3 203.4 206.7 208.8 211.7 213.1 217.6 220.2 222.6 39 Durable consumer parts 4.0 150.7 148.4 150.5 153.9 147.2 156.0 153.7 154.8 155.0 156.0 153.1 154.8 153.4 155.1 40 Equipment parts 7.6 360.9 345.0 355.2 364.6 369.0 371.4 377.5 386.8 394.9 404.9 418.0 436.0 449.5 460.6 41 Other 9.2 131.3 130.4 130.6 131.1 131.6 131.2 131.7 133.4 134.0 134.8 134.1 134.6 134.8 134.3 42 Basic metal materials 3.1 121.8 119.9 122.6 122.8 123.3 122.1 123.5 125.6 126.3 126.2 124.2 126.3 127.0 126.4 43 Nondurable goods materials 8.9 114.6 113.8 114.2 114.5 114.4 114.7 117.4 119.1 118.7 117.0 117.6 116.7 117.1 116.5 44 Textile materials 1.1 101.0 101.8 101.2 101.2 101.1 100.3 102.3 103.3 100.9 99.3 101.9 102.7 100.9 100.2 45 Paper materials 1.8 117.0 115.3 117.7 116.3 116.3 118.6 118.5 119.3 118.5 117.9 116.6 118.4 119.8 119.1 46 Chemical materials 3.9 117.3 116.0 116.9 117.7 117.4 117.7 122.0 125.1 124.2 122.1 124.5 121.1 121.7 121.3 47 Other 2.1 113.5 114.2 112.0 113.0 113.2 112.5 114.9 114.9 116.8 114.8 112.7 113.4 113.7 112.8 48 Energy materials 9.7 101.7 102.2 101.6 102.9 102.3 101.8 101.5 101.6 101.4 101.2 100.5 101.1 102.4 102.9 49 Primary energy 6.3 99.2 98.3 98.9 100.2 100.3 99.6 98.8 100.1 99.5 98.3 96.7 98.5 99.5 99.9 50 Converted fuel materials 3.3 107.0 109.9 106.8 108.0 106.1 106.1 106.5 104.1 104.8 106.8 108.2 106.2 108.0 108.7 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.1 137.0 136.1 136.4 137.3 137.4 138.0 138.9 139.3 140.2 141.0 141.6 142.6 143.6 144.1 52 Total excluding motor vehicles and parts 95.1 136.4 135.6 135.9 136.7 137.1 137.2 138.3 138.7 139.5 140.4 141.1 142.0 143.1 143.6 53 Total excluding computer and office equipment 98.2 131.1 130.2 130.6 131.2 131.4 131.5 132.4 132.7 133.2 134.1 134.4 135.2 136.0 136.4 54 Consumer goods excluding autos and trucks . 27.4 115.0 114.8 114.8 115.0 115.2 115.2 116.3 115.6 116.4 116.9 117.0 116.7 117.2 117.1 55 Consumer goods excluding energy 26.2 117.3 117.0 117.2 116.6 117.7 117.1 118.7 118.8 118.8 119.5 119.1 119.1 119.6 119.3 56 Business equipment excluding autos and trucks 12.0 176.2 175.7 175.7 177.4 178.3 178.5 179.5 179.7 181.1 184.5 186.0 188.3 190.5 191.7 57 Business equipment excluding computer and office equipment 12.1 143.8 144.2 143.6 144.4 144.6 143.6 144.0 143.7 143.8 146.8 146.9 148.0 149.2 149.6 58 Materials excluding energy 29.8 172.0 167.4 169.5 171.6 171.3 173.0 174.7 177.4 178.6 179.8 181.0 183.6 185.4 186.7 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A45 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1—Continued 1992 Group c S o I d C e p p o ro r- - 1 a 9 v 9 g 9 . tion May June July Aug. Sept. Feb.r Apr. Mayp Index (1992 = 100) MAJOR INDUSTRIES 59 Total index 100.0 137.1 136.2 136.6 137.4 137.7 138.1 139.1 139.4 140.1 141.1 141.6 142.6 143.6 144.2 60 Manufacturing 85.4 142.3 141.0 141.4 142.0 142.5 142.9 144.2 145.0 145.6 146.7 147.2 148.3 149.3 149.7 61 Primary processing 26.5 123.3 122.5 122.7 123.3 123.4 123.6 124.8 125.6 125.9 126.0 125.9 125.9 126.5 126.0 62 Advanced processing 58.9 151.8 150.7 151.2 151.8 152.6 153.1 154.5 155.2 155.9 157.5 158.4 160.1 161.3 162.3 63 Durable goods 45.0 172.8 170.8 172.2 173.8 174.4 175.0 176.5 177.4 178.4 181.0 181.8 184.5 186.5 187.8 64 Lumber and products " ' 24 2.0 121.6 123.9 122.2 121.5 120.2 119.7 120.5 119.8 121.4 122.1 121.2 119.9 119.6 119.5 65 Furniture and fixtures 25 1.4 125.5 124.4 124.4 125.7 126.4 127.9 127.0 125.2 128.6 126.9 126.8 127.6 128.0 128.1 66 Stone, clay, and glass products 32 2.1 130.5 128.5 127.8 129.3 130.2 129.6 131.2 132.4 131.4 130.9 131.7 132.3 133.4 132.3 67 Primary metals 33 3.1 126.6 123.9 127.4 128.0 129.6 128.3 129.0 131.1 132.8 132.8 130.9 133.4 133.9 133.4 68 Iron and steel 331,2 1.7 123.2 120.1 124.5 126.2 127.6 125.9 124.9 130.7 131.7 130.8 129.1 132.7 132.5 132.3 69 Raw steel 331PT .1 113.3 111.4 110.7 111.1 115.9 112.4 121.8 124.0 124.2 123.1 118.7 121.1 124.1 124.1 70 Nonferrous 333-6,9 1.4 130.9 128.6 130.8 130.2 132.1 131.4 134.0 131.7 134.1 135.2 133.2 134.3 135.6 134.8 71 Fabricated metal products . . 34 5.0 128.7 127.2 128.3 128.6 128.5 128.4 128.8 129.7 129.0 130.8 130.4 130.6 131.2 130.9 72 Industrial machinery and equipment 35 8.0 230.1 228.4 228.2 230.0 231.4 235.5 238.3 239.7 241.8 247.7 252.6 256.9 260.2 261.6 73 Computer and office equipment 357 1.8 1,061.4 1,021.6 1,048.2 1,075.1 1,123.7 1,167.5 1,196.6 1,222.8 1,244.6 1,284.5 1,342.2 1,389.1 1,428.4 1,466.2 74 Electrical machinery 36 7.3 390.2 373.3 384.2 399.2 401.3 402.1 412.6 418.1 426.4 443.5 455.6 475.5 491.2 503.8 75 Transportation equipment. . . 37 9.5 122.4 122.8 123.5 122.9 122.9 123.1 122.3 121.8 120.4 121.7 119.6 120.4 120.2 120.7 76 Motor vehicles and parts . 371 4.9 151.0 150.6 152.9 152.2 152.2 155.6 155.7 155.8 152.7 156.6 153.4 155.6 155.9 157.0 77 Autos and light tracks . 371PT 2.6 137.8 138.3 142.0 135.8 146.8 139.4 140.7 141.0 135.0 141.0 137.7 138.1 142.3 142.1 78 Aerospace and miscellaneous transportation equipment 372-6,9 4.6 94.9 96.0 95.2 94.7 94.7 92.2 90.6 89.5 89.7 88.6 87.5 87.0 86.4 8866..44 79 Instruments 38 5.4 116.5 116.7 117.0 117.2 117.7 117.2 118.3 118.9 119.7 118.4 117.3 117.5 117.7 118.6 80 Miscellaneous 39 1.3 124.7 125.5 124.5 125.2 125.2 125.1 125.0 125.0 126.4 126.9 125.5 124.8 125.2 124.6 81 Nondurable goods 40.4 111.8 111.9 111.3 111.0 111.5 111.8 113.0 113.6 113.7 113.5 113.8 113.6 113.7 113.4 82 Foods 20 9.4 110.1 110.6 110.0 108.9 108.9 109.6 110.1 110.3 110.0 109.8 110.7 111.2 111.1 111.0 83 Tobacco products 21 1.6 94.3 95.4 94.5 96.0 94.8 90.9 91.9 93.1 94.7 96.7 94.5 91.4 92.7 92.8 84 Textile mill products 22 1.8 110.9 110.9 110.8 112.3 111.7 110.8 112.7 111.4 110.1 111.5 110.8 111.7 112.6 111.6 85 Apparel products 23 2.2 90.7 91.2 90.7 89.8 89.2 89.0 89.1 89.1 89.1 89.0 89.7 89.4 89.9 88.5 86 Paper and products 26 3.6 116.2 114.6 115.7 115.0 115.8 117.2 118.0 118.1 117.7 117.1 116.5 117.7 119.2 118.0 87 Printing and publishing .... 27 6.7 104.4 104.1 103.5 102.8 103.6 104.6 106.0 105.7 105.3 105.3 105.7 105.9 105.1 105.5 88 Chemicals and products .... 28 9.9 117.5 117.0 116.3 115.8 117.7 117.4 119.8 122.7 122.9 121.6 122.4 121.0 121.0 120.5 89 Petroleum products 29 1.4 114.7 114.2 113.4 115.1 114.1 114.6 114.5 112.8 114.9 113.2 115.6 118.8 117.6 118.4 90 Rubber and plastic products . 30 3.5 137.7 137.4 136.4 138.0 137.6 139.3 138.9 139.3 141.4 142.2 141.2 140.3 140.5 140.0 91 Leather and products 31 .3 69.8 70.9 71.3 69.1 70.2 69.5 68.2 67.7 65.4 68.1 66.2 65.0 64.0 63.7 92 Mining 6.9 98.0 97.4 97.1 97.8 98.5 98.3 99.2 99.7 99.5 99.7 100.0 101.6 102.0 102.3 93 Metal 10 .5 97.1 100.2 98.9 96.2 93.0 91.4 94.2 94.5 95.2 95.5 94.1 93.3 93.0 92.5 94 Coal 12 1.0 108.1 106.1 107.0 110.0 110.7 109.4 108.8 110.0 109.5 106.3 101.9 109.3 112.0 110.1 95 Oil and gas extraction 13 4.8 92.5 91.8 91.4 92.3 93.2 93.0 94.0 94.5 94.6 95.7 96.2 96.4 96.7 98.0 96 Stone and earth minerals 14 .6 124.4 123.9 123.3 120.5 123.0 125.5 126.3 125.0 122.4 120.8 127.5 133.0 131.3 127.8 97 Utilities 7.7 115.6 116.1 117.4 119.8 117.8 117.7 115.2 110.9 113.5 114.6 115.3 113.2 116.1 117.7 98 Electric 491.493PT 6.2 118.2 118.4 119.6 122.6 120.0 119.8 116.9 115.8 116.9 116.0 116.0 115.9 118.5 120.7 99 Gas 492.493PT 1.6 104.8 105.8 107.5 107.4 108.2 108.5 107.9 88.2 98.1 108.4 112.6 100.9 105.5 104.5 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 80.5 141.7 140.5 140.8 141.4 142.0 142.3 143.6 144.5 145.2 146.2 146.9 148.0 149.0 149.4 101 Manufacturing excluding computer and office equipment 83.6 135.3 134.1 134.3 134.8 135.1 135.3 136.5 137.1 137.6 138.5 138.7 139.7 140.4 140.7 102 Computers, communications equipment, and semiconductors 5.9 794.1 753.3 780.5 812.1 830.4 843.0 863.9 887.7 908.5 952.4 994.7 1,045.0 1,085.2 1,120.8 103 Manufacturing excluding computers and semiconductors 81.1 121.6 121.3 121.2 121.3 121.6 121.7 122.6 122.9 123.1 123.6 123.4 123.7 124.0 124.0 lOt Manufacturing excluding computers, communications equipment, and semiconductors 79.5 119.3 119.1 118.9 118.9 119.1 119.3 120.1 120.4 120.6 120.9 120.7 120.9 121.1 120.9 Gross value (billions of 1992 dollars, annual rates) Major Markets 105 Products, total 2,001.9 2,726.1 2,721.9 2,723.6 2,726.1 2,742.0 2,740.2 2,762.6 2,740.0 2,751.5 2,781.7 2,791.9 2,799.9 2,814.5 2,821.0 106 Final 1,552.1 2,101.6 2,095.3 2,100.3 2,102.8 2,118.5 2,112.5 2,132.5 2,115.8 2,122.4 2,147.5 2,152.5 2,160.1 2,173.8 2,181.0 107 Consumer goods 1,049.6 1,294.9 1,290.1 1,295.1 1,292.4 1,301.3 1,297.0 1,311.7 1,294.7 1,301.5 1,309.9 1,309.9 1,309.1 1,314.9 1,315.2 108 Equipment 502.5 808.3 806.7 806.7 812.3 819.0 817.5 822.5 823.4 822.9 840.3 845.6 854.5 862.6 869.8 109 Intermediate 449.9 623.3 625.2 622.1 622.0 622.4 626.4 628.9 623.0 627.9 633.0 638.1 638.5 639.5 638.9 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 1999. The recent annual revision is described in an article in the Historical Revision," Federal Reserve Bulletin, vol. 76 (April 1990), pp. 187-204. March 2000 issue of the Bulletin. For a description of the methods of estimating industrial 2. Standard industrial classification. production and capacity utilization, see "Industrial Production and Capacity Utilization: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics • August 2000 2.14 HOUSING AND CONSTRUCTION Monthly figures at seasonally adjusted annual rates except as noted 1999 2000 11999977 11999999 July Aug. Sept. Oct. Nov. Dec. Jan. Feb.r Mar.r Apr. Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 1,441 1,612 1,664 1,673 1,658 1,553 1,636 1,678 1,683 1,762 1,661 1,597 1,559 2 One-family 1,062 1,188 1,247 1,263 1,233 1,200 1,204 1,238 1,266 1,317 1,223 1,238 1,164 3 Two-family or more 379 425 417 410 425 353 432 440 417 445 438 359 395 4 Started 1,474 1,617 1,667 1,704 1,657 1,628 1,636 1,663 1,769 1,744 1,822 1,630 1,656 5 One-family 1,134 1,271 1,335 1,348 1,285 1,290 1,343 1,344 1,441 1,361 1,324 1,327 1,321 6 Two-family or more 340 346 332 356 372 338 293 319 328 383 498 303 335 7 Under construction at end of period1 833 935 1,022 1,017 1,026 1,021 1,020 1,022 1,025 1,033 1,041 1,031 1,031 8 One-family 570 637 704 702 706 702 706 708 710 712 712 707 704 9 Two-family or more 264 297 318 315 320 319 314 314 315 321 329 324 327 10 Completed 1,404 1,473 1,636 1,619 1,581 1,642 1,608 1,653 1,675 1,599 1,732 1,734 1,668 11 One-family 1,120 1,158 1,308 1,262 1,251 1,307 1,274 1,345 1,340 1,296 1,382 1,382 1,369 12 Two-family or more 285 315 328 357 330 335 334 308 335 303 350 352 299 13 Mobile homes shipped 354 374 348 336 340 320 321 316 304 307 291 287 271 Merchant builder activity in one-family units 14 Number sold 804 886 907 936 914 848 906 895 916 927r 912 965 909 15 Number for sale at end of period' 287 300 326 306 307 311 314 317 320 321r 308 320 319 Price of units sold (thousands of dollars)2 16 Median 146.0 152.5 160.0 157.9 154.9 162.0 160.0 172.9 165.0 163.0r 162.5 165.0 161.4 17 Average 176.2 181.9 195.8 188.8 193.3 194.4 200.3 212.4 203.0 200. lr 199.5 202.3 208.0 EXISTING UNITS (one-family) 18 Number sold 4,382 4,970 5,197 5,310 5,300 5,150 4,880 5,150 5,140 4,450 4,760 5,200 4,880 Price of units sold (thousands of dollars)2 19 Median 121.8 128.4 133.3 136.0 137.4 134.4 132.5 133.2 133.7 132.2 133.7 134.7 136.1 20 Average 150.5 159.1 168.3 171.9 174.3 170.2 167.2 168.9 168.8 168.9 168.1 171.5 173.3 Value of new construction (millions of dollars)3 CONSTRUCTION 21 Total put in place 617,877 664,451 706,431 701,961 698,439 698,168 703,447 717,585 731,771 746,204 756,004 761,738 757,259 22 Private 474,842 518,987 547,514 545,992 541,793 540,939 544,532 550,018 557,688 565,804 581,807 587,202 583,821 23 Residential 265,908 293,569 321,795 320,350 319,656 320,048 322,876 326,091 330,141 337,230 339,786 343,770 340,062 24 Nonresidential 208,933 225,418 225,720 225,642 222,137 220,891 221,656 223,927 227,547 228,574 242,021 243,432 243,759 25 Industrial buildings 31,355 32,308 26,698 26,246 25,703 25,566 25,387 26,136 26,771 25,954 30,267 30,030 30,105 26 Commercial buildings 86,190 95,252 103,111 103,355 102,407 102,728 102,746 104,208 104,172 104,207 112,612 113,031 114,443 21 Other buildings 37,198 39,438 38,774 38,412 37,791 37,727 38,478 37,820 38,735 39,752 42,268 41,716 41,809 28 Public utilities and other 54,190 58,421 57,136 57,629 56,236 54,870 55,045 55,763 57,869 58,661 56,874 58,655 57,402 29 Public 143,035 145,464 158,917 155,969 156,646 157,229 158,915 167,566 174,083 180,401 174,197 174,535 173,438 30 Military 2,559 2,588 2,133 2,275 1,682 1,947 2,090 1,961 2,362 1,775 2,860 2,278 2,129 31 Highway 44,295 45,067 50,495 47,822 48,182 49,031 47,058 53,487 56,887 63,677 53,495 55,225 54,273 32 Conservation and development 5,576 5,487 6,173 5,820 6,598 6,268 6,283 6,555 7,104 6,629 7,114 6,674 6,078 33 Other 90,605 92,322 100,117 100,052 100,184 99,983 103,484 105,563 107,730 108,320 110,728 110,358 110,958 1. Not at annual rates. SOURCE. Bureau of the Census estimates for all series except (1) mobile homes, which are 2. Not seasonally adjusted. private, domestic shipments as reported by the Manufactured Housing Institute and season- 3. Recent data on value of new construction may not be strictly comparable with data for ally adjusted by the Census Bureau, and (2) sales and prices of existing units, which are previous periods because of changes by the Bureau of the Census in its estimating techniques. published by the National Association of Realtors. All back and current figures are available For a description of these changes, see Construction Reports (C-30-76-5), issued by the from the originating agency. Permit authorizations are those reported to the Census Bureau Census Bureau in July 1976. from 19,000 jurisdictions beginning in 1994. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A47 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data except as noted Change from 12 Change from 3 months earlier Change from 1 month earlier months earlier (annual rate) IIInnndddeeexxx llleeevvveeelll,,, IIIttteeemmm 1999 2000 2000 MMMaaayyy... 11999999 22000000 222000000000111 MMaayy MMaayy June Sept. Dec. Mar. Jan. Feb. Mar. Apr. May CONSUMER PRICES2 (1982-84=100) 1 All items 2.1 3.1 2.7 3.9 2.4 5.8 .2 .5 .7 .0 .1 171.3 2 Food 2.1 2.2 1.5 2.5 2.2 1.7 -.1 .4 .1 .1 .5 167.3 3 Energy items 1.7 14.6 16.5 26.0 7.8 50.5 1.0 4.6 4.9 -1.9 -1.9 121.0 4 All items less food and energy 2.0 2.4 2.1 2.5 1.8 3.2 .2 .2 .4 .2 .2 180.8 Commodities .6 .7 1.7 2.5 -.6 .3 -.2 .0 .3 .2 .0 145.5 6 Services 2.7 3.0 2.3 2.5 3.1 4.1 .3 .3 .5 .2 .2 200.9 PRODUCER PRICES (1982=100) 7 Finished goods 1.4 3.9 2.5 6.8 .9 8.6 .1 1.0 1.0 -.3 .0 137.5 8 Consumer foods .7 2.6 -.6 3.3 -2.0 3.3 .2 .4 .1 1.0 -.2 138.0 9 Consumer energy 1.6 18.1 22.4 37.6 5.9 59.0 .9 5.2 5.8 -4.1 -.5 91.5 10 Other consumer goods 2.5 1.9 .8 3.8 1.1 .8 -.4 .5 .1 .1 .2 153.8 11 Capital equipment .2 .8 .0 .3 1.2 .9 .1 -,lr .1 .2 .1 138.7 Intermediate materials 12 Excluding foods and feeds -.8 5.1 5.7 6.6 3.6 9.8 ,5r .9' 1.0 -.2 -.1 129.2 13 Excluding energy -1.0 3.2 2.8 3.4 2.1 3.9 .4 .2 .4 .4 .1 136.7 Crude materials 14 Foods -6.2 5.0 -7.7 3.7 -3.6 21.0 ,7r ,6r 3.5 1.7 -1.8 104.6 15 Energy 6.1 37.2 163.8 134.4 -27.9 91.5 4.7r li.r 1.2 -6.9 9.9 105.8 16 Other -10.7 13.0 7.0 22.6 26.2 10.2 2.3r ,3r -.2 -1.2 -.3 148.5 1. Not seasonally adjusted. SOURCE. U.S. Department of Labor, Bureau of Labor Statistics. 2. Figures for consumer prices are for all urban consumers and reflect a rental-equivalence measure of homeownership. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • August 2000 2.16 GROSS DOMESTIC PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1999 2000 AAccccoouunntt 11999977 11999988 11999999 Ql Q2 Q3 Q4 Qlr GROSS DOMESTIC PRODUCT 1 Total 8,300.8 8,759.9 9,256.1 9,072.7 9,146.2 9,297.8 9,507.9 9,697.6 By source 2 Personal consumption expenditures 5,524.4 5,848.6 6,257.3 6,090.8 6,200.8 6,303.7 6,434.1 6,602.5 i Durable goods 642.9 698.2 758.6 739.0 751.6 761.8 782.1 818.6 4 Nondurable goods 1,641.7 1,708.9 1,843.1 1,787.8 1,824.8 1,853.9 1,905.8 1,957.2 5 Services 3,239.8 3,441.5 3,655.6 3,564.0 3,624.3 3,688.0 3,746.2 3,826.7 6 Gross private domestic investment 1,383.7 1,531.2 1,622.7 1,594.3 1,585.4 1,635.0 1,675.8 1,719.3 / Fixed investment 1,315.4 1,460.0 1,578.0 1,543.3 1,567.8 1,594.2 1,606.8 1,685.4 8 Nonresidential 986.1 1,091.3 1,166.7 1,139.9 1,155.4 1,181.6 1,190.0 1,259.2 y Structures 254.1 272.8 273.4 274.7 272.5 272.1 274.1 290.1 10 Producers' durable equipment 732.1 818.5 893.4 865.2 882.9 909.5 916.0 969.2 11 Residential structures 329.2 368.7 411.3 403.4 412.4 412.7 416.7 426.1 12 Change in business inventories 68.3 71.2 44.6 51.0 17.6 40.8 69.1 34.0 13 Nonfarm 65.6 70.9 41.3 40.9 12.8 40.1 71.3 36.3 14 Net exports of goods and services — 88.3 -149.6 -253.9 -201.6 -245.8 -278.2 -290.1 -330.9 B Exports 968.0 966.3 998.3 966.9 978.2 1,008.5 1,039.5 1,058.9 16 Imports 1,056.3 1,115.9 1,252.2 1,168.5 1,224.0 1,286.6 1,329.6 1,389.8 17 Government consumption expenditures and gross investment 1,481.0 1,529.7 1,630.1 1,589.1 1,605.9 1,637.2 1,688.0 1,706.7 18 Federal 537.8 538.7 570.6 557.4 561.6 569.8 593.6 579.9 iy State and local 943.2 991.0 1.059.4 1,031.8 1,044.3 1,067.4 1,094.4 1,126.7 By major type of product 20 Final sales, total 8,232.4 8,688.7 9,211.5 9,021.6 9,128.6 9,257.0 9,438.8 9,663.7 21 Goods . 3,074.1 3,239.1 3,437.5 3,365.6 3,406.6 3,453.2 3,524.6 3,634.4 22 Durable 1,424.8 1,528.9 1,618.7 1,584.3 1,601.7 1,631.1 1,657.8 1,729.6 23 Nondurable 1,649.3 1,710.3 1,818.8 1,781.3 1,804.9 1,822.2 1,866.9 1,904.9 24 Services 4,434.7 4,664.6 4,932.0 4,820.7 4,885.5 4,963.7 5,058.2 5,138.1 25 Structures 723.7 785.1 842.0 835.3 836.5 840.1 856.0 891.1 26 Change in business inventories 68.3 71.2 44.6 51.0 17.6 40.8 69.1 34.0 27 Durable goods 35.6 39.0 25.8 24.1 6.3 23.0 49.8 23.2 28 Nondurable goods 32.8 32.3 18.9 27.0 11.4 17.8 19.2 10.8 MEMO 29 Total GDP in chained 1996 dollars 8,144.8 8,495.7 8,848.2 8,717.6 8,758.3 8,879.8 9,037.2 9,156.7 NATIONAL INCOME 30 Total 6,635.5 7,038.8 7,496.3 7,339.4 7,428.1 7,527.0 7,690.9 7,828.0 31 Compensation of employees 4,675.7 5,011.2 5,331.7 5,217.7 5,287.1 5,373.6 5,448.3 5,546.2 32 Wages and salaries 3,884.7 4,189.5 4,472.3 4,371.5 4,432.6 4,509.4 4,575.6 4,659.8 33 Government and government enterprises 664.4 692.8 726.5 715.8 721.3 730.3 738.5 754.3 34 Other 3,220.3 3,496.7 3,745.8 3,655.7 3,711.3 3,779.1 3,837.1 3,905.5 35 Supplement to wages and salaries 791.0 821.7 859.4 846.2 854.5 864.2 872.7 886.4 36 Employer contributions for social insurance 290.1 306.0 323.6 318.3 321.5 325.7 329.0 335.9 37 Other labor income 500.9 515.7 535.8 528.0 533.0 538.5 543.7 550.5 38 Proprietors' income1 578.6 606.1 658.5 639.9 655.3 654.0 685.0 685.4 39 Business and professional1 549.1 581.0 627.3 607.5 621.2 633.0 647.4 661.7 40 Farm1 29.5 25.1 31.3 32.5 34.1 21.0 37.6 23.7 41 Rental income of persons2 130.2 137.4 145.9 148.6 148.8 139.0 147.3 145.2 42 Corporate profits1 838.5 848.4 892.7 886.9 880.5 884.1 919.4 953.9 43 Profits before tax3 795.9 781.9 848.5 818.1 835.8 853.8 886.3 923.7 44 Inventory valuation adjustment 7.4 20.9 -13.0 13.3 -13.6 -26.7 -24.9 -26.7 45 Capital consumption adjustment 35.3 45.6 57.2 55.5 58.2 57.0 58.0 56.9 46 Net interest 412.5 435.7 467.5 446.3 456.4 476.3 491.0 497.3 1. With inventory valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.48. 