Federal Reserve Bulletin, 2001-05

Volume 87 • Number 5 • May 2001 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 283 U.S. INTERNATIONAL TRANSACTIONS 298 TESTIMONY OF FEDERAL RESERVE IN 2000 OFFICIALS The U.S. current account deficit widened to Alan Greenspan, Chairman, Board of Governors $435 billion in 2000, a record 4.4 percent of of the Federal Reserve System, discusses his gross domestic product, as the lagged effect of views on the important issues surrounding the strong growth in the U.S. economy in late 1999 outlook for the federal budget and the attendant and early 2000 continued to drive up imports of implications for fiscal policy; he testifies that in goods and services faster than exports increased. his judgment, it is far better that the surpluses be To a lesser extent, a decline in U.S. price com- lowered by tax reductions than by spending petitiveness also contributed to the expansion increases. He states further that we need to resist in the deficit. The $104 billion increase in the those policies that could readily resurrect the current account deficit was entirely accounted deficits of the past and the fiscal imbalances that for by an equal-sized increase in the goods followed in their wake (Testimony before the and services deficit. Other components of the House Committee on the Budget, March 2, current account moved in small and offsetting 2001). directions. 301 Laurence H. Meyer, Member, Board of Gover- The current account deficit represents an nors of the Federal Reserve System, testifies on excess of U.S. investment over U.S. saving behalf of the Board and states that the Board of more than $400 billion. In addition, almost strongly supports legislative proposals to autho- $300 billion of U.S. saving flowed abroad in the rize the payment of interest on demand deposits form of a continued increase in foreign direct and on balances held by depository institutions and portfolio investment by U.S. residents. To at Reserve Banks, as well as increased flexibility finance the current account deficit and the capiin the setting of reserve requirements. He states tal outflow, the foreign private sector purchased further that the Board believes that these steps a record amount—more than $700 billion—of would improve the efficiency of our financial U.S. securities and direct investment assets. The sector, make a wider variety of interest-bearing sharp slowdown in U.S. economic growth in late accounts available to more bank customers, and 2000 and early 2001 should reduce the rate of better ensure the efficient conduct of monetary increase of the current account deficit in 2001 policy in the future (Testimony before the Subthrough a slowing of the rate of growth of goods committee on Financial Institutions and Conand services imports. sumer Credit of the House Committee on Financial Services, March 13, 2001). 295 INDUSTRIAL PRODUCTION AND CAPACITY UTILIZATION FOR MARCH 2001 306 ANNOUNCEMENTS Industrial production increased 0.4 percent in Federal Open Market Committee actions and March, its first increase since September. At changes in the discount rate. 146.5 percent of its 1992 average, industrial production in March was 0.8 percent higher than Central bank research conference on risk in March 2000. The rate of capacity utilization measurement. for total industry moved up in March to Consumer Advisory Council meeting. 79.4 percent but remains at a level more than 1V2 percentage points below its 1967-2000 Revisions to the official staff commentary on average. Regulation E. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Guidance on public disclosure of market risk 323 LEGAL DEVELOPMENTS and credit quality. Various bank holding company, bank service Procedures for filing documents under CRA sun- corporation, and bank merger orders; and pendshine requirements. ing cases. Interim rule on uniform standards for electronic AI FINANCIAL AND BUSINESS STATISTICS delivery of disclosures to consumers. These tables reflect data available as of Interagency guidance on appropriate accounting March 28, 2001. and reporting for loans held for sale. Privacy notices allowed by banking agencies A3 GUIDE TO TABULAR PRESENTATION under existing Fair Credit Reporting Act. A4 Domestic Financial Statistics Extension of the effective date on interagency A42 Domestic Nonfinancial Statistics bank insurance rules. A50 International Statistics Revised brochure on home equity lines of credit. A63 GUIDE TO STATISTICAL RELEASES AND Enforcement actions. SPECIAL TABLES A76 INDEX TO STATISTICAL TABLES 311 MINUTES OF THE MEETING OF THE FEDERAL OPEN MARKET COMMITTEE A78 BOARD OF GOVERNORS AND STAFF HELD ON JANUARY 30-31, 2001 At this meeting, the Committee voted to lower A80 FEDERAL OPEN MARKET COMMITTEE AND its target for the federal funds rate by 50 basis STAFF; ADVISORY COUNCILS points, to 5Vi percent. The Committee members also agreed that the risks were weighted mainly A82 FEDERAL RESERVE BOARD PUBLICATIONS toward conditions that could generate economic weakness in the foreseeable future. Previously, A84 MAPS OF THE FEDERAL RESERVE SYSTEM the Committee met via telephone conference on January 3 to lower its target for the funds rate by A86 FEDERAL RESERVE BANKS, BRANCHES, 50 basis points, to 6 percent. AND OFFICES 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

U.S. International Transactions in 2000 Joseph E. Gagnon, of the Board's Division of services trade deficit of more than $100 billion in International Finance, prepared this article. Chad 2000 (table 1). Cleaver, Anthony Leegwater, and Nicholas Warren The investment income deficit decreased modestly provided research assistance. in 2000 despite a growing net foreign liability position. Strong growth abroad and the effect of high The U.S. current account deficit widened substan- oil prices on the profitability of U.S. energy compatially in 2000 as the lagged effect of strong growth in nies raised the rate of return on U.S. foreign direct the U.S. economy in late 1999 and early 2000 contin- investment assets at the same time that the rate of ued to drive up imports of goods and services faster return on U.S. direct investment liabilities fell than exports increased. To a lesser extent, a decline in slightly. The deficit on unilateral transfers continued U.S. price competitiveness also contributed to the to grow at a moderate pace. expansion in the deficit. The current account deficit reached a new record Strong foreign economic growth supported a rapid of nearly 4Vi percent of U.S. GDP last year (chart 1). increase of U.S. exports of both goods and services in This deficit represents an excess of U.S. investment 2000. However, U.S. imports of goods and services over U.S. saving of more than $400 billion. In addigrew more than exports as US. gross domestic prod- tion, almost $300 billion of U.S. saving flowed abroad uct (GDP) accelerated in late 1999 and the first half in the form of a continued increase in foreign direct of 2000. Both U.S. and foreign GDP growth slowed and portfolio investment by U.S. residents. To finance sharply in the second half of 2000, but the lagged the current account deficit and the capital outflow, the effect of the previous acceleration continued to widen foreign private sector purchased a record amount— the trade deficit. The real trade-weighted value of more than $700 billion—of U.S. securities and direct the dollar rose throughout the year, exerting a investment assets. Continuing a trend that began in restraining influence on exports and helping to 1999, more than 100 percent of net foreign private increase import demand. The net effect of these securities purchases involved U.S. corporate bonds developments was an expansion in the goods and and stocks (including agency securities); the foreign 1. U.S. international transactions, 1996-2000 Billions of dollars except as noted Change, Item 1996 1997 1998 1999 2000 1999-2000 Trade in goods and services, net -102 -106 -167 -265 -368 -104 Goods, net -191 -197 -247 -346 -449 -104 Services, net 89 91 80 81 81 0 Investment income, net 23 11 -1 -13 -8 5 Compensation of employees, net -5 -5 -5 -5 -6 0 Unilateral current transfers, net -40 -41 -44 -48 -53 -5 Current account balance -123 -141 -217 -331 -435 -104 Official capital, net 132 18 -27 54 35 -19 Private capital, net 25 250 174 269 364 95 Financial account balance 158 268 147 323 399 76 Capital account balance 1 0 1 1 4 Statistical discrepancy -35 -128 70 12 36 24 MEMO Current account as percentage of GDP -1.6 -1.7 -2.5 -3.6 -^.4 -.8 NOTE. In this and the tables that follow, components may not sum to totals SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, U.S. because of rounding. international transactions accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

284 Federal Reserve Bulletin • May 2001 1. U.S. external balances, 1970-2000 in 1999—which built on earlier appreciations in 1997 and 1998. Percent of GDP 4 Foreign Economic Activity Following the slowdown of 1998, foreign growth increased through 1999 and peaked at a 5lA percent annual rate in the first half of 2000 (table 2). In the second half of 2000, foreign growth slowed to 3 percent at an annual rate, and for the four quarters of 2000, foreign GDP grew AVA percent. The pattern of slowing from strong growth rates early in the year was shared on average by the industrial countries and by all major developing regions. Among the major foreign industrial countries, the strongest performers in 2000 were Canada and SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis. Australia, which each grew 4 percent. The European Union grew almost 3 percent and Japan, 23A percent. private sector was a net seller of U.S. Treasury securi- Of these regions, the European Union exhibited the ties. Net official inflows were down slightly from the least slackening in growth during the course of last moderate pace of 1999. year. In the foreign industrial countries, average inflation MAJOR ECONOMIC INFLUENCES ON U.S. edged up to 3 percent, a result mainly of higher oil INTERNATIONAL TRANSACTIONS prices. During the first part of the year, monetary authorities moved to tighten conditions in many Many factors influenced the U.S. current and finan- industrial countries in reaction to continued strong cial accounts in 2000. The most important of these growth in economic activity that was starting to were the lagged effects of strong U.S. and foreign impinge on capacity constraints, as well as some growth in late 1999 and early 2000, the sharp rise upward pressures on prices. Interest rates on longin oil prices in 1999 that continued into 2000, and a term government securities declined on balance in further appreciation of the dollar—following a pause most industrial countries, especially toward year-end 2. Change in real GDP in the United States and abroad, 1997-2000 Percentage change, annual rate H| Half years AArreeaa 11999977 11999988 11999999 22000000 1998:H2 1999:H1 1999:H2 2000: HI 2000:H2 United States 4.3 4.6 5.0 3.4 4.5 3.0 7.0 5.2 1.6 Total foreign1 4.3 1.2 4.8 4.2 1.8 4.5 5.1 5.5 2.9 Asian emerging markets2 .. 4.8 -1.8 8.9 6.3 2.6 9.6 8.2 7.7 4.8 China 8.2 9.5 6.2 7.4 12.4 1.7 11.0 5.7 9.2 Indonesia 1.2 -18.2 5.8 5.3 -8.8 14.0 -1.8 12.7 -1.7 Korea 3.4 -5.2 13.8 5.2 6.9 15.2 12.4 6.5 3.9 Malaysia 6.3 -11.1 11.0 6.5 -5.4 16.5 5.9 11.0 2.3 Philippines 5.0 -2.0 5.1 3.6 .9 6.3 3.8 4.9 2.3 Taiwan 7.0 3.4 6.5 4.1 3.9 8.9 4.2 6.7 1.6 Latin America3 6.1 1.2 4.3 4.7 -.5 3.0 5.6 7.4 2.1 Argentina 7.6 -.5 -.6 -2.0 -6.2 -4.1 3.2 -2.8 -1.3 Brazil 2.4 -.8 3.4 4.3 -4.0 3.5 3.4 3.8 4.8 Mexico 6.7 2.8 5.5 5.2 2.4 4.5 6.4 8.7 1.7 Venezuela 6.7 -4.7 -4.1 5.5 -10.3 -4.6 -3.7 9.5 1.7 Canada 4.8 3.2 4.9 4.0 4.5 4.1 5.8 4.5 3.5 European Union 3.1 2.1 3.4 2.9 1.7 2.6 4.1 3.3 2.5 Japan .7 -1.4 .4 2.8 -1.9 4.1 -3.1 5.4 .4 NOTE. Aggregate measures are weighted by moving bilateral shares in U.S. 2. Weighted average of China, Hong Kong, Indonesia, Korea, Malaysia, exports of nonagricultural merchandise. Annual data are four-quarter changes. Philippines, Singapore, Taiwan, and Thailand. Half-yearly data are calculated as Q4/Q2 or Q2/Q4 changes at an annual rate. 3. Weighted average of Mexico, Argentina, Brazil, Chile, Colombia, and 1. Selected regions and economies are shown below. Venezuela. SOURCE. Various national sources. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. International Transactions in 2000 285 when evidence of a slowdown in global economic 2. Oil prices, 1985-2000 growth started to emerge. Dollars per barrel The improvement in overall fiscal positions of the major industrial countries continued during 2000. Partly as a result of one-time revenues from the sale of mobile telephone licenses, the general government balance of the euro area moved into surplus. The Canadian surplus is estimated to have been 2l/z percent of GDP last year. Even in Japan, where the deficit is estimated to have been nearly 6V2 percent of GDP in 2000, there has been some movement toward fiscal consolidation. The experiences of major Latin American countries were mixed in 2000. Brazil enjoyed relatively strong growth as a result of lower domestic nominal 1985 1990 1995 2000 and real interest rates. Mexico began 2000 with NOTE. The data are monthly. SOURCE. Wall Street Journal and the U.S. Department of Commerce, Bureau extremely strong growth rates supported by high oil of Economic Analysis. prices, but growth slowed sharply in the second half, in response partly to tighter monetary policy and partly to slower growth in the United States late in Household spending on services advanced at a the year. Strong oil prices also supported a return to rapid pace throughout the year. But spending on growth in Venezuela last year. In contrast, Argenti- goods stagnated in the second half, in part because of na's economy contracted substantially in 2000 after a an outright decline in motor vehicle sales. The slugstagnant 1999. The Argentine government continued gish pace of consumer spending was likely linked to struggle to put policies in place that would bolster to a less favorable labor market situation, deceleratmarket confidence and support recovery. ing real personal income, and the waning of positive Growth in Asian developing economies slowed wealth effects from previous stock price increases. sharply during 2000, with the principal exception of In addition, there was probably some rebound from China. To a large extent, this pattern reflects the the strong light vehicle purchases in 1999 and early importance of high-technology exports to the United 2000. Businesses were apparently caught off guard States and the slackening in U.S. high-tech imports by the slowing in final sales last year, and inventories late in the year. Another contributing factor to the built up, leaving inventory-sales ratios elevated at Asian slowdown may have been the sustained high year-end. Housing starts declined from a very high price of imported oil. Finally, specific factors in level at the beginning of the year before flattening out individual economies played a role in holding as falling mortgage rates balanced the restraining down growth, including a resurgence of corporate- effects of a leveling-off of household wealth. restructuring problems in Korea and heightened Real government spending rose only 1 percent political uncertainty in Indonesia, the Philippines, over the four quarters of 2000. Federal purchases and Taiwan. declined after a surge in spending in late 1999 due to Y2K concerns. State and local government purchases posted only a modest gain, as spending on investment U.S. Economic Activity slowed from its rapid 1999 pace. The general government surplus rose to 2lA percent of GDP for the year After expanding briskly in the first half, the U.S as a whole. economy decelerated dramatically in the second half of 2000. For the year as a whole, GDP increased 3V2 percent (table 2). The major contributor to the Oil and Other Primary Commodity Prices deceleration was business investment in equipment and software, which slowed in the third quarter and The phrase "high and volatile" best describes oil contracted in the fourth. The high-tech sector was prices during 2000. The spot price of West Texas especially hard hit, but slowing growth in business intermediate, the U.S. benchmark crude, fluctuated output, rising energy costs, and falling profits took between $24 and $37 per barrel last year and reached their toll on business expenditures on motor vehicles levels not seen since the Gulf War in 1991 (chart 2). and other types of equipment as well. Relatively high oil prices persisted throughout the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

286 Federal Reserve Bulletin • May 2001 3. Prices of world non-oil primary commodities, 1985-2000 nomic activity reversed this decline, and prices strengthened in the second half of 1999. The combi- 1990= 100 nation of the strength of the dollar and the slowdown in global economic growth led prices of non-oil pri- — 1 — 120 mary commodities to resume their decline in mid- 2000. By the end of last year, the decline in prices — P — 110 was particularly evident in the cyclically sensitive commodities—metals and agricultural raw materials. f \ — 100 — 1 \klT 90 U.S. Price Competitiveness — 80 Over 2000, non-energy price increases remained subdued in the United States and in most of its trading 1 1 I I 1 1 1 1 1 1 1 1 1 1 partners. As is usually the case, the major factor 1985 1990 1995 2000 contributing to gains and losses in U.S. international NOTE. The data are monthly. price competitiveness has been the exchange value SOURCE. International Monetary Fund, International Financial Statistics, index of non-oil commodity prices in dollars. of the dollar. After remaining flat in 1999, the real trade-weighted exchange value of the dollar in terms of an index of a broad group of U.S. trading partners year as a result of demand spurred by strong global appreciated IVi percent over the four quarters of economic growth. The underlying strength of world 2000. As of year-end, the broad dollar index had oil demand was apparent: Oil prices remained ele- appreciated 27 percent from its previous low point in vated even as world oil production increased sharply. July 1995 (chart 4). Most of the expansion in production came from The dollar's movements last year differed signifithe Organization of Petroleum Exporting Countries cantly across the trading partners of the United States. (OPEC), which reversed the production restraints that The dollar appreciated (in real terms) 20 percent had been implemented in the previous two years. against the euro, 14 percent against the pound, 10 per- Non-OPEC production rebounded as well, led nota- cent against the yen, and 4 percent against the bly by increases in the former Soviet Union. Canadian dollar. The dollar's appreciation against the The unusual volatility of oil prices during 2000 euro in 2000 followed an appreciation during 1999 of was the consequence of historically low levels of crude oil and petroleum product inventories in the United States and abroad. With little scope for 4. Foreign exchange value of the U.S. dollar, 1990-2000 changes in inventories to accommodate fluctuations in supply and demand, large and rapid swings in oil 1996= 100 prices were common. For example, in September as the spot price of West Texas intermediate approached its high for the year, the U.S. government authorized a release of 30 million barrels from the Strategic Petroleum Reserve, and oil prices declined about $7 per barrel within a few days. Oil prices soon reversed this decline, however, but then fell $10 per barrel during the last two months of the year as evidence mounted that U.S. economic growth was slowing. Prices of non-oil primary commodities resumed their decline last year, following a modest uptick in late 1999 (chart 3). From 1997 through the first half 1990 1995 2000 of 1999, weak global demand, combined with a large NOTE. The broad dollar index included thirty-five currencies until the beginsupply increase in response to the high prices of the ning of stage three of European Economic and Monetary Union on January 1, 1999, when the euro replaced the ten euro-area currencies; the broad dollar mid-1990s (especially for agricultural products), put index now has twenty-six currencies. Currencies of all foreign countries or severe downward pressure on commodity prices. regions that had a share of U.S. non-oil imports or nonagricultural exports of at least Vz percent in 1997 are included in the broad dollar index. The data for the Reduced supplies and the recovery in global ecoeuro use the restated German mark before January 1999. The data are monthly. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. International Transactions in 2000 287 nearly 15 percent, and it persisted despite year-end lagged effects on imports of robust economic growth evidence that the U.S. economy had slowed to a rate in the United States early in the year and the increasof growth below that of Europe. Against a weighted ing price competitiveness of foreign goods as the average of developing country trading partners, the dollar appreciated; together these factors outweighed dollar appreciated just over 2 percent in real terms the pull on exports of generally strong economic during 2000. A number of developing countries have growth abroad during the first three quarters of 2000. significantly higher inflation rates than the United States, so that their currencies tend to appre- Exports ciate against the dollar in real terms even when the nominal exchange rate is constant or slowly depreci- The value of exports of goods and services rose ating. For example, the Mexican peso appreciated $113 billion in 2000 after a very small increase in nearly 5 percent against the dollar in real terms last 1999 (table 3). Receipts from services rose 9 percent, year, primarily because of higher inflation in Mexico. more than twice the rate recorded in 1999, with much of the increase recorded in receipts from foreign travelers in the United States and "other private DEVELOPMENTS IN US. TRADE IN GOODS AND services" (mostly business, professional, technical, and financial services). Sales of military equipment SERVICES declined slightly as did receipts from other govern- The U.S. trade deficit in goods and services was ment services. substantially larger in 2000 than in 1999 (table 3). The value of goods exports expanded 13 percent The steep decline in the external balance reflected the after a marginal increase in 1999. Capital equipment 3. U.S. international trade in goods and services, 1997-2000 Billions of dollars except as noted Dollar change PPeerrcceennttaaggee IItteemm 11999977 11999988 11999999 22000000 cchhaannggee,, 1997 to 1998 1998 to 1999 1999 to 2000 11999999 ttoo 22000000 Balance on goods and services -106 -167 -265 -368 -61 -98 -104 Exports of goods and services 937 933 956 1,070 -4 23 113 12 Services 257 263 272 296 5 9 24 9 Goods 680 670 684 773 -9 14 89 13 Agricultural products 58 53 50 53 -5 -3 4 7 Nonagricultural goods 621 617 635 720 -4 18 85 13 Capital equipment 296 300 312 357 4 12 45 14 Aircraft and parts 41 54 53 48 12 -1 -5 -9 Computers, peripherals, and parts .. 49 45 47 56 -A 1 9 19 Semiconductors 39 38 47 60 -1 9 13 28 Telecommunications equipment ... 24 25 27 33 1 2 6 22 Other machinery and equipment ... 142 139 139 161 -3 0 22 16 Industrial supplies 148 138 139 163 -9 1 24 17 Automotive products 74 73 76 80 -1 3 4 6 Consumer goods 77 79 81 89 2 2 8 10 Other nonagricultural exports 26 26 27 31 0 1 4 15 Imports of goods and services 1,043 1,100 1,221 1,438 57 121 217 18 Services 167 183 191 215 16 9 24 13 Goods 876 917 1,030 1,223 41 113 193 19 Oil 72 51 68 120 -21 17 52 77 Non-oil 805 866 962 1,102 62 96 140 15 Capital equipment 253 270 297 352 16 28 55 19 Aircraft and parts 17 22 24 26 5 2 3 11 Computers, peripherals, and parts .. 70 72 81 90 2 9 8 10 Semiconductors 37 33 38 48 -3 4 11 28 Telecommunications equipment ... 15 17 24 38 2 7 14 59 Other machinery and equipment ... 115 125 130 150 10 6 19 15 Industrial supplies 146 152 157 181 7 5 24 15 Automotive products 140 149 179 196 9 30 17 9 Consumer goods 194 217 240 276 23 23 36 15 Food and other goods 72 79 89 97 7 10 8 9 . . . Not applicable. SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, U.S. international transactions accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

288 Federal Reserve Bulletin • May 2001 Structural Change in U.S. Export Markets In recent years, U.S. goods exports have grown faster than Chart 5 shows that U.S. exports to Canada and Mexico would have been predicted by historical relationships based have increased much faster than Canadian and Mexican on foreign GDP growth and relative prices. Examination of GDP. We attribute this structural change to the U.S.the pattern of U.S. export growth across destination markets Canadian Free Trade Agreement of 1989 and to the North suggests that this acceleration of goods exports is the result American Free Trade Agreement of 1994. Apparently, of trade liberalization and the opening of markets abroad. barriers to U.S. exports have fallen substantially in these Chart 5 displays U.S. goods exports as a share of GDP in countries, and U.S. businesses have taken advantage of the five major markets: Australia, Canada, the European Union, opportunities created. Japan, and Mexico, which together account for nearly The data for exports to Australia and Japan provide little 70 percent of total U.S. goods exports. The data are normal- evidence of structural change in the 1990s. However, U.S. ized so that the U.S. export share of destination market GDP exports to the European Union have increased much faster is 100 in 1990. This normalization allows us to compare than European GDP in the past four years. This developchanges in market penetration over time. To a reasonable ment raises the intriguing possibility that the European approximation, changes in foreign GDP and real exchange Single Market initiative of 1992 and the establishment of rates should not affect market penetration in nominal terms.1 European Economic and Monetary Union in 1999 have increased the attractiveness of the European market for U.S. 1. If the income and price elasticities of foreign demand for U.S. exports exporters. are both equal to one, then the market penetration ratio is constant except for structural change and (relatively minor) lagged volume adjustments. Estimates of the income and price elasticities of U.S. goods exports are typically This study and other studies have found a higher estimate of the income close to one. See, for example, the long-run and short-run estimates in Peter elasticity of U.S. goods imports, typically around two, compared with one for Hooper, Karen Johnson, and Jaime Marquez, "Trade Elasticities for the G-7 exports. The source of this higher import elasticity is not clear, but it implies Countries," Princeton Studies in International Economics No. 87, Princeton that US. imports tend to grow faster than U.S. exports even when the U.S. University, August 2000. economy grows at the same rate as that of the rest of the world. and industrial supplies accounted for most of the petroleum products, steel, other metals, paper, chemigrowth in goods exports. There were strong increases cals, and textiles. There was a smaller expansion in in high-tech equipment, such as computers, semicon- exports of automotive products, consumer goods, and ductors, and telecommunications equipment, as well agricultural products. Exports of aircraft and parts as in other machinery, such as power-generating, declined moderately in 2000. industrial, and service equipment. Increases in Although goods exports rose strongly during much exported industrial supplies were spread widely of the year, in the fourth quarter most categories of among categories and were especially strong in exports fell. This reduction coincided with a sharp slowing of growth rates both in the United States and abroad. The U.S. slowdown contributed to the fourth- 5. U.S. bilateral export values relative to destination GDP, quarter decline in exports because a large fraction of 1990-2000 U.S. high-tech and automotive exports are processed abroad and returned to the United States for final 1990 = 100 sale. Canada Reflecting the strength of economic activity in North America for most of the year, U.S. exports to Canada and Mexico advanced rapidly in the first three quarters of 2000. This growth in exports to Canada and Mexico continues a pattern evident since the 1994 North American Free Trade Agreement of stronger-than-expected exports to these countries (see box). Exports to Mexico rose $25 billion in 2000, or nearly 30 percent, with increases spread over all major categories of trade (table 4). Capital equipment exports to Mexico made up more than 35 percent of the total, and industrial supplies, nearly 30 percent. 1990 1992 1994 1996 1998 2000 Automotive products (largely parts) accounted for SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis; 15 percent of exports to Mexico. Exports to Canada various national sources. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. International Transactions in 2000 289 expanded $12 billion, or 7 percent. Increases were 5. Change in the quantity of U.S. exports and imports of largely in capital equipment and industrial supplies. goods and services, 1997-2000 Automotive products (one-fourth of U.S. exports to Percent, fourth quarter to fourth quarter Canada) declined in 2000, primarily in the second Item 1997 1998 1999 2000 half of the year. Exports of goods to Asian emerging markets grew Exports of goods and services $24 billion in 2000, or 23 percent. Almost all of the Services 1 Goods .. 12 increase was in capital goods (particularly high-tech Capital equipment 18 equipment), which accounted for 60 percent of U.S. Aircraft and parts 8 49 exports to that region. After gaining strength in the Computers, peripherals, and parts 26 7 Semiconductors 21 9 first three quarters, exports to this region accounted Other machinery and equipment . 17 for much of the decline in total U.S. exports in the Industrial supplies 6 -3 fourth quarter. Exports to Japan followed a more Automotive vehicles and parts 14 -2 Consumer goods 7 1 muted pattern, rising moderately through the third Agricultural products 1 0 quarter before leveling off in the fourth quarter. Imports of goods and services 14 The value of exports to Western Europe rose Services 14 strongly in 2000, following several years of lack- Goods .. 14 luster performance, as economic growth picked up Oil .... 4 Non-oil 15 in the area. Capital equipment constituted nearly 55 percent of U.S. exports to Western Europe in Capital equipment 25 19 20 Aircraft and parts 26 -2 23 2000, and industrial supplies another 20 percent. In Computers, peripherals, and parts 33 27 25 15 contrast to most other regions, exports to Western Semiconductors 33 -7 34 23 Europe continued to rise in the fourth quarter, even as Other machinery and equipment 17 17 21 total U.S. goods exports declined. Industrial supplies 9 !• The quantity of exports rose 7 percent in 2000 Automotive vehicles and parts 15 2 Consumer goods 15 (Q4/Q4), substantially faster than in the previous two Foods, feeds, and beverages .. 11 years (table 5). Increases were spread across most NOTE. Quantities are measured in chained (1996) dollars. major categories of trade, with the exception of air- SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, craft exports, which declined. national income and product accounts; and the Federal Reserve Board. Prices of goods exports rose 3A percent in 2000 (table 6). When computers, semiconductors, and agricultural products are excluded, the increase in the was about the same rate as in 1999. Stronger growth index for export prices was larger, l3A percent, which in prices of exported industrial supplies and aircraft was moderated by small rises in prices of other machinery and automotive products. Prices of agri- 4. U.S. exports of goods to its major trading partners, cultural exports declined V2 percent, the smallest rate 1997-2000 of decrease in four years. Prices of computers and Billions of dollars semiconductors (measured by hedonic indexes) continued to decline. Change, Destination 1997 1998 1999 2000 1999 to 2000 Total goods exports .. 680 670 684 773 89 Imports Western Europe 153 159 163 178 16 Canada 152 156 167 179 12 The value of imports grew 18 percent in 2000, nearly Latin America 135 142 141 171 29 twice as fast as in 1999, with increases recorded in all Mexico 71 78 87 111 25 Other countries 64 63 55 59 4 major categories of trade (table 3). The expansion Asia 183 154 161 193 32 of imports was fueled by the sharp growth of U.S. Japan 65 57 56 64 8 Other Asia1 118 97 104 129 24 domestic expenditures throughout most of the year, the increasing price competitiveness of foreign goods All other2 57 59 53 53 -1 as the dollar appreciated, and the rise in the price 1. Includes China, Hong Kong, Singapore, Taiwan, Indonesia, Philippines, of imported oil. Oil and capital equipment each Malaysia, and Thailand. 2. Includes Australia, New Zealand, Middle East, Eastern Europe, and Africa. accounted for one-quarter of the rise in imports; SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, U.S. consumer goods accounted for another 17 percent; international transactions accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

290 Federal Reserve Bulletin • May 2001 6. Change in prices of U.S. exports and imports of goods and Non-Oil Imports services, 1997-2000 Percent, fourth quarter to fourth quarter The quantity of non-oil imports grew 11 percent in 2000 (Q4/Q4, table 5). Reflecting the strength of Item 1997 1998 1999 2000 spending by both households and businesses in the Total exports of goods and services -.8 -2.6 1.0 1.3 United States, the quantity of imported consumer Services .8 -.2 2.9 2.6 goods (other than automotive products) rose 14 per- Goods -1.5 -3.5 .3 .7 cent, and the quantity of imported capital equipment Agricultural products -3.2 -10.1 -5.1 -.5 increased 20 percent. The slowdown in U.S. GDP Nonagricultural goods -1.3 -2.9 .7 .8 growth that occurred during the second half of the Computers, peripherals, and parts -11.0 -12.7 -6.9 -4.4 year was reflected in a drop in the growth of goods Semiconductors -13.3 -5.6 -3.6 -4.3 Other goods .6 -1.9 1.7 1.8 imports from a pace of more than 15 percent at an Industrial supplies -.5 -7.3 4.1 4.0 annual rate during the first three quarters of the year Aircraft 2.6 1.2 2.6 4.5 Other machinery 1.2 -.1 .3 .7 to about zero growth in the fourth quarter. Imports of Automotive products .7 .4 .8 .6 Consumer goods .8 -.5 .1 .0 automotive products, which increased only 2Vi percent during the year, turned down in the fourth quar- Total imports of goods and services ... -4.2 -5.0 3.6 2.4 ter as U.S. sales of vehicles dropped back from the Services -2.3 -.4 3.2 -1.2 Goods -4.6 -5.9 3.7 3.1 very high levels recorded earlier in the year. In addition, there were significant declines in the fourth Oil -20.2 -35.7 93.6 31.9 Non-oil -2.8 -3.6 -.7 .6 quarter in the quantity of imported high-tech equip- Computers, peripherals, ment and industrial supplies. Fourth-quarter increases and parts -14.8 -16.4 -10.6 -6.1 were recorded for imports of other capital equipment Semiconductors -14.9 -8.2 -2.7 -2.9 Other goods -.8 -2.0 .4 1.4 and of consumer goods and services, albeit at a Industrial supplies -.1 -6.8 4.3 10.6 Aircraft 3.4 1.7 1.6 3.4 somewhat slower pace than in the first half of the Other machinery -3.2 -1.3 -1.6 -1.1 Automotive products .6 -.3 .9 .7 year. Consumer goods -1.3 -1.2 -.6 -1.1 Foods, feeds, and beverages ... .1 -3.0 -3.1 -2.4 Overall, U.S. non-oil import prices rose V2 percent in 2000 (table 6). When prices of computers and SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, national income and product accounts; chain-weighted indexes; and the Federal semiconductors are excluded, the import price Reserve Board. increases were larger, IV2 percent. Much of the rise in these prices was attributable to industrial supplies, whose prices surged more than 10 percent, an and automotive products, industrial supplies, and serincrease led by prices of natural gas, paper, nonvices each accounted for about 10 percent. ferrous metals, fertilizers, and organic chemicals. In contrast, prices of other imported goods, such as Oil Imports machinery other than computers and semiconductors and consumer goods, declined at rates of just over The quantity of U.S. imports of crude oil and petro- 1 percent in 2000, rates only slightly different from leum products increased 13 percent over the four those recorded during the previous two years. The quarters of 2000. Despite robust economic growth hedonic indexes of prices of computers and semiconthrough the first half of the year, U.S. final demand ductors continued to drop in 2000. for oil was essentially unchanged from 1999, a reflection, at least in part, of the effects of high oil prices. High prices also helped to stabilize domestic oil DEVELOPMENTS IN THE NONTRADE CURRENT production in 2000 after several years of declines. ACCOUNT With flat consumption and production, one would normally not expect such a strong increase in The two major components of the current account imports. The explanation lies in the fact that oil other than trade in goods and services are investment imports in 1999 were moderated by a considerable income and unilateral transfers. drawdown in oil inventories. With U.S. oil stocks near historically low levels by the end of 1999, a boost in oil imports was required just to keep con- Investment Income sumption constant. Reflecting both higher quantities and prices, the value of U.S. oil imports grew 50 per- Net investment income is the difference between the cent in 2000 (Q4/Q4). income that U.S. residents earn on their holdings of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. International Transactions in 2000 291 6. U.S. net international investment: increase in the rate of return on U.S. direct invest- Position and receipts, 1980-2000 ment abroad and a decline in the rate of return on foreign direct investment in the United States. Billions of dollars Billions of dollars Net income Direct Investment Income •''ll||||| Net position Net direct investment income—the difference 500 — 50 between receipts from U.S. direct investment abroad and payments on foreign direct investment in the United States—increased almost 35 percent in 2000, 1,000 — 100 to $84 billion dollars. Direct investment receipts grew a robust 26 percent (table 7). Despite a slowdown in M I 11 I il I II 11 II I I I 1 M 1 I the last half of the year, payments grew 18 percent 1980 1985 1990 1995 2000 over 1999. NOTE. The net position data are averages of the end-of-year positions for the current and previous years. The year-end position for 2000 was constructed by The growth in receipts reflected strong GDP adding the recorded portfolio investment flows during 2000 to the recorded growth abroad in the first three quarters of the year, a year-end position for 1999. The net position excludes U.S. gold holdings and foreign holdings of U.S. currency. rising stock of direct investment capital, and the SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis; and effects of high oil prices on the profitability of U.S.the Federal Reserve Board. based international energy corporations. Receipts grew strongly despite the offsetting effect of the strength of the dollar vis-a-vis many of the important foreign assets (receipts) and the income that foreignhost countries for U.S. direct investment, which lowers earn on their holdings of U.S. assets (payments). ered the dollar value of profits earned in foreign Traditionally (since 1914), the balance on investment currencies. income has been positive, but starting in the early Major increases in direct investment receipts were 1990s it began a persistent decline that brought it registered for Western European countries, particuto near zero in 1998 and to negative $13 billion in larly the United Kingdom, and for Canada, Japan, 1999—a net payment position (chart 6). This recent and a number of other Asian countries. Receipts from decline in net investment income has resulted pri- Latin America were flat for the second straight year. marily from the fact that, over the period, the United Mirroring the overall strength of receipts, the rate of States has experienced large net financial inflows return on the direct investment position rose to from the rest of the world. That is, foreign acquisition 10!/2 percent—more than 1 percentage point higher of U.S. assets has vastly exceeded U.S. acquisition of than in 1999 (chart 7).1 foreign assets. Although the net financial asset position is the primary determinant of net investment Although income payments on direct investment in income, changing rates of return on these assets also the United States, at $66 billion for 2000, increased affect the balance. In 2000, net investment payments were $8 billion, slightly less than in 1999. Although 1. In charts 6-9, the investment receipts (or payments) scale is large financial inflows last year tended to increase net one-tenth of the investment position scale, and thus when the receipts (or payments) line coincides with the top of the position bar, the payments, the inflows were more than offset by an implied rate of return is 10 percent. 7. U.S. net investment income, 1995-2000 Billions of dollars Change, Item 1995 1996 1997 1998 1999 2000 1999 to 2000 Investment income, net 25 23 11 -1 -13 -8 5 Direct investment income, net 65 69 72 68 63 84 21 Receipts 95 103 116 106 119 149 31 Payments 30 33 44 39 56 66 10 Portfolio investment income, net -40 -46 -61 -69 -76 -92 -16 Receipts 114 120 140 150 155 194 38 Payments 154 166 201 219 231 286 55 SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, U.S. international transactions accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

292 Federal Reserve Bulletin • May 2001 7. U.S. direct investment abroad: typically newer than U.S. direct investment abroad Position and receipts, 1980-2000 and hence is more likely to be incurring startup and •JUS restructuring costs and less likely to have fully realized the gains from operational experience. Portfolio Investment Income Portfolio receipts reflect the dividends and interest that U.S. residents receive on their holdings of foreign financial assets, whereas payments reflect the dividends and interest that foreigners receive on their holdings of U.S. financial assets. The Bureau of Economic Analysis (BEA) estimates these payments and receipts by using estimates of the holdings of various NOTE. The position data are averages using the current-cost measures as of year-end for the current and previous years. The year-end data for 2000 were types of assets combined with estimates of the interconstructed by adding the recorded direct investment capital flows and current est or dividend-payout rates for the various assets. cost adjustment during 2000 to the recorded year-end position for 1999. SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis; and Portfolio income excludes any capital gains or losses the Federal Reserve Board. (realized or not) that result from changes in the price of the underlying assets. significantly over 1999, the growth slowed consider- Although portfolio income is affected by changes ably in the second half of 2000 as the U.S. economy in interest rates and the composition of the assets cooled. The overall rate of return, at about 5 percent, held, the primary determinant of net portfolio paywas VA of a percentage point lower than that in 1999 ments is the net portfolio asset position, which is (chart 8). illustrated in chart 9. As shown in the chart, net With the net direct investment position continuing portfolio income turned negative in 1985 when the its trend decline toward zero, the large positive bal- net investment position moved from one of net crediance on direct investment income was primarily the tor to net debtor, and it has followed the general result of the long-standing higher rate of return on contour of the net investment position since. Between U.S. direct investment abroad than on foreign direct 1999 and 2000, net income declined $15 billion, to investment in the United States. The reasons for the negative $92 billion. This decline reflects a further differential in the rates of return are not well under- deterioration of the net asset position as well as a stood, but age-related factors appear to be important: Foreign direct investment in the United States is 9. Net portfolio investment: Position and receipts, 1980-2000 Foreign direct investment in the United States: Position and payments, 1980-2000 Billions of dollars Billions of dollars Billions of dollars Billions of dollars Net income + '--mm 0 1,200 120 300 — 30 1,000 100 800 80 600 60 600 60 llU 900 90 400 40 Net position Position 1,200 120 200 20 + + I I I 1 I I I M I II II I 1 I II I 1 I 1 I 0 0 Payments to foreign investors in the United States —, 1980 1985 1990 1995 2000 1 I I I I I I 1 I 1 I H I I I I I II I 1 I I 1980 1985 1990 1995 2000 NOTE. The net position data are Federal Reserve Board estimates of the average position during the year. Through 1999 these are based on quarterly NOTE. The position data are averages using the current-cost measures as of financial flows and year-end position estimates published by the BEA. For 2000, year-end for the current and previous years. The year-end data for 2000 were the average is based on year-end 1999 position data and quarterly financial flows constructed by adding the recorded direct investment capital flows and current- during 2000. The net position excludes US. gold holdings and foreign holdings cost adjustment during 2000 to the recorded year-end position for 1999. of U.S. currency. SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis; and SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis; and the Federal Reserve Board. the Federal Reserve Board. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. International Transactions in 2000 293 general increase in interest rates, which raised the that began in 1999, as the U.S. budget surplus and the rate of return on portfolio assets. attendant decline in the supply of Treasuries lowered their yield relative to that of other debt securities. Last year sales by private foreigners were, on net, Unilateral Transfers $52 billion in Treasury securities, compared with net sales of $21 billion in 1999 (table 8). Although Unilateral transfers include government grant and sizable, these sales were slightly less than they would pension payments as well as private transfers to and have been had foreigners reduced their holdings in from foreigners. In 2000, net unilateral transfers proportion to the reduction in Treasuries outstanding. recorded a deficit of $52 billion, $4 billion more than The increased sale of Treasuries was fully offset by in 1999. About half the increase was in private remitlarger foreign purchases of U.S. securities issued by tances, and half was in government grants. government-sponsored agencies. Net purchases of agency securities topped $110 billion, compared with the record $72 billion set in 1999. In contrast to FINANCIAL AND CAPITAL ACCOUNT the shrinking supply of Treasury securities, U.S.- TRANSACTIONS government-sponsored agencies accelerated the pace The counterpart to the increase in the U.S. current of their debt issuance. Private foreign purchases of account deficit in 2000 was an increase in net finan- U.S. corporate and other bonds (including agencies) cial inflows. As in 1999, U.S. financial flows in 2000 grew to a record $294 billion, while net purchases of reflected the relatively strong cyclical position of the U.S. equities ballooned from $99 billion in 1999 to U.S. economy and the global wave of corporate merg- $172 billion. ers. Foreign private purchases of U.S. securities were The pace of foreign direct investment inflows also exceptionally strong—well in excess of the record set accelerated from the record pace of 1999. As in the in 1997. previous two years, direct investment inflows were The composition of U.S. securities purchased by driven by foreign acquisition of U.S. firms, which foreigners continued the shift away from Treasuries reflected the global strength in merger and acquisi- Composition of U.S. financial flows, 1995-2000 Billions of dollars Item 1995 1996 1997 1998 1999 2000 Current account balance -110 -123 -141 -217 -332 Official financial flows, net 99 132 18 -27 54 Foreign official assets in the United States 110 127 -119 -20 43 U.S. official reserve assets -1-01 -71 0 -7 9 Other U.S. government assets 0 3 Private financial flows, net 14 25 250 174 269 Net inflows reported by U.S. banking offices — -45 4 -3 Securities transactions, net 73 131 183 Private foreign net purchases of U.S. securities 196 267 311 Treasury securities 100 49 -21 Corporate and other bonds 83 172 233 Corporate stocks 14 46 99 U.S. net purchases of foreign securities -123 -136 -129 Bonds -57 —35 -14 Stocks -65 -101 -114 Stock swaps -7 -96 -123 H if v, Direct investment, net -41 40 125 Foreign direct investment in the United States. 58 186 276 U.S. direct investment abroad -99 -146 -151 Foreign holdings of U.S. currency 12 17 22 Other 14 -18 -58 0 Capital account balance 1 Statistical discrepancy -4 70 12 SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, U.S. international transactions accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

294 Federal Reserve Bulletin • May 2001 tion activity. Of the $317 billion in direct investment ciated with immigration—netted to positive $1 bilinflows in 2000, almost $200 billion was directly lion last year. In 1999, they were negative $4 billion, attributable to merger activity. Many of these merg- most of which reflected the transfer of the Panama ers were financed, at least in part, by an exchange of Canal to the Republic of Panama. equity, in which shares in the U.S. firm were swapped for equity in the acquiring firm. Although U.S. residents generally appear to have sold a portion of the PROSPECTS FOR 2001 equity acquired through these swaps, the swaps likely contributed significantly to the $124 billion capital Opposing forces have been at work on the U.S. outflow attributed to U.S. acquisition of foreign secu- current account balance since late 2000. The continrities. U.S. direct investment abroad was also boosted ued appreciation of the dollar into the first few by merger activity and totaled $162 billion in months of 2001 will tend to increase the goods and 2000—a modest increase over 1999. services trade deficit this year as the adjustment pro- Financial inflows from foreign official sources cess unfolds. In addition, the ongoing deterioration of totaled $36 billion in 2000—a slight decrease from the U.S. net international investment position will 1999. Nearly all of the official inflows were attribut- tend to increase the deficit on investment income. able to reinvested interest earnings. Modest official However, domestic spending growth appears to have sales of dollar assets associated with foreign slowed more sharply than foreign spending growth exchange intervention were offset by larger inflows recently, which puts more downward pressure on from some non-OPEC oil exporting countries, which the growth rate of imports than on that of exports. If benefited from the elevated price of oil. U.S. govern- these circumstances persist, the current account defiment assets abroad (official and other) were little cit is likely to change much less in 2001 than it did in changed on balance last year. 2000. • Capital account transactions—which consist mainly of debt forgiveness and wealth transfers asso- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

295 Industrial Production and Capacity Utilization for March 2001 Released for publication April 17 ing output rose 0.3 percent after a 0.3 percent drop in February; excluding motor vehicles and parts, manu- Industrial production increased 0.4 percent in March, facturing output edged down 0.1 percent in March. its first increase since September. At 146.5 percent of Output at utilities increased 1.1 percent, and producits 1992 average, industrial production in March was tion in mining rose 0.8 percent. For the first quarter 0.8 percent higher than in March 2000. Manufactur- as a whole, total industrial production contracted at Industrial production Ratio scale, 1992 = 100 145 125 105 85 Capacity utilization Percent of capacity Total industry 85 80 75 70 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 12-month percent change Percent of capacity High-tech industries are defined as semiconductors and related electronic Shaded areas are periods of business recession as defined by the NBER. components (SIC 3672-9), computers (SIC 357), and communications equipment (SIC 366). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

296 Federal Reserve Bulletin • May 2001 Industrial production and capacity utilization, March 2001 Industrial production, index, 1992=100 Percent change CCCCaaaatttteeeeggggoooorrrryyyy 22000000 22000011 20001 20011 MMaarr.. 22000000 ttoo Dec.r Jan.r Feb/ Mar.p Dec.r Jan.r Feb.r Mar.p MMaarr.. 22000011 Total 147.3 146.4 145.9 146.5 -.6 -.6 -.4 .4 .8 Previous estimate 147.7 146.8 146.0 -.3 -.6 -.6 Major market groups Products, total2 136.0 135.5 134.9 135.4 -.2 -.3 -.4 .4 .7 Consumer goods 123.1 122.1 122.0 122.3 .6 -.8 -.1 .3 .1 Business equipment 199.2 198.2 196.2 197.9 -.7 -.5 -1.0 .9 4.8 Construction supplies 140.6 140.3 139.5 139.1 -.7 -.3 -.5 -.3 -3.8 Materials 167.8 166.2 165.8 166.5 -1.2 -1.0 -.2 .4 1.1 Major industry groups Manufacturing 152.6 151.8 151.3 151.8 -1.0 -.5 -.3 .3 .4 Durable 195.1 192.7 191.9 193.6 -.8 -1.2 -.4 .9 2.5 Nondurable 114.1 114.6 114.4 114.0 -1.2 .4 -.1 -.4 -2.3 Mining 99.6 100.7 101.1 101.9 -1.5 1.1 .4 .8 1.5 Utilities 129.1 124.4 121.8 123.1 5.9 -3.6 -2.0 1.1 7.3 Capacity utilization, percent MMMEEEMMMOOO CCCaaapppaaaccciiitttyyy,,, pppeeerrrccceeennnttt 2000 2001 ccchhhaaannngggeee,,, AAvveerraaggee,, LLooww,, HHiigghh,, MMMaaarrr... 222000000000 11996677--0000 11998822 11998888--8899 tttooo Mar. Dec.r Jan.r Feb.r Mar.p MMMaaarrr... 222000000111 Total 82.1 71.1 85.4 82.2 80.6 79.9 79.3 79.4 4.4 Manufacturing 81.1 69.0 85.7 81.6 79.3 78.6 78.2 78.1 4.8 Advanced processing 80.6 71.0 84.2 79.6 79.0 78.9 78.4 78.5 2.5 Primary processing . 82.2 65.7 88.3 85.9 80.9 79.3 78.8 78.6 8.4 Mining 87.4 80.3 88.0 86.1 86.1 87.1 87.5 88.4 -1.1 Utilities 87.6 75.9 92.6 87.2 95.7 92.0 89.8 90.5 3.4 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. an annual rate of 4.7 percent—the biggest quarterly the output of paper products, foods and tobacco, and decline since the first quarter of 1991; the index clothing were only partly offset by a gain in the edged down at a 0.9 percent rate in the fourth quarter production of consumer chemicals. The output of of 2000. The rate of capacity utilization for total consumer energy products, which had fallen in the industry moved up in March to 79.4 percent but preceding two months, rose 0.6 percent and was remains at a level more than 2Vi percentage points boosted by an increase in utilities' sales to residences. below its 1967-2000 average. The production of business equipment increased 0.9 percent in March after three months of declines. The output of transit equipment rebounded 4.5 per- MARKET GROUPS cent because of gains in the production of autos, trucks, and commercial aircraft. The production of The output of consumer goods rose 0.3 percent in information processing and related equipment posted March; an increase of 2.4 percent in the production of a relatively small increase of 0.7 percent. After havconsumer durables more than offset a decline in the ing risen 23.1 percent last year, this index slowed to a production of nondurables. The output of automotive 6.1 percent pace in the first quarter. The production of products rose 5.7 percent; nonetheless, because of the industrial and other equipment fell 0.3 percent in sharp cutbacks during the fourth quarter of 2000 and March, with declines in the output of construction earlier this year, output in March remained 6.7 per- equipment, electrical distribution equipment, and specent below its year-ago level. The output of home cial industry machinery. electronics rose 2.7 percent, but the production of The production of construction supplies fell other consumer durables decreased. Among con- 0.3 percent further in March; for the first quarter, it sumer nondurables, the production of non-energy dropped 5.1 percent at an annual rate, a decline close consumer goods declined 0.4 percent; declines in to that for the fourth quarter of last year. The output Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Industrial Production and Capacity Utilization 297 of materials was up 0.4 percent in March, the first of 1991. In March, declines in the output of nongain since September. The output of durable goods durables were fairly widespread. The only excepmaterials rose 0.5 percent, led by an increase of tions were small increases in apparel products and 2.6 percent in the output of parts for consumer goods. chemicals. Equipment parts (including the production of semi- The factory operating rate edged down, to 78.1 perconductors and related electronic components) cent. The utilization rate for primary-processing increased 0.5 percent in March and rose only 0.8 per- industries decreased slightly, to 78.6 percent, while cent in the first quarter; output has decelerated the rate for advanced-processing industries edged steadily after having peaked at a 57.0 percent annual up, to 78.5 percent. Capacity utilization in highgrowth rate in the second quarter of last year. The technology industries (computers, communications output of nondurable goods materials slipped 0.2 per- equipment, and semiconductors) dropped for the cent in March, with declines in the production of eighth successive month, to 77.3 percent, a level textiles, paper, and chemical materials. The produc- 12.7 percentage points below its July 2000 peak. The tion of energy materials was up 0.8 percent. operating rate at utilities rose to 90.5 percent. The operating rate for mining increased for the third consecutive month, to 88.4 percent. INDUSTRY GROUPS Manufacturing output rose 0.3 percent in March, the NEW RELEASE FORMAT first increase since September, because of gains in the production of durable goods; the production of non- Beginning with the February 16 issue, the G.17 statisdurable goods slipped 0.4 percent. Among durable tical release has been redesigned. Special aggregoods, the largest increases were in the production of gates have been added. Although some detailed motor vehicles and parts and aerospace and miscella- industry data no longer appear in the regular release, neous transportation equipment. For the quarter, how- these series continue to be available on the Fedever, durable goods production fell at an annual rate eral Reserve Board's public web site (www. of 7.4 percent, the largest drop since the first quarter federalreserve.gov/releases/gl7). • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

298 Testimony of Federal Reserve Officials Testimony by Alan Greenspan, Chairman, Board of few signs of weakening despite the marked curtail- Governors of the Federal Reserve System, before the ment in recent months of capital investment plans for Committee on the Budget, U.S. House of Representa- equipment and software. tives, March 2, 2001 To be sure, these impressive upward revisions to the growth of structural productivity and economic I am pleased to appear here today to discuss some of potential are based on inferences drawn from ecothe important issues surrounding the outlook for the nomic relationships that are different from anything federal budget and the attendant implications for the we have considered in recent decades. The resulting formulation of fiscal policy. In doing so, I want to budget projections, therefore, are necessarily subject emphasize that I speak for myself and not necessarily to a relatively wide range of uncertainty. CBO, for for the Federal Reserve. example, expects productivity growth rates through The challenges you face both in shaping a budget the next decade to average roughly 2Vi percent per for the coming year and in designing a longer-run year—far above the average pace from the early strategy for fiscal policy have been brought into sharp 1970s to the mid-1990s, but still below that of the focus by the budget projections that have been past five years. released in the past month and a half. Both the Bush Had the innovations of recent decades, espe- Administration and the Congressional Budget Office cially in information technologies, not come to frui- (CBO) project growing on-budget surpluses under tion, productivity growth during the past five to current policy over the next decade. Indeed, growing seven years, arguably, would have continued to lanon-budget surpluses were projected even under the guish at the rate of the preceding twenty years. The more conservative assumptions of the Clinton sharp increase in prospective long-term rates of return Administration's final budget projections. on high-tech investments would not have emerged The key factor driving the cumulative upward revi- as it did in the early 1990s, and the associated surge sions in the budget picture in recent years has been in stock prices would surely have been largely absent. the extraordinary pickup in the growth of labor pro- The accompanying wealth effect, so evidently critical ductivity experienced in this country since the mid- to the growth of economic activity since the mid- 1990s. Between the early 1970s and 1995, output per 1990s, would never have materialized. hour in the nonfarm business sector rose about In contrast, the experience of the past five to seven IV2 percent per year, on average. Since 1995, how- years has been truly without recent precedent. The ever, productivity growth has accelerated markedly, doubling of the growth rate of output per hour has about doubling the earlier pace, even after one takes caused individuals' real taxable income to grow account of the impetus from cyclical forces. Though nearly two and one-half times as fast as it did over hardly definitive, the apparent sustained strength in the preceding ten years and has resulted in the submeasured productivity in the face of a pronounced stantial surplus of receipts over outlays that we are slowing in the growth of aggregate demand during now experiencing. Not only has taxable income risen, the second half of last year was an important test with the faster growth of GDP, but the associated of the extent of the improvement in structural produc- large increase in asset prices and capital gains created tivity. These most recent indications have added to additional tax liabilities not directly related to income the accumulating evidence that the apparent increases from current production. in the growth of output per hour are more than The most recent projections from the Office of transitory. Management and Budget (OMB) and CBO indicate It is these observations that appear to be causing that, if current policies remain in place, the total economists to raise their forecasts of the economy's unified surplus will reach about $800 billion in fiscal long-term growth rates and budget surpluses. This year 2010, including an on-budget surplus of almost increased optimism receives support from the $500 billion. Moreover, the admittedly quite uncerforward-looking indicators of technical innovation tain long-term budget exercises released by the CBO and structural productivity growth, which have shown last October maintain an implicit on-budget surplus Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

299 under baseline assumptions well past 2030 despite invested in larger enterprises, our innovative, smaller, the budgetary pressures from the aging of the baby- non-publicly traded businesses might find themboom generation, especially on the major health selves competitively disadvantaged in obtaining programs. financing. To be sure, there is not universal agree- These most recent projections, granted their ten- ment among economists on this point; but it is a tativeness, nonetheless make clear that the highly consideration that should be kept in mind. More desirable goal of paying off the federal debt is in generally, the problematic experiences of some other reach and, indeed, would occur well before the end countries with large government accumulation of priof the decade under baseline assumptions. This is in vate assets should give us pause about moving in that marked contrast to the perception of a year ago direction. To repeat, over time, having the federal when the elimination of the debt did not appear likely government hold significant amounts of private assets until the next decade. But continuing to run sur- would risk suboptimal performance by our capital pluses beyond the point at which we reach zero or markets, diminished economic efficiency, and lower near-zero federal debt brings to center stage the overall standards of living than would be achieved critical longer-term fiscal policy issue of whether otherwise. the federal government should accumulate large Private asset accumulation may be forced upon us quantities of private (more technically nonfederal) well short of reaching zero debt. Obviously, savings assets. bonds and state and local government series bonds At zero debt, the continuing unified budget sur- are not readily redeemable before maturity. But the pluses now projected under current law imply a major more important issue is the potentially rising cost of accumulation of private assets by the federal govern- retiring long-maturity marketable Treasury debt. ment. Such an accumulation would make the federal While shorter-term marketable securities could be government a significant factor in our nation's capital allowed to run off as they mature, longer-term issues markets and would risk significant distortion in the could only be retired before maturity through debt allocation of capital to its most productive uses. Such buybacks. The magnitudes are large: As of January 1, a distortion could be quite costly, as it is our extraor- for example, there was in excess of three-quarters of dinarily effective allocation process that has enabled a trillion dollars in outstanding nonmarketable securisuch impressive increases in productivity and stan- ties, such as savings bonds and state and local series dards of living despite a relatively low domestic issues, and marketable securities (excluding those saving rate. held by the Federal Reserve) that do not mature and I doubt that it is possible to secure and sustain could not be called before 2011. Some holders of institutional arrangements that would insulate federal long-term Treasury securities may be reluctant to investment decisions, over the long run, from politi- give them up, especially those who highly value the cal pressures. To be sure, the roughly $100 billion risk-free status of those issues. Inducing such holdof assets in the federal government's defined- ers, including foreign holders, to willingly offer to contribution Thrift Savings Plan have been well- sell their securities before maturity could require insulated from political pressures. But the defined- paying premiums that far exceed any realistic value contribution nature of this plan means that it is of retiring the debt before maturity. Both CBO and effectively self-policed by individual contributors, OMB project an inability of current services unified who would surely object were their retirement assets budget surpluses to be applied wholly to repay debt to be diverted to investments that offered less than by the middle of this decade. Without policy changes, market returns. private asset accumulation is likely to begin in just a But such countervailing forces may be greatly few short years. attenuated for federal government defined-benefit In summary, the Congress needs to make a policy plans such as social security. To the extent that bene- judgment regarding whether and how private assets fits are perceived to be guaranteed by the govern- should be accumulated in federal government ment, beneficiaries may be much less vigilant about accounts. This judgment will have important implicathe stewardship of trust fund assets. tions for the level of saving and, hence, investment in Requiring the federal government to invest in our economy, as well as for the nature of government indexed funds arguably would largely insulate the programs. If, for example, the accumulation of assets investment decision from political tampering. But is avoided by eliminating unified budget surpluses such assets, by definition, can cover only publicly through tax and spending changes, public and pretraded securities, perhaps three-fifths of total private sumably national saving may well fall from already capital assets. With large allocations of public funds low levels. If so, over time, capital accumulation and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

300 Federal Reserve Bulletin • May 2001 the productive capacity of the economy presumably troubling because it makes the previous year's lack of would be reduced through this channel. Eliminating discipline less likely to have been an aberration. unified surpluses by transforming social security into As for tax policy over the longer run, most econoa defined-contribution system with accounts held mists believe that it should be directed at setting rates in the private sector would likely better maintain at the levels required to meet spending commitments, national saving levels. But the nature of social secu- while doing so in a manner that minimizes distorrity would at the same time be fundamentally tions, increases efficiency, and enhances incentives changed. Alternatively, unified surpluses could be for saving, investment, and work. used to establish mandated individual retirement In recognition of the uncertainties in the economic accounts outside the social security system, also miti- and budget outlook, it is important that any long-term gating the erosion in national saving. tax plan, or spending initiative for that matter, be The task before the Administration and the Con- phased in. Conceivably, it could include provisions gress in the years ahead is likely to prove truly that, in some way, would limit surplus-reducing testing. But, of course, the choices confronting you actions if specified targets for the budget surplus or are far more benign than having to deal with deficits federal debt levels were not satisfied. Only if the "as far as the eye can see." probability were very low that prospective tax cuts or Returning to the broader fiscal picture, I continue new outlay initiatives would send the on-budget to believe, as I have testified previously, that all else accounts into deficit, would unconditional initiatives being equal, a declining level of federal debt is desir- appear prudent. able because it holds down long-term real interest The reason for caution, of course, rests on the rates, thereby lowering the cost of capital and elevat- tentativeness of our projections. What if, for examing private investment. The rapid capital deepening ple, the forces driving the surge in tax revenues in that has occurred in the U.S. economy in recent years recent years begin to dissipate or reverse in ways that is a testament to these benefits. But the sequence of we do not now foresee? Indeed, we still do not have upward revisions to the budget surplus projections a full understanding of the exceptional strength in for several years now has reshaped the choices and individual income tax receipts during the latter years opportunities before us. of the 1990s. To the extent that some of the surprise Indeed, in almost any credible baseline scenario, has been indirectly associated with the surge in asset short of a major and prolonged economic contraction, values in the 1990s, the softness in equity prices over the full benefits of debt reduction are now achieved the past year has highlighted some of the risks going well before the end of this decade—a prospect that forward. did not seem reasonable only a year or even six To be sure, unless the current economic weakness months ago. Thus, the emerging key fiscal policy reveals a less favorable relationship between tax need now is to address the implications of maintain- receipts, income, and asset prices than has been ing surpluses beyond the point at which publicly held assumed in recent projections, receipts should be debt is effectively eliminated. reasonably well maintained in the near term, as the But, though special care must be taken not to effects of earlier gains in asset values continue to feed conclude that wraps on fiscal discipline are no longer through with a lag into tax liabilities. But the longernecessary, at the same time we must avoid a situation run effects of movements in asset values are much in which we come upon the level of irreducible debt more difficult to assess, and those uncertainties would so abruptly that the only alternative to the accumula- intensify should equity prices remain significantly tion of private assets would be a sharp reduction in off their peaks. Of course, the uncertainties in the taxes or an increase in expenditures. These actions receipts outlook do seem less troubling in view of the might occur at a time when sizable economic stimu- cushion provided by the recent sizable upward revilus would be inappropriate. Should this Congress sions to the ten-year surplus projections. But the risk conclude that this is a sufficiently high probability, of adverse movements in receipts is still real, and the it is none too soon to adjust policy to fend off such probability of dropping back into deficit as a consepotential imbalances. quence of imprudent fiscal policies is not negligible. In general, for reasons I have testified to previ- In the end, the outlook for federal budget surpluses ously, if long-term fiscal stability is the criterion, it is rests fundamentally on expectations of longer-term far better, in my judgment, that the surpluses be trends in productivity, fashioned by judgments about lowered by tax reductions than by spending increases. the technologies that underlie these trends. Econo- The flurry of increases in outlays that occurred near mists have long noted that the diffusion of technology the conclusion of last fall's budget deliberations is starts slowly, accelerates, and then slows with matu- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Testimony of Federal Reserve Officials 301 rity. But knowing where we now stand in that expenditures under way during those years, few sequence is difficult—if not impossible—in real time. believed that a surplus was anywhere on the hori- Faced with these uncertainties, it is crucial that we zon. And the notion that the rapidly mounting federal develop budgetary strategies that deal with any disap- debt could be paid off would not have been taken pointments that could occur. seriously. That said, the changes in the budget outlook over But let me end on a cautionary note. With today's the past several years are truly remarkable. Little euphoria surrounding the surpluses, it is not difficult more than a decade ago, the Congress established to imagine the hard-earned fiscal restraint developed budget controls that were considered successful in recent years rapidly dissipating. We need to resist because they were instrumental in squeezing the those policies that could readily resurrect the deficits burgeoning budget deficit to tolerable dimensions. of the past and the fiscal imbalances that followed in Nevertheless, despite the sharp curtailment of defense their wake. Testimony by Laurence H. Meyer, Member, Board ence its level by adjusting the aggregate supply of of Governors of the Federal Reserve System, deposit balances held at Reserve Banks through open before the Subcommittee on Financial Institutions market operations—the purchase or sale of securities and Consumer Credit of the Committee on Financial that causes increases or decreases in such balances. Services, U.S. House of Representatives, March 13, However, in deciding on the appropriate level of 2001 balances to supply to achieve the targeted funds rate, the Open Market Desk must estimate the aggregate I welcome the opportunity to testify on behalf of the demand for such balances. Federal Reserve Board on issues related to interest on In estimating that demand, the Desk must take demand deposits and interest on balances held at account of the demand for the three types of balances Reserve Banks. The Board continues to strongly sup- held by depository institutions at the Federal port legislative proposals to authorize the payment of Reserve—required reserve balances, contractual clearinterest on demand deposits and interest on balances ing balances, and excess reserve balances. Required held by depository institutions at Reserve Banks. It reserve balances are the balances that a depository also supports obtaining increased flexibility in setting institution must hold to meet reserve requirements. reserve requirements—a proposal included in legisla- At present, the Federal Reserve requires depository tion that passed the House last year. As we have institutions to maintain reserves equal to 10 percent previously testified, unnecessary restrictions on the of their transaction deposits above certain minimum payment of interest on demand deposits and balances levels. Reserve requirements may be satisfied either held at Reserve Banks distort market prices and lead with vault cash or with required reserve balances, to economically wasteful efforts to circumvent these neither of which earn interest. restrictions. Authorization of interest on balances at Depository institutions may also commit them- Reserve Banks could also be helpful in ensuring that selves in advance to holding additional balances the Federal Reserve will continue to be able to imple- called required or contractual clearing balances. They ment monetary policy with its existing procedures, are called clearing balances because institutions tend while increased flexibility in setting reserve require- to hold them when they need a higher level of balments would allow the Federal Reserve to reduce a ances than their required reserve balances in order to regulatory burden on the financial sector to the extent clear checks or wire transfers without running into that is consistent with the effective implementation of overdrafts. These clearing balances are similar to the monetary policy. compensating balances offered by depository institu- As background, let me begin by discussing the role tions to their business customers. The clearing balof balances held at Reserve Banks in the implementa- ances earn no explicit interest, but earn implicit intertion of monetary policy. The Federal Open Market est for depository institutions in the form of credits Committee (FOMC) formulates monetary policy by that may offset the cost of using Federal Reserve setting a target for the overnight federal funds rate— services, such as check-clearing. Finally, excess the interest rate on loans between depository institu- reserve balances are funds held by depository institutions of balances held in their accounts at Reserve tions in their accounts at Reserve Banks in excess Banks. While the federal funds rate is a market of their required reserve and contractual clearing interest rate, the Federal Reserve can strongly influ- balances. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