2. With capital consumption adjustment. SOURCE. U.S. Department of Commerce, Survey of Current Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A49 2.17 PERSONAL INCOME AND SAVING Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1999 2000 AAccccoouunntt 11999977 11999988 11999999 Ql Q2 Q3 Q4 Qlr PERSONAL INCOME AND SAVING 1 Total personal income 6,951.1 7,358.9 7,791.8 7,630.2 7,732.6 7,831.4 7,972.9 8,092.5 7. Wage and salary disbursements 3,888.9 4,186.0 4,472.3 4,371.5 4,432.6 4,509.4 4,575.6 4,659.8 3 Commodity-producing industries 975.5 1,038.7 1,082.4 1,062.9 1,075.1 1,090.2 1,101.4 1,120.7 4 Manufacturing 718.8 757.5 779.7 767.0 774.8 786.4 790.7 798.9 Distributive industries 879.1 944.6 1,005.8 986.3 997.6 1,013.4 1,025.8 1,042.8 6 Service industries 1,369.8 1,509.9 1,657.6 1,606.6 1,638.5 1,675.5 1,709.9 1,742.0 7 Government and government enterprises 664.4 692.8 726.5 715.8 721.3 730.3 738.5 754.3 8 Other labor income 500.9 515.7 535.8 528.0 533.0 538.5 543.7 550.5 9 Proprietors' income' 578.6 606.1 658.5 639.9 655.3 654.0 685.0 685.4 in Business and professional1 549.1 581.0 627.3 607.5 621.2 633.0 647.4 661.7 n Farm' 29.5 25.1 31.3 32.5 34.1 21.0 37.6 23.7 12 Rental income of persons2 130.2 137.4 145.9 148.6 148.8 139.0 147.3 145.2 n Dividends 333.4 348.3 364.3 356.1 361.2 367.0 373.1 379.6 14 Personal interest income 854.9 897.8 931.3 907.4 920.5 938.8 958.5 972.5 H Transfer payments 962.4 983.6 1,018.2 1,007.8 1,013.6 1,021.3 1,030.2 1,047.1 16 Old-age survivors, disability, and health insurance benefits 565.8 578.1 596.4 588.9 593.0 599.0 604.7 617.7 17 LESS: Personal contributions for social insurance 298.1 315.9 334.6 328.9 332.3 336.7 340.4 347.6 18 EQUALS: Personal income 6,951.1 7,358.9 7,791.8 7,630.2 7,732.6 7,831.4 7,972.9 8,092.5 19 LESS: Personal tax and nontax payments 968.3 1,072.6 1,152.1 1,124.8 1,139.4 1,160.4 1,183.8 1,212.7 20 EQUALS: Disposable personal income 5,982.8 6,286.2 6,639.7 6,505.4 6,593.2 6,671.0 6,789.1 6,879.8 21 LESS: Personal outlays 5,711.7 6,056.6 6,483.3 6,310.3 6,425.2 6,531.5 6,666.3 6,839.2 22 EQUALS: Personal saving 271.1 229.7 156.3 195.1 168.0 139.5 122.8 40.6 MEMO Per capita (chained 1996 dollars) 73 Gross domestic product 30,391.0 31,395.8 32,387.3 32,038.3r 32,105.0r 3322,,446677..44rr 32,958.4 3333,,333333..55 7,4 Personal consumption expenditures 20,213.8 20,997.0 21,901.9 21,577.7 21,790.5r 21,995.2 22,257.1 22,622.3 25 Disposable personal income 21,887.0 22,569.0 23,244.0 23,043.0 23,172.0 23,275.0 23,485.0 23,571.0 26 Saving rate (percent) 4.5 3.7 2.4 3.0 2.5 2.1 1.8 .6 GROSS SAVING 27 Gross saving 1,521.3 1,646.0 1,727.1 1,727.8 1,709.5 1,735.6 1,735.8 1,752.9 28 Gross private saving 1,362.0 1,371.2 1,364.7 1,389.4 1,359.3 1,355.7 1,354.3 1,306.5 79 Personal saving 271.1 229.7 156.3 195.1 168.0 139.5 122.8 40.6 30 Undistributed corporate profits' 266.6 259.6 268.6 282.5 264.5 257.4 270.1 285.2 31 Corporate inventory valuation adjustment 7.4 20.9 -13.0 13.3 -13.6 -26.7 -24.9 -26.7 Capital consumption allowances 3? Corporate 578.8 616.9 661.1 640.9 652.2 667711..66 667799..77 669944..66 33 Noncorporate 249.8 261.5 278.6 271.0 274.6 287.2 281.6 286.1 34 Gross government saving 159.3 274.8 362.5 338.3 350.2 379.9 381.4 446.4 35 Federal 37.7 134.3 206.3 187.2 208.3 225.1 204.6 279.7 36 Consumption of fixed capital 86.6 87.4 90.9 89.6 90.2 91.2 92.4 93.4 37 Current surplus or deficit (-), national accounts -48.8 46.9 115.4 97.6 118.1 133.8 112.2 186.3 38 State and local 121.5 140.5 156.2 151.1 141.9 154.8 176.9 166.7 39 Consumption of fixed capital 94.0 98.8 105.2 102.4 104.3 106.0 108.1 109.9 40 Current surplus or deficit (-), national accounts 27.5 41.7 51.0 48.7 37.6 48.9 68.8 56.7 41 Gross investment 1,518.1 1,598.4 1,602.0 1,628.4 1,574.0 1,594.4 1,611.3 1,624.8 47 Gross private domestic investment 1,383.7 1,531.2 1,622.7 1,594.3 1,585.4 1,635.0 1,675.8 1,719.3 43 Gross government investment 258.1 268.7 297.9 289.8 292.2 295.7 313.7 321.1 44 Net foreign investment -123.7 -201.5 -318.5 -255.7 -303.7 -336.3 -378.2 -415.7 45 Statistical discrepancy -3.2 -47.6 -125.1 -99.4 -135.5 -141.2 -124.5 -128.1 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 • August 2000 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data seasonally adjusted except as noted1 1999 2000 IItteemm ccrreeddiittss oorr ddeebbiittss 11999977 11999988 11999999 Ql Q2 Q3 Q4 Qlp 1 Balance on current account -143,465 -220,562 -338,918 -68,902 -81,157 -89,085 -99,779 -102,301 ? 3 . Ba E la x n p c o e r t o s n goods and services -1 9 0 3 4 8 , , 7 5 3 4 0 3 -1 9 6 3 4 3 , , 2 9 8 0 2 7 -2 9 6 6 7 0 , , 5 0 4 8 8 8 - 2 5 3 4 1 , , 1 5 7 6 7 7 - 2 6 3 5 4 , , 2 1 9 7 0 4 - 2 7 4 2 3 , , 5 2 8 5 8 4 - 2 7 5 5 1 , , 4 0 9 9 6 2 - 2 8 5 6 5 , , 1 0 7 3 6 7 4 -1,043,273 -1,098,189 -1,227,636 -285,744 -299,464 -315,842 — 326,588 -341,213 5 Income, net 3,231 -12,205 -24,789 -4,419 -4,692 -5,289 -10,391 -4,200 6 Investment, net 8,185 -6,956 -19,186 -3,029 -3,308 -3,887 -8,964 -2,820 7 Direct 69,220 59,405 58,433 14,757 13,913 16,543 13,218 17,687 8 Portfolio -61,035 -66,361 -77,619 -17,786 -17,221 -20,430 -22,182 -20,507 9 Compensation of employees -4,954 -5,249 -5,603 -1,390 -1,384 -1,402 -1,427 -1,380 10 Unilateral current transfers, net -41,966 -44,075 -46,581 -10,306 -11,175 -11,208 -13,892 -11,925 11 Change in U.S. government assets other than official reserve assets, net (increase, —) 68 -429 -365 111199 —392 -686 559944 --8822 12 Change in U.S. official reserve assets (increase, —) -1,010 -6,784 8,749 4,068 1,159 1,950 1,572 -554 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -350 -149 12 563 -190 -185 -176 -180 15 Reserve position in International Monetary Fund -3,575 -5,118 5,485 3 1,413 2,268 1,801 -237 16 Foreign currencies 2,915 -1,517 3,252 3,502 -64 -133 -53 -137 17 Change in U.S. private assets abroad (increase, —) -464,354 —285,605 -380,951 -19,581 -155,726 -114,652 -90,988 -142,647 18 Bank-reported claims3 —144,822 -24,918 -61,424 27,771 -42,519 -8,799 -37,877 -45,084 19 Nonbank-reported claims -120,403 -25,041 -69,493 -13,853 -16,816 -24,066 -14,758 -35,183 20 U.S. purchases of foreign securities, net -89,174 -102,817 -97,882 8,132 -64,579 -34,431 -7,004 -27,535 21 U.S. direct investments abroad, net -109,955 -132,829 -152,152 -41,631 -31,812 -47,356 -31,349 -34,845 22 Change in foreign official assets in United States (increase, +) 18,119 -21,684 44,570 4,708 -628 11,881 28,609 20,442 73 U.S. Treasury securities -6,690 -9,957 12,073 800 -6,708 12,963 5,018 16,198 24 Other U.S. government obligations 4,529 6,332 20,350 5,993 5,792 1,835 6,730 8,107 25 Other U.S. government liabilities3 -1,798 -3,113 -3,698 -1,594 -647 -1,070 -387 -644 26 Other U.S. liabilities reported by U.S. banks3 22,286 -11,469 14,937 -589 1,437 -2,032 16,121 -4,150 27 Other foreign official assets4 -208 -3,477 908 98 -502 185 1,127 931 28 Change in foreign private assets in United States (increase, +) 733,542 524,321 706,195 84,260 275,007 195,854 151,077 194,566 79 U.S. bank-reported liabilities2 149,026 40,731 67,713 -14,184 34,938 22,629 24,330 -6,701 30 U.S. nonbank-reported liabilities 107,779 9,412 29,411 20,188 8,871 3,475 -3,123 42,035 31 Foreign private purchases of U.S. Treasury securities, net 146,433 46,155 -21,756 -8,781 -5,407 9,639 -17,207 -9,254 3? U.S. currency flows 24,782 16,622 22,407 2,440 3,057 4,697 12,213 -6,847 33 Foreign purchases of other U.S. securities, net 196,258 218,026 325,913 61,540 79,067 94,573 90,733 133,000 34 Foreign direct investments in United States, net 109,264 193,375 282,507 23,057 154,481 60,841 44,131 42,333 35 Capital account transactions, net5 292 617 -172 166 178 175 -691 166 36 Discrepancy -143,192 10,126 -39,108 -4,838 -38,441 -5,437 9,606 30,410 37 Due to seasonal adjustment 5,650 662 -9,615 3,301 5,588 38 Before seasonal adjustment -143,192 10,126 -39,108 -10,488 -39,103 4,178 6,305 24,822 MEMO Changes in official assets 39 U.S. official reserve assets (increase, —) -1,010 -6,784 8,749 44,,006688 1,159 1,950 1,572 --555544 40 Foreign official assets in United States, excluding line 25 (increase, +) 19,917 —18,571 48,268 6.302 19 12,951 28,996 21,086 41 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22) 12,124 -11,499 968 2,058 1,966 -983 -2,073 55,,995511 1. Seasonal factors are not calculated for lines 11-16, 18-20, 22-35, and 38—41. corporations and state and local governments. 2. Reporting banks included all types of depository institutions as well as some brokers 5. Consists of capital transfers (such as those of accompanying migrants entering or and dealers. leaving the country and debt forgiveness) and the acquisition and disposal of nonproduced 3. Associated primarily with military sales contracts and other transactions arranged with nonfinancial assets. or through foreign official agencies. SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current 4. Consists of investments in U.S. corporate stocks and in debt securities of private 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 1999r 2000 IItteemm 11999977 11999988 11999999rr Oct. Nov. Dec. Jan.r Feb.r Mar.r Apr.p 1 Goods and services, balance -104,731 -166,897 -264,971 -24,910 -25,711 -25,657 -27,425 -28,144 -30,606 -30,438 2 Merchandise -196,652 -246,853 -345,559 -31,576 -32,400 -32,255 -34,049 -34,641 -37,148 -36,909 3 Services 91,921 79,956 80,588 6,666 6,689 6,598 6,624 6,497 6,542 6,471 4 Goods and services, exports 938,543 932,977 956,242 82,349 83,198 84,107 83,583 84,731 86,723 86,699 5 Merchandise 679,715 670,324 684,358 59,193 59,682 61,211 60,321 60,894 62,513 62,632 6 Services 258,828 262,653 271,884 23,156 23,516 22,896 23,262 23,837 24,210 24,067 7 Goods and services, imports -1,043,273 -1,099,875 -1,221,213 -107,259 -108,909 -109,764 -111,008 -112,875 -117,329 -117,137 8 Merchandise -876,366 -917,178 -1,029,917 -90,769 -92,082 -93,466 -94,370 -95,535 -99,661 -99,541 9 Services -166,907 -182,697 -191,296 -16,490 -16,827 -16,298 -16,638 -17,340 -17,668 -17,596 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 1999 2000 AAsssseett 11999966 11999977 11999988 Nov. Dec. Jan. Feb. Mar. Apr. May Junep 1 Total 75,090 69,954 81,755 72,318 71,516 69,898 69,309 70,789 66,587 67,160 67,957 2 Gold stock, including Exchange Stabilization Fund1 11,049 11,050 11,041 11,049 11,089 11,048 11,048 11,048 11,048 11,048 11,048 3 Special drawing rights2'3 10,312 10,027 10,603 10,326 10,336 10,199 10,277 10,335 10,122 10,310 10,444 4 Reserve position in International Monetary Fund2 15,435 18,071 24,111 18,707 17,950 17,710 17,578 17,871 15,403 15,373 15,428 5 Foreign currencies4 38,294 30,809 36,001 32,236 32,182 30,941 30,406 31,535 30,014 30,429 31,037 1. Gold held "under earmark" at Federal Reserve Banks for foreign and international SDR holdings and reserve positions in the IMF also have been valued on this basis since July accounts is not included in the gold stock of the United States; see table 3.13, line 3. Gold 1974. stock is valued at $42.22 per fine troy ounce. 3. Includes allocations of SDRs by the International Monetary Fund on Jan. 1 of the year 2. Special drawing rights (SDRs) are valued according to a technique adopted by the indicated, as follows: 1970—$867 million; 1971—$717 million; 1972—$710 million; 1979— International Monetary Fund (IMF) in July 1974. Values are based on a weighted average of $1,139 million; 1980—$1,152 million; 1981—$1,093 million; plus net transactions in SDRs. exchange rates for the currencies of member countries. From July 1974 through December 4. Valued at current market exchange rates. 1980, sixteen currencies were used; since January 1981, five currencies have been used. U.S. 3.13 FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS1 Millions of dollars, end of period 1999 2000 AAsssseett 11999966 11999977 11999988 Nov. Dec. Jan. Feb. Mar. Apr. May Junep 1 Deposits 167 457 167 501 71 82 87 125 142 110 104 Held in custody 2 U.S. Treasury securities2 638,049 620,885 607,574 629,430 632,482 627,326 631,421 641,830 632,216 623,553 627,081 3 Earmarked gold3 11,197 10,763 10,343 10,015 9,933 9,866 9,771 9,711 9,711 9,711 9,688 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 • August 2000 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1999 2000 IItteemm 11999977 11999988 Oct. Nov. Dec. Jan. Feb. Mar. Apr? 1 Total1 776,505 759,928 782,865 779,191 806,046 808,231 812,353r 827,394 834,533 By type 2 Liabilities reported by banks in the United States 135,384 125,883 124,523 122,505 138,575 134,510 130,268r 134,687 138,103 3 U.S. Treasury bills and certificates3 148,301 134,177 154,582 153,465 156,177 153,548 156,995 164,781 157,607 U.S. Treasury bonds and notes 4 Marketable 428,004 432,127 419,629 417,304 422,266 429,029 430,806 430,237 436,640 5 Nonmarketable4 5,994 6,074 6,139 6,177 6,111 6,152 6,191 5,734 5,770 6 U.S. securities other than U.S. Treasury securities5 58,822 61,667 77,992 79,740 82,917 84,992 88,093 91,955 96,413 By area 7 Europe1 252,289 256,026 243,412 242,587 244,805 246,022 248,792 249,545 249,685 8 Canada 36,177 36,715 39,682 39,081 38,666 39,439 39,358 39,846 39,501 9 Latin America and Caribbean 96,942 79,503 73,627 70,632 73,518 71,888 71,180 77,014 72,026 10 Asia 400,144 400,631 439,811 441,070 463,434 463,561 466,087r 474,828 486,893 11 Africa 9,981 10,059 7,868 7,174 7,520 8,205 7,976r 7,979 8,024 12 Other countries 7,058 3,080 4,551 4,733 4,189 5,202 5,046 4,268 4,490 1. Includes the Bank for International Settlements. Venezuela, beginning December 1990, 30-year maturity issue; Argentina, beginning April 2. Principally demand deposits, time deposits, bankers acceptances, commercial paper, 1993, 30-year maturity issue. negotiable time certificates of deposit, and borrowings under repurchase agreements. 5. Debt securities of U.S. government corporations and federally sponsored agencies, and 3. Includes nonmarketable certificates of indebtedness and Treasury bills issued to official U.S. corporate stocks and bonds. institutions of foreign countries. SOURCE. Based on U.S. Department of the Treasury data and on data reported to the 4. Excludes notes issued to foreign official nonreserve agencies. Includes current value of department by banks (including Federal Reserve Banks) and securities dealers in the United zero-coupon Treasury bond issues to foreign governments as follows: Mexico, beginning States, and on the 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 1999r 2000 IItteemm 11999966 11999977 11999988 June Sept. Dec. Mar. 1 Banks' liabilities 103,383 117,524 101,125 90,305 100,112 88,144 85,344 2 Banks' claims 66,018 83,038 78,162 59,597 67,032 67,355 63,573 3 Deposits 22,467 28,661 45,985 31,452 32,713 34,416 32,804 4 Other claims 43,551 54,377 32,177 28,145 34,319 32,939 30,769 5 Claims of banks' domestic customers2 10,978 8,191 20,718 23,474 11,534 20,826 21,753 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

Bank-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 1999 2000 IItteemm 11999977 11999988 11999999 Oct. Nov. Dec. Jan. Feb. Mar. Apr? BY HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners 1,283,027 1,347,837 1,413,074 1,377,112 1,422,378 1,413,074 1,413,612 l,407,178r 1,404,226 1,403,855 2 Banks' own liabilities 882,980 884,939 975,791 932,195 976,348 975,791 981,262 970,629r 958,053 972,223 3 Demand deposits 31,344 29,558 42,917 39,452 42,889 42,917 36,558 39,678r 29,793 31,186 4 Time deposits2 198,546 151,761 167,182 162,271 166,483 167,182 165,205 171,066r 170,919 186,632 5 Other3 168,011 140,752 162,485 155,705 162,708 162,485 174,797 163,872r 161,469 164,910 6 Own foreign offices4 485,079 562,868 603,207 574,767 604,268 603,207 604,702 596,013r 595,872 589,495 7 Banks' custodial liabilities5 400,047 462,898 437,283 444,917 446,030 437,283 432,350 436,549 446,173 431,632 8 U.S. Treasury bills and certificates6 193,239 183,494 185,797 188,486 184,675 185,797 181,879 184,604 195,050 184,222 9 Other negotiable and readily transferable instruments7 93,641 141,699 132,575 131,464 131,859 132,575 129,551 128,673 127,630 125,011 10 Other 113,167 137,705 118,911 124,967 129,496 118,911 120,920 123,272 123,493 122,399 11 Nonmonetary international and regional organizations8 .. 11,690 11,883 14,872 17,893 14,043 14,872 21,756 20,436r 18,311 20,068 12 Banks' own liabilities 11,486 10,850 13,953 17,052 13,156 13,953 20,900 19,513r 17,536 19,278 13 Demand deposits 16 172 98 187 70 98 202 148 71 58 14 Time deposits2 5,466 5,793 10,349 8,772 7,675 10,349 9,621 9,251 9,741 11,338 15 Other3 6,004 4,885 3,506 8,093 5,411 3,506 11,077 10,114r 7,724 7,882 16 Banks' custodial liabilities5 204 1,033 919 841 887 919 856 923 775 790 17 U.S. Treasury bills and certificates6 69 636 680 628 658 680 625 704 695 623 18 Other negotiable and readily transferable instruments7 133 397 233 213 229 233 225 213 71 77 19 Other 2 0 6 0 0 6 6 6 9 90 20 Official institutions9 283,685 260,060 294,752 279,105 275,970 294,752 288,058 287,263r 299,468 295,710 21 Banks' own liabilities 102,028 80,256 97,373 79,376 80,029 97,373 82,435 79,652r 85,634 87,758 22 Demand deposits 2,314 3,003 3,341 2,314 2,829 3,341 2,645 3,306 2,854 3,509 23 Time deposits2 41,396 29,506 28,700 29,152 27,009 28,700 25,666 27,690r 30,117 36,337 24 Other3 58,318 47,747 65,332 47,910 50,191 65,332 54,124 48,656 52,663 47,912 25 Banks' custodial liabilities5 181,657 179,804 197,379 199,729 195,941 197,379 205,623 207,611 213,834 207,952 26 U.S. Treasury bills and certificates6 148,301 134,177 156,177 154,582 153,465 156,177 153,548 156,995 164,781 157,607 27 Other negotiable and readily transferable instruments7 33,151 44,953 41,152 44,804 42,331 41,152 51,522 50,298 48,689 50,118 28 Other 205 674 50 343 145 50 553 318 364 227 29 Banks10 815,247 885,336 901,425 877,167 923,780 901,425 901,621 887,476r 883,267 884,547 30 Banks' own liabilities 641,447 676,057 729,398 698,718 739,978 729,398 736,931 725,301r 719,170 723,984 31 Unaffiliated foreign banks 156,368 113,189 126,191 123,951 135,710 126,191 132,229 129,288r 123,298 134,489 32 Demand deposits 16,767 14,071 17,583 17,111 14,402 17,583 12,964 12,424 13,930 14,407 33 Time deposits2 83,433 45,904 48,199 48,693 54,388 48,199 51,218 51,518r 49,724 57,498 34 Other3 56,168 53,214 60,409 58,147 66,920 60,409 68,047 65,346r 59,644 62,584 35 Own foreign offices4 485,079 562,868 603,207 574,767 604,268 603,207 604,702 596,013r 595,872 589,495 36 Banks' custodial liabilities5 173,800 209,279 172,027 178,449 183,802 172,027 164,690 162,175 164,097 160,563 37 U.S. Treasury bills and certificates6 31,915 35,359 16,936 22,203 19.512 16,936 17,582 14,635 15,770 13,993 38 Other negotiable and readily transferable instruments7 35,393 45,332 45,695 41,529 44,889 45,695 36,426 34,629 35,453 34,592 39 Other 106,492 128,588 109,396 114,717 119,401 109,396 110,682 112,911 112,874 111,978 40 Other foreigners 172,405 190,558 202,025 202,947 208,585 202,025 202,177 212,003r 203,180 203,530 41 Banks' own liabilities 128,019 117,776 135,067 137,049 143,185 135,067 140,996 146,163r 135,713 141,203 42 Demand deposits 12,247 12,312 21,895 19,840 25,588 21,895 20,747 23,800" 12,938 13,212 43 Time deposits2 68,251 70,558 79,934 75,654 77,411 79,934 78,700 82,607' 81,337 81,459 44 Other3 47,521 34,906 33,238 41,555 40,186 33,238 41,549 39,756r 41,438 46,532 45 Banks' custodial liabilities5 44,386 72,782 66,958 65,898 65,400 66,958 61,181 65,840 67,467 62,327 46 U.S. Treasury bills and certificates6 12,954 13,322 12,004 11,073 11,040 12,004 10,124 12,270 13,804 11,999 47 Other negotiable and readily transferable instruments7 24,964 51,017 45,495 44,918 44,410 45,495 41,378 43,533 43,417 40,224 48 Other 6,468 8,443 9,459 9,907 9,950 9,459 9,679 10,037 10,246 10,104 MEMO 49 Negotiable time certificates of deposit in custody for foreigners 16,083 27,026 30,345 26,550 28,320 30,345 28,344 27,266 28,056 26,087 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 • August 2000 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1—Continued 1999 2000 IItteemm 11999977 11999988 11999999 Oct. Nov. Dec. Jan. Feb. Mar. Apr.P AREA 50 Total, all foreigners 1,283,027 1,347,837 1,413,074 1,377,112 1,422,378 1,413,074 1,413,612 l,407,178r 1,404,226 1,403,855 51 Foreign countries 1,271,337 1,335,954 1,398,202 1,359,219 1,408,335 1,398,202 1,391,856 l,386,742r 1,385,915 1,383,787 52 Europe 419,672 427,375 448,004 442,633 470,893 448,004 449,970 450,970R 449,599 433,581 53 Austria 2,717 3,178 2,789 3,299 2,842 2,789 2,648 2,997 2,570 2,536 54 Belgium and Luxembourg 41,007 42,818 44,692 38,750 41,331 44,692 42,433 38,783 36,385 32,866 55 Denmark 1,514 1,437 2,196 2,658 3,197 2,196 2,510 2,533 3,235 2,601 56 Finland 2,246 1,862 1,658 1,269 1,894 1,658 1,290 1,479 2,015 1,744 57 France 46,607 44,616 49,790 45,763 50,261 49,790 48,530 49,839 43,666 45,324 58 Germany 23,737 21,357 24,748 25,472 26,530 24,748 24,097 24,201 25,176 23,710 59 Greece 1,552 2,066 3,748 3,322 3,365 3,748 3,145 4,000 3,216 3,188 60 Italy 11,378 7,103 6,775 6,305 5,264 6,775 6,261 5,405 5,278 4,789 61 Netherlands 7,385 10,793 8,310 13,874 12,775 8,310 7,271 7,797 7,617 7,319 62 Norway 317 710 1,327 951 1,364 1,327 834 1,169 1,336 1,197 63 Portugal 2,262 3,236 2,228 1,875 2,148 2,228 2,034 2,113 2,006 1,913 64 Russia 7,968 2,439 5,475 3,713 3,655 5,475 6,404 7,543 7,360 10,065 65 Spain 18,989 15,781 10,426 9,287 11,181 10,426 12,531 12,130 12,518 11,209 66 Sweden 1,628 3,027 4,652 5,381 5,518 4,652 4,673 4,792 5,425 5,165 67 Switzerland 39,023 50,654 65,985 65,966 67,025 65,985 64,282 61,335 81,934 69,198 68 Turkey 4,054 4,286 7,842 8,250 8,817 7,842 6,912 7,714 7,995 8,016 69 United Kingdom 181,904 181,554 176,168 177,992 195,453 176,168 184,457 187,295R 168,995 168,985 70 Yugoslavia11 239 233 286 267 267 286 273 294 270 265 71 Other Europe and other former U.S.S.R.12 25,145 30,225 28,909 28,239 28,006 28,909 29,385 29,551 32,602 33,491 72 Canada 28,341 30,212 34,119 34,995 33,746 34,119 32,965 33,387 36,147 40,563 73 Latin America and Caribbean 536,393 554,866 577,599 576,142 594,400 577,599 599,486 596,206 593,705 602,198 74 Argentina 20,199 19,014 18,633 17,547 15,042 18,633 15,333 16,327 17,906 18,487 75 Bahamas 112,217 118,085 134,407 134,111 139,179 134,407 149,727 155,720 141,370 159,115 76 Bermuda 6,911 6,846 7,877 10,902 8,859 7,877 9,910 9,106 10,108 9,710 77 Brazil 31,037 15,815 12,860 13,252 14,184 12,860 12,230 12,785 14,889 10,305 78 British West Indies 276,418 302,486 312,664 311,509 328,052 312,664 320,245 311,923 317,614 312,515 79 Chile 4,072 5,015 7,008 6,559 6,521 7,008 6,366 6,244 5,752 5,933 80 Colombia 3,652 4,624 5,656 5,011 4,783 5,656 4,438 4,304 4,314 4,243 81 Cuba 66 62 75 72 73 75 75 75 100 77 82 Ecuador 2,078 1,572 1,956 1,833 1,930 1,956 1,985 2,035 2,141 2,193 83 Guatemala 1,494 1,336 1,621 1,484 1,577 1,621 1,636 1,617 1,706 1,628 84 Jamaica 450 577 520 549 546 520 540 571 671 670 85 Mexico 33,972 37,157 30,718 32,210 31,189 30,718 32,090 32,216 31,393 32,832 86 Netherlands Antilles 5,085 5,010 3,997 2,696 3,389 3,997 4,269 3,692 4,528 5,067 87 Panama 4,241 3,864 4,415 4,007 3,834 4,415 4,042 3,737 4,157 3,788 88 Peru 893 840 1,142 958 997 1,142 1,073 1,051 975 1,021 89 Uruguay 2,382 2,486 2,386 2,219 2,585 2,386 2,260 2,262 2,377 2,431 90 Venezuela 21,601 19,894 20,189 19,914 20,311 20,189 21,517 21,297 22,572 21,140 91 Other 9,625 10,183 11,475 11,309 11,349 11,475 11,750 11,244 11,132 11,043 92 Asia 269,379 307,960 319,361 287,963 292,078 319,361 290,432 228877,,337711RR 228888,,110033 228899,,666622 China 93 Mainland 18,252 13,441 12,325 10,460 13,981 12,325 11,570 11,661 8,096 8,530 94 Taiwan 11,840 12,708 13,595 12,023 14,791 13,595 11,677 11,211r 14,642 14,488 95 Hong Kong 17,722 20,900 27,697 24,299 22,276 27,697 25,951 24,038 23,144 23,732 96 India 4,567 5,250 7,367 5,659 5,610 7,367 5,491 5,405 6,258 5,586 97 Indonesia 3,554 8,282 6,567 6,037 6,486 6,567 6,853 7,495 7,837 7,275 98 Israel 6,281 7,749 7,488 5,175 5,071 7,488 6,581 7,680 8,338 7,063 99 Japan 143,401 168,563 159,075 151,632 152,095 159,075 149,033 145,314 145,074 147,404 100 Korea (South) 13,060 12,524 12,840 9,935 8,474 12,840 11,573 12,625 16,420 16,820 101 Philippines 3,250 3,324 3,253 2,134 2,639 3,253 1,938 2,540R 2,277 2,290 102 Thailand 6,501 7,359 6,050 4,983 5,164 6,050 5,389 5,134 4,370 3,628 103 Middle Eastern oil-exporting countries" 14,959 15,609 21,280 16,825 17,944 21,280 16,923 15,807 16,127 19,001 104 Other 25,992 32,251 41,824 38,801 37,547 41,824 37,453 38,461R 35,520 33,845 105 Africa 10,347 8,905 9,469 8,037 7,799 9,469 8,106 8,270R 8,614 8,576 106 Egypt 1,663 1,339 2,022 1,364 1,846 2,022 1,616 1,703 1,770 1,663 107 Morocco 138 97 179 174 166 179 176 262 115 106 108 South Africa 2,158 1,522 1,495 828 957 1,495 730 698 673 687 109 Zaire 10 5 14 14 13 14 7 13 13 7 110 Oil-exporting countries14 3,060 3,088 2,915 2,912 2,248 2,915 2,953 3,098R 3,318 3,586 111 Other 3,318 2,854 2,844 2,745 2,569 2,844 2,624 2,496 2,725 2,527 112 Other 7,205 6,636 9,650 9,449 9,419 9,650 10,897 10,538 9,747 9,207 113 Australia 6,304 5,495 8,377 8,199 8,394 8,377 9,910 9,335 8,669 8,414 114 Other 901 1,141 1,273 1,250 1,025 1,273 987 1,203 1,078 793 115 Nonmonetary international and regional organizations . . 11,690 11,883 14,872 17,893 14,043 14,872 21,756 20,436R 18,311 20,068 116 International15 10,517 10,221 12,972 16,009 12,710 12,972 19,657 17,861R 16,256 18,685 117 Latin American regional16 424 594 650 960 345 650 1,128 1,558 1,244 518 118 Other regional17 749 1,068 1,250 924 988 1,250 971 1,017 811 865 11. Since December 1992, has excluded Bosnia, Croatia, and Slovenia. 15. Principally the International Bank for Reconstruction and Development. Excludes 12. Includes the Bank for International Settlements. Since December 1992, has "holdings of dollars" of the International Monetary Fund. included all parts of the former U.S.S.R. (except Russia), and Bosnia, Croatia, and Slovenia. 16. Principally the Inter-American Development Bank. 13. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab 17. Asian, African, Middle Eastern, and European regional organizations, except the Bank Emirates (Trucial States). for International Settlements, which is included in "Other Europe." 14. Comprises Algeria, Gabon, Libya, and Nigeria. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Bank-Reported Data A55 3.18 BANKS' OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States1 Payable in U.S. Dollars Millions of dollars, end of period 1999 2000 AArreeaa oorr ccoouunnttrryy 11999977 11999988 11999999 Oct. Nov. Dec. Jan. Feb. Mar. Apr.P 1 Total, all foreigners 708,225 734,995 793,421 752,319 779,765 793,421 755,370 750,751r 813,504 815,351 2 Foreign countries 705,762 731,378 788,855 747,029 774,100 788,855 749,752 746,084r 809,195 810,349 3 Europe 199,880 233,321 313,955 293,618 313,288 313,955 306,304 314,283r 361,084 349,493 4 Austria 1,354 1,043 2,643 2,752 2,407 2,643 3,020 2,471 2,493 2,429 5 Belgium and Luxembourg 6,641 7,187 10,193 9,624 9,332 10,193 8,898 9,777 8,022 7,939 6 Denmark 980 2,383 1,669 2,352 1,756 1,669 1,702 1,743 1,625 1,940 7 Finland 1,233 1,070 2,020 1,669 2,034 2,020 2,328 1,846 2,093 2,087 8 France 16,239 15,251 29,142 21,533 24,592 29,142 30,051 28,303 28,127 30,932 9 Germany 12,676 15,923 29,205 23,616 22,365 29,205 29,871 28,890 35,371 33,975 10 Greece 402 575 806 743 754 806 793 683 842 728 11 Italy 6,230 7,284 8,496 6,682 7,297 8,496 8,614 6,785 7,048 7,034 12 Netherlands 6,141 5,697 10,477 8,940 8,100 10,477 10,144 ll,617r 14,222 14,054 13 Norway 555 827 867 949 920 867 1,243 1,013 999 1,355 14 Portugal 111 669 1,571 1,691 1,430 1,571 1,307 1,155 1,043 1,085 11 Russia 1,248 789 713 871 711 713 701 743 709 709 16 Spain 2,942 5,735 3,796 4,073 4,641 3,796 4,581 4,339 3,187 3,217 17 Sweden 1,854 4,223 3,213 4,325 3,853 3,213 4,505 5,382r 7,492 8,100 18 Switzerland 28,846 46,874 79,086 78,448 91,493 79,086 68,904 70,250r 111,544 97,687 19 Turkey 1,558 1,982 2,617 2,403 2,491 2,617 2,969 3,031 3,053 3,148 20 United Kingdom 103,143 106,349 119,829 114,209 120,836 119,829 119,886 128,03 lr 124,776 125,439 21 Yugoslavia2 52 53 50 51 50 50 50 50 50 186 22 Other Europe and other former U.S.S.R.3 7,009 9,407 7,562 8,687 8,226 7,562 6,737 8,174 8,388 7,449 23 Canada 27,189 47,037 37,196 35,903 37,060 37,196 36,474 38,541 42,686 43,259 24 Latin America and Caribbean 343,730 342,654 353,409 335,163 335,356 353,409 323,537 314,839 323,816 328,885 25 Argentina 8,924 9,552 10,167 10,148 10,034 10,167 9,962 10,095 9,845 9,760 76 Bahamas 89,379 96,455 99,324 87,083 87,177 99,324 78,641 68,914 74,018 72,312 77 Bermuda 8,782 5,011 8,007 9,887 9,449 8,007 10,145 11,771 7,441 5,685 78 Brazil 21,696 16,184 15,706 14,218 14,973 15,706 15,031 15,382 14,981 16,278 79 British West Indies 145,471 153,749 167,182 159,171 158,937 167,182 157,469 156,776 166,284 173,907 30 Chile 7,913 8,250 6,607 6,846 6,591 6,607 6,672 6,224 6,511 6,447 31 Colombia 6,945 6,507 4,529 4,800 4,745 4,529 4,326 4,176 3,937 3,917 37 Cuba 0 0 0 0 0 0 0 0 0 0 33 Ecuador 1,311 1,400 760 792 761 760 692 730 688 662 34 Guatemala 886 1,127 1,133 1,084 1,090 1,133 1,067 1,170 1,181 1,252 35 Jamaica 424 239 295 319 309 295 298 332 328 325 36 Mexico 19,428 21,212 17,899 17,792 17,924 17,899 17,848 17,489 16,998 16,945 37 Netherlands Antilles 17,838 6,779 5,982 7,497 8,078 5,982 6,194 6,341 6,385 6,388 38 Panama 4,364 3,584 3,387 2,917 3,050 3,387 3,067 2,972 2,912 2,844 39 Peru 3,491 3,275 2,529 2,442 2,507 2,529 2,462 2,414 2,223 2,375 40 Uruguay 629 1,126 801 778 775 801 709 111 761 714 41 Venezuela 2,129 3,089 3,494 4,103 3,587 3,494 3,571 3,524 3,580 3,474 42 Other 4,120 5,115 5,607 5,286 5,369 5,607 5,383 5,752 5,743 5,600 43 125,092 98,607 74,922 73,099 78,454 74,922 73,327 69,074r 72,692 79,024 China 44 Mainland 1,579 1,261 2,090 1,998 2,082 2,090 2,221 2,726 3,161 4,532 45 Taiwan 922 1,041 1,390 816 1,495 1,390 1,462 1,501 925 1,080 46 Hong Kong 13,991 9,080 5,893 4,740 6,010 5,893 5,240 4,453 4,519 4,546 47 India 2,200 1,440 1,738 1,856 1,972 1,738 1,616 1,802 1,749 1,786 48 Indonesia 2,651 1,942 1,776 1,636 1,681 1,776 1,711 1,743 1,817 1,821 49 Israel 768 1,166 1,875 851 1,053 1,875 1,853 1,832 3,412 3,293 50 Japan 59,549 46,713 28,636 28,363 30,305 28,636 28,597 25,559r 27,310 31,148 51 Korea (South) 18,162 8,289 9,267 12,441 13,262 9,267 11,378 12,066 11,466 12,209 52 Philippines 1,689 1,465 1,410 1,562 990 1,410 1,088 1,058 1,698 1,714 53 Thailand 2,259 1,807 1,518 1,411 1,433 1,518 1,155 1,275 1,154 1,081 54 Middle Eastern oil-exporting countries4 10,790 16,130 14,252 10,667 11,631 14,252 10,774 10,947 11,612 10,765 55 Other 10,532 8,273 5,077 6,758 6,540 5,077 6,232 4,112 3,869 5,049 56 Africa 3,530 3,122 2,268 2,299 2,473 2,268 2,786 2,453 1,991 2,054 57 Egypt 247 257 258 251 233 258 222 207 243 206 58 Morocco 511 372 352 439 354 352 299 313 279 300 59 South Africa 805 643 622 589 873 622 943 889 428 360 60 Zaire 0 0 24 0 9 24 0 0 0 0 61 Oil-exporting countries5 1,212 936 276 253 275 276 494 228 198 394 62 Other 755 914 736 767 729 736 828 816 843 794 63 Other 6,341 6,637 7,105 6,947 7,469 7,105 7,324 6,894 6,926 7,634 64 Australia 5,300 6,173 6,824 6,696 7,272 6,824 7,113 6,682 6,674 7,225 65 Other 1,041 464 281 251 197 281 211 212 252 409 66 Nonmonetary international and regional organizations6 . . . 2,463 3,617 4,566 5,290 5,665 4,566 5,618 4,667 4,309 5,002 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 • August 2000 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 1999 2000 TTyyppee ooff ccllaaiimm 11999977 11999988 11999999 Oct. Nov. Dec. Jan. Feb.r Mar. Apr? 1 Total 852,852 875,891 943,378r 943,378r 1,008,616 2 Banks' claims 708,225 734,995 793,421 752,319 779,765 793,421 755,370 750,751 813,504 815,351 3 Foreign public borrowers 20,581 23,542 35,213 40,948 39,910 35,213 42,344 36,541 34,432 37,245 4 Own foreign offices2 431,685 484,535 528,036 487,624 511,669 528,036 490,010 496,550 551,832 556,973 5 Unaffiliated foreign banks 109,230 106,206 101,230 97,262 99,497 101,230 93,524 87,666 97,634 91,901 6 Deposits 30,995 27,230 34,320 24,865 27,835 34,320 24,259 21,275 24,361 22,399 7 Other 78,235 78,976 66,910 72,397 71,662 66,910 69,265 66,391 73,273 69,502 8 All other foreigners 146,729 120,712 128,942 126,485 128,689 128,942 129,492 129,994 129,606 129,232 9 Claims of banks' domestic customers' 144,627 140,896 149,957R 149,957R 195,112 10 Deposits 73,110 79,363 86,164R 86,164R 127,077 11 Negotiable and readily transferable instruments4 53,967 47,914 51,161r 51,161R 56,032 12 Outstanding collections and other claims 17,550 13,619 12,632 12,632 12,003 MEMO 13 Customer liability on acceptances 9,624 4,520 4,672 4,672 4,466 14 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States5 33,816 39,978 31,125 33,847 32,592 31,125 41,544 48,225 53,657 45,383 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 1999 2000 MMaattuurriittyy,, bbyy bboorrrroowweerr aanndd aarreeaa22 11999966 11999977 11999988 June' Sept. Dec.r Mar.p 1 Total 258,106 276,550 250,418 261,268 270,102r 266,330 261,095 By borrower 2 Maturity of one year or less 211,859 205,781 186,526 186.494 196,82 lr 187,454 180,047 3 Foreign public borrowers 15,411 12,081 13,671 25,354 22,603 22,904 21,332 4 All other foreigners 196,448 193,700 172,855 161,140 174,218r 164,550 158,715 5 Maturity of more than one year 46,247 70,769 63,892 74,774 73,281r 78,876 81,048 6 Foreign public borrowers 6,790 8,499 9,839 11,704 12,193 12,043 12,803 7 All other foreigners 39,457 62,270 54,053 63,070 61,088r 66,833 68,245 By area Maturity of one year or less 8 Europe 55,690 58,294 68,679 84,717 82,567 80,843 79,673 9 Canada 8,339 9,917 10,968 6,674 8,545 7,860 8,408 10 Latin America and Caribbean 103,254 97,207 81,766 64,879 78,102r 69,035 62,377 11 Asia 38,078 33,964 18,007 22,587 20,864r 21,820 22,510 1? Africa 1,316 2,211 1,835 1,543 1,119 1,122 957 13 All other3 5,182 4,188 5,271 6,094 5,624 6,774 6,122 Maturity of more than one year 14 Europe 6,965 13,240 14,923 18,962 18,618 22,950 23,949 15 Canada 2,645 2,525 3,140 3,292 3,192 3,191 3,134 16 Latin America and Caribbean 24,943 42,049 33,442 39.090 38,lllr 38,741 39,153 17 Asia 9,392 10,235 10,018 10,482 10,641r 11,257 12,093 18 Africa 1,361 1,236 1,232 1,105 1,087 1,065 965 19 Allother3 941 1,484 1,137 1,843 1,632 1,672 1,754 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

Bank-Reported Data A57 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. and Foreign Offices of U.S. Banks1 Billions of dollars, end of period 1998 1999 2000 AArreeaa oorr ccoouunnttrryy 11999966 11999977 Mar. June Sept. Dec. Mar. June Sept. Dec. Mar.p 1 Total 645.8 721.8 1029.8 1017.2 1071.9 1051.6 992.6 938.5 936.8 935.5 950.0 2 G-10 countries and Switzerland 228.3 242.8 250.9 273.9 240.0 217.7 208.5 222.2 205.5 235.5 283.6 3 Belgium and Luxembourg 11.7 11.0 12.0 14.0 11.7 10.7 15.6 16.1 15.7 14.3 14.2 4 France 16.6 15.4 16.5 21.7 20.3 18.4 21.6 20.4 19.9 29.0 27.1 5 Germany 29.8 28.6 27.0 30.5 31.4 30.9 34.7 32.1 37.4 38.7 37.3 6 Italy 16.0 15.5 20.8 21.1 18.5 11.5 17.8 16.4 15.0 18.1 20.0 7 Netherlands 4.0 6.2 7.7 8.6 8.4 7.8 10.7 13.3 10.6 11.0 17.2 8 Sweden 2.6 3.3 4.8 3.1 2.1 2.3 4.0 2.6 3.6 2.9 3.9 9 Switzerland 5.3 7.2 5.9 7.0 7.6 8.5 7.8 8.2 8.8 10.2 10.1 10 United Kingdom 104.7 113.4 114.6 125.9 100.1 85.4 55.9 73.4 51.1 72.8 112.8 11 Canada 14.0 13.7 14.2 16.7 15.9 16.8 15.9 17.1 17.8 16.3 17.5 12 Japan 23.7 28.6 27.3 25.3 23.9 25.4 24.6 22.6 25.6 22.0 23.5 13 Other industrialized countries 66.1 65.5 78.2 78.7 78.5 69.0 80.1 79.7 71.7 68.2 62.6 14 Austria 1.1 1.5 1.7 1.9 2.1 1.4 2.8 2.8 3.0 3.5 2.6 IS Denmark 1.5 2.4 2.1 2.2 3.0 2.2 3.4 2.9 2.1 2.6 1.5 16 Finland .8 1.3 1.5 1.4 1.6 1.4 1.5 .9 .9 .9 .8 17 Greece 6.7 5.1 6.1 5.8 5.8 5.9 6.5 5.9 6.6 6.0 5.7 18 Norway 8.0 3.6 4.0 3.4 3.2 3.2 3.1 3.0 3.8 3.2 2.9 19 Portugal .9 .9 .8 1.4 1.1 1.4 1.4 1.2 1.2 1.0 1.0 20 Spain 13.3 12.6 18.1 17.5 19.5 13.7 15.7 16.6 15.1 12.1 11.3 21 Turkey 2.7 4.5 4.9 6.5 5.2 4.8 5.2 4.9 4.7 4.8 5.1 22 Other Western Europe 4.9 8.3 10.2 9.9 10.4 10.4 10.2 10.2 9.2 6.8 8.3 23 South Africa 2.0 2.2 5.5 6.9 5.4 4.4 4.8 4.7 4.0 3.8 4.8 24 Australia 24.0 23.1 23.2 21.8 21.4 20.3 25.4 26.6 21.1 23.5 18.6 75 OPEC2 19.8 26.0 26.0 25.5 26.0 27.1 26.2 26.1 30.1 31.4 28.9 26 Ecuador 1.1 1.3 1.3 1.2 1.2 1.3 1.2 1.1 .9 .8 .7 27 Venezuela 2.4 2.5 3.4 3.3 3.1 3.2 3.5 3.2 3.0 2.8 3.0 78 Indonesia 5.2 6.7 5.6 5.1 4.7 4.7 4.5 5.0 4.4 4.2 3.9 29 Middle East countries 10.7 14.4 14.4 15.6 16.1 17.0 16.7 16.5 21.4 23.0 21.1 30 African countries .4 1.2 1.4 .3 .8 1.0 .4 .4 .5 .5 .2 31 Non-OPEC developing countries 130.3 139.2 149.8 146.1 140.4 143.4 146.7 148.6 142.5 147.3 152.2 Latin America 32 Argentina 14.3 18.4 20.0 20.9 22.9 23.1 24.3 22.8 22.1 22.4 21.3 33 Brazil 20.7 28.6 33.4 30.3 24.0 24.7 24.2 25.1 22.1 26.4 26.9 34 Chile 7.0 8.7 9.0 9.1 8.5 8.3 8.6 8.2 7.7 7.4 8.2 35 Colombia 4.1 3.4 3.3 3.6 3.4 3.2 3.3 3.1 2.7 2.5 2.5 36 Mexico 16.2 17.4 17.8 18.1 18.7 18.9 19.7 18.5 19.4 18.7 18.3 37 Peru 1.6 2.0 2.1 2.2 2.2 2.2 2.2 2.1 1.8 1.7 1.9 38 Other 3.3 4.1 4.0 4.4 4.6 5.4 5.3 5.5 5.5 5.9 6.1 Asia China 39 Mainland 2.5 3.2 4.2 3.9 2.8 3.0 5.0 5.3 3.3 3.6 4.6 40 Taiwan 10.3 9.5 12.1 11.8 12.5 13.3 11.8 12.6 12.3 12.0 12.6 41 India 4.3 4.9 5.0 4.9 5.3 5.5 5.5 6.7 7.0 7.7 7.9 42 Israel .5 .7 .7 .9 .9 1.1 1.1 2.0 1.0 1.8 3.3 43 Korea (South) 21.5 15.6 16.2 14.6 13.1 13.7 13.7 15.3 16.0 15.1 17.3 44 Malaysia 6.0 5.1 4.5 4.7 5.0 5.6 5.9 6.0 6.1 6.1 6.5 45 Philippines 5.8 5.7 5.1 5.4 4.7 5.1 5.4 5.7 5.8 6.2 5.3 46 Thailand 5.7 5.4 5.5 5.0 5.3 4.7 4.5 4.2 4.0 4.1 4.3 47 Other Asia 4.1 4.3 4.2 3.7 3.1 2.9 3.0 2.8 2.8 2.9 2.6 Africa 48 Egypt .7 .9 1.0 1.5 1.7 1.3 1.4 1.4 1.3 1.4 1.4 49 Morocco .7 .6 .6 .6 .5 .5 .5 .5 .5 .4 .3 50 Zaire .1 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 51 Other Africa3 .9 .8 1.1 .8 1.1 1.0 1.2 1.0 1.0 1.0 .9 52 Eastern Europe 6.9 9.1 12.3 11.3 6.3 5.5 7.1 5.8 5.4 5.2 4.7 53 Russia4 3.7 5.1 7.5 6.9 2.8 2.2 2.3 2.1 2.0 1.6 1.7 54 Other 3.2 4.0 4.7 4.4 3.5 3.3 4.8 3.7 3.4 3.6 3.0 55 Offshore banking centers 135.1 140.2 133.1 130.0 121.0 93.9 93.6 75.9 90.3 60.1 42.0 56 Bahamas 20.5 24.2 32.6 28.6 30.7 35.4 32.6 20.4 29.4 13.9 2.4 57 Bermuda 4.5 9.8 9.1 9.4 10.4 4.6 3.9 5.7 8.2 8.0 7.3 58 Cayman Islands and other British West Indies 37.2 43.4 24.9 34.3 27.8 12.8 13.9 7.2 6.3 1.3 .0 59 Netherlands Antilles 26.1 14.6 14.0 10.5 6.0 2.6 2.7 1.3 9.1 1.7 2.5 60 Panama5 2.0 3.1 3.2 3.3 4.0 3.9 3.9 3.9 3.9 3.9 3.4 61 Lebanon .1 .1 .1 .1 .2 .1 .1 .1 .2 .1 .1 62 Hong Kong, China 27.9 32.2 33.9 30.0 30.6 23.3 22.8 22.0 22.4 21.0 22.2 63 Singapore 16.7 12.7 15.0 13.6 11.1 11.1 13.5 15.2 10.6 10.1 4.1 64 Other" .1 .1 .1 .2 .2 .2 .2 .1 .2 .1 .1 65 Miscellaneous and unallocated7 59.6 99.1 379.7 351.7 459.9 495.1 430.4 380.2 391.2 387.9 376.0 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 • August 2000 3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States Millions of dollars, end of period 1998 1999 TTyyppee ooff lliiaabbiilliittyy,, aanndd aarreeaa oorr ccoouunnttrryy 11999966 11999977 11999988 Sept. Dec. Mar. June Sept. Dec. 1 Total 61,782 57,382 46,570 49,279 46,570 46,663 49,337 52,979 53,044r 2 Payable in dollars 39,542 41,543 36,668 38,410 36,668 34,030 36,032 36,296 37,605r 3 Payable in foreign currencies 22,240 15,839 9,902 10,869 9,902 12,633 13,305 16,683 15,415 By type 4 Financial liabilities 33,049 26,877 19,255 19,331 19,255 22,458 25,058 27,422 27,980 5 Payable in dollars 11,913 12,630 10,371 9,812 10,371 11,225 13,205 12,231 13,883 6 Payable in foreign currencies 21,136 14,247 8,884 9,519 8,884 11,233 11,853 15,191 14,097 7 Commercial liabilities 28,733 30,505 27,315 29,948 27,315 24,205 24,279 25,557 25,064r 8 Trade payables 12,720 10,904 10,978 10,276 10,978 9,999 10,935 12,651 12,857r 9 Advance receipts and other liabilities 16,013 19,601 16,337 19,672 16,337 14,206 13,344 12,906 12,207r 10 Payable in dollars 27,629 28,913 