302 Federal Reserve Bulletin • May 2001 Depository institutions must maintain their speci- volatile and could diverge markedly at times from its fied levels of both required reserve and contractual targeted level. clearing balances, not day-by-day, but on an average Moderate levels of volatility are not a concern for basis over a maintenance period that is typically two monetary policy, in part because the Federal Reserve weeks long. This averaging feature allows these two now announces the target federal funds rate, eliminattypes of balances to be helpful for the implementa- ing the possibility that fluctuations in the actual funds tion of monetary policy. The required amounts of rate in the market would give misleading signals both types of balances are known before the begin- about monetary policy. A significant increase in volaning of the maintenance period, so the Open Market tility in the federal funds rate, however, would be of Desk knows the balances it needs to supply on aver- concern because it would affect other overnight interage over the period to satisfy these needs. Moreover, est rates, raising funding risks for most large banks, the two-week averaging creates incentives for deposi- securities dealers, and other money market particitory institutions to arbitrage the funds rate from one pants. Suppliers of funds to the overnight markets, day to the next in a manner that helps keep that rate including many small banks and thrifts, would face close to the FOMC's target. For instance, if the funds greater uncertainty about the returns they would earn, rate were higher than usual on a particular day, some and market participants would incur additional costs depository institutions could choose to hold lower in managing their funding to limit their exposure to balances on that day, and their reduced demand the heightened risks. would help to damp the upward pressure on the funds As we have previously testified, the issue of potenrate. Later in the two-week period, when the funds tial volatility in the funds rate has arisen in recent rate might be lower, those institutions could choose years because of substantial declines in required to hold extra balances to make up the shortfall in reserve balances owing to the reserve-avoidance their average holdings of reserve balances. These activities of depository institutions. Depositories have actions are desirable in that they help smooth out the always attempted to reduce required reserve balances funds rate over the two-week maintenance period. to a minimum, in large part because those balances The averaging feature is only effective in stabiliz- earn no interest. For more than two decades, some ing markets, however, if the sum of required reserve commercial banks have done so by sweeping the and contractual clearing balances is sufficiently high. reservable transaction deposits of businesses into If their sum dropped to a very low level, depositories instruments that are not subject to reserve requirewould be at increased risk of overdrafting their ments. These wholesale business sweeps not only accounts at Reserve Banks because of unpredictable have avoided reserve requirements, but also have payments out of the accounts of depository institu- allowed businesses to earn interest on instruments tions late in the day. Depositories would need to hold that are effectively equivalent to demand deposits. In higher levels of excess reserves at Federal Reserve recent years, developments in information systems Banks as a precaution against such overdrafts, and have allowed depository institutions to sweep transdemand for these excesses would vary from day to action deposits of retail customers into nonreservable day and be difficult to predict. For example, on days accounts. These retail sweep programs use computerwhen payment flows are particularly heavy and ized systems to transfer consumer and some small uncertain, or when the distribution of reserves around business transaction deposits, which are subject to the banking system is substantially different from reserve requirements, into savings accounts, which normal, depositories need a higher-than-usual level are not. Largely because of such programs, required of precautionary balances to reduce the risk of over- reserve balances have dropped from about $28 billion drafts. The uncertainties about how many balances in late 1993 to around $5 billion or $6 billion today, depositories wish to hold in a given day would make and the spread of such programs probably has not yet it harder for the Federal Reserve to determine the fully run its course. appropriate daily quantity of balances to supply to the Despite the unusually low level of required reserve market to keep the federal funds rate near the target balances, no trend increase in the volatility of the level set by the FOMC. Moreover, if the marginal funds rate has been observed to date. In part, this demand for balances were for daily precautionary stability reflects the increasingly important role of purposes, there would be less arbitrage of the funds contractual clearing balances, which have risen over rate by depositories across the days of a maintenance the last decade to the point where they now exceed period. Thus, if the demand for balances were deter- the level of required reserve balances. In addition, mined largely by daily precautionary demands for improvements in information technology have eviexcess reserves, the funds rate could become more dently allowed depository institutions to become Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Testimony of Federal Reserve Officials 303 much more adept at managing their reserve positions, ized countries have eliminated reserve requirements and as a result, their need for day-to-day precaution- altogether, thereby avoiding completely the waste of ary balances have declined considerably. A number resources associated with reserve-avoidance activiof measures taken by the Federal Reserve also have ties. These countries do not have contractual clearing helped to foster stability in the funds market. These balance programs but have employed alternative proinclude improvements in the timeliness of account cedures for implementing monetary policy, such as information provided to depository institutions; more central bank lending at an interest rate that acts like a frequent open market operations geared increasingly ceiling on overnight market interest rates. Some cento daily payment needs rather than two-week-average tral banks also establish a floor for overnight rates by requirements; a shift to lagged reserve requirements, paying interest on the non-reserve deposits they hold. which give depositories and the Federal Reserve The Federal Reserve could establish such a floor for advance information on the demand for reserves; and overnight rates if it were authorized to pay interest on improved procedures for estimating reserve demand. excess reserves; a depository would not likely lend To prevent the sum of required reserve and con- balances to another depository at a lower interest rate tractual clearing balances from falling even lower than it could earn by keeping the excess funds in its and to diminish the incentives for depositories to account at the Federal Reserve. Hence, the authorizaengage in wasteful reserve-avoidance activities, the tion to pay interest on excess reserve balances would Federal Reserve has sought authorization to pay inter- be a potentially useful addition to the monetary toolest on required reserve balances and to pay explicit kit of the Federal Reserve, although such interest interest on contractual clearing balances. With inter- payments are not needed for monetary policy purest on required reserve balances, some of the retail poses at the present time. sweep programs that have been implemented in At present, the Federal Reserve is constrained in its recent years might be unwound, and new programs flexibility to adjust reserve requirements. By law, the would be less likely to be implemented, thereby ratio of required reserves on transaction deposits helping to boost the level of such balances. Eliminat- above a certain level must be set between 8 percent ing such wasteful reserve-avoidance activities would and 14 percent. Authorization of increased flexibility also tend to improve the efficiency of the financial in setting reserve requirements would allow the Fedsector. eral Reserve to consider exploring at some point the Payment of explicit interest on contractual clearing possibility of reducing reserve requirements below balances could result in an increase in the level of the minimum levels currently allowed by law, prothese balances; some depositories are currently con- vided we are also granted the authority to pay interest strained in the amount of such credit-earning bal- on contractual clearing balances to ensure a stable ances they can hold because of their limited use and predictable demand for the remaining deposit of Federal Reserve services. Moreover, payment of balances at the Federal Reserve, an essential pillar for explicit interest would help to maintain the level of the effective implementation of monetary policy. If clearing balances at a time of rising interest rates. At the Federal Reserve were granted these additional present, some depositories pay for all their Federal authorities, before making modifications in our proce- Reserve services with credits earned on clearing dures, we would carefully study the new range of balances; these institutions would not be able to use possible strategies for implementing monetary policy their additional credits if interest rates were to rise. If in the most efficient possible way. enough institutions were in this position, contractual The payment of interest on required reserve balclearing balances might drop below levels needed to ances would reduce the revenues received by the be helpful for the implementation of monetary policy. Treasury from the Federal Reserve. The extent of With explicit interest, the level of balances on which the revenue loss, however, has fallen in recent years interest could be effectively earned would not be as banks have increasingly implemented reservelimited to the level of charges incurred for the use of avoidance techniques. Paying interest on contractual Federal Reserve services. Therefore, these deposi- clearing balances would primarily involve a switch to tories would not be impelled to reduce their balances explicit interest from the implicit interest currently when interest rates rise. paid in the form of credits and therefore would have The substantial decline in balances held at Reserve essentially no net cost to the Treasury. In the past, Banks has not produced any trend increase in the bills approved by the Committee, such as H.R. 4209 volatility of the funds rate in recent years. Thus, the from the last Congress, have provided for a general question arises as to the continued need for reserve authorization for the payment of interest on any balrequirements at current levels. Some other industrial- ances held by depository institutions at Reserve Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

304 Federal Reserve Bulletin • May 2001 Banks. This would be a desirable outcome. However, systems of merging banks. Such expenses waste the if budgetary issues continue to inhibit the passage economy's resources and would be unnecessary if of legislation to authorize payment of interest on interest were allowed to be paid on both demand required reserve balances, the Federal Reserve would deposits and the reserve balances that must be held support a separate authorization of the payment of against them. interest on contractual clearing balances, which The prohibition of interest on demand deposits also would have essentially no budgetary cost. The pay- distorts the pricing of other bank products. Because ment of interest on excess reserves could also be banks cannot attract demand deposits through the authorized without immediate effect on the budget payment of explicit interest, they often try to attract because the Federal Reserve would use that authority these deposits, aside from compensating balances, only in circumstances that do not seem likely to arise through the provision of services at little or no cost. in the years immediately ahead. When services are offered below cost, they tend to be Another legislative proposal that would improve overused to the extent that the benefits of consuming the long-run efficiency of our financial sector is elimi- them are less than the costs to society of producing nation of the prohibition of interest on demand depos- them. its. This prohibition was enacted during the Great Previous legislative proposals have included a Depression, a time when the Congress was concerned transition period before the direct payment of interthat large money center banks might have earlier bid est on demand deposits would be effective. During deposits away from country banks to make loans to the transition, a reservable twenty-four-transaction stock market speculators, depriving rural areas of money market deposit account (MMDA) would financing. It is unclear whether the rationale for this be authorized. Banks would be able to sweep balprohibition was ever valid, and it is certainly no ances from demand deposits into these twenty-fourlonger applicable today. Funds flow freely around the transaction MMDAs each night, pay interest on them, country, and among banks of all sizes, to find the and then sweep them back into demand deposits the most profitable lending opportunities, using a wide next day. This type of account in effect would permit variety of market mechanisms, including the federal banks to pay interest on demand deposits, but perfunds market. Moreover, Congress authorized inter- haps more selectively than with direct interest payest payments on household checking accounts with ments. The twenty-four-transaction MMDA, which the approval of nationwide NOW accounts in the would be useful only during the transition period early 1980s. The absence of interest on demand before direct interest payments were allowed, could deposits, which are held predominantly by busi- be implemented at lower cost by banks already havnesses, is no bar to the movement of funds from ing sweep programs. Because other banks would face depositories with surpluses—whatever their size or a competitive disadvantage, while some businesses location—to the markets where the funding can be would not benefit from this MMDA, and extra costs profitably employed. In fact, small firms in rural would be incurred in operating new sweep programs, areas are able to bypass their local banks and invest a long delay before interest could be paid directly on in money market mutual funds with transaction capa- demand deposits would be very undesirable. A short bilities. Indeed, smaller banks complain that they are transition period of a year or so would not be as unable to compete for the deposits of businesses objectionable, given that many banks may take some precisely because of their inability to offer interest on time in any case to develop competitive interestdemand deposits. bearing demand deposit products. The prohibition of interest on demand deposits Small businesses that currently earn no interest on distorts the pricing of transaction deposits and associ- their checking accounts would see important benefits ated bank services. In order to compete for the liquid from interest on demand deposits. For banks, interest assets of businesses, banks set up complicated proce- on demand deposits would increase costs, at least in dures to pay implicit interest on compensating bal- the short run. Interest on required reserve balances, ance accounts. Banks also spend resources—and or possibly a lower burden associated with reduced charge fees—for sweeping the excess demand depos- reserve requirements, would help to offset the rise in its of businesses into money market investments on a costs, however. And over time, these measures should nightly basis. To be sure, the progress of computer help the banking sector attract liquid funds in comtechnology has reduced the cost of such systems over petition with nonbank institutions and direct market time. However, the expenses are not trivial, particu- investments by businesses. Small banks in particular larly when substantial efforts are needed to upgrade should be able to bid for business demand deposits such automation systems or to integrate the diverse on a more level playing field vis-a-vis both nonbank Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Testimony of Federal Reserve Officials 305 competition and large banks using sweep programs held by depository institutions at Reserve Banks, as for such deposits. Moreover, large and small banks well as increased flexibility in the setting of reserve will be strengthened by the elimination of unneces- requirements. We believe these steps would improve sary costs associated with sweep programs and other the efficiency of our financial sector, make a wider reserve-avoidance procedures. variety of interest-bearing accounts available to more In summary, the Federal Reserve Board strongly bank customers, and better ensure the efficient consupports legislative proposals to authorize the pay- duct of monetary policy in the future. • ment of interest on demand deposits and on balances Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

306 Announcements FEDERAL OPEN MARKET COMMITTEE ACTIONS The Committee on the Global Financial System AND CHANGES IN DISCOUNT RATE (CGFS) will host the conference at the BIS in cooperation with the Bank of Japan, the Board of Gover- The Federal Open Market Committee at its meeting nors of the Federal Reserve System, and the Euroon March 20, 2001, decided to lower its target for the pean Central Bank. The conference will focus on risk federal funds rate by 50 basis points to 5 percent. In a measurement and systemic risks from a central bank related action, the Board of Governors approved a perspective. Conference organizers seek to bring 50 basis point reduction in the discount rate to together central bankers, market practitioners, and 4'/ percent. academics. 2 Persistent pressures on profit margins are restrain- Those interested in presenting research papers ing investment spending and, through declines in should submit completed papers or extended equity wealth, consumption. The associated backup abstracts to the BIS by the end of August 2001. in inventories has induced a rapid response in manu- Details can be obtained in the conference announcefacturing output and, with spending having firmed a ment and call for papers on the BIS web site: http:// bit since last year, inventory adjustment appears to be www.bis.org/cgfs/cgfscfp2001.htm. well under way. The CGFS is a central bank forum established by Although current developments do not appear to the governors of the Group of Ten central banks to have materially diminished the prospects for long- monitor and examine issues related to financial marterm growth in productivity, excess productive capac- kets and systems and to make appropriate policy ity has emerged recently. The possibility that this recommendations. excess could continue for some time and the potential for weakness in global economic conditions suggest substantial risks that demand and production could CONSUMER ADVISORY COUNCIL MEETING remain soft. In these circumstances, when the economic situation could be evolving rapidly, the Fed- The Federal Reserve Board announced on March 8, eral Reserve will need to monitor developments 2001, that the Consumer Advisory Council would closely. hold its next meeting on Thursday, March 22. The Committee continues to believe that against The Council's function is to advise the Board on the background of its long-run goals of price stability the exercise of its responsibilities under the Conand sustainable economic growth and of the informasumer Credit Protection Act and on other matters on tion currently available, the risks are weighted mainly which the Board seeks its advice. toward conditions that may generate economic weakness in the foreseeable future. In taking the discount rate action, the Federal Reserve Board approved requests submitted by the REVISIONS TO STAFF COMMENTARY ON Boards of Directors of all twelve Reserve Banks. REGULATION E The Federal Reserve Board on March 13, 2001, published revisions to the Regulation E (Electronic Fund CENTRAL BANK RESEARCH CONFERENCE ON Transfers) Official Staff Commentary, which applies RISK MEASUREMENT and interprets the requirements of the regulation. The effective date is March 15, 2001; however, to The Joint Central Bank Research Conference on Risk allow time for any necessary operational changes, the Measurement and Systemic Risk will be held on mandatory compliance date is January 1, 2002. March 7-8, 2002, at the Bank for International Settle- The revisions provide guidance on electronic check ments (BIS) in Basel, Switzerland. The conference is conversion transactions when a consumer authorizes the third in a series. the use of a check to capture information for initiat- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

307 ing an electronic debit from the consumer's account. The new CRA sunshine provisions require nongov- Guidance is also provided on electronic authoriza- ernmental entities or persons (NGEPs) and insured tions permitting recurring debits from a consumer's depository institutions or affiliates that are parties to account and on other issues. The commentary is certain written agreements that are in fulfillment of intended to help financial institutions comply with the Community Reinvestment Act (CRA) to (1) make Regulation E when they offer electronic fund transfer the agreement available to the public and the relevant services to consumers. bank or thrift supervisory agency and (2) file an annual report about the agreement with the relevant supervisory agency. GUIDANCE ON PUBLIC DISCLOSURE OF For an agreement to be covered by the rule, an MARKET RISK AND CREDIT QUALITY NGEP that is a party to the agreement must have had The Federal Reserve Board on March 23, 2001, a "CRA communication," as defined in the rule, issued supervisory guidance that encourages large before the agreement, and the agreement must meet banking organizations to enhance their public disclo- certain dollar thresholds set forth in the rule. sures by using the recommendations of the Working A compliance chart, which was published in the Group on Public Disclosure. Federal Register with the final rule, highlights the This private-sector working group recommended rule's disclosure and annual reporting requirements. several specific practices that would enhance disclo- The chart notes that the rule's disclosure requiresure by large banking organizations. These include ments apply only to covered agreements entered quarterly disclosure of some market-risk information into after November 12, 1999, and the rule's annual that is now disclosed annually and enhanced quar- reporting requirements apply only to covered agreeterly disclosures about credit concentrations and ments entered into on or after May 12, 2000. The credit quality of portfolios. chart and the final rule also describe the proce- The Federal Reserve believes that the types of dures for filing agreements that include confidential disclosures recommended by the working group information. can enhance the transparency of well-managed If a covered agreement, list of covered agreements, institutions. or annual report must be filed with the Federal The Federal Reserve's supervisory guidance, Reserve, the documents should be sent to the followincluding the specific disclosure recommendations ing individual: of the working group, is detailed in Supervision and Regulation Letter (SR Letter) 01-06, Enhancements Ms. Jennifer J. Johnson to Public Disclosure. SR Letters can be viewed Secretary of the Board Attention: CRA Sunshine Agreements on the Board's web site (www.federalreserve.gov/ and Annual Reports boarddocs/srletters). Board of Governors of the Federal Reserve System 20th Street and Constitution Avenue, N.W. Washington, DC 20551 PROCEDURES FOR FILING DOCUMENTS UNDER CRA SUNSHINE REQUIREMENTS As a general matter, a covered agreement, list of The Federal Reserve Board on March 22, 2001, covered agreements, or annual report concerning a announced procedures for the filing of documents covered agreement must be filed with the Federal required by the CRA Sunshine Requirements of the Reserve if Federal Deposit Insurance Act, which were enacted by the Gramm-Leach-Bliley Act of 1999. • The parties to the agreement include a state On December 21, 2000, the Board of Governors of member bank, a subsidiary of a state member bank, a the Federal Reserve System, the Federal Deposit bank holding company, or a subsidiary of a bank Insurance Corporation, the Office of the Comptroller holding company (other than an insured depository of the Currency, and the Office of Thrift Supervision institution or subsidiary thereof); or approved final regulations implementing the CRA • A state member bank, or a subsidiary or CRA Sunshine Requirements. The joint final rule was pub- affiliate of a state member bank, provides funds or lished in the Federal Register on January 10, 2001, resources under the agreement. and took effect on April 1, 2001. The Federal Reserve's implementing rule is Regulation G, Dis- For more information about the final rule, please closure and Reporting of CRA-Related Agreements contact Kathleen Ryan, Senior Attorney (202-452- (12CFR207). 3667), of the Board's Division of Consumer and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

308 Federal Reserve Bulletin • May 2001 Community Affairs; or Kieran Fallon, Senior Coun- directly from the loan portfolio or transferred to a sel (202-452-5270), or Andrew Miller, Senior Attor- held-for-sale account. ney (202-452-3428), of the Board's Legal Division. The Interagency Guidance on Certain Loans Held For more information about submitting agree- for Sale applies when (1) an institution decides to sell ments, lists, and annual reports to the Federal loans that were not originated or otherwise acquired Reserve, please contact Cathy Gates, Team Leader, with the intent to sell and (2) the fair value of those or Kathleen Conley, Senior Review Examiner loans has declined for any reason other than a change (202-452-3946). in the general market level of interest or foreign exchange rates. Selling loans has become an increasingly important portfolio risk-management tool for institutions INTERIM RULE ON UNIFORM STANDARDS FOR seeking to manage concentrations, change risk pro- ELECTRONIC DELIVERY OF DISCLOSURES TO files, improve returns, and generate liquidity. CONSUMERS Examiners, however, have noted differences among institutions in the accounting for and reporting of The Federal Reserve Board on March 29, 2001, pubthese transactions. Specifically, accounting inconsislished interim final rules to establish uniform stantencies relate to (1) how and where initial and subsedards for the electronic delivery of federally manquent fair value adjustments are recorded and (2) the dated disclosures under five consumer protection reporting of past-due and non-accrual loans that have regulations: B (Equal Credit Opportunity), E (Elecbeen designated as held for sale. tronic Fund Transfers), M (Consumer Leasing), The interagency guidance clarifies existing instruc- Z (Truth in Lending), and DD (Truth in Savings). tions and promotes accounting transparency consis- Under the rules, financial institutions, creditors, tent with generally accepted accounting principles. lessors, and others may deliver disclosures electroni- The guidance reminds institutions to appropriately cally if they obtain consumer consent in accordance report reductions in the value of loans transferred to with the requirements of the Electronic Signatures a held-for-sale account through a write-down of the in Global and National Commerce Act (the "E-Sign recorded investment to fair value upon transfer. At Act"), enacted in June 2000. The Board's interim the same time, there should be a charge to the institurules provide guidance on the timing and delivery of tion's allowance for loan and lease losses. Instituelectronic disclosures, consistent with proposed rules tions are also reminded that loans transferred to a issued by the Board in August 1999, to ensure that held-for-sale account should continue to be accorded consumers have adequate opportunity to access and the same past-due and non-accrual treatment as other retain the information. loans. The rules are being published as interim rules to The Securities and Exchange Commission said in a allow commenters to present new information or letter to the agencies that it had reviewed the interviews not previously considered in the context of the agency guidance and determined that the guidance Board's 1999 proposals. In addition, comment is will assist in promoting consistent accounting and solicited on the need for the Board to interpret the reporting treatment for loan sales and transfers of E-Sign Act's provisions requiring consumer consent loans to held-for-sale accounts that are within the to receive electronic disclosures and other provisions. scope of the agencies' guidance. Comment is also solicited on any further statutory or regulatory changes that might be needed to facilitate on-line delivery of financial services to consumers. Comment is requested by June 1, 2001. FEDERAL BANKING AGENCIES ALLOW PRIVACY NOTICES UNDER EXISTING FAIR CREDIT REPORTING ACT INTERAGENCY GUIDANCE ON APPROPRIATE ACCOUNTING AND REPORTING FOR LOANS Federal banking agencies announced on March 14, HELD FOR SALE 2001, that any final Fair Credit Reporting Act (FRCA) rule will not require depository institutions The federal financial institution regulatory agencies to revise Gramm-Leach-Bliley (GLB) Act privacy on March 27, 2001, issued guidance to institutions notices prepared in accordance with existing FCRA and examiners about the appropriate accounting and law and delivered to consumers before January reporting treatment for certain loans that are sold 2002. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 309 The agencies will provide guidance on any final Home Is on the Line: What You Should Know about FCRA rule concerning the effect that new require- Home Equity Lines of Credit. ments imposed in the rule will have on notices sent Regulation Z, which implements the Truth in after January 1, 2002. Lending Act, requires creditors to provide the bro- The agencies indicated in a Federal Register notice chure, or a suitable substitute, to consumers when an that institutions should not delay delivering their application form is provided for a home equity line of privacy notices in anticipation of a final FCRA rule. credit. The Office of Thrift Supervision, the Office of the Creditors may use the earlier version of the bro- Comptroller of the Currency, the Board of Governors chure until existing supplies are exhausted. of the Federal Reserve System, and the Federal Single as well as multiple copies of the revised Deposit Insurance Corporation jointly issued the brochure are available from Publications Services, notice. Mail Stop 127, Board of Governors of the Federal The agencies believe that financial institution cus- Reserve System, Washington, DC 20551 (202-452tomers will benefit by receiving GLB Act privacy 3245). The first 100 copies are free of charge. The notices that accurately describe their institution's in- brochure is also available on the Board's public web formation practices before the mandatory GLB Act site: http://www.federalreserve.gov/pubs/HomeLine/. privacy compliance date, July 1, 2001. In the absence of a final FCRA rule, financial institutions providing GLB Act privacy notices should comply with the ENFORCEMENT ACTIONS FCRA statute when preparing the FCRA portion of their privacy notices. The Federal Reserve Board on March 29, 2001, announced the issuance of a consent order of assessment of civil money penalty against First Community AGENCIES EXTEND EFFECTIVE DATE ON BANK Bank, Conway, Arkansas, a state member bank. First INSURANCE RULES Community Bank, without admitting to any allegations, consented to the issuance of the order in con- The federal banking regulatory agencies on nection with its alleged violations of the Board's March 14, 2001, approved a joint rule that extends regulations implementing the National Flood Insurthe effective date of consumer protection rules for the ance Act. The order requires First Community Bank sale of insurance products by depository institutions to pay a civil money penalty of $2,000. on their premises, or on their behalf. The new effective date will be October 1, 2001, rather than the The Federal Reserve Board on March 26, 2001, original effective date of April 1, 2001. No other announced that a public administrative hearing would provisions of the rules have changed. commence on April 2, 2001, in connection with The final rules implement section 305 of the an enforcement action against Oren L. Benton, the Gramm-Leach-Bliley Act and were jointly published former sole shareholder and a director of The Proon December 4, 2000, by the Federal Deposit Insurfessional Bank, a former state member bank, and ance Corporation, the Board of Governors of the Edward D. Scott, a former executive vice president Federal Reserve System, the Office of the Compand director of the bank. troller of the Currency, and the Office of Thrift The hearing was scheduled to be held before Supervision. an administrative law judge to determine whether After issuing the final rules, the banking agencies Messrs. Benton and Scott should be permanently found that a significant number of institutions rebarred from the banking industry and whether the quired additional time to fully implement the require- Board should assess a fine of $1.25 million against ments of the regulation by the April 1 effective date. Mr. Benton and a fine of $75,000 against Mr. Scott. The extension will allow more time to change sys- The notice alleges that Messrs. Benton and Scott tems, alter forms, gain state regulatory approvals, and violated laws and regulations, engaged in unsafe or train personnel. unsound banking practices, and breached their fiduciary duty to the bank when they caused the bank to REVISED BROCHURE ON HOME EQUITY LINES violate section 23A of the Federal Reserve Act and the Board's Regulation O. OF CREDIT The Federal Reserve Board on March 22, 2001, The Federal Reserve Board on March 16, 2001, announced that it has revised its brochure When Your announced the execution of a written agreement by Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

310 Federal Reserve Bulletin • May 2001 and between USABancShares.com, Inc., Philadel- order dismissing an enforcement action brought phia, Pennsylvania, and the Federal Reserve Bank of against Guillaume Henri Andre Fonkenell, a former Philadelphia. institution-affiliated party of Bankers Trust Company, New York, New York. • The Federal Reserve Board announced on March 14, 2001, the issuance of a final decision and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

311 Minutes of the Meeting of the Federal Open Market Committee Held on January 30-31, 2001 A meeting of the Federal Open Market Committee Mr. Simpson, Senior Adviser, Division of Research was held in the offices of the Board of Governors of and Statistics, Board of Governors the Federal Reserve System in Washington, D.C., Mr. Madigan, Associate Director, Division of beginning on Tuesday, January 30, 2001, at 9:00 a.m. Monetary Affairs, Board of Governors and continuing on Wednesday, January 31, 2001, at 9:00 a.m. Messrs. Oliner, Struckmeyer, and Whitesell, Assistant Directors, Divisions of Research and Statistics, Present: Research and Statistics, and Monetary Affairs Mr. Greenspan, Chairman respectively, Board of Governors Mr. McDonough, Vice Chairman Mr. Ferguson Messrs. Morton,1 Rosine,1 and Sack,1 Senior Mr. Gramlich Economists, Divisions of International Finance, Mr. Hoenig Research and Statistics, and Monetary Affairs Mr. Kelley respectively, Board of Governors Mr. Meyer Ms. Minehan Mr. Reifschneider,3 Section Chief, Division of Mr. Moskow Research and Statistics, Board of Governors Mr. Poole Ms. Garrett,3 Economist, Division of Monetary Messrs. Jordan, McTeer, Santomero, and Stern, Affairs, Board of Governors Alternate Members of the Federal Open Market Committee Ms. Low, Open Market Secretariat Assistant, Division of Monetary Affairs, Board of Messrs. Broaddus, Guynn, and Parry, Presidents of Governors the Federal Reserve Banks of Richmond, Atlanta, and San Francisco respectively Mr. Lang, Executive Vice President, Federal Reserve Bank of Philadelphia Mr. Kohn, Secretary and Economist Mr. Bernard, Deputy Secretary Messrs. Beebe, Eisenbeis, Goodfriend, Kos, Ms. Fox, Assistant Secretary Ms. Krieger, Messrs. Rosenblum, and Mr. Gillum, Assistant Secretary Sniderman, Senior Vice Presidents, Federal Mr. Mattingly, General Counsel Reserve Banks of San Francisco, Atlanta, Mr. Baxter, Deputy General Counsel Richmond, New York, New York, Dallas, Ms. Johnson, Economist and Cleveland respectively Mr. Stockton, Economist Mr. Weber, Vice President, Federal Reserve Bank of Ms. Cumming, Messrs. Fuhrer, Hakkio, Howard, Minneapolis Hunter, Lindsey, Rasche, Reinhart, and Slifman, Associate Economists In the agenda for this meeting, it was reported that advices of the election of the following members and Mr. Fisher, Manager, System Open Market Account alternate members of the Federal Open Market Com- Mr. Winn,1 Assistant to the Board, Office of Board mittee for the period commencing January 1, 2001, Members, Board of Governors and ending December 31, 2001, had been received Ms. Johnson,2 Secretary of the Board, Office of the and that these individuals had executed their oaths of Secretary, Board of Governors office. 1. Attended Tuesday session only. 2. Attended portion of meeting relating to a staff study of the Federal Reserve asset portfolio. 3. Attended Wednesday session only. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

312 Federal Reserve Bulletin • May 2001 The elected members and alternate members were to the board of directors of the Federal Reserve Bank of as follows: New York. William J. McDonough, President of the Federal Reserve By unanimous vote, the minutes of the meetings of Bank of New York, with Jamie B. Stewart, Jr., the Federal Open Market Committee held on Decem- First Vice President of the Federal Reserve Bank ber 19, 2000, and January 3, 2001, were approved. of New York, as alternate The next item on the agenda encompassed issues Cathy E. Minehan, President of the Federal Reserve relating in part to the discount window and other Bank of Boston, with Anthony M. Santomero, matters that are within the legal purview of the Board President of the Federal Reserve Bank of of Governors. Accordingly, a Board meeting was Philadelphia, as alternate formally convened and this item was considered in a Michael H. Moskow, President of the Federal Reserve joint Board-Federal Open Market Committee ses- Bank of Chicago, with Jerry L. Jordan, President sion. The Board members voted unanimously at the of the Federal Reserve Bank of Cleveland, outset to close the Board meeting. as alternate At its meeting in March 2000, the Committee asked the staff to undertake a broad study of alterna- William Poole, President of the Federal Reserve Bank of St. Louis, with Robert D. McTeer, Jr., President tive approaches to the management of the System of the Federal Reserve Bank of Dallas, as alternate asset portfolio in the current and prospective environment of large budget surpluses and rapid associated Thomas M. Hoenig, President of the Federal Reserve Bank declines in the amount of Treasury debt outstanding. of Kansas City, with Gary H. Stern, President of the Such paydowns were having favorable effects on the Federal Reserve Bank of Minneapolis, as alternate macroeconomy and would not impair the Commit- By unanimous vote, the following officers of tee's ability to pursue its overall economic objecthe Federal Open Market Committee were elected to tives. But the FOMC's historical reliance on purserve until the election of their successors at the first chases and sales of Treasury securities to implement regularly scheduled meeting of the Committee after monetary policy would be difficult to maintain if December 31, 2001, with the understanding that in steep paydowns of debt were, as seemed likely, to the event of the discontinuance of their official con- continue. To prepare for such a contingency, the nection with the Board of Governors or with a Fed- Committee needed to identify and explore alternative eral Reserve Bank, they would cease to have any instruments for the conduct of monetary policy. official connection with the Federal Open Market In their discussion at this meeting, the members Committee: agreed that continuing paydowns of Treasury debt outstanding could create complications for the imple- Alan Greenspan Chairman mentation of monetary policy well before the full William J. McDonough Vice Chairman repayment of marketable federal debt. In particular, Donald L. Kohn Secretary and Economist the Treasury market could be expected to become Normand R.V. Bernard Deputy Secretary less liquid over time, making it more difficult for the Lynn S. Fox and Gary P. Gillum Assistant Secretaries Federal Reserve to accommodate the trend growth J. Virgil Mattingly, Jr. General Counsel of currency through outright purchases of Treasuries Thomas C. Baxter, Jr. Deputy General Counsel without unduly affecting market prices. Reduced Karen H. Johnson and activity in the Treasury repurchase agreement (RP) David J. Stockton Economists market could complicate the use of such obligations Christine M. Cumming, Jeffrey C. Fuhrer, Craig S. Hakkio, to respond to seasonal and unexpected variations in William C. Hunter, David H. Howard, David E. the aggregate supply of reserves. Lindsey, Robert H. Rasche, Vincent R. Reinhart, In reviewing the possibilities, the members noted and Lawrence Slifman, Associate Economists that relative to investments in Treasury securities, all of the options could entail significant drawbacks, By unanimous vote, Peter R. Fisher was selected to including increases in credit risk, reductions in liquidserve at the pleasure of the Committee as Manager, ity, and potentially distorting effects on relative prices System Open Market Account, on the understanding in financial markets. In light of these potential issues, that his selection was subject to being satisfactory to the Committee agreed that it should proceed cauthe Federal Reserve Bank of New York. tiously and maintain the current emphasis on Treasury securities in the SOMA portfolio, especially the Secretary's note: Advice subsequently was received that portion of the portfolio held outright, for as long as the selection of Mr. Fisher as Manager was satisfactory Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 313 practicable. In that regard, some members suggested depository institutions. Some members expressed that the Committee look carefully at whether it could reservations about this option, noting that such a loosen the limits it currently imposes on holdings of program would have to be carefully structured in individual Treasury issues without causing undue order to avoid situations in which some institutions market distortions. Some felt it would be desirable to might become heavily dependent on such credit or consider buying and holding Ginnie Mae mortgage- engage in excessive risk taking. But extremely heavy backed securities, which are guaranteed by the full reliance on temporary transactions could itself influfaith and credit of the United States. A few members ence credit flows, suggesting that approaches to staysuggested that consideration might be given to the ing longer with Treasury securities or adding new possibility of continuing to rely on Treasury securi- assets not currently allowed by law to the permanent ties, even as the publicly held debt is paid down, by portfolio would also need to be studied. acquiring such securities through special arrange- The use of private securities for temporary transacments with the Treasury. tions or permanent portfolio holdings had a number In the near term, the members agreed that it would of risk-management and accounting implications that be useful to extend for at least another year the would need to be examined carefully. Another aspect temporary authority, in effect since late August 1999, that required further examination was the approach of the Manager to supplement repurchase agreements to diversification of the System portfolio in order in Treasuries and direct agency debt with repurchase to minimize any effects on credit conditions. In this transactions in mortgage-backed securities guaran- context, the members compared the merits of an teed by a federal agency or a government-sponsored incremental approach in which classes of private enterprise. They also asked the staff to investigate the securities were gradually added to the RP pool or the possibility of authorizing the Desk to engage in RP permanent portfolio, with the safest and most liquid operations using assets that could be purchased under being used first, to an alternative approach in which existing legal authority but were not currently autho- very broad diversification was sought quickly through rized by the Committee—specifically, certain debt investment in diverse pools of assets. obligations of U.S. state and local governments and In view of the importance of these issues and their of foreign governments. Making a wider range of complexity, the Committee determined to explore assets available for RP operations would reduce the various means to seek the input of the public and the potential for distortions to the pricing of instruments Congress to develop and refine alternatives and to collateralizing RPs, but would entail resolving a num- investigate all the associated policy issues. ber of issues. The Congress and market participants would need to be consulted before the Committee By unanimous vote, the Committee approved decided to undertake any such operations. amendments to paragraphs 1(b), 1(c), and 3 of the From a somewhat longer-term perspective, Com- Authorization for Domestic Open Market Operations mittee members identified several alternative issues to permit temporary operations with a maturity limit for further study. One involved the appropriate degree of 65 business days. of reliance on outright purchases of a broader array of assets relative to greater use of temporary short-term AUTHORIZATION FOR DOMESTIC transactions undertaken through intermediaries. A OPEN MARKET OPERATIONS number of members saw advantages to the greater (AMENDED JANUARY 30, 2001) reliance on the latter—RPs with security dealers and discount window loans to depository institutions— 1. The Federal Open Market Committee authorizes and especially when they involved a wide range of underdirects the Federal Reserve Bank of New York, to the lying assets. It was noted that such instruments would extent necessary to carry out the most recent domestic afford the Federal Reserve considerable protection policy directive adopted at a meeting of the Committee: against credit risks, could be structured to provide (a) To buy or sell U.S. Government securities, including securities of the Federal Financing Bank, and securisubstantial liquidity to respond to unanticipated ties that are direct obligations of, or fully guaranteed as to changes in the supply or demand for reserves, and, principal and interest by, any agency of the United States in relative to outright purchases of the underlying collat- the open market, from or to securities dealers and foreign eral, could help to mitigate potential distortions to and international accounts maintained at the Federal asset pricing and credit allocation. Many members Reserve Bank of New York, on a cash, regular, or deferred indicated that a potentially attractive approach to delivery basis, for the System Open Market Account at market prices, and, for such Account, to exchange maturexpanding the role of the discount window might ing U.S. Government and Federal agency securities with involve auctioning such credit to financially sound the Treasury or the individual agencies or to allow them to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

314 Federal Reserve Bulletin • May 2001 mature without replacement; provided that the aggregate paragraph 1(b), repurchase agreements in U.S. Government amount of U.S. Government and Federal agency securities and agency securities, and to arrange corresponding sale held in such Account (including forward commitments) and repurchase agreements between its own account and at the close of business on the day of a meeting of the foreign and international accounts maintained at the Bank. Committee at which action is taken with respect to a Transactions undertaken with such accounts under the prodomestic policy directive shall not be increased or visions of this paragraph may provide for a service fee decreased by more than $12.0 billion during the period when appropriate. commencing with the opening of business on the day 4. In the execution of the Committee's decision regardfollowing such meeting and ending with the close of busi- ing policy during any intermeeting period, the Committee ness on the day of the next such meeting; authorizes and directs the Federal Reserve Bank of New (b) To buy U.S. Government securities and obliga- York, upon the instruction of the Chairman of the Committions that are direct obligations of, or fully guaranteed as to tee, to adjust somewhat in exceptional circumstances the principal and interest by, any agency of the United States, degree of pressure on reserve positions and hence the from dealers for the account of the Federal Reserve Bank intended federal funds rate. Any such adjustment shall be of New York under agreements for repurchase of such made in the context of the Committee's discussion and securities or obligations in 65 business days or less, at rates decision at its most recent meeting and the Committee's that, unless otherwise expressly authorized by the Com- long-run objectives for price stability and sustainable ecomittee, shall be determined by competitive bidding, after nomic growth, and shall be based on economic, financial, applying reasonable limitations on the volume of agree- and monetary developments during the intermeeting ments with individual dealers; provided that in the event period. Consistent with Committee practice, the Chairman, Government securities or agency issues covered by any if feasible, will consult with the Committee before making such agreement are not repurchased by the dealer pursuant any adjustment. to the agreement or a renewal thereof, they shall be sold in the market or transferred to the System Open Market By unanimous vote, the Committee approved until Account; the Committee's first scheduled meeting in 2002 an (c) To sell U.S. Government securities and obligaextension of the temporary suspension of parations that are direct obligations of, or fully guaranteed as to graphs 3 to 6 of the Guidelines for the Conduct of principal and interest by, any agency of the United States to dealers for System Open Market Account under agree- System Operations in Federal Agency Issues. For the ments for the resale by dealers of such securities or obliga- year ahead, the Guidelines therefore continued to tions in 65 business days or less, at rates that, unless read as follows: otherwise expressly authorized by the Committee, shall be determined by competitive bidding, after applying reasonable limitations on the volume of agreements with individual dealers. GUIDELINES FOR THE CONDUCT OF 2. In order to ensure the effective conduct of open SYSTEM OPEN MARKET OPERATIONS IN market operations, the Federal Open Market Committee FEDERAL AGENCY ISSUES authorizes the Federal Reserve Bank of New York to lend (REAFFIRMED JANUARY 30, 2001) on an overnight basis U.S. Government securities held in the System Open Market Account to dealers at rates that 1. System open market operations in Federal agency shall be determined by competitive bidding but that in no issues are an integral part of total System open market event shall be less than 1.0 percent per annum of the operations designed to influence bank reserves, money market value of the securities lent. The Federal Reserve market conditions, and monetary aggregates. Bank of New York shall apply reasonable limitations on 2. System open market operations in Federal agency the total amount of a specific issue that may be auctioned, issues are not designed to support individual sectors of and on the amount of securities that each dealer may the market or to channel funds into issues of particular borrow. The Federal Reserve Bank of New York may agencies. reject bids which could facilitate a dealer's ability to control a single issue as determined solely by the Federal Reserve Bank of New York. By unanimous vote, the Foreign Currency Authori- 3. In order to ensure the effective conduct of open zation was reaffirmed in the form shown below. market operations, while assisting in the provision of shortterm investments for foreign and international accounts maintained at the Federal Reserve Bank of New York, the Federal Open Market Committee authorizes and directs the AUTHORIZATION FOR FOREIGN CURRENCY Federal Reserve Bank of New York (a) for System Open OPERATIONS (REAFFIRMED JANUARY 30, 2001) Market Account, to sell U.S. Government securities to such foreign and international accounts on the bases set forth in 1. The Federal Open Market Committee authorizes and paragraph 1(a) under agreements providing for the resale directs the Federal Reserve Bank of New York, for System by such accounts of those securities in 65 business days or Open Market Account, to the extent necessary to carry out less on terms comparable to those available on such trans- the Committee's foreign currency directive and express actions in the market; and (b) for New York Bank account, authorizations by the Committee pursuant thereto, and in when appropriate, to undertake with dealers, subject to the conformity with such procedural instructions as the Comconditions imposed on purchases and sales of securities in mittee may issue from time to time: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 315 A. To purchase and sell the following foreign curren- 4. It shall be the normal practice to arrange with foreign cies in the form of cable transfers through spot or forward central banks for the coordination of foreign currency transactions on the open market at home and abroad, transactions. In making operating arrangements with forincluding transactions with the U.S. Treasury, with the U.S. eign central banks on System holdings of foreign cur- Exchange Stabilization Fund established by Section 10 rencies, the Federal Reserve Bank of New York shall of the Gold Reserve Act of 1934, with foreign monetary not commit itself to maintain any specific balance unless authorities, with the Bank for International Settlements, authorized by the Federal Open Market Committee. Any and with other international financial institutions: agreements or understandings concerning the administration of the accounts maintained by the Federal Reserve Canadian dollars Mexican pesos Bank of New York with the foreign banks designated by Danish kroner Norwegian kroner the Board of Governors under Section 214.5 of Regula- Euro Swedish kronor tion N shall be referred for review and approval to the Pounds sterling Swiss francs Committee. Japanese yen 5. Foreign currency holdings shall be invested to ensure that adequate liquidity is maintained to meet anticipated B. To hold balances of, and to have outstanding for- needs and so that each currency portfolio shall generally ward contracts to receive or to deliver, the foreign curren- have an average duration of no more than 18 months cies listed in paragraph A above. (calculated as Macaulay duration). When appropriate in C. To draw foreign currencies and to permit foreign connection with arrangements to provide investment facilibanks to draw dollars under the reciprocal currency ties for foreign currency holdings, U.S. Government securiarrangements listed in paragraph 2 below, provided that ties may be purchased from foreign central banks under drawings by either party to any such arrangement shall be agreements for repurchase of such securities within 30 calfully liquidated within 12 months after any amount out- endar days. standing at that time was first drawn, unless the Commit- 6. All operations undertaken pursuant to the preceding tee, because of exceptional circumstances, specifically paragraphs shall be reported promptly to the Foreign Curauthorizes a delay. rency Subcommittee and the Committee. The Foreign Cur- D. To maintain an overall open position in all foreign rency Subcommittee consists of the Chairman and Vice currencies not exceeding $25.0 billion. For this purpose, Chairman of the Committee, the Vice Chairman of the the overall open position in all foreign currencies is defined Board of Governors, and such other member of the Board as the sum (disregarding signs) of net positions in indi- as the Chairman may designate (or in the absence of vidual currencies. The net position in a single foreign members of the Board serving on the Subcommittee, other currency is defined as holdings of balances in that cur- Board members designated by the Chairman as alternates, rency, plus outstanding contracts for future receipt, minus and in the absence of the Vice Chairman of the Committee, outstanding contracts for future delivery of that currency, his alternate). Meetings of the Subcommittee shall be i.e., as the sum of these elements with due regard to sign. called at the request of any member, or at the request of the 2. The Federal Open Market Committee directs the Fed- Manager, System Open Market Account ("Manager"), for eral Reserve Bank of New York to maintain reciprocal the purposes of reviewing recent or contemplated operacurrency arrangements ("swap" arrangements) for the Sys- tions and of consulting with the Manager on other matters tem Open Market Account for periods up to a maximum of relating to his responsibilities. At the request of any mem- 12 months with the following foreign banks, which are ber of the Subcommittee, questions arising from such among those designated by the Board of Governors of the reviews and consultations shall be referred for determina- Federal Reserve System under Section 214.5 of Regula- tion to the Federal Open Market Committee. tion N, Relations with Foreign Banks and Bankers, and 7. The Chairman is authorized: with the approval of the Committee to renew such arrange- A. With the approval of the Committee, to enter into ments on maturity: any needed agreement or understanding with the Secretary of the Treasury about the division of responsibility for Amount of arrangement foreign currency operations between the System and the Foreign bank (millions of dollars Treasury; equivalent) B. To keep the Secretary of the Treasury fully advised 222,,,000000000 concerning System foreign currency operations, and to 333,,,000000000 consult with the Secretary on policy matters relating to foreign currency operations; Any changes in the terms of existing swap arrangements, C. From time to time, to transmit appropriate reports and the proposed terms of any new arrangements that may and information to the National Advisory Council on Interbe authorized, shall be referred for review and approval to national Monetary and Financial Policies. the Committee. 8. Staff officers of the Committee are authorized 3. All transactions in foreign currencies undertaken un- to transmit pertinent information on System foreign curder paragraph l.A. above shall, unless otherwise expressly rency operations to appropriate officials of the Treasury authorized by the Committee, be at prevailing market rates. Department. For the purpose of providing an investment return on 9. All Federal Reserve Banks shall participate in the System holdings of foreign currencies, or for the purpose foreign currency operations for System Account in accorof adjusting interest rates paid or received in connection dance with paragraph 3 G(l) of the Board of Governors' with swap drawings, transactions with foreign central Statement of Procedure with Respect to Foreign Relationbanks may be undertaken at non-market exchange rates. ships of Federal Reserve Banks dated January 1, 1944. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

316 Federal Reserve Bulletin • May 2001 By unanimous vote, the Foreign Currency Direc- A. Any operation that would result in a change in tive was reaffirmed in the form shown below. the System's overall open position in foreign currencies exceeding $300 million on any day or $600 million since the most recent regular meeting of the Committee. B. Any operation that would result in a change on FOREIGN CURRENCY DIRECTIVE any day in the System's net position in a single foreign (REAFFIRMED JANUARY 30, 2001) currency exceeding $150 million, or $300 million when the operation is associated with repayment of swap 1. System operations in foreign currencies shall gener- drawings. ally be directed at countering disorderly market conditions, C. Any operation that might generate a substantial provided that market exchange rates for the U.S. dollar volume of trading in a particular currency by the System, reflect actions and behavior consistent with the IMF Arti- even though the change in the System's net position in that cle IV, Section 1. currency might be less than the limits specified in l.B. 2. To achieve this end the System shall: D. Any swap drawing proposed by a foreign bank not A. Undertake spot and forward purchases and sales exceeding the larger of (i) $200 million or (ii) 15 percent of of foreign exchange. the size of the swap arrangement. B. Maintain reciprocal currency ("swap") arrange- 2. The Manager shall clear with the Committee (or with ments with selected foreign central banks. the Subcommittee, if the Subcommittee believes that con- C. Cooperate in other respects with central banks sultation with the full Committee is not feasible in the time of other countries and with international monetary available, or with the Chairman, if the Chairman believes institutions. that consultation with the Subcommittee is not feasible in 3. Transactions may also be undertaken: the time available): A. To adjust System balances in light of probable A. Any operation that would result in a change in the future needs for currencies. System's overall open position in foreign currencies B. To provide means for meeting System and Trea- exceeding $1.5 billion since the most recent regular meetsury commitments in particular currencies, and to facilitate ing of the Committee. operations of the Exchange Stabilization Fund. B. Any swap drawing proposed by a foreign bank C. For such other purposes as may be expressly exceeding the larger of (i) $200 million or (ii) 15 percent of authorized by the Committee. the size of the swap arrangement. 4. System foreign currency operations shall be 3. The Manager shall also consult with the Subcommitconducted: tee or the Chairman about proposed swap drawings by the A. In close and continuous consultation and coopera- System and about any operations that are not of a routine tion with the United States Treasury; character. B. In cooperation, as appropriate, with foreign monetary authorities; and On January 22, 2001, the continuing rules, regu- C. In a manner consistent with the obligations of the lations, and other instructions of the Committee had United States in the International Monetary Fund regarding exchange arrangements under the IMF Article IV. been distributed with the advice that, in accordance with procedures approved by the Committee, they By unanimous vote, the Procedural Instructions were being called to the Committee's attention before with Respect to Foreign Currency Operations were the January 30-31 organization meeting to give memreaffirmed in the form shown below. bers an opportunity to raise any questions they might have concerning them. Members were asked to indicate if they wished to have any of the instruments PROCEDURAL INSTRUCTIONS WITH in question placed on the agenda for consideration RESPECT TO FOREIGN CURRENCY OPERATIONS at this meeting. The Guidelines for the Conduct of (REAFFIRMED JANUARY 30, 2001) System Operations in Federal Agency Issues were placed on the agenda and an extension of their tempo- In conducting operations pursuant to the authorization and direction of the Federal Open Market Committee as set rary amendment was approved as noted above. forth in the Authorization for Foreign Currency Operations The Manager of the System Open Market Account and the Foreign Currency Directive, the Federal Reserve reported on recent developments in foreign exchange Bank of New York, through the Manager, System Open markets. There were no open market operations in Market Account ("Manager"), shall be guided by the foreign currencies for the System's account in the following procedural understandings with respect to consultations and clearances with the Committee, the Foreign period since the previous meeting. Currency Subcommittee, and the Chairman of the Commit- The Manager also reported on developments in tee. All operations undertaken pursuant to such clearances domestic financial markets and on System open marshall be reported promptly to the Committee. ket transactions in government securities and federal 1. The Manager shall clear with the Subcommittee (or agency obligations during the period December 20, with the Chairman, if the Chairman believes that consul- 2000, through January 30, 2001. By unanimous vote, tation with the Subcommittee is not feasible in the time available): the Committee ratified these transactions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 317 The Committee then turned to a discussion of the vehicles slumped and outlays for other goods economic and financial outlook and the implementa- increased only a little. However, spending on services tion of monetary policy over the intermeeting period picked up somewhat in November (latest data), ahead. A summary of the economic and financial reflecting at least in part higher expenditures for information available at the time of the meeting and heating services owing to unseasonably cold weather. of the Committee's discussion is provided below, The decline in mortgage rates since the middle of followed by the domestic policy directive that was last year had provided some support to residential approved by the Committee and issued to the Federal building activity. Total housing starts increased Reserve Bank of New York. slightly further in December, with single-family starts The information reviewed at this meeting indicated recording a brisk rise that might have been, in part, that the expansion of economic activity had slowed a response to the lower mortgage rates. By contrast, appreciably over the fourth quarter. Consumer and multifamily starts slowed, more than reversing business spending decelerated further, with outlays November's run-up. Sales of new homes jumped in for consumer durables and business equipment par- December to a very high level, but sales of existing ticularly weak. Housing construction remained rela- homes dropped considerably. tively firm, though significantly below its brisk Business fixed investment contracted slightly in pace of earlier in the year. The slower growth of final the fourth quarter, reflecting a sizable decline in spending resulted in inventory overhangs in a number business spending on equipment and software that of industries, most notably those related to the motor was offset in part by a large increase in nonresidential vehicle sector. Manufacturing production declined construction. Data on nominal shipments of nondesharply as a result, and overall employment gains fense capital goods in the fourth quarter indicated a moderated further. Price inflation was still relatively drop in office and computing equipment, only a small subdued. gain in communications equipment, and a decline, on Labor demand softened further in December, with net, in non-high-tech equipment. By contrast, investprivate nonfarm payroll employment continuing to ment in nonresidential structures increased briskly increase slowly and the average workweek to decline. further in October and November (latest data). While Nonetheless, the labor market remained very tight spending for new office buildings was rising less and the unemployment rate held at 4 percent, its rapidly, outlays for other commercial structures average for the year. Reduced labor demand in manu- picked up, and investment in industrial structures facturing accounted for much of the slowdown in remained robust. nonfarm payroll gains in the fourth quarter, with Business inventories on a book-value basis factory payrolls falling sharply further in Decem- mounted further in October and November. Despite ber, but in addition sizable cuts in net new hires production cutbacks, stockbuilding in manufacturing were recorded in the help-supply and construction remained rapid and sizable inventory overhangs had industries. emerged in some industries, particularly those related The contraction in industrial production that began to the motor vehicle sector. As a result, the aggregate in October, largely in the motor vehicle sector, deep- stock-sales ratio for the manufacturing sector continened and broadened in November and December. For ued its upward drift that began early last year. Sizable the fourth quarter as a whole, the drop in production inventory buildups and associated overhangs also was concentrated in manufacturing; mining activity were apparent in portions of the retail sector, and fell by less while utilities output surged late in the the aggregate inventory-sales ratio for the sector year in response to unseasonably cold weather. Most remained at the upper end of its range over the past of the initial weakness in manufacturing output was year. At the wholesale level, inventory accumulation related directly or indirectly to the slowing in the was moderate in October and November, but the motor vehicle sector, but by year-end all major mar- sector's inventory-sales ratio continued to be at the ket groups had registered steep declines in produc- top of its range for the last twelve months. tion. Weaker factory activity in December resulted in The U.S. trade deficit in goods and services fell a sizable drop in the rate of capacity utilization in slightly in October and November after having posted manufacturing to a level further below its long-run a new record high in September. Nevertheless, the average. average deficit for October and November was larger Against a background of slowing growth of dispos- than the rate for the third quarter. The value of able personal income and abrupt declines in con- exports declined in both months, and the average sumer sentiment, consumer spending decelerated sub- value for the two-month period was below the thirdstantially in the fourth quarter. Purchases of motor quarter level; the weakness in exports was spread Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

318 Federal Reserve Bulletin • May 2001 across a number of trade categories. The value of tary easing, particularly given the current high level imports for the first two months of the fourth quarter of resource utilization and the record over the last was slightly above the third-quarter average. Eco- several years of strong rebounds from brief lulls in nomic growth in foreign industrial countries mod- growth. If, however, incoming data were to reinforce erated in the second half of last year. The pace of the recent anecdotal indications, the Committee economic expansion in the euro area softened some- would be prepared to respond promptly. what further in the fourth quarter, as consumer spend- Open market operations during the intermeeting ing remained weak. In Japan, available indicators period were initially directed toward maintaining the suggested that economic activity had stagnated in the federal funds rate at the Committee's targeted level fourth quarter. Economic growth in Canada and the of 6V2 percent. However, information that became United Kingdom seemed to have slowed somewhat available in the weeks after the December meeting in the fourth quarter. In addition, the latest data for tended to confirm the earlier indications of weakness the major developing countries pointed to reduced in spending, and at a telephone conference on Januexpansion in many of those countries. ary 3, 2001, the Committee approved a V2 percentage By most measures, price inflation had remained point reduction in the federal funds rate, to 6 percent, moderate in recent months. Judging by the consumer and also agreed that the risks remained weighted price index (CPI), total and core consumer prices toward economic weakness. The federal funds rate rose mildly over November and December, but both remained close to the Committee's targets over the accelerated somewhat on a year-over-year basis. In intermeeting period, and interest rates on short-term terms of the personal consumption expenditure (PCE) Treasury securities and high-quality private debt chain-type price index, however, core consumer price obligations declined over the period almost as much inflation was modest in both November (latest data) as the funds rate. The Committee's action seemed and the twelve months ended in November, and to help ease some concerns about the longer-term there was essentially no change year over year. At outlook, and risk spreads on lower-grade bonds fell the producer level, core prices edged up over the substantially while broad indexes of U.S. stock mar- November-December period, and the rise in core ket prices rose on balance over the intermeeting prices over the year was minimal as well. With period. regard to labor costs, the employment cost index of In foreign exchange markets, the trade-weighted hourly compensation for private industry workers value of the dollar changed little on balance over the (ECI) decelerated noticeably in the fourth quarter, intermeeting interval in terms of an index of major with both the wage and benefit components recording foreign currencies. The dollar lost ground against the smaller gains. However, growth of ECI compensation euro as market participants took note of the deteriorapicked up somewhat in 2000 from 1999, probably tion of near-term prospects for economic growth in owing in large part to the upward trend in productiv- the United States relative to those for Europe. Howity growth. Productivity improvements also showed ever, that decline was roughly counterbalanced by a through to the average hourly earnings of production rise in the dollar against the yen, reflecting continuor nonsupervisory workers, which exhibited a ing economic stagnation in Japan. The dollar posted a roughly similar acceleration. small gain against an index of the currencies of other At its meeting on December 19, 2000, the Commit- important trading partners, largely reflecting expectee adopted a directive that continued to call for tations that some emerging economies might be maintaining conditions in reserve markets consistent adversely affected by slower growth in the United with an unchanged federal funds rate of about States. 6V2 percent. At the same time, however, the members The broad monetary aggregates accelerated sharply concluded that the balance of risks had shifted suffi- in December and apparently strengthened further in ciently that they had become weighted toward condi- January. The pickup in M2 growth evidently reflected tions that could generate economic weakness in the a flight from heightened equity market volatility late foreseeable future. Indeed, very recent information last year to the safety and liquidity of M2 assets had seemed to signal sudden further weakness, but it along with a recent narrowing of the opportunity was largely anecdotal and most of the aggregate data costs of holding funds in M2 accounts. M3 grew even on spending and employment suggested continued faster than M2, boosted in part by stepped-up issueconomic expansion, albeit at a relatively slow rate. ance of large time deposits to fund a pickup in bank As a result, most members believed that it would be credit. The expansion of domestic nonfinancial debt prudent to await further confirmation of a noticeably increased in November and December (latest data), weaker expansion before implementing any mone- reflecting greater business borrowing, perhaps to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 319 finance growing inventories and smaller contractions struction activity had remained relatively robust and in the amount of federal debt outstanding. to fragmentary data and anecdotal reports suggesting The staff forecast prepared for this meeting sug- that consumer spending had steadied or possibly gested that, after a pause associated in part with an turned up early this year. Several commented that the inventory correction, the economic expansion would sound condition of the banking system was another regain strength over the next two years and gradually supportive factor. Some also observed that, counter move to a rate near the staff's current estimate of the to the experience generally associated with the onset growth of the economy's potential output. The period of earlier recessions, monetary growth had been well of sub-par activity was expected to foster an appre- maintained in recent months, and a few noted that ciable slackening of resource utilization and some long-term interest rates currently were appreciably moderation in core price inflation. The forecast antici- below their peaks of the past year. The prospect that pated that the expansion of domestic final demand fiscal policy might begin to move in an expansionary would be held back to some extent by the decline in direction later in the year was cited as another factor household net worth associated with the downturn in the outlook for stronger economic activity. A that had occurred in equity prices, the remaining decline in energy prices, should it materialize as effects of prior monetary restraint, and the continua- anticipated in futures markets, would have a positive tion of somewhat stringent credit terms and condi- effect on both business and consumer spending by tions on some types of loans by financial institutions. lowering business costs and raising disposable con- As a result, growth of spending on consumer dura- sumer incomes adjusted for energy costs. Perhaps the bles was expected to be appreciably below that of the most critical element in this outlook was the persisfirst half of last year and housing demand to be about tence of elevated growth in structural labor productivunchanged from its recent level. Business fixed ity, which seemed likely to play a vital role in supinvestment, notably outlays for equipment and soft- porting growth in incomes and aggregate demand ware, was projected to resume relatively robust while also helping to limit inflation pressures. growth after a comparatively brief period of adjust- At the same time, members also saw considerable ment of capital stocks to more desirable levels; downside risks to the economic expansion. Energy growth abroad was seen as supporting the expansion prices remained elevated and were continuing to of U.S. exports; and fiscal policy was assumed to depress business and household purchasing power; become more expansionary. the overhang of excess capital stocks in some sectors In the Committee's discussion of current and pro- could turn out to be sizable, depressing investment spective economic developments, members com- spending for some time; consumer confidence could mented that while a slowdown in the expansion over worsen appreciably more in the face of weaker the second half of 2000 was not unexpected in light expansion of incomes and higher job layoffs; and of the previously unsustainable rate of increase in investor concerns about earnings could increase furoutput, the speed and extent of the slowdown were ther, sparking lower equity prices and tighter stanmuch more pronounced than they had anticipated. dards and terms on credit. Consumer spending and business capital investment Except for prices of energy and medical services, had decelerated markedly, partly in association with a the currently available information indicated relasharp decline in consumer and business confidence. tively subdued rates of inflation, and recent surveys This weakening, which was especially evident in pointed to little change in inflation expectations. durable goods producing industries, had led to large Looking ahead, members anticipated that somecutbacks in manufacturing output as numerous busi- what reduced pressures in labor and product marness firms attempted to pare what they now viewed as kets would foster some softening in consumer price excessive inventories. The eventual degree and dura- inflation over coming quarters, a development that tion of the softening in economic conditions were would be abetted should prices of oil and natural difficult to predict. In particular, it was unclear gas ease during the year in line with current market whether the pause in the economic expansion would expectations. be largely limited to a relatively short inventory In preparation for a semi-annual report to Concorrection or would involve a more extensive cyclical gress, the members of the Board of Governors and adjustment. the presidents of the Federal Reserve Banks provided In general, members saw favorable prospects for individual projections of the growth in nominal and an appreciable recovery in overall business activity real GDP, the rate of unemployment, and the rate of as the year progressed. Members referred to indica- inflation for the year 2001. The forecasts were contions that both residential and nonresidential con- centrated in ranges of 4 to 5 percent for the growth in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