26,297 28,598 26,297 22,805 22,827 24,065 23,722r 11 Payable in foreign currencies 1,104 1,592 1,018 1,350 1,018 1,400 1,452 1,492 1,318 By area or country Financial liabilities 12 Europe 23,179 18,027 12,589 12,905 12,589 16,098 19,578 21,695 23,241 13 Belgium and Luxembourg 632 186 79 150 79 50 70 50 31 14 France 1,091 1,425 1,097 1,457 1,097 1,178 1,287 1,675 1,659 15 Germany 1,834 1,958 2,063 2,167 2,063 1,906 1,959 1,712 1,974 16 Netherlands 556 494 1,406 417 1,406 1,337 2,104 2,066 1,996 17 Switzerland 699 561 155 179 155 141 143 133 147 18 United Kingdom 17,161 11,667 5,980 6,610 5,980 9,729 13,097 15,096 16,521 19 Canada 1,401 2,374 693 389 693 781 320 344 284 20 Latin America and Caribbean 1,668 1,386 1,495 1,351 1,495 1,528 1,369 1,180 892 21 Bahamas 236 141 7 1 7 1 1 1 1 22 Bermuda 50 229 101 73 101 78 52 26 5 23 Brazil 78 143 152 154 152 137 131 122 126 24 British West Indies 1,030 604 957 834 957 1,064 944 786 492 25 Mexico 17 26 59 23 59 22 19 28 25 26 Venezuela 1 1 2 1 2 2 1 0 0 27 Asia 6,423 4,387 3,785 4,005 3,785 3,475 3,217 3,622 3,437 28 Japan 5,869 4,102 3,612 3,754 3,612 3,337 3,035 3,384 3,142 29 Middle Eastern oil-exporting countries1 25 27 0 0 0 1 2 3 3 30 Africa 38 60 28 31 28 31 29 31 28 31 Oil-exporting countries2 0 0 0 0 0 2 0 0 0 32 All other3 340 643 665 650 665 545 545 550 98 Commercial liabilities 33 Europe 9,767 10,228 10,030 11,010 10,030 8,580 8,718 9,265 9,262r 34 Belgium and Luxembourg 479 666 278 623 278 229 189 128 140 35 France 680 764 920 740 920 654 656 620 672r 36 Germany 1,002 1,274 1,392 1,408 1,392 1,088 1,143 1,201 1,131r 37 Netherlands 766 439 429 440 429 361 432 535 507r 38 Switzerland 624 375 499 507 499 535 497 593 626 39 United Kingdom 4,303 4,086 3,697 4,286 3,697 3,008 2,959 3,175 3,071r 40 Canada 1,090 1,175 1,390 1,504 1,390 1,597 1,670 1,753 l,775r 41 Latin America and Caribbean 2,574 2,176 1,618 1,840 1,618 1,612 1,674 1,957 2,310r 42 Bahamas 63 16 14 48 14 11 19 24 22r 43 Bermuda 297 203 198 168 198 225 180 178 152 44 Brazil 196 220 152 256 152 107 112 120 145 45 British West Indies 14 12 10 5 10 7 5 39 48 46 Mexico 665 565 347 511 347 437 490 704 887r 47 Venezuela 328 261 202 230 202 155 149 182 305 48 Asia 13,422 14,966 12,342 13,539 12,342 10,428 10,039 10,428 9,886 49 Japan 4,614 4,500 3,827 3,779 3,827 2,715 2,753 2,689 2,609 50 Middle Eastern oil-exporting countries' 2,168 3,111 2,852 3,582 2,852 2,479 2,209 2,618 2,551 51 Africa 1,040 874 794 810 794 727 832 959 950 52 Oil-exporting countries2 532 408 393 372 393 377 392 584 499 53 Other3 840 1,086 1,141 1,245 1,141 1,261 1,346 1,195 881r 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 1998 1999 TTyyppee ooff ccllaaiimm,, aanndd aarreeaa oorr ccoouunnttrryy 11999966 11999977 11999988 Sept. Dec. Mar. June Sept. Dec. 1 Total 65,897 68,128 77,462 67,976 77,462 69,054 63,884 67,566 76,669r 2 Payable in dollars 59,156 62,173 72,171 62,034 72,171 64,026 57,006 60,456 69, no1 3 Payable in foreign currencies 6,741 5,955 5,291 5,942 5,291 5,028 6,878 7,110 7,472r By type 4 Financial claims 37,523 36,959 46,260 37,262 46,260 38,217 31,957 33,877 40,23 r 5 Deposits 21,624 22,909 30,199 15,406 30,199 18,686 13,350 15,192 18,566r 6 Payable in dollars 20,852 21,060 28,549 13,374 28,549 17,101 11,636 13,240 16,373r 7 Payable in foreign currencies 772 1,849 1,650 2,032 1,650 1,585 1,714 1,952 2,193r 8 Other financial claims 15,899 14,050 16,061 21,856 16,061 19,531 18,607 18,685 21,665 9 Payable in dollars 12,374 11,806 14,049 19,867 14,049 17,457 14,800 15,718 18,593 10 Payable in foreign currencies 3,525 2,244 2,012 1,989 2,012 2,074 3,807 2,967 3,072 11 Commercial claims 28,374 31,169 31,202 30,714 31,202 30,837 31,927 33,689 36,438r 12 Trade receivables 25,751 27,536 27,202 26,330 27,202 26,724 27,791 29,397 32,629r 13 Advance payments and other claims 2,623 3,633 4,000 4,384 4,000 4,113 4,136 4,292 3,809 14 Payable in dollars 25,930 29,307 29,573 28,793 29,573 29,468 30,570 31,498 34,204r 15 Payable in foreign currencies 2,444 1,862 1,629 1,921 1,629 1,369 1,357 2,191 2,207 By area or country Financial claims 16 Europe 11,085 14,999 12,294 14,473 12,294 12,881 13,978 13,878 1133,,002233rr 17 Belgium and Luxembourg 185 406 661 496 661 469 457 574 529 18 France 694 1,015 864 1,140 864 913 1,368 1,212 967 19 Germany 276 427 304 359 304 302 367 549 504 70 Netherlands 493 677 875 867 875 993 997 1,067 1,229 71 Switzerland 474 434 414 409 414 530 504 559 643 22 United Kingdom 7,922 10,337 7,766 9,849 7,766 8,400 8,631 8,157 7,561r 23 Canada 3,442 3,313 2,503 4,090 2,503 3,111 2,828 3,172 2,553r 74 Latin America and Caribbean 20,032 15,543 27,714 15,758 27,714 18,825 11,486 12,749 18,206r 75 Bahamas 1,553 2,308 403 2,105 403 666 467 755 l,593r 76 Bermuda 140 108 39 63 39 41 39 524 11 77 Brazil 1,468 1,313 835 710 835 1,112 1,102 1,265 1,476 78 British West Indies 15,536 10,462 24,388 10,960 24,388 14,621 7,393 7,263 12,099r 7.9 Mexico 457 537 1,245 1,122 1,245 1,583 1,702 1,791 1,798 30 Venezuela 31 36 55 50 55 72 71 47 48 31 2,221 2,133 3,027 2,121 3,027 2,648 2,801 3,205 5,457 32 Japan 1,035 823 1,194 928 1,194 942 949 1,250 3,262 33 Middle Eastern oil-exporting countries' 22 11 9 13 9 8 5 5 21 34 Africa 174 319 159 157 159 174 228 251 286r 35 Oil-exporting countries2 14 15 16 16 16 26 5 12 15 36 All other3 569 652 563 663 563 578 636 622 706 Commercial claims 37 Europe 10,443 12,120 13,246 13,029 13,246 12,782 12,961 14,367 16,389r 38 Belgium and Luxembourg 226 328 238 219 238 281 286 289 316 39 France 1,644 1,796 2,171 2,098 2,171 2,173 2,094 2,375 2,236r 40 Germany 1,337 1,614 1,822 1,502 1,822 1,599 1,660 1,944 1,960r 41 Netherlands 562 597 467 463 467 415 389 617 1,429r 47 Switzerland 642 554 483 546 483 367 385 714 610 43 United Kingdom 2,946 3,660 4,769 4,681 4,769 4,529 4,615 4,789 5,827r 44 Canada 2,165 2,660 2,617 2,291 2,617 2,983 2,855 2,638 2,151' 45 Latin America and Caribbean 5,276 5,750 6,296 5,773 6,296 5,930 6,278 5,879 5,959r 46 Bahamas 35 27 24 39 24 10 21 29 20 47 Bermuda 275 244 536 173 536 500 583 549 390 48 Brazil 1,303 1,162 1,024 1,062 1,024 936 887 763 905r 49 British West Indies 190 109 104 91 104 117 127 157 18 lr 50 Mexico 1,128 1,392 1,545 1,356 1,545 1,431 1,478 1,613 l,678r 51 Venezuela 357 576 401 566 401 361 384 365 439 57 8,376 8,713 7,192 7,190 7,192 7,080 7,690 8,579 9,165r 53 Japan 2,003 1,976 1,681 1,789 1,681 1,486 1,511 1,823 2,074 54 Middle Eastern oil-exporting countries1 971 1,107 1,135 967 1,135 1,286 1,465 1,479 1,625 55 Africa 746 680 711 740 711 685 738 682 631 56 Oil-exporting countries2 166 119 165 128 165 116 202 221 171 57 Other3 1,368 1,246 1,140 1,691 1,140 1,377 1,405 1,544 1,537 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 • August 2000 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 2000 1999 2000 Transaction, and area or country 1998 1999 J A a p n r .- . Oct. Nov. Dec. Jan. Feb. Mar. Apr.p U.S. corporate securities STOCKS 1 Foreign purchases 1,574,192 2,340,659 1,269,222 218,983 240,329 256,414 263,947 293,110 402,373 309,792 2 Foreign sales 1,524,203 2,233,137 1,203,361 211,213 221,911 247,460 253,365 265,365 378,141 306,490 3 Net purchases, or sales (—) 49,989 107,522 65,861 7,770 18,418 8,954 10,582 27,745 24,232 3,302 4 Foreign countries 50,369 107,578 65,821 7,796 18,393 8,983 10,540 27,626 24,414 3,241 5 Europe 68,124 98,060 70,960 7,760 10,695 13,283 15,704 24,375 18,594 12,287 6 France 5,672 3,813 3,461 1,020 -369 66 -240 529 1,831 1,341 7 Germany 9,195 13,410 19,021 1,719 2,467 1,587 5,633 5,425 4,532 3,431 8 Netherlands 8,249 8,083 625 159 1,375 1,640 -281 516 277 113 9 Switzerland 5,001 5,650 8,506 -1,418 384 1,495 2,926 4,804 -913 1,689 10 United Kingdom 23,952 42,902 14,280 3,836 3,966 3,080 2,246 6,685 44,,779944 555 11 Canada -4,689 -335 1,851 543 -958 -940 666 890 228866 9 12 Latin America and Caribbean 757 5,187 -9,802 -3,162 7,746 -4,735 -5,190 1,989 4,840 -11,441 13 Middle East1 -1,449 -1,068 6,054 -14 -1,197 465 677 1,182 2,125 2,070 14 Other Asia -12,351 4,447 -4,172 2,386 2,350 752 -1,645 -863 -1,717 53 15 Japan -1,171 5,723 -5,768 1,695 630 211 -1,603 -1,115 -2,604 -446 16 Africa 639 372 582 -23 1 -18 151 -2 205 228 17 Other countries -662 915 348 306 -244 176 177 55 81 35 18 Nonmonetary international and regional organizations -380 -56 40 -26 25 -29 42 119 -182 61 BONDS2 19 Foreign purchases 905,782 856,804 373,107 81,301r 74,940 56,928 79,045r 99,605 106,302 88,155 20 Foreign sales 727,044 602,109 276,244 55,120 50,839 41,321 58,889 69,476 76,979 70,900 21 Net purchases, or sales (-) 178,738 254,695 96,863 26,181r 24,101 15,607 20,156r 30,129 29,323 17,255 22 Foreign countries 179,081 255,097 96,990 27,045r 24,172 15,626 20,161r 30,147 29,422 17,260 23 Europe 130,057 140,674 54,240 14,75 lr 11,639 7,500 10,083r 17,063 19,454 7,640 24 France 3,386 1,870 1,596 52 53 269 -114 1,124 620 -34 25 Germany 4,369 7,723 720 1,203 1,327 -228 -618 702 348 288 26 Netherlands 3,443 2,446 253 103 133 183 -23 -97 94 279 27 Switzerland 4,826 4,553 663 360 429 462 -47 526 202 -18 28 United Kingdom 99,637 106,344 43,555 11,043r 9,241 6,040 10,324r 13,478 15,479 4,274 29 Canada 6,121 6,043 4,910 271 1,506 961 2,133 1,324 689 764 30 Latin America and Caribbean 23,938 60,861 22,721 6,396 6,652 4,094 4,658 9,659 3,680 4,724 31 Middle East1 4,997 1,979 754 178 -506 309 -86 -177 670 347 32 Other Asia 12,662 42,842 13,427 4,847 4,566 2,591 2,623r 2,545 4,506 3,753 33 Japan 8,384 17,541 4,876 2,081 2,297 1,437 1,113R 1,173 2,010 580 34 Africa 190 1,411 571 343 146 257 677 -130 -11 35 35 Other countries 1,116 1,287 367 259 169 -86 73 -137 434 -3 36 Nonmonetary international and regional organizations -343 -402 -127 -864 -71 -19 -5 -18 -99 -5 Foreign securities 37 Stocks, net purchases, or sales (-) 6,227 15,643 -15,218 -8,206 3,816 -1,504 1,107 -8,882r -8,171 728 38 Foreign purchases 929,923 1,177,306 643,284 96,523 129,534 125,956 134,949 176,938r 177,087 154,310 39 Foreign sales 923,696 1,161,663 658,502 104,729 125,718 127,460 133,842 185,820r 185,258 153,582 40 Bonds, net purchases, or sales (-) -17,350 -5,676 -8,121 -1,320 -512 3,872 -3,502 -1,986 -3,431 798 41 Foreign purchases 1,328,281 798,267 284,323 62,533 59,650 52,227 62,189 74,380 83,838 63,916 42 Foreign sales 1,345,631 803,943 292,444 63,853 60,162 48,355 65,691 76,366 87,269 63,118 43 Net purchases, or sales (—), of stocks and bonds .... -11,123 9,967 -23,339 -9,526 3,304 2,368 -2,395 -10,868r -11,602 1,526 44 Foreign countries -10,778 9,682 -23,792 -9,532 3,496 2,210 -2,555 — 10,897r -11,701 1,361 45 Europe 12,632 59,247 -8,358 2,202 2,238 5,001 754 -4,968r -5,922 1,778 46 Canada -1,901 -999 -4,158 315 -1,671 1,342 -471 -1,865 -1,400 -422 47 Latin America and Caribbean -13,798 -4,726 -15,121 -1,950 6,403 524 -4,868 -4,252 -701 -5,300 48 Asia -3,992 -42,961 2,851 -9,603 -4,048 -4,945 1,951 -711 -4,085 5,696 49 Japan -1,742 -43,637 3,219 -10,006 -4,453 -3,596 866 -879 -1,457 4,689 50 Africa -1,225 713 523 63 160 535 99 183 384 -143 51 Other countries -2,494 -1,592 471 -559 414 -247 -20 716 23 -248 52 Nonmonetary international and regional organizations -345 285 453 6 -192 158 160 29 99 165 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 2000 1999 2000 AArreeaa oorr ccoouunnttrryy 11999988 11999999 J A a p n r .- . Oct. Nov. Dec. Jan. Feb. Mar. Apr.p 1 Total estimated 49,039 -9,953 12,755 -9,733 -3,615 4,642 9,543 5,563 -16,871 14,520 2 Foreign countries 46,570 -10,518 12,740 -9,904 -3,802 4,566 9,578 5,770 -17,092 14,484 3 Europe 23,797 -38,228 -12,832 -405 8,643 -5,533 214 -2,443 -9,971 -632 4 Belgium and Luxembourg 3,805 -81 414 -351 -357 -798 731 65 116 -498 5 Germany 144 2,285 -2,188 78 510 607 1,706 -866 -1,352 -1,676 6 Netherlands -5,533 2,122 4,520 130 360 268 806 2,475 539 700 7 Sweden 1,486 1,699 373 -6 369 317 499 -100 263 -289 8 Switzerland 5,240 -1,761 -5,072 365 144 1,403 -3,407 -1,382 5 -288 9 United Kingdom 14,384 -20,232 -7,394 -1,854 5,837 -3,481 -450 -1,261 -5,150 -533 10 Other Europe and former U.S.S.R 4,271 -22,260 -3,485 1,233 1,780 -3,849 329 -1,374 -4,392 1,952 11 Canada 615 7,348 1,885 -656 -550 218 -582 8 640 1,819 12 Latin America and Caribbean -3,662 -7,523 2,155 -9,911 -5,417 806 -2,409 6,844 -4,789 2,509 13 Venezuela 59 362 117 25 154 -33 54 13 24 26 14 Other Latin America and Caribbean 9,523 1,661 -2,693 -1,777 1,362 576 -3,837 2,482 -1,596 258 15 Netherlands Antilles -13,244 -9,546 4,731 -8,159 -6,933 263 1,374 4,349 -3,217 2,225 16 Asia 27,433 29,359 21,690 942 -6,630 9,718 12,403 1,064 -2,943 11,166 17 Japan 13,048 20,102 10,772 344 -4,378 8,263 1,297 -1,874 494 10,855 18 Africa 751 -3,021 22 -202 -680 -541 -43 80 -19 4 19 Other -2,364 1,547 -180 328 832 -102 -5 217 -10 -382 20 Nonmonetary international and regional organizations 2,469 565 15 171 187 76 -35 -207 221 36 21 International 1,502 190 -20 184 125 75 -7 -194 151 30 22 Latin American regional 199 666 76 -1 -4 1 0 0 70 6 MEMO 23 Foreign countries 46,570 -10,518 12,740 -9,904 -3,802 4,566 9,578 5,770 -17,092 14,484 24 Official institutions 4,123 -9,861 14,374 -1,248 -2,325 4,962 6,763 1,777 -569 6,403 25 Other foreign 42,447 -657 -1,634 -8,656 -1,477 -396 2,815 3,993 -16,523 8,081 Oil-exporting countries 26 Middle East2 -16,554 2,207 4,177 201 -2,050 -3,556 2,913 170 283 811 27 2 0 0 0 0 -1 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 • August 2000 3.28 FOREIGN EXCHANGE RATES AND INDEXES OF THE FOREIGN EXCHANGE VALUE OF THE U.S. DOLLAR1 Currency units per U.S. dollar except as noted 2000 IItteemm 11999977 11999988 11999999 Jan. Feb. Mar. Apr. May June Exchange Rates COUNTRY/CURRENCY UNIT 1 Australia/dollar2 74.37 62.91 64.54 65.60 62.78 60.94 59.60 57.84 59.49 2 Austria/schilling 12.206 12.379 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 3 Belgium/franc 35.81 36.31 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 4 Brazil/real 1.0779 1.1605 1.8207 1.8057 1.7765 1.7424 1.7696 1.8278 1.8099 5 Canada/dollar 1.3849 1.4836 1.4858 1.4486 1.4512 1.4608 1.4689 1.4957 1.4770 6 China, P.R./yuan 8.3193 8.3008 8.2781 8.2792 8.2781 8.2786 8.2793 8.2781 8.2772 7 Denmark/krone 6.6092 6.7030 6.9900 7.3492 7.5725 7.7228 7.8872 8.2329 7.8501 8 European Monetary Union/euro3 .. n.a. n.a. 1.0653 1.0131 0.9834 0.9643 0.9449 0.9059 0.9505 9 Finland/markka 5.1956 5.3473 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 10 France/franc 5.8393 5.8995 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 11 Germany/deutsche mark 1.7348 1.7597 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 12 Greece/drachma 273.28 295.70 306.30 326.86 338.87 346.33 355.02 371.63 354.14 13 Hong Kong/dollar 7.7431 7.7467 7.7594 7.7791 7.7816 7.7848 7.7880 7.7907 7.7934 14 India/rupee 36.36 41.36 43.13 43.59 43.65 43.64 43.68 44.08 44.76 15 Ireland/pound2 151.63 142.48 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 16 Italy/lira 1,703.81 1,736.85 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 17 Japan/yen 121.06 130.99 113.73 105.30 109.39 106.31 105.63 108.32 106.13 18 Malaysia/ringgit 2.8173 3.9254 3.8000 3.8000 3.8000 3.8000 3.8000 3.8000 3.8000 19 Mexico/peso 7.918 9.152 9.553 9.494 9.427 9.289 9.394 9.506 9.834 20 Netherlands/guilder 1.9525 1.9837 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 21 New Zealand/dollar2 66.25 53.61 52.94 51.27 49.03 49.02 49.60 47.08 47.05 22 Norway/krone 7.0857 7.5521 7.8071 8.0241 8.2374 8.4100 8.6272 9.0533 8.6807 23 Portugal/escudo 175.44 180.25 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 24 Singapore/dollar 1.4857 1.6722 1.6951 1.6757 1.7028 1.7153 1.7096 1.7286 1.7277 25 South Africa/rand 4.6072 5.5417 6.1191 6.1309 6.3209 6.4675 6.6480 7.0238 6.9147 26 South Korea/won 947.65 1,400.40 1,189.84 1,130.99 1,129.75 1,116.39 1,110.32 1,119.49 1,117.94 27 Spain/peseta 146.53 149.41 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 28 Sri Lanka/rupee 59.026 65.006 70.868 73.140 73.552 73.810 74.123 74.867 76.736 29 Sweden/krona 7.6446 7.9522 8.2740 8.4918 8.6480 8.6971 8.7486 9.0925 8.7471 30 Switzerland/franc 1.4514 1.4506 1.5045 1.5903 1.6348 1.6636 1.6657 1.7190 1.6420 31 Taiwan/dollar 28.775 33.547 32.322 30.890 30.806 30.724 30.520 30.772 30.831 32 Thailand/baht 31.072 41.262 37.887 37.380 37.759 37.923 37.993 38.951 39.087 33 United Kingdom/pound2 163.76 165.73 161.72 164.04 160.00 157.99 158.23 150.90 150.92 34 Venezuela/bolivar 488.87 548.39 606.82 652.81 659.44 666.82 672.73 680.00 680.96 Indexes4 NOMINAL 35 Broad (January 1997=100)' 104.44 116.48 116.87 115.95 117.44 117.44 118.10 120.70 119.43 36 Major currencies (March 1973= 100)6 .. 91.24 95.79 94.07 93.14 95.31 95.64 96.31 99.31 96.74 37 Other important trading partners (January 1997= 100)7 104.67 126.03 129.94 129.14 129.11 128.54 129.05 130.43 131.62 REAL 38 Broad (March 1973 = 100)5 91.33 99.36 98.76 98.05 99.34 100.08 100.50 102.75 101.61 39 Major currencies (March 1973 = 100)6 . . 92.25 97.25 96.75 96.63 99.18 99.91 100.25 103.57 100.86 40 Other important trading partners (March 1973= 100)7 95.87 108.52 107.74 106.17 105.81 106.60 107.16 108.13 109.03 1. Averages of certified noon buying rates in New York for cable transfers. Data in this 4. The December 1999 Bulletin contains revised index values resulting from the annual table also appear in the Board's G.5 (405) monthly statistical release. For ordering address, revision to the trade weights. For more information on the indexes of the foreign exchange see inside front cover. value of the dollar, see Federal Reserve Bulletin, vol. 84 (October 1998), pp. 811-18. 