320 Federal Reserve Bulletin • May 2001 nominal GDP and 2 to 2Vi percent for the expansion tighter supply conditions in segments of the credit in real GDP, implying some strengthening of eco- markets, and a buildup in excess capacity that had nomic activity as the year progressed. With growth in eroded profitability. In this regard, members referred business activity falling short of the expansion in the to earlier unsustainable rates of investment by many economy's potential, the rate of unemployment was high-tech firms that were now obliged to retrench expected to rise somewhat to an average of about despite still high rates of growth in the demand for 4Vi percent by the fourth quarter of the year. Fore- their products and services. With regard to the noncasts of the rate of inflation, as measured by the residential construction sector, members provided chain-type price index for personal consumption anecdotal reports of continued high levels of activity expenditures, were centered in a range of l3A to in several parts of the country and little evidence of 2V4 percent, reflecting declines from the inflation rate the substantial overbuilding that had characterized last year largely stemming from the projected reduc- the construction industry in earlier periods of develtions in energy prices. oping economic weakness. On balance, while the The marked deceleration in final sales experienced business investment outlook seemed vulnerable to late last year was concentrated in consumer spending somewhat greater than projected weakness in the for motor vehicles and other durable goods and in short run, the members were persuaded that, against business expenditures for equipment and software. In the background of large continuing gains in structural the household sector, rapidly declining consumer con- productivity and cost savings from further investment fidence, apparently associated in important measure in equipment and software, business firms were likely with increasing worker layoffs and growing concerns to accelerate their spending for new capital after a about future job prospects, had contributed to gener- period of adjustment. ally disappointing retail sales during the holiday sea- Concerning the outlook for housing activity, recent son. There was some evidence that sales had stabi- statistical and anecdotal reports indicated that houslized and possibly risen slightly in January, though a ing sales and construction were being well mainpart of the improvement could reflect steep price tained and indeed were a bright spot in several discounts for the purpose of reducing inventories. regions. Reduced mortgage interest rates appeared to Other negative factors cited by the members included be largely offsetting the marked decline in consumer the adverse wealth effects of the decrease in stock confidence. Accordingly, and contrary to the experimarket valuations, relatively high consumer debt ser- ence in earlier periods of softening economic activity, vice burdens, and possible retrenchment by consum- the stabilization of housing activity at a pace near its ers after an extended period of large increases in current fairly high level was seen as a reasonable purchases and related buildups of consumer durables. expectation. Nonetheless, in the absence of possible developments The outlook for inventory investment was more leading to further deterioration in consumer senti- uncertain. The drop in final sales during late 2000 ment, the members saw reasonable prospects for evidently was much faster than generally expected, strengthening consumer spending this year even and inventories rose considerably over the fourth assuming some decline in such expenditures relative quarter as a whole despite sharp downward adjustto income. An important factor in this outlook was ments in manufacturing output. In keeping with justthe expectation of some reduction in energy prices, in-time inventory policies, which had been furthered which would boost disposable incomes available for in recent years by advances in technology that non-energy expenditures and likely provide a fillip to allowed faster and more complete readings on sales consumer sentiment in the process. Moreover, with and adjustments in orders, efforts to reduce inventhe relatively high rate of growth in structural produc- tories were continuing in recent weeks and net inventivity showing little or no signs of waning, the longer- tory liquidation was anticipated in the current quarter. run prospects for household incomes remained posi- Looking further ahead, a number of members comtive. On balance, the various factors weighing on the mented that they expected a period of inventory outlook for consumer spending later this year seemed correction that would be relatively sharp but short by favorable, though substantial downside risks clearly historical standards. Improvements in inventory manwould persist for some interim period of uncertain agement and related indications that inventory overduration. hangs were small compared to earlier historical experience were factors in this assessment. At the same The depressing effects of lagging final sales on time, members recognized that the inventory correcbusiness investment spending, notably for equipment tion had just begun and its duration would depend and software, were reinforced by deterioration in importantly on the ongoing strength of final sales. In the financial balance sheets of some business firms, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 321 this regard, developments bearing on business and The extent and duration of the current economic consumer confidence and willingness to spend would correction remained uncertain, but the stimulus proplay a crucial, though at this point uncertain, role. vided by the Committee's policy easing actions Members expressed some divergence of views would help guard against cumulative weakness in regarding the outlook for foreign economic activity economic activity and would support the positive and the implications for the domestic economy. Some factors that seemed likely to promote recovery later emphasized that most of the nation's important trad- in the year. Several members observed that the evolving partners had growing economies that were likely ing nature of the domestic economy, including the to provide support for expanding U.S. exports. Other ongoing improvements in inventory management and members were concerned about indications of grow- the increase in managerial flexibility to alter the level ing weakness in a number of foreign economies that and mix of capital equipment, associated in part with might increasingly inhibit U.S. exports and add to the greater availability of information, appeared to competitive pressures on U.S. producers in domestic have fostered relatively prompt adjustments by busimarkets. The large current account deficit was seen nesses to changing economic conditions. As a conseas a factor pointing to potential depreciation of the quence, monetary policy reactions to shifts in ecodollar over time, with adverse repercussions on nomic trends needed in this view to be undertaken domestic inflation albeit favorable effects on exports. more aggressively and completed sooner than in the In their comments about the outlook for inflation, past. In current circumstances, members saw little members noted that current indicators continued on inflation risk in such a "front-loaded" easing policy, the whole to point to subdued price increases, with given the reduced pressures on resources stemming lagging demand and strong competitive pressures in from the sluggish performance of the economy and many markets severely limiting the ability of busi- relatively subdued expectations of inflation. ness firms to raise their prices. Labor markets were All the members agreed that the balance of risks described as still tight across the nation, but reports sentence in the press statement to be released shortly of layoffs in specific industries were increasing and after this meeting should continue to indicate that the numerous business contacts indicated that openings risks would remain tilted toward economic weakness were now much easier to fill in many job markets. even after today's easing action. The members saw There were some related indications that wage pres- substantial underlying strength and resilience in the sures might be easing. Against the background of a economy and they remained optimistic about its prossluggish economy in the near term and forecasts of pects beyond the near term in light of the monetary only moderate economic growth, the members antici- policy stimulus that was being implemented and the pated that inflation would remain contained over the persistence of rapid advances in productivity. In this forecast horizon. A key factor in this assessment regard, some members commented that the upside continued to be their outlook for rapid further gains risks could not be totally dismissed. But with the in structural productivity that would help to hold adjustments to the stock of capital, consumer durable down increases in unit labor costs. Other factors goods, and inventories to more sustainable levels included the prospect of some decline in energy likely only partly completed and with investors in prices and the persistence of generally benign infla- financial markets remaining skittish, the risks that tion expectations. On balance, with pressures in labor growth would persist below that of the economy's and product markets ebbing, the outlook for infla- productivity-enhanced potential continued to domition was a source of diminished though persisting nate the outlook. concern. At the conclusion of this discussion, the Commit- In the Committee's discussion of policy for the tee voted to authorize and direct the Federal Reserve intermeeting period ahead, all the members endorsed Bank of New York, until it was instructed othera proposal calling for a further easing in reserve wise, to execute transactions in the System Account conditions consistent with a 50 basis point decrease in accordance with the following domestic policy in the federal funds rate to a level of 5Vi percent. directive: Such a policy move in conjunction with the 50 basis point reduction in early January would represent a The Federal Open Market Committee seeks monetary relatively aggressive policy adjustment in a short and financial conditions that will foster price stability and period of time, but the members agreed on its desir- promote sustainable growth in output. To further its longrun objectives, the Committee in the immediate future ability in light of the rapid weakening in the ecoseeks conditions in reserve markets consistent with nomic expansion in recent months and associated reducing the federal funds rate to an average of around deterioration in business and consumer confidence. 5 '/a percent. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

322 Federal Reserve Bulletin • May 2001 The vote encompassed approval of the sentence larly scheduled meeting after December 31, 2001, below for inclusion in the press statement to be subject to the understanding that in the event of the released shortly after the meeting: discontinuance of his official connection with the Federal Reserve Bank of New York he would cease Against the background of its long-run goals of price to have any official connection with the Federal Open stability and sustainable economic growth and of the infor- Market Committee. It also was understood that this mation currently available, the Committee believes that the selection needed to be satisfactory to the Federal risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future. Reserve Bank New York. Advice subsequently was received that the selection of Mr. Kos as Manager Votes for this action: Messrs. Greenspan, McDonough, was satisfactory to the board of directors of that Ferguson, Gramlich, Hoenig, Kelley, Meyer, Ms. Mine- Bank. han, Messrs. Moskow and Poole. Votes against this It was agreed that the next meeting of the Commitaction: None. tee would be held on Tuesday, March 20, 2001. By notation vote completed on March 15, 2001, The meeting adjourned at 10:50 a.m. on Januthe Federal Open Market Committee voted unani- ary 31,2001. mously to select Dino Kos as Manager for Domestic and Foreign Operations of the System Open Market Donald L. Kohn Account to serve in that capacity until the first regu- Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

323 Legal Developments FINAL RULE—AMENDMENT TO REGULATION E j. Under Section 205.7-Initial Disclosures, under 7(a) Timing of Disclosures, paragraph 2. is revised; The Board of Governors is amending 12 C.F.R. Part 205, k. Under Section 205.7-Initial Disclosures, under Paraits Official Staff Commentary to Regulation E, which im- graph 7(b)(10) Error Resolution, paragraph 2. is plements the Electronic Fund Transfer Act. The commen- revised; tary interprets the requirements of Regulation E to facili- 1. Under Section 205.8-Change-In-Terms Notice; Error tate compliance by financial institutions that offer Resolution Notice, under 8(b) Error Resolution Noelectronic fund transfer services to consumers. The final tice, a new paragraph 2. is added; rule provides guidance on Regulation E coverage of elec- m. Under Section 205.9-Receipts At Electronic Termitronic check conversion transactions and computer- nals; Periodic Statements, under Paragraph 9(a)(5)initiated bill payments; authorization of recurring debits Terminal Location, paragraph 1. is revised; from a consumer's account; telephone-initiated transfer; n. Under Section 205.9-Receipts At Electronic Termiand other issues. nals; Periodic Statements, under Paragraph Effective March 15, 2001, 12 C.F.R. Part 205 is 9(a)(5)(iv), paragraphs 1. and 2. are redesignated as amended as follows: paragraphs 3. and 4. under paragraph 9(a)(5) and republished; Part 205—Electronic Fund Transfers (Regualtion E) o. Under Section 205.9-Receipts At Electronic Terminals; Periodic Statements, Paragraph 9(a)(5)(iv) is 1. The authority citation for Part 205 is revised to read as removed; follows: p. Under Section 205.9-Receipts At Electronic Termi- Authority: 15 U.S.C. 1693b. nals; Periodic Statements, under 9(b) Periodic Statements, paragraph 4. is revised; 2. In Supplement I to Part 205, the following amendments q. Under Section 205.9-Receipts At Electronic Termiare made: nals; Periodic Statements, under 9(c) Exceptions to a. Under Section 205.2-Definitions, under 2(a) Access the Periodic Statement Requirements for Certain Device, a new paragraph 2. is added; Accounts, a new heading, Paragraph 9(c)(1)b. Under Section 205.2-Definitions, under 2(h) Elec- Preauthorized Transfers to Accounts is added and tronic Terminal, paragraph 2. is revised; new paragraphs 1. and 2. are added to the newly c. Under Section 205.2-Definitions, a new heading 2(k) designated heading; Preauthorized Electronic Fund Transfer, and a new r. Under Section 205.10-Preauthorized Transfers, paragraph 1. are added; under 10(b) Written Authorization for Preauthorized d. Under Section 205.2-Definitions, under 2(m) Unau- Transfers from Consumer's Account, paragraph 5. is thorized Electronic Fund Transfer, a new paragraph revised, and new paragraph 7. is added; 5. is added; s. Under Section 205.10-Preauthorized Transfers, une. Under Section 205.3-Coverage, under 3(b) Elec- der Paragraph 10(e)(2)-Employment or Government tronic Fund Transfer, new paragraphs l.v., l.vi., and Benefit, paragraph 1. is revised; 3. are added; t. Under Section 205.11-Procedures For Resolving f. Under Section 205.3-Coverage, under 3(c) Exclu- Errors, under 11(a) Definition of Error, paragraph 2. sions from Coverage, a new heading "Paragraph is revised; and 3(c)(l)-Checks" is added; u. Under Section 205.12-Relation To Other Laws, ung. Under Section 205.3-Coverage, under 3(c) Exclu- der 12(a) Relation to Truth in Lending, paragraph 1. sions from Coverage, under newly added heading is revised. Paragraph 3(c)(l)-Checks, paragraphs 1. and 2. are added; Supplement to Part 205—Official Staff h. Under Section 205.3-Coverage, under 3(c) Exclu- Interpretations sions from Coverage, under Paragraph 3(c)(6)- Telephone-Initiated Transfers, paragraph 1. is re- Section 205.2—Definitions vised and paragraph 2.v. is added; i. Under Section 205.6-Liability Of Consumer For 2(a) Access Device Unauthorized Transfers, under Paragraph 6(b)(1)- Timely Notice Given, new paragraph 3. is added; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

324 Federal Reserve Bulletin • May 2001 2. Checks used to capture information. The term "access Section 205.3—Coverage device" does not include a check or draft used to capture the MICR (Magnetic Ink Character Recognition) encoding to initiate a one-time ACH debit. For example, if a consumer authorizes a one-time ACH 3(b) Electronic Fund Transfer debit from the consumer's account using a blank, partially completed, or fully completed and signed check 1. Fund transfers covered. * * * for the merchant to capture the routing, account, and v. A transfer via ACH where a consumer has provided serial numbers to initiate the debit, the check is not an a check to enable the merchant or other payee to access device. (Although the check is not an access capture the routing, account, and serial numbers to device under Regulation E, the transaction is nonethe- initiate the transfer, whether the check is blank, less covered by the regulation. See comment 3(b)-l(v).) partially completed, or fully completed and signed; whether the check is presented at POS or is mailed to a merchant or other payee or lockbox and later converted to an EFT; or whether the check is re- 2(h) Electronic Terminal tained by the consumer, the merchant or other payee, or the payee's financial institution. vi. A payment made by a bill payer under a bill- 2. POS terminals. A POS terminal that captures data elec- payment service available to a consumer via comtronically, for debiting or crediting to a consumer's puter or other electronic means, unless the terms of asset account, is an electronic terminal for purposes of the bill-payment service explicitly state that all pay- Regulation E even if no access device is used to initiate ments, or all payments to a particular payee or paythe transaction. (See section 205.9 for receipt require- ees, will be solely by check, draft, or similar paper ments.) instrument drawn on the consumer's account, and the payee or payees that will be paid in this manner are identified to the consumer. 2(k) Preauthorized Electronic Fund Transfer 3. Authorization of one-time EFT initiated using MICR 1. Advance authorization. A "preauthorized electronic encoding on a check. A consumer authorizes a one-time fund transfer'' under Regulation E is one authorized by EFT (in providing a check to a merchant or other payee the consumer in advance of a transfer that will take for the MICR encoding), where the consumer receives place on a recurring basis, at substantially regular inter- notice that the transaction will be processed as an EFT vals, and will require no further action by the consumer and completes the transaction. Examples of notice into initiate the transfer. In a bill-payment system, for clude, but are not limited to, signage at POS and written example, if the consumer authorizes a financial institu- statements. tion to make monthly payments to a payee by means of EFTs, and the payments take place without further action by the consumer, the payments are preauthorized EFTs. In contrast, if the consumer must take action each 3(c) Exclusions from Coverage month to initiate a payment (such as by entering instructions on a touch-tone telephone or home computer), the payments are not preauthorized EFTs. Paragraph 3(c)(l)-Checks 1. Re-presented checks. The electronic re-presentment of a returned check is not covered by Regulation E because 2(m) Unauthorized Electronic Fund Transfer the transaction originated by check. Regulation E does apply, however, to any fee authorized by the consumer to be debited electronically from the consumer's ac- 5. Reversal of direct deposits. The reversal of a direct count because the check was returned for insufficient deposit made in error is not an unauthorized EFT when funds. Authorization occurs where the consumer has it involves: received notice that a fee imposed for returned checks i. A credit made to the wrong consumer's account; will be debited electronically from the consumer's acii. A duplicate credit made to a consumer's account; or count. iii. A credit in the wrong amount (for example, when the amount credited to the consumer's account dif- 2. Check used to capture information for a one-time EFT. fers from the amount in the transmittal instructions). See comment 3(b)-l(v). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 325 Paragraph 3(c)(6) Telephone-Initiated Transfers Section 205.7—Initial Disclosures 7(a) Timing of Disclosures 1. Written plan or agreement. A transfer that the consumer initiates by telephone is covered by Regulation E if the transfer is made under a written plan or agreement 2. Lack of advance notice of a transfer. Where a consumer between the consumer and the financial institution makauthorizes a third party to debit or credit the consumer's ing the transfer. A written statement available to the account, an account-holding institution that has not republic or to account holders that describes a service ceived advance notice of the transfer or transfers must allowing a consumer to initiate transfers by telephone provide the required disclosures as soon as reasonably constitutes a plan—for example, a brochure, or material possible after the first debit or credit is made, unless the included with periodic statements. The following, howinstitution has previously given the disclosures. ever, do not by themselves constitute a written plan or agreement: i. A hold-harmless agreement on a signature card that protects the institution if the consumer requests a Paragraph 7(b)(10)-Error Resolution transfer. ii. A legend on a signature card, periodic statement, or passbook that limits the number of telephone- 2. Extended time-period for certain transactions. To take initiated transfers the consumer can make from a advantage of the longer time periods for resolving errors savings account because of reserve requirements under section 205.11(c)(3) (for new accounts as defined under Regulation D (12 C.F.R. Part 204). in Regulation CC (12 C.F.R. Part 229), transfers initiiii. An agreement permitting the consumer to approve ated outside the United States, or transfers resulting by telephone the rollover of funds at the maturity of from POS debit-card transactions), a financial instituan instrument. tion must have disclosed these longer time periods. 2. Examples of covered transfers. * * * Similarly, an institution that relies on the exception v. The consumer initiates the transfer using a financial from provisional crediting in section 205.11(c)(2) for institution's audio-response or voice-response tele- accounts subject to Regulation T (12 C.F.R. Part 220) phone system. must have disclosed accordingly. Section 205.8—Change-in-Terms Notice; Error Resolution Notice Section 205.6—Liability of Consumer for 8(b) Error Resolution Notice Unauthorized Transfers 2. Exception for new accounts. For new accounts, disclosure of the longer error resolution time periods under 6(b) Limitations on Amount of Liability section 205.11(c)(3) is not required in the annual error resolution notice or in the notice that may be provided with each periodic statement as an alternative to the annual notice. Paragraph 6(b)(1) Timely Notice Given 3. Two-business-day rule. The two-business-day period Section 205.9—Receipts at Electronic Terminals; does not include the day the consumer learns of the loss Periodic Statements or theft or any day that is not a business day. The rule is calculated based on two 24-hour periods, without regard 9(a) Receipts at Electronic Terminals to the financial institution's business hours or the time of day that the consumer learns of the loss or theft. For example, a consumer learns of the loss or theft at 6 p.m. on Friday. Assuming that Saturday is a business day and Paragraph 9(a)(5)Terminal Location Sunday is not, the two-business-day period begins on Saturday and expires at 11:59 p.m. on Monday, not at 1. Options for identifying terminal. The institution may the end of the financial institution's business day on provide either: Monday. i. The city, state or foreign country, and the information in sections 205.9(a)(5)(i), (ii), or (iii), or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

326 Federal Reserve Bulletin • May 2001 ii. A number or a code identifying the terminal. If the 10(b) Written Authorization for Preauthorized Transfers institution chooses the second option, the code or from Consumer's Account terminal number identifying the terminal where the transfer is initiated may be given as part of a transaction code. 5. Similarly authenticated. The similarly authenticated standard permits signed, written authorizations to be provided electronically. The writing and signature re- 3. Omission of state. The state may be omitted from the quirements of this section are satisfied by complying location information on the receipt if: with the Electronic Signatures in Global and National i. All the terminals owned or operated by the financial Commerce Act, 15 U.S.C. 7001 et seq., which defines institution providing the statement (or by the system electronic records and electronic signatures. Examples in which it participates) are located in that state, or of electronic signatures include, but are not limited to, ii. All transfers occur at terminals located within digital signatures and security codes. A security code 50 miles of the financial institution's main office. need not originate with the account-holding institution. 4. Omission of city and state. The city and state may be The authorization process should evidence the consumomitted if all the terminals owned or operated by the er's identity and assent to the authorization. The person financial institution providing the statement (or by the that obtains the authorization must provide a copy of the system in which it participates) are located in the same terms of the authorization to the consumer either eleccity. tronically or in paper form. Only the consumer may authorize the transfer and not, for example, a third-party merchant on behalf of the consumer. 9(b) Periodic Statements 7. Bona fide error. Consumers sometimes authorize third- 4. Statement pickup. A financial institution may permit, party payees, by telephone or on-line, to submit recurbut may not require, consumers to pick up their periodic ring charges against a credit card account. If the constatements at the financial institution. sumer indicates use of a credit card account when in fact a debit card is being used, the payee does not violate the requirement to obtain a written authorization if the failure to obtain written authorization was not inten- 9(c) Exceptions to the Periodic Statement Requirements tional and resulted from a bona fide error, and if the for Certain Accounts payee maintains procedures reasonably adapted to avoid any such error. If the payee is unable to determine, at the time of the authorization, whether a credit or debit card number is involved, and later finds that the card Paragraph 9(c)(1) Preauthorized Transfers to Accounts used is a debit card, the payee must obtain a written and signed or (where appropriate) a similarly authenticated 1. Accounts that may be accessed only by preauthorized authorization as soon as reasonably possible, or cease transfers to the account. The exception for "accounts debiting the consumer's account. that may be accessed only by preauthorized transfers to the account" includes accounts that can be accessed by means other than EFTs, such as checks. If, however, an account may be accessed by any EFT other than preau- 10(e) Compulsory Use thorized credits to the account, such as preauthorized debits or ATM transactions, the account does not qualify for the exception. 2. Reversal of direct deposits. For direct-deposit-only ac- Paragraph 10(e)(2) Employment or Government Benefit counts, a financial institution must send a periodic statement at least quarterly. A reversal of a direct deposit to 1. Payroll. An employer (including a financial institution) correct an error does not trigger the monthly statement may not require its employees to receive their salary by requirement when the error represented a credit to the direct deposit to any particular institution. An employer wrong consumer's account, a duplicate credit, or a credit may require direct deposit of salary by electronic means in the wrong amount. (See also comment 2(m)-5.) if employees are allowed to choose the institution that will receive the direct deposit. Alternatively, an employer may give employees the choice of having their Section 205.10—Preauthorized Transfers salary deposited at a particular institution (designated by the employer) or receiving their salary by another means, such as by check or cash. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 327 Section 205.11—Procedures for Resolving Errors provisions of Regulation E apply; Regulation Z does not apply. 11(a) Definition of Error C. In the same situation, assume the card is stolen and used both as a debit card and as a credit card; for example, the thief makes some purchases us- 2. Verifying an account debit or credit. If the consumer ing the card as a debit card, and other purchases contacts the financial institution to ascertain whether a using the card as a credit card. Here, the liability payment (for example, in a home-banking or bill- limits and error resolution provisions of Regulapayment program) or any other type of EFT was debited tion E apply to the unauthorized transactions in to the account, or whether a deposit made via ATM, which the card was used as a debit card, and the preauthorized transfer, or any other type of EFT was corresponding provisions of Regulation Z apply credited to the account, without asserting an error, the to the unauthorized transactions in which the card error resolution procedures do not apply. was used as a credit card. D. Assume a somewhat different type of card, one that draws on the consumer's checking account and can also draw on an overdraft line of credit Section 205.12—Relation to other Laws attached to the checking account. There is no separate line of credit, only the overdraft line, 12(a) Relation to Truth in Lending associated with the card. In this situation, if the card is stolen and used, the liability limits and the 1. Determining applicable regulation. error resolution provisions of Regulation E apply. i. For transactions involving access devices that also In addition, if the use of the card has resulted in function as credit cards, whether Regulation E or accessing the overdraft line of credit, the error Regulation Z (12 C.F.R. Part 226) applies depends resolution provisions of section 226.13(d) and (g) on the nature of the transaction. For example, if the of Regulation Z also apply, but not the other error transaction solely involves an extension of credit, resolution provisions of Regulation Z. and does not include a debit to a checking account (or other consumer asset account), the liability limitations and error resolution requirements of Regula- ORDERS ISSUED UNDER BANK HOLDING COMPANY tion Z apply. If the transaction debits a checking ACT account only (with no credit extended), the provisions of Regulation E apply. If the transaction debits Orders Issued Under Section 3 of the Bank Holding a checking account but also draws on an overdraft Company Act line of credit attached to the account, Regulation E's liability limitations apply, in addition to sections Bank Hapoalim, B.M. 226.13(d) and (g) of Regulation Z (which apply Tel Aviv, Israel because of the extension of credit associated with the overdraft feature on the checking account). If a con- Zohar Hashemesh Le 'Hashkaot Ltd. sumer's access device is also a credit card and the Tel Aviv, Israel device is used to make unauthorized withdrawals from a checking account, but also is used to obtain Hapoalim U.S.A. Holding Company, Inc. unauthorized cash advances directly from a line of New York, New York credit that is separate from the checking account, both Regulation E and Regulation Z apply. Arison Holdings (1998) Ltd. ii. The following examples illustrate these principles: Tel Aviv, Israel A. A consumer has a card that can be used either as a credit card or a debit card. When used as a debit Israel Salt Industries Ltd. card, the card draws on the consumer's checking Atlit, Israel account. When used as a credit card, the card draws only on a separate line of credit. If the card Order Approving Formation of Bank Holding Companies is stolen and used as a credit card to make pur- and Acquisition of a Bank chases or to get cash advances at an ATM from the line of credit, the liability limits and error Bank Hapoalim, B.M. ("Bank Hapoalim"), Zohar resolution provisions of Regulation Z apply; Reg- Hashemesh Le'Hashkaot Ltd. ("Zohar"), Hapoalim U.S.A. ulation E does not apply. Holding Company, Inc. ("Hapoalim U.S.A."), Arison B. In the same situation, if the card is stolen and is Holdings (1998) Ltd. ("Arison"), and Israel Salt Industries used as a debit card to make purchases or to get Ltd. ("Israel Salt") (collectively, "Applicants") have recash withdrawals at an ATM from the checking quested the Board's approval under section 3(a)(1) of the account, the liability limits and error resolution Bank Holding Company Act ("BHC Act") (12 U.S.C. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

328 Federal Reserve Bulletin • May 2001 § 1842(a)(1)) to become bank holding companies by ac- supervisory factors. The Board has reviewed information quiring control of all the voting shares of Signature Bank, provided by Bank Hapoalim, confidential supervisory and New York, New York ("Bank"), a de novo New York examination information, and publicly reported financial State-chartered bank.1 and other information in assessing the financial and mana- Notice of the application, affording interested persons an gerial strength of Bank Hapoalim and its subsidiaries. opportunity to comment, has been published (65 Federal Bank Hapoalim's capital ratios exceed the minimum levels Register 57,353; 69,537; and 70,570 (2000)). The time for that would be required under the Basle Capital Accord and filing comments has expired, and the Board has considered are considered equivalent to the capital that would be the application and all comments received in light of the required of a U.S. banking organization. In addition, the factors set forth in section 3 of the BHC Act. Board has reviewed supervisory information from the Bank Hapoalim, with consolidated assets of $52.8 bil- home country authorities responsible for supervising Bank lion, is the largest banking organization headquartered in Hapoalim concerning the proposal and the managerial re- Israel.2 Bank Hapoalim maintains three branches in New sources of Applicants, as well as reports of examination York, New York; a branch in Chicago, Illinois; an agency from the appropriate federal and state supervisors of the in Miami, Florida, and a representative office in San Fran- U.S. operations of Bank Hapoalim assessing its managerial cisco, California. Bank Hapoalim also engages in securi- resources. Based on all the facts of record, the Board ties brokerage activities in the United States. concludes that the financial and managerial resources and future prospects of Applicants and Bank are consistent Competitive Considerations with approval under section 3 of the BHC Act. Under section 3 of the BHC Act, the Board may not The proposal involves the formation and acquisition of a approve an application involving a foreign bank unless the de novo bank. The Board previously has noted that the bank is "subject to comprehensive supervision or regulaestablishment of a de novo bank enhances competition in tion on a consolidated basis by the appropriate authorities the relevant banking market and is a positive consideration in the bank's home country."5 The Supervisor of Banks, in an application under section 3 of the BHC Act.3 There is who heads the Banking Supervision Unit within the Bank no evidence in this case that the transaction would lessen of Israel, is the primary regulator of Israeli banks, includcompetition or create or further a monopoly in any relevant ing Bank Hapoalim. The Supervisor of Banks conducts market. Accordingly, the Board concludes that consumma- on-site examinations of Bank Hapoalim that cover areas tion of the proposal would not have a significantly adverse such as major lines of business, risk management, corpoeffect on competition or on the concentration of banking rate governance, compliance, asset quality, and transacresources in any relevant banking market, and that compet- tions with affiliates. These examinations include a review itive considerations are consistent with approval.4 of Bank Hapoalim's internal audit function and internal audit reports. Examinations by the Supervisor of Banks Financial, Managerial, and Supervisory Considerations include frequent targeted examinations of specific business lines or supervisory areas. Although the Bank of Israel The BHC Act requires the Board to consider the financial does not generally conduct on-site examinations of foreign and managerial resources and future prospects of the com- offices, the Supervisor of Banks reviews Bank Hapoalim's panies and banks involved in the proposal and certain foreign operations based on periodic reporting provided by Bank Hapoalim and information provided by host country supervisors. 1. The New York State Banking Department conditionally approved External auditors evaluate Bank Hapoalim's internal Bank's organization certificate on September 7, 2000. Bank would be controls and audit Bank Hapoalim's consolidated financial wholly owned by Hapoalim U.S.A., which is a wholly owned subsid- statements annually. Their comments and findings are proiary of Zohar. Hapoalim U.S.A. and Zohar are wholly owned subsidvided to the board of directors of Bank Hapoalim. The iaries of Bank Hapoalim. Arison and Israel Salt own 20.7 percent and 11.6 percent, respectively, of the voting shares of Bank Hapoalim. Supervisor of Banks reviews the findings of the external Arison and Israel Salt also are parties to a shareholder agreement auditors. among the owners of 42.5 percent of the voting shares of Bank Bank Hapoalim is subject to extensive reporting require- Hapoalim. Under this agreement, Arison and Israel Salt each have the ments and must provide reports to the Supervisor of Banks power under certain circumstances to control the voting of all the shares held by the parties to the agreement. As a result, Arison and Israel Salt each are considered to control Bank Hapoalim and have joined in the filing of this application. Arison and Israel Salt are each 5. 12 U.S.C. § 1842(c)(3)(B). As provided in Regulation Y, the qualifying foreign banking organizations under Regulation K. See Board determines whether a foreign bank is subject to consolidated 12 C.F.R. 211.23. home country supervision under the standards set forth in Regula- 2. Asset data are as of June 30, 2000, and use exchange rates then in tion K. 12 C.F.R. 225.13(a)(4). Regulation K provides that a foreign effect. Ranking data are as of November 1, 2000. bank may be considered subject to consolidated supervision if the 3. See Wilson Bank Holding Company, 82 Federal Reserve Bulletin Board determines that the bank is supervised or regulated in such a 568 (1996). manner that its home country supervisor receives sufficient informa- 4. After consummation of the proposal, New York would be the tion on the worldwide operations of the foreign bank, including the home state of Applicants and Bank for purposes of the BHC Act. relationships of the bank to its affiliates, to assess the foreign bank's Accordingly, the proposed transaction is not barred by section 3(d) of overall financial condition and compliance with law and regulation. the BHC Act. See 12 U.S.C. §§ 1841(o)(4) and 1842(d). 12 C.F.R. 211.24(c)(l)(ii). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 329 concerning, among other things, profit and loss, capital information on the operations of Bank Hapoalim and any adequacy, liquidity, asset quality, large exposures, currency of its affiliates that the Board deems necessary to determine positions, loans to related parties, investments in subsidiar- and enforce compliance with the BHC Act, the Internaies and affiliated companies, and controlling shareholders. tional Banking Act (12 U.S.C. § 3101 et seq.), and other Bank Hapoalim also must submit quarterly and annual applicable federal law. Each of Bank Hapoalim and its reports on overseas operations, as well as annual audited parents also has committed to cooperate with the Board to consolidated financial statements. The Supervisor of Banks obtain any waivers or exemptions that may be necessary to has the authority to require Bank Hapoalim, its directors, enable Bank Hapoalim to make such information available employees, or auditors to provide any information related to the Board. In light of these commitments and other facts to the bank's business and any corporation under the of record, the Board has concluded that Bank Hapoalim bank's control. has provided adequate assurances of access to any appro- The Supervisor of Banks has promulgated regulations priate information the Board may request. for banks limiting loans to one borrower or a group of For these reasons, and based on all the facts of record, borrowers under common control and limiting aggregate the Board has concluded that the supervisory factors it is exposure to the bank's six largest borrowers. In addition, required to consider under section 3(c) of the BHC Act are the Supervisor of Banks has imposed capital-based limits consistent with approval. on the amounts that a credit institution may invest overseas and in nonfinancial companies. Convenience and Needs Considerations With respect to affiliate transactions, a directive of the Supervisor of Banks limits the aggregate amount of Bank The Board also has carefully considered the effect of the Hapoalim's exposure to related parties to 10 percent of the proposal on the convenience and needs of the communities bank's capital. Additionally, the Supervisor of Banks re- to be served in light of all the facts of record. The Board quires that transactions between Bank Hapoalim and re- has long held that consideration of the convenience and lated parties be conducted on market terms. needs factor includes a review of the records of the rele- The Supervisor of Banks has statutory authority to re- vant depository institutions under the Community Reinvoke the license of a bank. In addition, the Supervisor of vestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). As Banks may restrict the business activities of a bank, forbid provided in the CRA, the Board evaluates the record of the distribution of dividends, and suspend or limit the performance of an institution in light of examinations by powers of directors or managers if an institution fails to the appropriate federal supervisors of the CRA perforfollow its remedial directives or if the Supervisor deter- mance records of the relevant institutions. An institution's mines the condition of the bank requires such actions. most recent CRA performance evaluation is a particularly Bank Hapoalim also is subject to laws and regulations important consideration in the applications process because issued by other Israeli government entities. As a company it represents a detailed, on-site evaluation of the instituwhose shares are listed on the Tel Aviv Stock Exchange tion's overall record of performance under the CRA by its ("TASE"), Bank Hapoalim is subject to laws and regula- appropriate federal supervisor.7 tions applicable to public companies and enforced by the One of Bank Hapoalim's New York branches (the "New TASE and the Israeli securities authority. Bank Hapoalim York Branch") is currently subject to the CRA. At its most and its affiliates are also subject to the jurisdiction of the recent examination for CRA performance, as of May 22, Tax Authorities, the Trade Practices Commission, and the 2000 (the "2000 Examination"), the New York Branch Registrar of Companies. The Bank of Israel may exchange received an overall rating of "satisfactory" from its prisupervisory information with these other authorities. mary federal regulator, the Federal Deposit Insurance Cor- Based on all the facts of record, the Board has concluded poration.8 The branch's levels of community development that Bank Hapoalim is subject to comprehensive supervi- lending, qualified investments and grants, and community sion and regulation on a consolidated basis by its home development services were all found to be adequate.9 country supervisor. As noted above, Bank is a newly chartered bank that has The BHC Act also requires the Board to determine that not yet begun operation. Bank Hapoalim's CRA plan calls the foreign bank has provided adequate assurances that it for Bank to engage in community development lending by will make available to the Board such information on its operations and activities and those of its affiliates that the Board deems appropriate to determine and enforce compli- 7. The Interagency Questions and Answers Regarding Community ance with the BHC Act.6 The Board has reviewed the Reinvestment provides that a CRA examination is an important and restrictions on disclosure in jurisdictions where Bank often controlling factor in the consideration of an institution's CRA record. See 65 Federal Register 25,088 and 25,107 (2000). Hapoalim has material operations and has communicated 8. The New York Branch is designated as a wholesale institution for with relevant government authorities concerning access to CRA purposes and is, therefore, evaluated under the community information. Each of Bank Hapoalim and its parents has development test. See 12 C.F.R. 345.25. committed that it will make available to the Board such 9. At its previous CRA examination, as of June 30, 1997, the New York Branch received a rating of "needs to improve." The 2000 Examination, however, found that the New York Branch had improved its CRA performance and merited a "satisfactory" CRA 6. See 12 U.S.C. § 1842(c)(3)(A). rating. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

330 Federal Reserve Bulletin • May 2001 extending credit to community development financial insti- The transaction shall not be consummated before the tutions ("CDFIs") that would make loans to nonprofit fifteenth calendar day after the effective date of this order, organizations funding affordable housing and economic or later than three months after the effective date of this development projects in Bank's assessment area.10 Bank order, unless such period is extended for good cause by the also would lend to community development corporations Board or the Federal Reserve Bank of New York, acting ("CDCs") and local development corporations ("LDCs") pursuant to delegated authority. in its assessment area. Bank's community development By order of the Board of Governors, effective March 26, investments would include nonmember deposits in credit 2001. unions in low- and moderate-income neighborhoods in New York City. Bank Hapoalim also expects Bank to make This action was taken pursuant to the Board's Rules Regarding grants to CDFIs, CDCs, and LDCs as it develops relation- Delegation of Authority (12 C.F.R. 265.4(b)(1)) by a committee of ships with them. Bank's services are expected to include Board members. Voting for this action: Chairman Greenspan and Governors Kelley and Meyer. Absent and not voting: Vice Chairman basic checking accounts and products designed for small Ferguson and Governor Gramlich. businesses and nonprofit organizations. Based on all the facts of record, including Bank Hapoal- ROBERT DEV. FRIERSON im's record of performance under the CRA, the Board Associate Secretary of the Board concludes that convenience and needs considerations are consistent with approval of the proposal. Orders Issued Under Sections 3 and 4 of the Bank Holding Company Act Conclusion Fifth Third Bancorp, Based on the foregoing, the Board has determined that the Cincinnati, Ohio application should be, and hereby is, approved. In reaching this conclusion, the Board has considered all the facts of Order Approving the Acquisition of a Bank Holding record in light of the factors that it is required to consider Company under the BHC Act and other applicable statutes.11 The Board's approval is specifically conditioned on compliance Fifth Third Bancorp ("Fifth Third"), a financial holding by Applicants with all the commitments made in connec- company within the meaning of the Bank Holding Comtion with the application, including the commitments dis- pany Act ("BHC Act"), has requested the Board's apcussed in this order and the conditions set forth in this proval under section 3 of the BHC Act (12 U.S.C. § 1842) order and the above-noted Board regulations and orders, to acquire Old Kent Financial Corporation, Grand Rapids and on the Board's receiving access to information on the ("Old Kent"), also a financial holding company, and operations or activities of Applicants and any of their thereby acquire Old Kent's subsidiary banks: Old Kent affiliates that the Board determines to be appropriate to Bank, its lead subsidiary bank, also in Grand Rapids, and determine and enforce compliance with applicable federal Old Kent Bank, N.A., Jonesville, all in Michigan. Fifth statutes and regulations by Applicants and their affiliates. Third proposes to acquire Old Kent through a merger with For the purpose of this action, the commitments relied on a newly formed direct subsidiary of Fifth Third, Fifth Third by the Board in reaching its decision are deemed to be Financial Corporation, Cincinnati ("FTFC").1 Fifth Third conditions imposed in writing by the Board in connection also has requested the Board's approval under section 3 of with its findings and decision and, as such, may be en- the BHC Act for FTFC to become a bank holding company forced in proceedings under applicable law. by acquiring Old Kent and has filed with the Board an election for FTFC to become a financial holding company pursuant to section 4(k) and (1) of the BHC Act (12 U.S.C. § 1843(k) and (1)) and section 225.82 of the Board's 10. Bank Hapoalim has identified Bank's assessment area for CRA Regulation Y (12 C.F.R. 225.82).2 purposes to be Bronx, Kings, New York, and Queens Counties in New York State. 11. The Board notes that, in a report dated June 22, 2000, the Financial Action Task Force, an intergovernmental body that develops and promotes policies to combat money laundering, identified Israel 1. In addition, Fifth Third has requested the Board's approval to as having certain deficiencies in its anti-money laundering policies exercise an option to acquire up to 19.9 percent of Old Kent's voting and procedures. In connection with this action, the U.S. Department of shares if certain events occur. The option would expire on consummathe Treasury's Financial Crimes Enforcement Network ("FinCEN") tion of the proposal. issued an advisory concerning potential problems that could arise in 2. Fifth Third initially would hold the subsidiary banks of Old Kent dealing with banks in Israel in light of the lack of adequate anti-money as direct subsidiaries of FTFC. Fifth Third has informed the Board laundering policies. Since that time, Israel has enacted anti-money that it might reorganize the branch structure of some of its subsidiary laundering legislation and issued implementing regulations to address banks through consolidations, mergers, and purchase and assumption these deficiencies, including adopting requirements that banks report transactions after the Board's decision on the current applications and suspicious transactions and maintain records of customer transactions. notices, and that it would make the necessary filings and request the In light of these and other actions taken by Israel to strengthen its Board's prior approval for any such reorganization under secanti-money laundering policies and procedures, the Board believes tion 18(c) of the Federal Deposit Insurance Act (12 U.S.C. § 1828(c)) that the application may be approved. and section 9 of the Federal Reserve Act (12 U.S.C. § 321). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 331 In addition, Fifth Third and FTFC (collectively, "Fifth met.6 For purposes of the BHC Act, the home state of Fifth Third") have requested the Board's approval under sec- Third is Ohio, and Old Kent's subsidiary banks are located tion 4(c)(8) and (j) of the BHC Act (12 U.S.C. § 1843(c)(8) in Illinois, Indiana, and Michigan.7 and (j)) to acquire all the nonbanking subsidiaries of Old All the conditions for an interstate acquisition enumer- Kent and thereby engage in certain nonbanking activities.3 ated in section 3(d) of the BHC Act are met in this case.8 In addition, Fifth Third has provided notice under section Fifth Third is adequately capitalized and adequately man- 25 of the Federal Reserve Act (12 U.S.C. § 601 et seq.) aged, as defined by applicable law.9 Each subsidiary bank and the Board's Regulation K (12 C.F.R. Part 211) of its of Old Kent located in a state with a minimum age requireintention to acquire the agreement corporation subsidiary ment has been in existence and operated continuously for of Old Kent. at least the period of time required by applicable state Notice of the proposal, affording interested persons an law.10 On consummation of the proposal and after accountopportunity to submit comments, has been published (66 ing for the proposed divestitures, Fifth Third and its affili- Federal Register 110 and 7,490 (2001)). The time for filing ates would control less than 30 percent, or the applicable comments has expired, and the Board has considered the percentage established by state law, of total deposits held proposal and all comments received in light of the factors by insured depository institutions in each state in which the set forth in the BHC Act and the Federal Reserve Act. insured depository institutions of both Fifth Third and Old Fifth Third, with total consolidated assets of approxi- Kent are located.11 All other requirements of section 3(d) mately $44.7 billion, is the 24th largest commercial bank- would be met in this case. Accordingly, based on all the ing organization in the United States.4 Fifth Third operates facts of record, the Board is permitted to approve the subsidiary depository institutions in Arizona, Florida, Ken- proposal under section 3(d) of the BHC Act. tucky, Indiana, Illinois, Michigan, and Ohio. Fifth Third is the second largest commercial banking organization in Competitive Considerations Ohio, controlling deposits of $16.4 billion, representing approximately 10 percent of total deposits in insured de- Section 3 of the BHC Act prohibits the Board from approvpository institutions in the state ("state deposits").5 In ing a proposal that would result in a monopoly or would be Michigan, Fifth Third is the 14th largest commercial bank- in furtherance of any attempt to monopolize the business of ing organization, controlling deposits of $1.2 billion, repre- banking in any relevant market. The BHC Act also prohibsenting approximately 1 percent of state deposits. its the Board from approving a proposed bank acquisition Old Kent, with total consolidated assets of $22.2 billion, that would substantially lessen competition in any relevant is the 41st largest commercial banking organization in the banking market, unless the Board finds that the anticom- United States. Old Kent operates subsidiary depository petitive effects of the proposal are clearly outweighed in institutions in Illinois, Indiana, and Michigan. Old Kent is the public interest by the probable effect of the proposal in the fourth largest commercial banking organization in meeting the convenience and needs of the community to be Michigan, controlling deposits of $10.7 billion, represent- served.12 ing approximately 9.1 percent of state deposits. Fifth Third and Old Kent compete directly in eight local On consummation of the proposal and after accounting banking markets in Michigan and Indiana.13 The Board has for the proposed divestitures in this order, Fifth Third reviewed carefully the competitive effects of the proposal would become the 21st largest commercial banking organi- in each of these markets in light of comments received and zation in the United States, with total consolidated assets of all the facts of record.14 In particular, the Board has consid- $66.9 billion, representing approximately 1.1 percent of ered the number of competitors that would remain in the total banking assets of commercial banks in the United markets, the relative share of total deposits in depository States. Fifth Third would become the third largest commer- institutions in the markets ("market deposits") controlled cial banking organization in Michigan, controlling deposits of $1.8 billion, representing approximately 10.1 percent of state deposits. 6. See 12 U.S.C. § 1842(d). A bank holding company's home state is the state in which the total deposits of all banking subsidiaries of Interstate Analysis such company were the largest on the later of July 1, 1966, or the date on which the company became a bank holding company. 12 U.S.C. § 1842(o)(4)(C). Section 3(d) of the BHC Act allows the Board to approve 7. For purposes of section 3(d) of the BHC Act, the Board considers an application by a bank holding company to acquire a bank to be located in the states in which the bank is chartered, control of a bank located in a state other than the home headquartered, or operates a branch. state of the bank holding company if certain conditions are 8. See 205 111. Comp. Stat. Ann. 10/3.071(i)(l) (West 2000); Ind. Code. Ann. § 28-2-16-17 (Michie 2000); Mich. Comp. Laws § 23.710(11104) (8) (2000). 9. See 12 U.S.C. § 1842(d)(1)(A). 10. See 12 U.S.C. § 1842(d)(1)(B). 3. These nonbanking activities are listed in Appendix A. 11. See 12 U.S.C. § 1842(d)(2)(B). 4. Asset and ranking data are as of June 30, 2000. 12. See 12 U.S.C. § 1842(c)(1). 5. Deposit and ranking data are as of June 30, 2000. In this context, 13. These banking markets are described in Appendix B. depository institutions include commercial banks, savings banks, and 14. Two commenters expressed concern that the proposal would savings associations. have anticompetitive effects in certain banking markets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

332 Federal Reserve Bulletin • May 2001 by Fifth Third and Old Kent,15 the concentration level of Fifth Third and Old Kent compete directly in four bankmarket deposits and the increase in this level as measured ing markets in Michigan where the proposal would result by the Herfindahl-Hirschman Index ("HHI") under the in concentration levels that warrant a more detailed review Department of Justice Merger Guidelines ("DOJ Guide- under the DOJ Guidelines and Board precedent: Holland, lines"),16 other characteristics of the markets, and commit- Benton Harbor-St. Joseph ("Benton Harbor"), Grand Rapments made by Fifth Third to divest certain branches.17 ids, and Ludington. In each of these banking markets, the Consummation of the proposal without divestitures Board has carefully considered whether other factors either would be consistent with Board precedent and the DOJ mitigate the competitive effects of the proposal in the Guidelines in the Allegan, Michigan and the Elkhart-Niles- market or indicate that the proposal would have a signifi- South Bend, Michigan/Indiana banking markets.18 After cantly adverse effect on competition in the market. The consummation of the proposal, these banking markets number and strength of factors necessary to mitigate the would remain moderately concentrated as measured by the competitive effects of a proposal depend on the level of HHI. concentration and size of the increase in market concentra- To reduce the potential for adverse effects on competi- tion.21 tion in four of the remaining six Michigan markets in Holland. Fifth Third operates the fourth largest deposiwhich Fifth Third and Old Kent compete directly, Fifth tory institution in the Holland banking market, controlling Third has committed to divest six branches that account for deposits of $202.3 million, representing approximately approximately $203.6 million in deposits.19 In light of the 13.6 percent of market deposits. Old Kent operates the proposed divestitures, consummation of the proposal second largest depository institution in the market, controlwould be consistent with Board precedent and the DOJ ling deposits of $308.1 million, representing approximately Guidelines in the Fremont-Newaygo and Muskegon-Grand 20.7 percent of market deposits. To reduce the potential for Haven banking markets.20 adverse competitive effects in this banking market, Fifth Third has committed to divest two branches in the market, with total deposits of $82.3 million, representing approxi- 15. Market share data are as of June 30, 2000, and are based on mately 5.5 percent of market deposits, to an out-of-market calculations in which the deposits of thrift institutions are included at commercial banking organization or an in-market commer- 50 percent, except as discussed in this order. The Board previously has indicated that thrift institutions have become, or have the potential to cial banking organization that currently controls less than become, significant competitors of commercial banks. See, e.g., Mid- 2 percent of market deposits. After the proposed merger west Financial Group, 75 Federal Reserve Bulletin 386 (1989); and divestiture, Fifth Third would operate the largest de- National City Corporation, 70 Federal Reserve Bulletin 743 (1984). pository institution in the market, controlling deposits of Thus, the Board regularly has included thrift deposits in the market $428.1 million, representing 28.7 percent of market deposshare calculation on a 50-percent weighted basis. See, e.g., First Hawaiian, Inc., 77 Federal Reserve Bulletin 52 (1991). its. The HHI would increase by not more than 260 points 16. Under the DOJ Guidelines, 49 Federal Register 26,823 (1984), and would not exceed 1962.22 a market is considered moderately concentrated if the post-merger Several factors indicate that the increase in concentration HHI is between 1000 and 1800 and highly concentrated if the postin the Holland banking market as measured by the HHI merger HHI is more than 1800. The Department of Justice has informed the Board that a bank merger or acquisition generally will does not reflect a significantly adverse effect on competinot be challenged (in the absence of other factors indicating anticom- tion. Many financial institutions, relative to the size of total petitive effects) unless the post-merger HHI is at least 1800 and the market deposits, would continue to compete in this market. merger increases the HHI by more than 200 points. The Department At least ten commercial banking organizations besides of Justice has stated that the higher than normal HHI thresholds for Fifth Third and one thrift institution would remain in the screening bank mergers for anticompetitive effects implicitly recognize the competitive elfects of limited-purpose lenders and other market after consummation of the proposal. At least two nondepository financial institutions. other banking organizations would each control more than 17. With respect to each market in which Fifth Third has committed 14 percent of market deposits, including a large multistate to divest offices to mitigate the anticompetitive effects of the proposal, banking organization with $416.2 million in deposits, rep- Fifth Third has committed to execute, before consummation of the proposal, a sales agreement for the proposed divestitures with a resenting 27.9 percent of market deposits. In addition, purchaser determined by the Board to be competitively suitable and to three other banking organizations each would control more complete the divestitures within 180 days after consummation of the than 5 percent of market deposits, and three other large proposal. Fifth Third also has committed that, if it is unsuccessful in multistate banking organizations would remain in the marcompleting any divestiture within 180 days after consummation of the ket after consummation. acquisition of Old Kent, Fifth Third will transfer the unsold branch(es) to an independent trustee that is acceptable to the Board and will instruct the trustee to sell the branch(es) promptly to one or more alternative purchasers acceptable to the Board. See BankAmerica Corporation, 78 Federal Reserve Bulletin 338 (1992); United New Mexico Financial Corporation, 77 Federal Reserve Bulletin 484 discussed in the Appendix, the transaction would result in no increase (1991). in the HHI in the Fremont-Newaygo banking market, and the increase 18. The effects of the proposal on the concentration of banking in the HHI in the Muskegon-Grand Haven banking market would be resources in these markets are described in Appendix C. within the threshold levels in the DOJ Guidelines. 19. These markets are Muskegon-Grand Haven, Fremont-Newaygo, 21. See NationsBank Corporation, 84 Federal Reserve Bulletin 129 Holland, and Benton-Harbor, all in Michigan. (1998). 20. The effects of the proposal on the concentration of banking 22. If Fifth Third were to divest the relevant Holland branches to an resources in the banking markets are described in Appendix D. As out-of-market firm, the HHI would increase by 244 points to 1946. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 333 The significant recent entries into the Holland banking addition, two large multistate banking organizations would market confirm that the market is attractive for entry. Since remain in the banking market and control 5.4 and 12 1997, two de novo banking organizations have been orga- percent of market deposits. nized and chartered in the banking market. Although these The Benton Harbor banking market also had de novo banking organizations did not begin to compete in the entry in recent years. Since 1997, two banking organizamarket until November 1997 and October 1998, they al- tions have entered the Benton Harbor banking market by ready are the third and fifth largest banking organizations, opening de novo branches, and nine banking organizations respectively, in the banking market, as measured by depos- have entered the market through the acquisition of its. In addition, five banking organizations have entered the branches. Other factors also indicate that the Benton Har- Holland banking market by opening de novo branches bor market is attractive for entry. From 1996 to 1999, the since 1997, and three other banking organizations besides percentage increase in per capita income in Van Buren and Fifth Third have entered the market through acquisitions. Berrien Counties, portions of which are in the Benton Other factors indicate that the Holland banking market is Harbor banking market, exceeded the average Metropoliattractive for entry. For example, from 1996 to 1999, the tan Statistical Area ("MSA") counties in Michigan. In percentage increase in total market deposits in the Holland addition, the percentage increase in total market deposits in banking market exceeded the percentage increase in total Van Buren County exceeded the average percentage indeposits statewide. During that same time period, the per- crease for all MSA counties in Michigan during the same centage increase in population in the Holland market ex- time period. The Board also has considered the competitive ceeded that of the state by almost 6 percent.23 effect of credit unions operating in the Benton Harbor The Board has concluded that these considerations and banking market. Five credit unions control approximately other factors mitigate the potential adverse competitive 21 percent of the market deposits and offer a full range of effects of the proposal in the Holland banking market. retail banking products. The largest credit union, which Benton Harbor. Fifth Third operates the second largest controls approximately 13 percent of market deposits, depository institution in the Benton Harbor banking mar- would be the third largest competitor in the market. ket, controlling deposits of $319.8 million, representing The Board has concluded that these considerations and approximately 23.1 percent of market deposits. Old Kent other factors mitigate the potential adverse competitive effects operates the fourth largest depository institution in the of the proposal in the Benton Harbor banking market. market, controlling deposits of $146.9 million, represent- Grand Rapids. Fifth Third, which did not enter the ing approximately 10.6 percent of market deposits. To Grand Rapids banking market until December 2000 by reduce the potential for adverse competitive effects in this acquiring a thrift institution, operates the eighth largest banking market, Fifth Third has committed to divest two depository institution in the market, controlling deposits of branches with total deposits of $63.8 million, representing $261 million, representing only 2.9 percent of market approximately 4.6 percent of market deposits, to an out-of- deposits. Old Kent, which is headquartered in Grand Rapmarket commercial banking organization or an in-market ids, operates the largest depository institution in the marcommercial banking organization that currently controls ket, controlling deposits of $4.2 billion, representing apless than 2 percent of market deposits. After the proposed proximately 46.7 percent of market deposits. After merger and divestiture, Fifth Third would operate the sec- consummation of the proposal, Fifth Third would operate ond largest depository institution in the market, controlling the largest depository institution in the market, controlling deposits of $402.8 million, representing 29.1 percent of deposits of $4.5 billion, representing 49.5 percent of marmarket deposits. The HHI would increase by not more than ket deposits. The HHI would increase by 268 points to 239 points and would not exceed 2699.24 2713. Several mitigating factors indicate that the increase in Although the structural effects as measured by the HHI market concentration in the Benton Harbor banking mar- would be sizeable, the Board finds that a number of factors ket, as measured by the HHI, does not reflect a signifi- mitigate the potential anticompetitive effects of the transaccantly adverse effect on competition. Many financial insti- tion. In this proposal, a competitor that only has a very tutions, relative to the size of total market deposits, would small presence in the market and that only recently entered continue to compete in this market. At least seven commer- the Grand Rapids market is acquiring the longstanding cial banking organizations besides Fifth Third and two largest competitor. The presence of numerous other deposthrift institutions would remain in the market after consum- itory institution competitors also is an important considermation of the proposal. One of the commercial banking ation in this market. Twenty-five other commercial bankorganizations would remain the largest depository institu- ing organizations, including five multistate organizations, tion in the market, with 40.3 percent of market deposits. In each with at least 20 branch offices in the market, and two thrift institutions would remain after consummation of the proposal. A large multistate bank holding company would 23. From 1996 to 1999, the population in the Holland banking remain the second largest depository institution in the market increased by 7.1 percent, while the population of Michigan market, controlling more than 11 percent of market deposincreased by 1.3 percent. its, and two other large multistate banking organizations 24. If Fifth Third were to divest the relevant Benton Harbor would each control between 5 percent and 10 percent of branches to an out-of-market firm, the HHI would increase by 222 market deposits. points to 2682. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

334 Federal Reserve Bulletin • May 2001 In addition, the attractiveness of the Grand Rapids bank- by this organization should be weighted at 100 percent in ing market is demonstrated by the significant new entry in calculating market concentration under the DOJ Guiderecent years. Four de novo commercial banks have been lines.26 organized in the Grand Rapids banking market since 1995, The presence and competitive strength of other bank including one organized in December 1997 that already is competitors is an important factor in this market. After the fifth largest depository institution with more than consummation of the proposal, six depository institutions $362 million in market deposits. In addition, five commer- besides Fifth Third would compete in the market, including cial banks and one thrift institution have entered the Grand two large multistate banking organizations. The largest Rapids banking market since 1995 by opening de novo competitor in the banking market would control more than branches, and four other commercial banking organiza- 27.8 percent, and two other commercial banking organizations besides Fifth Third have entered the market through tions would each control more than 10 percent of market branch acquisitions. Other factors indicate that the Grand deposits. Further, two of the three other remaining commer- Rapids banking market is attractive for entry. For example, cial banking organizations would each control more than 9 the statistics for Kent County have exceeded the averages percent of market deposits. for all MSA counties in Michigan, in recent years, with In addition, factors indicate that the Ludington market is respect to total deposits per banking office, per capita attractive for entry. For example, the averages for the income, and percentage increases in market population, counties in the Ludington banking market have exceeded market deposits, and per capita income. the averages for all non-MSA counties in Michigan, in Based on all the facts of record, the Board concludes that recent years, with respect to the following statistical catethese considerations, including the number and strength of gories: population per banking office, total deposits per competitors in the market, the significant recent de novo banking office, and percentage increases in total market entry in the market, the attractiveness of the market for deposits, market population, and per capita income. future entry by out-of-market competitors, and other fac- The Board has concluded that these considerations and tors, mitigate the potentially adverse competitive effects of other factors mitigate the potential adverse competitive the proposal in the Grand Rapids banking market.25 effects of the proposal in the Ludington banking market. Ludington. Fifth Third operates the seventh largest de- The Department of Justice also has conducted a detailed pository institution in the Ludington banking market, con- review of the anticipated competitive effect of the proposal trolling deposits of $45.3 million, representing approxi- and has advised the Board that, in light of the proposed mately 8.7 percent of market deposits. Old Kent operates divestitures, consummation of the proposal would not have the second largest depository institution in the market, a significantly adverse effect on competition in any relecontrolling deposits of $80.8 million, representing approx- vant banking market. The Office of the Comptroller of the imately 15.5 percent of market deposits. After the pro- Currency ("OCC") and the Federal Deposit Insurance posed merger, Fifth Third would operate the second largest Corporation ("FDIC") have been afforded an opportunity depository institution in the market, controlling deposits of to comment and have not objected to consummation of the $126.1 million, representing 24.7 percent of market depos- proposal. its. The HHI would increase by 282 points to 1904. After carefully reviewing all the facts of record, includ- Several factors suggest that this increase in market con- ing public comments on the competitive effects of the centration in the Ludington banking market as measured proposal, and for the reasons discussed above and in the by the HHI does not reflect a significantly adverse effect on appendices, the Board has concluded that consummation of competition in the market. The Board has considered that the proposal would not result in a significantly adverse one savings association operating in the market serves as a effect on competition or on the concentration of banking significant source of commercial loans and provides a resources in any of the eight markets in which Fifth Third broad range of consumer, mortgage, and other banking and Old Kent compete directly or in any other relevant products. Competition from this savings association closely banking market.27 Accordingly, based on all the facts of approximates competition from a commercial bank. Ac- record and subject to completion of the proposed divesticordingly, the Board has concluded that deposits controlled 26. The Board previously has indicated that it may consider the competitiveness of a saving association at a level greater than 25. Fifth Third contends that, for purposes of evaluating the compet- 50 percent of the savings association's deposits, if appropriate. See, itive factors in the Grand Rapids market, the Board should exclude e.g., Banknorth Group, Inc., 75 Federal Reserve Bulletin 703 (1989). certain categories of Old Kent's deposits, primarily brokered certifi- On consummation of the proposal, and after taking into account the cates of deposits. The Board continues to believe that deposits main- deposits controlled by this thrift, the HHI would increase by 268 tained by a banking organization in a specific market, including points to 1830. deposits generated outside the market, represent an important measure 27. One commenter criticized Fifth Third for not identifying the of the banking organization's capacity to compete in that market. See, specific branches that it would divest in connection with the proposal e.g., First Security Corporation, 86 Federal Reserve Bulletin 122 in the nonconfidential portion of its application during the comment (2000). The Board has adjusted market indices to account for certain period and indicated that this omission hindered the commenter's types of deposits only under very limited circumstances, such as when ability to submit views on the competitive effects of the proposal. The the bank holding company was limited by law, contract, or duration of Board has concluded that the publicly available information provided relationship in its ability to use the deposits for any activity other than by Fifth Third on the proposal is sufficient for interested persons to supporting the deposit account. evaluate and comment on the competitive effects of the proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 335 tures, the Board has determined that competitive factors the convenience and needs of the communities to be served are consistent with approval of the proposal. and to take into account the records of the relevant depository institutions under the Community Reinvestment Act Financial, Managerial, and Other Supervisory Factors ("CRA").29 The CRA requires the federal financial supervisory agencies to encourage financial institutions to help Section 3 of the BHC Act requires the Board to consider meet the credit needs of local communities in which they the financial and managerial resources and future prospects operate, consistent with safe and sound operation, and of the companies and banks involved in the proposal and requires the appropriate federal financial supervisory other supervisory factors. The Board has carefully consid- agency to take into account an institution's record of ered these factors in light of all the facts of record, includ- meeting the credit needs of its entire community, including ing public comments, reports of examination, other confi- low- and moderate-income ("LMI") neighborhoods, in dential supervisory information assessing the financial and evaluating bank expansion proposals. The Board has caremanagerial resources of the organizations, and other infor- fully considered the convenience and needs factor and the mation provided by Fifth Third and Old Kent.28 CRA performance records of the subsidiary depository In evaluating financial factors in expansion proposals by institutions of Fifth Third and Old Kent in light of all the a banking organization, the Board consistently has consid- facts of record, including public comments received on the ered capital adequacy to be especially important. Fifth effect the proposal would have on the communities to be Third, Old Kent, and each of their subsidiary depository served by the combined organization. institutions are, and on consummation of the proposed transaction would remain, well capitalized and the earnings A. Summary of Public Comments of each company have been strong. The proposed acquisition is structured as an exchange of shares of Fifth Third The Board received timely comments on the proposal from for shares of Old Kent, and Fifth Third would not incur any 17 commenters. Fourteen supported the proposal or comdebt as a result of the transaction. mented favorably on Fifth Third's or Old Kent's CRA- The Board also has considered the managerial resources related activities. Many of these commenters commended of Fifth Third and Old Kent and the examination records of Fifth Third's efforts to increase lending in LMI and prethose organizations and their subsidiary depository institu- dominantly minority communities, including through activtions by the appropriate federal financial supervisory agen- ities such as homebuyer training seminars, community cies. Fifth Third, Old Kent, and their subsidiary depository development grants, and financial, strategic, and technical institutions are well managed and have appropriate risk assistance to community development organizations. For management systems in place. The Board also has consid- example, one local government agency and three private ered the plans of Fifth Third to implement the proposed organizations involved in community development in Akacquisition, including its available managerial resources. ron, Ohio, commented favorably on their experiences with The Board has considered that Fifth Third recently ac- Fifth Third. They noted that Fifth Third has provided quired other bank holding companies and that Fifth Third's below-market rate loans to build and renovate homes in management successfully integrated the acquired institu- Akron for LMI families, helped community development tions into its existing operations. groups expand their activities and services, and provided Based on all the facts of record, including confidential numerous grants and scholarships to LMI individuals. reports of examination and other supervisory information, Other favorable comments commended Fifth Third's acthe Board has concluded that considerations relating to the tive participation in community development efforts in financial and managerial resources and future prospects of Columbus and Springfield, Ohio, and Lexington, Ken- Fifth Third, Old Kent, and their respective subsidiary de- tucky. pository institutions are consistent with approval, as are the Three commenters opposed the proposal and expressed other supervisory factors that the Board must consider concerns about the CRA performance records of Fifth under section 3 of the BHC Act. Third or Old Kent. Commenters criticized the level of banking services that Fifth Third and Old Kent provided to Convenience and Needs Considerations LMI or predominantly minority neighborhoods, expressed concerns about their records of providing home mortgage In acting on a proposal under section 3 of the BHC Act, the loans to minorities in the communities they serve, or re- Board is required to consider the effects of the proposal on quested that the Board approve the proposal subject to conditions suggested by the commenters.30 Two comment- 28. One commenter criticized Fifth Third for not disclosing in its application an agreement it reached with the U.S. Department of 29. 12 U.S.C. §2901 et seq. Labor in March 2000 to resolve allegations of race and gender 30. Commenters requested that Fifth Third provide certain commitdiscrimination at the company. The Board previously has noted that ments, take certain actions, and answer certain questions, or that the the racial composition of a company's management or work force is Board impose specific CRA performance-related conditions. The not among the factors the Board is authorized to consider under the Board notes that the CRA requires that, in considering an acquisition BHC Act. See, e.g., Deutsche Bank AG, 85 Federal Reserve Bulletin proposal, the Board carefully review the actual performance records 509 (1999). of the relevant depository institutions in helping to meet the credit Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