2. U.S. cents per currency unit. 5. Weighted average of the foreign exchange value of the U.S. dollar against the currencies 3. As of January 1999, the euro is reported in place of the individual euro area currencies. of a broad group of U.S. trading partners. The weight for each cuiTency is computed as an By convention, the rate is reported in U.S. dollars per euro. These currency rates can be average of U.S. bilateral import shares from and export shares to the issuing country and of a derived from the euro rate by using the fixed conversion rates (in currencies per euro) as measure of the importance to U.S. exporters of that country's trade in third country markets. shown below: 6. Weighted average of the foreign exchange value of the U.S. dollar against a subset of broad index currencies that circulate widely outside the country of issue. The weight for each Euro equals currency is its broad index weight scaled so that the weights of the subset of currencies in the 13.7603 Austrian schillings 1936.27 Italian lire index sum to one. 40.3399 Belgian francs 40.3399 Luxembourg francs 7. Weighted average of the foreign exchange value of the U.S. dollar against a subset of 5.94573 Finnish markkas 2.20371 Netherlands guilders broad index currencies that do not circulate widely outside the country of issue. The weight 6.55957 French francs 200.482 Portuguese escudos for each currency is its broad index weight scaled so that the weights of the subset of 1.95583 German marks 166.386 Spanish pesetas currencies in the index sum to one. .787564 Irish pounds Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A63 Guide to Statistical Releases and Special Tables STATISTICAL RELEASES—List Published Semiannually, with Latest Bulletin Reference Issue Page Anticipated schedule of release dates for periodic releases June 2000 A72 SPECIAL TABLES—Data Published Irregularly, with Latest Bulletin Reference Title and Date Issue Page Assets and liabilities of commercial banks June 30, 1999 November 1999 A64 September 30, 1999 February 2000 A64 December 31, 1999 May 2000 A64 March 31, 2000 August 2000 A64 Terms of lending at commercial banks August 1999 November 1999 A66 November 1999 February 2000 A66 February 2000 May 2000 A66 May 2000 August 2000 A66 Assets and liabilities of U.S. branches and agencies of foreign banks June 30, 1999 November 1999 A72 September 30, 1999 February 2000 A72 December 31, 1999 May 2000 A72 March 31, 2000 August 2000 A72 Pro forma balance sheet and income statements for priced service operations June 30, 1999 October 1999 A64 September 30, 1999 January 2000 A64 March 31, 2000 August 2000 A76 Residential lending reported under the Home Mortgage Disclosure Act 1997 September 1998 A64 1998 September 1999 A64 Disposition of applications for private mortgage insurance 1997 September 1998 A72 1998 September 1999 A73 Small loans to businesses and farms 1997 September 1998 A76 1998 September 1999 A76 Community development lending reported under the Community Reinvestment Act 1997 September 1998 A79 1998 September 1999 A79 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 Special Tables • August 2000 4.20 DOMESTIC AND FOREIGN OFFICES Insured Commercial Bank Assets and Liabilities Consolidated Report of Condition, March 31, 2000 Millions of dollars except as noted Banks with foreign offices1 Bank o s f f w ic i e t s h o d n o ly m 2 estic DDoommeessttiicc TToottaall ttoottaall Total Domestic Over 100 Under 100 1 Total assets 5,778,480 5,077,514 4,031,504 3,330,538 1,490,406 256,570 2 Cash and balances due from depository institutions 316,665 233,193 246,999 163,526 57,668 11,999 3 Cash items in process of collection, unposted debits, and currency and coin 121,781 118,731 29,742 4 Cash items in process of collection and unposted debits n.a. 95,390 19,258 T 5 Currency and coin n.a. n.a. 23,340 10,483 n.a. 6 Balances due from depository institutions in the United States 32,268 25,077 18,648 I 7 Balances due from banks in foreign countries and foreign central banks n.a. 80,628 7,470 1,058 1 8 Balances due from Federal Reserve Banks 12,322 12,249 8,220 T MEMO 9 Non-interest-bearing balances due from commercial banks in the United States (included in balances due from depository institutions in the United States) 31,574 n.a. 13,184 13,960 4,430 10 Total securities, held-to-maturity (amortized cost) and available-for-sale (fair value) 1,038,720 611,247 359,339 68,134 11 U.S. Treasury securities 107,204 72,763 27,927 6,513 12 U.S. government agency and corporation obligations (excludes mortgage-backed securities) 209,860 70,863 104,656 34,341 13 Issued by U.S. government agencies 4,827 2,186 1,967 674 14 Issued by U.S. government-sponsored agencies 205,033 68,678 102,688 33,667 15 Securities issued by states and political subdivisions in the United States 8 5,915 28,915 48,330 11,670 16 General obligations 64,774 19,993 36,422 8,359 17 Revenue obligations 23,442 8,448 11,723 3,271 18 Industrial development and similar obligations 698 474 184 40 19 Mortgage-backed securities (MBS) 455,490 301,978 140,941 12,571 20 Pass-through securities 283,858 192,633 82,777 8,449 21 Guaranteed by GNMA 73,186 n.a. 40,798 n.a. 29,204 3,184 22 Issued by FNMA and FHLMC 207,778 150,115 52,426 5,238 23 Privately issued 2,894 1,720 1,147 27 24 Other mortgage-backed securities (includes CMOs, REMICs, and stripped MBS) . . . 171,632 109,346 58,164 4,122 25 Issued or guaranteed by FNMA, FHLMC or GNMA 120,366 75,694 40,896 3,777 26 Collateralized by MBS issued or guaranteed by FNMA, FHLMC, or GNMA 4,070 3,045 907 119 27 All other mortgage-backed securities 47,195 30,607 16,361 227 28 Other debt securities 138,717 110,617 26,276 1,824 29 Other domestic debt securities 52,172 25,867 n.a. 30 Foreign debt securities n.a. 58,445 409 n.a. 31 Equity securities 38,535 26,111 11,210 1,215 32 Investments in mutual funds and other equity securities with readily determinable fair value 12,380 9,018 3,081 281 33 All other equity securities 26,155 17,093 8,128 934 34 Federal funds sold and securities purchased under agreements to resell 248,306 203,387 193,124 148,205 43,987 11,195 35 Total loans and lease-financing receivables, gross 3,529,307 3,245,392 2,408,250 2,124,335 964,281 156,777 36 LESS: Unearned income on loans 3,105 2,528 1,576 998 1,239 290 37 Total loans and leases (net of unearned income) 3,526,202 3,242,865 2,406,674 2,123,336 963,041 156,487 38 LESS: Allowance for loan and lease losses 58,578 n.a. 40,384 n.a. 16,018 2,176 39 LESS: Allocated transfer risk reserves 113 n a. 112 n a. 1 1 40 EQUALS: Total loans and leases, net 3,467,511 n.a. 2,366,179 n.a. 947,022 154,310 Total loans and leases, gross, by category 41 Loans secured by real estate 1,547,198 1,514,854 908,452 876,109 547,744 91,002 42 Construction and land development t 140,800 T 75,326 57,719 7,755 43 Farmland 32,673 6,138 15,409 11,126 44 One- to four-family residential properties 1 854,144 1 547,505 262,890 43,748 45 Revolving, open-end loans, extended under lines of credit n.a. 107,989 n.a. 77,728 28,069 2,192 46 All other loans 746,155 1 469,778 234,821 41,556 47 Multifamily (five or more) residential properties 57,021 i1 31,974 23,030 2,017 48 Nonfarm nonresidential properties 430,216 215,165 188,695 26,357 49 Loans to depository institutions 97,841 81,487 95,937 79,583 1,826 77 50 Commercial banks in the United States n.a. n.a. 64,373 64,090 1,466 n.a. 51 Other depository institutions in the United States n.a. n.a. 10,139 9,947 198 n.a. 52 Banks in foreign countries n.a. n.a. 21,425 5,545 163 n.a. 53 Loans to finance agricultural production and other loans to farmers 43,115 42,378 11,031 10,293 17,082 15,002 54 Commercial and industrial loans 995,291 836,654 796,182 637,544 171,668 27,442 55 U.S. addressees (domicile) n.a. n.a. 649,951 628,672 170,850 n.a. 56 Non-U.S. addressees (domicile) n.a. n.a. 146,231 3,873 818 n.a. 57 Acceptances of other banks 1,298 683 1,181 565 108 10 58 U.S. banks n.a. n.a. 303 294 n.a. n.a. 59 Foreign banks n.a. n.a. 877 272 n.a. n.a. 60 Loans to individuals for household, family, and other personal expenditures (includes purchased paper) 539,023 497,047 315,926 273,950 201,985 21,112 61 Credit cards and related plans 195,254 n.a. 111,508 n.a. 82,926 821 62 Other (includes single payment and installment) 343,769 n.a. 204,417 n.a. 119,060 20,292 63 Obligations (other than securities) of states and political subdivisions in the United States (includes nonrated industrial development obligations) 20,107 20,107 13,224 13,224 6,140 743 64 All other loans 136,333 108,249 128,271 100,187 7,315 747 65 Loans to foreign governments and official institutions n.a. n.a. 7,000 1,454 19 n.a. 66 Other loans n.a. n.a. 121,271 9 8,733 7,297 n.a. 67 Loans for purchasing and carrying securities n.a. n.a. n.a. 23,786 1,489 n.a. 68 All other loans (excludes consumer loans) n.a. n.a. n.a. 74,946 5,808 n.a. 69 Lease-financing receivables 149,101 143,933 138,047 132,879 10,412 642 70 Assets held in trading accounts 281,570 4 280,913 654 1 71 Premises and fixed assets (including capitalized leases) 73,210 T 45,573 T 22,610 5,028 72 Other real estate owned 3,012 n.a. 1,588 n.a. 1,141 284 73 Investments in unconsolidated subsidiaries and associated companies 9,530 1 9,065 I 417 47 74 Customers' liability on acceptances outstanding 9,366 1 9,138 224 4 75 Net due from own foreign offices, Edge Act and agreement subsidiaries, and IBFs n.a. 21,214 n.a. 21,214 n.a. n.a. 76 Intangible assets 9 8,120 n.a. 82,594 n.a. 14,659 867 77 All other assets 232,470 n.a. 185,085 n.a. 42,686 4,699 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banks A65 4.20 DOMESTIC AND FOREIGN OFFICES Insured Commercial Bank Assets and Liabilities—Continued Consolidated Report of Condition, March 31, 2000 Millions of dollars except as noted Banks with foreign offices1 Bank o s f f w ic i e t s h o d n o l m y2 estic TToottaall DDoommeessttiicc ttoottaall Total Domestic Over 100 Under 101 78 Total liabilities, limited-life preferred stock, and equity capital 5,778,480 n.a. 4,031,504 n.a. 1,490,406 256,570 79 Total liabilities 5,295,958 4,594,992 3,709,902 3,008,936 1,356,483 229,573 80 Total deposits ,84 5,655 3,209,380 2,546,131 1,906,856 1,084,294 218,230 81 Individuals, partnerships, and corporations 5,445,150 2,989,799 2,243,734 1,788,383 1,004,882 196,534 82 U.S. government n a. 7,285 n.a. 6,341 824 120 83 States and political subdivisions in the United States n.a. 144,986 n.a. 64,747 62,305 17,933 84 Commercial banks in the United States 83,473 33,025 76,635 26,186 5,911 927 85 Other depository institutions in the United States n.a. 9,267 n.a. 4,260 3,771 1,236 86 Foreign banks, governments, and official institutions 128,994 8,451 128,672 8,130 314 7 87 Banks n.a. n.a. 93,095 7,030 304 n a. 88 Governments and official institutions n a. n.a. 35,577 1,100 10 n.a. 89 Certified and official checks 17,818 16,568 10,059 8,808 6,285 1,474 90 Total transaction accounts 662,388 376,272 223,741- 62,375 91 Individuals, partnerships, and corporations 566,754 316,548 195,825 54,382 92 U.S. government 1,810 1,453 312 45 93 States and political subdivisions in the United States 43,636 20,746 16,750 6,139 94 Commercial banks in the United States 23,400 19,521 3,626 252 95 Other depository institutions in the United States 3,157 2,426 654 77 96 Foreign banks, governments, and official institutions 7,063 6,769 288 6 97 Banks n.a. 6,213 278 n.a. 98 Governments and official institutions n.a. 556 10 n.a. 99 Certified and official checks 16,568 8,808 6,285 1,474 100 Demand deposits (included in total transaction accounts) 511,436 331,781 147,163 32,492 101 Individuals, partnerships, and corporations 440,838 280,163 131,139 29,536 102 U.S. government 1,604 1,308 261 36 103 States and political subdivisions in the United States 18,847 12,803 4,930 1,113 104 Commercial banks in the United States n.a. 23,380 n a. 19,507 3,622 251 105 Other depository institutions in the United States 3,138 2,426 637 75 106 Foreign banks, governments, and official institutions 7,060 6,766 288 6 107 Banks n.a. 6,213 278 n.a. 108 Governments and official institutions n.a. 553 10 n a. 109 Certified and official checks 16,568 8,808 6,285 1,474 110 Total nontransaction accounts 2,546,992 1,530,584 860,553 155,854 111 Individuals, partnerships, and corporations 2,423,044 1,471,836 809,057 142,151 112 U.S. government 5,474 4,888 512 75 113 States and political subdivisions in the United States 101,350 44,001 45,555 11,794 114 Commercial banks in the United States 9,625 6,665 2,285 675 115 Other depository institutions in the United States 6,110 1,833 3,118 1,159 116 Foreign banks, governments, and official institutions 1,387 1,361 26 0 117 Banks n.a. 817 26 n.a. 118 Governments and official institutions n.a. 544 0 n.a. 119 Federal funds purchased and securities sold under agreements to repurchase 471,777 444,878 383,506 356,607 85,206 3,066 120 Demand notes issued to the U.S. Treasury 35,692 35,692 33,011 33,011 2,604 77 121 Trading liabilities 197,122 n.a. 197,023 n.a. 94 5 122 Other borrowed money 49 i,389 457,284 339,323 298,218 152,854 6,212 123 Banks' liability on acceptances executed and outstanding 9,502 7,021 9,274 6,793 224 4 124 Notes and debentures subordinated to deposits 78,292 n.a. 74,195 n.a. 4,077 19 125 Net due to own foreign offices, Edge Act and agreement subsidiaries, and IBFs n.a. 155,703 n.a. 155,703 n.a. n.a. 126 All other liabilities 156,529 n.a. 127,440 n.a. 27,130 1,960 127 Total equity capital 482,522 n.a. 321,601 n.a. 133,923 26,998 MEMO 128 Trading assets at large banks4 281,357 118,148 280,885 117,676 472 129 U.S. Treasury securities (domestic offices) 18,170 18,155 15 130 U.S. government agency corporation obligations 4,163 4,076 87 131 Securities issued by states and political subdivisions in the United States n.a. 1,284 n.a. 1,264 20 132 Mortgage-backed securities 4,747 4,645 101 n.a. 133 Other debt securities 14,374 14,374 0 134 Other trading assets 9,423 9,291 132 135 Trading assets in foreign banks 163,209 0 163,209 0 0 136 Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity contracts 65,987 65,987 65,870 65,870 117 137 Total individual retirement (IRA) and Keogh plan accounts 147,884 79,754 57,167 10,963 138 Total brokered deposits 108,351 64,377 42,344 1,630 139 Fully insured brokered deposits 76,619 36,540 38,611 1,467 140 Issued in denominations of less than $100,000 12,702 4,683 7,063 957 141 Issued in denominations of $100,000, or in denominations greater than $100,000 and participated out by the broker in shares of $100,000 or less n a. 63,917 n a. 31,857 31,548 511 142 Money market deposit accounts (MMDAs) 868,773 614,652 228,968 25,152 143 Other savings deposits (excluding MMDAs) 432,999 270,103 142,617 20,278 144 Total time deposits of less than $100,000 755,203 359,690 316,620 78,892 145 Total time deposits of $100,000 or more 490,017 286,138 172,347 31,532 146 All negotiable order of withdrawal (NOW) accounts 148,692 44,166 75,274 29,252 147 Number of banks ,494 8,494 154 n.a. 3,109 5,231 NOTE. The notation "n.a." indicates the lesser detail available from banks that don't have were $100 million or more. (These banks file the FFIEC 032 or FFIEC 033 Call Report.) foreign offices, the inapplicability of certain items to banks that have only domestic offices or "Under 100" refers to banks whose assets, on June 30 of the preceding calendar year, were the absence of detail on a fully consolidated basis for banks that have foreign offices. less than $100 million. (These banks file the FFIEC 034 Call Report.) 1. All transactions between domestic and foreign offices of a bank are reported in "net due 3. Because the domestic portion of allowances for loan and lease losses and allocated from" and "net due to" lines. All other lines represent transactions with parties other than the transfer risk reserves are not reported for banks with foreign offices, the components of total domestic and foreign offices of each bank. Because these intraoffice transactions are nullified assets (domestic) do not sum to the actual total (domestic). by consolidation, total assets and total liabilities for the entire bank may not equal the sum of 4. Components of "Trading assets at large banks" are reported only by banks with either assets and liabilities respectively of the domestic and foreign offices. total assets of $1 billion or more or with $2 billion or more in the par/notional amount of their Foreign offices include branches in foreign countries, Puerto Rico, and U.S. territories and off-balance-sheet derivative contracts. possessions; subsidiaries in foreign countries; all offices of Edge Act and agreement corporations wherever located; and IBFs. 2. "Over 100" refers to banks whose assets, on June 30 of the preceding calendar year, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 Special Tables • August 2000 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, May 1-5, 2000 E. Commercial and industrial loans made by U.S. branches and agencies of foreign banks1 W e a f e v f i e e g r c h a t t i g e v e d e - Am lo ou an n s t of Avera si g z e e loan W m a e a v i t e g u r h r a t i g e t e y d 3 - Amount of loans (percent) ( l p o e a r n c e r n a t t ) e 2 o ( f m d il o l l i l o a n r s s ) (tho d u o s l a la n r d s s ) of S c e o c l u la r t e e d r a b l y p S r u ep b a je y c m t e t n o t c M om ad m e it u m nd en er t Days penalty LOAN RISK3 1 All commercial and industrial loans 7.78 134,548 681 408 44.0 9.5 31.3 76.6 2 Minimal risk 6.82 27,790 3,303 367 60.5 3.2 84.4 97.8 3 Low risk 7.15 20,513 1,168 368 13.9 12.1 33.9 81.8 4 Moderate risk 7.97 38,722 585 478 45.8 12.6 18.6 75.5 5 Other 8.63 24,608 418 364 39.1 8.9 7.9 67.8 By maturity/repricing interval6 6 Zero interval 8.92 27,668 382 407 55.0 10.8 2.2 69.4 7 Minimal risk 9.42 529 310 709 56.6 62.8 6.3 99.8 8 Low risk 7.93 2,272 414 341 31.0 13.5 10.7 94.7 9 Moderate risk 8.80 11,187 381 353 61.0 8.8 1.7 93.4 10 Other 9.56 5,864 208 631 72.1 21.2 1.9 86.6 11 Daily 7.21 64,053 1,249 197 45.3 9.5 41.5 75.2 12 Minimal risk 6.52 17,738 19,725 128 80.0 .5 97.0 99.6 13 Low risk 6.94 10,067 3,547 254 6.7 12.6 41.3 72.8 14 Moderate risk 7.34 16,798 1,355 232 31.6 15.8 20.2 61.5 15 Other 7.77 8,916 120 23.6 5.0 1.9 45.3 16 2 to 30 days 7.60 18,757 1,104 26.7 6.6 46.2 77.7 17 Minimal risk 7.16 5,146 5,069 21.7 2.1 86.0 93.6 18 Low risk 6.98 3,350 2,297 237 13.2 17.3 35.4 83.0 19 Moderate risk 7.81 4,392 759 359 41.1 8.9 40.5 76.7 20 Other 8.59 3,990 538 158 30.3 3.1 8.6 61.7 21 31 to 365 days 8.04 17,903 504 525 34.1 4.0 30.9 90.9 22 Minimal risk 7.17 3,523 962 784 32.5 .3 37.8 96.1 23 Low risk 7.46 3,719 677 366 19.3 5.0 36.0 94.0 24 Moderate risk 8.10 4,176 350 640 49.0 8.4 34.5 91.3 25 Other 9.00 4,816 721 315 27.2 1.6 26.1 26 More than 365 days 8.37 5,118 283 60.1 16.3 12.5 75.2 27 Minimal risk . .. 7.90 848 787 8.4 41.0 19.5 93.6 28 Low risk 6.73 964 457 30.1 .6 3.7 92.2 29 Moderate risk . . 8.74 1,842 361 81.2 16.3 22.0 53.1 30 Other 9.23 851 202 74.8 18.0 6.1 78.7 Weighted- Weighted- average average risk maturity/ rating5 repricing interval6 Days SIZE OF LOAN (thousands of dollars) 31 1-99 9.94 3,356 3.3 195 86.1 28.3 2.0 75.8 32 100-999 9.26 13,562 3.2 120 75.3 19.9 6.9 84.3 33 1,000-9,999 8.30 37,099 3.0 105 20.5 78.4 34 10,000 or more 7.20 80,530 2.3 40 41.6 74.5 BASE RATE OF LOAN4 35 Prime7 9.54 31,988 3.2 128 75.1 16.5 1.8 80.2 36 Fed funds 6.88 34,234 2.7 24 30.4 8.6 22.3 56.2 37 Other domestic 7.06 13,265 2.3 36 8.1 19.7 69.4 73.9 38 Foreign 7.37 39,432 1.9 30 46.1 2.2 57.8 92.5 39 Other 7.81 15,629 3.0 181 34.9 6.9 10.8 76.2 Footnotes appear at end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A67 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, May 1-5, 2000 B. Commercial and industrial loans made by all domestic banks' Weighted- Amount of loans (percent) Weighted- Amount of Average loan average ( l e p a o f e v a f r e e n c c r e a t r n i a g v t t e e ) e 2 o ( f m l d o i o l a l l i n l o a s n r s s ) (tho d u o s s l i a l z a n e r d s s ) of ma D tu ay ri s t y3 S c e o c l u la r t e e d r a b l y p S r u p ep b en a je y a c m l t t y e t n o t c M om ad m e it u m nd en er t LOAN RISK3 1 All commercial and industrial loans 8.06 90,036 474 566 45.8 13.2 25.7 78.3 2 Minimal risk 6.97 13,680 1,901 535 35.4 5.9 77.6 95.7 3 Low risk 7.19 13,730 827 506 20.1 16.4 42.2 85.4 4 Moderate risk 8.17 30,811 480 602 52.7 15.3 18.8 5 Other 8.95 14,706 261 567 57.1 14.2 7.3 By maturity/repricing interval6 6 Zero interval 8.91 27,119 381 407 54.7 10.8 2.2 69.1 7 Minimal risk 9.32 462 324 709 51.2 57.4 7.2 99.8 8 Low risk 8.01 2,144 394 363 32.7 14.2 11.3 94.4 9 Moderate risk 8.79 11,032 380 352 60.7 8.9 1.7 93.4 10 Other 9.52 5,665 204 632 71.2 21.9 2.0 87.3 11 Daily 7.51 34,979 713 355 41.7 16.6 38.8 79.4 12 Minimal risk 6.60 6,694 9,820 297 58.6 1.3 96.2 98.9 13 Low risk 6.96 6,193 2,461 333 10.8 19.8 61.0 82.1 14 Moderate risk 7.50 11,072 935 376 39.5 22.6 28.7 67.0 15 Other 8.15 4,849 458 216 32.8 8.3 2.4 55.3 16 2 to 30 days 7.62 12,287 543 30.8 9.4 46.0 86.4 17 Minimal risk 7.19 4,185 5,248 803 9.3 2.6 84.5 92.3 18 Low risk 7.00 2,339 1,788 333 18.9 20.9 38.6 79.2 19 Moderate risk 7.94 3,170 592 458 53.1 12.3 31.4 87.5 20 Other 9.14 1,645 236 352 57.3 7.6 9.6 76.8 21 31 to 365 days 7.97 9,812 298 619 46.0 5.6 27.2 90.4 22 Minimal risk 6.75 1,489 471 314 15.2 .1 9.9 90.8 23 Low risk 7.43 1,962 386 629 33.3 4.7 42.8 89.3 24 Moderate risk 8.18 3,369 297 762 50.9 9.9 31.1 93.0 25 Other 8.99 1,534 272 489 70.1 1.7 41.5 94.0 26 More than 365 days 8.37 5,094 282 60.0 16.3 12.5 75.1 27 Minimal risk .. . 7.89 843 787 7.9 40.6 19.7 93.6 28 Low risk 6.70 950 452 29.1 .7 3.7 92.1 29 Moderate risk . . 