336 Federal Reserve Bulletin • May 2001 ers also expressed concerns about the level of Fifth Third's "satisfactory" ratings at the most recent examinations of community development activity. In addition, two com- their CRA performance. In particular, Old Kent Bank, menters alleged that Fifth Third and Old Kent engaged in Grand Rapids, which is Old Kent's lead bank and now disparate treatment of minority individuals in home mort- represents approximately 98.3 percent of the total consoligage lending, based on data submitted under the Home dated assets controlled by Old Kent, received a "satisfacto- Mortgage Disclosure Act ("HMDA").31 ry" rating at its most recent CRA performance evaluation by the Federal Reserve Bank of Chicago, as of August 9, B. CRA Performance Examinations 1999.35 Examiners found no evidence of prohibited discrimina- As provided in the CRA, the Board has evaluated the tion or other illegal credit practices at any of the insured convenience and needs factor in light of examinations by depository institutions involved in this proposal and found the appropriate federal supervisors of the CRA perfor- no violations of substantive provisions of the fair lending mance records of the relevant insured depository institu- laws. Examiners also reviewed the assessment areas delintions. An institution's most recent CRA performance eval- eated by the subsidiary banks of Fifth Third and Old Kent uation is a particularly important consideration in the and did not report that these assessment areas were unreaapplications process because it represents a detailed, on- sonable or arbitrarily excluded LMI areas.36 site evaluation of the institution's overall record of perfor- In recent years, Fifth Third has acquired other banking mance under the CRA by its appropriate federal supervi- organizations and consolidated their subsidiary banks. The sor.32 most recent CRA performance evaluations of Fifth Third's All the subsidiary insured depository institutions of Fifth subsidiary banks predated the current structure of the orga- Third received either "outstanding" or "satisfactory" rat- nization. Old Kent also has acquired other banking organiings at the most recent examinations of their CRA perfor- zations since the most recent CRA performance evaluamance. In particular, Fifth Third's lead bank, Fifth Third tions of its subsidiary banks. Therefore, the Board also has Bank, Cincinnati, Ohio ("Fifth Third Bank"), which cur- evaluated substantial information submitted by Fifth Third rently accounts for approximately 71.2 percent of the total and Old Kent concerning their CRA performance since the consolidated assets of Fifth Third,33 received a "satisfacto- dates of their most recent performance evaluations. ry" rating at its most recent CRA performance evaluation by the Federal Reserve Bank of Cleveland, as of March 8, C. Fifth Third's CRA Performance Record 1999.34 All the subsidiary banks of Old Kent also received In the most recent CRA performance evaluations of Fifth Third's subsidiary insured depository institutions, examinneeds of their communities. Neither the CRA nor the federal banking ers commended the depository institutions for their responagencies' CRA regulations require depository institutions to make siveness to the credit needs in the communities they serve, pledges concerning future performance under the CRA. The Board particularly with respect to the percentages of loans the also notes that future activities of Fifth Third's subsidiary depository institutions will be reviewed by the appropriate federal financial supervisors in future performance examinations, and that such CRA performance records will be considered by the Board in any subse- "satisfactory" rating from FRB SL, as of March 8, 1999; and Fifth quent applications by Fifth Third to acquire a depository institution. Third Bank, Southwest, F.S.B., Scottsdale, Arizona—"satisfactory" 31. 12 U.S.C. § 2801 etseq. rating from the Office of Thrift Supervision, as of February 22, 2000. 32. See Interagency Questions and Answers Regarding Community Fifth Third Bank, Indianapolis, Indiana ("Fifth Third Bank IN"), Reinvestment, 65 Federal Register 25,088 and 25,107 (2000). which received a "satisfactory" rating from FRB of Chicago, as of 33. Total consolidated asset data for Fifth Third and Old Kent are as March 8, 1999, was merged into Civitas Bank in March 2000. The of December 31, 2000, and include acquisitions by both companies as resulting institution was named "Fifth Third Bank, Indiana" and its of that date, except Fifth Third's acquisition of Capital Holdings, Inc. headquarters were relocated to St. Joseph. 34. Fifth Third Bank is the surviving bank from Fifth Third's A commenter contended that Fifth Third Bank of Northeastern consolidation of its Ohio subsidiary banks in December 2000. The Ohio, Cleveland, Ohio, a predecessor bank of Fifth Third Bank, N.A., predecessor banks involved in the Ohio consolidation were Fifth was not examined for CRA performance. This bank was merged into Third Bank of Western Ohio, Dayton; Fifth Third Bank of Central Fifth Third Bank, N.A., in March 1998, and its CRA performance was Ohio, Columbus; Fifth Third Bank of Northwestern Ohio, N.A., reviewed by the OCC as part of that bank's most recent CRA Toledo ("Fifth Third Bank, N.A."); and Fifth Third Bank, Ohio performance evaluation in March 1999. Valley, Hillsboro, all in Ohio. Each of these banks received a "satis- 35. Old Kent's other bank subsidiary, Old Kent Bank, N.A., refactory" rating from the Federal Reserve Bank of Cleveland, as of ceived a "satisfactory" rating at its most recent CRA performance March 8, 1999, except for Fifth Third Bank, N.A., which received a evaluation by the OCC, as of April 12, 1999. "satisfactory" rating from the OCC, as of February 17, 1998. 36. Using information submitted by Old Kent, a commenter noted Fifth Third's other subsidiary insured depository institutions and that Old Kent Bank deleted low-income census tracts from its Ann their CRA performance evaluation ratings are: Fifth Third Bank, Arbor MSA assessment area. The Board has considered this comment Indiana, St. Joseph, Michigan (the former Civitas Bank, Evansville, in light of the fact that Old Kent Bank closed its Ann Arbor banking Indiana)— "satisfactory" rating from the Federal Reserve Bank of center in 1999, which was the only Old Kent banking center in the Chicago ("FRB Chicago"), as of August 9, 1999; Fifth Third Bank of county where Ann Arbor is located, Washtenaw County. Accordingly, Florida, Naples, Florida—"satisfactory" rating from the Federal Re- Old Kent Bank modified its assessment area by eliminating the serve Bank of Atlanta, as of October 28, 1996; Fifth Third Bank of 81 census tracts in the county, including 55 middle- and upper-income Kentucky, Louisville, Kentucky—"outstanding" rating from Federal census tracts. Since its CRA performance evaluation in 1999, Old Reserve Bank of St. Louis ("FRB SL"), as of March 22, 1999; Fifth Kent has increased the total number of branches in LMI census tracts Third Bank of Northern Kentucky, Florence, Kentucky— in other areas from 28 to 35. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 337 institutions made in their assessment areas. Examiners subsidiary banks provided a significant level of qualified commented favorably on efforts by Fifth Third's insured community development investments or grants or made depository institutions to increase consumer and mortgage significant use of innovative and complex investments to lending to LMI borrowers. Examiners uniformly reported support community development initiatives.39 that Fifth Third's depository institutions offered an array of Although the composition of community development innovative lending products to enhance their ability to investments or grants used by Fifth Third's banks to meet meet the credit needs of their assessment areas, including the needs of their assessment areas varied, examiners gen- LMI areas, and noted the depository institutions' extensive erally noted two corporate community development investuse of innovative and flexible lending criteria. ment vehicles: the Fifth Third Foundation ("FTF") and the Fifth Third has implemented the Good Neighbor home Fifth Third Community Development Corporation mortgage loan program, which provides flexible, afford- ("CDC").40 For each Fifth Third depository institution, the able home purchase loans for LMI borrowers, no or re- FTF manages a charitable trust that is funded from the duced downpayments, higher debt-to-income ratios, re- institution's profits to provide grants and contributions to duced closing costs, and a homebuyer training course. the community and to neighborhood, health and human Examiners noted that, as of their latest CRA performance services, educational, and cultural organizations. The CDC evaluations, Fifth Third's depository institutions provided makes community development investments through lowloans under this program totaling more than $37 million. income housing tax credits and small business venture Fifth Third stated that, from May 1999 through year-end capital equity funds. These equity funds invest primarily in 2000, mortgage loans provided through its Good Neighbor small businesses in the assessment areas of Fifth Third's mortgage loan program totaled more than $268 million. To insured depository institutions. increase home mortgage and consumer lending to LMI In the 1999 CRA performance evaluations of five Fifth residents, Fifth Third has reduced closing costs on its Good Third banks, the examiners noted that the FTF had made Neighbor mortgage loan product that features no down more than $1.6 million in contributions annually and that payment and offered a 50 basis point discount on interest the CDC had funded almost $7.9 million of approximately rates for home improvement, auto loans, and other con- $15 million in total commitments made on behalf of the sumer loans. five banks 41 Examiners also reported that the CDC had, on Fifth Third's depository institution subsidiaries also par- behalf of the individual banks, funded a combined total of ticipate in a number of government-sponsored home mort- more than $3.3 million in small business venture capital gage loan programs, including Federal Housing Adminis- equity funds since the previous CRA performance evaluatration ("FHA") and Veterans Administration ("VA") tion of each bank.42 programs. For example, examiners noted that Fifth Third Fifth Third stated that, between August 1999 and Octo- Bank and Fifth Third Bank IN made FHA loans totaling ber 2000, it provided $54 million in low-income housing more than $7.5 million and VA loans totaling more than tax credit, venture capital project investments, and charita- $6.3 million during the applicable review periods. Examin- ble contributions. Fifth Third also stated that it had commuers also reported that Fifth Third's subsidiary banks participated in a number of state and locally sponsored programs. The commenter also expressed concerns that Fifth Third had not Examiners generally commended Fifth Third's banks, fulfilled an earlier CRA agreement with community groups in Akron. Neither the CRA nor the federal banking agencies' CRA regulations particularly those in Ohio, for good penetration in small require depository institutions to make pledges or enter into agreebusiness lending among businesses of different sizes and in ments with any organization. The Board, therefore, views such LMI areas.37 In addition, examiners noted Fifth Third's pledges and agreements and their enforceability as matters outside the varied small business lending efforts and active participa- CRA and focuses on the existing record of an applicant and the tion in state and federal government-sponsored small busi- programs that the applicant has in place to serve the credit needs of its community. See, e.g., Fleet Financial Group, Inc., 85 Federal Reserve ness lending programs. For example, they cited Fifth Third Bulletin 747, 765 (1999). Bank of Northwestern Ohio's participation in the State of 39. These banks included Fifth Third Bank Western Ohio; Fifth Ohio Link Deposit program, a program to provide lower- Third Bank, Florida; Fifth Third Bank IN; Fifth Third Bank Kentucky, cost funds for Ohio businesses. Inc.; Fifth Third Bank; Fifth Third Bank of Central Ohio; and Fifth Third Bank of Northern Kentucky. Examiners stated that Fifth Third's Examiners also commended each of Fifth Third's subsidother two subsidiary banks at the time, Fifth Third Bank, N.A., and iary banks for its community development activities.38 In Fifth Third Bank of Southern Ohio, affirmatively addressed the needs particular, examiners determined that seven of Fifth Third's of their assessment areas through their community development investment activities. 40. FTF operates as a department of the Fifth Third Investment 37. In this context, "small business loans" refers to commercial Advisors division at each bank. The CDC is a direct subsidiary of loans with an original amount of less than $1 million. Fifth Third Bancorp. 38. A commenter alleged that Fifth Third had not sufficiently 41. These banks included Fifth Third Bank, Fifth Third Bank of participated in community development programs related to housing Central Ohio, Fifth Third Bank of Northern Kentucky, Fifth Third development and financing in Akron. Fifth Third denied the allegation Bank of Kentucky, and Fifth Third Bank IN. and noted that it had pledged $300,000 in financial support for the 42. The CRA performance evaluation of each bank before its 1999 affordable housing activities of the Local Initiatives Support Corpora- performance evaluation took place in 1997, with the exception of the tion in Akron and provided financial and technical assistance to previous evaluation of Fifth Third Bank of Central Ohio, which was in various other community development organizations in Akron. December 1996. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

338 Federal Reserve Bulletin • May 2001 nity development loans outstanding totaling $97.7 million D. Old Kent's CRA Performance Record in 2000, including more than $78 million in the assessment areas of its Ohio subsidiary banks. Examples of Fifth Third Old Kent Bank's most recent CRA performance evaluation Bank's community development loans since the last CRA reviewed the bank's activities from July 1, 1997, through performance evaluations include a $3.7 million loan to a June 30, 1999 ("review period").46 Examiners found that nonprofit organization for the development of a project that the bank's loan volume and general responsiveness to the provided 62 units of low-income residential housing in credit needs of its assessment area during the review period Cincinnati; a $1.45 million loan to a developer to purchase were good. Examiners favorably noted that Old Kent an apartment building and provide affordable housing for Bank's geographic distribution of HMDA-reportable loans LMI residents in East Cleveland, Ohio; and two loans had improved each successive year since the bank's previtotaling almost $500,000 to nonprofit organizations in Ken- ous performance evaluation. tucky to construct housing for LMI individuals who are In particular, examiners found that during the review chemically dependent. period 95 percent of the bank's HMDA-reportable loans Examiners generally found that Fifth Third's banks pro- were originated in Old Kent Bank's delineated community. vided a good level of banking services to their assessment Examiners noted that Old Kent Bank ranked as the first or areas, including LMI areas.43 In addition, examiners deter- second highest lender among HMDA-loan reporters in six mined that the retail banking and alternative delivery ser- assessment areas in 1998. During the review period, Old vices of Fifth Third's subsidiary depository institutions Kent Bank and Old Kent Mortgage Company ("OKMC") were generally accessible to all geographies in their assess- originated housing-related loans to borrowers in LMI cenment areas and that no branch closing had adversely af- sus tracts totaling more than $354 million. Examiners fected the accessibility of its delivery systems in the com- commended Old Kent Bank and OKMC for originating munities served, including LMI communities. more than 28 percent of their number of multifamily loans Fifth Third stated that its current policy for "banking in LMI geographies and noted that this figure compared center closures, consolidations and reductions in service" favorably with the percentage of LMI geographies in the would apply for any such event after consummation of the bank's assessment area. proposal.44 Under this policy, the Fifth Third subsidiary Old Kent stated that, in the bank's assessment area in bank must consider the impact of any proposed banking 1999, Old Kent and OKMC originated or purchased center closing, consolidation, or reduction in service on the housing-related loans to borrowers in LMI census tracts community in which the facility is located, in light of the totaling more than $216 million and more than $573 milbank's ability to provide continuity of service through lion in housing-related loans to LMI borrowers. In addiother offices, the physical proximity of the bank's other tion, Old Kent noted that OKMC began a "Home Club" offices, and the presence of other financial institutions in program in Grand Rapids for LMI residents referred by the the community. Before any banking center is closed, Fifth Grand Rapids Housing Commission. Since the program's Third Bank also must review and evaluate alternatives to inception in 1999, 21 members have received home purclosing to determine the feasibility of continuing to serve chase or refinance loans from OKMC totaling more than the surrounding community by restructuring the services $1.3 million. Old Kent also noted that it participates in the offered at the banking center 45 Michigan State Housing Development Authority Property Improvement Program, which provides lower interest rate loans of up to $25,000 to LMI borrowers for residential property improvements. 43. A commenter alleged that Fifth Third had not sufficiently marketed its loan products and banking services, or opened a full- Examiners commended the community development service branch, in the LMI areas in Akron. Fifth Third began operat- activities of Old Kent Bank and noted that the bank origiing in Akron in 1995 by acquiring a thrift institution. Since that time, nated more than $33 million in community development Fifth Third has marketed its products and services through a variety of loans during the review period. Old Kent stated that, durmedia, including radio stations and publications with predominately minority audiences. Fifth Third stated that its marketing efforts have led to a threefold increase in its home improvement lending in Akron's LMI areas. federal financial supervisor as part of the CRA examination of the 44. The policy defines a "banking center" as a traditional "brick relevant subsidiary bank. and mortar" building or similar banking facility at which deposits are 46. The April 1999 CRA performance evaluation of Old Kent's received, checks are paid, or money is lent, but does not include an other subsidiary bank, Old Kent Bank, N.A., was the bank's first CRA automated teller machine or a temporary office. performance evaluation since the bank was chartered in April 1997. 45. Two commenters criticized Fifth Third for not publicly disclos- Old Kent Bank, N.A., is a relatively small bank in a rural community ing in its proposal which branches it would close or consolidate after in Michigan, without any LMI census tracts in its assessment area. As consummating the acquisition of Old Kent. Federal banking law of June 30, 2000, the bank represented less than 1 percent of Old provides a specific mechanism for addressing branch closings that Kent's total assets. Examiners generally found that Old Kent Bank, requires insured depository institutions to provide notice to the public N.A., addressed community credit needs in a manner consistent with and to the appropriate federal regulatory agency at least 30 days its size, resources, and capabilities. Examiners commended the bank's before closing a branch. See 12 U.S.C. § 1831r-l (as implemented by consumer lending efforts, primarily through home equity and direct the Interagency Policy Statement on Branch Closings (64 Federal consumer loans. Examiners also favorably noted the community de- Register 34,844 (1999)). The law does not authorize federal regulators velopment services provided by Old Kent Bank, N.A., particularly to prevent the closing of any branch. Any branch closings resulting through job training. Examiners identified the bank's job training from the proposed transaction will be considered by the appropriate program as benefiting LMI individuals in the bank's assessment area. 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Legal Developments 339 ing 1999 and 2000, it made community development loans mended the bank's recognition of the community's need totaling more than $65 million, including almost $13 mil- for its financial expertise, through the involvement of bank lion in Grand Rapids. For example, Old Kent Bank par- representatives in community development organizations tially funded its $1.1 million in participation commitments and activities, including Bankers Alliance for Neighborto two loan pools administered by nonprofit organizations hood Development, a loan pool to fund residential mortto fund residential mortgages in LMI areas of Grand gages in LMI census tracts in Grand Rapids, and the Grand Rapids and Muskegon. Old Kent added that Old Kent Bank Rapids Housing Commission, which provides financing to has remained an active participant in the Community In- rental clients unable to qualify for conventional financing. vestment Program of the Federal Home Loan Bank of Indianapolis. Through this program in 1999, Old Kent E. HMDA Data Bank provided a $3.9 million construction and permanent loan for a 120-unit affordable housing project in Holland, The Board also has carefully considered the lending Michigan. In addition, Old Kent Bank provided more than records of Fifth Third and Old Kent in light of comments $2 million in financing for projects to develop 144 units of about HMDA data reported by their subsidiaries 48 Some affordable housing in western Michigan in 2000. Old Kent categories of Fifth Third's housing-related lending to mialso stated that, in 1999 and 2000, it made CRA-qualified nority individuals and in predominantly minority commuinvestments totaling almost $54 million. nities were below the average lending levels of the HMDA- Examiners characterized Old Kent Bank as an active reporting lenders in the aggregate (the "aggregate") in small business and small farm lender in its assessment some of Fifth Third's CRA assessment areas, while in areas and noted that Old Kent Bank's distribution of loans others it exceeded the aggregate's lending levels. For examong small businesses and farms of different sizes was ample, the 1998 and 1999 HMDA data indicate that Fifth reasonable and consistent with the demographics of its Third's housing-related loan originations to Africancombined assessment area. Between July 1997 and July American applicants as a percentage of its total housing- 1999, Old Kent Bank originated small business loans total- related loan originations ("percentage of originations") ing $2.56 billion, including almost $412 million to busi- generally was below that of the aggregate in the states and nesses in LMI census tracts. Seventy-five percent of the MSAs reviewed, but its percentage of originations to total small business loans were originated to businesses African-American applicants exceeded that of the aggrewith gross annual revenues of $1 million or less. Old Kent gate in the Akron, Cleveland, and Toledo MSAs in 1998, stated that, in 2000, its small business loans totaled more and in the Tucson and Toledo MSAs in 1999. The HMDA than $1.57 billion, including more than $253 million in data for those years also indicate that Fifth Third's percentloans to businesses in LMI census tracts in its assessment age of originations to Hispanics generally was below that areas. of the aggregate, but exceeded the aggregate's percentage In addition, examiners found that the bank was an active in the Lexington, Tucson, Cleveland, and Toledo MSAs in participant in Small Business Administration ("SBA") 1998, and in the Tuscon and Cleveland MSAs in 1999 49 lending programs. Examiners noted that, during 1998 and The 1998 and 1999 HMDA data also indicate that Old 1999, Old Kent Bank originated SBA loans totaling Kent's percentage of housing-related loan originations to $39.4 million and, as of June 30, 1999, the bank's SBA African-Americans in its assessment areas generally was portfolio totaled $60.7 million. In 2000, Old Kent Bank lower than that of the aggregate. With respect to housingwas awarded the SBA's Lender of the Year in Michigan related loan originations to Hispanics, Old Kent's percentand was the largest SBA lender in Michigan, and the fourth age of originations generally was lower than the aggrelargest in Illinois, based on quantity of loan approvals. gate's percentage of originations in its assessment areas. In addition, examiners found that Old Kent Bank has However, Old Kent's percentage of housing-related loans established a network of branches and alternative delivery to Hispanics exceeded the aggregate's percentage in Michsystems that provide customers reasonable convenience igan and the Grand Rapids MSA in 1998 and 1999, and in and accessibility in its assessment areas.47 Examiners com- the Detroit MSA in 1999. The Board is concerned when an institution's record indicates disparities in lending and believes that all banks 47. A commenter expressed concern about the services to minorities at branches in a predominantly minority community in Grand Rapids and about the fees that Old Kent Bank allegedly charged for cashing checks for minority residents who were not the bank's customers. The Bank began offering another free checking account with the same commenter also alleged that Old Kent had not made subsequent terms but without a homeownership requirement. contact with community leaders after a meeting in May 2000. Old 48. Commenters criticized Fifth Third's record of home mortgage Kent stated that the purpose of the May meeting was to identify how lending to African-American or Hispanic individuals in the following Old Kent Bank could better serve the predominantly minority commu- MSAs: Cincinnati, Cleveland, Akron, Dayton, Columbus, Tuscon, nity and that Old Kent Bank initiated subsequent contacts with various Louisville, and Lexington. Commenters also criticized Old Kent's participants. After these meetings, Old Kent Bank introduced a free record of home mortgage lending to minority applicants in the Grand checking account for all homeowners (regardless of whether they had Rapids, Detroit, and Chicago MSAs. received a mortgage loan from the bank) with no minimum balance 49. Fifth Third's origination rates to Hispanics were comparable requirement, monthly account fee, or per-check charge. Old Kent with the aggregate's origination rate in the following states or MSAs stated that consumers had opened more than 30,000 of these accounts in the years indicated: Kentucky in 1998; Cincinnati in 1998 and throughout the banks' assessment area. In January 2001, Old Kent 1999; Louisville in 1998; and Columbus and Dayton in 1999. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

340 Federal Reserve Bulletin • May 2001 are obligated to ensure that their lending practices are The Board has considered the HMDA data in light of the based on criteria that ensure not only safe and sound overall lending records of Fifth Third and Old Kent, includbanking, but also equal access to credit by creditworthy ing the lending and community development programs applicants, regardless of their race or income level. The discussed above, which show that they assist significantly Board recognizes, however, that HMDA data alone provide in meeting the credit needs of their communities. an incomplete measure of an institution's lending in its community because the data cover only a few categories of F. Conclusion on Convenience and Needs housing-related lending.50 HMDA data, moreover, provide only limited information about the covered loans. HMDA In reviewing the effect of the proposal on the convenience data, therefore, have limitations that make the data an and needs of the communities to be served, the Board has inadequate basis, absent other information, for concluding carefully considered the entire record, all the information that an institution has not adequately assisted in meeting its provided by commenters, Fifth Third, and Old Kent, evalucommunities' credit needs or has engaged in illegal dis- ations of the performance of each of Fifth Third's and Old crimination in making lending decisions. Kent's insured depository institution subsidiaries under the Because of the limitations of HMDA data, the Board has CRA, and confidential supervisory information. carefully considered the data in light of other information, Based on all the facts of record, and for the reasons including examination reports that provide an on-site eval- discussed above, the Board concludes that considerations uation of compliance by the subsidiary banks of Fifth relating to the convenience and needs factor, including the Third and Old Kent with fair lending laws and the overall CRA performance records of the relevant depository instilending and community development activities of the tutions, are consistent with approval of the proposal. banks, and a fair lending examination of OKMC. Examiners found no evidence of prohibited discrimination or ille- Nonbanking Activities gal credit practices at the subsidiary depository institutions of Fifth Third or Old Kent, and examiners considered Fifth Third also has filed a notice under section 4(c)(8) OKMC's fair lending policies, procedures, training pro- and (j) of the BHC Act (12 U.S.C. § 1843(c)(8) and (j)) to grams, and internal monitoring programs to be satisfactory. acquire certain nonbanking subsidiaries of Old Kent. Fifth The record indicates that Fifth Third and Old Kent have Third would engage in a number of permissible nonbanktaken a number of affirmative steps to ensure compliance ing activities, including financial investment advising, sewith fair lending laws. Fifth Third requires all lending curities brokerage, credit-related insurance, and commupersonnel to receive training on corporate lending policies nity development activities. The Board has determined by and procedures, including compliance with fair lending regulation that each of the activities for which Fifth Third laws. Old Kent also requires banking center managers and has provided notice under section 4 of the BHC Act is staff to receive regular fair lending training. During 2000, closely related to banking for purposes of the BHC Act.52 all OKMC loan officers received fair lending training. Fifth Moreover, the Federal Reserve System previously has ap- Third and Old Kent also have implemented a second proved applications by Old Kent to engage in all the review process for all denied loan applications and special proposed activities, and Fifth Third has committed to concomputer software to analyze underwriting patterns and duct these nonbanking activities in accordance with the practices to help ensure fair treatment of all applicants.51 limitations set forth in Regulation Y and the Board's orders and interpretations thereunder. To approve this notice, the Board is required by sec- 50. The data, for example, do not account for the possibility that an tion 4(j)(2)(A) of the BHC Act to determine that the institution's outreach efforts may attract a larger proportion of margin- acquisition of the nonbanking subsidiaries of Old Kent by ally qualified applicants than other institutions attract and do not Fifth Third "can reasonably be expected to produce beneprovide a basis for an independent assessment of whether an applicant who was denied credit was, in fact, creditworthy. Credit history problems and excessive debt levels relative to income (reasons most frequently cited for a credit denial) are not available from HMDA The Board has considered information submitted by Old Kent on data. OKMC's lending practices, including the processes by which OKMC 51. A commenter generally noted that Old Kent engages in makes credit available to consumers, the fair lending policies and subprime mortgage lending through a subsidiary of Old Kent Bank, procedures of OKMC, the compliance procedures established by OKMC, and characterized OKMC as a significant competitor in the OKMC, and the relationship of OKMC with loan brokers and corresubprime lending market. The commenter also alleged that Old Kent's spondents. As discussed above, Old Kent has taken a number of subprime lending activities had resulted in predatory lending litigation aflirmative steps to ensure compliance with fair lending laws, includagainst a division of Old Kent, National Pacific Mortgage ("NPM"), ing extensive fair lending training and second review processes. In and concluded that Fifth Third should have noted these issues in its addition, Old Kent has implemented a procedure for referring borrowproposal to the Board. ers that appear to qualify for traditional "prime" home mortgage NPM does not engage in subprime lending activities, and the loans to OKMC's prime lending division. The Board has forwarded pending litigation against NPM has not established that its lending copies of the comments on OKMC's lending activities to the Departactivities violate federal or state law. Old Kent conducts subprime ment of Housing and Urban Development, the Department of Justice, lending exclusively through Old Kent Financial Services, a division of and the Federal Trade Commission, which have responsibility for fair OKMC. The Board notes that subprime lending is a permissible lending law compliance by nondepository companies like OKMC. activity and provides needed credit to consumers who have difficulty The Board also has consulted with these agencies. meeting conventional underwriting criteria. 52. See 12 C.F.R. 225.28(b)(6), (7), (11), and (12). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 341 fits to the public . . . that outweigh possible adverse effects, Rapids, which is organized under section 25A of the Fedsuch as undue concentration of resources, decreased or eral Reserve Act. The Board concludes that all the factors unfair competition, conflicts of interests, or unsound bank- it is required to consider under the Federal Reserve Act and ing practices."53 Regulation K are consistent with the approval of the notice. As part of its evaluation of these factors, the Board has considered the financial and managerial resources of Fifth Financial Holding Company Declaration Third, its subsidiaries, and the companies to be acquired, and the effect of the proposed transaction on those re- FTFC also has filed with the Board an election to become a sources. For the reasons noted above, and based on all the financial holding company pursuant to section 4(k) and (1) facts of record, the Board has concluded that financial and of the BHC Act and section 225.83 of Regulation Y. FTFC managerial considerations are consistent with approval of has certified that all depository institutions that it proposes the notice. to control are well capitalized and well managed and has The Board also has considered the competitive effects of provided all the information required under Regulation Y. Fifth Third's proposed acquisition of the nonbanking sub- The Board has reviewed the examination ratings received sidiaries of Old Kent in light of all the facts of record. by each insured depository institution controlled by FTFC Community development markets are local in nature, but and Old Kent under the CRA and other relevant examina- Fifth Third's and Old Kent's nonbanking subsidiaries do tion reports and information. Based on all the facts of not directly compete in any markets. The other nonbanking record, the Board has determined that this election to activities of the subsidiaries of Fifth Third and Old Kent— become a financial holding company will become effective securities brokerage, financial and investment advisory, on consummation of the acquisition of Old Kent by Fifth and credit-related insurance services—are national or re- Third and FTFC, as long as each of the relevant depository gional in scope, are conducted in unconcentrated markets, institutions continue to be well capitalized and well manand involve numerous competitors. As a result, the Board aged and they each have at least a satisfactory CRA rating expects that consummation of the proposal would have a on that date. de minimis effect on competition for each of these services. Based on all the facts of record, the Board concludes that it Conclusion is unlikely that significantly adverse competitive effects would result from the nonbanking acquisitions proposed in Based on the foregoing and all the facts of record, the this transaction. Board has determined that the applications and notices Fifth Third has indicated that the proposal would en- should be, and hereby are, approved.54 In reaching its hance its ability to serve the needs of all segments of the conclusion, the Board has considered all the facts of record communities it serves, including LMI areas, through an in light of the factors that it is required to consider under expanded range of products and services and through im- the BHC Act and other applicable statutes. The Board's proved operating efficiencies in Old Kent's nonbanking approval is specifically conditioned on compliance by Fifth subsidiaries. Fifth Third has stated that the proposal also would provide Old Kent's customers with a broader range of banking and nonbanking services. In addition, the expanded community development activities would benefit 54. Two commenters requested that the Board hold a public meeting or hearing on the proposal. Section 3(b) of the BHC Act does not the convenience and needs of the LMI communities in require the Board to hold a public hearing on an application unless the which Fifth Third operates. appropriate supervisory authority for the bank to be acquired makes a The Board also concludes that the conduct of the pro- timely written recommendation of denial of the application. The posed nonbanking activities within the framework of Reg- Board has not received such a recommendation from the appropriate ulation Y and Board precedent is not likely to result in supervisory authorities. Under its rules, the Board also may, in its discretion, hold a public adverse effects, such as undue concentration of resources, meeting or hearing on an application to acquire a bank if a meeting or decreased or unfair competition, conflicts of interests, or hearing is necessary or appropriate to clarify factual issues related to unsound banking practices, that would outweigh the public the application and to provide an opportunity for testimony. 12 C.F.R. benefits of the proposal, such as increased customer conve- 225.16(e). Section 4 of the BHC Act and the Board's rules thereunder provide for a hearing on a notice to acquire nonbanking companies if nience and gains in efficiency. Accordingly, based on all there are disputed issues of material fact that cannot be resolved in the facts of record, the Board has determined that the some other manner. 12 U.S.C. § 1843(c)(8); 12 C.F.R. 225.25(a)(2). balance of public interest factors that it must consider The Board has considered carefully the commenters' requests in light under section 4(j)(2)(A) of the BHC Act is favorable and of all the facts of record. In the Board's view, commenters have had consistent with approval of this proposal. ample opportunity to submit their views, and they submitted written comments that have been considered carefully by the Board in acting As required by section 25 of the Federal Reserve Act on the proposal. The commenters' requests fail to demonstrate why and section 211.4(f) of the Board's Regulation K (12 their written comments do not present their evidence adequately and C.F.R. 211.4(f)), Fifth Third also has provided notice of its fail to identify disputed issues of fact that are material to the Board's intention to acquire Old Kent Hong Kong LLC, Grand decision that would be clarified by a public meeting or hearing. For these reasons, and based on all the facts of record, the Board has determined that a public meeting or hearing is not required or warranted in this case. Accordingly, the requests for a public meeting or 53. 12 U.S.C. § 1843(j)(2)(A). hearing on the proposal are denied. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

342 Federal Reserve Bulletin • May 2001 Third with all commitments made in connection with the Appendix B applications and notices, including the divestiture commitments discussed in this order. These commitments are Banking Markets in which Fifth Third and Old Kent deemed to be conditions imposed in writing by the Board Compete Directly in connection with its findings and decision and, as such, may be enforced in proceedings under applicable law. A. Michigan Banking Markets The acquisition of the subsidiary banks of Old Kent may not be consummated before the fifteenth calendar day after Allegan the effective date of this order, and the proposal may not be Allegan County, excluding Laketown, Fillmore, consummated later than three months after the effective Overisel, Salem, Dorr, Leighton, Otsego, and date of this order, unless such period is extended for good Gunplain townships. cause by the Board or the Federal Reserve Bank of Cleve- Benton Harbor-St. Joseph land, acting pursuant to delegated authority. Van Buren County, excluding the eastern two By order of the Board of Governors, effective March 12, tiers of townships and the northwestern portion 2001. of Berrien County (Watervliet, Coloma, Hagar, Bainbridge, Benton, St. Joseph, Pipestone, Voting for this action: Chairman Greenspan and Governors Kelley, Sodus, Royalton, Lincoln, Baroda, Lake, and Meyer, and Gramlich. Absent and not voting: Vice Chairman Fergu- Chikaming townships). son. Fremont-Newaygo The southern two-thirds of Newaygo County ROBERT DEV. FRIERSON (Denver, Lincoln, Wilcox, Goodwell, Dayton, Associate Secretary of the Board Sherman, Everett, Big Prairie, Sheridan, Garfield, Brooks, Croton, Bridgeton, Ashland, Grant, and Ensley townships). Grand Rapids Appendix A Kent County, excluding Oakfield and Spencer townships; Yankee Springs, Thornapple, and Irv- Nonbanking Activities of Old Kent to be Acquired Under ing townships in Barry County; Casnovia town- Section 4 of the BHC Act ship in Muskegon County; Salem, Dorr, and Leighton townships in Allegan County; and Engaging in financial and investment advisory and securi- Jamestown, Georgetown, Blendon, Allendale, ties brokerage activities pursuant to sections 225.28(b)(6) Tallmadge, Polkton, Wright, and Chester townand (7) of Regulation Y (12 C.F.R. 225.28(b)(6) and (7)), ships in Ottawa County. through Old Kent Securities Corporation, Grand Rapids, Holland Michigan; Park, Holland, Zeeland, Olive, and Port Sheldon Engaging in credit-related reinsurance activities pursu- townships in Ottawa County; and Laketown, Fillant to sections 225.28(b)(l 1) of Regulation Y (12 C.F.R. more, and Overisel townships in Allegan County. 225.28(b)(ll), through Old Kent Financial Life Insurance Ludington Company, Grand Rapids, Michigan; and Mason County, excluding Grant, Freesoil, and Engaging in community development activities pursuant Meade townships; Lake County, excluding Elk to section 225.28(b)(12) of Regulation Y (12 C.F.R. and Eden townships; Oceana County; and the 225.28(12)), through CFSB-Eastbrook Apartments Inves- northern third of Newaygo County (Barton, tor, LLC, Lansing; Eastbrook Apartment Limited Housing Beaver, Home, Lilley, Merrill, Monroe, Norwich, Association Limited Partnership, Lansing; Gladshire Lim- and Troy townships). ited Dividend Housing Association LP, Kalamazoo; Grand Muskegon-Grand Haven Rapids Hope Limited Partnership, Grand Rapids; Grand Muskegon County, excluding Casnovia town- Rapids Hope II Limited Partnership, Grand Rapids; ship; and Grand Haven, Spring Lake, Crockery, Hayward-Wells Limited Dividend Housing Association and Robinson townships in Ottawa County. Limited Partnership, Benton Harbor; Independence Village of Brighton Limited Dividend Housing Association LP, B. Banking Market Located in Michigan and Indiana Brighton; Michigan Capital Fund for Housing Limited Partnership I, Lansing; Michigan Capital Fund for Housing Elkhart-Niles-South Bend Limited Partnership II, Lansing; Mount Mercy LP, Grand Elkhart County, Indiana; St. Joseph County, Indi- Rapids; New Hope Homes Limited Dividend Housing ana, excluding Olive and Warren townships; Association LP, Grand Rapids; Pleasant Prospect Limited Scott, Jefferson, Van Buren, and Turkey Creek Dividend Housing Association LP, Grand Rapids; Pleasant townships in Kosciusko County, Indiana; Cass Prospect II Limited Dividend Housing Association LP, County, Michigan; and Oronoko, Berrien, Grand Rapids; and Trinity Village II Limited Dividend Buchanan, Niles, and Bertrand townships in Ber- Housing Association LP, Muskegon, all in Michigan. rien County, Michigan. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 343 Appendix C Muskegon-Grand Haven Fifth Third operates the fifth largest out of 14 Certain Banking Markets without Divestitures depository institutions in the market, controlling deposits of $194.5 million, representing approxi- Allegan, Michigan mately 11.2 percent of market deposits. Old Kent Fifth Third operates the seventh largest out of ten operates the ninth largest depository institution in depository institutions in the market, controlling the market, controlling deposits of $374.9 mildeposits of $14.1 million, representing approxi- lion, representing approximately 21.6 percent of mately 4 percent of market deposits. Old Kent market deposits. Fifth Third proposes to divest a operates the fourth largest depository institution branch in the market, with $31 million of deposin the market, controlling deposits of $50 mil- its, representing approximately 1.8 percent of lion, representing approximately 14.3 percent of market deposits, to an out-of-market commercial market deposits. After the proposed merger, Fifth banking organization or an in-market banking Third would operate the largest depository insti- organization that currently controls less than tution in the market, controlling deposits of 2 percent of market deposits. After the proposed $64.1 million, representing 18.3 percent of mar- merger and divestiture, Fifth Third would operket deposits. The HHI would increase by 115 ate the largest depository institution in the marpoints to 1607. ket, controlling deposits of $538.4 million, repre- Elkhart-Niles-South Bend Indiana/Michigan senting 31 percent of market deposits. The HHI Fifth Third operates the sixteenth largest out of would increase by not more than 383 points and 23 depository institutions in the market, control- would not exceed 1718.1 At least eleven commerling deposits of $26.9 million, representing less cial banking organizations besides Fifth Third than 1 percent of market deposits. Old Kent would remain in the market. operates the sixth largest depository institution in the market controlling deposits of $314.2 mil- Franklin Resources, Inc. lion, representing approximately 5.8 percent of San Mateo, California market deposits. After the proposed merger, Fifth Third would operate the sixth largest depository Order Approving Formation of a Bank Holding institution in the market, controlling deposits of Company and Determination on a Financial Holding $341.1 million, representing 6.3 percent of mar- Company Election ket deposits. The HHI would increase by 6 points to 1670. Franklin Resources, Inc. ("Franklin") has requested the Board's approval under section 3 of the Bank Holding Company Act ("BHC Act") (12 U.S.C. § 1842) to become a bank holding company by acquiring all the shares Appendix D of Fiduciary Trust Company International, New York, New York ("Fiduciary"), a New York chartered trust company. Certain Michigan Banking Markets with Divestitures As part of its proposal to become a bank holding company, Franklin has also filed with the Board an election to be- Fremont-Newaygo come a financial holding company pursuant to section 4(k) Fifth Third operates the fifth largest out of six and (/) of the BHC Act (12 U.S.C. § 1843(k) & (/)) and depository institutions in the market, controlling section 225.82 of the Board's Regulation Y (12 C.F.R. deposits of $28 million representing approxi- 225.82). mately 11.3 percent of market deposits. Old Kent Franklin has also requested the Board's approval under operates the second largest depository institution section 4(c)(8) and (j) of the BHC Act (12 U.S.C. § in the market, controlling deposits of $57.5 mil- 1843(c)(8) and (j)) and section 225.24 of the Board's lion, representing approximately 23.2 percent of Regulation Y (12 C.F.R. 225.24) to retain its interest in market deposits. Fifth Third proposes to divest Franklin Templeton Bank & Trust, F.S.B., Salt Lake City, one branch in the market, with $26.5 million of Utah ("Franklin B&T").1 deposits, representing approximately 10.7 percent of market deposits, to an out-of-market commercial banking organization. After the proposed merger and divestiture, Fifth Third would oper- 1. If Fifth Third were to divest the relevant Muskegon-Grand Haven ate the second largest depository institution in the branch to an out-of-market firm, the HHI would increase by market, controlling deposits of $59 million, rep- 378 points to 1713. resenting 23.8 percent of market deposits. There would be no resulting change in the HHI. Five 1. Franklin also has requested the Board's approval to hold and exercise an option to acquire up to 19.9 percent of the shares of commercial banking organizations, other than Fiduciary's common stock. The option would expire on consumma- Fifth Third would remain in the market. tion of the proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

344 Federal Reserve Bulletin • May 2001 Notice of the proposal, affording interested persons an Competitive Considerations opportunity to submit comments, has been published (66 Federal Register 798 and 749 (2001)). The time for filing Section 3 of the BHC Act prohibits the Board from approvcomments has expired, and the Board has considered the ing a proposal that would result in a monopoly. The BHC proposal and all comments received in light of the factors Act also prohibits the Board from approving a proposed set forth in sections 3 and 4 of the BHC Act. bank acquisition that would substantially lessen competi- Franklin, with total consolidated assets of $4 billion, is tion in any relevant banking market unless the anticompetian investment management firm engaged principally in tive effects of the proposal are clearly outweighed in the providing investment advisory and related services to mu- public interest by the probable effect of the proposal in tual funds and institutional and private investors. Through meeting the convenience and needs of the community to be its ownership of Franklin B&T, Franklin is also the 37th served.5 largest depository organization in Utah, controlling depos- As part of its review of these factors, the Board has its of $56.8 million, representing less than 1 percent of considered carefully the competitive effects of the proposal total deposits in insured depository institutions in the state in light of all the facts of record.6 The proposal involves ("state deposits").2 Franklin also engages in a variety of the acquisition of a bank by Franklin, which owns Franklin other financial activities in the United States and overseas, B&T and a variety of nonbanking companies. Franklin including underwriting and distribution of mutual fund B&T and Fiduciary do not compete directly in any relevant shares and providing transfer agency, mutual fund adminis- banking market. Based on all the facts of record, the Board tration, custodial, trustee, and fiduciary services. Franklin concludes that consummation of the proposal would not also provides consumer lending and other banking services result in a monopoly or in any significantly adverse effects to the public through Franklin B&T. on competition or on the concentration of banking re- Fiduciary, with total consolidated assets of $642 million, sources in any relevant banking market. is the 68th largest commercial banking organization in New York, controlling deposits of $505 million, represent- Financial and Managerial Considerations ing less than 1 percent of state deposits.3 Fiduciary and its subsidiaries engage primarily in providing investment man- The Board has carefully considered the financial and management, custody and administration, trust, estate and tax agerial resources and future prospects of the companies planning, and private banking services to high-net-worth and bank involved in the proposal, the effect the proposed individuals and families and institutional customers in the transaction would have on such resources, and other super- United States and internationally. Fiduciary also engages visory factors in light of all the facts of record. In evaluatthrough subsidiaries in securities brokerage and investment ing the financial and managerial factors, the Board has advisory activities in the United States. reviewed confidential examination information and other supervisory information assessing the financial and mana- Factors Governing Board Review of Transaction gerial strength of Franklin and its subsidiaries and of Fiduciary and its subsidiaries. In addition, the Board has The BHC Act sets forth the factors that the Board must reviewed public and confidential supervisory reports and consider when reviewing the formation of a bank holding information regarding the activities and financial position company or the acquisition of a bank. These factors are the of the regulated subsidiaries of Franklin. competitive effects of the proposal in the relevant geo- The Board consistently has considered capital adequacy graphic markets; the financial and managerial resources to be an especially important aspect in analyzing financial and future prospects of the companies and banks involved factors.7 Fiduciary and all the subsidiaries of Fiduciary and in the proposal; the convenience and needs of the commu- Franklin that are subject to regulatory capital requirements nities to be served, including the records of performance currently exceed the relevant minimum regulatory requireunder the Community Reinvestment Act (12 U.S.C. ments. In addition, Fiduciary and Franklin B&T are cur- § 2901 et seq.) ("CRA") of the insured depository institu- rently well capitalized under applicable federal guidelines. tions involved in the transaction; and the availability of Franklin would also be well capitalized on a pro forma information needed to determine and enforce compliance basis on consummation of the proposal. Moreover, the with the BHC Act and other applicable federal banking transaction is structured as a stock-for-stock combination laws.4 and would not increase the debt service requirements of the combined company and is not expected to have a significantly adverse effect on the financial resources of Franklin. Other financial factors are consistent with approval. 2. Asset data for Franklin are as of September 30, 2000. Deposit and ranking data for Franklin B&T are as of June 30, 2000. 3. Asset and deposit data for Fiduciary are as of June 30, 2000. 4. In cases involving interstate bank acquisitions by bank holding companies, the Board also must consider the concentration of deposits 5. 12 U.S.C. § 1842(c)(1). nationwide and in relevant individual states, as well as compliance 6. See First Hawaiian, Inc., 79 Federal Reserve Bulletin 966 with the other provisions of section 3(d) of the BHC Act. As a result (1993). of this transaction, Franklin will become a bank holding company and 7. See Chemical Banking Corporation, 82 Federal Reserve Bulletin its home state will be New York. 230 (1996). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 345 The Board also has carefully considered the managerial the convenience and needs of the communities to be served resources of Franklin and Fiduciary in light of all the facts are consistent with approval. of record, including confidential examination and other supervisory information and information provided by Nonbanking Activities Franklin on its existing and proposed risk management policies and processes. Based on all the facts of record, the Franklin has also filed a notice under section 4(c)(8) Board concludes that considerations relating to the finan- and 4(j) of the BHC Act to retain its interest in Franklin cial and managerial resources and future prospects of the B&T, and thereby engage in operating a savings associaorganizations involved are consistent with approval. tion.10 The Board determined by regulation before Novem- The Board notes further that a substantial proportion of ber 12, 1999, that this activity is so closely related to Franklin's activities are conducted in subsidiaries that are banking as to be a proper incident thereto for purposes of subject to functional regulation by the Securities and Ex- section 4(c)(8) of the BHC Act.11 Franklin has committed change Commission ("SEC"). The Board will, consistent that it will conduct this activity in accordance with the with the provisions of section 5 of the BHC Act as Board's regulations and orders approving the activity for amended by the Gramm-Leach-Bliley Act, rely heavily on bank holding companies. the SEC for examination and other supervisory information In order to approve Franklin's proposal to retain its in fulfilling the Board's responsibilities as holding com- interest in Franklin B&T, the Board is also required by pany supervisor. section 4(j)(2)(A) of the BHC Act to determine that the retention of Franklin B&T by Franklin "can reasonably be Convenience and Needs Considerations expected to produce benefits to the public . . . that outweigh possible adverse effects, such as undue concentra- The Board also has carefully considered the effect of the tion of resources, decreased or unfair competition, conflicts proposal on the convenience and needs of the communities of interests, or unsound banking practices."12 to be served in light of all the facts of record, including the As part of its evaluation of these factors, the Board has records of performance of the relevant institutions under considered the financial and managerial resources of Frankthe CRA. The Board has long held that consideration of the lin and its subsidiaries, including the companies to be convenience and needs factor includes a review of the acquired, and the effect of the proposed transaction on records of the relevant depository institutions under the those resources. For the reasons noted above, and based on CRA. As provided in the CRA, the Board evaluates the all the facts of record, the Board has concluded that finanrecord of performance of an institution in light of examina- cial and managerial considerations are consistent with aptions by the appropriate federal supervisors of the CRA proval of the notice. performance records of the relevant institutions. An institu- The Board also has considered the competitive effects of tion's most recent CRA performance evaluation is a partic- Franklin's proposed retention of its nonbanking subsidiarularly important consideration in the applications process ies in light of all the facts of record. For the reasons already because it represents a detailed, on-site evaluation of the discussed, the Board has concluded that Franklin's proinstitution's overall record of performance under the CRA posed retention of Franklin B&T would not likely result in by its appropriate federal supervisor.8 decreased or unfair competition or undue concentration of Neither Fiduciary nor its subsidiaries are currently sub- resources in any relevant banking market. ject to CRA.9 Franklin B&T, then known as Franklin Bank, Franklin has indicated that the proposed transaction San Mateo, California, received an overall rating of "satis- would diversify Franklin's business and could decrease the factory" from the Federal Deposit Insurance Corporation, volatility in Franklin's earnings. In addition, the proposed which was Franklin Bank's primary federal supervisor, at transaction would make a greater range of financial prodits most recent evaluation for CRA performance, as of June ucts and services available to customers of Franklin and 1997. Franklin Bank converted from a California State- Fiduciary. Franklin B&T's principal lines of business are chartered bank to a federal savings bank in May 2000, providing credit cards and retail consumer loans and acting becoming Franklin B&T. The Office of Thrift Supervision, as nondiscretionary trustee or custodian for individual re- Franklin B&T's primary federal supervisor, has not re- tirement accounts, business retirement plans, and 401(k) viewed it for CRA performance. Based on all the facts of plans invested in mutual funds offered by Franklin affiliates record, the Board concludes that considerations related to ("Franklin Templeton funds"). Franklin B&T's credit products are marketed nationwide and are not limited to investors in Franklin Templeton funds. Fiduciary, by contrast, does not provide retail credit or other products, but 8. The Interagency Questions and Answers Regarding Community engages principally in providing discretionary investment Reinvestment provides that a CRA examination is an important and often controlling factor in the consideration of an institution's CRA record. See 65 Federal Register 25,088 and 25,107 (2000). 9. Fiduciary's primary federal supervisor, the Federal Deposit Insurance Corporation exempts from its CRA regulations "special purpose 10. Franklin has indicated that its current activities are permissible banks" like Fiduciary that do not grant credit to the public in the under section 4(k) of the BHC Act. ordinary course of business, other than as incident to their specialized 11. See 12 C.F.R. 225.28(b)(4)(H). operations. 12 C.F.R. 345.11(c)(3); see also 12 C.F.R. 228.11(c)(3). 12. 12 U.S.C. § 1843(j)(2)(A). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

346 Federal Reserve Bulletin • May 2001 management, custody, trust, and related services to high- Friedman, Billings, Ramsey Group, Inc. net-worth individuals and institutional customers. Arlington, Virginia Based on all the facts of record, the Board has determined that consummation of this proposal can reasonably FBR Bancorp, Inc. be expected to produce public benefits that would out- Arlington, Virginia weigh any likely adverse effects under the proper incident to banking standard of section 4(j)(2) of the BHC Act. Money Management Associates, Inc. Arlington, Virginia Conclusion Regarding Bank Acquisition Money Management Associates (LP), Inc. Based on the foregoing, and in light of all the facts of Arlington, Virginia record, the Board has determined that the application should be, and hereby is, approved. In reaching its conclu- Money Management Associates, L.P. sion, the Board has considered all the facts of record in Bethesda, Maryland light of the factors it is required to consider under the BHC Act and other applicable statutes. The Board's approval is Order Approving Formation of Bank Holding Companies specifically conditioned on compliance by Franklin with all and Determination on Financial Holding Company the commitments made in connection with the application. Elections For the purpose of this action, the commitments relied on by the Board in reaching its decision are deemed to be Friedman, Billings, Ramsey Group, Inc. ("FBR Group") conditions imposed in writing by the Board in connection and its wholly owned subsidiaries, FBR Bancorp, Inc., with its findings and decision and, as such, may be en- Money Management Associates, Inc., and Money Manageforced in proceedings under applicable law. ment Associates (LP), Inc. (collectively, "FBR") have The transaction shall not be consummated before the requested the Board's approval under section 3 of the Bank fifteenth calendar day after the effective date of this order, Holding Company Act ("BHC Act") (12 U.S.C. § 1842) or later than three months after the effective date of this to become bank holding companies by acquiring all the order, unless such periods are extended for good cause by shares of Money Management Associates, L.P. ("MMA"), the Board or the Federal Reserve Bank of San Francisco, and thereby indirectly acquiring FBR National Bank, both acting pursuant to delegated authority. of Bethesda, Maryland ("Bank").1 As part of its proposal to become a bank holding company, FBR also has filed Financial Holding Company Declaration with the Board an election to become a financial holding company pursuant to sections 4(k) and (1) of the BHC Act Franklin also has filed with the Board an election to be- (12 U.S.C. §§ 1843(k) and (1)) and section 225.82 of the come a financial holding company pursuant to section 4(k) Board's Regulation Y (12 C.F.R. 225.82). and (/) of the BHC Act and section 225.82 of Regulation Y. Notice of the proposal under section 3 of the BHC Act, Franklin has certified that Fiduciary and Franklin B&T are affording interested persons an opportunity to submit comwell capitalized and well managed, and has provided all ments, has been published (65 Federal Register 45,602 the information required under Regulation Y. (2000)). The time for filing comments has expired, and the The Board has reviewed the examination ratings re- Board has considered the proposal and all comments received by Franklin B&T under the CRA and other relevant ceived in light of the factors set forth in section 3 of the examinations and information. Based on all the facts of BHC Act. record, the Board has determined that this election to FBR Group, with total consolidated assets of $252 milbecome a financial holding company will become effective lion, is a securities and financial services firm engaged on consummation of the acquisition of Fiduciary by Franklin, as long as Fiduciary and Franklin B&T continue to be well capitalized, well managed, and Franklin B&T has at least a satisfactory CRA rating on that date.13 By order of the Board of Governors, effective March 26, 2001. 1. MMA currently owns Rushmore Trust and Savings, FSB, Bethesda, Maryland ("RTS"), a savings association that is not a bank for This action was taken pursuant to the Board's Rules Regarding purposes of the BHC Act. RTS has applied to the Office of the Delegation of Authority (12 C.F.R. 265.4(b)(1)) by a committee of Comptroller of the Currency ("OCC") to convert to a national bank Board members. Voting for this action: Chairman Greenspan and and change its name to FBR National Bank. The conversion will Governors Kelley and Meyer. Absent and not voting: Vice Chairman occur immediately before RTS's acquisition by FBR, and RTS will Ferguson and Governor Gramlich. not operate as a national bank before its acquisition by FBR. The ROBERT DEV. FRIERSON Board's approval of the present applications is conditioned upon the OCC's approval of RTS's conversion application. After consumma- Associate Secretary of the Board tion of the proposal, MMA would be a wholly owned subsidiary of FBR Group. Accordingly, FBR Group also has sought the Board's approval under section 3 of the BHC Act for MMA to become a bank 13. As noted above, Fiduciary is not subject to CRA. holding company and references to "FBR" include MMA. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 347 primarily in securities underwriting and dealing, securities banking market. Accordingly, the Board has determined brokerage, investment advisory, and merchant banking ac- that competitive factors under section 3 of the BHC Act are tivities.2 FBR Group engages in these and other financial consistent with approval of the proposal. activities in the United States and overseas. In the United States, FBR Group conducts its securities and advisory Financial and Managerial Considerations activities through a number of subsidiaries that are subject to regulation by the Securities and Exchange Commission The Board has carefully considered the financial and man- ("SEC"), including Friedman, Billings, Ramsey & Co., agerial resources and future prospects of the companies Inc., Arlington, Virginia, a broker-dealer registered with and bank involved in the proposal, the effect the proposed the SEC under section 15 of the Securities Exchange Act transaction would have on such resources, and other superof 1934 (15 U.S.C. § 78o). visory factors in light of all the facts of record. In evaluat- Bank, with total consolidated assets of $26.4 million, is ing the financial and managerial factors, the Board has the 113th largest depository institution in Maryland, con- reviewed confidential examination and other supervisory trolling deposits of approximately $27.4 million, represent- information evaluating the financial and managerial reing less than 1 percent of deposits in the state.3 sources of FBR Group and its subsidiaries, including its regulated subsidiaries, and of Bank. Factors Governing Board Review of Bank Transaction The Board consistently has considered capital adequacy to be an especially important aspect in analyzing financial The BHC Act sets forth the factors that the Board must factors.6 Bank currently is well capitalized under applicaconsider when reviewing the formation of a bank holding ble federal guidelines and all of the subsidiaries of FBR company or the acquisition of a bank. These factors are the Group that are subject to regulatory capital requirements competitive effects of the proposal in the relevant geo- currently exceed the relevant regulatory minimum capital graphic banking markets; the financial and managerial requirements. In addition, after consummation of the proresources and future prospects of the companies and banks posal, FBR Group would have capital levels that signifiinvolved in the proposal; the convenience and needs of the cantly exceed the well capitalized thresholds for bank communities to be served, including the records of perfor- holding companies, and the transaction would not have a mance under the Community Reinvestment Act (12 U.S.C. significant effect on FBR Group's financial resources. § 2901 et seq.) ("CRA") of the insured depository institu- Other financial factors also are consistent with approval. tions involved in the transaction; and the availability of The Board also has carefully considered the managerial information needed to determine and enforce compliance resources of FBR Group and Bank in light of all the facts with the BHC Act and other applicable federal banking of record, including confidential examination and other laws.4 supervisory information provided by the primary federal supervisors for RTS and Bank. In addition, the Board has Competitive Considerations considered confidential examination and other supervisory information provided by the SEC concerning FBR Group's Section 3 of the BHC Act prohibits the Board from approv- SEC-regulated subsidiaries. The Board also has considered ing a proposal that would result in a monopoly. The BHC confidential information submitted by FBR Group concern- Act also prohibits the Board from approving a proposed ing its risk management policies, procedures, and systems bank acquisition that would substantially lessen competi- and the enhancements that FBR Group has made to these tion in any relevant banking market unless the anticompeti- policies, procedures, and systems in anticipation of the tive effects of the proposal are clearly outweighed in the proposed transaction. Based on all the facts of record, the public interest by the probable effect of the proposal in Board concludes that considerations relating to the finanmeeting the convenience and needs of the community to be cial and managerial resources and future prospects of the served.5 organizations involved are consistent with approval, as are The proposal involves the acquisition of a commercial the other supervisory factors that the Board must consider bank by FBR, which does not currently control any com- under section 3 of the BHC Act. mercial bank. Based on all the facts of record, the Board The Board notes further that a substantial portion of concludes that consummation of the proposal would not FBR Group's activities are conducted through subsidiaries result in any significantly adverse effects on competition or that are subject to functional regulation by the SEC. Acon the concentration of banking resources in any relevant cordingly, the Board has in this case consulted with the SEC and will, consistent with the provisions of section 5 of the BHC Act as amended by the Gramm-Leach-Bliley Act, rely heavily on the SEC for examination and other supervi- 2. Asset data for FBR Group are as of December 31, 2000. sory information in fulfilling the Board's responsibilities as 3. Asset data for Bank are as of September 30, 2000, and deposit and ranking data are as of June 30, 2000. holding company supervisor. 4. In cases involving interstate bank acquisitions by bank holding companies, the Board also must consider the concentration of deposits nationwide and in the relevant individual states, as well as compliance with the other provisions of section 3(d) of the BHC Act. 6. See Chemical Banking Corporation, 82 Federal Reserve Bulletin 5. 12 U.S.C. § 1842(c)(1). 230 (1996). 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348 Federal Reserve Bulletin • May 2001 Convenience and Needs Considerations Request to Exceed Merchant Banking Investment Thresholds The Board also has carefully considered the effect of the Bank holding companies that have made an effective elecproposal on the convenience and needs of the communities tion to become financial holding companies may own or to be served in light of all the facts of record. As part of control merchant banking investments in accordance with this review, the Board has considered the record of the the requirements and limitations of section 4(k)(4)(H) of relevant insured depository institution under the CRA. the BHC Act and Subpart J of Regulation Y.7 Sec- FBR Group currently does not control any insured deposi- tion 225.174 of Subpart J provides that a financial holding tory institution subject to evaluation under the CRA. RTS, company may, with the Board's approval, make merchant the predecessor to Bank, received an overall rating of banking investments under section 4(k)(4)(H) of the BHC "satisfactory" from the Office of Thrift Supervision, its Act that, in the aggregate, have a carrying value that primary federal supervisor, at its most recent evaluation for exceeds certain thresholds.8 These investment thresholds CRA performance, as of June 1999. Based on all the facts will automatically sunset once a final capital rule addressof record, the Board concludes that considerations related ing the appropriate capital treatment of merchant banking to the convenience and needs of the communities to be investments is adopted by the Board and becomes effecserved are consistent with approval. tive.9 FBR engages in a significant amount of merchant banking investment activities, both directly and through private Conclusion Regarding Section 3 Application equity funds, and has requested the Board's approval for its merchant banking investments to exceed the aggregate thresholds currently applicable under Subpart J. In light of Based on the foregoing, and in light of all the facts of this request, the Board has reviewed confidential informarecord, the Board has determined that the application under tion received from FBR concerning the risk management section 3 of the BHC Act should be, and hereby is, appolicies, procedures and systems that FBR has in place to proved. The Board's approval is specifically conditioned monitor and control the financial and operational risks on compliance by FBR with all the commitments made in associated with its investment activities and its experience connection with the application. For the purpose of this in managing those risks. The Board also has carefully action, the commitments and conditions relied on by the reviewed FBR's capital adequacy in light of the current Board in reaching its decision are deemed to be conditions and projected scope and nature of its merchant banking imposed in writing by the Board in connection with its investment activities. The Board notes that FBR's pro findings and decision and, as such, may be enforced in forma capital levels would significantly exceed the well proceedings under applicable law. capitalized levels for bank holding companies under both The acquisition of Bank shall not be consummated bethe Board's existing capital guidelines and the proposed fore the fifteenth calendar day after the effective date of amendments to the Board's capital guidelines relating to this order, or later than three months after the effective date merchant banking and other equity investments. of this order, unless such period is extended for good cause Based on these and all other facts of record, the Board by the Board or the Federal Reserve Bank of Richmond, has approved FBR's request for its merchant banking inacting pursuant to delegated authority. vestments to exceed the aggregate thresholds set forth in section 225.174 of Regulation Y. The Board expects FBR Financial Holding Company Declaration to continue to operate with capital levels commensurate with the nature and extent of its merchant banking activities. FBR also has filed with the Board an election to become a By order of the Board of Governors, effective March 13, financial holding company pursuant to sections 4(k) and (/) 2001. of the BHC Act and section 225.82(f) of Regulation Y. FBR has stated that RTS is well capitalized and well managed, has certified that Bank will be well capitalized and well managed on the date FBR consummates the proposal, and has provided all the information required 7. See 12 U.S.C. 1843(k)(4)(H); 12 C.F.R. 225.170 through 225.175; under Regulation Y. 66 Federal Register 8,465 (2001). The Board has reviewed the examination ratings re- 8. These thresholds are (i) 30 percent of the company's Tier 1 capital, or (ii) 20 percent of the company's Tier 1 capital after ceived by Bank under the CRA and other relevant examiexcluding investments in private equity funds (as defined in Subnations and information. Based on all the facts of record, part J). See 12 C.F.R. 225.174. the Board has determined that this election to become a 9. See 12 C.F.R. 225.174(c). The Board, the OCC, and the Federal financial holding company will become effective on con- Deposit Insurance Corporation have requested comment on proposed rules that would establish new minimum regulatory capital requiresummation of the acquisition of Bank by FBR, provided ments for merchant banking investments made by financial holding that Bank continues to be well capitalized, well managed, companies and similar equity investments made by banks and bank and have at least a satisfactory CRA rating on that date. holding companies. See 66 Federal Register 10,212 (2001). 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Legal Developments 349 Voting for this action: Chairman Greenspan and Governors Kelley, become one of the largest banking organizations in the Meyer, and Gramlich. Absent and not voting: Vice Chairman Fergu- world, with total consolidated assets of approximately son. $860 billion.4 Tokyo Bank, with total consolidated assets of ROBERT DEV. FRIERSON $698 billion, is the largest bank in Japan. In the United Associate Secretary of the Board States, Tokyo Bank owns UnionBanCal, and indirectly owns Union Bank. Tokyo Bank operates branches in Los Mitsubishi Tokyo Financial Group, Inc. Angeles and San Francisco, California; Chicago, Illinois; Tokyo, Japan New York, New York; Portland, Oregon; and Seattle, Washington; agencies in Atlanta, Georgia; and Houston, Order Approving Formation of a Bank Holding Texas; and representative offices in Washington, D.C.; Company and Acquisition of Nonbanking Companies Minneapolis, Minnesota; and Dallas, Texas. Mitsubishi Trust, with total consolidated assets of Mitsubishi Tokyo Financial Group, Inc. (In Formation) $156 billion, is the 13th largest bank in Japan. In the ("MTFG") has requested the Board's approval under sec- United States, Mitsubishi Trust owns Mitsubishi Trust-NY. tion 3 of the Bank Holding Company Act (12 U.S.C. Mitsubishi Trust also operates branches in Chicago, Illi- § 1842) ("BHC Act") to become a bank holding company nois, and New York, New York, and an agency in Los by acquiring The Bank of Tokyo-Mitsubishi, Ltd. ("Tokyo Angeles, California. Bank"), a registered bank holding company, and its subsid- In addition, Tokyo Bank and Mitsubishi Trust engage in iary banks, and The Mitsubishi Trust and Banking Corpoa broad range of permissible nonbanking activities in the ration ("Mitsubishi Trust"), both in Tokyo, Japan, a regis- United States through subsidiaries. tered bank holding company, and its subsidiary bank.1 MTFG also has requested the Board's approval under Factors Governing Board Review of Transaction section 4(c)(8) and (j) of the BHC Act (12 U.S.C. § 1843(c)(8) and (j)) and section 225.24 of the Board's The BHC Act sets forth the factors that the Board must Regulation Y (12 C.F.R. 225.24) to acquire the direct and consider when reviewing the formation of a bank holding indirect U.S. nonbanking subsidiaries of Tokyo Bank and company or the acquisition of banks. These factors are the Mitsubishi Trust and thereby engage in certain permissible nonbanking activities.2 In addition, MTFG proposes to competitive effects of the proposal in the relevant geographic markets; the financial and managerial resources indirectly acquire Union Bank of California International, and future prospects of the companies and banks involved New York, New York ("UBCI"), an Edge corporation, and in the proposal; the convenience and needs of the commu- BTM North America International, Inc., New York, New nities to be served, including the records of performance York, ("BNAI"), an agreement corporation subsidiary of under the Community Reinvestment Act (12 U.S.C. Tokyo Bank, pursuant to sections 25 and 25A of the § 2901 et seq.) ("CRA") of the insured depository institu- Federal Reserve Act (12 U.S.C. § 601 et seq.) and Regulations involved in the transaction; the availability of infortion K (12 C.F.R. 211). mation needed to determine and enforce compliance with Notice of the proposal, affording interested persons an the BHC Act and other applicable federal banking law; opportunity to submit comments, has been published (65 and, in the case of applications involving foreign banks, Federal Register 70,911 (2000)). The time for filing comwhether the foreign banks involved are subject to comprements has expired, and the Board has considered the prohensive supervision and regulation on a consolidated basis posal and all comments received in light of the factors set by their home country supervisor. The Board also must forth in sections 3 and 4 of the BHC Act and the Federal consider interstate bank acquisitions in light of the concen- Reserve Act. tration of deposits nationwide and in each relevant state, MTFG is a corporation that would be formed under the and compliance with other provisions of section 3(d) of the laws of Japan to acquire Tokyo Bank and Mitsubishi BHC Act. Trust.3 On consummation of the proposal, MTFG would The Board has considered these factors in light of a record that includes information provided by MTFG, Tokyo Bank, and Mitsubishi Trust; confidential supervisory 1. Tokyo Bank's banking subsidiaries are: Bank of Tokyoand examination information; and publicly reported finan- Mitsubishi Trust Company ("Tokyo Bank-NY"), New York, New York; and UnionBanCal Corporation ("UnionBanCal"), a registered cial and other information. The Board also has considered bank holding company, and its subsidiary bank, Union Bank of information collected from the primary home country su- California, N.A. ("Union Bank"), both in San Francisco, California. pervisor of Tokyo Bank and Mitsubishi Trust and from Mitsubishi Trust's subsidiary bank is Mitsubishi Trust & Banking appropriate federal and state agencies. Corporation (U.S.A.) ("Mitsubishi Trust-NY"), New York, New York. 2. The nonbanking activities of Tokyo Bank and Mitsubishi Trust for which MTFG has sought Board approval under section 4(c)(8) consummation, MTFG would also acquire Nippon Trust Bank and (j) of the BHC Act are listed in the Appendix. Limited and The Tokyo Trust Bank, Ltd., both in Tokyo, Japan. 3. The transaction would be effected through an exchange of shares. Neither bank has operations in the United States. MTFG's existence would begin on the date on which it consummates 4. Asset and ranking data are as of March 31, 2000, and are based the exchange of shares. See Japanese Commercial Code, art. 370. On on the exchange rate then applicable. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