8.74 1,842 361 81.2 16.3 22.0 53.1 30 Other 9.23 845 201 75.3 18.1 6.1 78.5 Weighted- Weighted- average average risk maturity/ rating5 repricing interval Days SIZE OF LOAN (thousands of dollars) 31 1-99 9.95 3,320 3.3 197 86.4 28.4 1.7 75.8 32 100-999 9.34 12,264 3.3 129 78.0 20.9 4.0 84.1 33 1,000-9,999 8.51 27,796 3.0 132 55.1 10.3 14.7 80.1 34 10,000 or more 7.31 46,655 2.3 61 28.9 11.8 39.8 75.9 BASE RATE OF LOAN4 35 Prime7 9.50 29,961 3.2 134 77.0 15.5 1.5 79.1 36 Fed funds 6.73 17,356 2.3 41 39.8 16.9 38.3 62.2 37 Other domestic 6.99 10,885 2.3 43 9.8 24.0 62.8 89.0 38 Foreign 7.74 17,579 2.3 45 29.9 3.6 42.8 83.3 39 Other 7.83 14,256 2.9 195 34.4 7.5 10.6 82.0 Footnotes appear at end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 Special Tables • August 2000 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, May 1-5, 2000 E. Commercial and industrial loans made by U.S. branches and agencies of foreign banks1 Weighted- Amount of loans (percent) W e a f e v f i e e g r c h a t t i g e v e d e - Am lo o a u n n s t of Aver s a i g z e e loan m a a v t e u r r a i g ty e 3 ( l p o e a r n c e r n a t t ) e 2 o ( f m d i o ll l i l o a n r s s ) (tho d u o s ll a a n r d s s ) of S c e o c l u la r t e e d r a b l y Callable p S r u ep b a je y c m t e t n o t c M om ad m e it u m nd en er t Days penalty LOAN RISK5 1 All commercial and industrial loans 7.90 80,081 861 499 41.8 11.8 27.3 78.4 2 Minimal risk 6.93 13,105 9,257 529 33.1 5.6 79.4 98.3 3 Low risk 7.04 12,543 2,835 16.3 15.7 46.1 85.9 4 Moderate risk 8.01 27,031 979 508 48.9 13.4 18.6 80.9 5 Other 8.78 12,071 372 484 50.9 11.8 6.7 75.2 By maturity/repricing interval6 6 Zero interval 23,007 724 409 51.7 7.3 66.5 7 Minimal risk 9.53 379 1,061 755 54.5 58.3 100.0 8 Low risk 7.80 1,638 1,185 354 29.7 4.9 13.7 95.0 9 Moderate risk 8.65 9,551 767 345 57.8 5.4 1.5 95.7 10 Other 9.41 4,370 304 670 67.5 19.2 .9 89.7 11 Daily 7.43 33,700 820 338 40.0 16.5 40.1 79.1 12 Minimal risk 6.57 6,630 18,311 296 58.2 1.3 97.2 99.8 13 Low risk 6.92 6,065 3,754 326 9.9 20.2 62.3 82.1 14 Moderate risk 7.37 10,429 1,213 323 36.2 23.4 30.3 65.7 15 Other 8.06 4,652 528 210 30.3 7.4 2.1 53.9 16 2 to 30 days 7.55 11,072 1,197 576 27.0 9.1 46.2 87.3 17 Minimal risk 7.20 4,010 18,561 834 5.3 2.7 84.6 95.6 18 Low risk 6.89 2,170 4,334 303 14.2 21.0 41.6 78.3 19 Moderate risk 7.89 2,647 1,051 516 52.5 11.0 27.1 85.7 20 Other 9.15 1,389 262 55.6 8.1 2.9 78.1 21 31 to 365 days 7.79 8,355 1,496 618 39.6 3.7 30.0 94.8 22 Minimal risk 6.65 1,300 4,273 217 4.1 .0 5.2 98.3 23 Low risk 7.25 1,773 2,787 659 28.3 3.9 47.4 92.9 24 Moderate risk 8.03 2,879 1,656 807 45.9 6.0 34.2 96.0 25 Other 8.76 1,221 584 564 66.0 1.3 50.2 95.4 26 More than 365 days 7.73 3,257 1,272 42.1 10.1 6.5 78.2 27 Minimal risk . .. 7.72 780 5,450 .9 40.5 22.6 99.2 28 Low risk 6.26 760 5,859 17.3 .3 4.4 99.7 29 Moderate risk . . 8.44 1,210 1,339 78.8 .4 3.1 46.3 30 Other 8.52 301 334 31.4 1.4 5.4 89.7 Weighted- Weighted- average average risk maturity/ rating5 repricing interval Days SIZE OF LOAN (thousands of dollars) 31 1-99 9.78 1,637 3.5 86.3 33.5 1.3 85.5 32 100-999 9.28 8,676 3.4 76.2 19.5 2.4 86.9 33 1,000-9,999 8.42 23,982 3.0 51.5 8.0 14.6 79.5 34 10,000 or more 7.30 45,786 2.3 28.6 11.5 39.7 75.9 BASE RATE OF LOAN4 35 Prime7 9.40 23,793 3.2 49 75.2 12.1 .3 78.5 36 Fed funds 6.68 16,870 2.3 24 39.2 15.8 39.4 61.2 37 Other domestic 6.97 10,731 2.3 38 24.1 63.6 89.7 38 Foreign 7.74 16,147 2.2 42 28.2 3.6 41.7 83.6 39 Other 7.70 12,539 2.9 134 27.8 5.9 11.2 84.7 Footnotes appear at end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A69 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, May 1-5, 2000 D. Commercial and industrial loans made by small domestic banks1 Weighted- Amount of loans (percent) Weighted- Amount of Average loan average average loans size maturity3 effective (millions (thousands of Subject to ( l p o e a r n c e r n a t t ) e 2 of dollars) dollars) Days S c e o c l u la r t e e d r a b l y pr p ep en ay a m lty e nt c M om ad m e it u m nd en er t LOAN RISK3 1 All commercial and industrial loans 9.31 9,955 1,099 78.0 24.5 12.9 78.0 2 Minimal risk 7.96 575 699 87.1 12.9 38.3 34.7 3 Low risk 1,187 97 679 59.9 24.2 2.2 4 Moderate risk 9.32 3,781 103 1,240 79.7 28.9 20.3 80.3 5 Other 9.75 2,635 111 951 85.4 25.2 10.0 79.0 By maturity/repricing interval6 6 Zero interval 9.58 4,113 104 392 71.7 30.3 7 Minimal risk 8.36 84 78 443 36.4 53.4 8 Low risk 8.66 506 125 395 42.3 44.3 3.4 92.7 9 Moderate risk 9.66 1,481 398 79.3 31.4 3.1 78.6 10 Other 9.90 1,295 507 83.8 31.0 5.6 79.4 11 Daily 9.62 1,279 161 773 19.6 2.8 85.4 12 Minimal risk 9.99 64 200 367 100.0 1.8 .0 2.5 13 Low risk 8.66 128 142 52.8 .0 .0 84.1 14 Moderate risk 9.66 643 198 93.2 9.6 2.5 88.1 15 Other 10.17 197 111 90.9 30.8 10.0 89.1 16 2 to 30 days 8.21 1,216 191 207 65.9 12.0 43.8 78.2 17 Minimal risk 6.84 175 300 78 99.9 .0 83*. 4 15.5 18 Low risk 8.39 169 209 723 79.4 19.2 90.7 19 Moderate risk 8.23 523 184 113 56.6 18.9 52.4 96.8 20 Other 9.10 255 152 139 66.7 4.7 44.1 69.4 21 31 to 365 days 9.02 1,457 53 82.6 16.2 11.9 65.2 22 Minimal risk 7.48 189 66 91.4 .6 39.4 38.5 23 Low risk 9.19 189 43 336 79.5 11.9 3.7 56.2 24 Moderate risk 9.03 490 51 502 80.4 32.6 13.4 75.6 25 Other 9.86 313 204 86.2 3.5 7.5 88.6 26 More than 365 days 9.50 1,837 117 91.9 27.3 69.5 27 Minimal risk . . . 9.95 63 71 93.3 42.4 24.1 28 Low risk 8.46 190 96 53 76.2 2.0 1.0 61.8 29 Moderate risk . . 9.32 632 150 146 85.8 58.0 66.3 30 Other 9.62 545 165 99.6 6.5 72.4 Weighted- Weighted- average average risk maturity/ rating5 repricing interval Days SIZE OF LOAN (thousands of dollars) 31 1-99 10.11 1,683 3.1 336 86.5 23.3 2.1 66.4 32 100-999 9.50 3,589 3.0 341 82.6 24.2 7.7 77.3 33 1,000-9,999 9.09 3,814 3.2 660 77.6 24.7 15.1 84.0 34 10,000 or more 7.94 870 2.7 113 44.2 26.5 45.5 76.6 BASE RATE OF LOAN4 35 Prime7 9.88 3.2 459 84.3 28.6 6.2 81.3 36 Fed funds 8.40 3.1 655 60.2 55.1 .3 97.6 37 Other domestic 153 3.1 395 95.4 12.4 5.2 39.3 38 Foreign 7.75 1,432 2.9 78 49.6 4.0 55.1 79.8 39 Other 8.85 1,717 2.9 639 82.5 18.9 6.1 62.3 Footnotes appear at end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Special Tables • August 2000 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, May 1-5, 2000 E. Commercial and industrial loans made by U.S. branches and agencies of foreign banks1 Weighted- Amount of loans (percent) Weighted- Amount of Average loan average average loans size maturity3 ( l e p o f e a f r n e c c e t r n i a v t t e ) e 2 o ( f m d il o l l i l o a n r s s ) (tho d u o s l a la n r d s s ) of Days S c e o c l u la r t e e d r a b l y p S r u p ep b en a je y a c m l t t y e t n o t c M om ad m e it u m nd en er t LOAN RISK5 1 All commercial and industrial loans 7.23 44,511 5,856 112 2.0 42.5 73.2 2 Minimal risk 6.67 14,110 11,568 201 .6 90.8 100.0 3 Low risk 7.07 6,784 7,167 112 1.3 3.4 17.4 74.4 4 Moderate risk 7.22 7,910 4,106 41 19.0 2.1 17.6 54.8 5 Other 8.15 9,902 3,944 103 12.3 1.0 8.7 55.8 By maturity/reprieing interval6 6 Zero interval 9.31 549 70.7 13.6 86.9 7 Minimal risk 10.13 66 94.6 100.0 100.0 8 Low risk * 9 Moderate risk 9.59 155 444 453 80.1 2.2 2.1 96.5 10 Other 10.52 199 438 626 98.9 1.7 .2 66.9 11 Daily 29,074 13,105 30 49.5 44.8 70.2 12 Minimal risk 6.47 11,045 50,748 23 92.9 97.5 100.0 13 Low risk 6.91 3,873 12,020 144 .1 1.1 9.8 57.8 14 Moderate risk 7.02 5,726 10,379 1 16.2 2.6 3.9 50.8 15 Other 7.31 4,068 7,328 10 12.7 1.1 1.4 33.3 16 2 to 30 days 7.58 6,469 4,671 75 18.9 1.4 46.7 61.1 17 Minimal risk 7.02 961 4,416 241 75.7 92.5 99.4 18 Low risk 6.94 1,011 6,736 20 8.9 28.3 91.8 19 Moderate risk 7.47 1,222 2,841 118 9.8 63.6 48.7 20 Other 8.20 2,345 5,451 34 11.4 7.9 51.1 21 31 to 365 days 8.12 8,090 3,064 414 19.7 2.1 35.2 91.6 22 Minimal risk 7.48 2,034 4,059 1,129 45.1 .5 56.6 100.0 23 Low risk 7.49 1,757 4,250 79 3.7 5.3 29.2 99.2 24 Moderate risk 7.77 807 1,356 150 40.9 2.0 48.3 83.9 25 Other 9.00 3,282 3,158 235 7.2 1.6 19.0 86.3 26 More than 365 days 27 Minimal risk . .. 28 Low risk 29 Moderate risk .. 30 Other Weighted- Weighted- average average risk maturity/ rating5 repricing interval Days SIZE OF LOAN (thousands of dollars) 31 1-99 9.18 35 3.1 58.2 19.2 23.0 73.9 32 100-999 8.48 1,298 3.0 49.8 11.2 34.3 86.2 33 1,000-9,999 7.67 9,303 2.8 29.8 4.3 37.8 73.3 34 10,000 or more 7.05 33,875 2.2 42.8 1.0 44.1 72.6 BASE RATE OF LOAN4 35 Prime7 10.08 2,027 3.2 46.0 6.1 96.0 36 Fed funds 7.04 16,878 3.1 20.8 5.8 50.1 37 Other domestic 7.35 2,380 2.7 .1 99.7 4.7 38 Foreign 7.07 21,853 1.7 59.2 1.1 69.9 99.9 39 Other 7.54 1,373 4.3 40.2 1.3 12.5 15.4 Footnotes appear at end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A71 NOTES TO TABLE 4.23 NOTE. The Survey of Terms of Business Lending collects data on gross loan extensions 5. A complete description of these risk categories is available from the Banking Analysis made during the first full business week in the mid-month of each quarter. The authorized Section, Mail Stop 81, Board of Governors of the Federal Reserve System, Washington, DC panel size for the survey is 348 domestically chartered commercial banks and fifty U.S. 20551. The category "Moderate risk" includes the average loan, under average economic branches and agencies of foreign banks. The sample data are used to estimate the terms of conditions, at the typical lender. The category "Other" includes loans rated "acceptable" as loans extended during that week at all domestic commercial banks and all U.S. branches and well as special mention or classified loans. The weighted-average risk ratings published for agencies of foreign banks. Note that the terms on loans extended during the survey week may loans in rows 31-39 are calculated by assigning a value of "1" to minimal risk loans; "2" to differ from those extended during other weeks of the quarter. The estimates reported here are low risk loans; "3" to moderate risk loans, "4" to acceptable risk loans; and "5" to special not intended to measure the average terms on all business loans in bank portfolios. mention and classified loans. These values are weighted by loan amount and exclude loans 1. As of December 31, 1996, assets of most of the large banks were at least $7.0 billion. with no risk rating. Some of the loans in lines 1,6, 11, 16,21,26, and 31-39 are not rated for Median total assets for all insured banks were roughly $62 million. Assets at all U.S. branches risk. and agencies averaged 1.3 billion. 6. The maturity/repricing interval measures the period from the date the loan is made until it 2. Effective (compounded) annual interest rates are calculated from the stated rate and first may reprice or it matures. For floating-rate loans that are subject to repricing at any other terms of the loans and weighted by loan amount. The standard error of the loan rate for time—such as many prime-based loans—the maturity/repricing interval is zero. For floating-rate all commercial and industrial loans in the current survey (line 1, column 1) is 0.16 percentage loans that have a scheduled repricing interval, the maturity/repricing interval measures the number point. The chances are about two out of three that the average rate shown would differ by less of days between the date the loan is made and the date on which it is next scheduled to reprice. For than this amount from the average rate that would be found by a complete survey of the loans having rates that remain fixed until the loan matures (fixed-rate loans), the maturity/repricing universe of all banks. interval measures the number of days between the date the loan is made and the date on which it 3. Average maturities are weighted by loan amount and exclude loans with no stated matures. Loans that reprice daily mature or reprice on the business day after they are made. Owing maturities. to weekends and holidays, such loans may have maturity/repricing intervals in excess of one day; 4. The most common base pricing rate is that used to price the largest dollar volume of such loans are not included in the "2 to 30 day" category. loans. Base pricing rates include the prime rate (sometimes referred to as a bank's "base" or 7. For the current survey, the average reported prime rate, weighted by the amount of "reference" rate); the federal funds rate; domestic money market rates other than the prime loans priced relative to a prime base rate, was 9.02 percent for all banks; 9.00 percent for rate and the federal funds rate; foreign money market rates; and other base rates not included large domestic banks, 9.10 percent for small domestic banks; and 9.00 percent for U.S. in the foregoing classifications. branches and agencies of foreign banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A72 Special Tables • August 2000 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, March 31, 2000'—Continued Millions of dollars except as noted All states2 New York California Illinois IItteemm in I c T B lu o F t d a s i l 3 n g o IB nl F y s 3 inc T I l B u o F t d a i s l n g I o B n F ly s inc T I l B u o F t d a s i l n g I o B n F ly s inc T I l B u o F t d a s i l n g I o B n F ly s 1 Total assets4 903,989 171,051 729,773 145,304 26,882 7,029 54,155 4,702 2 Claims on nonrelated parties 730,694 83,792 581,520 71,950 26,119 1,591 53,892 4,117 3 Cash and balances due from depository institutions 82,887 37,430 77,772 35,256 755 289 2,872 1,627 4 Cash items in process of collection and unposted debits 2,656 0 2,535 0 5 0 26 0 5 Currency and coin (U.S. and foreign) 17 n.a. 12 n.a. 1 n.a. 0 n.a. 6 Balances with depository institutions in United States 5511,,558877 1133,,557711 4488,,445588 1122,,335522 588 167 11,,339911 890 7 U.S. branches and agencies of other foreign banks (including IBFs) 43,733 12,898 40,996 11,697 439 167 1,371 890 8 Other depository institutions in United States (including IBFs) . .. 77,,885544 673 77,,446611 655 149 0 20 0 y Balances with banks in foreign countries and with foreign central banks 28,265 23,859 26,489 22,904 127 123 1,447 737 10 Foreign branches of U.S. banks 551 508 513 481 0 0 0 0 n Banks in home country and home-country central banks 8,420 7,286 8,344 7,224 56 56 0 0 12 All other banks in foreign countries and foreign central banks .... 19,294 16,064 17,631 15,198 71 67 11,,444466 737 13 Balances with Federal Reserve Banks 361 n.a. 278 n.a. 35 n.a. 88 n.a. 14 Total securities and loans 436,479 35,560 335,907 27,390 24,421 1,246 35,550 1,640 15 Total securities, book value 113,607 4,460 104,999 3,869 1,252 488 6,071 66 16 U.S. Treasury 18,537 n.a. 17,587 n.a. 61 n.a. 877 n.a. 17 Obligations of U.S. government agencies and corporations 4477,,662266 n.a. 4455,,003333 n.a. 184 n.a. 22,,003311 n.a. 18 Other bonds, notes, debentures, and corporate stock (including state and local securities) 47,444 4,460 42,379 3,869 1,007 488 3,163 66 19 Securities of foreign governmental units 10,487 2,468 10,164 2,309 263 120 28 28 20 All Other 36,956 1,992 32,216 1,561 744 368 3,135 38 21 Federal funds sold and securities purchased under agreements to resell 83,963 8,512 74,396 7,625 421 15 8,244 825 22 U.S. branches and agencies of other foreign banks 12,129 3,190 11,246 3,146 360 15 270 0 23 Commercial banks in United States 10,842 160 10,201 158 40 0 59 0 24 Other 60,992 5,162 52,950 4,322 22 0 7,915 825 25 Total loans, gross 323,194 31,125 231,131 23,541 23,210 758 29,501 1,574 26 LESS: Unearned income on loans 322 25 224 21 41 1 22 0 27 EQUALS: Loans, net 322,873 31,100 230,908 23,521 23,169 758 29,480 1,574 Total loans, gross, by category 28 Real estate loans 17,065 95 11,665 93 3,301 0 357 0 29 Loans to depository institutions 23,415 14,786 15,766 9,397 981 513 1,881 1,513 30 Commercial banks in United States (including IBFs) 5,672 2,442 3,742 1,387 706 267 813 679 31 U.S. branches and agencies of other foreign banks 3,554 1,638 2,499 1,291 583 223 92 15 32 Other commercial banks in United States 2,118 805 1,243 96 123 45 721 664 33 Other depository institutions in United States (including IBFs) 15 0 0 0 0 0 0 0 34 Banks in foreign countries 17,728 12,343 12,023 8,010 276 245 1,068 834 35 Foreign branches of U.S. banks 1,599 1,045 1,559 1,010 3 0 0 0 36 Other banks in foreign countries 16,129 11,298 10,465 7,000 273 245 1,068 834 37 Loans to other financial institutions 53,261 1,505 40,397 1,286 1,020 0 3,986 0 38 Commercial and industrial loans 207,029 12,360 143,966 10,574 17,667 222 21,719 51 39 U.S. addressees (domicile) 168,891 31 116,256 31 16,138 0 19,980 0 40 Non-U.S. addressees (domicile) 38,138 1122,,332299 27,710 1100,,554433 1,529 222 1,738 51 41 Acceptances of other banks 767 88 116 88 16 0 635 0 42 U.S. banks 6 0 2 0 4 0 0 0 43 Foreign banks 761 8 114 8 12 0 663355 0 44 Loans to foreign governments and official institutions (including foreign central banks) 3,568 2,258 2,971 2,084 148 24 108 9 45 Loans for purchasing or carrying securities (secured and unsecured) . . . 11,030 22 10,359 22 0 0 50 0 46 All other loans 6,256 90 5,643 76 77 0 213 0 47 Lease financing receivables (net of unearned income) 801 0 249 0 0 0 552 0 48 U.S. addressees (domicile) 801 0 249 0 0 0 552 0 49 Non-U.S. addressees (domicile) 0 0 0 0 0 0 0 0 50 Trading assets 91,602 679 62,447 679 58 0 5,185 0 51 All other assets 35,762 1,611 30,997 999 463 40 2,042 26 52 Customers' liabilities on acceptances outstanding 1,476 n.a. 1,019 n.a. 130 n.a. 283 n.a. 53 U.S. addressees (domicile) 788 n.a. 633 n.a. 130 n.a. 24 54 Non-U.S. addressees (domicile) 687 n.a. 386 n.a. 0 n.a. 259 55 Other assets including other claims on nonrelated parties 34,287 1,611 29,979 999 333 40 1,759 26 56 Net due from related depository institutions5 173,295 87,258 148,254 73,354 763 5,438 262 585 57 Net due from head office and other related depositor}' institutions . . . 117733,,229955 n.a. 114488,,225544 n.a. 763 n.a. 262 58 Net due from establishing entity, head office, and other related depository institutions5 n.a. 87,258 n.a. 73,354 n.a. 5,438 n.a. 585 59 Total liabilities4 903,989 171,051 729,773 145,304 26,882 7,029 54,155 4,702 60 Liabilities to nonrelated parties 779,332 152,571 651,408 129,712 12,679 6,909 40,983 3,350 Footnotes appear at end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Branches and Agencies A73 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, March 31, 20001—Continued Millions of dollars except as noted All states2 New York California Illinois IItteemm ex I c T B l o u F t d a s i l 3 n g o IB nl F y s 3 exc T I l B o u F t d a s i l n g I o B n F ly s exc T I l B o u F t d a s i l n g I o B n F ly s exc T I l B o u F t d a s i l n g I o B n F ly s 61 Total deposits and credit balances 380,861 107,807 314,896 95,025 3,637 1,606 17,707 2,253 62 Individuals, partnerships, and corporations 291,204 11,817 233,337 6,511 2,450 202 15,225 4 63 U.S. addressees (domicile) 274,286 19 222,442 15 807 0 14,998 0 64 Non-U.S. addressees (domicile) 16,918 11,798 10,895 6, 496 1,643 202 227 4 65 Commercial banks in United States (including IBFs) 44,516 12 464 40,034 12,082 356 119 1,025 220 66 U.S. branches and agencies of other foreign banks 18,199 11,684 15,176 11,410 0 59 364 172 67 Other commercial banks in United States 26,317 780 24,858 672 356 60 661 48 68 Banks in foreign countries 9,335 60,011 8,940 56,890 8 540 150 979 69 Foreign branches of U.S. banks 1,080 4,882 1,080 4,745 0 0 0 137 70 Other banks in foreign countries 8,255 55,129 7,860 52,144 8 540 150 842 71 Foreign governments and official institutions (including foreign central banks) 17,533 23,513 15,783 19,542 9 745 1,305 1,C1 48 72 All other deposits and credit balances 18 098 2 16,647 0 09 0 0 2 73 Certified and official checks 175 156 5 1 74 Transaction accounts and credit balances (excluding IBFs) 8,583 6,460 270 612 75 Individuals, partnerships, and corporations 7,130 5,352 254 508 76 U.S. addressees (domicile) 5,003 4,116 140 605 77 Non-U.S. addressees (domicile) 2,127 1,236 114 4 78 Commercial banks in United States (including IBFs) 45 35 0 0 79 U.S. branches and agencies of other foreign banks 11 10 0 0 80 Other commercial banks in United States 34 24 0 0 81 Banks in foreign countries 727 513 8 0 82 Foreign branches of U.S. banks 0 0 0 0 83 Other banks in foreign countries 727 513 8 0 84 Foreign governments and official institutions (including foreign central banks) 353 273 2 2 85 AH other deposits and credit balances 152 131 1 0 86 Certified and official checks 175 156 5 1 87 Demand deposits (included in transaction accounts and credit balances) 8,051 6,155 207 609 88 Individuals, partnerships, and corporations 6,728 5,173 192 605 89 U.S. addressees (domicile) 4,849 4,020 120 602 90 Non-U.S. addressees (domicile) 1,879 1,153 72 4 91 Commercial banks in United States (including IBFs) 42 n.a. 32 n a. 0 n.a. 0 n.a. 92 U.S. branches and agencies of other foreign banks U 10 0 0 93 Other commercial banks in United States 31 21 0 0 94 Banks in foreign countries 679 466 8 0 95 Foreign branches of U.S. banks 0 0 0 0 96 Other banks in foreign countries 679 466 8 0 97 Foreign governments and official institutions (including foreign central banks) 349 269 2 2 98 All other deposits and credit balances 77 60 0 0 99 Certified and official checks 175 156 5 1 100 Nontransaction accounts (including MMDAs, excluding IBFs) 372,278 308,437 3,367 17,095 101 Individuals, partnerships, and corporations 284,074 227,985 2,196 14,617 102 U.S. addressees (domicile) 269,283 218,326 666 14,394 103 Non-U.S. addressees (domicile) 14,791 9,659 1,529 223 104 Commercial banks in United States (including IBFs) 44,470 39,999 356 1,025 105 U.S. branches and agencies of other foreign banks 18 188 15,165 0 364 106 Other commercial banks in United States 26,282 24,834 356 661 107 Banks in foreign countries 8 608 8,427 0 150 108 Foreign branches of U.S. banks 1,080 1,080 0 0 109 Other banks in foreign countries 7,528 7,347 0 150 110 Foreign governments and official institutions (including foreign central banks) 17,180 15,510 7 1,303 111 All other deposits and credit balances 17,945 16,516 08 0 k 112 IBF deposit liabilities 107,807 A 95,025 1,606 2,253 113 Individuals, partnerships, and corporations 11,817 6,511 202 4 114 U.S. addressees (domicile) 19 15 0 0 115 Non U.S. addressees (domicile) 11,798 6,496 202 4 116 Commercial banks in United States (including IBFs) 12,464 12,082 119 220 117 U.S. branches and agencies of other foreign banks 11,684 11,410 59 172 118 Other commercial banks in United States n a. 780 n a. 672 n a. 60 n a. 48 119 Banks in foreign countries 60,011 56,890 540 979 120 Foreign branches of U.S. banks 4,882 4,745 0 137 121 Other banks in foreign countries 55.129 52.144 540 842 122 Foreign governments and official institutions (including foreign central banks) 23.513 19.542 745 1,048 123 All other deposits and credit balances 2 0 0 2 Footnotes appear at end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 Special Tables • August 2000 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, March 31, 2000'—Continued Millions of dollars except as noted All states2 New York California Illinois IItteemm in I c T B l o u F t d a s i l 3 n g o IB nl F y s 3 inc T I l B u ot F d a i s l n g I o B n F ly s inc T I l B u ot F d a i s l n g I o B n F ly s inc T I l B o u t F d a i s l n g I o B n F ly s 124 Federal funds purchased and securities sold under agreements to repurchase 119,545 20,313 108,921 16,516 1,289 644 5,428 88 125 U.S. branches and agencies of other foreign banks 12,694 4,379 10,167 3,565 632 352 979 112 126 Other commercial banks in United States 8,434 652 6,871 597 298 31 452 24 127 Other 98,417 15,282 91,883 12,353 359 261 3,997 752 128 Other borrowed money 77,127 23,097 59,286 16,933 5,770 4,615 5,338 194 129 Owed to nonrelated commercial banks in United States (including IBFs) 10,698 4,204 8,977 3,442 816 598 443 20 130 Owed to U.S. offices of nonrelated U.S. banks 4,297 285 4,004 272 74 10 67 0 131 Owed to U.S. branches and agencies of nonrelated foreign banks 6,400 3,918 4,973 3,170 742 5 88 376 20 132 Owed to nonrelated banks in foreign countries 18,141 15,296 13,299 10,549 3,431 3,423 176 174 133 Owed to foreign branches of nonrelated U.S. banks 1,165 1,052 752 651 375 375 0 0 134 Owed to foreign offices of nonrelated foreign banks 16,976 14,245 12,547 9,897 3,056 3,048 176 174 135 Owed to others 48,289 3,597 37,009 2,942 1,524 594 4,719 0 136 All other liabilities 93,991 1,354 73,280 1,239 377 45 10,257 15 137 Branch or agency liability on acceptances executed and outstanding 1,827 n.a. 1,178 n.a. 131 n.a. 467 n.a. 138 Trading liabilities 65,601 27 49,964 27 45 0 8,370 0 139 Other liabilities to nonrelated parties 26,563 1,327 22,138 1,212 201 45 1,421 15 140 Net due to related depository institutions5 124,657 18,480 78,365 15,592 14,203 119 13,171 1,352 141 Net due to head office and other related depository institutions5 .... 124,657 n a. 78,365 n.a. 14,203 n.a. 13,171 n.a. 142 Net due to establishing entity, head office, and other related depository institutions5 n.a. 18,480 n.a. 15,592 n.a. 119 n.a. 1,352 MEMO 143 Non-interest-bearing balances with commercial banks in United States 2,970 0 2,826 0 35 0 7 0 144 Holding of own acceptances included in commercial and industrial loans 11,,998844 •> 11,,551199 • 169 > 204 • 145 Commercial and industrial loans with remaining maturity of one year or less (excluding those in nonaccrual status) 104,607 63,310 9,054 17,504 146 Predetermined interest rates 61,482 n.a. 33,960 n.a. 4,070 n.a. 14,840 n.a. 147 Floating interest rates 4433,,112255 2299,,335500 44,,998844 22,,666644 148 Commercial and industrial loans with remaining maturity of more than one year (excluding those in nonaccrual status) 100,735 79,358 8,521 4,148 149 Predetermined interest rates 22,552 18,853 1,124 571 150 Floating interest rates 78,183 60,505 7,398 3,577 Footnotes appear at end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Branches and Agencies A75 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, March 31, 20001—Continued Millions of dollars except as noted All states2 New York California Illinois IItteemm ex I c T B l o u F t d a s i l 3 n g o IB nl F y s 3 exc T I l B o u F t d a s i l n g I o B n F ly s exc T I l B o u F t d a s i l n g I o B n F ly s exc T I l B o u F t d a s i l n g I o B n F ly s 111155551111 CCCCoooommmmppppoooonnnneeeennnnttttssss ooooffff ttttoooottttaaaallll nnnnoooonnnnttttrrrraaaannnnssssaaaaccccttttiiiioooonnnn aaaaccccccccoooouuuunnnnttttssss,,,, iiiinnnncccclllluuuuddddeeeedddd iiiinnnn ttttoooottttaaaallll ddddeeeeppppoooossssiiiittttssss aaaannnndddd ccccrrrreeeeddddiiiitttt bbbbaaaallllaaaannnncccceeeessss ((((eeeexxxxcccclllluuuuddddiiiinnnngggg IIIIBBBBFFFFssss)))) 373,619 n.a. 311,100 n.a. 3,176 n.a. 17,026 n.a. 111155552222 TTTTiiiimmmmeeee ddddeeeeppppoooossssiiiittttssss ooooffff $$$$111100000000,,,,000000000000 oooorrrr mmmmoooorrrreeee 368,113 n.a. 305,704 n.a. 3,156 n.a. 16,973 n.a. 111155553333 TTTTiiiimmmmeeee CCCCDDDDssss iiiinnnn ddddeeeennnnoooommmmiiiinnnnaaaattttiiiioooonnnnssss ooooffff $$$$111100000000,,,,000000000000 oooorrrr mmmmoooorrrreeee wwwwiiiitttthhhh rrrreeeemmmmaaaaiiiinnnniiiinnnngggg mmmmaaaattttuuuurrrriiiittttyyyy ooooffff mmmmoooorrrreeee tttthhhhaaaannnn 11112222 mmmmoooonnnntttthhhhssss 5,506 n.a. 5,396 n.a. 20 n.a. 53 n.a. All states2 New York California Illinois inc T I l B u o F t d a s i l n g I o B n F ly s inc T I l B u o F t d a s i l n g I o B n F ly s inc T I l B u o F t d a s i l n g I o B n F ly s inc T I l B u o F t d a s i l n g I o B n F ly s 111155554444 IIIImmmmmmmmeeeeddddiiiiaaaatttteeeellllyyyy aaaavvvvaaaaiiiillllaaaabbbblllleeee ffffuuuunnnnddddssss wwwwiiiitttthhhh aaaa mmmmaaaattttuuuurrrriiiittttyyyy ggggrrrreeeeaaaatttteeeerrrr tttthhhhaaaannnn oooonnnneeee ddddaaaayyyy iiiinnnncccclllluuuuddddeeeedddd iiiinnnn ooootttthhhheeeerrrr bbbboooorrrrrrrroooowwwweeeedddd mmmmoooonnnneeeeyyyy 30,738 n.a. 26,618 n.a. 2,681 n.a. 890 n.a. 111155555555 NNNNuuuummmmbbbbeeeerrrr ooooffff rrrreeeeppppoooorrrrttttssss ffffiiiilllleeeedddd6666 354 0 184 0 72 0 29 0 1. Data are aggregates of categories reported on the quarterly form FFIEC 002, "Report of either because the item is not an eligible IBF asset or liability or because that level of detail is Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks." The form was first not reported for IBFs. From December 1981 through September 1985, IBF data were used for reporting data as of June 30, 1980, and was revised as of December 31, 1985. From included in all applicable items reported. November 1972 through May 1980, U.S. branches and agencies of foreign banks had filed a 4. Total assets and total liabilities include net balances, if any, due from or owed to related monthly FR 886a report. Aggregate data from that report were available through the Federal banking institutions in the United States and in foreign countries (see note 5). On the former Reserve monthly statistical release G.l 1, last issued on July 10, 1980. Data in this table and in monthly branch and agency report, available through the G.ll monthly statistical release, the G. 11 tables are not strictly comparable because of differences in reporting panels and in gross balances were included in total assets and total liabilities. Therefore, total asset and total definitions of balance sheet items. liability figures in this table are not comparable to those in the G.l 1 tables. 2. Includes the District of Columbia. 5. Related depository institutions includes the foreign head office and other U.S. and 3. Effective December 1981, the Federal Reserve Board amended Regulations D and Q to foreign branches and agencies of a bank, a bank's parent holding company, and majoritypermit banking offices located in the United States to operate international banking facilities owned banking subsidiaries of the bank and of its parent holding company (including (IBFs). Since December 31, 1985, data for IBFs have been reported in a separate column. subsidiaries owned both directly and indirectly). These data are either included in or excluded from the total columns as indicated in the 6. In some cases two or more offices of a foreign bank within the same metropolitan area headings. The notation "n.a." indicates that no IBF data have been reported for that item, file a consolidated report. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 Special Tables • August 2000 4.31 PRO FORMA FINANCIAL STATEMENTS FOR FEDERAL RESERVE PRICED SERVICES A. Pro forma balance sheet Millions of dollars Item Mar. 31, 2000 Mar. 31, 2000 Short-term assets (Note 1) Imputed reserve requirement on clearing balances 640.9 671.3 Investment in marketable securities 5.768.1 6,041.7 Receivables 80.5 73.4 Materials and supplies 3.5 4.1 Prepaid expenses 32.9 29.8 Items in process of collection 2.823.2 4,406.3 Total short-term assets 9,349.1 11,226.7 Long-term assets (Note 2) Premises 440.2 404.7 Furniture and equipment 167.5 143.1 Leases and leasehold improvements 48.1 29.5 Prepaid pension costs 571.7 459.3 Total long-term assets 1,227.5 1,036.5 Total assets 10,576.6 12,263.1 Short-term liabilities Clearing balances and balances arising from early credit of uncollected items 6,173.2 6,192.0 Deferred-availability items 3,059.0 4,927.3 116.8 107.4 Total short-term liabilities 9,349.1 11,226.7 Long-term liabilities Obligations under capital leases 0.0 0.0 Long-term debt 390.5 214.7 Postretirement/postemployment benefits obligation : 236.4 219.3 Total long-term liabilities 626.9 434.1 Total liabilities 9,976.0 11,660.7 600.6 602.4 Total liabilities and equity (Note 3) 10,576.6 12,263.1 NOTE. Components may not sum to totals because of rounding. The priced services (2) LONG-TERM ASSETS financial statements consist of these tables and the accompanying notes. Consists of long-term assets used solely in priced services, the priced-services portion of (L) SHORT-TERM ASSETS long-term assets shared with nonpriced services, and an estimate of the assets of the Board of Governors used in the development of priced services. Effective Jan. 1, 1987, the Reserve The imputed reserve requirement on clearing balances held at Reserve Banks by depository Banks implemented the Financial Accounting Standards Board's Statement of Financial institutions reflects a treatment comparable to that of compensating balances held at corre- Accounting Standards No. 87, Employers' Accounting for Pensions (SFAS 87). Accordingly, spondent banks by respondent institutions. The reserve requirement imposed on respondent the Federal Reserve Banks recognized credits to expenses of $28.9 million in the first quarter balances must be held as vault cash or as nonearning balances maintained at a Reserve Bank; of 2000, and $21.9 million in the first quarter of 1999, and corresponding increases in this thus, a portion of priced services clearing balances held with the Federal Reserve is shown as asset account. required reserves on the asset side of the balance sheet. The remainder of clearing balances is assumed to be invested in three-month Treasury bills, shown as investment in marketable securities. (3) LIABILITIES AND EQUITY Receivables are (1) amounts due the Reserve Banks for priced services and (2) the share of Under the matched-book capital structure for assets that are not "self-financing," short-term suspense-account and difference-account balances related to priced services. assets are financed with short-term debt. Long-term assets are financed with long-term debt Materials and supplies are the inventory value of short-term assets. and equity in a proportion equal to the ratio of long-term debt to equity for the fifty largest Prepaid expenses include salary advances and travel advances for priced-service personnel. bank holding companies, which are used in the model for the private-sector adjustment factor Items in process of collection is gross Federal Reserve cash items in process of collection (PSAF). The PSAF consists of the taxes that would have been paid and the return on capital (CIPC) stated on a basis comparable to that of a commercial bank. It reflects adjustments for that would have been provided had priced services been furnished by a private-sector firm. intra-System items that would otherwise be double-counted on a consolidated Federal Other short-term liabilities include clearing balances maintained at Reserve Banks and Reserve balance sheet; adjustments for items associated with non-priced items, such as those deposit balances arising from float. Other long-term liabilities consist of obligations on capital collected for government agencies; and adjustments for items associated with providing fixed leases. availability or credit before items are received and processed. Among the costs to be recovered under the Monetary Control Act is the cost of float, or net CIPC during the period (the difference between gross CIPC and deferred-availability items which is the portion of gross CIPC that involves a financing cost), valued at the federal funds rate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Bank-Reported Data All 4.31 PRO FORMA FINANCIAL STATEMENTS FOR FEDERAL RESERVE PRICED SERVICES B. Pro forma income statement Millions of dollars Item Quarter ending Mar. 31, 2000 Quarter ending Mar. 31, 1999 Revenue from services provided to depository institutions (Note 4) 211.5 203.1 Operating expenses (Note 5) 172.8 170.4 Income from operations 38.8 32.8 Inputed costs (Note 6) Interest on float 2.8 5.4 Interest on debt 7.9 4.6 Sales taxes 2.3 2.2 FDIC insurance 0.0 13.0 .8 13.1 Income from operations after imputed costs 25.8 19.7 Other income and expenses (Note 7) Investment income on clearing balances 104.9 81.9 Earnings credits (88.4) 16.4 (70.5) 11.4 Income before income taxes 42.2 31.1 Inputed income taxes (Note 8) 13.3 10.0 Net income 28.9 21.2 MEMO Targeted return on equity (Note 9) 24.6 17.3 NOTE. Components may not sum to totals because of rounding. The priced services Unrecovered float includes float generated by services to government agencies and by other financial statements consist of these tables and the accompanying notes. central bank services. Float recovered through income on clearing balances is the result of the increase in investable clearing balances; the increase is produced by a deduction for float for (4) REVENUE cash items in process of collection, which reduces imputed reserve requirements. The income on clearing balances reduces the float to be recovered through other means. As-of adjustments Revenue represents charges to depository institutions for priced services and is realized from are memorandum adjustments to an institution's reserve or clearing position to recover float each institution through one of two methods: direct charges to an institution's account or incurred by the institution. Direct charges are billed to the institution for float incurred when charges against its accumulated earnings credits. 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 funds rate and charged directly to an institution's account. Float recovered through per-item (5) OPERATING EXPENSES fees is valued at the federal funds rate and has been added to the cost base subject to recovery Operating expenses consist of the direct, indirect, and other general administrative expenses in the first quarter of 2000 and 1999. of the Reserve Banks for priced services plus the expenses for staff members of the Board of Governors working directly on the development of priced services. The expenses for Board (7) OTHER INCOME AND EXPENSES staff members were $1.05 million in the first quarter of 2000 and $0.85 million in the first quarter of 1999. The credit to expenses under SFAS 87 (see note 2) is reflected in operating Consists of imputed investment income on clearing balances and the actual cost of earnings expenses. credits. Investment income on clearing balances represents the average coupon-equivalent yield on three-month Treasury bills applied to the total clearing balance maintained, adjusted for the effect of reserve requirements on clearing balances. Expenses for earnings credits (6) IMPUTED COSTS granted to depository institutions on their clearing balances are derived by applying the Imputed costs consist of interest on float, interest on debt, sales taxes, and the FDIC average federal funds rate to the required portion of the clearing balances, adjusted for the net assessment. Interest on float is derived from the value of float to be recovered, either effect of reserve requirements on clearing balances. explicitly or through per-item fees, during the period. Float costs include costs for checks, book-entry securities, noncash collection, ACH, and funds transfers. (8) INCOME TAXES Interest is imputed on the debt assumed necessary to finance priced-service assets. The sales taxes and FDIC assessment that the Federal Reserve would have paid had it been a Imputed income taxes are calculated at the effective tax rate derived from the PSAF model private-sector firm are among the components of the PSAF (see note 3). (see note 3). Float costs are based on the actual float incurred for each priced service, multiplied by the appropriate federal funds rate. Other imputed costs are allocated among priced services (9) RETURN ON EQUITY according to the ratio of operating expenses less shipping expenses for each service to the total expenses for all services less the total shipping expenses for all services. Represents the after-tax rate of return on equity that the Federal Reserve would have earned The following list shows the daily average recovery of float (before converting to float had it been a private business firm, as derived from the PSAF model (see note 3). This amount costs) by the Reserve Banks for the first quarter of 2000 and 1999 in millions of dollars: is adjusted to reflect the recovery of automation consolidation costs of $0.0 million for first quarter of 2000, and $3.3 million for the first quarter of 1999. The Reserve Banks recovered 2000 1999 these amounts, along with a finance charge, by the end of 1999. Total float 222.9 486.0 Unrecovered float (436.5) (516.1) Float subject to recovery 659.4 1,002.1 Sources of float recovery Income on clearing balances 66.0 98.9 As-of adjustments 451.7 531.8 Direct charges 311.3 245.2 Per-item fees (169.6) 126.2 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