350 Federal Reserve Bulletin • May 2001 Interstate Analysis facts of record, the Board concludes that consummation of the proposal would not result in any significantly adverse Section 3(d) of the BHC Act allows the Board to approve effects on competition or on the concentration of banking an application by a bank holding company to acquire resources in this market or any other relevant banking control of a bank located in a state other than the home markets. state of the bank holding company if certain conditions are met. For purposes of the BHC Act, the home state of Financial and Managerial Considerations MTFG is California,5 and MTFG's subsidiary banks would be located in California, New York, Oregon, and Washing- The Board also has considered carefully the financial and ton.6 All the conditions for an interstate acquisition enu- managerial resources and future prospects of MTFG and merated in section 3(d) are met in this case.7 In light of all the banks involved in the proposal, the effect the proposed the facts of record, the Board is permitted to approve the transaction would have on such resources, and other superproposal under section 3(d) of the BHC Act. visory factors in light of all the facts of record. The Board notes that the proposal is intended to enhance the overall Competitive Considerations financial strength and future prospects of the combined organization. The transaction would occur through an ex- Section 3 of the BHC Act prohibits the Board from approv- change of shares and Tokyo Bank, and Mitsubishi Tokyo ing a proposal that would result in a monopoly. The BHC would not incur any additional debt as part of the transac- Act also prohibits the Board from approving a proposed tion. MTFG's pro forma capital levels would exceed the bank acquisition that would substantially lessen competi- minimum levels that would be required under the Basle tion in any relevant banking market unless the anticompeti- Capital Accord, and its capital levels are considered equivtive effects of the proposal are clearly outweighed in the alent to the capital levels that would be required of a U.S. public interest by the probable effect of the proposal in banking organization under similar circumstances. meeting the convenience and needs of the community to be In addition, the Board has reviewed supervisory informaserved.8 tion from the home country authorities responsible for Tokyo Bank and Mitsubishi Trust control banking oper- supervising Tokyo Bank and Mitsubishi Trust concerning ations that compete directly in the New York/New Jersey the proposal and condition of the parties, confidential fi- Metropolitan banking market ("New York banking mar- nancial information from Tokyo Bank and Mitsubishi ket").9 Consummation of the proposal would result in an Trust, and reports of examination from the appropriate increase of less than 1 point in the Herfindahl-Hirschman federal and state supervisors of the affected organizations Index ("HHI") in the New York banking market, which assessing the financial and managerial resources of the would remain unconcentrated with numerous competitors organization." Based on all the facts of record, the Board operating in the market.10 Based on these and all other has concluded that the financial and managerial resources and future prospects of the organizations involved in the proposal are consistent with approval. 5. A bank holding company's home state is that state in which the total deposits of all banking subsidiaries of such company were the 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). MTFG would become a bank holding company on consummation of the proposal, and California would be the state in which the total deposits of its U.S. banking subsidiaries would be the largest. 6. For purposes of section 3(d), the Board considers a bank to be controls deposits of $3.1 billion in the New York banking market, located in the states in which the bank is chartered, headquartered, or representing less than 1 percent of total deposits in depository instituoperates a branch. tions in the market ("market deposits"). Mitsubishi Trust controls 7. MTFG is adequately capitalized and adequately managed, as deposits of $666 million in the market, representing less than defined by applicable law. 12 U.S.C. § 1842(d)(1)(A). On consumma- 1 percent of total market deposits. After consummation of the protion of the proposal, MTFG and its affiliates would control less than posal, MTFG would remain one of the smaller banking organizations 10 percent of the total amount of deposits of insured depository in the New York banking market, with less than 1 percent of market institutions in the United States (12 U.S.C. § 1842(d)(2)), and would deposits. The HHI for the New York banking market would remain not exceed applicable deposit limitations in any state as calculated unchanged at 931 after consummation of the proposal. Under the under state and federal law. All other requirements of section 3(d) of revised Department of Justice Merger Guideline, 49 Federal Register the BHC Act would be met on consummation of the proposal. 26,823 (June 29, 1984), a market is considered unconcentrated if the 8. 12 U.S.C. § 1842(c)(1). post-merger HHI is less than 1000. The Department of Justice has 9. The New York banking market includes New York City; Nassau, informed the Board that a bank merger or acquisition generally will Orange, Putnam, Rockland, Suffolk, Sullivan, and Westchester Coun- not be challenged (in the absence of other factors indicating anticomties in New York; Bergen, Essex, Hudson, Hunterdon, Middlesex, petitive effects) unless the postmerger HHI is at least 1800 and the Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union, War- merger increases the HHI by more than 200 points. The Department ren, and a portion of Mercer Counties in New Jersey; Pike County in of Justice has stated that the higher than normal HHI thresholds for Pennsylvania; and portions of Fairfield and Litchfield Counties in screening bank mergers for anticompetitive effects implicitly recog- Connecticut. nize the competitive effects of limited-purpose lenders and other 10. Market share data are as of June 30, 1999, and are based on nondepository financial entities. calculations in which the uninsured deposits of the branches of Tokyo 11. The Japanese Financial Services Agency ("FSA") has approved Bank and Mitsubishi Trust are included at 100 percent. Tokyo Bank the formation of MTFG. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 351 Convenience and Needs Considerations previously that certain Japanese banks, including Tokyo Bank, are subject to comprehensive consolidated supervi- The Board also has carefully considered the elfect of the sion by their home country supervisor.14 In this case, the proposal on the convenience and needs of the communities Board has determined that Mitsubishi Trust is supervised to be served in light of all the facts of record. on substantially the same terms and conditions as these The Board has long held that consideration of the conve- other Japanese banks. In addition, the FSA has supervisory nience and needs factor includes a review of the records of authority with respect to MTFG and its nonbanking subsidthe relevant depository institutions under the CRA. As iaries. The FSA may conduct inspections of MTFG and its provided in the CRA, the Board evaluates the record of subsidiaries and require MTFG to submit reports about its performance of an institution in light of examination by the operations on a consolidated basis. The FSA also may appropriate federal supervisors of the CRA performance review transactions between MTFG and its subsidiaries records. An institution's most recent CRA performance and has authority to require MTFG to take measures necesevaluation is a particularly important consideration in the sary to ensure the safety and soundness of the MTFG applications process because it represents a detailed, on- organization. Based on all the facts of record, the Board site evaluation of the institution's overall record of perfor- has concluded that Tokyo Bank and Mitsubishi Trust are mance under the CRA by its appropriate federal supervi- subject to comprehensive supervision and regulation on a sor.12 consolidated basis by their home country supervisor. This proposal involves the proposed formation of a new The BHC Act also requires the Board to determine that bank holding company. Accordingly, the Board has re- foreign banks have provided adequate assurances that they viewed in detail the CRA performance records of the U.S. will make available to the Board such information on their subsidiary insured depository institutions of the organiza- operations and activities and those of their affiliates that the tions involved in this transaction: Tokyo Bank-NY re- Board deems appropriate to determine and enforce compliceived an "outstanding"CRA performance rating from the ance with the BHC Act. The Board has reviewed the Federal Deposit Insurance Corporation ("FDIC") at its restrictions on disclosure in jurisdictions where Tokyo most recent examination, as of June 1999; Union Bank Bank and Mitsubishi Trust have, and MTFG would have, received a "satisfactory" CRA performance rating from material operations and has communicated with relevant the Office of the Comptroller of the Currency at its most government authorities concerning access to information. recent examination, as of March 1998; and Mitsubishi MTFG has committed that, to the extent not prohibited by Trust-NY received a "satisfactory" CRA performance rat- applicable law, it will make available to the Board such ing from the FDIC at its most recent examination, as of information on the operations of MTFG and any of its October 1998. affiliates that the Board deems necessary to determine and Examiners found no evidence of prohibited discrimina- enforce compliance with the BHC Act and other applicable tion or other illegal credit practices and found no violations federal law. MTFG also has committed to cooperate with of fair lending laws at any of the insured depository institu- the Board to obtain any waivers or exemptions that may be tions involved in the proposal. Examiners also reviewed necessary in order to enable MTFG to make any such the assessment areas delineated by these insured depository information available to the Board. In light of these cominstitutions and found that the respective assessment areas mitments and other facts of record, the Board has conwere reasonable and did not arbitrarily exclude low- and cluded that MTFG has provided adequate assurances of moderate-income areas. access to any appropriate information the Board may re- In light of all the facts of record, the Board has con- quest. For these reasons, and based on all the facts of cluded that considerations relating to the convenience and record, the Board has concluded that the supervisory facneeds of the communities to be served, including the tors it is required to consider under section 3(c)(3) of the records of performance of the relevant depository institu- BHC Act are consistent with approval. tions under the CRA, are consistent with approval. Certain Supervisory Considerations Under section 3 of the BHC Act, the Board may not approve an application involving a foreign bank unless the bank is "subject to comprehensive supervision or regula- bank is subject to consolidated home country supervision under the tion on a consolidated basis by the appropriate authorities standards set forth in Regulation K. Regulation K provides that a in the bank's home country."13 The Board has determined foreign bank may be considered subject to consolidated supervision if the Board determines that the bank is supervised or regulated in such a manner that its home country supervisor receives sufficient information on the worldwide operations of the foreign bank, including the 12. The Interagency Questions and Answers Regarding Community relationships of the bank to its affiliates, to assess the foreign bank's Reinvestment provides that a CRA examination is an important and overall financial condition and compliance with law and regulation. 12 often controlling factor in the consideration of an institution's CRA C.F.R. 211.24(c)(1)(h). record. See 65 Federal Register 25,088 and 25,107 (2000). 14. See The Mitsubishi Bank, Limited, 82 Federal Reserve Bulletin 13. 12 U.S.C. § 1842(c)(3)(B). As provided in Regulation Y 436 (1996); The Chuo Mitsui Trust & Bank Co. Ltd. 86 Federal (12 C.F.R. 225.13(a)(4)), the Board determines whether a foreign Reserve Bulletin 702 (2000). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

352 Federal Reserve Bulletin • May 2001 Nonbanking Activities Mitsubishi Trust. The proposal would enable Tokyo Bank, through its indirect subsidiary bank, Union Bank, to pro- MTFG also has filed notices under section 4(c)(8) and 4(j) vide Mitsubishi Trust's customers with access to a broader of the BHC Act to acquire the U.S. nonbanking subsidiar- array of products and services, including commercial retail ies of Tokyo Bank and Mitsubishi Trust and to engage in bank products which Mitsubishi Trust-NY does not offer as the United States in various permissible nonbanking activi- a wholesale bank. Furthermore, customers of Tokyo Bank ties. Through these subsidiaries, MTFG would directly and and Mitsubishi Trust would have an expanded service area, indirectly engage in a number of nonbanking activities with numerous branches, agencies, and representative oflisted in the Appendix, including engaging in lending activ- fices nationwide, including a significant retail banking ities and activities related to extending credit, engaging in branch network in California. Based on all the facts of leasing activities, performing trust company functions, pro- record, the Board has determined that consummation of viding investment and financial advisory services, provid- this proposal can reasonably be expected to produce public ing securities brokerage services,15 engaging in riskless benefits that would outweigh any likely adverse effects principal transactions, providing private-placement ser- under the standard of section 4(j)(2) of the BHC Act. vices, acting as a futures commission merchant,16 engaging The Board has carefully considered the competitive efas principal in foreign exchange and forward contracts, fects of the proposed transaction under section 4 of the options, futures, options on futures, swaps, and similar BHC Act. To the extent that Tokyo Bank and Mitsubishi contracts based on any rate, price, or financial asset,17 Trust offer different types of nonbanking products, the providing to customers as agent transactional services with proposal would result in no loss of competition. Certain respect to swaps and similar transactions based on any rate, nonbanking subsidiaries of Tokyo Bank and Mitsubishi price, or financial asset, underwriting and dealing in gov- Trust compete, however, in the markets for lending, leasernment obligations and money market instruments, and ing, and trust company services. The market for these engaging in data processing and transmission activities. nonbanking activities are regional or national and are un- The Board determined by regulation before November 12, concentrated. The record in this case also indicates that 1999, that the types of activities for which notice has been there are numerous providers of these services. For the provided are closely related to banking for purposes of reasons discussed, and based on all the facts of record, the section 4(c)(8) of the BHC Act.18 MTFG has committed Board concludes that consummation of the proposal would that it will conduct these activities in accordance with the have a de minimis effect on competition for the relevant Board's regulations and in accordance with the orders nonbanking activities. approving these activities for bank holding companies. The Board also concludes that the conduct of the pro- In order to approve the notice, the Board also must posed nonbanking activities within the framework estabdetermine that the acquisition of the U.S. nonbank subsid- lished in this order, prior orders, and Regulation Y is not iaries of Tokyo Bank and Mitsubishi Trust and the perfor- likely to result in adverse effects, such as undue concentramance of the proposed activities by MTFG can reasonably tion of resources, decreased or unfair competition, conflicts be expected to produce benefits to the public that outweigh of interests, or unsound banking practices, that would not possible adverse effects, such as undue concentration of be outweighed by the public benefits of the proposal, such resources, decreased or unfair competition, conflicts of as increased customer convenience and gains in efficiency. interests, or unsound banking practices.19 Accordingly, based on all the facts of record, the Board has MTFG has indicated that the proposal would improve determined that the balance of public interest factors that it the financial position and future business prospects of the must consider under the standard of section 4(j)(2) of the banking and nonbanking subsidiaries of Tokyo Bank and BHC Act is favorable and consistent with approval of the proposal. MTFG also has provided notice under sections 25 and 15. Specifically, MTFG has requested the Board's authorization to 25 A of the Federal Reserve Act and section 211.4 of retain certain securities-related, foreign exchange, brokerage, invest- Regulation K (12 C.F.R. 211.4) to acquire UBCI and ment advisory, leasing, and data processing activities and activities related to extending credit which Tokyo Bank currently conducts BNAI, companies organized under sections 25 and 25A of through BTM Capital Corporation, Boston, Massachusetts, and the Federal Reserve Act. The Board concludes that all the Tokyo-Mitsubishi Securities (U.S.A.), New York, New York. MTFG factors required to be considered under the Federal Rehas committed to comply with commitments and limitations regarding serve Act and Regulation K are consistent with approval of this activity in accordance with the Board's orders approving Tokyo the proposal. Bank's notice to engage in these activities. See The Mitsubishi Bank, Limited, 82 Federal Reserve Bulletin 436 (1996); The Bank of Tokyo, Ltd.,16 Federal Reserve Bulletin 654 (1990). Conclusion 16. MTFG's authority to operate as a futures commission merchant is limited to the authority approved in The Mitsubishi Bank, Limited, 82 Federal Reserve Bulletin 436 (1996). Based on the foregoing, the Board has determined that the 17. MTFG's authority to trade for its own account or to act as agent transaction should be, and hereby is approved. In reaching for others in transactions is limited to the authority approved in The its conclusion, the Board has considered all the facts of Mitsubishi Bank, Limited, 11 Federal Reserve Bulletin 337 (1991), record in light of the factors that it Board is required to and The Bank of Tokyo, Ltd., 76 Federal Reserve Bulletin 654 (1990). consider under the BHC Act and other applicable statutes. 18. See 12 C.F.R. 225.28(b)(1), (2), (3), (5), (6), (7), (8), and (14). 19. See 12 U.S.C. § 1843(j)(2)(A). The Board's approval is specifically conditioned on com- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 353 pliance by MTFG with all the commitments and conditions (6) Providing securities brokerage, riskless principal, and set forth in this order and the regulations and orders cited private placement services in accordance with secabove, and on the Board's receiving access to information tion 225.28(b)(7)(i)-(iii) of the Board's Regulation Y on the operations or activities of MTFG and any of its (12 C.F.R. 225.28(b)(7)(i)-(iii)); affiliates that the Board determines to be appropriate to (7) Acting as a futures commission merchant in accordetermine and enforce compliance by MTFG and its affili- dance with section 225.28(b)(7)(iv) of Regulation Y ates with applicable federal statutes. The Board's approval (12 C.F.R. 225.28(b)(7)(iv)), and The Mitsubishi of the nonbanking aspects of the proposal also is subject to Bank, Limited 82 Federal Reserve Bulletin 436 all the conditions set forth in Regulation Y, including those (1996); in sections 225.7 and 225.25(c) of Regulation Y (12 C.F.R. (8) Providing to customers as agent transactional services 225.7 and 225.25(c)), and to the Board's authority to with respect to swaps and similar transactions based require such modification or termination of the activities of on any rate, price, or financial asset in accordance a bank holding company or any of its subsidiaries as the with section 225.28(b)(7)(v) of Regulation Y and The Board finds necessary to ensure compliance with, and to Mitsubishi Bank, Limited, 82 Federal Reserve Bulleprevent evasion of, the provisions of the BHC Act and the tin 436 (1996), and The Mitsubishi Bank, Limited, Board's regulations and orders issued thereunder. These 11 Federal Reserve Bulletin 337 (1991); commitments and conditions are deemed to be conditions (9) Underwriting and dealing in government obligations imposed in writing by the Board in connection with its and money market instruments in accordance with findings and decision and, as such, may be enforced in 225.28(b)(8)(i) of Regulation Y (12 C.F.R. proceedings under applicable law. 225.28(b)(8)(i)); The acquisition of the subsidiary banks of Tokyo Bank (10) Engaging as principal in foreign exchange and forand Mitsubishi Trust may not be consummated before the ward contracts, options, futures, options on futures, fifteenth calendar day after the effective date of this order, swaps, and similar contracts based on any rate, price, and the proposal may not be consummated later than three or financial asset in accordance with secmonths after the effective date of this order, unless such tion 225.28(b)(8)(ii)(A) & (B) of Regulation Y (12 period is extended for good cause by the Board or by the C.F.R. 225.28(b)(8)(ii)(A) & (B)) and The Mitsubishi Federal Reserve Bank of San Francisco acting pursuant to Bank, Limited, 11 Federal Reserve Bulletin 337 delegated authority. (1991), and The Bank of Tokyo, Ltd., 76 Federal By order of the Board of Governors, effective March 14, Reserve Bulletin 654 (1990); and 2001. (11) Data processing and transmission activities in accordance with section 225.28(b)(14) of Regulation Y Voting for this action: Chairman Greenspan and Governors Kelley, (12 C.F.R. 225.28(b)(14)). Meyer, and Gramlich. Absent and not voting: Vice Chairman Ferguson. ROBERT DEV. FRIERSON ORDERS ISSUED UNDER INTERNATIONAL Associate Secretary of the Board BANKING ACT Societe Generate Appendix Paris, France Nonbanking activities of Tokyo Bank and Mitsubishi Order Approving Establishment of an Agency Trust in which MTFG proposes to engage: Societe Generale ("Bank"), Paris, France, a foreign bank (1) Extending credit and servicing loans in accordance within the meaning of the International Banking Act with section 225.28(b)(1) of Regulation Y (12 C.F.R. ("IBA"), has applied under section 7(d) of the IB A 225.28(b)(1)); (12 U.S.C. § 3105(d)) to establish a state-licensed agency (2) Activities related to extending credit in accordance in Greenwich, Connecticut. The Foreign Bank Supervision with section 225.28(b)(2) of Regulation Y (12 C.F.R. Enhancement Act of 1991, which amended the IBA, pro- 225.28(b)(2)); vides that a foreign bank must obtain the Board's approval (3) Providing leasing services in accordance with section to establish an agency in the United States. 225.28(b)(3) of Regulation Y (12 C.F.R. Notice of the application, affording interested persons an 225.28(b)(3)); opportunity to comment, has been published in a newspa- (4) Performing trust company functions in accordance per of general circulation in Greenwich, Connecticut with section 225.28(b)(5) of Regulation Y (12 C.F.R. (Greenwich Time, November 1, 2000). The time for filing 225.28(b)(5)); comments has expired, and the Board has considered all (5) Providing financial and investment advisory services comments received. in accordance with section 225.28(b)(6) of Regula- Bank, with total consolidated assets of approximately tion Y (12 C.F.R. 225.28(b)(6)); $412 billion, is one of the largest banking organizations in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

354 Federal Reserve Bulletin • May 2001 France.1 Bank's shares are publicly traded and widely held, With respect to supervision by home country authorities, with no single shareholder owning more than 10 percent of the Board previously has determined, in connection with shares. applications involving other banks in France, that those Bank engages in retail and commercial banking and banks were subject to home country supervision on a other financial activities, including asset management, di- consolidated basis.3 Bank is supervised by the French rectly and through its bank and nonbank subsidiaries. Out- Banking Commission on substantially the same terms and side France, Bank has operations in Europe, Africa, the conditions as those other banks. Based on all the facts of Middle-East, the Americas, Asia, and Oceania. In the record, the Board has determined that Bank is subject to United States, Bank operates branches in New York, New comprehensive supervision on a consolidated basis by its York, Chicago, Illinois, and Los Angeles, California; an home country supervisor. agency in Dallas, Texas; and representative offices in San The Board has also taken into account the additional Francisco, California, and Houston, Texas; and engages in standards set forth in section 7 of the IBA and Regulanonbanking activities through a number of subsidiaries. tion K (see 12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. Bank is a qualifying foreign banking organization within 211.24(c)(2)-(3)). The French Banking Commission has no the meaning of Regulation K (12 C.F.R. 211.23(b)). objection to the establishment of the proposed agency. Bank proposes to establish an agency for the purpose of France's risk-based capital standards conform to the relocating certain of its operations from Bank's New York European Union capital standards, which are consistent branch to Greenwich, Connecticut. The agency would man- with those established by the Basle Capital Accord. Bank's age Bank's global U.S. dollar derivative market-making capital is in excess of the minimum levels that would be activities, market fixed-income derivatives and financial required by the Basle Capital Accord and is considered products, market and trade credit derivatives and structured equivalent to capital that would be required of a U.S. and tax-driven financial products, and engage in limited banking organization. Managerial and other financial remunicipal finance activities. sources of Bank also are considered consistent with ap- In order to approve an application by a foreign bank to proval, and Bank appears to have the experience and establish an agency in the United States, the IBA and capacity to support the proposed agency. In addition, Bank Regulation K require the Board to determine that the has established controls and procedures for the proposed foreign bank applicant engages directly in the business of agency to ensure compliance with U.S. law, as well as banking outside of the United States and has furnished to controls and procedures for its worldwide operations generthe Board the information it needs to assess the application ally. adequately. The Board also shall take into account whether With respect to access to information about Bank's the foreign bank (and any foreign bank parent) is subject to operations, the Board has reviewed the restrictions on comprehensive supervision or regulation on a consolidated disclosure in relevant jurisdictions in which Bank operates basis by its home country supervisor (12 U.S.C. and has communicated with relevant government authori- § 3105(d)(2); 12 C.F.R. 211.24).2 The Board may also take ties regarding access to information. Bank has committed into account additional standards as set forth in the IBA to make available to the Board such information on the and Regulation K (12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. operations of Bank and any of its affiliates that the Board 211.24(c)(2)(3)). deems necessary to determine and enforce compliance with As noted above, Bank engages directly in the business of the IBA, the Bank Holding Company Act and other applibanking outside the United States. Bank also has provided cable federal law. To the extent that the provision of such the Board with information necessary to assess the applica- information to the Board may be prohibited by law or tion through submissions that address the relevant issues. otherwise, Bank has committed to cooperate with the Board to obtain any necessary consents or waivers that might be required from third parties for disclosure of such information. In addition, subject to certain conditions, the 1. Asset data are as of September 30, 2000. 2. In assessing this standard, the Board considers, among other French Banking Commission may share information on factors, the extent to which the home country supervisors: Bank's operations with other supervisors, including the (i) ensure that the bank has adequate procedures for monitoring and Board. In light of these commitments and other facts of controlling its activities worldwide; record, and subject to the condition described below, the (ii) obtain information on the condition of the bank and its subsidiar- Board concludes that Bank has provided adequate assuries and offices through regular examination reports, audit reports, ances of access to any necessary information that the or otherwise; (iii) obtain information on the dealings with and relationship between Board may request. the bank and its affiliates, both foreign and domestic; On the basis of all the facts of record, and subject to the (iv) receive from the bank financial reports that are consolidated on a commitments made by Bank, as well as the terms and worldwide basis or comparable information that permits analysis of the bank's financial condition on a worldwide consolidated basis; (v) evaluate prudential standards, such as capital adequacy and risk 3. See Paribus, 85 Federal Reserve Bulletin 449 (1999); Credit asset exposure, on a worldwide basis. These are indicia of Agricole Indosuez, 83 Federal Reserve Bulletin 1025 (1997); Caisse comprehensive, consolidated supervision. No single factor is Nationale de Credit Agricole, 81 Federal Reserve Bulletin 1055 essential, and other elements may inform the Board's determina- U995); Banque Nationale de Paris, 81 Federal Reserve Bulletin 515 tion. (1995). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 355 conditions set forth in this order, the Board has determined commitments and conditions referred to above are condithat Bank's application to establish an agency should be, tions imposed in writing by the Board in connection with and hereby is, approved. Should any restrictions on access its decision and may be enforced in proceedings under to information on the operations or activities of Bank and 12 U.S.C. § 1818 against Bank and its affiliates. its affiliates subsequently interfere with the Board's ability By order of the Board of Governors, effective March 5, to obtain information to determine and enforce compliance 2001. by Bank or its affiliates with applicable federal statutes, the Board may require termination of any of Bank's direct or Voting for this action: Chairman Greenspan, Vice Chairman Ferguindirect activities in the United States. Approval of this son, and Governors Kelley, Meyer, and Gramlich. application also is specifically conditioned on compliance ROBERT DEV. FRIERSON by Bank with the commitments made in connection with this application and with the conditions in this order.4 The Associate Secretary of the Board this application does not supplant the authority of the Connecticut 4. The Board's authority to approve the establishment of the pro- Department of Banking ("Department") to license the proposed office posed agency parallels the continuing authority of the State of Con- of Bank in accordance with any terms or conditions that the Departnecticut to license offices of a foreign bank. The Board's approval of ment 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 Trustmark Corporation, Barrett Bancorp, Inc., March 2, 2001 Jackson, Mississippi Barretville, Tennessee Peoples Bank, Barretville, Tennessee The Somerville Bank & Trust Company, Somerville, Tennessee Wesbanco Inc., Freedom Bancshares, Inc., March 12, 2001 Wheeling, West Virginia Belington, West Virginia 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 1st Choice Bancorp, Inc., 1st Choice Bank, Dallas March 5, 2001 Houston, Texas Houston, Texas 1st Choice Bancorp of Delaware, Inc. Wilmington, Delaware ABC Bancorp, Tri-County Bank, Atlanta March 16,2001 Moultrie, Georgia Trenton, Florida Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

356 Federal Reserve Bulletin • May 2001 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Admiral Family Banks, Inc., Federated Bancorp, Chicago March 29, 2001 Alsip, Illinois Loda, Illinois Federated Bank, Onarga, Illinois American State Bancshares, Inc. American State Bank, National Kansas City March 15, 2001 Great Bend, Kansas Association, Great Bend, Kansas Astra Financial Corporation, First Missouri Bancshares, Inc., Kansas City March 14, 2001 Prairie Village, Kansas Brookfield, Missouri First Missouri National Bank, Brookfield, Missouri BSB Community Bancorporation, Benton State Bank, Chicago March 5, 2001 Inc., Benton, Wisconsin Benton, Wisconsin CCB Corporation, Acquisition Corporation, Kansas City March 8, 2001 Kansas City, Missouri Leawood, Kansas Centra Financial Holdings, Inc., Centra Financial Corporation- Richmond March 9, 2001 Morgantown, West Virginia Morgantown, Inc., Morgantown, West Virginia Centra Financial Corporation- Martinsburg, Inc., Martinsburg, West Virginia Centra Bank, Inc., Morgantown, West Virginia Chittenden Corporation, Maine Bank Corporation, Boston March 28, 2001 Burlington, Vermont Portland, Maine Maine Bank and Trust Company, Portland, Maine First Olathe Bancshares, Inc., Bannister Bancshares, Inc., Kansas City March 9, 2001 Kansas City, Missouri Kansas City, Missouri Foster Bankshares, Inc., Foster Bank, Chicago March 1, 2001 Chicago, Illinois Chicago, Illinois Grant County State Bancshares, Grant County State Bancshares, Chicago March 22, 2001 Inc., Employee Stock Ownership Swayzee, Indiana Plan, Swayzee, Indiana Heartland Bancorp, Inc., Court Acceptance Company, Chicago March 27, 2001 Bloomington, Illinois Pekin, Illinois First State Bank of Pekin, Pekin, Illinois Innovative Bancorp, Bank of Oakland, San Francisco March 14, 2001 Calabasas, California Oakland, California Katy Bancshares, Inc., Katy Bancshares Delaware, Inc., Dallas March 8, 2001 Katy, Texas Wilmington, Delaware Katy Bank, National Association, Katy, Texas Plymouth Financial Corporation, New Liberty Bank, Chicago March 6, 2001 Plymouth, Michigan Plymouth, Michigan Shelby Bancshares, Inc., Shelby Savings Bank, SSB, Dallas February 27, 2001 Center, Texas Center, Texas Shelby Savings of Nevada, Inc., Carson City, Nevada Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 357 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Sterling Bancshares, Inc., CaminoReal Bancshares, Inc., Dallas January 26, 2001 Houston, Texas San Antonio, Texas Sterling Bancorporation, Inc. CaminoReal Delaware, Inc., Wilmington, Delaware Wilmington, Delaware CaminoReal Bank National Association, San Antonio, Texas Texas Financial Bancorporation, Inc. First National Bank of Texas, Dallas February 23, 2001 Minneapolis, Minnesota Decatur, Texas Delaware Financial, Inc., Wilmington, Delaware United Bancorp, Inc., United Bank & Trust - Washtenaw, Chicago March 9, 2001 Tecumseh, Michigan Ann Arbor, Michigan United Financial Holdings, Inc., First Security Bank, Atlanta March 16, 2001 St. Petersburg, Florida Sarasota, Florida WB&T Bankshares, Inc., Guardian Bank, Atlanta March 9, 2001 Waycross, Georgia Valdosta, Georgia Section 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date AmericaUnited Bancorp, Inc., AmericaUnited Bank and Trust Chicago February 27, 2001 Schaumburg, Illinois Company USA, Schaumburg, Illinois Bank One Corporation, To expand its community development Chicago March 16, 2001 Chicago, Illinois activities to an aggregate investment Capital Bank Corporation, Capital Bank Investment Services, Inc., Richmond March 21, 2001 Raleigh, North Carolina Raleigh, North Carolina Commonwealth Bancshares, Inc. SMC Capital, Inc., St. Louis February 28, 2001 Shelbyville, Kentucky Louisville, Kentucky First Ainsworth Company, To engage de novo in extending credit Kansas City March 7, 2001 Ainsworth, Nebraska and servicing loans Hawarden Banshares, Inc., G.W. Insurance Services, Inc., Chicago March 21, 2001 Hawarden, Iowa Hawarden, Iowa Farmers State Agency, Hawarden, Iowa Mitsubishi Tokyo Financial Group, KOKUSAI America Incorporated, San Francisco March 28, 2001 Inc., New York, New York Tokyo, Japan The Bank of Tokyo-Mitsubishi, Ltd., Tokyo, Japan Southern Community Bancorp. Inc. Southern Community Banc Mortgage, Atlanta March 23, 2001 Orlando, Florida LLC, Longwood, Florida Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

358 Federal Reserve Bulletin • May 2001 Sections 3 and 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date First National Bank of Moose Lake First Financial Services of Moose Lake, Minneapolis March 15, 2001 Profit Sharing and ESOP, Inc., Moose Lake, Minnesota Moose Lake, Minnesota F.N.B. Corporation, Citizens Community Bancorp, Inc., Cleveland February 27, 2001 Hermitage, Pennsylvania Marco Island, Florida Citizens Financial Corporation, Naples, Florida CCB Mortgage Corporation, Marco Island, Florida APPLICATIONS APPROVED UNDER BANK MERGER ACT By the Secretary of the Board Recent applications have been approved by the Secretary of the Board as listed below. Copies are available upon request to the Freedom of Information Office, Office of the Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Applicant(s) Bank(s) Effective Date WesbancoBank, Inc., Belington Bank, March 12, 2001 Wheeling, West Virginia Belington, West Virginia 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 Dacotah Bank, First National Bank, Minneapolis March 21, 2001 Rolla, North Dakota Bowbells, North Dakota Iron and Glass Bank, First Commonwealth Bank, Cleveland February 22, 2001 Pittsburgh, Pennsylvania Indiana, Pennsylvania M&I Marshall & Ilsley Bank, M&I Bank of LaCrosse, Chicago March 1, 2001 Milwaukee, Wisconsin LaCrosse, Wisconsin M&I Bank South Central, Watertown, Wisconsin M&I Bank South, Janesville, Wisconsin M&I Bank of Mayville, Mayville, Wisconsin M&I Community State Bank, Eau Claire, Wisconsin M&I Bank of Southern Wisconsin, Madison, Wisconsin M&I Thunderbird Bank, Phoenix, Arizona Pointe Bank, Republic Bank, Atlanta March 1, 2001 Boca Raton, Florida St. Petersburg, Florida Placer Sierra Bank, Sacramento Commercial Bank, San Francisco February 22, 2001 Auburn, California Sacramento, California Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 359 Federal Reserve Banks—Continued Applicant(s) Bank(s) Reserve Bank Effective Date The Sylvan State Bank, Boonslick Bank, Kansas City March 21, 2001 Sylvan Grove, Kansas Boonville, Missouri PENDING CASES INVOLVING THE BOARD OF GOVERNORS This list of pending cases does not include suits against the Bettersworth v. Board of Governors, No. 00-50262 (5th Cir., Federal Reserve Banks in which the Board of'Governors is not filed April 14, 2000). Appeal of district court's dismissal of named a party. Privacy Act claims. Albrecht v. Board of Governors, No. 00-CV-317 (CKK) (D.D.C., filed February 18, 2000). Action challenging the Artis v. Greenspan, No. 01-CV-0400(ESG) (D.D.C., complaint method of funding of the retirement plan for certain Board filed February 22, 2001. Employment discrimination action. employees. On March 30, 2001, the district court granted in Dime Bancorp, Inc. v. Board of Governors, No. 00-4249 part and denied in part the Board's motion to dismiss. (2d Cir., filed December 11, 2000). Petition for review of a Guerrero v. United States, No. CV-F-99-6771(OWW) (E.D. Board order dated September 27, 2000, approving the appli- Cal., filed November 29, 1999). Prisoner suit. cations of North Fork Corporation, Inc., Melville, Artis v. Greenspan, No. 1:99CV02073 (EGS) (D.D.C., filed New York, to acquire control of Dime Bancorp, Inc. and to August 3, 1999). Employment discrimination action. thereby acquire its wholly owned subsidiary, The Dime Fraternal Order of Police v. Board of Governors, No. Savings Bank of New York, FSB, both of New York, 1:98CV03116 (WBB)(D.D.C„ filed December 22, 1998). New York. Declaratory judgment action challenging Board labor prac- Nelson v. Greenspan, No. 99-215(EGS) (D.D.C., amended tices. On February 26, 1999, the Board filed a motion to complaint filed December 8, 2000). Employment discrimi- dismiss the action. nation action. Howe v. Bank for International Settlements, No. 00CV12485 FINAL ENFORCEMENT DECISION ISSUED BY THE RCL (D. Mass., filed December 7, 2000). Action seeking BOARD OF GOVERNORS damages in connection with gold market activities and the repurchase of privately-owned shares of the Bank for Inter- In the Matter of national Settlements. Guillaume Henry Andre Fonkenell Barnes v. Reno, No. 1:00CV02900 (D.D.C., filed December 4, A Former Institution-Affiliated 2000). Civil rights action. Party of El Bey v. United States, No. 00-5293 (D.C. Cir., filed August 31, 2000). Appeal from district court order dismiss- Bankers Trust Company, ing pro se action as lacking arguable basis in law. On New York, New York January 11, 2001, the court dismissed the appeal. Trans Union LLC v. Board of Governors, et al., No. 00-CV- Docket No. 98-032-B-I, 98-032-CMP-I 2087(ESH) (D.D.C., filed August 30, 2000). Action under Administrative Procedure Act challenging a portion of inter- Final Decision agency rule regarding Privacy of Consumer Financial Information. This is an administrative proceeding of the Board of Governors of the Federal Reserve System (the "Board"), based Sedgwick v. Board of Governors, No. 00-16525 (9th Cir., filed upon the issuance on October 29, 1998, of a "Notice of August 7, 2000). Appeal of district court dismissal of action Charges and of Hearing and Notice of the Assessment of a under Federal Tort Claims Act alleging violation of bank Civil Money Penalty Issued Pursuant to Sections 8(b) and supervision requirements. (i) of the Federal Deposit Insurance Act, as Amended" (the Individual Reference Services Group, Inc., v. Board of Gover- "Notice"). The Notice alleges that respondent Guillaume nors, et al., No. 00-CV-1828 (ESH) (D.D.C., filed July 28, Henri Andre Fonkenell, a former derivatives trader at 2000). Action under Administrative Procedure Act chal- Bankers Trust Company, New York, New York, violated lenging a portion of interagency rule regarding Privacy of the law and engaged in unsafe or unsound practices in Consumer Finance Information. connection with two leveraged derivative trades in which Reed Elsevier Inc. v. Board of Governors, No. 00-1289 (D.C. he was involved. The Notice, as amended, seeks a civil Cir., filed June 30, 2000). Petition for review of interagency money penalty of $250,000 and a cease and desist order rule regarding Privacy of Consumer Financial Information. prohibiting Fonkenell from serving as an institution- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

360 Federal Reserve Bulletin • May 2001 affiliated party of any financial institution where his duties or unsound practice specified in the notice of charges has include participating in structuring derivative transactions been established." In that event, the Board may issue an for sale or marketing to customers, advising customers order requiring the respondent to cease and desist from the regarding the purchase, sale, or structuring of a derivative practice, and "to take affirmative action to correct the transaction, and preparing marketing materials regarding conditions resulting from any such violation or practice." derivatives transactions.1 12 U.S.C. § 1818(b)(1). This authority includes the author- Following an extensive hearing and submission of post- ity, among other things, to require the respondent to "take hearing filings, administrative law judge Walter J. Alprin such other action as the banking agency determines to be (the "ALJ") issued a Recommended Decision ("RD") appropriate" (12 U.S.C. § 1818(b)(6)(F)) and the authority recommending that the Board find that the allegations in to "place limitations on the activities or functions of . . . the Notice are not supported by the record, and that the any institution-affiliated party." 12 U.S.C. § 1818(b)(7). Board dismiss the Notice in its entirety. Enforcement The appropriate Federal banking agency may assess a Counsel filed exceptions to the RD, in which they argued civil money penalty at various levels under various condithat while the ALJ's factual findings were correct, they did tions set forth in the statute. A "first tier" civil money not include certain facts supported by the record. Enforce- penalty of $5000 per day may be assessed against any ment Counsel also excepted to the ALJ's conclusions of institution-affiliated party who violates a law, regulation, law. Fonkenell's exception was limited to his contention final order, condition imposed in writing, or written agreethat the ALJ erred in permitting the testimony of Enforce- ment with the agency. 12 U.S.C. § 1818(i)(2)(A). A ment Counsel's expert witness.2 "second-tier" civil money penalty of $25,000 per day may Upon review of the administrative record, the Board be assessed against an institution-affiliated party who comhereby makes its Final Decision and adopts the ALJ's mits any of the above violations, or who "recklessly en- Recommended Decision, Recommended Findings of Fact, gages in an unsafe or unsound practice in conducting the and Recommended Conclusions of Law, except as specifi- affairs" of the institution, or who breaches a fiduciary duty, cally supplemented or modified herein. The Board there- if the Board makes the additional finding that the violation, fore determines that no enforcement order is warranted practice, or breach was either part of a pattern of misconunder the facts of this case, and dismisses the Notice. duct, or caused (or was likely to cause) more than a minimal loss to the institution, or resulted in pecuniary Statutory Overview gain or other benefit to the respondent. 12 U.S.C. § 1818(i)(2)(B). The Federal Deposit Insurance Act (the "FDI Act") pro- As with a cease and desist proceeding, the respondent vides that the appropriate Federal banking agency may has a right to a hearing before an ALJ, and the Board issue a cease and desist notice against a depository institu- makes the final decision regarding the imposition of a tion or an institution- affiliated party within its jurisdiction penalty. 12 C.F.R. 263.40. if it has reasonable cause to believe that the institution or An ALJ's findings of fact are not conclusive on the party has engaged in an unsafe or unsound practice, or has agency. Under the Administrative Procedure Act, it is the violated a law, rule, regulation, or certain conditions im- agency, not the ALJ, that has the responsibility for making posed in writing. 12 U.S.C. § 1818(b)(1). Following issu- findings of fact based on the record, and drawing legal ance of a Notice, the Board's Rules of Practice assign conclusions from them. Greater Boston Television Corp. v. responsibility to an ALJ to hear the matter and make a FCC, 444 F.2d 841, 853 (D.C. Cir. 1970), cert, denied, 403 recommended decision to the Board. 12 C.F.R. 263.5. The U.S. 923 (1971). Nonetheless, because the ALJ has had an parties may file exceptions to the ALJ's recommended opportunity to hear the evidence directly and assess the decision, and the Board makes final findings of fact and credibility of witnesses, agencies generally defer an ALJ's conclusions of law, and determines whether to issue a credibility assessment unless the evidence clearly warrants cease and desist order. 12 C.F.R. 263.40. rejection of that assessment. See, e.g., Stanley v. Board of A cease and desist order may be issued if the agency Governors, 940 F.2d 267, 272 (7th Cir. 1991). finds on review of the record "that any violation or unsafe Discussion 1. The original Notice sought in addition a cease and desist order precluding Fonkenell's service as an institution-affiliated party at any The facts of this case revolve around two separate sets of financial institution or agency identified in 12 U.S.C. § 1818(e)(7)(a) transactions, the "Indonesian Transactions" and the without Federal Reserve approval. On May 7, 1999, the Board "Procter & Gamble [or P&G] Transaction." Both were amended the notice to delete that requested relief and to substitute a request that the Board order "other appropriate restrictions on leveraged derivative transactions sold by Bankers Trust to [Fonkenell's] future activities as an institution-affiliated party as are clients, and in both cases Fonkenell was involved in his warranted based on the record in this proceeding." capacity as a trader on Bankers Trust's dollar derivatives 2. This issue is not properly an exception, as the ALJ did not make desk. In both cases, Enforcement Counsel contends that any findings based on the expert's challenged testimony. Accordingly, Fonkenell's actions constituted an unsafe or unsound practhe Board takes no position on the propriety of the admission of this testimony. tice justifying imposition of the civil money penalty and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 361 cease-and-desist relief sought.3 Apart from these similari- percent. The spread formulation in the January 18 message ties, the facts of the two transactions do not overlap, and was expressed as "10 x [6mLIB - 3.75%]." Because the the Board, like the ALJ, will consider them separately. customer would pay ten times the difference in the rates, the leverage factor in the formula was 10. A. The Indonesian Transactions Fonkenell and Hyun subsequently spoke about the proposal. Hyun indicated that he liked the idea, but that he A derivative is a financial product the value of which is wanted to "hide the leverage" in the trade. Fonkenell based on, or derived from, something other than the trans- discussed the proposed trade and Hyun's request to hide action itself. During the late 1980s and through the mid- the leverage with Oliver Lu, a trader assisting Hyun, on 1990s, the market for derivatives products increased sub- January 19 and again on January 24, 1994. In each of these stantially, and Bankers Trust was at the forefront of this tape-recorded conversations Fonkenell and Lu discussed expansion. Among the Bankers Trust employees involved various methods of reformulating the spread in order to in the derivatives trade were marketers, who presented "hide the leverage" in the transaction.5 Among the methtransactions to clients, and traders, who developed and ods they discussed was the use of a divisor rather than a structured derivatives transactions, priced the transactions, multiplier to express the leverage in the transaction. In and hedged the risk associated with the transactions. Gen- neither of the taped conversations did Fonkenell or Lu erally, traders had little or no contact with customers, and discuss why Hyun would want to hide the leverage in the this was true for Fonkenell in connection with the Indone- transaction. They did, however, discuss moving the interest sian transactions. rate "barrier" up to a figure higher than the 4.75 percent In 1993 and 1994, Fonkenell was a trader in Bankers favored by Hyun. Raising the barrier would mean that the Trust's "dollar derivatives" desk, responsible for several customer was less likely to have to pay the spread. Lu trading books and also for developing derivatives transac- commented in this regard, "I don't want to be too tions for marketers. Fonkenell was located in Bankers greedy... I want to make sure the guy wins," to which Trust's offices in New York. One of the marketers with Fonkenell replied, "yeah me too exactly. Yeah, we should, whom Fonkenell interacted was Hogi Hyun, a well- I was looking on what barrier, I was looking I think 5 %." regarded managing director of Bankers Trust based in Board Ex. 16A at 10. Southeast Asia. After the second conversation with Lu, Fonkenell sent a As part of his job developing potential transactions for second message to Hyun, stating that he had "thought marketers, on January 18, 1994, Fonkenell sent an elec- about ways to hide the leverage and came up with the tronic mail message to Hyun and others, proposing a following." Board Ex. 19. The trade proposed in this so-called "barrier swap" trade for "one of the PT's," a second message differed in a number of respects from that term for Indonesian corporations. Board Ex. 18. Under this shown in the January 18 message. The barrier was type of trade, Bankers Trust would pay the customer a 5 percent, and the amount Bankers Trust paid to the fixed rate on the principal (or "notional") amount to matu- customer on its side of the swap was calculated differently. rity, and the customer would make payments to Bankers But most importantly for purposes of this proceeding, the Trust calculated by applying an agreed-upon formula to the spread if the barrier were breached was expressed as folnotional amount. The formula proposed in the January 18 lows: message was that the customer would make payments to SPREAD = (6mLIBOR/ 4.3125%) - 1. Bankers Trust based on the "12-month late LIBOR rate" In this formulation, the spread is calculated by dividing a plus a specified "spread," which would in turn be calcurate (6-month LIBOR) by a percentage - 4.3125 percent. lated based on the movement of interest rates in the market.4 If the 6-month LIBOR rate never traded above 4.75 Dividing a number by 4.3125 percent is the mathematical equivalent of multiplying that number by approximately percent during the first year of the contract, the spread 23, making the leverage factor for this formula about 23. would be zero (and the customer would pay just the In late January and February 1994, Hyun sent barrier 12-month late LIBOR rate). If that interest rate "barrier" swap proposals based loosely on the proposal set forth in were breached within the first year after the trade, the Fonkenell's second message to two Indonesian customers. customer would pay in addition a spread equal to ten times Board Ex. 20, 21. In both cases, the spread if the barrier the difference between the six-month LIBOR rate and 3.75 was breached was expressed as the 6-month LIBOR rate divided by a percentage (4.3 percent in one case, 4.5 percent in the other), minus one. In one case, the barrier 3. Enforcement Counsel originally contended that Fonkenell's involvement in the Indonesian transactions constituted wire fraud in under which the spread would be zero was 5 percent, and violation of 18 U.S.C. § 1343, and that his actions in connection with in the other it was 5.25 percent. In each case, the proposal the P&G transaction resulted in a false entry in the books and records informed the customer that "as the likelihood of 6-month of a financial institution in violation of 18 U.S.C. § 1005. The ALJ USD LIBOR trading above [the barrier] is very small," the rejected these claims in the Recommended Decision, and in its postdecision filings Enforcement Counsel did not except to the ALJ's conclusions. Enforcement Counsel also has not argued that Fonkenell's actions constituted a breach of any fiduciary duty. 5. At Bankers Trust, as elsewhere, traders' telephone lines were 4. "LIBOR" refers to the London Inter Bank Offered Rate, a set of recorded in order to provide confirmation of orders, and for other interest rates published daily and widely used in such instruments. purposes. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

362 Federal Reserve Bulletin • May 2001 customer was likely to enjoy a low cost of funds under the obvious to some customers when expressed as a multiplier proposal. The proposals were also accompanied by discus- rather than as a divisor, but the mathematical result is the sions of the U.S. economic outlook which projected the same. It is undisputed that Fonkenell did not know the 6-month LIBOR rate to be well below the barrier by identity of any particular customer to whom the barrier year-end 1994 (the time when the barrier would be tested), trade might be marketed, so he had no basis on which to and a "sensitivity analysis" that failed to show clearly the presume greater or lesser mathematical sophistication on effect of the transaction at higher interest rate levels. It is the part of the customer. Fonkenell explained that he underundisputed that Fonkenell had no responsibility for or stood the purpose of "hiding the leverage" to be to permit input into the marketing material presented to these cus- a marketer to discuss a complex transaction with a potentomers. tial customer in a way that would allow full consideration Interest rates rose dramatically in 1994, and these trades of the transaction's risks and rewards, rather than focusing resulted in substantial losses to the Indonesian customers. on the leverage factor which was only one component of Both customers complained about the trades, and in partic- risk. Fonkenell was aware that a sensitivity analysis would ular the sales practices used to market them. Both transac- normally be provided to customers showing a wide range tions ended up in court, where the disputes were ultimately of outcomes of the trade, both positive and negative, based settled by the parties. on a wide range of possible rates in the market. Tr. at 1930. On the basis of these facts, Enforcement Counsel asserts While such an analysis appears not to have been presented that Fonkenell engaged in an unsafe or unsound practice in in connection with these particular trades, there is nothing that he "intended to deceive" the Indonesian customers by in the record to suggest that Fonkenell had either any providing a formula to "hide the leverage." On this record, responsibility for that failing or even any basis to believe it the Board cannot agree. The record contains no evidence would occur. In short, Fonkenell's use of the phrase "hide that any customer was defrauded or misled by the spread the leverage" is not enough to turn his otherwise legal formula itself, which is the only part of the transaction in actions into an unsafe or unsound practice. which Fonkenell had a role. Indeed, there is no evidence that any customer was defrauded at all. The fact that A. The Proctor & Gamble Transaction Bankers Trust entered into a settlement with customers, with a disclaimer of wrongdoing, cannot be considered 1. Background evidence of fraud.6 Commercial enterprises settle claims Fonkenell began his career at Bankers Trust in June 1990, for a variety of reasons, some of which have nothing to do as a junior swap trader. By November 1993, Fonkenell was with the merits. Moreover, even if there were legitimate a relatively senior trader in Bankers Trust's New York liability on the part of Bankers Trust, on this record it is office. He was responsible for oversight of several options more reasonable to assume that it stemmed from the mar- books - portfolios of common transactions linked to one or keting materials - which were outside of Fonkenell's re- more particular market variables - although by late 1993 he sponsibility or control - than from the spread formula itself, no longer had day-to-day responsibility for any book. which admittedly accurately set out the terms of the trans- Among the books for which he had oversight responsibility action. It is important in this regard to put Fonkenell's was the so-called T24 book. A more junior colleague, actions in context. At that time at Bankers Trust, the use of Kassy Kabede, had day-to-day responsibility as the "book formulas in which the leverage factor was expressed as a runner" for the T24 book. Fonkenell and Kabede reported divisor was commonplace. Use of such a formula violated to Ari Bergmann, who managed the dollar derivative desk no rule, regulation, or policy of the Federal Reserve or any as a whole. other regulator - indeed, there still is no prohibition or At the end of October 1993, Kabede and Bankers Trust limitation on the use of divisors to express leverage. Thus, marketer Kevin Hudson were working on a major derivathe only basis for Enforcement Counsel's claim that tives transaction with Procter & Gamble (the "P&G Fonkenell's actions constituted an unsafe or unsound prac- Trade"). The P&G Trade was an "exotic" trade involving tice is that Fonkenell created the formula in order to an option linked to the value of Treasury instruments, and respond to a request to "hide the leverage," and Enforce- as such it would be recorded and managed principally on ment Counsel's assertion that Fonkenell intended that the the T24 book for which Kebede was chiefly responsible. formula he developed would in fact "hide the leverage" Kebede, however, was out of the country during the week from - and thus defraud - Bankers Trust customers. beginning November 1, 1993, and in his absence Fonkenell While the use of the phrase "hide the leverage" cer- filled in for him as book runner for the T24 book. tainly raises concerns, in the context of this type of transac- The P&G Trade was a "5s/30s swap", under which tion the concerns do not appear to be well-founded. A Bankers Trust would pay P&G a fixed rate for the six-year formula that accurately states the leverage factor cannot by life of the transaction, and P&G would pay Bankers Trust a itself be misleading. The leverage factor might be more variable rate based on the future prices of the 5-year Treasury note and the 30-year Treasury bond, as determined six months after the trade date. With a notional 6. In fact, as the ALJ pointed out, there is no evidence that the amount of $200 million, the P&G Trade was one of the amounts paid to the customers by Bankers Trust under these settlelargest derivative transactions Bankers Trust had entered ments even exceeded the amounts it was obligated to pay under the terms of the swap transactions. RD at 34. into. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 363 At Bankers Trust, the trader's role in executing a trade value, or expected profit, on the transaction, depending on like the P&G Trade involved a number of steps. The trader the known terms (such as notional amount and length of was involved with the marketer in pricing the trade. Fol- time the transaction was to be outstanding) and the varilowing its execution, the trader was responsible for hedg- ables such as the current price of volatilities and other ing the Bankers Trust's risks associated with the transac- components of the trade. Traders would save the spreadtion. In addition, the trader was responsible for working sheet for a particular transaction to a computer system that with Bankers Trust's "back office" operation to book the could be accessed both by the back-office personnel for transaction, including allocation of portions of the trade's purposes of booking the transaction, and by the bank's expected profits among various trading books. The back controllers whose job was to ensure that the accuracy of office person responsible for booking the P&G Trade was the bank's books. The responsible back-office person Joseph Mancino. would then enter the new trade figures from the spread- The back office entered the trade into the bank's books, sheet model into the pre-existing inventory of trades for the and marked the books to market every day by recalculating book. the value of the various trades in the book to take account A chief function of the back office was to mark the of market changes in the various components of the trans- bank's investments to market on a daily basis. Marking to actions in the portfolio. One of the components of the market refers to the process of marking the bank's books trades in the T24 book was the "volatility" of the underly- and records with values for the bank's trading positions ing instruments to which the trades were linked, including that are as close as possible to the market at a given point the 5-year Treasury Note and the 30-year Treasury Bond. in time. A bank's trading books must be marked to market Volatility is a measure of the degree of uncertainty of on a daily basis in order to provide bank management with future price movements. When volatility goes up, the price an accurate picture of the bank's investment exposure and of an option goes up. While there is a market for volatility, allow an assessment of the bank's earnings in comparison it is unlike other components of the trades in the T24 book, to its risk. because the level at which volatility trades on a given day As part of the function of marking the bank's books to is not widely available. Instead, volatility is determined or market, daily statements of profit and loss were generated derived from options that are traded in the market by using at Bankers Trust for each of the derivatives books. In 1993, a model that calculates volatility based on an option's the back office that generated these statements at Bankers strike rate, time to expiration, discount rate, and other Trust received its market input information from the tradfactors. ers, who had the greatest familiarity with the market. When In the options market, volatility trades within a range, a new trade was put on the books, the trader was not known as the "bid/ask spread." When pricing a trade or required to use the market inputs that existed on the books selecting an appropriate volatility figure at which to value prior to the trade. Rather, the trader was expected to the trade for booking purposes, a trader must take account determine the appropriate values based on the market at the of the fact that he will be hedging the risk of the trade by time, and to mark the new trade and all existing trades in a engaging in opposing transactions, and that his hedges will particular book with the same market inputs. Thus, for be executed at either the bid or the offer side of the market, example, the T24 book included transactions whose value depending on whether he is buying or selling volatility. depended, among other things, on the volatilities of the The trader will therefore select a volatility number that is 5-year Treasury Note and the 30-year Treasury Bond. either on the bid or the ask side of the market when pricing When the P&G Trade was recorded on November 2, 1993, a transaction. At Bankers Trust, the same factors were Fonkenell was not required to use the volatilities for those taken into consideration when providing a volatility figure instruments in use in the T24 book prior to the execution of to the back office for purposes of booking and valuing a the trade, but was expected to identify the volatilities in the transaction. When a book such as the T24 book was long market and then have the back office mark all of the T24 on volatility, as it was following the execution of the P&G book consistently with those volatilities. The selection of a Trade, the trader was expected to use a figure at the lower particular volatility figure would affect the recorded value end of the bid/ask range when supplying volatility figures of a derivative trade (and, indeed, the entire book). to the back office for purposes of marking the bank's books The day a trade is put on the books at Bankers Trust, its to market.7 expected value is known as "new deal profit." New deal Because of the complexity of exotic transactions such as profit at Bankers Trust was shown on a specific line in the the P&G Trade, pricing and booking operations were aided bank's profit and loss explanation system; the remainder of by computer spreadsheets, which contained all the terms of the profit (or loss) realized in a particular trading book the transactions. The spreadsheets would generate the total shown on the system was known generally as "trading profit." Bankers Trust tracked the profitability of each trading book in the profit and loss explanation system in order to understand and manage its portfolios, and not for 7. Enforcement Counsel's expert witness testified that institutions purposes of determining trader compensation. Traders were generally mark to market using a mid-market volatility figure, about generally expected to maintain or protect new deal profit, halfway between the bid and the ask price. Testimony from Bankers and possibly to enhance it, through their hedging and Trust witnesses established, however, that this was not the practice at trading activities. Traders made most of their compensa- Bankers Trust in 1993. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

364 Federal Reserve Bulletin • May 2001 tion from Bankers Trust in the form of a year-end bonus, volatilities. RD at 25-28.8 There is no dispute that the rather than as a salary. A trader's bonus was not deter- volatility for the 5-year Note was increased from 17 to 18 mined by a simple mathematical calculation based on the on November 3, and the volatility for the 30-year Bond profit and loss of his trading books, however. Rather, was increased from 9 to 10 on November 8. These changes traders' bonuses were based on a number of subjective resulted in an increase in the "trading profit" in the T24 factors, including the trader's ability to structure new deals book associated with the P&G Trade of approximately and work with marketers. One of these factors was the $3 million. Finally, there is no dispute that 17 and 9 were trader's ability to preserve new deal profit, but the evidence appropriate, prudent figures at which to mark those volatildid not establish that this was the primary or even an ities on November 2, following the execution of the P&G important determinant of a trader's bonus. Trade, and that the increases in those volatilities in the With respect to the P&G Trade, the lower the volatility following days also reflected the market and were not in figure employed when the trade was first put on the bank's any sense "improper" figures. RD at 35. books, the lower the new deal, or expected, profit that On the basis of these facts, the ALJ concluded that would be booked on the first day of the trade. The size of Fonkenell did not engage in an unsafe or unsound practice the P&G Trade was so substantial that one point change in or a violation of law with regard to manipulation of the either the 5-year or the 30-year volatility figure would volatilities for the P&G Trade. RD at 34-36. The Board result in a profit or loss of $1.5 million; a one-point change agrees. in both volatility figures would result in profit or loss of Although some evidence in the record suggested that $3 million. manipulating volatility figures used to mark a bank's books to market could cause management to underestimate the degree of risk associated with the bank's portfolio, no 2. The conduct at issue evidence was presented regarding whether this potential Fonkenell is accused of manipulating the 5-year and 30- existed where the volatilities chosen were within the range year volatilities recorded in Bankers Trust's T24 book by of reasonable, prudent market figures.9 Thus, the record reporting artificially low figures to the back office on the does not reflect that the precise actions of which Fonkenell day the P&G Trade was executed, and then raising the was accused - manipulating volatilities within the range of volatility figures over the next several days so that they prudent market figures - could have caused any harm to the again reflected the market. This would have had the effect institution. We do not conclude that engaging in a scheme of reducing artificially the "new deal profit" and increas- to manipulate volatilities in order to enhance personal ing the "trading profit" associated with the T24 book. The benefits is by definition not an unsafe or unsound practice, alleged motive for these actions was greed: by artificially so long as the volatilities chosen are within a reasonable increasing trading profit, Fonkenell would allegedly have market range. We conclude simply that the evidence in this made himself look like a more competent trader, leading to case does not establish the potential risk of such a practice. an increase in his year-end bonus. Moreover, this case involved a single incident of alleged The facts relating to the booking of the P&G Trade are manipulation. Potentially, a different result would be called complex and involved considerable apparent confusion and for if the conduct alleged had involved a pattern of minimisunderstanding between Fonkenell and Mancino, the mizing the volatility figures, but the evidence did not back-office worker responsible for the T24 book. On No- suggest that this alleged manipulation occurred at any vember 2 and 3, immediately after the execution of the other time. Finally, the alleged motivation for the manipu- P&G Trade, Fonkenell was engaged in carrying out exten- lation - Fonkenell's asserted desire to increase his bonus by sive and complex hedging activities with respect to the increasing "trading profit" - also was not supported by the trade, in addition to discussing with Mancino and others record evidence. Rather, a former Bankers Trust supervisor the booking of the trade and the allocation of various testified that he did not believe there was any useful aspects of the trade to various trading books in addition to distinction between "new deal" profit and "trading profit" T24. Mancino was also occupied with other tasks, and was in connection with setting a trader's bonus, and that borelatively new to the T24 book. These other distractions may have been partly responsible for the apparent lack of communication between Fonkenell and Mancino; in any 8. Although the P&G Trade was marked with volatilities of 17 and 9 on the day it was executed, the rest of the T24 book was marked at event, it is evident from the transcripts of the conversations 18 and 9 on that day, because Mancino failed to carry out Fonkenell's that Fonkenell was not alone in his lack of clarity. instruction and mistakenly lowered the volatility on the 3-year Note, There appears to be no dispute, however, and the ALJ known in Bankers Trust's parlance as "Losh," rather than the 5-year Note, known as "Bosh." found, that prior to execution of the P&G Trade on Novem- 9. There is reason to question whether management's assessment of ber 2, 1993, the volatilities for the 5-year Treasury Note risk could be impaired if volatilities are chosen within a range of and the 30-year Treasury Bond were marked in the T24 prudent, reasonable market-based figures. Evidence in the record book at 18 and 10, respectively. There also is no dispute showed that marking a bank's books to market involves a number of that following the execution of the P&G Trade, Fonkenell judgment calls; for example, some banks evidently use a mid-market volatility figure5 for purposes of marking to market, while others, directed the back-office worker, Mancino, to mark both such as Bankers Trust, do not. Management's assessment of risk may volatilities down one, to 17 and 9, throughout the T24 well take into account the variation in value that can result from book, and that the P&G Trade was booked with those same choosing one volatility rather than another equally defensible one. 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Legal Developments 365 nuses were set by reference to a large number of subjective BOARD OF GOVERNORS OF THE measures. Moreover, no evidence was presented that FEDERAL RESERVE SYSTEM Fonkenell's actual bonus was affected in any manner by the alleged manipulations. JENNIFER J. JOHNSON Secretary of the Board Conclusion The Board has considered the entire record in this proceed- WRITTEN AGREEMENT APPROVED BY FEDERAL ing, including the ALJ's Recommended Decision and the RESERVE BANKS Exceptions to the Recommended Decision filed by both parties, and has concluded that the allegations of the Notice USABancShares.com, Inc. are not supported by the record. Philadelphia, Pennsylvania Accordingly, it is hereby ordered that the Notice against Respondent Guillaume Henri Andre Fonkenell is dis- The Federal Reserve Board announced on March 16, 2001, missed. the execution of a Written Agreement by and between By Order of the Board of Governors, this 14th day of USABancShares.com, Inc., Philadelphia, Pennsylvania, March, 2001. and the Federal Reserve Bank of Philadelphia. 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 A27 Gross public debt of U.S. Treasury— DOMESTIC FINANCIAL STATISTICS Types and ownership A28 U.S. government securities Money Stock and Bank Credit dealers—Transactions A4 Reserves, money stock, 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 A32 Open-end investment companies—Net sales A9 Federal Reserve open market transactions and assets A32 Corporate profits and their distribution Federal Reserve Banks A32 Domestic finance companies—Assets and liabilities A33 Domestic financec ompanies—Owned and managed A10 Condition and Federal Reserve note statements receivables All Maturity distribution of loan and security holding Real Estate Monetary and Credit Aggregates A34 Mortgage markets—New homes A12 Aggregate reserves of depository institutions A35 Mortgage debt outstanding and monetary base A13 Money stock and debt measures Consumer Credit A3 6 Total outstanding Commercial Banking Institutions— A3 6 Terms Assets and Liabilities A15 All commercial banks in the United States Flow of Funds A16 Domestically chartered commercial banks A17 Large domestically chartered commercial banks A37 Funds raised in U.S. credit markets A19 Small domestically chartered commercial banks A39 Summary of financial transactions A20 Foreign-related institutions A40 Summary of credit market debt outstanding A41 Summary of financial assets and liabilities Financial Markets A22 Commercial paper and bankers dollar DOMESTIC NONFINANCIAL STATISTICS acceptances outstanding A22 Prime rate charged by banks on short-term Selected Measures business loans A23 Interest rates—Money and capital markets A42 Nonfinancial business activity A24 Stock market—Selected statistics A42 Labor force, employment, and unemployment A43 Output, capacity, and capacity utilization A44 Industrial production—Indexes and gross value Federal Finance A46 Housing and construction A25 Federal fiscala nd financing operations A47 Consumer and producer prices A26 U.S. budget receipts and outlays A48 Gross domestic product and income A27 Federal debt subject to statutory limitation A49 Personal income and saving Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • May 2001 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 US. liabilities to foreign official institutions A63 GUIDE TO STATISTICAL RELEASES AND 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 December 31, 2000 A56 Banks' own and domestic customers' claims on A66 Terms of lending at commercial banks, foreigners February 2001 A56 Banks' own claims on unaffiliated foreigners A72 Assets and liabilities of U.S. branches and agencies A57 Claims on foreign countries—Combined of foreign banks, December 31, 2000 domestic offices and foreign branches A76 INDEX TO STATISTICAL TABLES Reported by Nonbanking Business Enterprises in the United States A58 Liabilities to unaffiliated foreigners A59 Claims on unaffiliated foreigners Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A3 Guide to Tabular Presentation SYMBOLS AND ABBREVIATIONS c Corrected G-7 Group of Seven e Estimated G-10 Group of Ten n.a. Not available GDP Gross domestic product n.e.c. Not elsewhere classified GNMA Government National Mortgage Association p Preliminary HUD Department of Housing and Urban r Revised (Notation appears on column heading Development when about half of the figures in that column IMF International Monetary Fund are changed.) IOs Interest only, stripped, mortgage-back securities * Amounts insignificant in terms of the last decimal IPCs Individuals, partnerships, and corporations place shown in the table (for example, less than IRA Individual retirement account 500,000 when the smallest unit given is millions) MMDA Money market deposit account 0 Calculated to be zero MSA Metropolitan statistical area . . . Cell not applicable NOW Negotiable order of withdrawal ABS Asset-backed security OCDs Other checkable deposits 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 POs Principal only, stripped, mortgage-back securities CRA Community Reinvestment Act of 1977 REIT Real estate investment trust FAMC Federal Agriculture Mortgage Corporation REMICs Real estate mortgage investment conduits FFB Federal Financing Bank RHS Rural Housing Service FHA Federal Housing Administration RP Repurchase agreement FHLBB Federal Home Loan Bank Board RTC Resolution Trust Corporation FHLMC Federal Home Loan Mortgage Corporation SCO Securitized credit obligation FmHA Farmers Home Administration SDR Special drawing right FNMA Federal National Mortgage Association SIC Standard Industrial Classification FSA Farm Service Agency VA Department of Veterans Affairs FSLIC Federal Savings and Loan Insurance Corporation 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 • May 2001 1.10 RESERVES, MONEY STOCK, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted1 2000 2000r 2001 MMoonneettaarryy oorr ccrreeddiitt aaggggrreeggaattee Qlr Q2 Q3r Q4r Oct. Nov. Dec. Jan.r Feb. Reserves of depository institutions2 1 Total 2.4 -10.9r -8.3 -8.7 -11.1 .1 -15.9 10.0 -.2 2 Required .6 -1.1' -8.6 -10.4 -12.3 -1.7 -20.3 12.7 -3.4 3 Nonborrowed 3.0 - 12.5r -9.9 -6.4 -9.4 4.3 -13.7 14.3 .5 4 Monetary base3 4.0 -3.6r 2.5 2.8 2.8 3.5 5.3 11.2 3.3 Concepts of money and debt4 5 Ml 2.0 -1.8 -3.6 -3.0 .4 -8.3 2.0 12.0 .0 6 M2 5.8 6.4 5.8 6.6 5.5 4.2 9.6 12.3 10.8 7 M3 10.7 9.0 8.9 7.0 3.8 4.2 13.8 16.0 11.7 8 Debt 5.6 6.1 4.9 4.6 3.5 5.4 5.8 3.8 n.a. Nontransaction components 9 In M25 7.1 8.9 8.7 9.4 7.0 7.9 11.8 12.4 13.8 10 In M3 only6 22.9 15.2r 16.3 7.9 -.2 4.1 23.7 24.6 13.7 Time and savings deposits Commercial banks 11 Savings, including MMDAs 2.5 7.8 11.8 11.9 5.0 10.4 16.3 13.2 23.8 12 Small time7 9.4 13.2 10.5 6.1 3.7 7.7 9.5 5.0 -5.8 13 Large time8'9 20.2 17.1 11.5 3.5 -9.0 4.8 39.2 22.0 -39.9 Thrift institutions 14 Savings, including MMDAs -2.9 1.6 3.3 .0 3.2 -3.4 -9.2 1.9 27.6 15 Small time7 7.2 3.3 10.8 9.7 9.9 9.1 5.6 14.6 6.8 16 Large time8 14.5 ,6r 23.0 14.0 20.1 4.6 -6.9 34.9 6.8 Money market mutual funds 17 Retail 17.8 13.3 4.6 12.7 13.2 9.3 19.5 21.2 9.2 18 Institution-only 22.8 18.0 29.2 18.6 10.4 12.9 24.9 52.5 86.9 Repurchase agreements and eurodollars 19 Repurchase agreements10 20.7 10.7r 8.0 -3.4 -3.3 -14.6 12.4 -10.7 -30.2 20 Eurodollars10 42.6 15.0r .6 2.0 -12.5 2.5 -1.3 -17.0 .6 Debt components4 21 Federal -4.9 -7.5 -7.3 -8.0 -10.1 -9.2 -6.6 -7.1 n.a. 22 Nonfederal 8.4 9.6 7.9 7.6 6.7 8.8 8.6 6.3 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 M1. 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 2001 2001 Dec. Jan. Feb. Jan. 17 Jan. 24 Jan. 31 Feb. 7 Feb. 14 Feb. 21 Feb. 28 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 578,891 577,991 574,233 577,821 577,550 573,706 572,082 572,626 577,131 575,091 U.S. government securities2 2 Bought outright—System account3 514,072 515,712 517,974 516,288 516,988 516,799 515,579 515,909 519,669 520,739 3 Held under repurchase agreements 0 0 0 0 0 0 0 0 0 0 Federal agency obligations 4 Bought outright 130 130 81 130 130 130 121 110 81 10 5 Held under repurchase agreements 0 0 0 0 0 0 0 0 0 0 6 Repurchase agreements—triparty4 27,923 24,662 19,085 24,228 22,429 18,986 18,921 17,757 21,976 17,685 7 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 8 Adjustment credit 96 43 29 4 79 12 6 24 13 72 9 Seasonal credit 114 32 19 26 23 31 19 23 17 17 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 1,502 873 1,231 731 1,172 675 623 1,543 955 1,802 13 Other Federal Reserve assets 35,054 36,539 35,815 36,415 36,730 37,072 36,814 37,260 34,421 34,766 14 Gold stock 11,046 11,046 11,046 11,046 11,046 11,046 11,046 11,046 11,046 11,046 15 Special drawing rights certificate account 2,652 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 16 Treasury currency outstanding 31,528 31,800r 31,923 31,793r 31,841r 31,888r 31,902 31,916 31,930 31,944 ABSORBING RESERVE FUNDS 17 Currency in circulation .. . 584,582 584,006r 582,422 584,339r 580,581r 578,487r 579,960 581,796 584,023 583,909 18 Reverse repurchase agreements—triparty ... 0 0 0 0 0 0 0 0 0 0 19 Treasury cash holdings 403 452 485 456 445 455 478 485 488 489 Deposits, other than reserve balances, with Federal Reserve Banks 20 Treasury 5,758 6,682 4,894 6,529 7,078 8,903 4,849 5,023 4,836 4,868 21 Foreign 115 104 94 106 85 110 89 79 107 100 22 Service-related balances and adjustments .. 6,959 6,841r 6,533 6,632 6,948r 6,578r 6,448 6,533 6,531 6,623 23 Other 355 305 302 199 267 277 339 323 257 290 2 2 4 5 O R t e h s e e r r v F e e b de a r la a n l c R es e s w er i v th e F li e a d b e i r li a t l i e R s e a s n e d r v c e a p B i a ta n l k s" v 1 7 8, , 4 5 0 4 1 3 1 6 8 , , 5 1 2 24 1 ' 1 6 8 , , 5 16 0 8 2 1 6 8 , , 3 26 3 5 3 1 8 8 , , 9 2 8 48 4 r 1 5 8 , ,1 8 9 3 8 2 ' 1 7 8 , , 0 0 3 3 5 2 1 5 8 , , 3 2 1 3 7 2 1 7 8 , , 9 1 0 6 3 2 1 5 8 , , 7 2 5 4 5 6 End-of-month figures Wednesday figures Dec. Jan. Feb. Jan. 17 Jan. 24 Jan. 31 Feb. 7 Feb. 14 Feb. 21 Feb. 28 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 593,092 573,194 578,124 578,853 589,511 573,194 579,003 574,244 587,381 578,124 U.S. government securities 2 Bought outright—System account3 511,703 516,018 519,618 516,778 518,441 516,018 516,486 514,561 521,118 519,618 3 Held under repurchase agreements 0 0 0 0 0 0 0 0 0 0 Federal agency obligations 4 Bought outright 130 130 10 130 130 130 110 110 10 10 5 Held under repurchase agreements 0 0 0 0 0 0 0 0 0 0 6 Repurchase agreements—triparty4 43,375 18,920 23,665 22,520 33,000 18,920 23,985 17,510 28,765 23,665 7 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 8 Adjustment credit 33 5 2 1 4 5 11 11 17 2 9 Seasonal credit 77 30 15 24 24 30 20 24 15 15 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 901 1,536 1,016 2,902 924 1,536 1,345 4,463 2,823 1,016 13 Other Federal Reserve assets 36,873 36,555 33,798 36,498 36,989 36,555 37,046 37,565 34,633 33,798 14 Gold stock 11,046 11,046 11,046 11.046 11,046 11,046 11,046 11,046 11,046 11,046 15 Special drawing rights certificate account 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 16 Treasury currency outstanding 31,643 31,888r 31,944 31.793r 31,841r 31,888r 31,902 31,916 31,930 31,944 ABSORBING RESERVE FUNDS 17 Currency in circulation . .. . 593,694 579,781r 584,987 583,690r 580,073r 579,78 lr 582,088 583,458 584,970 584,987 18 Reverse repurchase agreements—triparty . .. 0 0 0 0 0 0 0 0 0 0 19 Treasury cash holdings 450 477 505 445 451 477 485 489 487 505 Deposits, other than reserve balances, with Federal Reserve Banks 20 Treasury 5,149 5,256 4,956 7,979 7,357 5,256 3,905 6,713 4,100 4,956 21 Foreign 216 199 196 103 69 199 96 72 77 196 22 Service-related balances and adjustments .. 7,428 6,578r 6,623 6,632 6,948r 6,578r 6,448 6,533 6,531 6,623 23 Other 1,382 306 377 283 262 306 335 286 256 377 24 Other Federal Reserve liabilities and capital . 17,962 17,648 17,842 17,936 17,937 17,648 17,906 17,921 17,935 17,842 25 Reserve balances with Federal Reserve Banks 11,701 8,082r 7,830 6,824 21,501r 8,082r 12,888 3,935 18,201 7,830 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 Nonfinancial Statistics • May 2001 1.12 RESERVES AND BORROWINGS Depository Institutions' Millions of dollars Prorated monthly averages of biweekly averages RReesseerrvvee ccllaassssiiffiiccaattiioonn 1998 1999 2000 2000 2001 Dec. Dec. Dec. Aug.r Sept.r Oct.' Nov.1" Dec. Jan.r Feb, 1 Reserve balances with Reserve Banks" 9,026 5,262r 7,159r 6,933 6,852 6,778 7,156 7,159r 7,190 6,616 2 Total vault cash3 44,294 60.619 45.120 45,319 44,807 45,178 44,546 45,120 47,506 48,397 3 Applied vault cash4 36,183 36,392 31,381 32.531 32,316 31,998 31,629 31,381 32,601 32.687 4 Surplus vault cash5 8,111 24,227 13,739 12,788 12,491 13,180 12,917 13,739 14,905 15,710 5 Total reserves6 45,209 41,654r 38,540r 39,464 39,168 38,776 38,786 38,540r 39,791 39,302 6 Required reserves 43,695 40,357r 37.216r 38,460 38.050 37,629 37,584 37,216r 38,538 37,949 7 Excess reserve balances at Reserve Banks7 1,514 1.297r 1.325 1,004 1,119 1.147 1.201 1,325 1,253 1,353 8 Total borrowing at Reserve Banks 117 320 210 579 477 418 283 210 73 51 9 Adjustment 101 179 99 25 50 119 124 99 39 30 10 Seasonal 15 67 111 554 427 299 159 111 34 21 11 Special Liquidity Facilitv8 0 74 0 0 0 0 0 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 2001 Nov. r Nov. 15 Nov. 29 Dec. 13 Dec. 27 Jan. 10 Jan. 24 Feb. 7r Feb. 21 Mar. 7 1 Reserve balances with Reserve Banks"* 6,965 6,709 7,620 7.131 7,208 7,085 7,656 6.410 6.612 6,829 2. Total vault cash3 44,523 44,633 44,539 43.452 46,220 46,696 45,558 52,561 48,505 44,017 3 Applied vault cash4 32,180 31,056 32,262r 30,255 32.370 31,579 32,316 34,631 32,303 31.512 4 Surplus vault cash5 12,343 13.577 12,277r 13,197 13,850 15,117 13,243 17,930 16,202 12,505 5 Total reserves6 39,145 37,765 39,881 37,386 39.578 38,664 39,972 41,041 38,914 38,341 6 Required reserves 37,961 36.763' 38,475r 36,254r 38,124 37,165 38,866 39,844 37,356 37,242 7 Excess reserve balances at Reserve Banks7 1,184 1,002r 1,406' 1,132r l,453r 1,499 1,106 1,196 1,559 1,098 8 Total borrowing at Reserve Banks 355 190 380 159 285 110 66 34 38 95 9 Adjustment 97 25 232 37 169 56 42 9 18 76 10 Seasonal 259 165 148 123 117 55 25 25 20 19 11 Special Liquidity Facility8 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 effect 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 effect 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 credit1 Seasonal credit2 Extended credit3 FFeeddeerraall RReesseerrvvee Bank 4/ O 6/ n 0 1 Effective date Previous rate 4/ O 6/ n 0 1 Effective date Previous rate 4/ O 6/ n 0 1 Effective date Previous rate Boston 4.50 3/20/01 5.00 4.95 4/5/01 5.15 5.45 4/5/01 5.65 New York 3/20/01 Philadelphia 3/20/01 Cleveland 3/20/01 Richmond 3/20/01 Atlanta 3/20/01 Chicago 3/20/01 St. Louis 3/21/01 Minneapolis 3/20/01 Kansas City 3/20/01 Dallas 3/20/01 San Francisco .... 4.50 3/20/01 5.00 4.95 4/5/01 5.15 5.45 4/5/01 5.65 Range of rates for adjustment credit in recent years4 Range (or F.R. Bank Range (or F.R. Bank Range (or Effective date • level)—All of Effecth level)—All of Effective date level)—All F.R. Banks N.Y. F.R. Banks N.Y. F.R. Banks In effect Dec. 31, 1977 6 6 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 2001—Jan. 3 . .. . 5.75-6.00 5.75 Sept. 26 11 11 1989—Feb. 24 6.5-7 7 4.... 5.50-5.75 5.50 Nov. 17 12 12 27 7 7 5 . . .. 5.50 5.50 Dec. 5 12-13 13 31 .... 5.00-5.50 5.00 8 13 13 1990—Dec. 19 6.5 6.5 Feb. 1 .. . . 5.00 5.00 Mar. 20.... 4.50-5.00 4.50 11998811——MMaayy 55 13-14 14 1991—Feb. 1 6-6.5 6 21 4.50 4.50 88 14 14 4 6 6 Nov. 2 13-14 13 Apr. 30 5.5-6 5.5 In effect Apr. 6, 2001 4.50 4.50 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 • May 2001 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1 Requirement TTyyppee ooff ddeeppoossiitt Percentage of Effective date deposits Net transaction accounts2 1 $0 million-$42.8 million3 33333 1111122222/////2222288888/////0000000000 2 More than $42.8 million4 1111100000 1111122222/////2222288888/////0000000000 00000 1111122222/////2222277777/////9999900000 00000 1111122222/////2222277777/////9999900000 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 28, 2000, for depository institutions that report include commercial banks, savings banks, savings and loan associations, credit unions, weekly, and with the period beginning January 18, 2001, for institutions that report quarterly, agencies and branches of foreign banks, and Edge Act corporations. the exemption was raised from $5.0 million to $5.5 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 1.5 years was reduced from 3 percent to 1.5 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 1.5 years was reduced from 3 against which the 3 percent reserve requirement applies be modified annually by 80 percent of percent to zero on Jan. 17, 1991. the percentage change in transaction accounts held by all depository institutions, determined The reserve requirement on nonpersonal time deposits with an original maturity of 1.5 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 28, 2000, 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 18, 2001, 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 $44.3 million to $42.8 million. deposits with an original maturity of less than 1.5 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 2000 2001 TTyyppee ooff ttrraannssaaccttiioonn aanndd mmaattuurriittyy 11999988 11999999 22000000 July Aug. Sept. Oct. Nov. Dec. Jan. U.S. TREASURY SECURITIES2 Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 3,550 0 8,676 1,825 531 231 779 2,507 550099 552200 7 Gross sales 0 0 0 0 0 0 0 0 0 0 Exchanges 450,835 464,218 477,904 33,718 42,797 37,006 38,142 45,182 39,428 40,769 4 For new bills 450,835 464,218 477,904 33,718 42,797 37,006 38,142 45,182 39,428 40,769 5 Redemptions 2,000 0 24,522 4,902 3,438 3,898 2,656 1,021 1,145 228 Others within one year 6 Gross purchases 6,297 11,895 8,809 1,284 2,770 716 0 580 1,420 00 7 Gross sales 0 0 0 0 0 0 0 0 0 0 8 Maturity shifts 46,062 50,590 62,025 5,152 7,040 0 8,663 7,957 0 5,405 9 Exchanges -49,434 -53,315 -54,656 -3,333 -7,396 0 -6,608 -7,012 0 -6,667 10 Redemptions 2,676 1,429 3,779 367 887 0 787 780 0 2,422 One to five years 11 Gross purchases 12,901 19,731 14,482 2,259 2,508 2,385 734 1,332 1,045 992255 1? Gross sales 0 0 0 0 0 0 0 0 0 0 N Maturity shifts -37,777 -44,032 -52,068 -5,152 -3,439 0 -8,663 -5,997 0 -5,405 14 Exchanges 37,154 42,604 46,177 3,333 5,418 0 6,608 5,737 0 6,667 Five to ten years 15 Gross purchases 2,294 4,303 5,871 0 1,914 448 0 510 771 11,,228833 16 Gross sales 0 0 0 0 0 0 0 0 0 0 17 Maturity shifts -5,908 -5,841 -6,801 0 -3,601 0 0 -699 0 0 18 Exchanges 7,439 7,583 6,585 0 1,254 0 0 1,275 0 0 More than ten years 19 Gross purchases 4,884 9,428 5,833 500 727 547 982 0 0 229966 20 Gross sales 0 0 0 0 0 0 0 0 0 0 71 Maturity shifts -2,377 -717 -3,155 0 0 0 0 -1,261 0 0 22 Exchanges 4,842 3,139 1,894 0 724 0 0 0 0 0 All maturities 23 Gross purchases 29,926 45,357 43,670 5,868 8,450 4,326 2,495 4,929 3,745 3,024 74 Gross sales 0 0 0 0 0 0 0 0 0 0 25 Redemptions 4,676 1,429 28,301 5,269 4,325 3,898 3,443 1,802 1,145 2,650 Matched transactions 76 Gross purchases 4,430,457 4,413,430 4,399,257 344,935 381,349 335,321 344,920 351,391 345,680 356,250 27 Gross sales 4,434,358 4,431,685 4,381,188 344,384 381,475 334,530 346,428 351,232 348,917 352,336 Repurchase agreements 28 Gross purchases 512,671 281,599 0 0 00 00 00 00 00 00 29 Gross sales 514,186 301,273 0 0 0 0 0 0 0 0 30 Net change in U.S. Treasury securities 19,835 5,999 33,439 1,150 3,999 1,219 -2,457 3,286 -637 4,289 FEDERAL AGENCY OBLIGATIONS Outright transactions 31 Gross purchases 0 0 0 0 0 0 00 0 00 00 37 Gross sales 25 0 0 0 0 0 0 0 0 0 33 Redemptions 322 157 51 0 0 10 0 0 0 0 Repurchase agreements 34 Gross purchases 284,316 360,069 00 00 00 00 00 00 00 00 35 Gross sales 276,266 370,772 0 0 0 0 0 0 0 0 36 Net change in federal agency obligations 7,703 -10,859 -51 0 0 -10 0 0 0 0 Reverse repurchase agreements 37 Gross purchases 0 0 0 0 00 00 00 00 00 00 38 Gross sales 0 0 0 0 0 0 0 0 0 0 Repurchase agreements 39 Gross purchases 0 304,989 890,236 66,485 47,265 66,080 64,428 87,125 9955,,447700 110044,,993300 40 Gross sales 0 164,349 987,501 75,925 46,230 67,285 62,308 79,295 79,365 129,385 41 Net change in triparty obligations 0 140,640 -97,265 -9,440 1,035 -1,205 2,120 7,830 16,105 -24,455 42 Total net change in System Open Market Account... 27,538 135,780 -63,877 -8,290 5,034 4 -337 11,116 15,468 -20,166 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 DomesticN onfinancial Statistics • May 2001 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements1 Millions of dollars Wednesday End of month Account 2001 2000 2001 Jan. 31 Feb. 7 Feb. 14 Feb. 21 Feb. 28 Dec. 31 Jan. 31 Feb. 28 Consolidated condition statement ASSETS 1 Gold certificate account 11,046 11,046 11,046 11,046 11,046 11,046 11,046 11,046 2 Special drawing rights certificate account 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 3 Coin 1,066 1,095 1,120 1,112 1,115 949 1,066 1,115 Loans 4 To depository institutions 35 31 35 32 18 110 35 18 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—triparty 18,920 23,985 17,510 28,765 23,665 43,375 18,920 23,665 Federal agency obligations3 8 Bought outright 130 110 110 10 10 130 130 10 9 Held under repurchase agreements 0 0 0 0 0 0 0 0 10 Total US. Treasury securities3 516,018 516,486 514,561 521,118 519,618 511,703 516,018 519,618 11 Bought outright4 516,018 516,486 514,561 521,118 519,618 511,703 516,018 519,618 12 Bills 182,949 183,417 179,718 183,912 182,998 178,741 182,949 182,998 13 Notes 239,725 239,724 240,940 242,437 241,792 240,178 239,725 241,792 14 Bonds 93,345 93,345 93,904 94,770 94,827 92,784 93,345 94,827 15 Held under repurchase agreements 0 0 0 0 0 0 0 0 16 Total loans and securities 535,103 540,611 532,216 549,925 543,311 555,318 535,103 543,311 17 Items in process of collection 10,023 10,270 13,497 14,267 9,019 7,105 10,023 9,019 18 Bank premises 1,467 1,468 1,469 1,469 1,476 1,461 1,467 1,476 Other assets 19 Denominated in foreign currencies5 15,495 15,502 15,509 15,516 15,386 15,670 15,495 15,386 20 All other6 19,673 20,115 20,662 17,724 17,534 19,766 19,673 17,534 21 Total assets 596,072 602,308 597,719 613,259 601,086 613,514 596,072 601,086 LIABILITIES 22 Federal Reserve notes 549,436 551,766 553,151 554,638 554,662 563,450 549,436 554,662 23 Reverse repurchase agreements—triparty2 0 0 0 0 0 0 0 0 24 Total deposits 21,182 24,283 18,996 29,427 20,667 25,792 21,182 20,667 25 Depository institutions 15,420 19,947 11,925 24,993 15,139 19,045 15,420 15,139 26 U.S. Treasury—General account 5,256 3,905 6,713 4,100 4,956 5,149 5,256 4,956 27 Foreign—Official accounts 199 96 72 77 196 216 199 196 28 Other 306 335 286 256 377 1,382 306 377 29 Deferred credit items 7,806 8,353 7,651 11,259 7,915 6,310 7,806 7,915 30 Other liabilities and accrued dividends7 3,960 3,996 3,980 3,907 3,931 4,170 3,960 3,931 31 Total liabilities 582,384 588,397 583,778 599,231 587,175 599,723 582,384 587,175 CAPITAL ACCOUNTS 32 Capital paid in 7,014 7,016 7,012 7,014 7,023 6,997 7,014 7,023 33 Surplus 6,265 6,299 6,333 6,367 6,355 6,794 6,265 6,355 34 Other capital accounts 409 595 595 648 534 0 409 534 35 Total liabilities and capital accounts 596,072 602,308 597,719 613,259 601,086 613,514 596,072 601,086 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) 746,920 746,182 745,878 745,316 744,972 751,714 746,920 744,972 38 LESS: Held by Federal Reserve Banks 197,484 194,416 192,727 190,678 190,310 188,264 197,484 190,310 39 Federal Reserve notes, net 549,436 551,766 553,151 554,638 554,662 563,450 549,436 554,662 Collateral held against notes, net 40 Gold certificate account 11,046 11,046 11,046 11,046 11,046 11,046 11,046 11,046 41 Special drawing rights certificate account 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 42 Other eligible assets 1,122 0 7,724 0 0 0 1,122 0 43 U.S. Treasury and agency securities 535,068 538,520 532,181 541,393 541,417 550,205 535,068 541,417 44 Total collateral 549,436 551,766 553,151 554,638 554,662 563,450 549,436 554,662 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 2001 2000 2001 Jan. 24 Feb. 7 Feb. 14 Feb. 21 Feb. 28 Dec. 31 Jan. 31 Feb. 28 1 Total loans 28 31 35 32 18 110 35 18 2 Within fifteen days1 0 17 35 32 16 96 30 16 3. Sixteen days to ninety days 0 14 0 0 2 14 5 2 4. 91 days to 1 year 0 0 0 0 0 0 0 0 5 Total U.S. Treasury securities2 518,441 516,486 514,561 521,118 519,618 511,702 516,018 519,618 6 Within fifteen days' 22,272 17,723 22,050 17,859 12,450 18,053 20,921 12,450 7 Sixteen days to ninety days 111,129 115,089 112,965 118,796 116,644 108,961 112,430 116,644 8 Ninety-one days to one year 124,918 125,624 120,844 121,988 128,775 125,539 124,617 128,775 9 One year to five years 132,160 130,088 130,246 134,991 134,268 132,792 130,088 134,268 10 Five years to ten years 56,750 56,750 56,749 54,894 54,893 55,461 56,750 54,893 11 More than ten years 71,212 71,212 71,707 72,589 72,589 70,896 71,212 72,589 12 Total federal agency obligations 130 110 110 10 10 130 130 10 13 Within fifteen days' 0 0 0 0 0 0 0 0 14 Sixteen days to ninety days 0 0 0 0 0 0 0 0 15 Ninety-one days to one year 0 0 0 0 0 0 0 0 16 One year to five years 130 110 110 10 10 130 130 10 17 Five years to ten years 0 0 0 0 0 0 0 0 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 Nonfinancial Statistics • May 2001 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 2000r 2001 1997 1998 1999 2000 IItteemm Dec. Dec. Dec/ Dec.r July Aug. Sept. Oct. Nov. Dec. Jan.' Feb. Seasonally adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS1 1 Total reserves3 46.85' 45.18' 41.78 38.51 40.12 39.64 39.39 39.02 39.02 38.51 38.83 38.82 2 Nonborrowed reserves4 46.52' 45.07 41.46 38.30 39.56 39.06 38.91 38.60 38.74 38.30 38.75 38.77 3 Nonborrowed reserves plus extended credit5.... 46.52' 45.07 41.46 38.30 39.56 39.06 38.91 38.60 38.74 38.30 38.75 38.77 4 Required reserves 45.16' 43.67' 40.48 37.18 38.98 38.64 38.27 37.87 37.82 37.18 37.57 37.47 5 Monetary base6 479.47' 513.49' 593.09 583.97 576.96 577.53 578.34 579.70 581.40 583.97 589.40 591.03 Not seasonally adjusted 6 Total reserves7 48.01 45.31 41.89 38.60 39.93 39.51 39.22 38.84 38.85 38.60 39.78 39.33 7 Nonborrowed reserves 47.69 45.19 41.57 38.39 39.36 38.93 38.75 38.42 38.56 38.39 39.70 39.28 8 Nonborrowed reserves plus extended credit5 47.69 45.19 41.57 38.39 39.36 38.93 38.75 38.42 38.56 38.39 39.70 39.28 9 Required reserves8 46.33 43.80 40.59 37.27 38.79 38.51 38.11 37.69 37.65 37.27 38.52 37.98 10 Monetary base9 484.98 518.27 600.72 590.20 577.49 576.66 576.84 578.29 582.36 590.20 591.49 588.94 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS10 11 Total reserves" 47.92 45.21 41.65 38.54 39.88 39.46 39.17 38.78 38.79 38.54 39.79 39.30 12 Nonborrowed reserves 47.60 45.09 41.33 38.33 39.32 38.89 38.69 38.36 38.50 38.33 39.72 39.25 13 Nonborrowed reserves plus extended credit5 47.60 45.09 41.33 38.33 39.32 38.89 38.69 38.36 38.50 38.33 39.72 39.25 14 Required reserves 46.24 43.70 40.36 37.22 38.74 38.46 38.05 37.63 37.58 37.22 38.54 37.95 15 Monetary base12 491.79 525.06 608.02 597.12 584.28 583.40 583.52 585.01 589.12 597.12 598.37 595.49 16 Excess reserves'3 1.69 1.51 1.30 1.33 1.14 1.00 1.12 1.15 1.20 1.33 1.25 1.35 17 Borrowings from the Federal Reserve .32 .12 .32 .21 .57 .58 .48 .42 .28 .21 .07 .05 1. Latest monthly and biweekly figures are available from the Board's H.3 (502) weekly 8. To adjust required reserves for discontinuities that are due to regulatory changes in statistical release. Historical data starting in 1959 and estimates of the effect on required reserve requirements, a multiplicative procedure is used to estimate what required reserves reserves of changes in reserve requirements are available from the Money and Reserves would have been in past periods had current reserve requirements been in effect. Break- Projections Section, Division of Monetary Affairs, Board of Governors of the Federal Reserve adjusted required reserves include required reserves against transactions deposits and nonper- System, Washington, DC 20551. sonal time and savings deposits (but not reservable nondeposit liabilities). 2. Figures reflect adjustments for discontinuities, or "breaks," associated with regulatory 9. The break-adjusted monetary base equals (1) break-adjusted total reserves (line 6), plus changes in reserve requirements. (See also table 1.10.) (2) the (unadjusted) currency component of the money stock, plus (3) (for all quarterly 3. Seasonally adjusted, break-adjusted total reserves equal seasonally adjusted, break- reporters on the "Report of Transaction Accounts, Other Deposits and Vault Cash" and for all adjusted required reserves (line 4) plus excess reserves (line 16). those weekly reporters whose vault cash exceeds their required reserves) the break-adjusted 4. Seasonally adjusted, break-adjusted nonborrowed reserves equal seasonally adjusted, difference between current vault cash and the amount applied to satisfy current reserve break-adjusted total reserves (line 1) less total borrowings of depository institutions from the requirements. Federal Reserve (line 17). 10. Reflects actual reserve requirements, including those on nondeposit liabilities, with no 5. Extended credit consists of borrowing at the discount window under the terms and adjustments to eliminate the effects of discontinuities associated with regulatory changes in conditions established for the extended credit program to help depository institutions deal reserve requirements. with sustained liquidity pressures. Because there is not the same need to repay such 11. Reserve balances with Federal Reserve Banks plus vault cash used to satisfy reserve borrowing promptly as with traditional short-term adjustment credit, the money market effect requirements. of extended credit is similar to that of nonborrowed reserves. 12. The monetary base, not break-adjusted and not seasonally adjusted, consists of (1) total 6. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally reserves (line 11), plus (2) required clearing balances and adjustments to compensate for float adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted currency at Federal Reserve Banks, plus (3) the currency component of the money stock, plus (4) (for component of the money stock, plus (3) (for all quarterly reporters on the "Report of all quarterly reporters on the "Report of Transaction Accounts, Other Deposits and Vault Transaction Accounts, Other Deposits and Vault Cash" and for all those weekly reporters Cash" and for all those weekly reporters whose vault cash exceeds their required reserves) the whose vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted difference between current vault cash and the amount applied to satisfy current reserve difference between current vault cash and the amount applied to satisfy current reserve requirements. Since February 1984, currency and vault cash figures have been measured over requirements. the computation periods ending on Mondays. 7. Break-adjusted total reserves equal break-adjusted required reserves (line 9) plus excess 13. Unadjusted total reserves (line 11) less unadjusted required reserves (line 14). reserves (line 16). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary and Credit Aggregates A13 1.21 MONEY STOCK AND DEBT MEASURES1 Billions of dollars, averages of daily figures 2000r 2001 1997 1998 1999 2000 IItteemm Dec. Dec. Dec.' Dec.r Nov. Dec. Jan.r Feb. Seasonally adjusted Measures2 1 Ml 1,073.4 1,097.0 1,124.3 1,090.3 1,088.5 1,090.3 1,101.2 1,101.2 4,030.4r 4,383.4r 4,650.0 4,947.3 4,908.0 4,947.3 4,998.2 5,043.0 3 M3 5,427.8r 6,027.3r 6,526.8 7,095.9 7,015.0 7,095.9 7,190.8 7,260.7 4 Debt 15,223.0r 16,277.8r 17,379.9 18,304.0 18,216.5 18,304.0 18,362.0 n.a. Ml components 5 Currency3 424.3 459.2 516.7 530.1 527.7 530.1 553344..55 553377..33 6 Travelers checks4 8.1 8.2 8.2 8.0 8.0 8.0 8.1 8.0 7 Demand deposits5 395.4 379.4 355.6 313.2 314.8 313.2 317.0 314.7 8 Other checkable deposits6 245.7 250.1 243.7 239.0 238.0 239.0 241.7 241.1 Nontransaction components 9 In M27 2,957.0r 3,286.4r 3,525.7 3,857.0 3,819.5 3,857.0 3,897.0 3,941.8 10 In M3 only8 l,397.4r l,643.9r 1,876.8 2,148.6 2,107.0 2,148.6 2,192.6 2,217.7 Commercial banks 11 Savings deposits, including MMDAs 1,021.1 1,185.8 1,287.0 1,420.3 1,401.3 1,420.3 1,435.9 1,464.4 12 Small time deposits9 625.5 626.4 635.2 699.9 694.4 699.9 702.8 699.4 13 Large time deposits10, 11 517.6r 575.4r 648.6 726.9 703.9 726.9 740.2 715.6 Thrift institutions 14 Savings deposits, including MMDAs 376.8 414.1 449.3 451.7 455.2 451.7 452.4 446622..88 15 Small time deposits9 342.9 325.8 320.9 346.3 344.7 346.3 350.5 352.5 16 Large time deposits10 85.5 88.7 91.3 103.1 103.7 103.1 106.1 106.7 Money market mutual funds 17 Retail 590.6r 734.3r 833.4 938.8 923.8 938.8 995555..44 996622..77 18 Institution-only 390.0r 530.4r 622.4 767.4 751.8 767.4 801.0 859.0 Repurchase agreements and eurodollars 19 Repurchase agreements12 254.3r 291.S' 341.2 360.5 356.8 360.5 335577..33 334488..33 20 Eurodollars12 150.0 151.8 173.3 190.7 190.9 190.7 188.0 188.1 Debt components 21 Federal debt 3,800.6 3,751.2 3,660.3 3,400.5 3,419.3 3,400.5 33,,338800..44 n.a. 22 Nonfederal debt 11,422.5 12,526.6r 13,719.6 14,903.5 14,797.2 14,903.5 14,981.6 n.a. Not seasonally adjusted Measures2 1,096.9 1,120.4 1,147.8 1,114.6 1,094.7 1,114.6 1,101.4 1,088.6 24 M2 4,051.8r 4,405.7r 4,674.0 4,976.0 4,900.2 4,976.0 5,007.6 5,041.8 25 M3 5,453. lr 6,059.4r 6,564.2 7,140.9 7,010.6 7,140.9 7,220.9 7,295.6 26 Debt 15,218.8r 16,273. lr 17,375.3 18,296.1 18,191.7 18,296.1 18,359.7 n.a. Ml components 27 Currency3 428.1 463.3 521.5 535.4 528.3 535.4 553322..33 553355..99 28 Travelers checks4 8.3 8.4 8.4 8.1 8.2 8.1 8.2 8.2 29 Demand deposits5 412.4 395.9 371.2 328.6 320.1 328.6 317.0 305.7 30 Other checkable deposits6 248.2 252.8 246.6 242.5 238.0 242.5 243.9 238.9 Nontransaction components 31 In M27 2,954.9r 3,285.3r 3,526.3 3,861.4 3,805.5 3,861.4 3,906.2 3,953.3 32 In M3 only8 l,401.3r l,653.7r 1,890.2 2,164.9 2,110.5 2,164.9 2,213.4 2,253.8 Commercial banks 33 Savings deposits, including MMDAs 1,020.4 1,186.0 1,288.5 1,425.0 1,397.1 1,425.0 1,433.6 1,456.1 34 Small time deposits9 625.3 626.5 635.4 700.1 695.8 700.1 704.1 701.7 35 Large time deposits10-11 517.0r 574.8r 648.0 726.2 705.0 726.2 733.9 716.1 Thrift institutions 36 Savings deposits, including MMDAs 376.5 414.2 449.8 453.2 453.8 453.2 451.7 460.2 37 Small time deposits9 342.8 325.8 321.0 346.4 345.4 346.4 351.1 353.7 38 Large time deposits10 85.4 88.6 91.2 103.0 103.9 103.0 105.2 106.8 Money market mutual funds 39 Retail 589.9r 732.7r 831.5 936.6 913.4 936.6 965.7 981.5 40 Institution-only 397.0 542.4r 637.3 785.3 755.5 785.3 827.8 889.0 Repurchase agreements and eurodollars 41 Repurchase agreements12 249.5r 293.4r 337.7 357.5 356.0 357.5 335566..77 335522..88 42 Eurodollars12 152.3 154.5 176.0 193.0 190.1 193.0 189.8 189.2 Debt components 43 Federal debt 3,805.8 3,754.9 3,663.2 3,403.5 3,401.2 3,403.5 33,,337733..22 n.a. 44 Nonfederal debt 1 l,413.0r 12,518.2r 13,712.1 14,892.6 14,790.5 14,892.6 14,986.5 n.a. Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Nonfinancial Statistics • May 2001 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: (I) 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 (I ) 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 2000 2000r 2001 2001 Feb. Aug. Sept. Oct. Nov. Dec. Jan.r Feb. Feb. 7 Feb. 14 Feb. 21 Feb. 28 Seasonally adjusted Assets 1 Bank credit 4,839.9r 5,122.7 5,170.9 5,150.1 5,162.3 5,225.5 5,265.0 5,287.9 5,268.0 5,273.2 5,284.6 5,325.8 2 Securities in bank credit l,272.5r 1,321.1 1,331.7 1,310.0 1,303.0 1,335.5 1,357.3 1,354.4 1,350.6 1,355.2 1,353.4 1,358.5 3 U.S. government securities 816.1r 813.5 808.1 794.4 784.3 786.5 786.9 775.2 775.3 780.2 773.5 771.6 4 Other securities 456.4r 507.6 523.6 515.6 518.6 549.1 570.3 579.2 575.2 574.9 579.9 586.9 5 Loans and leases in bank credit2 .. . 3,567.4 3,801.7 3,839.2 3,840.0 3,859.3 3,889.9 3,907.8 3,933.5 3,917.4 3,918.0 3,931.1 3,967.4 6 Commercial and industrial 1,024.7 1,081.3 1,081.1 1,081.2 1,082.5 1,091.5 1,106.4 1,114.7 1,114.0 1,111.0 1,116.1 1,117.6 7 Real estate 1,508.2 1,624.5 1,635.4 1,635.2 1,646.6 1,653.3 1,652.3 1,665.3 1,659.4 1,660.5 1,665.8 1,675.7 8 Revolving home equity 106.2 120.6 122.4 125.3 127.0 128.5 129.5 131.0 130.4 130.7 131.2 131.7 9 Other 1,402.0 1,503.9 1,513.0 1,509.9 1,519.7 1,524.9 1,522.8 1,534.3 1,528.9 1,529.8 1,534.6 1,544.0 10 Consumer 500.8 528.7 532.0 532.2 535.3 536.7 539.0 539.9 538.7 540.8 542.3 537.8 11 Security3 142.8 158.2 178.8 176.5 178.1 186.5 184.2 183.8 176.4 179.1 179.6 200.1 12 Other loans and leases 390.8 408.9 411.9 414.8 416.8 421.9 425.9 429.7 428.9 426.5 427.4 436.1 13 Interbank loans 225.0 247.6 240.0 248.1 247.2 252.8 270.2 264.2 267.8 254.3 262.0 272.6 14 Cash assets4 291. lr 270.7 268.1 266.8 254.4 266.1 273.7 263.6 264.2 249.2 272.2 268.9 15 Other assets5 359.7 395.8 396.1 418.0 407.5 407.3 421.9 421.0 411.7 414.6 436.5 421.2 16 Total assets6 5,656.7r 5,974.8 6,012.7 6,020.9 6,009.0 6,088.2 6,166.5 6,172.0 6,147.0 6,126.6 6,190.4 6,223.9 Liabilities 17 Deposits 3,512.1 3,753.4 3,771.1 3,784.2 3,772.1 3,848.5 3,891.3 3,904.3 3,882.7 3,887.7 3,913.0 33,,993333..66 18 Transaction 648.0 617.1 609.6 612.5 597.8 596.8 606.6 602.6 577.5 588.3 616.2 628.3 19 Nontransaction 2,864.1 3,136.2 3,161.5 3,171.7 3,174.3 3,251.7 3,284.7 3,301.7 3,305.2 3,299.4 3,296.7 3,305.3 20 Large time 846.4 931.1 920.5 914.7 911.8 929.2 943.2 936.7 939.9 937.6 938.9 930.5 21 Other 2,017.7 2,205.2 2,241.0 2,257.1 2,262.5 2,322.5 2,341.6 2,365.0 2,365.4 2,361.8 2,357.9 2,374.8 22 Borrowings 1,141.3 1,228.0 1,220.8 1,213.7 1,209.9 1,241.4 1,270.8 1,270.2 1,267.8 1,274.6 1,251.6 1,286.6 23 From banks in the U.S 367.2 389.4 373.9 370.2 365.8 393.0 404.3 403.2 405.2 401.0 392.9 413.6 24 From others 774.2 838.6 846.9 843.5 844.1 848.3 866.4 866.9 862.6 873.6 858.7 872.9 25 Net due to related foreign offices 231.3 269.7 269.2 251.9 241.5 224.3 223.0 212.2 223.3 188.3 217.4 219.8 26 Other liabilities 298.6 312.2 331.4 349.8 350.0 348.4 367.7 349.5 351.1 348.5 350.6 347.9 27 Total liabilities 5,183.4 5,5633 5,592.4 5,599.7 5,573.5 5,662.7 5,752.8 5,736.1 5,724.9 5,699.1 5,732.6 5,787.9 28 Residual (assets less liabilities)7 473.3r 411.5 420.2 421.2 435.6 425.5 413.7 435.9 422.1 427.4 457.8 436.1 Not seasonally adjusted Assets 29 Bank credit 4,842.5r 5,093.9 5,157.7 5,163.6 5,193.3 5,259.0 5,288.9 5,287.6 5,276.7 5,278.6 5,272.2 55,,332222..88 30 Securities in bank credit l,276.6r 1,308.3 1,326.5 1,314.5 1,317.9 1,345.3 1,366.6 1,358.0 1,358.8 1,360.2 1,352.9 1,360.0 31 U.S. government securities 820// 804.6 800.1 789.3 786.9 788.2 788.6 779.2 780.0 783.9 776.4 776.5 32 Other securities 456.6r 503.7 526.4 525.2 531.0 557.1 578.1 578.8 578.8 576.3 576.5 583.5 33 Loans and leases in bank credit2 .. . 3,565.9 3,785.6 3,831.2 3,849.2 3,875.4 3,913.8 3,922.2 3,929.6 3,917.9 3,918.4 3,919.3 3,962.8 34 Commercial and industrial 1,025.3 1,071.0 1,077.0 1,082.0 1,086.7 1,094.1 1,103.8 1,114.7 1,112.0 1,111.2 1,115.2 1,120.6 35 Real estate 1,505.1 1,624.6 1,635.8 1,640.9 1,654.6 1,658.6 1,656.4 1,661.7 1,660.3 1,659.8 1,657.9 1,668.7 36 Revolving home equity 105.9 120.8 123.2 125.9 127.5 128.9 129.8 130.6 130.3 130.5 130.6 131.1 37 Other 1,399.2 1,503.8 1,512.7 1,515.0 1,527.1 1,529.6 1,526.6 1,531.0 1,530.0 1,529.2 1,527.3 1,537.6 38 Consumer 502.9 527.6 532.8 529.9 534.3 542.6 545.1 541.1 541.0 542.3 543.0 537.9 39 Credit cards and related plans. . n.a. 204.4 208.1 206.9 210.3 219.4 219.8 214.8 213.4 215.4 217.6 212.8 40 Other n.a. 323.2 324.6 323.1 324.0 323.2 325.4 326.3 327.6 327.0 325.4 325.0 41 Security3 144.4 153.1 171.9 180.3 180.4 190.7 188.6 185.7 178.6 181.3 180.0 203.0 42 Other loans and leases 388.3 409.4 413.7 415.9 419.3 427.8 428.4 426.4 426.0 423.8 423.1 432.7 43 Interbank loans 226.4 237.6 233.5 241.9 252.1 260.2 271.2 266.1 269.9 258.4 260.9 275.0 44 Cash assets4 291.6r 258.3 263.8 267.8 262.3 285.0 287.3 264.6 252.3 250.1 285.6 270.1 45 Other assets5 362.0 394.1 394.6 410.8 404.5 407.2 420.4 423.2 414.4 416.4 435.9 426.0 60293 46 Total assets6 5,663.6r 5,921.8 5,986.9 6,022.0 6,049.7 6,147.8 6,203.8 6,176.7 6,148.8 6,138.9 6,190.0 Liabilities 47 Deposits 3,511.0 3,721.1 3,755.0 3,777.3 3,801.5 3,889.6 3,903.4 3,903.2 3,880.5 3,891.8 3,907.9 3,932.5 48 Transaction 640.7 601.5 603.3 604.5 605.4 627.9 617.0 596.0 563.1 584.6 613.2 623.0 49 Nontransaction 2,870.2 3,119.6 3,151.7 3,172.8 3,196.1 3,261.7 3,286.4 3,307.2 3,317.4 3,307.2 3,294.7 3,309.5 50 Large time 859.1 914.1 909.5 912.0 922.6 945.5 956.1 949.9 953.6 950.9 950.3 944.6 51 Other 2,011.2 2,205.5 2,242.1 2,260.9 2,273.5 2,316.2 2,330.3 2,357.3 2,363.8 2,356.3 2,344.4 2,364.9 52 Borrowings 1,145.5 1,200.7 1,216.4 1,215.6 1,219.0 1,252.1 1,288.3 1,272.5 1,269.8 1,278.7 1,256.0 1,285.4 53 From banks in the U.S 368.8 385.0 373.5 369.3 369.3 398.8 407.3 402.9 403.3 401.8 393.8 412.7 54 From others 776.8 815.7 842.9 846.3 849.7 853.4 881.0 869.6 866.5 876.9 862.2 872.7 55 Net due to related foreign offices .... 245.8 267.0 264.2 253.0 246.6 230.7 225.5 225.6 227.1 197.3 238.9 239.1 56 Other liabilities 301.0 311.7 330.7 348.8 351.1 350.9 369.2 351.8 353.7 350.8 352.5 350.2 57 Total liabilities 5,203.2 5,500.6 5,566.3 5,594.7 5,618-3 5,7233 5,786.4 5,753.1 5,731.1 5,718.6 5,7553 5,8073 58 Residual (assets less liabilities)7 460.3r 421.2 420.6 427.3 431.4 424.5 417.4 423.7 417.7 420.2 434.7 422.1 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Financial Statistics • May 2001 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 2000 2000r 2001 2001 Feb. Aug. Sept. Oct. Nov. Dec. Jan.r Feb. Feb. 7 Feb. 14 Feb. 21 Feb. 28 Seasonally adjusted Assets 1 4,296.4r 4,535.9 4,577.1 4,567.4 4,585.1 4,625.0 4,649.9 4,676.8 4,662.8 4,668.6 4,674.0 4,701.7 ?. Securities in bank credit 1,077. lr 1,109.8 1,122.1 1,115.3 1,116.5 1,131.5 1,149.7 1,152.1 1,151.4 1,154.9 1,149.9 1,152.0 U.S. government securities 740. lr 734.3 731.2 724.0 717.6 718.4 720.2 710.8 713.7 716.6 708.5 704.3 4 375.6 390.9 391.3 398.8 413.1 429.4 441.3 437.7 438.4 441.4 447.8 Loans and leases in bank credit2 3,219.3 3,426.1 3,455.0 3,452.1 3,468.6 3,493.6 3,500.2 3,524.7 3,511.4 3,513.7 3,524.2 3,549.7 6 828.2 874.8 877.2 879.0 880.2 885.9 893.8 899.0 897.7 897.4 901.4 899.4 7 1,491.3 1,606.1 1,616.5 1,617.5 1,628.4 1,635.0 1,634.0 1,647.3 1,641.3 1,642.5 1,647.7 1,657.8 8 106.2 120.6 122.4 125.3 127.0 128.5 129.5 131.0 130.4 130.7 131.2 131.7 9 Other 1,385.1 1,485.6 1,494.1 1,492.2 1,501.4 1,506.5 1,504.4 1,516.3 1,510.9 1,511.8 1,516.5 1,526.0 in 500.8 528.7 532.0 532.2 535.3 536.7 539.0 539.9 538.7 540.8 542.3 537.8 u 76.0 76.5 84.6 75.0 75.3 80.4 73.9 76.3 72.3 73.4 72.2 87.2 p 322.9 339.9 344.6 348.3 349.4 355.5 359.5 362.3 361.4 359.5 360.6 367.5 n 192.3 225.1 216.0 221.1 220.5 226.0 241.0 236.0 239.9 229.8 232.5 241.7 14 241.2 226.4 223.6 224.4 215.5 225.8 230.4 219.9 221.0 207.4 227.4 224.0 15 Other assets5 322.0 354.8 356.1 376.5 367.6 371.5 385.0 385.0 376.5 377.6 399.9 386.1 16 Total assets6 4,993.3r 5,280.6 5,310.6 5,327.7 5,326.7 5,385.1 5,442.3 5,453.4 5,436.0 5,419.1 5,469.3 5,489.2 Liabilities 17 Deposits 3,134.9 3,357.8 3,383.1 3,401.7 3,391.0 3,464.9 3,500.1 3,521.1 3,498.4 3,506.1 3,524.7 3,555.2 18 637.1 606.3 599.9 602.0 587.2 586.5 596.3 592.9 567.5 578.8 606.8 618.4 19 Nontransaction 2,497.9 2,751.5 2,783.2 2,799.7 2,803.8 2,878.4 2,903.8 2,928.2 2,930.8 2,927.3 2,917.9 2,936.8 70 479.1 548.8 544.8 545.3 543.9 559.2 563.1 564.2 565.5 566.1 561.2 563.9 ?1 Other 2,018.7 2,202.7 2,238.4 2,254.4 2,259.8 2,319.2 2,340.6 2,364.0 2,365.3 2,361.2 2,356.6 2,372.9 ?? 