78 Federal Reserve Bulletin • August 2000 Index to Statistical Tables References are to pages A3-A77, although the prefix 'A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Federal finance Assets and liabilities (See also Foreigners) Debt subject to statutory limitation, and types and ownership Commercial banks, 15-21, 64, 65 of gross debt, 27 Domestic finance companies, 32, 33 Receipts and outlays, 25, 26 Federal Reserve Banks, 10 Treasury financing of surplus, or deficit, 25 Foreign banks, U.S. branches and agencies, 72-5 Treasury operating balance, 25 Foreign-related institutions, 20 Federal Financing Bank, 30 Automobiles Federal funds, 23, 25 Consumer credit, 36 Federal Home Loan Banks, 30 Production, 44, 45 Federal Home Loan Mortgage Corporation, 30, 34, 35 Federal Housing Administration, 30, 34, 35 BANKERS acceptances, 5, 10, 22, 23 Federal Land Banks, 35 Bankers balances, 15-21, 72-5. (See also Foreigners) Federal National Mortgage Association, 30, 34, 35 Bonds (See also U.S. government securities) Federal Reserve Banks New issues, 31 Condition statement, 10 Rates, 23 Discount rates (See Interest rates) Business activity, nonfinancial, 42 U.S. government securities, 5, 10, 11, 27 Business loans (See Commercial and industrial loans) Federal Reserve credit, 5, 6, 10, 12 Federal Reserve notes, 10 Federal Reserve System CAPACITY utilization, 43 Capital accounts Balance sheet for priced services, 76, 77 Commercial banks, 15-21, 64, 65 Condition statement for priced services, 76, 77 Federal Reserve Banks, 10 Federally sponsored credit agencies, 30 Certificates of deposit, 23 Finance companies Commercial and industrial loans Assets and liabilities, 32 Commercial banks, 15-21, 64—71 Business credit, 33 Weekly reporting banks, 17, 18 Loans, 36 Commercial banks Paper, 22, 23 Assets and liabilities, 15-21, 64, 65 Float, 5 Commercial and industrial loans, 15-21, 64-71 Flow of funds, 37-^-1 Consumer loans held, by type and terms, 36, 66-71 Foreign banks, U.S. branches and agencies, 71-5 Real estate mortgages held, by holder and property, 35 Foreign currency operations, 10 Terms of lending, 64, 65 Foreign deposits in U.S. banks, 5 Time and savings deposits, 4 Foreign exchange rates, 62 Commercial paper, 22, 23, 32 Foreign-related institutions, 20 Condition statements (See Assets and liabilities) Foreign trade, 51 Construction, 42, 46 Foreigners Consumer credit, 36 Claims on, 52, 55-7, 59 Consumer prices, 42 Liabilities to, 51-3, 58, 60, 61 Consumption expenditures, 48, 49 GOLD Corporations Certificate account, 10 Profits and their distribution, 32 Stock, 5, 51 Security issues, 31, 61 Government National Mortgage Association, 30, 34, 35 Cost of living (See Consumer prices) Gross domestic product, 48, 49 Credit unions, 36 Currency in circulation, 5, 13 HOUSING, new and existing units, 46 Customer credit, stock market, 24 INCOME and expenses, Federal Reserve System, 76, 77 DEBT (See specific types of debt or securities) Income, personal and national, 42, 48, 49 Demand deposits, 15—21 Industrial production, 42, 44 Depository institutions Insurance companies, 27, 35 Reserve requirements, 8 Interest rates Reserves and related items, 4—6, 12, 64, 65 Bonds, 23 Deposits (See also specific types) Commercial banks, 66-71 Commercial banks, 4, 15-21, 64, 65 Consumer credit, 36 Federal Reserve Banks, 5, 10 Federal Reserve Banks, 7 Discount rates at Reserve Banks and at foreign central banks and Money and capital markets, 23 foreign countries (See Interest rates) Mortgages, 34 Discounts and advances by Reserve Banks (See Loans) Prime rate, 22, 66-71 Dividends, corporate, 32 International capital transactions of United States, 50-61 International organizations, 52, 53, 55, 58, 59 EMPLOYMENT, 42 Inventories, 48 Euro, 62 Investment companies, issues and assets, 32 Investments (See also specific types) FARM mortgage loans, 35 Commercial banks, 4, 15-21, 66-71 Federal agency obligations, 5, 9-11, 28, 29 Federal Reserve Banks, 10, 11 Federal credit agencies, 30 Financial institutions, 35 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A79 LABOR force, 42 SAVING Life insurance companies (See Insurance companies) Flow of funds, 37-41 Loans (See also specific types) National income accounts, 48 Commercial banks, 15-21, 64-71 Savings deposits (See Time and savings deposits) Federal Reserve Banks, 5-7, 10, 11 Savings institutions, 35-7, 41 Federal Reserve System, 76, 77 Securities (See also specific types) Financial institutions, 35 Federal and federally sponsored credit agencies, 30 Foreign banks, U.S. branches and agencies, 72 Foreign transactions, 60 Insured or guaranteed by United States, 34, 35 New issues, 31 Prices, 24 MANUFACTURING Special drawing rights, 5, 10, 50, 51 Capacity utilization, 43 State and local governments Production, 43, 45 Holdings of U.S. government securities, 27 Margin requirements, 24 New security issues, 31 Member banks, reserve requirements, 8 Rates on securities, 23 Mining production, 45 Stock market, selected statistics, 24 Mobile homes shipped, 46 Stocks (See also Securities) Monetary and credit aggregates, 4, 12 New issues, 31 Money and capital market rates, 23 Prices, 24 Money stock measures and components, 4, 13 Mortgages (See Real estate loans) Student Loan Marketing Association, 30 Mutual funds, 13, 32 TAX receipts, federal, 26 Mutual savings banks (See Thrift institutions) Thrift institutions, 4. (See also Credit unions and Savings institutions) NATIONAL defense outlays, 26 Time and savings deposits, 4, 13, 15-21, 64, 65 National income, 48 Trade, foreign, 51 Treasury cash, Treasury currency, 5 OPEN market transactions, 9 Treasury deposits, 5, 10, 25 Treasury operating balance, 25 PERSONAL income, 49 UNEMPLOYMENT, 42 Prices U.S. government balances Consumer and producer, 42, 47 Commercial bank holdings, 15-21 Stock market, 24 Treasury deposits at Reserve Banks, 5, 10, 25 Prime rate, 22, 66-71 U.S. government securities Producer prices, 42, 47 Bank holdings, 15-21, 27 Production, 42, 44 Dealer transactions, positions, and financing, 29 Profits, corporate, 32 Federal Reserve Banks holdings, 5, 10, 11, 27 Foreign and international holdings and transactions, 10, 27, 61 REAL estate loans Open market transactions, 9 Banks, 15-21, 35 Outstanding, by type and holder, 27, 28 Terms, yields and activity, 34 Rates, 23 Type and holder and property mortgaged, 35 U.S. international transactions, 50-62 Reserve requirements, 8 Utilities, production, 45 Reserves Commercial banks, 15-21 VETERANS Administration, 34, 35 Depository institutions, 4—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

80 Federal Reserve Bulletin • August 2000 Federal Reserve Board of Governors and Official Staff ALAN GREENSPAN, Chairman EDWARD W. KELLEY, JR. ROGER W. FERGUSON, JR., Vice Chairman 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 DAVID H. HOWARD, Deputy Director WINTHROP P. HAMBLEY, Deputy Congressional Liaison VINCENT R. REINHART, Deputy Director BOB STAHLY MOORE, Special Assistant to the Board DALE W. HENDERSON, Associate Director ROSANNA PIANALTO-CAMERON, Special Assistant to the Board THOMAS A. CONNORS, Deputy Associate Director DAVID W. SKIDMORE, Special Assistant to the Board DONALD B. ADAMS, Senior Adviser DIANE E. WERNEKE, Special Assistant to the Board RICHARD T. FREEMAN, Assistant Director WILLIAM L. HELKIE, Assistant Director STEVEN B. KAMIN, 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 DAVID J. STOCKTON, Director OLIVER IRELAND, Associate General Counsel EDWARD C. ETTIN, Deputy Director KATHLEEN M. O'DAY, Associate General Counsel DAVID WILCOX, Deputy Director ANN E. MISBACK, Assistant General Counsel WILLIAM R. JONES, Associate Director SANDRA L. RICHARDSON, Assistant General Counsel MYRON L. KWAST, Associate Director STEPHEN L. SICILIANO, Assistant General Counsel STEPHEN D. OLINER, Associate Director KATHERINE H. WHEATLEY, Assistant General Counsel PATRICK M. PARKINSON, Associate Director LAWRENCE SLIFMAN, Associate Director OFFICE OF THE SECRETARY CHARLES S. STRUCKMEYER, Associate Director MARTHA S. SCANLON, Deputy Associate Director JENNIFER J. JOHNSON, Secretary JOYCE K. ZICKLER, Deputy Associate Director ROBERT DEV. FRIERSON, Associate Secretary STEPHEN A. RHOADES, Assistant Director BARBARA R. LOWREY, Associate Secretary and Ombudsman WAYNE S. PASSMORE, Assistant Director DAVID L. REIFSCHNEIDER, Assistant Director DIVISION OF BANKING JANICE SHACK-MARQUEZ, Assistant Director SUPERVISION AND REGULATION ALICE PATRICIA WHITE, Assistant Director GLENN B. CANNER, Senior Adviser RICHARD SPILLENKOTHEN, Director DAVID S. JONES, Senior Adviser STEPHEN C. SCHEMERING, Deputy Director THOMAS D. SIMPSON, Senior Adviser HERBERT A. BIERN, Associate Director ROGER T. COLE, Associate Director DIVISION OF MONETARY AFFAIRS WILLIAM A. RYBACK, Associate Director DONALD L. KOHN, Director GERALD A. EDWARDS, JR., Deputy Associate Director DAVID E. LINDSEY, Deputy Director STEPHEN M. HOFFMAN, JR., Deputy Associate Director BRIAN F. MADIGAN, Associate Director JAMES V. HOUPT, Deputy Associate Director RICHARD D. PORTER, Deputy Associate Director JACK P. JENNINGS, Deputy Associate Director WILLIAM C. WHITESELL, Assistant Director MICHAEL G. MARTINSON, Deputy Associate Director NORMAND R.V. BERNARD, Special Assistant to the Board SIDNEY M. SUSSAN, Deputy Associate Director MOLLY S. WASSOM, Deputy Associate Director DIVISION OF CONSUMER HOWARD A. AMER, Assistant Director AND COMMUNITY AFFAIRS NORAH M. BARGER, Assistant Director BETSY CROSS, Assistant Director DOLORES S. SMITH, Director RICHARD A. SMALL, Assistant Director GLENN E. LONEY, Deputy Director WILLIAM C. SCHNEIDER, JR., Project Director, SANDRA F. BRAUNSTEIN, Assistant Director National Information Center MAUREEN P. ENGLISH, Assistant Director ADRIENNE D. HURT, Assistant Director IRENE SHAWN MCNULTY, Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A81 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 MANAGEMENT DIVISION KENNETH D. BUCKLEY, Assistant Director STEPHEN J. CLARK, Associate Director, Finance Function JACK DENNIS, JR., Assistant Director DARRELL R. PAULEY, Associate Director, Human Resources JOSEPH H. HAYES, JR., Assistant Director Function JEFFREY C. MARQUARDT, Assistant Director EDGAR A. MARTINDALE, Assistant Director SHEILA CLARK, EE0 Programs Director MARSHA REIDHILL, Assistant Director DIVISION OF SUPPORT SERVICES JEFF J. STEHM, Assistant Director ROBERT E. FRAZIER, Director OFFICE OF THE INSPECTOR GENERAL GEORGE M. LOPEZ, Assistant Director BARRY R. SNYDER, Inspector General DAVID L. WILLIAMS, Assistant Director DONALD L. ROBINSON, Deputy Inspector General DIVISION OF INFORMATION TECHNOLOGY RICHARD C. STEVENS, Director MARIANNE M. EMERSON, Deputy Director MAUREEN T. HANNAN, Associate Director TILLENA G. CLARK, Assistant Director GEARY L. CUNNINGHAM, Assistant Director Po KYUNG KIM, Assistant Director RAYMOND H. MASSEY, Assistant Director SHARON L. MOWRY, Assistant Director DAY W. RADEBAUGH, JR., Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

82 Federal Reserve Bulletin • August 2000 Federal Open Market Committee and Advisory Councils FEDERAL OPEN MARKET COMMITTEE MEMBERS ALAN GREENSPAN, Chairman WILLIAM J. MCDONOUGH, Vice Chairman J. ALFRED BROADDUS, JR. JACK GUYNN LAURENCE H. MEYER ROGER W. FERGUSON, JR. JERRY L. JORDAN ROBERT T. PARRY EDWARD M. GRAMLICH EDWARD W. KELLEY, JR. ALTERNATE MEMBERS THOMAS M. HOENIG MICHAEL H. MOSKOW JAMIE B. STEWART, JR. CATHY E. MINEHAN WILLIAM POOLE STAFF DONALD L. KOHN, Secretary and Economist CHRISTINE M. CUMMING, Associate Economist NORMAND R.V. BERNARD, Deputy Secretary ROBERT A. EISENBEIS, Associate Economist LYNN S. FOX, Assistant Secretary MARVIN S. GOODFRIEND, Associate Economist GARY P. GILLUM, Assistant Secretary DAVID H. HOWARD, Associate Economist J. VIRGIL MATTINGLY, JR., General Counsel DAVID E. LINDSEY, Associate Economist THOMAS C. BAXTER, JR., Deputy General Counsel VINCENT R. REINHART, Associate Economist KAREN H. JOHNSON, Economist THOMAS D. SIMPSON, Associate Economist DAVID J. STOCKTON, Economist MARK S. SNIDERMAN, Associate Economist JACK H. BEEBE, Associate Economist PETER R. FISHER, Manager, System Open Market Account FEDERAL ADVISORY COUNCIL DOUGLAS A. WARNER III, President NORMAN R. BOBINS, 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 R. SCOTT JONES, Ninth District DAVID A. DABERKO, Fourth District C. Q. CHANDLER, Tenth District L. M. BAKER, JR., Fifth District RICHARD W. EVANS, JR., Eleventh District WILLIAM G. SMITH, JR., 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

A83 CONSUMER ADVISORY COUNCIL DWIGHT GOLANN, Boston, Massachusetts, Chairman LAUREN ANDERSON, New Orleans, Louisiana, Vice Chairman WALTER J. BOYER, Dallas, Texas GWENN S. KYZER, Allen, Texas DOROTHY BROADMAN, San Francisco, California JOHN C. LAMB, Sacramento, California TERESA A. BRYCE, St. Louis, Missouri ANNE S. LI, Trenton, New Jersey MALCOLM M. BUSH, Chicago, Illinois MARTHA W. MILLER, Greensboro, North Carolina ROBERT M. CHEADLE, Ada, Oklahoma DANIEL W. MORTON, Columbus, Ohio MARY ELLEN DOMEIER, New ULM, Minnesota JEREMY NOWAK, Philadelphia, Pennsylvania JEREMY D. EISLER, Biloxi, Mississippi MARTA RAMOS, San Juan, Puerto Rico ROBERT F. ELLIOTT, Prospect Heights, Illinois DAVID L. RAMP, St. Paul, Minnesota LESTER W. FIRSTENBERGER, Middletown, Connecticut RUSSELL W. SCHRADER, San Francisco, California JOHN C. GAMBOA, San Francisco, California ROBERT G. SCHWEMM, Lexington, Kentucky VINCENT J. GIBLIN, West Caldwell, New Jersey DAVID J. SHIRK, Tarrytown, New York KARLA S. IRVINE, Cincinnati, Ohio GARY S. WASHINGTON, Chicago, Illinois WILLIE M. JONES, Boston, Massachusetts ROBERT L. WYNN, II, Madison, Wisconsin M. DEAN KEYES, St. Louis, Missouri THRIFT INSTITUTIONS ADVISORY COUNCIL F. WELLER MEYER, Falls Church, Virginia, President THOMAS S. JOHNSON, New York, New York, Vice President JAMES C. BLAINE, Raleigh, North Carolina CORNELIUS D. MAHONEY, Westfield, Massachusetts LAWRENCE L. BOUDREAUX III, New Orleans, Louisiana KATHLEEN E. MARINANGEL, McHenry, Illinois TOM R. DORETY, Tampa, Florida ANTHONY J. POPP, Marietta, Ohio BABETTE E. HEIMBUCH, Santa Monica, California MARK H. WRIGHT, San Antonio, Texas WILLIAM A. LONGBRAKE, Seattle, Washington CLARENCE ZUGELTER, Kansas City, Missouri Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

84 Federal Reserve Bulletin • August 2000 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, 1999. 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 about a Bank GUIDE TO THE FLOW OF FUNDS ACCOUNTS. January 2000. Making Sense of Savings 1,186 pp. $20.00 each. SHOP: The Card You Pick Can Save You Money FEDERAL RESERVE REGULATORY SERVICE. Loose-leaf; updated Welcome to the Federal Reserve monthly. (Requests must be prepaid.) When Your Home is on the Line: What You Should Know Consumer and Community Affairs Handbook. $75.00 per year. About Home Equity Lines of Credit Monetary Policy and Reserve Requirements Handbook. $75.00 Keys to Vehicle Leasing per year. Looking for the Best Mortgage Securities Credit Transactions Handbook. $75.00 per year. 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

A85 STAFF STUDIES: Only Summaries Printed in the 164. THE 1989-92 CREDIT CRUNCH FOR REAL ESTATE, by BULLETIN James T. Fergus and John L. Goodman, Jr. July 1993. 20 pp. Studies and papers on economic and financial subjects that are of general interest. Requests to obtain single copies of the full text or 167. A SUMMARY OF MERGER PERFORMANCE STUDIES IN BANKto be added to the mailing list for the series may be sent to ING, 1980-93, AND AN ASSESSMENT OF THE "OPERATING Publications Services. PERFORMANCE" AND "EVENT STUDY" METHODOLOGIES, by Stephen A. Rhoades. July 1994. 37 pp. 170. THE COST OF IMPLEMENTING CONSUMER FINANCIAL REGU- Staff Studies 1-158, 161, 163, 165, 166, 168, and 169 are out of LATIONS: AN ANALYSIS OF EXPERIENCE WITH THE TRUTH print. IN SAVINGS ACT, by Gregory Elliehausen and Barbara R. Lowrey, December 1997. 17 pp. 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUBSIDI- 171. THE COST OF BANK REGULATION: A REVIEW OF THE EVI- ARIES OF BANK HOLDING COMPANIES, by Nellie Liang and DENCE, by Gregory Elliehausen, April 1998. 35 pp. Donald Savage. February 1990. 12 pp. 172. USING SUBORDINATED DEBT AS AN INSTRUMENT OF MAR- 160. BANKING MARKETS AND THE USE OF FINANCIAL SER- KET DISCIPLINE, by Study Group on Subordinated Notes VICES BY SMALL AND MEDIUM-SIZED BUSINESSES, by and Debentures, Federal Reserve System, December 1999. Gregory E. Elliehausen and John D. Wolken. September 69 pp. 1990. 35 pp. 173. IMPROVING PUBLIC DISCLOSURE IN BANKING, by Study 162. EVIDENCE ON THE SIZE OF BANKING MARKETS FROM MORT- Group on Disclosure, Federal Reserve System, March 2000. GAGE LOAN RATES IN TWENTY CITIES, by Stephen A. 35 pp. Rhoades. February 1992. 11 pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

86 Federal Reserve Bulletin • August 2000 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

A87 1-A Mb 2-B 3-C 4-D Pittsburgh 5-E DBa1. l timore MD „ - VT WV NH cinnati Bill I aid •Charlotk MA ® I NJ NY KY ^ R1 BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 6-F 7-G 8-H TN—©Nashville KY Birmingham- Lf^iisville IA Detroit© MO - TN LA AR L • Memphis fe'Jf - Now Orleans ATLANTA CHICAGO ST. LOUIS 9-1 Ml ND • I • T MINNEAPOLIS 10-J 12-L Oklahoma Cit\ OK KANSAS CITY 11-K • \ • S.m '\nionio AZ DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

88 Federal Reserve Bulletin • August 2000 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 Peter G. Peterson William J. McDonough Charles A. Heimbold, Jr. Jamie B. Stewart, Jr. Buffalo 14240 Bal Dixit Carl W. Turnipseed1 PHILADELPHIA 19105 Joan Carter Anthony Santomero Charisse R. Lillie William H. Stone, Jr. CLEVELAND* 44101 David H. Hoag Jerry L. Jordan To be announced Sandra Pianalto Cincinnati 45201 George C. Juilfs Barbara B.Henshaw Pittsburgh 15230 John T. Ryan, III Robert B. Schaub RICHMOND* 23219 Jeremiah J. Sheehan J. Alfred Broaddus, Jr. Wesley S. Williams, Jr. Walter A. Varvel Baltimore 21203 George L. Russell, Jr. 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 D. Bruce Carr Andre T. Anderson Jacksonville 32231 William E. Flaherty Robert J. Slack Miami 33152 Karen Johnson-Street James T. Curry III Nashville 37203 Frances F. Marcum Melvyn K. Purcell1 New Orleans 70161 Dwight H. Evans Robert J. Musso1 CHICAGO* 60690 Arthur C. Martinez Michael H. Moskow Robert J. Darnall William C. Conrad Detroit 48231 Timothy D. Leuliette 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 J. Stephen Barger Thomas A. Boone Memphis 38101 Mike P. Sturdivant, Jr. Martha Perine Beard MINNEAPOLIS 55480 James J. Howard Gary H. Stern Ronald N. Zwieg James M. Lyon Helena 59601 William P. Underriner 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. H. B. Zachry, Jr. Helen E. Holcomb El Paso 79999 Beauregard Brite White Sammie C. Clay Houston 77252 Edward O. Gaylord Robert Smith, III1 San Antonio 78295 Patty P. Mueller 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