965.9 1,029.1 1,005.9 992.0 984.9 998.6 1,025.5 1,030.2 1,038.1 1,032.9 1,018.7 1,030.9 ?3 348.7 372.4 354.3 350.7 345.8 368.3 376.4 378.6 384.2 376.5 373.3 380.3 74 617.2 656.7 651.6 641.3 639.2 630.3 649.1 651.6 653.9 656.4 645.5 650.6 ?5 Net due to related foreign offices .... 203.9 246.4 244.9 235.3 235.4 226.3 218.3 206.1 210.0 189.8 211.0 213.7 26 Other liabilities 224.4 239.7 255.7 269.3 275.3 275.8 290.0 271.9 273.3 271.8 272.9 269.5 27 Total liabilities 4,529.2 4,873.0 4,889.5 4,898.3 4,886.6 4,965.6 5,033.8 5,029.3 5,019.8 5,000.7 5,027.3 5,069.3 28 Residual (assets less liabilities)7 464. lr 407.6 421.1 429.3 440.0 419.5 408.5 424.1 416.2 418.4 442.0 419.9 Not seasonally adjusted Assets 29 Bank credit 4,294.8r 4,517.0 4,564.6 4,572.1 4,601.8 4,647.6 4,664.5 4,672.8 4,664.9 4,668.2 4,662.0 4,696.0 30 Securities in bank credit l,079.9r 1,102.9 1,116.7 1,112.2 1,120.6 1,137.1 1,154.0 1,154.7 1,155.7 1,157.5 1,151.0 1,154.5 31 U.S. government securities 743.9r 727.0 725.2 719.3 718.8 719.0 721.3 714.8 717.7 720.1 711.7 709.5 32 Other securities 336.0r 375.9 391.4 392.9 401.8 418.2 432.7 440.0 438.0 437.4 439.3 445.1 33 Loans and leases in bank credit2 3,214.9 3,414.1 3,447.9 3,459.9 3,481.2 3,510.5 3,510.5 3,518.1 3,509.1 3,510.7 3,510.9 3,541.5 34 Commercial and industrial 826.4 867.1 873.2 878.4 881.0 884.5 889.6 896.5 894.4 894.4 898.0 899.2 35 Real estate 1,487.9 1,606.4 1,617.2 1,622.9 1,636.3 1,640.3 1,637.9 1,643.4 1,641.9 1,641.5 1,639.6 1,650.5 36 Revolving home equity 105.9 120.8 123.2 125.9 127.5 128.9 129.8 130.6 130.3 130.5 130.6 131.1 37 Other 1,382.0 1,485.6 1,494.0 1,497.0 1,508.8 1,511.4 1,508.0 1,512.7 1,511.7 1,510.9 1,509.0 1,519.4 38 Consumer 502.9 527.6 532.8 529.9 534.3 542.6 545.1 541.1 541.0 542.3 543.0 537.9 39 Credit cards and related plans. . n.a. 204.4 208.1 206.9 210.3 219.4 219.8 214.8 213.4 215.4 217.6 212.8 40 Other n.a. 323.2 324.6 323.1 324.0 323.2 325.4 326.3 327.6 327.0 325.4 325.0 41 Security-1 77.7 71.2 77.9 79.4 78.4 84.2 77.7 78.5 74.2 76.2 73.7 89.7 42 Other loans and leases 320.0 341.8 346.9 349.2 351.2 358.9 360.2 358.7 357.6 356.3 356.6 364.2 43 Interbank loans 193.7 215.1 209.5 214.9 225.4 233.3 242.0 237.9 242.1 233.9 231.4 244.1 44 Cash assets4 242.3 215.6 220.1 224.5 221.0 241.3 242.1 221.4 209.3 208.4 241.7 226.1 45 Other assets5 322.4 353.8 355.2 370.1 364.5 369.2 381.8 385.5 377.2 377.6 398.0 389.1 46 Total assets6 4,994.6r 5,239.7 5,287.1 5319.9 5,350.6 5,428.2 5,466.9 5,453.2 5,429.2 5,423.9 5,468.7 5,491.1 Liabilities 47 Deposits 3,126.8 3,337.5 3,373.3 3,399.2 3,417.2 3,497.0 3,504.0 3,512.3 3,487.9 3,503.0 3,513.0 3,545.3 48 Transaction 629.9 590.8 593.1 593.8 594.7 616.9 606.6 586.4 553.3 575.1 603.7 613.4 49 Nontransaction 2,496.9 2,746.7 2,780.2 2,805.4 2,822.5 2,880.1 2,897.4 2,925.9 2,934.6 2,927.8 2,909.3 2,931.9 50 Large time 485.7 543.4 540.3 546.8 551.2 566.1 569.3 570.8 573.1 573.8 567.1 569.3 51 Other 2,011.2 2,203.3 2,239.9 2,258.7 2,271.3 2,314.0 2,328.1 2,355.1 2,361.6 2,354.1 2,342.2 2,362.7 52 Borrowings 970.1 1,001.8 1,001.5 993.9 994.0 1,009.4 1,043.0 1,032.5 1,040.1 1,037.0 1,023.1 1,029.7 53 From banks in the U.S 350.3 368.0 353.9 349.8 349.3 374.1 379.4 378.3 382.3 377.2 374.1 379.5 54 From others 619.7 633.8 647.6 644.1 644.8 635.4 663.6 654.2 657.7 659.8 649.0 650.3 55 Net due to related foreign offices .... 216.1 243.8 240.6 236.3 239.0 227.7 218.7 217.6 214.9 196.7 229.7 228.9 56 Other liabilities 224.7 239.6 255.4 268.9 275.3 276.0 289.6 272.4 273.9 272.2 273.4 270.1 57 Total liabilities 4,537.7 4,822.7 4,870.8 4,898.2 4,925.5 5,010.2 5,055.4 5,034.7 5,016.7 5,008.9 5,039.2 5,074.0 58 Residual (assets less liabilities)7 456.9r 416.9 416.3 421.7 425.1 418.0 411.5 418.6 412.6 415.0 429.5 417.1 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities A17 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'—Continued C. Large domestically chartered commercial banks Billions of dollars Monthly averages Wednesday figures AAAccccccooouuunnnttt 2000 2000r 2001 2001 Feb.r Aug. Sept. Oct. Nov. Dec. Jan.r Feb. Feb. 7 Feb. 14 Feb. 21 Feb. 28 Seasonally adjusted Assets 1 Bank credit 2,424.3 2,544.0 2,566.9 2,543.8 2,542.5 2,561.2 2,568.7 2,584.8 2,575.6 2,575.1 2,578.3 2,610.3 2 Securities in bank credit 562.2 579.2 587.2 577.4 573.4 581.3 592.0 592.4 593.1 593.5 589.6 593.3 3 US. government securities 363.2 362.7 360.8 354.7 348.1 351.3 353.0 346.1 349.0 348.8 343.8 342.6 4 Trading account 21.6 23.8 23.3 21.2 20.5 29.1 33.3 35.9 35.0 35.1 35.4 38.0 5 Investment account 341.6 339.0 337.5 333.5 327.6 322.2 319.7 310.2 314.0 313.7 308.4 304.6 6 Other securities 199.0 216.5 226.4 222.7 225.2 230.0 239.0 246.3 244.1 244.6 245.8 250.7 7 Trading account 85.9 102.5 114.5 112.7 116.0 122.0 127.6 129.3 128.5 127.6 128.5 132.7 8 Investment account 113.1 113.9 112.0 110.1 109.3 108.0 111.4 117.0 115.6 117.0 117.3 118.0 9 State and local government . 24.5 25.9 25.8 26.1 26.3 26.7 27.2 27.4 27.1 27.3 27.7 27.6 10 Other 88.6 88.1 86.2 83.9 82.9 81.3 84.2 89.6 88.5 89.8 89.6 90.4 11 Loans and leases in bank credit2 .. . 1,862.1 1,964.8 1,979.6 1,966.4 1,969.1 1,979.9 1,976.7 1,992.4 1,982.4 1,981.7 1,988.7 2,017.0 12 Commercial and industrial 568.1 590.7 591.2 591.0 589.2 594.1 598.8 602.1 601.2 600.6 604.2 602.3 13 Bankers acceptances 1.0 .9 .9 .8 .9 .9 .8 .8 .8 .8 .8 .8 14 Other 567.1 589.8 590.3 590.2 588.4 593.3 598.0 601.3 600.4 599.8 603.4 601.5 15 Real estate 763.9 824.4 825.4 817.4 820.2 818.7 815.1 821.9 818.6 817.3 821.1 830.5 16 Revolving home equity 68.1 79.1 78.0 80.0 81.2 82.1 82.4 83.4 82.9 83.1 83.5 84.0 17 Other 695.7 745.3 747.4 737.4 739.0 736.6 732.7 738.5 735.6 734.2 737.7 746.5 18 Consumer 225.3 233.6 234.0 234.7 236.3 235.6 234.7 238.1 237.2 238.1 238.7 238.2 19 Security3 69.9 69.5 77.7 67.9 68.1 72.8 66.5 68.4 64.4 65.8 64.4 79.0 20 Federal funds sold to and repurchase agreements with broker-dealers 47.1 50.7 58.2 49.1 50.0 56.1 49.0 5511..00 4466..44 4488..33 4477..66 6611..77 21 Other 22.8 18.8 19.5 18.7 18.1 16.7 17.5 17.4 18.0 17.5 16.8 17.3 22 State and local government 12.4 12.5 12.6 12.6 12.6 12.4 12.6 12.7 12.7 12.7 12.8 12.8 23 Agricultural 9.5 9.6 9.4 9.4 9.5 9.7 9.8 10.1 10.0 10.0 10.1 10.1 24 Federal funds sold to and repurchase agreements with others 13.4 14.1 16.2 16.9 19.0 20.9 25.7 26.1 26.1 25.9 25.1 2277..44 25 All other loans 81.7 84.3 86.3 87.6 85.1 86.6 85.1 84.9 83.9 83.1 84.1 88.3 26 Lease-financing receivables 118.0 126.2 126.8 128.7 129.1 129.1 128.3 128.3 128.4 128.2 128.2 128.3 27 Interbank loans 132.7 141.1 131.5 137.0 140.8 140.5 153.6 139.1 146.5 138.0 134.4 137.4 28 Federal funds sold to and repurchase agreements with commercial banks 62.0 66.9 57.2 58.3 61.5 64.1 77.3 70.1 71.5 69.7 6688..66 7700..55 29 Other 70.8 74.1 74.3 78.7 79.3 76.3 76.4 69.0 74.9 68.3 65.8 66.9 30 Cash assets4 150.6 145.3 142.2 142.8 137.6 144.5 146.6 137.0 137.6 128.1 143.4 138.9 31 Other assets5 223.9 246.1 248.2 263.6 259.8 257.5 264.5 261.7 258.7 260.5 262.5 265.3 32 Total assets6 2,896.7 3,040.9 3,053.1 3,051.8 3,045.2 3,067.2 3,096.1 3,084.9 3,080.6 3,064.0 3,080.7 3,1143 Liabilities 33 Deposits 1,625.3 1,647.8 1,647.5 1,650.7 1,634.6 1,665.3 1,673.6 1,678.1 1,662.8 1,670.8 1,677.9 1,700.8 34 Transaction 316.5 306.1 302.2 304.5 294.3 295.3 300.0 297.6 281.0 289.7 306.8 312.9 35 Nontransaction 1,308.8 1,341.7 1,345.3 1,346.2 1,340.2 1,370.0 1,373.6 1,380.5 1,381.8 1,381.1 1,371.1 1,387.8 36 Large time 234.0 266.9 258.9 255.8 251.6 261.7 263.7 258.8 259.5 259.7 256.1 260.1 37 Other 1,074.8 1,074.8 1,086.4 1,090.4 1,088.7 1,108.3 1,109.8 1,121.6 1,122.4 1,121.4 1,115.0 1,127.7 38 Borrowings 633.7 690.9 673.0 665.9 662.9 671.6 683.6 687.1 693.4 690.8 676.0 688.2 39 From banks in the U.S 193.3 208.0 192.6 196.9 194.3 212.8 215.9 215.6 221.0 215.3 209.5 216.5 40 From others 440.4 483.0 480.4 469.0 468.7 458.8 467.7 471.5 472.3 475.5 466.5 471.7 41 Net due to related foreign offices 203.9 222.7 224.4 211.9 211.8 205.4 201.4 189.4 193.5 174.8 190.8 198.6 42 Other liabilities 163.7 193.7 208.1 216.5 221.1 221.6 236.0 217.8 220.5 218.5 217.2 215.0 43 Total liabilities 2,626.6 2,755.1 2,752.9 2,744.9 2,730.4 2,763.9 2,794.6 2,7714 2,770.2 2,754.9 2,761.9 2,802.5 44 Residual (assets less liabilities)7 270.0 285.8 300.2 306.8 314.8 303.3 301.5 312.5 310.4 309.1 318.8 311.7 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 DomesticN onfinancial Statistics • May 2001 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued C. Large domestically chartered commercial banks—Continued Billions of dollars Monthly averages Wednesday figures AAAccccccooouuunnnttt 2000 2000r 2001 2001 Feb/ Aug. Sept. Oct. Nov. Dec. Jan.r Feb. Feb. 7 Feb. 14 Feb. 21 Feb. 28 Not seasonally adjusted Assets 45 Bank credit 2,435.5 Z521.6 2,550.0 2,546.5 2,558.8 2,582.0 2,590.3 2,596.7 2,592.0 2,590.6 2,584.4 2,619.6 46 Securities in bank credit 568.3 572.7 583.2 576.9 579.1 586.9 597.7 598.7 600.5 599.8 595.2 599.1 47 U.S. government securities 369.5 356.1 355.8 352.5 351.1 352.4 355.8 352.7 355.5 355.2 350.1 349.9 48 Trading account 22.6 23.1 22.6 21.1 21.8 28.9 34.5 37.9 36.6 37.1 37.4 40.3 49 Investment account 346.9 333.0 333.2 331.5 329.4 323.5 321.3 314.8 318.9 318.1 312.7 309.6 50 Mortgage-backed securities .. 223.0 208.4 208.8 210.9 211.2 213.1 219.5 215.4 218.6 218.1 212.6 212.2 51 Other 123.8 124.6 124.5 120.6 118.2 110.4 101.9 99.4 100.3 100.0 100.1 97.4 52 One year or less 28.2 32.5 33.3 32.0 32.7 31.3 31.4 33.5 33.0 33.7 34.3 33.1 53 One to five years 56.5 54.2 53.7 51.6 49.9 45.0 38.4 37.0 36.6 37.7 37.4 36.3 54 More than five years ... 39.2 37.9 37.5 37.0 35.6 34.1 32.0 28.9 30.7 28.6 28.5 28.0 55 Other securities 198.8 216.6 227.5 224.4 228.0 234.5 241.9 246.0 245.1 244.6 245.1 249.3 56 Trading account 85.9 102.5 114.5 112.7 116.0 122.0 127.6 129.3 128.5 127.6 128.5 132.7 57 Investment account 112.9 114.1 113.0 111.7 112.0 112.5 114.3 116.7 116.5 116.9 116.6 116.6 58 State and local government .. 24.7 25.6 25.7 26.1 26.6 26.9 27.5 27.6 27.3 27.5 27.9 27.8 59 Other 88.2 88.5 87.3 85.6 85.4 85.6 86.8 89.1 89.2 89.5 88.7 88.8 60 Loans and leases in bank credit2 . . 1,867.3 1,948.9 1,966.7 1,969.6 1,979.7 1,995.1 1,992.6 1,998.0 1,991.4 1,990.8 1,989.2 2,020.5 61 Commercial and industrial 567.4 585.0 588.8 590.8 591.5 593.2 595.9 601.3 599.7 599.5 602.6 603.3 62 Bankers acceptances 1.0 .9 .9 .8 .9 .9 .8 .8 .8 .8 .8 .8 63 Other 566.5 584.0 588.0 589.9 590.6 592.3 595.1 600.5 598.9 598.7 601.8 602.5 64 Real estate 765.2 821.9 823.0 819.4 825.4 824.7 821.6 823.5 824.1 821.7 819.7 828.5 65 Revolving home equity 68.0 79.3 78.3 80.2 81.3 82.3 82.8 83.3 83.1 83.2 83.3 83.6 66 Other 422.9 457.8 460.2 454.2 457.3 455.7 454.2 454.2 455.5 452.7 450.3 458.2 67 Commercial 274.2 284.7 284.5 285.0 286.8 286.7 284.6 286.0 285.5 285.7 286.1 286.7 68 Consumer 228.3 231.7 233.0 232.7 234.7 238.2 240.1 240.7 240.7 241.0 241.1 240.1 69 Credit cards and related plans.. n.a. 74.3 75.4 76.5 78.0 82.3 83.3 83.0 81.7 83.1 84.1 83.1 70 Other n.a. 157.4 157.6 156.2 156.7 155.9 156.8 157.7 158.9 157.9 157.0 157.0 71 Security3 71.6 64.2 70.9 72.3 71.2 76.6 70.3 70.6 66.4 68.6 66.0 81.5 72 Federal funds sold to and repurchase agreements with broker-dealers .... 49.7 45.7 51.8 53.8 53.6 59.7 53.4 53.8 49.7 52.0 49.7 63.9 73 Other 22.0 18.5 19.2 18.5 17.6 16.8 16.9 16.8 16.6 16.6 16.3 17.6 74 State and local government .... 12.3 12.7 12.8 12.8 12.7 12.5 12.6 12.6 12.6 12.6 12.7 12.7 75 Agricultural 9.2 9.7 9.6 9.6 9.6 9.7 9.8 9.8 9.8 9.8 9.8 9.9 76 Federal funds sold to and repurchase agreements with others 13.4 14.1 16.2 16.9 19.0 20.9 25.7 26.1 26.1 25.9 25.1 27.4 77 All other loans 79.9 84.5 87.1 87.6 87.7 90.6 86.2 83.1 81.9 81.7 82.1 86.8 78 Lease-financing receivables .... 119.9 125.2 125.2 127.5 127.8 128.7 130.5 130.2 130.4 130.1 130.1 130.2 79 Interbank loans 133.0 135.1 128.0 131.1 139.2 141.2 154.7 139.6 145.3 139.8 134.1 139.0 80 Federal funds sold to and repurchase agreements with commercial banks 61.6 63.1 55.5 56.5 62.2 65.2 79.2 69.9 70.9 70.6 66.7 71.3 81 Other 71.4 72.0 72.5 74.6 77.0 76.0 75.6 69.7 74.4 69.3 67.4 67.7 82 Cash assets4 152.2 137.3 139.1 143.1 139.9 155.3 156.7 139.0 130.0 130.1 154.8 141.0 83 Other assets5 225.1 243.4 247.8 257.2 255.3 255.7 264.2 263.8 260.9 262.5 262.4 269.2 84 Total assets6 2&112 3,001.7 3,029.0 3,04Z7 3,057.4 3,097.6 3,128.9 3,1013 3,090.5 3,0853 3,098.1 3,131.2 Liabilities 85 Deposits 1,625.6 1,632.1 1,639.8 1,645.3 1,647.8 1,688.3 1,684.5 1,679.5 1,661.3 1,677.3 1,678.2 1,701.3 86 Transaction 313.0 295.0 297.6 298.6 298.1 314.4 308.7 294.7 271.3 289.6 306.8 311.0 87 Nontransaction 1,312.6 1,337.1 1,342.2 1,346.6 1,349.7 1,373.9 1,375.9 1,384.8 1,390.0 1,387.7 1,371.4 1,390.3 88 Large time 240.6 261.6 254.4 257.2 258.8 268.6 269.9 265.4 267.0 267.3 262.0 265,5 89 Other 1,072.1 1,075.6 1,087.8 1,089.4 1,090.9 1,105.4 1,105.9 1,119.4 1,123.0 1,120.4 1,109.4 1,124.8 90 Borrowings 642.2 660.5 662.9 664.8 669.9 678.1 703.7 695.9 704.4 700.6 685.2 693.6 91 From banks in the U.S 197.5 200.7 188.6 193.4 196.8 215.8 220.1 219.9 225.0 220.2 214.1 220.3 92 From nonbanks in the U.S 444.7 459.8 474.2 471.4 473.2 462.4 483.6 476.0 479.4 480.4 471.1 473.2 93 Net due to related foreign offices ... 216.1 220.1 220.0 212.8 215.3 206.8 201.9 200.8 198.3 181.7 209.6 213.8 94 Other liabilities 163.7 193.7 208.1 216.5 221.1 221.6 236.0 217.8 220.5 218.5 217.2 215.0 95 Total liabilities 2,647.7 2,706.4 2,730.7 2,739.4 2,754-2 2,794.9 2,826.2 2,794.0 2,784.5 2,778.0 2,790.1 2,823.6 96 Residual (assets less liabilities)7 263.5 295.3 298.3 303.3 303.2 302.7 302.8 307.2 306.0 307.3 308.0 307.6 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 2000 2000r 2001 2001 Feb.r Aug. Sept. Oct. Nov. Dec. Jan.r Feb. Feb. 7 Feb. 14 Feb. 21 Feb. 28 Seasonally adjusted Assets 1 Bank credit 1,872.2 1,992.0 2,010.2 2.023.6 2,042.5 2,063.8 2.081.2 2,092.0 2,087.3 2,093.5 2,095.8 2,091.4 2 Securities in bank credit 515.0 530.6 534.8 537.9 543.1 550.2 557.7 559.7 558.2 561.5 560.3 558.7 3 U.S. government securities 377.0 371.6 370.4 369.3 369.5 367.1 367.2 364.7 364.7 367.7 364.7 361.6 4 Other securities 138.0 159.1 164.5 168.6 173.6 183.1 190.5 195.0 193.6 193.7 195.6 197.1 5 Loans and leases in bank credit2 1,357.2 1,461.3 1,475.4 1,485.7 1,499.5 1,513.6 1,523.5 1,532.3 1,529.0 1,532.0 1,535.5 1,532.7 6 Commercial and industrial 260.1 284.1 286.0 288.0 291.0 291.8 295.0 296.9 296.5 296.8 297.2 297.1 7 Real estate 727.4 781.8 791.1 800.1 808.1 816.3 818.9 825.5 822.7 825.2 826.6 827.3 8 Revolving home equity 38.1 41.5 44.4 45.3 45.8 46.3 47.2 47.6 47.5 47.6 47.7 47.8 9 Other 689.3 740.3 746.7 754.7 762.3 769.9 771.7 777.8 775.3 777.7 778.9 779.5 10 Consumer 275.5 295.2 298.0 297.5 299.0 301.2 304.3 301.9 301.6 302.7 303.6 299.6 11 Security3 6.1 7.0 7.0 7.1 7.2 7.6 7.4 7.9 7.9 7.6 7.7 8.2 12 Other loans and leases 88.1 93.3 93.3 93.0 94.1 96.8 98.0 100.2 100.4 99.7 100.4 100.5 13 Interbank loans 59.6 84.1 84.5 84.1 79.7 85.6 87.4 96.9 93.4 91.8 98.1 104.2 14 Cash assets4 90.7 81.0 81.3 81.6 77.9 81.3 83.8 82.9 83.4 79.3 84.0 85.0 15 Other assets5 98.1 108.7 107.8 112.9 107.8 114.0 120.5 123.3 117.9 117.2 137.4 120.8 16 Total assets6 2,096.6 2,239.7 2,257.4 2,275.9 2,281.5 2318.0 2346.2 23683 2355.4 2355.1 2388.7 2374.9 Liabilities 17 Deposits 1,509.7 1,710.0 1,735.6 1,751.0 1,756.4 1,799.6 1,826.5 1,843.0 1,835.5 1,835.3 1,846.8 1,854.4 18 Transaction 320.6 300.3 297.7 297.5 292.9 291.2 296.3 295.3 286.5 289.1 300.0 305.5 19 Nontransaction 1,189.1 1,409.8 1,437.9 1,453.6 1,463.5 1,508.5 1,530.2 1,547.7 1,549.0 1,546.2 1,546.8 1,549.0 20 Large time 245.2 281.8 285.9 289.5 292.4 297.6 299.4 305.4 306.1 306.5 305.1 303.8 21 Other 943.9 1,127.9 1,152.0 1,164.0 1,171.2 1,210.9 1,230.8 1,242.4 1,242.9 1,239.8 1,241.6 1,245.2 22 Borrowings 332 2 338.2 332.8 326.2 322.0 327.1 341.9 343.1 344.7 342.1 342.8 342.7 23 From banks in the U.S 155.4 164.5 161.7 153.8 151.5 155.6 160.6 163.0 163.2 161.2 163.8 163.8 24 From others 176.8 173.7 171.2 172.3 170.5 171.5 181.3 180.1 181.5 180.9 179.0 178.9 25 Net due to related foreign offices .... 0.0 23.7 20.6 23.4 23.7 20.9 16.8 16.7 16.5 15.0 20.2 15.1 26 Other liabilities 60.6 45.9 47.6 52.8 54.1 54.1 54.0 54.1 52.8 53.4 55.7 54.5 27 Total liabilities 1,902.5 2,117.9 2,136.6 2,153.4 2,1563 2,201.7 2,239.2 2,256.9 2,249.6 2,245.8 2,265.5 2,266.8 28 Residual (assets less liabilities)7 194.1 121.8 120.8 122.5 125.2 116.2 107.0 111.6 105.8 109.3 123.2 108.1 Not seasonally adjusted Assets 29 Bank credit 1,859.3 1,995.4 2,014.6 2,025.6 2,043.0 2,065.6 2,074.2 2.076.1 2,072.9 2,077.6 2,077.5 2,076.4 30 Securities in bank credit 511.7 530.2 533.4 535.3 541.5 550.2 556.3 556.0 555.2 557.7 555.8 555.4 31 U.S. government securities 374.4 370.9 369.5 366.8 367.7 366.6 365.5 362.1 362.2 364.9 361.6 359.6 32 Other securities 137.2 159.3 164.0 168.5 173.8 183.7 190.8 194.0 193.0 192.8 194.2 195.8 33 Loans and leases in bank credit2 1,347.6 1,465.2 1,481.2 1,490.3 1,501.5 1,515.3 1,517.9 1,520.1 1,517.7 1,519.9 1,521.7 1,521.0 34 Commercial and industrial 259.0 282.2 284.3 287.7 289.5 291.3 293.7 295.2 294.7 295.0 295.3 295.9 35 Real estate 722.7 784.5 794.2 803.5 810.8 815.6 816.3 819.9 817.9 819.8 819.9 821.9 36 Revolving home equity 37.9 41.4 44.9 45.7 46.2 46.6 47.0 47.3 47.2 47.3 47.3 47.4 37 Other 684.9 743.1 749.3 757.8 764.7 769.0 769.2 772.5 770.7 772.5 772.6 774.5 38 Consumer 274.5 295.9 299.8 297.2 299.6 304.4 305.0 300.4 300.3 301.4 302.0 297.8 39 Credit cards and related plans. . n.a. 130.2 132.7 130.4 132.3 137.2 136.5 131.8 131.6 132.3 133.6 129.8 40 Other n.a. 165.7 167.1 166.9 167.3 167.2 168.5 168.6 168.7 169.1 168.4 168.0 41 Security3 6.1 7.0 7.0 7.1 7.2 7.6 7.4 7.9 7.9 7.6 7.7 8.2 42 Other loans and leases 85.3 95.6 95.9 94.8 94.4 96.5 95.6 96.8 96.9 96.2 96.8 97.2 43 Interbank loans 60.6 80.0 81.6 83.7 86.2 92.1 87.3 98.3 96.8 94.0 97.3 105.1 44 Cash assets4 90.1 78.3 81.0 81.4 81.1 86.0 85.4 82.4 79.3 78.4 86.9 85.1 45 Other assets5 97.2 110.4 107.4 112.8 109.3 113.5 117.6 121.7 116.3 115.1 135.6 120.0 46 Total assets6 2,0833 2,237.9 2,258.1 2,277.2 2,293.2 2330.6 2338.0 2352.0 2338.7 2338.6 2370.7 2360.0 Liabilities 47 Deposits 1,501.2 1,705.4 1,733.6 1,754.0 1,769.4 1,808.8 1,819.5 1,832.8 1,826.6 1.825.7 1,834.8 1,844.1 48 Transaction 316.9 295.8 295.5 295.1 296.6 302.6 297.9 291.7 282.0 285.6 296.9 302.4 49 Nontransaction 1,184.3 1,409.6 1,438.1 1,458.8 1,472.8 1,506.2 1,521.5 1,541.1 1,544.7 1,540.1 1,537.9 1,541.7 50 Large time 245.2 281.8 285.9 289.5 292.4 297.6 299.4 305.4 306.1 306.5 305.1 303.8 51 Other 939.1 1,127.7 1,152.1 1,169.3 1,180.4 1,208.6 1,222.2 1,235.7 1,238.6 1,233.7 1,232.8 1,237.9 52 Borrowings 327.8 341.3 338.7 329.1 324.1 331.3 339.3 336.5 335.7 336.4 337.9 336.2 53 From banks in the U.S 152.8 167.4 165.3 156.4 152.5 158.3 159.3 158.4 157.3 157.0 160.0 159.1 54 From others 175.0 174.0 173.4 172.6 171.6 173.0 180.0 178.2 178.4 179.4 177.9 177.0 55 Net due to related foreign offices .... 0.0 23.7 20.6 23.4 23.7 20.9 16.8 16.7 16.5 15.0 20.2 15.1 56 Other liabilities 61.0 45.9 47.4 52.4 54.1 54.4 53.6 54.6 53.4 53.7 56.3 55.1 57 Total liabilities 1,890.0 2,1163 2,140.1 2,158.9 2,1713 2,215.4 2,229.2 2,240.7 2,232.2 2,230.9 2,249.1 2,250.5 58 Residual (assets less liabilities)7 193.3 121.6 118.0 118.3 121.9 115.2 108.8 111.3 106.5 107.7 121.5 109.5 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Nonfinancial Statistics • May 2001 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued E. Foreign-related institutions Billions of dollars Monthly averages Wednesday figures Account 2000 2000r 2001 2001 Feb. Aug. Sept. Oct. Nov. Dec. Jan. Feb. Feb. 7 Feb. 14 Feb. 21 Feb. 28 Seasonally adjusted Assets 1 Bank credit 543.4r 586.8 593.8 582.7 577.2 600.4 615.2r 611.1 605.2 604.6 610.5 624.1 2 Securities in bank credit 195.3r 211.2 209.6 194.7 186.5 204.0 207,6r 202.3 199.2 200.2 203.5 206.4 3 U.S. government securities 76.0 79.2 76.9 70.4 66.7 68.1 66.7r 64.4 61.7 63.7 65.0 67.3 4 Other securities 119.4r 132.0 132.7 124.3 119.8 136.0 137.9 137.5 136.6 138.5 139.1 5 Loans and leases in bank credit2 ... 348.1 375.6 384.2 388.0 390.7 396.4 407.6 408.8 406.0 404.3 407.0 417.7 6 Commercial and industrial 196.4 206.5 203.9 202.2 202.3 205.6 212.5r 215.7 216.3 213.6 214.7 218.3 7 Real estate 16.9 18.4 18.8 17.7 18.3 18.4 18.3r 18.0 18.0 18.0 18.1 18.0 8 Security3 66.8 81.7 94.2 101.6 102.8 106.1 110.3 107.5 104.2 105.7 107.4 112.9 9 Other loans and leases 67.9 69.0 67.3 66.5 67.3 66.4 66.4 67.5 67.4 67.0 66.8 68.6 10 Interbank loans 32.7 22.5 24.0 27.0 26.7 26.8 29.1 28.2 27.9 24.5 29.5 30.9 11 Cash assets4 49.9r 44.3 44.5 42.4 38.9 40.4 43.3r 43.7 43.2 41.8 44.8 44.9 12 Other assets5 37.7 41.0 40.1 41.5 39.9 35.8 37.0 36.0 35.1 37.0 36.6 35.1 13 Total assets6 663.5r 694.2 702.1 693.2 682.4 703.0 724.2r 718.6 711.0 707.5 721.1 734.7 Liabilities 14 Deposits 377.2 395.6 388.0 382.5 381.1 383.6 391.2r 383.2 384.4 381.6 388.3 378.4 15 Transaction 10.9 10.8 9.7 10.6 10.6 10.3 10.3 9.7 10.0 9.5 9.4 9.8 16 Nontransaction 366.3 384.8 378.3 372.0 370.5 373.3 381.0 373.5 374.4 372.1 378.9 368.5 17 Borrowings 175.5 198.9 214.9 221.7 225.0 242.7 245.3 240.0 229.7 241.7 232.9 255.7 18 From banks in the U.S 18.4 17.0 19.6 19.5 20.0 24.7 27.9 24.6 21.0 24.6 19.7 33.3 19 From others 157.0 181.9 195.3 202.2 204.9 218.0 217.4 215.4 208.7 217.1 213.2 222.4 20 Net due to related foreign offices 27.4 23.4 24.3 16.6 6.0 -2.0 4.7 6.0 13.2 -1.5 6.4 6.1 21 Other liabilities 74.2 72.5 75.7 80.6 74.7 72.7 77.7 77.7 77.8 76.7 77.7 78.4 22 Total liabilities 654.2 690.4 702.9 701.4 686.8 697.1 719.0" 706.8 705.1 698.5 705.2 718.5 23 Residual (assets less liabilities)7 9.2r 3.9 -.9 -8.1 -4.4 6.0 5.2 11.7 5.9 9.0 15.8 16.2 Not seasonally adjusted Assets 24 Bank credit 547.7r 576.9 593.1 591.5 591.4 611.4 624.4r 614.8 611.8 610.4 610.3 626.8 25 Securities in bank credit 196.7r 205.4 209.8 202.2 197.3 208.1 212.7r 203.3 203.1 202.7 201.9 205.5 26 U.S. government securities 76.1 77.6 74.8 70.0 68.1 69.2 67.3r 64.5 62.4 63.8 64.7 67.1 27 Trading account 7.3 13.9 14.2 11.8 10.8 11.7 11.1 10.4 8.9 10.3 10.9 11.3 28 Investment account 68.8 63.7 60.6 58.2 57.2 57.5 56.2r 54.1 53.4 53.5 53.8 55.7 29 Other securities 120.6r 127.8 135.0 132.3 129.2 138.9 145.4r 138.8 140.7 138.9 137.2 138.4 30 Trading account 77.4r 83.3 91.9 90.3 87.8 90.3 95.6r 90.9 93.1 90.6 89.2 90.7 31 Investment account 43.2 44.6 43.0 42.0 41.5 48.6 49.7' 47.9 47.6 48.2 48.0 47.7 32 Loans and leases in bank credit2 ... 351.1 371.5 383.3 389.3 394.1 403.3 411.7 411.5 408.7 407.7 408.4 421.3 33 Commercial and industrial 198.9 203.8 203.9 203.6 205.7 209.6 214.2r 218.2 217.6 216.7 217.3 221.4 34 Real estate 17.2 18.2 18.6 18.0 18.3 18.3 18.6r 18.3 18.4 18.3 18.3 18.2 35 Security3 66.6 81.9 94.0 100.9 102.0 106.5 110.9 107.3 104.4 105.1 106.3 113.3 36 Other loans and leases 68.3 67.6 66.8 66.7 68.1 68.8 68. Ir 67.7 68.4 67.5 66.5 68.4 37 Interbank loans 32.7 22.5 24.0 27.0 26.7 26.8 29.1 28.2 27.9 24.5 29.5 30.9 38 Cash assets4 49.3r 42.8 43.7 43.3 41.3 43.7 45.2r 43.2 43.0 41.7 44.0 44.0 39 Other assets5 39.6 40.3 39.4 40.7 40.0 37.9 38.5 37.7 37.2 38.8 37.8 36.8 40 Total assets6 669.0r 682.1 699.8 702.1 699.1 719.6 736.9 723.5 719.5 715.0 721.2 7382 Liabilities 41 Deposits 384.2 383.6 381.7 378.1 384.3 392.5 399.4 390.9 392.6 388.8 394.9 387.2 42 Transaction 10.8 10.7 10.2 10.7 10.8 10.9 10.4 9.6 9.9 9.5 9.5 9.6 43 Nontransaction 373.3 372.9 371.5 367.4 373.6 381.6 389.0 381.3 382.8 379.3 385.4 377.5 44 Borrowings 175.5 198.9 214.9 221.7 225.0 242.7 245.3 240.0 229.7 241.7 232.9 255.7 45 From banks in the U.S 18.4 17.0 19.6 19.5 20.0 24.7 27.9 24.6 21.0 24.6 19.7 33.3 46 From others 157.0 181.9 195.3 202.2 204.9 218.0 217.4 215.4 208.7 217.1 213.2 222.4 47 Net due to related foreign offices .... 29.7 23.2 23.6 16.8 7.6 3.0 6.8 8.1 12.2 .6 9.2 10.2 48 Other liabilities 76.2 72.1 75.3 79.9 75.9 74.8 79.5 79.4 79.8 78.6 79.1 80.2 49 Total liabilities 665.5 677.8 6955 696.5 692.8 713.0 731.0 718.4 714.4 709.8 716.0 7332 50 Residual (assets less liabilities)7 3.5r 4.3 4.3 5.7 6.3 6.5 5.9 5.1 5.1 5.2 5.2 5.0 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities A21 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued F. Memo items Billions of dollars Monthly averages Wednesday figures AAAccccccooouuunnnttt 2000 2000r 2001 2001 Feb. Aug. Sept. Oct. Nov. Dec. Jan.r Feb. Feb. 7 Feb. 14 Feb. 21 Feb. 28 Not seasonally adjusted MEMO Large domestically chartered banks, adjusted for mergers 1 Revaluation gains on off-balance-sheet items8 64.5 66.5 74.4 70.9 68.0 77.8 79.5 77.6 77.3 76.4 76.2 80.6 2 Revaluation losses on off-balancesheet items8 64.3 67.3 73.9 72.8 72.6 83.1 82.5 81.0 80.9 80.0 79.9 83.3 3 Mortgage-backed securities9 253.2r 238.6 238.8 240.3 240.4 242.3 247.7 244.3 247.5 247.0 241.7 240.9 4 Pass-through 175.5r 170.2 170.7 173.6 174.0 177.3 182.5 179.2 182.0 181.6 176.8 176.6 5 CMO, REMIC, and other 11.1' 68.5 68.1 66.6 66.4 65.0 65.2 65.0 65.5 65.4 64.9 64.4 6 Net unrealized gains (losses) on available-for-sale securities10 .... -10.8 -8.6 -7.4 -4.7 -3.3 -.4 -2.3 -.5 -.6 -1.0 -.7 .1 7 Off-shore credit to U.S. residents"... . 23.6 22.1 22.1 22.3 23.1 23.4 23.0 22.7 22.8 22.7 22.5 22.8 8 Securitized consumer loans n.a. 86.6 85.9 80.8 80.5 82.2 82.4 80.8 81.8 80.3 80.0 80.9 9 Credit cards and related plans n.a. 72.0 71.8 67.2 67.3 68.6 68.5 67.3 68.1 66.9 66.7 67.6 10 Other n.a. 14.6 14.1 13.6 13.2 13.6 13.9 13.4 13.7 13.4 13.4 13.3 11 Securitized business loans12 n.a. 16.2 15.3 15.2 17.8 18.6 18.4 18.6 18.6 18.5 18.5 18.6 Small domestically chartered commercial banks, adjusted for mergers 12 Mortgage-backed securities9 202.4r 209.6 211.0 211.8 213.2 214.7 218.2 222.2 219.0 221.0 223.3 225.7 13 Securitized consumer loans12 n.a. 220.9 221.6 224.4 225.4 230.7 231.0 235.2 234.3 233.4 234.6 238.4 14 Credit cards and related plans n.a. 212.0 213.0 215.1 215.9 221.6 222.0 226.4 225.4 224.6 225.8 229.7 15 Other n.a. 8.9 8.6 9.3 9.5 9.1 9.0 8.8 8.8 8.8 8.8 8.7 Foreign-related institutions 16 Revaluation gains on off-balancesheet items8 42.8 43.0 48.6 47.3 44.7 45.6 51.0 49.8 49.9 49.3 49.6 50.3 17 Revaluation losses on off-balancesheet items8 42.3 40.1 45.0 44.7 41.0 41.7 47.4 47.8 47.8 47.6 47.7 48.1 18 Securitized business loans12 n.a. 23.7 23.1 23.0 22.8 23.1 23.2 22.4 22.8 22.2 22.3 22.2 NOTE. Tables 1.26, 1.27, and 1.28 have been revised to reflect changes in the Board's H.8 acquiring bank. Balance sheet data for acquired banks are obtained from Call Reports, and a statistical release, "Assets and Liabilities of Commercial Banks in the United States." Table ratio procedure is used to adjust past levels. 1.27, "Assets and Liabilities of Large Weekly Reporting Commercial Banks," and table 1.28, 2. Excludes federal funds sold to, reverse RPs with, and loans made to commercial banks "Large Weekly Reporting U.S. Branches and Agencies of Foreign Banks," are no longer in the United States, all of which are included in "Interbank loans." being published in the Bulletin. Instead, abbreviated balance sheets for both large and small 3. Consists of reverse RPs with brokers and dealers and loans to purchase and carry domestically chartered banks have been included in table 1.26, parts C and D. Data are both securities. merger-adjusted and break-adjusted. In addition, data from large weekly reporting U.S. 4. Includes vault cash, cash items in process of collection, balances due from depository branches and agencies of foreign banks have been replaced by balance sheet estimates of all institutions, and balances due from Federal Reserve Banks. foreign-related institutions and are included in table 1.26, part E. These data are break- 5. Excludes the due-from position with related foreign offices, which is included in "Net adjusted. due to related foreign offices." The not-seasonally-adjusted data for all tables now contain additional balance sheet items, 6. Excludes unearned income, reserves for losses on loans and leases, and reserves for which were available as of October 2, 1996. transfer risk. Loans are reported gross of these items. 1. Covers the following types of institutions in the fifty states and the District of 7. This balancing item is not intended as a measure of equity capital for use in capital Columbia: domestically chartered commercial banks that submit a weekly report of condition adequacy analysis. On a seasonally adjusted basis, this item reflects any differences in the (large domestic); other domestically chartered commercial banks (small domestic); branches seasonal patterns estimated for total assets and total liabilities. and agencies of foreign banks, and Edge Act and agreement corporations (foreign-related 8. Fair value of derivative contracts (interest rate, foreign exchange rate, other commodity and institutions). Excludes International Banking Facilities. Data are Wednesday values or pro equity contracts) in a gain/loss position, as determined under FASB Interpretation No. 39. rata averages of Wednesday values. Large domestic banks constitute a universe; data for 9. Includes mortgage-backed securities issued by U.S. government agencies, U.S. small domestic banks and foreign-related institutions are estimates based on weekly samples government-sponsored enterprises, and private entities. and on quarter-end condition reports. Data are adjusted for breaks caused by reclassifications 10. Difference between fair value and historical cost for securities classified as availableof assets and liabilities. for-sale under FASB Statement No. 115. Data are reported net of tax effects. Data shown are The data for large and small domestic banks presented on pp. A17-19 are adjusted to restated to include an estimate of these tax effects. remove the estimated effects of mergers between these two groups. The adjustment for 11. Mainly commercial and industrial loans but also includes an unknown amount of credit mergers changes past levels to make them comparable with current levels. Estimated extended to other than nonfinancial businesses. quantities of balance sheet items acquired in mergers are removed from past data for the bank 12. Total amount outstanding. group that contained the acquired bank and put into past data for the group containing the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic Nonfinancial Statistics • May 2001 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING A. Commercial Paper Millions of dollars, seasonally adjusted, end of period Year ending December 2000 2001 IItteemm 1996 1997 1998 1999 2000 Aug. Sept. Oct. Nov. Dec. Jan. 1 All issuers 775,371 966,699 1,163,303 1,403,023 1,615,341 1,559,054 1,557,700 1,587,591 1,624,421 1,615,341 1,566,104 Financial companies1 2 Dealer-placed paper, total2 361,147 513,307 614,142 786,643 973,060 905,634 899,853 912,739 960,701 973,060 976,735 i Directly placed paper, total3 229,662 252,536 322,030 337,240 298,848 303,307 315,039 328,049 312,438 298,848 270,922 4 Nonfinancial companies4 184.563 200,857 227,132 279,140 343,433 350,113 342,809 346,803 351,282 343,433 318,447 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 1997 1998 1999 2000 1 Total amount of reporting banks' acceptances in existence 25,774 14,363 10,094 9,881 2 Amount of other banks' eligible acceptances held by reporting banks 736 523 461 462 3 Amount of own eligible acceptances held by reporting banks (included in item 1) 6,862 4,884 4,261 3,789 4 Amount of eligible acceptances representing goods stored in, or shipped between, foreign countries (included in item 1) 10,467 5,413 3,498 3,689 I. Includes eligible, dollar-denominated bankers acceptances legally payable in the United 2. Data on bankers dollar acceptances are gathered from approximately 40 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 Av r e a r t a e g e PPeerriioodd Av r e a r t a e g e 1998—Jan. 1 8.50 1998 8.35 1999—Jan 7.75 2000—Jan 8.50 Sept. 30 8.25 1999 8.00 Feb 7.75 Feb 8.73 Oct. 16 8.00 2000 9.23 Mar. 7.75 Mar. 8.83 Nov. 18 7.75 Apr 7.75 Apr 9.00 1998—Jan 8.50 May 7.75 May 9.24 1999—July 1 8.00 Feb 8.50 June 7.75 June 9.50 Aug. 25 8.25 Mar. 8.50 July 8.00 July 9.50 Nov. 17 8.50 Apr 8.50 Aug 8.06 Aug 9.50 May 8.50 Sept 8.25 Sept 9.50 2000—Feb. 3 8.75 June 8.50 Oct 8.25 Oct 9.50 Mar. 22 9.00 July 8.50 Nov 8.37 Nov 9.50 May 17 9.50 Aug 8.50 Dec 8.50 Dec 9.50 Sept 8.49 2001—Jan. 4 9.00 Oct 8.12 2001—Jan 9.05 Feb. 1 8.50 7.89 Feb 8.50 Mar. 21 88..0000 Dec 77..7755 88..3322 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 2001, 2000 2001 week 2001, week ending ending IItteemm 11999988 11999999 22000000 Nov. Dec. Jan. Feb. Jan. 26 Feb. 2 Feb. 9 Feb. 16 Feb. 23 MONEY MARKET INSTRUMENTS 1 5.35 4.97 6.24 6.51 6.40 5.98 5.49 5.96 5.94 5.51 5.47 5.50 2 Discount window borrowing2'4 4.92 4.62 5.73 6.00 6.00 5.52 5.00 5.50 5.43 5.00 5.00 5.00 Commercial paper3,5,6 3 5.40 5.09 6.27 6.49 6.51 5.74 5.39 5.60 5.44 55..4433 55..4433 5.43 4 5.38 5.14 6.29 6.52 6.42 5.59 5.25 5.47 5.34 5.26 5.31 5.29 5 3-month 5.34 5.18 6.31 6.50 6.34 5.49 5.14 5.35 5.27 5.19 5.18 5.16 6 5.42 5.11 6.28 6.49 6.52 5.75 5.41 5.59 5.48 5.45 5.45 5.46 7 5.40 5.16 6.30 6.54 6.42 5.62 5.29 5.50 5.40 5.34 5.33 5.33 8 3-month 5.37 5.22 6.33 6.52 6.33 5.51 5.19 5.42 5.30 5.23 5.23 5.21 Commercial paper (historical)^'1 9 1-month n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 10 3-month n.a. 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 n.a. 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 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 13 3-month n.a. 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 n.a. 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 55..3399 55..2244 66..2233 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 16 6-month 5.30 5.30 6.37 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Certificates of deposit, secondary market3'10 17 5.49 5.19 66..3355 66..5566 66..6622 55..8833 55..4477 55..6688 55..5533 55..5533 55..5533 55..4499 18 5.47 5.33 6.46 6.65 6.45 5.62 5.26 5.52 5.38 5.33 5.32 5.27 19 6-month 5.44 5.46 6.59 6.63 6.30 5.45 5.12 5.35 5.20 5.18 5.19 5.11 20 Eurodollar deposits, 3-month3,11 5.45 5.31 6.45 6.64 6.43 5.62 5.26 5.51 5.37 5.33 5.32 5.25 U.S. Treasury bills Secondary market3,5 71 4.78 4.64 5.82 6.17 5.77 5.15 4.88 55..1111 4.91 44..9944 44..9933 44..8877 4.83 4.75 5.90 6.06 5.68 4.95 4.71 4.92 4.72 4.76 4.80 4.69 23 1-year 4.80 4.81 5.78 5.84 5.33 4.63 4.51 4.64 4.47 4.54 4.61 4.54 Auction high3,5,12 ?4 4.81 44..6666 55..6666 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. ?5 4.85 4.76 5.85 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 26 1-year 4.85 4.78 5.85 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. U.S. TREASURY NOTES AND BONDS Constant maturities13 ->7 1 year 5.05 5.08 6.11 6.09 5.60 4.81 4.68 4.83 44..6666 44..7722 44..8800 44..6699 ">8 5.13 5.43 6.26 5.88 5.35 4.76 4.66 4.79 4.66 4.70 4.78 4.64 "79 5.14 5.49 6.22 5.79 5.26 4.77 4.71 4.81 4.70 4.74 4.81 4.72 30 5.15 5.55 6.16 5.70 5.17 4.86 4.89 4.94 4.87 4.90 4.95 4.93 31 5.28 5.79 6.20 5.78 5.28 5.13 5.10 5.23 5.12 5.10 5.14 5.14 3? 5.26 5.65 6.03 5.72 5.24 5.16 5.10 5.29 5.20 5.13 5.11 5.13 33 20-year 5.72 6.20 6.23 5.98 5.64 5.65 5.62 5.75 5.65 5.59 5.65 5.69 34 30-year 5.58 5.87 5.94 5.78 5.49 5.54 5.45 5.64 5.56 5.47 5.45 5.49 Composite 35 More than 10 years (long-term) 55..6699 66..1144 66..4411 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. STATE AND LOCAL NOTES AND BONDS Moody's series14 36 AAaaaa 4.93 5.28 5.58 5.38 5.11 4.99 5.09 55..1100 55..0044 55..0044 55..1144 55..1122 37 5.14 5.70 6.19 6.17 5.85 5.76 5.86 5.85 5.83 5.83 5.90 5.89 38 Bond Buyer series15 5.09 5.43 5.71 5.54 5.22 5.10 5.18 5.20 5.15 5.15 5.20 5.21 CORPORATE BONDS 39 Seasoned issues, all industries16 6.87 7.45 7.98 7.90 7.65 7.55 7.50 7.60 7.49 7.47 7.53 7.57 Rating group 40 6.53 7.05 7.62 7.45 7.21 7.15 7.10 7.21 7.13 7.12 7.12 7.13 41 Aa 6.80 7.36 7.83 7.75 7.48 7.38 7.32 7.44 7.32 7.28 7.36 7.40 AT*A 6.93 7.53 8.11 8.09 7.88 7.75 7.69 7.80 7.66 7.63 7.72 7.78 43 Baa 7.22 7.88 8.36 8.28 8.02 7.93 7.87 7.95 7.84 7.83 7.91 7.96 MEMO Dividend-price ratio17 44 Common stocks 1.49 1.25 1.15 1.16 1.19 1.16 1.22 1.15 1.14 11..1177 11..1199 1.25 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 the Board's Commercial Paper web in compiling this index. The twenty-bond index has a rating roughly equivalent to Moodys' pages (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. Digitized for FRA8S. AEnR a verage 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. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 Domestic Nonfinancial Statistics • May 2001 1.36 STOCK MARKET Selected Statistics 2000 2001 IInnddiiccaattoorr 11999988 11999999 22000000 June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Prices and trading volume (averages of daily figures) Common stock prices (indexes) 1 New York Stock Exchange (Dec. 31, 1965 = 50) 550.65 619.52 643.71 649.61 653.27 666.14 667.05 646.53 646.64 645.44 650.55 648.05 2 Industrial 684.35 775.29 809.40 819.54 825.28 837.23 829.99 797.00 800.88 792.66 796.74 799.38 3 Transportation 468.61 491.62 414.73 395.09 410.67 419.84 404.23 403.20 434.92 457.53 471.21 482.26 4 Utility 190.52 284.82 478.99 501.93 484.19 459.91 463.76 469.16 455.66 444.16 440.36 424.53 5 Finance 516.65 530.97 552.48 544.51 556.32 597.17 616.89 587.76 600.45 621.62 634.17 626.41 6 Standard & Poor's Corporation (1941-43 = 10)' 1,085.50 1,327.33 1,427.22 1,461.96 1,473.00 1,485.46 1,468.06 1,390.14 1,375.04 1,330.93 1,335.63 1,305.75 7 American Stock Exchange (Aug. 31, 1973 = 50)2 682.69 770.90 922.22 934.90 930.66 920.54 952.74 913.64 892.60 870.16 898.18 923.99 Volume of trading (thousands of shares) 8 New York Stock Exchange 666,534 799,554 1,026,867 971,137 941,694 875,087 1,026,597 1,167,025 1,015,606 1,183,149 1,299,986 1,117,977 9 American Stock Exchange 28,870 32,629 51,437 42,490 36,486 35,695 47,047 57,915 58,541 73,759 72,312 70,648 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers' 140,980° 228,530° 198,790° 247,200 244,970 247,560 250,780 233,376 219,110 198,790 197,110 186,870 Free credit balances at brokers4 11 Margin accounts5 40,250r 55,130° 100,680° 64,970 71,730 68,020 70,959 83,131 96,730 100,680 90,380 99,400 12 Cash accounts 62,450c 79,070° 84,400° 74,140 74,970 72,640 74,766 73,271 74,050 84,400 80,470 78,670 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, eifectively 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 2000 2001 11999988 11999999 22000000 Sept. Oct. Nov. Dec. Jan. Feb. U.S. budget1 1 Receipts, total 1,721,798 1,827,302 2,025,218 219,474 135,111 125,666 200,489 219,215 110,481 2 On-budget 1,305,999 1,382,986 1,544,634 176,695 101,121 89,216 161,737 171,001 70,555 3 Off-budget 415,799 444,468 480,584 42,779 33,990 36,450 38,752 48,214 39,926 4 Outlays, total 1,652,224 1,702,942 1,788,826 153,727 146,431 149,356 167,823 142,836 158,649 5 On-budget 1,335,948 1,382,262 1,458,061 114,751 115,840 116,737 132,747 144,448 123,573 6 Off-budget 316,604 320,778 330,765 38,901 30,592 32,619 35,075 -1,613 35,076 7 Surplus or deficit (-), total 69,246 124,414 236,392 65,747 -11,321 -23,690 32,666 76,379 -48,168 8 On-budget -29,949 724 86,573 61,944 -14,719 -27,521 28,990 26,553 -53,018 9 Off-budget 99,195 123,690 149,819 3,878 3,398 3,831 3,677 49,827 4,850 Source of financing (total) 10 Borrowing from the public -51,211 -88,674 -222,672 -32,334 -29,666 41,325 -36,689 -23,990 15,100 11 Operating cash (decrease, or increase [—]) 4,743 -17,580 3,799 -39,479 42,653 -1,431 -9,632 -45,761 45,717 12 Other 2 -22,778 -18,160 -17,519 6,066 -1,666 -16,204 13,655 -6,628 -12,649 MEMO 13 Treasury operating balance (level, end of period) 38,878 56,458 52,659 52,659 10,006 11,437 21,069 66,830 21,113 14 Federal Reserve Banks 4,952 6,641 8,459 8,459 5,360 4,382 5,149 5,256 4,956 15 Tax and loan accounts 33,926 49,817 44,199 44,199 4,646 7,055 15,920 61,574 16,158 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 loan- Survivors, and Disability Insurance) and the U.S. Postal Service. valuation adjustment: and profit on sale of gold. 2. Includes special drawing rights (SDRs); reserve position on the U.S. quota in the SOURCE. Monthly totals: U.S. Department of the Treasury, Monthly Treasury Statement of International Monetary Fund (IMF); loans to the IMF; other cash and monetary assets; Receipts and Outlays of the U.S. Government; fiscal year totals: U.S. Office of Management accrued interest payable to the public; allocations of SDRs; deposit funds; miscellaneous and Budget, Budget of the U.S. Government when available. liability (including checks outstanding) and asset accounts; seigniorage; increment on gold; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic Nonfinancial Statistics • May 2001 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS' Millions of dollars Fiscal year Calendar year SSSooouuurrrccceee ooorrr tttyyypppeee 1999 2000 2000 2001 11999999 22000000 HI H2 HI H2 Dec. Jan. Feb. RECEIPTS 1 All sources l,827,302r 2,025,218 966,045 892,266 l,089,763r 952,942r 200,489 219,215 110,481 2 Individual income taxes, net 879,480 1,004,462 481,907 425,451 550,208 458,679 83,485 135,702 48,030 3 Withheld 693,940 780,397 351,068 372,012 388,526 395,572 78,133 84,319 70,179 4 Nonwithheld 308,185 358,049 240,278 68,302 281,103 77,732 6,468 52,713 3,454 5 Refunds 122,706 134,046 109,467 14,841 119,477 14,628 1,116 1,330 25,610 Corporation income taxes 6 Gross receipts 216,324 235,655 106,861 110,111 119,166 123,962 53,192 7,778 3,474 7 Refunds 31,645 28,367 17,092 13,996 13,781 15,776 1,886 2,066 4,973 8 Social insurance taxes and contributions, net . .. 611,833 652,852 324,831 292,551 353,514 310,122 53,559 64,214 53,473 9 Employment taxes and contributions2 580,880 620,451 306,235 280,059 333,584 297,665 52,932 62,259 50,868 10 Unemployment insurance 26,480 27,640 16,378 10,173 17,562 10,097 260 1,596 2,147 11 Other net receipts3 4,473 4,761 2,216 2,319 2,368 2,360 367 359 457 12 Excise taxes 70,414 68,865 31,015 34,262 33,532 35,501 5,865 5,307 4,074 13 Customs deposits 18,336 19,914 8,440 10,287 9,218 10,676 1,461 1,694 1,474 14 Estate and gift taxes 27,782 29,010 14,915 14,001 15,073 13,216 1,863 2,403 1,879 15 Miscellaneous receipts4 34,929 42,826 15,140 19,569 22,831 16,556 2,949 4,183 3,050 OUTLAYS 16 All types 1,702,942 1,788,826 817,227 882,465 892,947 894,905r 167,823 142,836 158,649 17 National defense 274,873 294,494 134,414 149,573 143,476 147,651 29,176 21,792 22,555 18 International affairs 15,243 17,216 6,879 8,530 7,250 11,902 4,828 1,289 1,153 19 General science, space, and technology 18,125 18,637 9,319 10,089 9,601 10,389 1,868 1,383 1,619 20 Energy 912 -1,060 797 -90 -893 -595 182 -378 -174 21 Natural resources and environment 23,970 25,031 10,351 12,100 10,814 12,907 2,083 1,708 1,737 22 Agriculture 23,011 36,641 9,803 20,887 11,164 20,977 3,618 3,870 2,003 23 Commerce and housing credit 2,649 3,211 -1,629 7,353 -2,497 4,408 555 -943 -487 24 Transportation 42,531 46,854 17,082 23,199 21,054 25,841 4,035 3,323 3,502 25 Community and regional development 11,870 10,629 5,368 6,806 5,050 5,962 822 722 939 26 Education, training, employment, and social services 56,402 59,201 29,003 27,532 31,234 29,263 6,122 5,660 5,957 27 Health 141,079 154,534 69,320 74,490 75,871 81,413 12,975 14,087 13,011 28 Social security and Medicare 580,488 606,549 261,146 295,030 306,966 307,473 54,224 50,633 52,154 29 Income security 237,707 247,895 126,552 113,504 133,915 113,212 23,882 18,473 33,203 30 Veterans benefits and services 43,212 47,083 20,105 23,412 23,174 22,615 5,520 2,101 4,089 31 Administration of justice 25,924 27,820 13,149 13,459 13,981 14,635 2,495 2,602 2,201 32 General government 15,771 13,454 6,641 7,010 6,198 6,461 1,205 707 2,400 33 Net interest5 229,735 223,218 116,655 112,420 115,545 104,685 17,122 19,575 17,590 34 Undistributed offsetting receipts6 -40,445 -42,581 -17,724 -22,850 -19,346 -24,070 -2,889 -3,767 -4,802 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 2002; monthly and half-year totals: U.S. Department of the Treadisability fund. sury, Monthly Treasury Statement of Receipts and Outlays of the U.S. Government. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance All 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars, end of month 1998 1999 2000 IItteemm Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 1 Federal debt outstanding 5,643 5,681 5,668 5,685 5,805 5,802 5,714 5,702 5,690 2 Public debt securities 5,614 5,652 5,639 5,656 5,776 5,773 5,686 5,674 5,662 3 Held by public 3,787 3,795 3,685 3,667 3,716 3,688 3,496 3,439 3,414r 4 Held by agencies 1,827 1,857 1,954 1,989 2,061 2,085 2,190 2,236 2,249 5 Agency securities 29 29 29 29 29 28 28 28 27 6 Held by public 29 28 28 28 28 28 28 28 27 7 Held by agencies 1 1 1 1 1 0 0 0 0 8 Debt subject to statutory limit 5,530 5,566 5,552 5,568 5,687 5,687 5,601 5,592 5,581 9 Public debt securities 5,530 5,566 5,552 5,568 5,687 5,686 5,601 5,591 5,580 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 Monthly Treasury Statement. bia stadium bonds. 1.41 GROSS PUBLIC DEBT OF U.S. TREASURY Types and Ownership Billions of dollars, end of period 2000 TTyyppee aanndd hhoollddeerr 11999977 11999988 11999999 22000000 Ql Q2 Q3 Q4 1 Total gross public debt 5,502.4 5,614.2 5,776.1 5,662.2 5,773.4 5,685.9 5,674.2 5,662.2 By type 2 Interest-bearing 5,494.9 5,605.4 5,766.1 5,618.1 5,763.8 5,675.9 5,622.1 5,618.1 3 Marketable 3,456.8 3,355.5 3,281.0 2,966.9 3,261.2 3,070.7 2,992.8 2,966.9 4 Bills 715.4 691.0 737.1 646.9 753.3 629.9 616.2 646.9 5 Notes 2,106.1 1,960.7 1,784.5 1,557.3 1,732.6 1,679.1 1,611.3 1,557.3 6 Bonds 587.3 621.2 643.7 626.5 653.0 637.7 635.3 626.5 7 Inflation-indexed notes and bonds' 33.0 67.6 100.7 121.2 107.4 109.0 115.0 121.2 8 Nonmarketable2 2,038.1 2,249.9 2,485.1 2,651.2 2,502.6 2,605.2 2,629.3 2,651.2 9 State and local government series 124.1 165.3 165.7 151.0 161.9 160.4 153.3 151.0 10 Foreign issues3 36.2 34.3 31.3 27.2 28.8 27.7 25.4 27.2 11 Government 36.2 34.3 31.3 27.2 28.8 27.7 25.4 27.2 12 Public .0 .0 .0 .0 .0 .0 .0 .0 13 Savings bonds and notes 181.2 180.3 179.4 176.9 178.6 177.7 177.7 176.9 14 Government account series4 1,666.7 1,840.0 2,078.7 2,266.1 2,103.3 2,209.4 2,242.9 2,266.1 15 Non-interest-bearing 7.5 8.8 10.0 44.2 9.6 10.1 52.1 44.2 By holder 5 16 U.S. Treasury and other federal agencies and trust funds 1,657. r l,828.1r 2,064.2r 2,270.2 2,088.9r 2,193.6r 2,226.5r 2,270.2 17 Federal Reserve Banks6 430.7r 452. lr 478.0r 511.7 501.7 504.9 511.4 511.7 18 Private investors 3,414.6 3,334.0 3,233.9 2,880.4 3,182.8 2,987.4 2,936.2 2,880.4 19 Depository institutions 300.3 237.3 246.5r 197.9 234.9r 219.4 218.3 197.9 20 Mutual funds 321.5 343.2 348.6 336.4 339.6r 322.4 323.7 336.4 21 Insurance companies 176.6 144.5 125.3 119.5 124.1r 121.3 120.6 119.5 22 State and local treasuries7 239.3 269.3 266.8 246.2 257.2 256.4 246.9 246.2 Individuals 23 Savings bonds 186.5 186.6r 186.4r 184.8 185.3 184.6 184.3r 184.8 24 Pension funds 360.5r 375.3r 380.9r 375.8 382.1r 384. r 379.1 375.8 25 Private 143.5r 157.6r 167.7r 181.3 171.0r 173.6r 179.2 181.3 26 State and Local 216.9 217.7r 213.2 194.5 211.1 210.5r 199.9 194.5 27 Foreign and international8 1,241.6 1,278.7 1,268.8 1,220.8 1,273.9 1,248.9 1,225.2 1,220.8 28 Other miscellaneous investors7'9 589.5 498.8 407.1 n.a. 382.1r 246.7r 224.4 n.a. 1. The US. Treasury first issued inflation-indexed securities during the first quarter of 1997. 8. 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- 9. 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. SOURCES. Data by type of security, U.S. Treasury Department, 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, Federal Reserve Board of Governors, Flow holdings; data for other groups are Treasury estimates. of Funds Accounts of the United States and U.S. Treasury Department, Treasury Bulletin, 6. U.S. Treasury securities bought outright by Federal Reserve Banks, see Bulletin unless otherwise noted. table 1.18. 7. In March 1996, in a redefinition of series, fully defeased debt backed by nonmarketable federal securities was removed from "Other miscellaneous investors" and added to "State and local treasuries." The data shown here have been revised accordingly. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 DomesticN onfinancial Statistics • May 2001 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions1 Millions of dollars, daily averages 2000 2001 2001, week ending IItteemm Nov. Dec. Jan. Jan. 3 Jan. 10 Jan. 17 Jan. 24 Jan. 31 Feb. 7 Feb. 14 Feb. 21 Feb. 28 OUTRIGHT TRANSACTIONS2 By type of security 1 U.S. Treasury bills 33,213 33,972 30,524 46,063 31,026 31,192 25,294 28,501 26,276 23,666 23,684 48,699 Coupon securities, by maturity 2 Five years or less 116,403 142,810 184,852 138,635 233,089 167,473 184,622 169,233 169,260 164,570 162,784 208,772 3 More than five years 62,146 80,454 92,425 70,178 108,729 88,749 83,347 97,040 106,574 97,364 73,762 106,457 4 Inflation-indexed 1,033 1,441 2,801 2,034 5,306 2,310 2,387 1,411 1,670 950 1,910 2,209 Federal agency 5 Discount notes 52,139 54,545 62,160 63,200 53,350 66,652 61,610 67,509 66,661 62,908 64,851 70,415 Coupon securities, by maturity 6 One year or less 1,094 1,821 1,451 1,225 1,246 2,800 793 1,324 1,823 1,118 1,742 1,005 7 More than one year, but less than or equal to five years 9,936 10,987 15,202 10,168 21,825 13,689 13,104 13,901 14,215 16,041 13,458 32,471 8 More than five years 7,450 12,455 12,984 7,280 17,020 10,642 13,583 12,505 11,961 9,160 7,461 10,665 9 Mortgage-backed 80,031 77,576 100,680 54,267 144,559 114,402 104,151 60,919 128,664 140,877 80,090 78,285 By type of counterparty With interdealer broker 10 U.S. Treasury 92,335 117,395 145,363 117,676 178,968 139,148 135,431 137,738 143,319 136,292 120,840 165,470 11 Federal agency 8,654 11,965 13,683 11,240 18,578 11,889 12,816 12,066 12,146 11,317 10,849 15,803 12 Mortgage-backed 23,812 26,775 31,191 22,031 44,970 30,924 30,977 21,504 41,121 38,985 20,191 27,846 With other 13 U.S. Treasury 120,459 141,282 165,238 139,234 199,182 150,575 160,220 158,446 160,461 150,258 141,300 200,667 14 Federal agency 61,966 67,843 78,114 70,633 74,862 81,895 76,273 83,173 82,514 77,910 76,663 98,753 15 Mortgage-backed 56,219 50,801 69,489 32,236 99,589 83,479 73,174 39,415 87,543 101,892 59,899 50,439 FUTURES TRANSACTIONS3 By type of deliverable security 16 U.S. Treasury bills 0 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0 n.a. n.a. n.a. Coupon securities, by maturity 17 Five years or less 3,309 3,629 3,821 2,637 4,007 3,831 4,256 3,666 3,221 3,734 3,685 6,171 18 More than five years 13,051 14,020 15,474 11,731 17,813 15,512 15,182 14,893 14,148 16,827 15,705 22,167 19 Inflation-indexed 0 0 0 0 0 0 0 0 0 0 0 0 Federal agency 20 Discount notes 0 0 0 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 21 One year or less 0 0 0 0 0 0 0 0 0 0 0 0 22 More than one year, but less than or equal to five years 0 0 0 0 0 0 n.a. 0 0 0 0 0 23 More than five years 72 325 63 n.a. 118 55 20 58 17 n.a. 36 139 24 Mortgage-backed 0 0 0 0 0 0 0 0 0 0 0 0 OPTIONS TRANSACTIONS4 By type of underlying security 25 U.S. Treasury bills 0 0 0 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 26 Five years or less 1,548 1,380 1,116 407 1,628 1,553 754 902 826 1,172 1,188 743 27 More than five years 3,619 4,111 4,423 3,491 6,201 4,420 3,853 3,590 4,190 4,683 3,975 3,778 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 n.a. 0 20 0 0 0 0 0 0 0 0 0 32 More than five years 124 14 105 0 n.a. n.a. 55 197 0 93 101 278 33 Mortgage-backed 1,272 1,228 1,269 1,092 2,105 692 1,206 1,029 2,048 1,445 1,113 1,104 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 All 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Millions of dollars 2000 2001 2001, week ending IItteemm Nov. Dec. Jan. Jan. 3 Jan. 10 Jan. 17 Jan. 24 Jan. 31 Feb. 7 Feb. 14 Feb. 21 NET OUTRIGHT POSITIONS3 By type of security 1 U.S. Treasury bills 6,870 15,431 10,534 12,648 11,859 6,987 12,609 9,774 8,105 1,309 1,840 Coupon securities, by maturity 2 Five years or less -28,545 -18,515 -12,508 -13,626 -10,388 -12,565 -13,972 -12,628 -15,217 -15,619 -19,210 3 More than five years -11,005 -13,463 -10,547 -13,363 -10,442 -10,434 -9,383 -10,721 -6,115 -2,686 -3,145 4 Inflation-indexed 3,015 1,713 3,571 1,400 4,458 3,628 3,733 3,395 2,963 3,590 4,506 Federal agency 5 Discount notes 29,599 31,108 30,005 29,242 29,498 33,882 31,607 25,360 31,734 36,194 32,880 Coupon securities, by maturity 6 One year or less 16,088 16,590 17,285 17,187 15,160 17,826 17,686 18,509 19,374 17,588 17,919 7 More than one year, but less than or equal to five years 7,057 7,293 6,450 5,520 6,757 6,822 6,942 5,678 6,930 6,419 5,088 8 More than five years 4,043 5,104 6,360 6,141 6,573 8,037 6,179 4,747 5,215 6,120 5,169 9 Mortgage-backed 12,132 14,596 15,656 20,050 17,785 16,521 13,052 13,385 11,541 10,241 10,827 NET FUTURES POSITIONS4 By type of deliverable security 10 U.S. Treasury bills n.a. 0 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Coupon securities, by maturity 11 Five years or less 1,921 -252 1,131 601 -859 -475 2,870 3,215 3,632 1,938 2,855 12 More than five years -2,745 -3,090 -6,366 -1,608 -4,660 -6,726 -8,017 -8,099 -10,962 -14,479 -10,334 13 Inflation-indexed 0 0 0 0 0 0 0 0 0 0 0 Federal agency 14 Discount notes 0 0 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 15 One year or less 0 0 0 0 0 0 0 0 0 0 0 16 More than one year, but less than or equal to five years 0 0 0 0 0 0 n.a. n.a. n.a. n.a. n.a. 17 More than five years -1,364 -521 -91 -215 -68 -56 -62 -124 -153 -347 -361 18 Mortgage-backed 0 0 0 0 0 0 0 0 0 0 0 NET OPTIONS POSITIONS By type of deliverable security 19 U.S. Treasury bills 0 0 0 0 0 0 0 0 0 0 0 Coupon securities, by maturity 20 Five years or less -1,768 -684 767 -344 1,248 1,421 1,634 -758 649 1,571 305 21 More than five years -203 -93 1,054 1,043 1,021 1,294 1,100 807 243 -688 -1,604 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 -209 -528 -529 -660 -586 -561 -448 -464 -489 -740 -734 26 More than five years 259 533 603 731 836 268 383 868 500 340 313 27 Mortgage-backed 2,892 2,031 894 -537 -207 360 2,357 1,680 2,064 1,258 1,247 Financing5 Reverse repurchase agreements 28 Overnight and continuing 310,115 336,969 348,805 344,120 349,812 344,926 338,103 364,387 327,737 343,786 342,527 29 Term 824,867 821,860 803,216 716,768 771,154 802,742 837,898 838,120 887,333 904,553 791,217 Securities borrowed 30 Overnight and continuing 271,420 263,064 270,561 268,404 280,055 273,500 267,513 262,101 281,075 279,487 285,069 31 Term 123,967 137,491 129,862 138,307 132,370 128,726 128,360 126,371 117,049 121,425 115,014 Securities received as pledge 32 Overnight and continuing 2,748 3,029 3,382 n.a. n.a. n.a. 3,042 2,418 2,584 2,912 2,730 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 724,736 769,228 794,087 775,926 784,189 802,148 783,734 814,061 781,539 808,069 787,131 35 Term 796,328 785,387 764,792 692,715 744,867 766,159 791,009 788,021 833,380 858,292 750,884 Securities loaned 36 Overnight and continuing 8,221 8,587 9,914 9,754 10,354 9,765 9,862 9,743 9,792 9,562 9,527 37 Term 4,465 4,284 4,185 4,179 4,168 4,171 4,103 4,301 4,258 4,246 4,078 Securities pledged 38 Overnight and continuing 56,285 56,939 54,311 59,944 58,504 54,998 51,701 49,627 50,507 51,934 52,388 39 Term 3,981 4,207 4,032 4,212 4,228 3,786 3,878 4,159 4,188 5,904 4,422 Collateralized loans 40 Total 26,695 25,778 24,507 28,184 26,103 25,033 26,837 18,479 24,975 20,291 21,331 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 US. 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 Nonfinancial Statistics • May 2001 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 2000 AAggeennccyy 11999977 11999988 11999999 22000000 Aug. Sept. Oct. Nov. Dec. 1 Federal and federally sponsored agencies 1,022,609 1,296,477 1,616,492 1,851,632 1,763,089 1,776,334 n.a. 1,833,155 1,851,632 2 Federal agencies 27,792 26,502 26,376 25,666 25,892 25,993 25,523 25,555 25,666 3 Defense Department1 6 6 6 6 6 6 6 6 6 4 Export-Import Bank2'3 552 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5 Federal Housing Administration4 102 205 126 255 210 227 237 239 255 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. / Postal Service6 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 8 Tennessee Valley Authority 27,786 26,496 26,370 25,660 25,886 25,987 25,517 25,549 25,660 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 994,817 1,269,975 1,590,116 1,825,966 1,737,197 1,750,341 1,777,824 1,807,600 1,825,966 11 Federal Home Loan Banks 313,919 382,131 529,005 594,404 572,836 580,579 576,689 580,957 594,404 12 Federal Home Loan Mortgage Corporation 169,200 287,396 360,711 426,899 412,656 406,936 422,960 429,617 426,899 13 Federal National Mortgage Association 369,774 460,291 547,619 642,700 595,117 607,000 615,463 633,100 642,700 14 Farm Credit Banks8 63,517 63,488 68,883 74,181 70,139 71,055 71,345 71,667 74,181 15 Student Loan Marketing Association9 37,717 35,399 41,988 45,375 44,113 42,423 48,988 50,016 45,375 16 Financing Corporation10 8,170 8,170 8,170 8,170 8,170 8,170 8,170 8,170 8,170 17 Farm Credit Financial Assistance Corporation" 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 1,261 18 Resolution Funding Corporation12 29,996 29,996 29,996 29,996 29,996 29,996 29,996 29,996 29,996 MEMO 19 Federal Financing Bank debt13 49,090 44,129 42,152 40,575 38,040 42,837 41,280 40,170 40,575 Lending to federal and federally sponsored agencies 20 Export-Import Bank3 555522 F F F F F F F F 21 Postal Service6 n.a. 1 1 1 1 1 1 1 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 4 3 U Te 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 . . T 1 1 1 T 1 T 1 T 1 T 1 T 1 •1 Other lending14 25 Farmers Home Administration 13,530 9,500 6,665 5,275 5,660 5,540 5,540 5,320 5,275 26 Rural Electrification Administration 14,898 14,091 14,085 13,126 13,238 12,989 12,891 13,023 13,126 27 Other 20,110 20,538 21,402 22,174 19,142 24,308 22,849 21,827 22,174 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 2000 2001 TTyyppee ooff ii oo ss rr ss uu uu ee ss ee oo rr iissssuueerr,, 11999988 11999999 22000000 July Aug. Sept. Oct. Nov. Dec. Jan. Feb. 1 All issues, new and refunding1 262,342 215,427 180,403 12,827 15,284 15,598 18,035 18,079 15,348 11,255 19,829 By type of issue 2 General obligation 87,015 73,308 64,475 4,256 5,194 6,888 5,871 5,044 5,060 6,256 9,389 3 Revenue 175,327 142,120 115,928 8,572 10,090 8,710 12,163 13,036 10,288 4,999 10,441 By type of issuer 4 State 23,506 16,376 19,944 783 1,011 2,022 3,005 1,942 1,640 1,738 3,268 5 Special district or statutory authority2 178,421 152,418 111,695 8,545 10,728 10,152 11,224 12,311 1,053 7,061 11,011 6 Municipality, county, or township 60,173 46,634 39,273 3,500 3,545 3,424 3,806 3,827 3,165 2,456 5,550 7 Issues for new capital 160,568 161,065 154,257 11,297 12,402 13,968 16,387 14,520 13,286 8,758 13,384 By use of proceeds 8 Education 36,904 36,563 38,665 3,185 3,630 3,210 3,492 3,446 2,919 2,786 3,102 9 Transportation 19,926 17,394 19,730 1,947 1,979 1,574 2,575 2,124 1,381 780 2,411 10 Utilities and conservation 21,037 15,098 11,917 353 1,409 1,408 1,272 1,973 1,307 678 1,335 11 Social welfare n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 12 Industrial aid 8,594 9,099 7,122 632 281 387 730 500 615 63 281 13 Other purposes 42,450 47,896 47,309 2,543 3,564 5,243 6,558 3,787 4,264 3,013 4,742 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 2000 2001 TTyyppee ooff iissssuuee,, ooffffeerriinngg,, 11999988 11999999 22000000rr oorr iissssuueerr June July Aug. Sept. Oct. Nov. Dec. Jan. 1 All issues' 1,128,491 1,072,866 942,198 100,615 65,511 82,752 94,492 62,466 95,595 61,378r 128,930 2 Bonds2 1,001,736 941,298 807,281 92,742 57,476 69,875 88,102 53,345 84,094 58,713r 118,372 By type of offering 3 Sold in the United States 923,771 818,683 684,484 75,271 40,753 56,133 73,516 47,415 76,383 57,189 115,583 4 Sold abroad 77,965 122,615 122,798 17,471 16,723 13,742 14,586 5,930 7,712 1,525 2,789 MEMO 5 Private placements, domestic n.a. n.a. n.a. 3,391 1,038 241 376 127 5,534 3,709 26 By industry group 6 Nonfinancial 307,711r 293,963 242,452 29,412 15,885 17,947 24,483 12,547 25,784 18,219 44,443 7 Financial 694,025r 647,335 564,829 63,331 41,592 51,928 63,619 40,799 58,310 40,495 73,928 8 Stocks3 205,605 217,868 134,917 7,873 8,035 12,877 6,390 9,121 11,501 2,665 7,459 By type of offering 9 Public 126,755 131,568 134,917 7,873 8,035 12,877 6,390 9,121 11,501 2,665 7,459 10 Private placement4 78,850 86,300 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. By industry group 11 Nonfinancial 74,113 110,284 118,369 6,521 7,773 8,645 6,205 8,278 10,794 2,146 4,349 12 Financial 52,642 21,284 16,548 1,352 262 4,232 185 843 707 519 3,110 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 Nonfinancial Statistics • May 2001 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Assets' Millions of dollars 2000 2001 IItteemm 11999999 22000000 July Aug. Sept. Oct. Nov. Dec. Jan.r Feb. 1 Sales of own shares2 1,791,894 2,279,315 166,815 179,890 159,809 169,071 143,412 170,255 206,765 148,308 2 Redemptions of own shares 1,621,987 2,057,277 151,717 159,027 147,644 153,067 138,791 160,918 171,819 141,568 3 Net sales3 169,906 222,038 15,098 20,864 12,166 16,004 4,621 9,337 34,946 6,740 4 Assets4 5,233,191 5,123,747 5,392,308 5,745,264 5,550,176 5,442,937 4,993,008 5,123,747 5,280,222 4,877,931 5 Cash5 219,189 277,386 258,472 261,967 280,192 302,682 300,133 277,386 280,472 270,886 6 Other 5,014,002 4,846,361 5,133,836 5,483,298 5,269,984 5,140,255 4,692,875 4,846,361 4,999,750 4,607,045 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 1999 2000 AAccccoouunntt 11999988 11999999 22000000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1 Profits with inventory valuation and capital consumption adjustment 815.0 856.0 946.2 852.0 836.8 842.0 893.2 936.3 963.6 970.3 914.7 2 Profits before taxes 758.2 823.0 925.6 797.6 804.5 819.0 870.7 920.7 942.5 945.1 894.1 3 Profits-tax liability 244.6 255.9 284.2 247.8 250.8 254.2 270.8 286.3 292.0 290.6 267.7 4 Profits after taxes 513.6 567.1 641.4 549.9 553.7 564.8 599.9 634.4 650.4 654.4 626.4 5 Dividends 351.5 370.7 397.0 361.1 367.2 373.9 380.6 387.3 393.0 400.1 407.6 6 Undistributed profits 162.1 196.4 244.4 188.7 186.5 190.9 219.3 247.1 257.4 254.4 218.8 7 Inventory valuation 17.0 -9.1 -12.9 11.4 -8.9 -19.7 -19.2 -25.0 -13.6 -4.5 -8.5 8 Capital consumption adjustment 39.9 42.1 33.5R 42.9 41.2 42.7 41.6 40.6 34.7 29.7 29. lr SOURCE. U.S. Department of Commerce, Survey of Current Business. 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities' Billions of dollars, end of period; not seasonally adjusted 1999 2000 AAccccoouunntt 11999988 11999999 22000000 Q2 Q3 Q4 QI Q2 Q3 Q4 ASSETS 1 Accounts receivable, gross2 711.7 811.5 915.3 756.5 776.3 811.5 848.7 884.4 900.1 915.3 2 Consumer 261.8 279.8 296.1 269.2 271.0 279.8 285.4 294.1 301.9 296.1 3 Business 347.5 405.2 471.1 373.7 383.0 405.2 434.6 454.1 455.7 471.1 4 Real estate 102.3 126.5 148.1 113.5 122.3 126.5 128.8 136.2 142.4 148.1 5 LESS: Reserves for unearned income 56.3 53.5 59.9 53.4 54.0 53.5 54.0 57.1 58.8 59.9 6 Reserves for losses 13.8 13.5 14.7 13.4 13.6 13.5 14.0 14.4 14.2 14.7 7 Accounts receivable, net 641.6 744.6 840.6 689.7 708.6 744.6 780.7 813.0 827.1 840.6 8 All other 337.9 406.3 463.0 373.2 368.5 406.3 412.7 418.3 441.4 463.0 9 Total assets 979.5 1,150.9 1,303.7 1,062.9 1,077.2 1,150.9 1,193.4 1,231.3 1,268.4 1,303.7 LIABILITIES AND CAPITAL 10 Bank loans 26.3 35.1 35.6 25.1 27.0 35.1 28.5 32.5 35.4 35.6 11 Commercial paper 231.5 227.9 235.2 231.0 205.3 227.9 230.2 221.3 215.6 235.2 Debt 12 Owed to parent 61.8 123.8 145.8 65.4 84.5 123.8 145.1 137.1 144.3 145.8 13 Not elsewhere classified 339.7 397.0 464.1 383.1 396.2 397.0 412.0 445.4 465.5 464.1 14 All other liabilities 203.2 222.7 280.4 226.1 216.0 222.7 247.6 259.3 269.2 280.4 15 Capital, surplus, and undivided profits 117.0 144.5 142.6 132.2 148.2 144.5 130.1 135.6 138.3 142.6 16 Total liabilities and capital 979.5 1,150.9 1,303.6 1,062.9 1,077.2 1,150.9 1,193.4 1,231.3 1,268.4 1,303.6 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 Receivables' Billions of dollars, amounts outstanding 2000 2001 TTyyppee ooff ccrreeddiitt 11999988 11999999 22000000 Aug. Sept. Oct. Nov. Dec. Jan. Seasonally adjusted 1 Total 875.8 993.9 1,145.0 1,094.1 1,112.1 1,134.9 1,136.2 1,145.0 1,157.9 2 Consumer 352.8 385.3 439.3 411.1 419.7 437.3 439.8 439.3 445.3 3 Real estate 131.4 154.7 174.7 169.0 170.9 174.4 176.6 174.7 177.5 4 Business 391.6 453.9 531.0 514.1 521.6 523.2 519.7 531.0 535.1 Not seasonally adjusted 5 Total 884.0 1,003.2 1,155.7 1,087.9 1,106.8 1,132.9 1,137.9 1,155.7 1,157.8 6 Consumer 356.1 388.8 443.4 412.3 421.0 437.9 441.4 443.4 445.4 7 Motor vehicles loans 103.1 114.7 122.5 130.7 130.1 131.8 127.8 122.5 117.5 8 Motor vehicle leases 93.3 98.3 102.9 105.4 104.6 104.3 104.0 102.9 103.8 9 Revolving2 32.3 33.8 38.3 33.6 35.4 37.1 38.0 38.3 38.1 10 Other3 33.1 33.1 32.4 32.3 31.7 31.9 32.0 32.4 32.4 Securitized assets4 11 Motor vehicle loans 54.8 71.1 97.1 76.2 78.8 84.3 91.5 97.1 103.9 12 Motor vehicle leases 12.7 9.7 6.6 7.4 7.2 7.0 6.8 6.6 6.3 13 Revolving 8.7 10.5 27.5 10.7 17.2 25.8 25.8 27.5 27.6 14 Other 18.1 17.7 16.0 16.2 16.0 15.7 15.5 16.0 15.8 15 Real estate 131.4 154.7 174.7 169.0 170.9 174.4 176.6 174.7 177.5 16 One- to four-family 75.7 88.3 105.2 101.7 100.9 104.6 107.0 105.2 108.0 17 Other 26.6 38.3 42.9 40.2 41.5 42.1 42.7 42.9 43.2 Securitized real estate assets4 18 One- to four-family 29.0 28.0 24.7 26.8 26.5 25.7 25.0 24.7 24.4 19 Other .1 .2 1.9 .2 1.9 1.9 1.9 1.9 1.9 20 Business 396.5 459.6 537.7 506.7 514.9 520.6 519.9 537.7 535.0 21 Motor vehicles 79.6 87.8 95.2 89.6 94.1 95.9 93.3 95.2 93.6 22 Retail loans 28.1 33.2 31.0 34.3 34.8 34.7 32.3 31.0 30.8 7,3 Wholesale loans5 32.8 34.7 39.6 32.6 35.5 37.5 37.3 39.6 38.2 24 Leases 18.7 19.9 24.6 22.7 23.7 23.7 23.8 24.6 24.6 25 Equipment 198.0 221.9 267.3 250.0 256.7 259.4 259.3 267.3 266.2 26 Loans 50.4 52.2 56.2 54.3 55.8 56.1 54.7 56.2 56.3 77 Leases 147.6 169.7 211.1 195.8 200.9 203.3 204.6 211.1 209.9 28 Other business receivables6 69.9 95.5 108.6 108.3 104.9 103.7 103.2 108.6 109.7 Securitized assets4 7.9 Motor vehicles 29.2 31.5 37.8 29.6 31.9 34.2 37.0 37.8 37.3 30 Retail loans 2.6 2.9 3.2 2.7 2.4 2.3 3.1 3.2 3.1 31 Wholesale loans 24.7 26.4 32.5 24.5 27.1 29.5 31.5 32.5 32.1 32 Leases 1.9 2.1 2.2 2.4 2.4 2.4 2.4 2.2 2.2 33 Equipment 13.0 14.6 23.1 22.4 21.4 21.7 21.3 23.1 22.5 34 Loans 6.6 7.9 15.5 15.9 15.1 14.9 14.6 15.5 14.7 35 Leases 6.4 6.7 7.6 6.5 6.4 6.7 6.7 7.6 7.8 36 Other business receivables6 6.8 8.4 5.6 6.8 5.8 5.8 5.8 5.6 5.6 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 DomesticN onfinancial Statistics • May 2001 1.53 MORTGAGE MARKETS Mortgages on New Homes Millions of dollars except as noted 2000 2001 IItteemm 11999988 11999999 22000000 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Terms and yields in primary and secondary markets PRIMARY MARKETS Terms1 1 Purchase price (thousands of dollars) 195.2 210.7 234.5 237.0 241.9 240.2 247.2 250.0 238.7 245.0 2 Amount of loan (thousands of dollars) 151.1 161.7 177.0 179.7 182.5 180.4 184.2 187.3 181.6 185.4 3 Loan-to-price ratio (percent) 80.0 78.7 77.4 77.7 77.1 77.2 76.2 76.5 78.2 77.9 4 Maturity (years) 28.4 28.8 29.2 29.3 29.2 29.2 29.2 29.1 29.4 29.0 5 Fees and charges (percent of loan amount)2 .89 .77 .70 .68 .70 .69 .69 .73 .71 .70 Yield (percent per year) 6 Contract rate1 6.95 6.94 7.41 7.44 7.41 7.43 7.36 7.29 7.09 6.99 7 Effective rate1'3 7.08 7.06 7.52 7.54 7.52 7.53 7.47 7.40 7.20 7.10 8 Contract rate (HUD series)4 7.00 7.45 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (Section 203)5 7.04 7.74 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 10 GNMA securities6 6.43 7.03 7.57 7.44 7.43 7.30 7.22 6.83 6.57 6.61 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 414,515 523,941 610,122 568,187 574,087 586,756 598,951 610,122 623,950 632,850 12 FHA/VA insured 33,770 55,318 61,539 60,150 59,961 60,329 60,694 61,539 62,970 63,337 13 Conventional 380,745 468,623 548,583 508,037 514,126 526,427 538,257 548,583 560,980 569,513 14 Mortgage transactions purchased (during period) 188,448 195,210 154,231 13,352 11,501 18,444 17,322 17,193 20,598 17,230 Mortgage commitments (during period) 15 Issued7 193,795 187,948 163,689 14,253 16,143 17,435 15,287 20,120 27,325 25,471 16 To sell8 1,880 5,900 11,786 236 693 268 676 1,436 766 835 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period f 17 Total 255,010 324,443 385,693 357,002 361,624 365,198 372,819 385,693 391,679 407,086 18 FHA/VA insured 785 1,836 3,332 2,903 3,517 3,530 3,321 3,332 3,307 3,319 19 Conventional 254,225 322,607 382,361 354,099 358,107 361,668 369,498 382,361 388,372 403,767 Mortgage transactions (during period) 20 Purchases 267,402 239,793 174,043 16,056 21,748 16,195 19,402 24,313 15,658 16,536 21 Sales 250,565 233,031 166,901 15,558 21,189 15,614 18,823 22,277 15,364 15,549 22 Mortgage commitments contracted (during period)9 281,899 228,432 169,231 17,468 19,481 17,915 20,012 21,780 18,685 17,664 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 the Federal 5. Average gross yield on thirty-year, minimum-downpayment first mortgages insured National Mortgage Association exclude swap activity. by the Federal Housing Administration (FHA) for immediate delivery in the private secondary market. Based on transactions on first day of subsequent month. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Real Estate A35 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period 1999 2000 Type of holder and property 11999966 11999977 11999988 Q3 Q4 QL Q2 Q3 1 All holders 4,868,298 5,204,119 5,737,161 6,236316 6,385,916 6,481,515 6,651,208 6,803,226 By type of property 2 One- to four-family residences 3,718,683 3,973,692 4,362,699 4,698,263 4,793,966 4,853,759 4.977,879 5,104,650 3 Multifamily residences 288,837 302,291 332,121 360,939 374,596 382,386 392,595 399,882 4 Nonfarm, nonresidential 773,643 837,837 945,836 1,075,719 1,114,392 1,141,622 1,174,687 1,191,463 5 Farm 87,134 90,299 96,506 101,395 102,962 103,748 106,047 107,232 By type of holder 6 Major financial institutions 1,981,886 2,083,981 2,194,813 2,321,356 2,394,923 2,456,786 2,548,570 2,603,713 7 Commercial banks2 1,145,389 1,245,315 1,337,217 1,418,819 1,495,502 1,546,816 1,614,307 1,648,734 8 One- to four-family 677,603 745,510 797,492 827,291 879,552 904,581 948,496 968,069 9 Multifamily 45,451 49,670 54,116 63,964 67,591 72,431 75,713 76,945 10 Nonfarm, nonresidential 397,452 423,148 456,574 496,246 516,520 537,131 556,382 569,801 11 Farm 24,883 26,986 29,035 31,320 31,839 32,673 33,717 33,919 12 Savings institutions3 628,335 631,826 643,957 676,346 668,634 680,745 701,992 721,488 13 One- to four-family 513,712 520,782 533,918 560,622 549,072 560,046 578,641 595,472 14 Multifamily 61,570 59,540 56,821 57,282 59,138 57,759 59,142 60,044 15 Nonfarm, nonresidential 52,723 51,150 52,801 57,983 59,948 62,447 63,691 65,441 16 Farm 331 354 417 459 475 493 518 531 17 Life insurance companies 208,162 206,840 213,640 226,190 230,787 229,225 232,270 233,491 18 One- to four-family 6,977 7,187 6,590 7,432 5,934 5,874 5,949 5,999 19 Multifamily 30,750 30,402 31,522 31,998 32,818 32,602 33,037 33,206 20 Nonfarm, nonresidential 160,315 158,779 164,004 174,571 179,048 177,870 180,243 181,167 21 Farm 10,120 10,472 11,524 12,189 12,987 12,879 13,041 13,119 22 Federal and related agencies 295,192 286,194 293,613 322,572 322,352 323,145 332,868 336,871 23 Government National Mortgage Association .. . 2 8 7 8 7 7 7 6 24 One- to four-family 2 8 7 8 7 7 7 6 25 Multifamily 0 0 0 0 0 0 0 0 26 Farmers Home Administration4 41,596 41,195 40,851 73,705 73,871 72,899 72,896 73,009 27 One- to four-family 17,303 17,253 16,895 16,583 16,506 16,456 16,435 16,444 28 Multifamily 11,685 11,720 11,739 11,745 11,741 11,732 11,729 11,734 29 Nonfarm, nonresidential 6,841 7,370 7,705 41,068 41,355 40,509 40,554 40,665 30 Farm 5,768 4,852 4,513 4,308 4,268 4,202 4,179 4,167 31 Federal Housing and Veterans' Administrations 6,244 3,811 3,674 3,889 3,712 3,794 3,845 3,395 32 One- to four-family 3,524 1,767 1,849 2,013 1,851 1,847 1,832 1,327 33 Multifamily 2,719 2,044 1,825 1,876 1,861 1,947 2,013 2,068 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 2,431 724 361 163 152 98 72 82 40 One- to four-family 365 117 58 26 25 16 12 13 41 Multifamily 413 140 70 31 29 19 14 16 42 Nonfarm, nonresidential 1,653 467 233 105 98 63 46 53 43 Farm 0 0 0 0 0 0 0 0 44 Federal National Mortgage Association 168,813 161,308 157,675 153,172 151,500 150,312 153,507 153,114 45 One- to four-family 155,008 149,831 147,594 142,982 141,195 139,986 142,478 141,786 46 Multifamily 13,805 11,477 10,081 10,190 10,305 10,326 11,029 11,328 47 Federal Land Banks 29,602 30,657 32,983 34,217 34,187 34,142 34,830 35,549 48 One- to four-family 1,742 1,804 1,941 2,013 2,012 2,009 2,049 2,092 49 Farm 0 0 0 0 0 0 0 0 50 Federal Home Loan Mortgage Corporation 46,504 48,454 57,085 55,695 56,676 57,009 56,972 57,046 51 One- to four-family 41,758 42,629 49,106 44,010 44,321 43,384 42,892 42,138 52 Multifamily 4,746 5,825 7,979 11,685 12,355 13,625 14,080 14,908 53 Mortgage pools or trusts5 2,040,847 2,239,350 2,589,800 2,891,187 2,954,784 2,982,316 3,034,134 3,112,824 54 Government National Mortgage Association ... 506,246 536,879 537,446 569,038 582,263 589,192 590,830 602,794 55 One- to four-family 494,064 523,225 522,498 552,670 565,189 571,506 572,783 584,318 56 Multifamily 12,182 13,654 14,948 16,368 17,074 17,686 18,047 18,476 57 Federal Home Loan Mortgage Corporation 554,260 579,385 646,459 738,581 749,081 757,106 768,641 790,891 58 One- to four-family 551,513 576,846 643,465 735,088 744,619 752,607 763,890 786,007 59 Multifamily 2,747 2,539 2,994 3,493 4,462 4,499 4,751 4,884 60 Federal National Mortgage Association 650,779 709,582 834,517 938,484 960,883 975,815 995,815 1,020,828 61 One- to four-family 633,209 687,981 804,204 903,531 924,941 938,898 957,584 981,206 62 Multifamily 17,570 21,601 30,313 34,953 35,942 36,917 38,231 39,622 63 Farmers Home Administration4 3 2 1 0 0 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 0 0 0 0 0 68 Private mortgage conduits 329,559 413,502 571,378 645,083 662,557 660,203 678,848 698,311 69 One- to four-family6 258,800 316,400 412,700 455,276 462,600 455,623 464,593 477,899 70 Multifamily 16,369 21,591 34,329 40,935 42,628 43,268 44,290 44,513 71 Nonfarm, nonresidential 54,390 75,511 124,348 148,872 157,330 161,312 169,965 175,899 72 Farm 0 0 0 0 0 0 0 0 73 Individuals and others7 550,372 594,594 658,935 701,202 713,857 719,268 735,636 749,818 74 One- to four-family 363,104 382,315 423,416 447,171 454,126 456,285 469,801 487,534 75 Multifamily 68,830 72,088 75,374 76,242 78,420 79,326 80,219 81,808 76 Nonfarm, nonresidential 100,269 121,412 140,171 156,874 160,093 162,289 163,806 158,437 77 Farm 18,169 18,779 19,974 20,915 21,217 21,368 21,811 22,039 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 Nonfinancial Statistics • May 2001 1.55 CONSUMER CREDIT1 Millions of dollars, amounts outstanding, end of period 2000 2001 HHoollddeerr aanndd ttyyppee ooff ccrreeddiitt 11999988 11999999 22000000rr Aug. Sept. Oct. Nov. Dec.r Jan. Seasonally adjusted 1 Total 1,301,023 1,393,657 1,533,800 1,484,081 1,492,934 1,509,568 1,522,000 1,533,800 1,550,000 2 Revolving 560,504 595,610 663,000 645,121 649,297 656,666 662,800 663,000 680,900 3 Nonrevolving2 740,519 798,047 870,800 838,961 843,637 852,902 862,200 870,800 882,600 Not seasonally adjusted 4 Total 1,331,742 1,426,151 1,568,800 1,486,048 1,495,627 1,513,688 1,529,800 1,568,800 1,558,700 By major holder 5 Commercial banks 508,932 499,758 543,700 520,431 521,767 521,515 527,200 543,700 533,300 6 Finance companies 168,491 181,573 193,200 196,555 197,276 200,815 197,800 193,200 189,600 7 Credit unions 155,406 167,921 185,300 180,679 181,597 183,010 184,200 185,300 184,100 8 Savings institutions 51,611 61,527 64,000 62,037 62,580 62,815 63,100 64,000 64,100 9 Nonfinancial business 74,877 80,311 82,700 73,030 72,091 70,842 73,800 82,700 73,000 10 Pools of securitized assets3 372,425 435,061 500,000 453,316 460,316 474,691 483,800 500,000 514,400 By major type of credit4 11 Revolving 586,528 623,245 692,800 641,298 645,820 654,678 664,300 692,800 681,700 12 Commercial banks 210,346 189,352 218,100 204,016 202,362 201,874 206,100 218,100 205,900 13 Finance companies 32,309 33,814 38,251 33,558 35,405 37,147r 37,956r 38,251 38,074 14 Credit unions 19,930 20,641 21,759 20,796 20,779r 20,804 21,276 21,759 21,313 15 Savings institutions 12,450 15,838 16,556 16,036 16,327 16,403r 16,480r 16,556 16,775 16 Nonfinancial business 39,166 42,783 42,430 36,669 35,817 34,484 36,430 42,430 38,845 17 Pools of securitized assets3 272,327 320,817 355,762 330,223 335,126 343,313 345,817 355,762 355,965 18 Nonrevolving 745,214 802,906 875,985 844,750 849,772r 861,838r 870,362r 875,985 879,988 19 Commercial banks 298,586 310,406 325,648 316,415 319,423r 321,998' 325,284r 325,648 329,723 20 Finance companies 136,182 147,759 154,938 162,997 161,871 163,700r 159,803r 154,938 149,937 21 Credit unions 135,476 147,280 163,493 159,883 160,818r 162,359 162,960 163,493 163,461 22 Savings institutions 39,161 45,689 47,452 46,001 46,196r 46,615r 47,034r 47,452 47,255 23 Nonfinancial business 35,711 37,528 40,244 36,361 36,274 36,308r 37,347r 40,244 38,723 24 Pools of securitized assets3 100,098 114,244 144,209 123,093 125,190 130,858 137,934 144,209 150,889 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 2000 2001 IItteemm 11999988rr 11999999rr 22000000rr July Aug. Sept. Oct. Nov. Dec. Jan. INTEREST RATES Commercial banks2 1 48-month new car 8.72 8.44 9.34 n.a. 9.62 n.a. n.a. 9.63 n.a. n.a. 2 24-month personal 13.74 13.39 13.90 n.a. 13.85 n.a. n.a. 14.12 n.a. n.a. Credit card plan 3 All accounts 15.71 15.21 15.71 n.a. 15.98 n.a. n.a. 15.99 n.a. n.a. 4 Accounts assessed interest 15.59 14.81 14.91 n.a. 15.35 n.a. n.a. 15.23 n.a. n.a. Auto finance companies 5 New car 6.30 6.66 66..6611 6.55 7.46 7.16 4.74 5.41 7.45 7.29 6 Used car 12.64 12.60 13.55 13.64 13.70 13.91 13.87 13.66r 13.58r 13.11 OTHER TERMS3 Maturity (months) 1 New car 52.1 52.7 54.9 55.6 55.7 55.9 57.6 57.3 55.2 54.3 8 Used car 53.5 55.9 57.0 57.2 57.2 57.0 57.0 56.8 56.6 57.8 Loan-to-value ratio 9 New car 92 92 92 92 92 91 93 93 91 90 10 Used car 99 99 99 100 100 100 100 100 100 98 Amount financed (dollars) 11 New car 19,083 19,880 20,923 20,406 20,664 21,010 22,069 22,443 21,867 21,315 12 Used car 12,691 13,642 14,058 14,269 14,166 13,950 13,978 14,325 14,591 14,155 1. The Board's series on amounts of credit covers most short- and intermediate-term credit 2. Data are available for only the second month of each quarter, extended to individuals. Data in this table also appear in the Board's G.19 (421) monthly 3. At auto finance companies, statistical release. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A3 7 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS1 Billions of dollars; quarterly data at seasonally adjusted annual rates 1999 2000 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999955 11999966 11999977 11999999 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors ... 711.1 731.3 804.6 1,044.6' 1,121.5 939.8 1,178.0 1,089.5 924.0 971.5 779.9 835.7 By sector and instrument 7 Federal government 144.4 145.0 23.1 -52.6 -71.2 -98.5 -68.9 -34.0 -215.5 -414.0 --221199..55 -334.5 Treasury securities 142.9 146.6 23.2 -54.6 -71.0 -99.1 -68.9 -34.0 -213.5 -415.8 -217.1 -333.3 4 Budget agency securities and mortgages 1.5 -1.6 -.1 2.0 -.2 .6 .0 .0 -2.1 1.8 -2.4 -1.2 5 Nonfederal 566.7 586.3 781.5 1,097.2 1,192.7 1,038.3 1,247.0 1,123.5 1,139.6 1,385.4 999.4 1,170.2 By instrument 6 Commercial paper 18.1 -.9 13.7 24.4 37.4 -2.6 49.8 44.0 29.8 110.4 5566..11 --44..00 7 Municipal securities and loans -48.2 2.6 71.4 96.8 68.2 56.8 71.3 52.5 8.9 34.0 29.8 68.6 8 Corporate bonds 91.1 116.3 150.5 218.7 229.9 287.6 202.8 155.2 186.2 153.8 184.4 175.6 9 103.7 70.5 106.5 108.2 82.7 24.0 112.3 108.6 131.9 163.1 31.8 84.2 in Other loans and advances 67.2 33.5 69.1 74.3 71.2 2.3 79.2 55.4 153.3 124.4 -2.5 141.1 n 195.8 275.7 317.7 507.2 608.9 608.9 655.4 598.3 484.9 662.6 577.0 570.5 l? 181.0 242.1 252.3 386.8 432.0 440.2 479.4 397.1 344.1 489.4 429.6 414.1 n Multifamily residential 6.1 9.0 8.2 20.8 40.2 33.0 41.3 50.9 29.5 44.7 31.3 36.6 14 7.1 22.0 54.1 93.4 131.2 126.7 127.6 147.9 104.4 119.7 110.7 116.8 is 1.6 2.6 3.2 6.2 5.5 9.0 7.0 2.5 6.9 8.9 5.3 3.0 16 Consumer credit 138.9 88.8 52.5 67.6 94.4 61.4 76.2 109.5 144.6 137.2 122.9 134.2 By borrowing sector 17 363.5 357.8 337.1 479.1 538.2 512.9 580.6 498.0 523.0 638.9 555522..22 557766..00 18 Nonfinancial business 254.7 235.3 388.2 537.8 602.1 481.8 613.9 591.9 612.8 725.7 423.5 533.9 19 227.5 149.1 266.5 418.1 481.6 372.8 473.8 453.6 481.3 592.4 309.1 404.5 ?o Nonfarm noncorporate 24.3 81.4 115.6 112.0 115.3 107.2 131.6 132.7 116.5 125.1 109.3 117.6 ?i 2.9 4.8 6.2 7.7 5.2 1.7 8.5 5.6 15.0 8.3 5.1 11.7 22 State and local government -51.5 -6.8 56.1 80.3 52.3 43.6 52.5 33.6 3.8 20.8 23.6 60.3 7^ Foreign net borrowing in United States 78.5 88.4 71.8 43.3 25.3 -24.5 77.3 17.6 118.0 -7.6 89.2 47.8 74 Commercial paper 13.5 11.3 3.7 7.8 16.3 -27.5 41.1 33.6 57.8 12.0 7.0 50.1 75 57.1 67.0 61.4 34.8 14.2 .2 44.0 -2.7 45.7 -27.4 71.7 -15.3 76 Bank loans n.e.c 8.5 9.1 8.5 6.7 .5 5.6 -6.6 2.3 15.4 5.7 11.9 12.2 27 Other loans and advances -.5 1.0 -1.8 -6.0 -5.7 -2.8 -1.1 -15.5 -.9 2.0 -1.5 .8 28 Total domestic plus foreign 789.6 819.7 876.3 1,087.9 1,146.8 915.3 1,255.4 1,107.1 1,042.0 963.9 869.0 883.5 Financial sectors 29 Total net borrowing by financial sectors 454.0 545.7 653.8 1,073.9 1,087.9 995.3 1,064.2 1,063.2 617.7 817.5 733.2 1,079.0 By instrument sn Federal government-related 204.2 231.4 212.9 470.9 592.0 576.6 651.6 550.1 248.6 370.9 550033..55 660077..99 31 Government-sponsored enterprise securities 105.9 90.4 98.4 278.3 318.2 304.7 407.1 367.9 104.9 248.9 278.1 300.5 32 Mortgage pool securities 98.3 141.0 114.6 192.6 273.8 271.9 244.5 182.2 143.7 122.1 225.4 307.4 33 Loans from U.S. government .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 34 249.8 314.4 440.9 603.0 495.9 418.8 412.6 513.0 369.2 446.6 229.7 471.1 35 Open market paper 42.7 92.2 166.7 161.0 176.2 57.3 89.9 479.0 130.9 77.4 65.2 237.5 36 Corporate bonds 195.9 173.8 210.5 296.9 221.8 254.8 179.5 -21.0 166.5 230.7 195.9 220.9 37 Bank loans n.e.c 2.5 12.6 13.2 30.1 -14.3 11.0 -5.9 -55.6 .3 5.4 -.7 -12.7 38 Other loans and advances 3.4 27.9 35.6 90.2 107.1 107.9 139.8 107.5 64.4 123.1 -36.7 19.1 39 Mortgages 5.3 7.9 14.9 24.8 5.1 -12.3 9.4 3.2 7.0 10.0 6.0 6.4 By borrowing sector 4n Commercial banking 22.5 13.0 46.1 72.9 67.2 61.5 107.0 54.1 72.4 113.2 2233..55 3311..11 41 Savings institutions 2.6 25.5 19.7 52.2 48.0 59.2 51.9 5.8 40.6 59.1 -23.4 32.5 47 Credit unions -.1 .1 .1 .6 2.2 1.4 2.8 3.3 -2.9 .9 11..11 1.0 43 Life insurance companies -.1 1.1 .2 .7 .7 3.0 1.1 -4.4 -.7 -1.1 --..33 -.7 44 Government-sponsored enterprises 105.9 90.4 98.4 278.3 318.2 304.7 407.1 367.9 104.9 248.9 278.1 300.5 45 Federally related mortgage pools 98.3 141.0 114.6 192.6 273.8 271.9 244.5 182.2 143.7 122.1 225.4 307.4 46 Issuers of asset-backed securities (ABSs) 142.4 150.8 202.2 321.4 234.0 301.5 220.5 124.2 166.0 154.8 155.6 298.8 47 Finance companies 50.2 45.9 48.7 43.0 62.4 90.5 -17.2 99.2 52.3 103.9 96.9 46.8 48 Mortgage companies -2.2 4.1 -4.6 1.6 .2 5.1 -6.1 6.2 -3.0 2.7 -.3 1.0 49 Real estate investment trusts (REITs) 4.5 11.9 39.6 62.7 6.3 -19.7 7.9 11.3 11.5 9.8 -2.4 10.4 5n Brokers and dealers -5.0 -2.0 8.1 7.2 -17.2 -18.3 17.8 -37.3 44.4 -.7 25.4 -6.7 51 Funding corporations 34.9 64.1 80.7 40.7 92.2 -65.3 27.0 250.6 -11.4 4.0 -46.4 56.9 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Nonfinancial Statistics • May 2001 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS1—Continued Billions of dollars; quarterly data at seasonally adjusted annual rates 1999 2000 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999955 11999966 11999977 11999988 11999999 Q2 Q3 Q4 QL Q2 Q3 Q4 All sectors 52 Total net borrowing, all sectors 1,243.7 1,365.4 1,530.1 2,161.8 2,234.6 1,910.7 2,319.6 2,170.3 1,659.8 1,781.4 1,602.2 1,962.6 53 Open market paper 74.3 102.6 184.1 193.1 229.9 27.2 180.7 556.6 218.4 199.8 128.4 283.6 54 U.S. government securities 348.6 376.4 236.0 418.3 520.7 478.1 582.7 516.1 33.0 -43.0 284.0 273.4 55 Municipal securities -48.2 2.6 71.4 96.8 68.2 56.8 71.3 52.5 8.9 34.0 29.8 68.6 56 Corporate and foreign bonds 344.1 357.0 422.4 550.4 465.9 542.6 426.3 131.5 398.4 357.2 452.0 381.2 57 Bank loans n.e.c 114.7 92.1 128.2 145.0 68.9 40.6 99.8 55.2 147.7 174.2 43.0 83.6 58 Other loans and advances 70.1 62.5 102.8 158.5 172.6 107.5 217.9 147.3 216.9 249.5 -40.7 161.0 59 Mortgages 201.1 283.5 332.6 532.0 614.0 596.6 664.8 601.5 491.9 672.6 583.0 576.9 60 Consumer credit 138.9 88.8 52.5 67.6 94.4 61.4 76.2 109.5 144.6 137.2 122.9 134.2 Funds raised through mutual funds and corporate equities 61 Total net issues 131.5 231.9 181.2 100.0 156.5 173.1 124.5 172.9 410.7 168.9 208.1 -105.7 62 Corporate equities -16.0 -5.7 -83.9 -174.6 -31.8 -39.3 -3.0 .1 104.6 -68.7 -51.7 -282.0 63 Nonfinancial corporations -58.3 -69.5 -114.4 -267.0 -143.5 -338.4 -128.4 -55.0 62.8 -248.8 -75.6 -350.8 64 Foreign shares purchased by U.S. residents 50.4 82.8 57.6 101.2 114.4 284.4 121.7 71.3 63.3 180.1 50.0 71.5 65 Financial corporations -8.1 -19.0 -27.1 -8.9 -2.8 14.7 3.7 -16.2 -21.4 -.1 -26.1 -2.8 66 Mutual fund shares 147.4 237.6 265.1 274.6 188.3 212.4 127.5 172.8 306.1 237.6 259.8 176.3 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 7 1.58 SUMMARY OF FINANCIAL TRANSACTIONS1 Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1999 2000 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999955 11999966 11999977 11999988 11999999 Q2 Q3 Q4 Qi Q2 Q3 Q4 NET LENDING IN CREDIT MARKETS2 1 Total net lending in credit markets 1,243.7 1,365.4 1,530.1 2,161.8 2,234.6 1,910.7 2319.6 2,170.3 1,659.8 1,781.4 1,602.2 1,962.6 7 Domestic nonfederal nonfinancial sectors -61.0 79.5 -13.7 132.3 264.5 360.2 234.2 -8.8 -156.0 151.0 -178.1 -212.4 3 Household 34.5 127.8 1.0 -16.2 200.5 279.4 242.8 9.7 -251.3 84.3 -186.6 -219.4 4 Nonfinancial corporate business -8.8 -10.2 -12.7 14.0 19.1 -1.4 33.0 -22.3 90.4 22.6 3.7 -29.4 5 Nonfarm noncorporate business 4.7 -4.3 -2.1 .1 1.5 1.2 .8 1.4 2.6 2.8 3.8 4.3 6 State and local governments -91.4 -33.7 .1 134.5 43.4 81.0 -42.4 2.4 2.3 41.4 1.0 32.1 7 Federal government -.5 -7.2 5.1 13.5 5.8 6.7 11.2 -11.7 6.5 7.7 4.5 15.0 8 Rest of the world 273.9 414.4 311.3 254.2 210.6 61.6 385.3 138.7 325.9 207.1 195.0 390.9 Financial sectors 1,031.2 878.7 1,227.5 1,761.7 1,753.7 1,482.1 1,688.9 2,052.2 1,483.4 1,415.6 1,580.8 1,769.1 in Monetary authority 12.7 12.3 38.3 21.1 25.7 59.8 20.6 -42.2 103.4 -3.9 27.3 7.9 n Commercial banking 265.9 187.5 324.3 305.2 308.2 166.6 449.4 548.7 377.1 484.6 369.3 206.1 12 U.S.-chartered banks 186.5 119.6 274.9 312.0 317.6 259.4 421.9 457.7 409.2 505.6 332.8 113.9 n Foreign banking offices in United States 75.4 63.3 40.2 -11.9 -20.1 -102.5 33.2 42.0 4.8 -29.9 30.9 90.4 14 Bank holding companies -.3 3.9 5.4 -.9 6.2 .4 -12.4 42.6 -42.2 3.5 -6.7 -3.3 H Banks in U.S.-affiliated areas 4.2 .7 3.7 6.0 4.4 9.2 6.6 6.3 5.4 5.4 12.3 5.1 16 Savings institutions -7.6 19.9 -4.7 36.3 68.7 85.3 58.1 20.2 50.2 73.0 56.5 43.0 17 Credit unions 16.2 25.5 16.8 19.0 27.5 32.7 27.5 18.8 35.6 36.6 28.5 25.4 18 Bank personal trusts and estates -8.3 -7.7 -25.0 -12.8 27.8 27.8 27.8 27.8 18.9 13.8 17.6 18.1 19 Life insurance companies 100.0 69.6 104.8 76.9 53.5 68.2 36.8 30.7 57.2 52.0 85.9 79.7 20 Other insurance companies 21.5 22.5 25.2 20.4 -4.2 26.7 -14.4 -9.4 -14.0 -18.1 6.0 6.3 21 Private pension funds 19.9 -4.1 47.6 56.4 45.0 68.7 5.9 49.8 46.8 24.7 68.9 21.4 22 State and local government retirement funds 33.6 37.3 63.8 71.5 49.9 25.1 40.0 58.2 55.3 20.7 -32.1 8.5 Money market mutual funds 86.5 88.8 87.5 244.0 182.0 -67.0 224.8 354.5 208.8 -156.2 244.9 299.4 24 Mutual funds 52.5 48.9 80.9 124.8 47.2 117.2 -13.0 -12.7 -77.8 63.7 46.3 72.2 75 Closed-end funds 10.5 4.7 -2.9 4.5 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1 26 Government-sponsored enterprises 86.7 84.2 94.3 261.7 235.5 251.7 275.9 225.3 139.2 222.5 158.9 264.5 27 Federally related mortgage pools 98.3 141.0 114.6 192.6 273.8 271.9 244.5 182.2 143.7 122.1 225.4 307.4 28 Asset-backed securities issuers (ABSs) 120.6 120.5 163.8 281.7 215.8 284.8 212.0 94.4 145.3 120.3 120.4 269.9 29 Finance companies 49.9 18.4 21.9 51.9 94.9 88.1 91.7 114.4 132.9 138.9 81.4 43.4 30 Mortgage companies -3.4 8.2 -9.1 3.2 .3 10.2 -12.1 12.3 -6.0 5.5 -.5 2.0 31 Real estate investment trusts (REITs) 1.4 4.4 20.2 -5.1 -2.6 -2.2 -2.7 -7.0 -16.3 -2.5 -3.6 -5.4 3? Brokers and dealers 90.1 -15.7 14.9 6.8 -34.7 -135.9 -6.7 -30.5 122.5 38.1 176.8 -52.9 33 Funding corporations -15.7 12.6 50.4 1.6 136.3 99.4 19.7 413.6 -42.6 176.8 -100.2 149.2 RELATION OF LIABILITIES TO FINANCIAL ASSETS 34 Net flows through credit markets 1,243.7 1,365.4 1,530.1 2,161.8 2,234.6 1,910.7 2,319.6 2,170.3 1,659.8 1,781.4 1,602.2 1,962.6 Other financial sources 35 Official foreign exchange 8.8 -6.3 .7 66..66 -8.7 --55..44 --88..55 --77..00 11..55 -8.8 ..77 88..77 36 Special drawing rights certificates 2.2 -.5 -.5 .0 -3.0 .0 -4.0 -4.0 .0 -8.0 -4.0 -4.0 37 Treasury currency .7 .5 .5 .6 1.0 2.1 2.0 .0 2.2 3.2 4.2 .0 38 Foreign deposits 35.3 85.9 108.9 2.0 86.5 110.1 69.4 52.7 258.5 8.5 -89.2 -80.0 39 Net interbank transactions 10.0 -51.6 -19.7 -32.3 17.6 93.4 -30.8 -40.7 -71.1 177.7 -61.3 -84.6 40 Checkable deposits and currency -12.8 15.7 41.2 47.4 151.4 37.5 139.3 365.2 -219.1 -65.0 49.2 -49.4 41 Small time and savings deposits 96.6 97.2 97.1 152.4 44.7 106.6 119.1 28.0 104.3 130.3 238.5 298.8 42. Large time deposits 65.6 114.0 122.5 92.1 130.6 42.4 102.7 359.4 149.2 108.4 141.5 64.9 43 Money market fund shares 141.2 145.4 155.9 287.2 249.1 115.3 174.3 485.5 241.0 48.2 241.9 402.8 44 Security repurchase agreements 110.5 41.4 120.9 91.3 169.7 -80.7 191.4 310.5 284.1 130.4 238.2 -200.6 45 Corporate equities -16.0 -5.7 -83.9 -174.6 -31.8 -39.3 -3.0 .1 104.6 -68.7 -51.7 -282.0 46 Mutual fund shares 147.4 237.6 265.1 274.6 188.3 212.4 127.5 172.8 306.1 237.6 259.8 176.3 47 Trade payables 127.5 113.5 132.1 29.0 197.3 224.4 243.6 199.5 228.2 124.8 132.6 100.5 48 Security credit 26.7 52.4 111.0 103.3 104.3 128.2 29.7 321.3 523.4 -99.8 104.1 14.4 49 Life insurance reserves 45.8 44.5 59.3 48.0 50.8 42.1 48.1 57.6 49.8 59.7 51.7 55.6 50 Pension fund reserves 158.7 148.1 201.2 202.5 187.7 199.0 191.6 177.3 217.6 220.4 196.2 129.3 51 Taxes payable 6.2 16.2 15.7 12.0 15.7 47.3 .4 16.8 22.5 31.6 -6.0 19.3 52 Investment in bank personal trusts 6.4 -5.3 -49.9 -42.5 -7.1 -7.1 -7.2 -6.9 -5.9 -10.6 -6.6 -5.5 53 Noncorporate proprietors' equity 34.6 -3.4 -46.0 -41.4 -8.0 23.8 -56.5 10.2 -13.4 -2.4 39.9 -18.2 54 Miscellaneous 505.4 532.1 487.5 841.6 749.1 1,436.1 534.8 584.9 701.5 1,105.4 1,189.7 1,063.7 55 Total financial sources 2,744.3 2,937.2 3,249.7 4,061.4 4,519.7 4,598.8 4,183.4 5,253.8 4,544.7 3,904.2 4,271.5 3,572.7 Liabilities not identified as assets (-) 56 Treasury currency -.3 -.4 -.2 -.1 -.7 .6 .2 -2.2 --11..88 -.7 ..99 -1.6 57 Foreign deposits 25.1 59.6 107.4 -6.4 66.5 96.8 27.3 92.5 220099..44 -65.7 -111.7 -132.1 58 Net interbank liabilities -3.1 -3.3 -19.9 3.4 3.5 -4.8 -7.0 -23.7 24.4 -4.3 -18.3 68.5 59 Security repurchase agreements 25.7 2.4 63.2 61.3 30.1 -.4 133.2 -225.9 561.2 27.6 119.3 -249.6 60 Taxes payable 21.1 23.1 28.0 13.9 3.2 25.0 3.0 -6.4 7.7 7.4 -15.4 -9.9 61 Miscellaneous -166.0 -82.8 -84.7 -56.4 -317.5 -101.4 -489.7 -157.6 -340.6 -267.1 -38.6 21.7 Floats not included in assets (—) 62 Federal government checkable deposits -6.0 .5 -2.7 2.6 -7.4 -27.0 8.6 -9.2 28.7 -2.6 -2.0 13.7 63 Other checkable deposits -3.8 -4.0 -3.9 -3.1 -.8 -.9 -.3 .0 .6 1.5 1.9 2.7 64 Trade credit 14.1 -21.9 -28.5 -40.1 54.0 -64.6 73.1 161.7 -2.9 -38.3 -41.4 32.2 65 Total identified to sectors as assets 2,837.6 2,964.2 3,190.9 4,086.3 4,688.9 4,675.5 4,434.9 5,424.6 4,058.0 4,246.5 4376.7 3,827.0 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 DomesticN onfinancial Statistics • May 2001 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1 Billions of dollars, end of period 1999 2000 11999999 Q2 Q3 Q4 Qi Q2 Q3 Q4 Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors 14,443.7 15,246.8 16,291.4 17,447.5 16,786.7 17,109.0 17,447.5 17,677.2 17,857.4 18,064.0 18,344.3 By sector and instrument 2 Federal government 3,781.8 3,804.9 3,752.2 3,681.0 3,651.7 3,633.4 3,681.0 3,653.5 3,464.0 3,410.2 3,385.2 i Treasury securities 3,755.1 3,778.3 3,723.7 3,652.8 3,623.4 3,605.1 3,652.8 3,625.8 3,435.7 3,382.6 3,357.8 4 Budget agency securities and mortgages 26.6 26.5 28.5 28.3 28.3 28.3 28.3 27.8 28.2 27.6 27.3 5 Nonfederal 10,662.0 11,441.9 12,539.1 13,766.5 13,135.0 13,475.6 13,766.5 14,023.7 14,393.5 14,653.9 14,959.2 By instrument 6 Commercial paper 156.4 168.6 193.0 230.3 232.4 239.3 230.3 260.8 296.8 307.0 278.4 7 Municipal securities and loans 1,296.0 1,367.5 1,464.3 1,532.5 1,510.0 1,518.6 1,532.5 1,539.2 1,551.6 1,550.3 1,567.8 8 Corporate bonds 1,460.4 1,610.9 1,829.6 2,059.5 1,970.0 2,020.7 2,059.5 2,106.0 2,144.5 2,190.6 2,234.5 9 Bank loans n.e.c 934.1 1,040.5 1,148.8 1,231.5 1,178.5 1,202.9 1,231.5 1,259.1 1,307.2 1,311.6 1,334.2 10 Other loans and advances 770.4 839.5 913.8 985.3 956.0 969.8 985.3 1,030.2 1,059.0 1,063.6 1,100.4 11 Mortgages 4,833.1 5,150.8 5,658.0 6,301.3 5,947.8 6,154.2 6,301.3 6,412.4 6,580.4 6,735.2 6,875.0 12 Home 3,719.0 3,971.3 4,358.1 4,790.1 4,563.8 4,693.3 4,790.1 4,865.9 4,990.6 5,108.6 5,209.4 13 Multifamily residential 278.4 286.6 307.4 347.8 324.8 335.1 347.8 355.2 366.4 374.2 383.3 14 Commercial 748.6 802.6 896.0 1,061.4 959.6 1,024.4 1,061.4 1,087.5 1,117.4 1,145.1 1,174.3 15 Farm 87.1 90.3 96.5 102.0 99.6 101.4 102.0 103.7 106.0 107.3 108.0 16 Consumer credit 1,211.6 1,264.1 1,331.7 1,426.2 1,340.4 1,370.1 1,426.2 1,416.0 1,454.0 1,495.6 1,568.8 By borrowing sector 17 Household 5,222.5 5,559.9 6,039.0 6,577.5 6,260.7 6,424.7 6,577.5 6,647.5 6,816.7 6,985.8 7,169.1 18 Nonfinancial business 4,376.1 4,762.5 5,300.3 5,936.8 5,636.0 5,808.5 5,936.8 6,118.9 6,311.0 6,405.0 6,510.8 19 Corporate 3,095.3 3,359.9 3,778.0 4,294.0 4,062.0 4,199.7 4,294.0 4,445.5 4,601.2 4,667.0 4,740.8 20 Nonfarm noncorporate 1,130.9 1,246.5 1,358.4 1,473.8 1,408.0 1,440.2 1,473.8 1,503.2 1,534.5 1,561.1 1,590.9 21 Farm 149.9 156.1 163.8 169.0 166.1 168.6 169.0 170.2 175.4 176.9 179.1 22 State and local government 1,063.4 1,119.5 1,199.8 1,252.1 1,238.2 1,242.4 1,252.1 1,257.3 1,265.7 1,263.1 1,279.3 23 Foreign credit market debt held in United States 542.2 608.0 651.4 676.9 652.7 672.9 676.9 704.6 699.3 727.8 738.8 24 Commercial paper 67.5 65.1 72.9 89.2 70.1 81.8 89.2 101.6 101.2 109.8 120.9 25 Bonds 366.3 427.7 462.5 476.7 466.4 477.4 476.7 488.1 481.3 499.2 495.4 26 Bank loans n.e.c 43.7 52.1 58.9 59.4 60.5 58.8 59.4 63.3 64.7 67.7 70.7 27 Other loans and advances 64.7 63.0 57.2 51.7 55.8 55.0 51.7 51.7 52.1 51.2 51.8 28 Total credit market debt owed by nonfinancial sectors, domestic and foreign 14,985.9 15,854.7 16,942.8 18,124.4 17,439.4 17,781.9 18,124.4 18,381.8 18,556.7 18,791.9 19,083.1 Financial sectors 29 Total credit market debt owed by financial sectors 4,824.5 5,445.2 6,519.1 7,607.0 7,073.3 7,346.8 7,607.0 7,744.3 7,964.4 8,160.1 8,430.8 By instrument 30 Federal government-related 2,608.2 2,821.1 3,292.0 3,884.0 3,580.7 3,745.9 3,884.0 3,940.1 4,035.5 4,164.2 4,316.7 31 Government-sponsored enterprise securities 896.9 995.3 1,273.6 1,591.7 1,398.0 1,499.8 1,591.7 1,618.0 1,680.2 1,749.7 1,824.8 32 Mortgage pool securities 1,711.3 1,825.8 2,018.4 2,292.2 2,182.7 2,246.1 2,292.2 2,322.1 2,355.3 2,414.5 2,491.9 33 Loans from U.S. government .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 34 Private 2,216.3 2,624.1 3,227.1 3,723.0 3,492.6 3,601.0 3,723.0 3,804.2 3,928.9 3,995.9 4,114.1 35 Open market paper 579.1 745.7 906.7 1,082.9 940.9 963.4 1,082.9 1,115.7 1,135.2 1,151.6 1,210.7 36 Corporate bonds 1,378.4 1,555.9 1,852.8 2,074.6 2,042.8 2,091.1 2,074.6 2,114.2 2,183.2 2,239.3 2,290.1 37 Bank loans n.e.c 64.0 77.2 107.2 92.9 106.8 105.2 92.9 91.4 92.7 92.5 91.0 38 Other loans and advances 162.9 198.5 288.7 395.8 328.6 365.4 395.8 404.4 436.9 430.2 438.3 39 Mortgages 31.9 46.8 71.6 76.7 73.6 75.9 76.7 78.5 81.0 82.5 84.1 By borrowing sector 40 Commercial banks 113.6 140.6 188.6 230.0 202.7 224.2 230.0 242.2 265.4 265.2 266.8 41 Bank holding companies 150.0 168.6 193.5 219.3 205.5 211.8 219.3 221.4 229.3 236.9 242.5 42 Savings institutions 140.5 160.3 212.4 260.4 241.6 255.4 260.4 266.9 280.7 276.0 287.7 43 Credit unions .4 .6 1.1 3.4 1.8 2.5 3.4 2.6 2.9 3.1 3.4 44 Life insurance companies 1.6 1.8 2.5 3.2 4.0 4.3 3.2 3.0 2.7 2.7 2.5 45 Government-sponsored enterprises 896.9 995.3 1,273.6 1,591.7 1,398.0 1,499.8 1,591.7 1,618.0 1,680.2 1,749.7 1,824.8 46 Federally related mortgage pools 1,711.3 1,825.8 2,018.4 2,292.2 2,182.7 2,246.1 2,292.2 2,322.1 2,355.3 2,414.5 2,491.9 47 Issuers of asset-backed securities (ABSs) 863.3 1,076.6 1,398.0 1,632.0 1,539.9 1,599.1 1,632.0 1,665.8 1,706.4 1,753.6 1,837.8 48 Brokers and dealers 27.3 35.3 42.5 25.3 30.2 34.6 25.3 36.4 36.2 42.6 40.9 49 Finance companies 529.8 554.5 597.5 659.9 639.2 628.5 659.9 670.7 699.2 716.5 734.8 50 Mortgage companies 20.6 16.0 17.7 17.8 17.8 16.3 17.8 17.1 17.8 17.7 17.9 51 Real estate investment trusts (REITs) 56.5 96.1 158.8 165.1 160.3 162.2 165.1 167.9 170.4 169.8 172.4 52 Funding corporations 312.7 373.7 414.4 506.6 449.7 462.0 506.6 510.1 517.9 511.9 507.4 All sectors 53 Total credit market debt, domestic and foreign ... 19,810.4 21,300.0 23,461.9 25,731.4 24,512.7 25,128.7 25,731.4 26,126.1 26,521.1 26,952.0 27,513.9 54 Open market paper 803.0 979.4 1,172.6 1,402.4 1,243.3 1,284.5 1,402.4 1,478.1 1,533.3 1,568.3 1,610.0 55 U.S. government securities 6,389.9 6,626.0 7,044.3 7,565.0 7,232.4 7,379.2 7,565.0 7,593.6 7,499.4 7,574.4 7,701.8 56 Municipal securities 1,296.0 1,367.5 1,464.3 1,532.5 1,510.0 1,518.6 1,532.5 1,539.2 1,551.6 1,550.3 1,567.8 57 Corporate and foreign bonds 3,205.1 3,594.5 4,144.9 4,610.8 4,479.2 4,589.1 4,610.8 4,708.3 4,808.9 4,929.0 5,019.9 58 Bank loans n.e.c 1,041.7 1,169.8 1,314.9 1,383.8 1,345.7 1,366.9 1,383.8 1,413.7 1,464.6 1,471.7 1,495.9 59 Other loans and advances 998.0 1,101.0 1,259.6 1,432.7 1,340.3 1,390.1 1,432.7 1,486.3 1,548.0 1,545.0 1,590.5 60 Mortgages 4,865.1 5,197.7 5,729.6 6,378.0 6,021.4 6,230.1 6,378.0 6,490.8 6,661.3 6,817.7 6,959.1 61 Consumer credit 1,211.6 1,264.1 1,331.7 1,426.2 1,340.4 1,370.1 1,426.2 1,416.0 1,454.0 1,495.6 1,568.8 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, tables L.2 through L.4. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A3 7 1.60 SUMMARY OF FINANCIAL ASSETS AND LIABILITIES1 Billions of dollars except as noted, end of period 1999 2000 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999966 11999977 11999988 11999999 Q2 Q3 Q4 Ql Q2 Q3 Q4 CREDIT MARKET DEBT OUTSTANDING2 1 19,810.4 21,300.0 23,461.9 25,731.4 24,512.7 25,128.7 25,731.4 26,126.1 26,521.1 26,952.0 27,513.9 ? Domestic nonfederal nonfinancial sectors 3,032.1 2,974.7 3,078.7 3,413.3 3,233.9 3,291.4 3,413.3 3,343.6 3,355.1 3,317.0 3,326.4 2,119.1 2,076.4 2,031.9 2,302.5 2,133.6 2,191.8 2,302.5 2,233.7 2,224.0 2,182.1 2,171.2 4 Nonfinancial corporate business 270.2 257.5 271.5 290.6 268.5 280.5 290.6 288.9 296.5 301.5 312.4 Nonfarm noncorporate business 38.0 35.9 35.9 37.5 36.9 37.1 37.5 38.1 38.8 39.8 40.8 6 State and local governments 604.8 605.0 739.4 782.8 794.8 781.9 782.8 782.9 795.8 793.7 802.0 7 Federal government 200.2 205.4 219.1 258.0 225.0 260.7 258.0 259.6 261.6 262.7 266.4 8 Rest of the world 1,926.6 2,257.3 2,539.8 2,678.0 2,621.3 2,718.1 2,678.0 2,763.6 2,812.8 2,862.0 2,957.7 14,651.5 15,862.5 17,624.3 19,382.0 18,432.5 18,858.5 19,382.0 19,759.3 20,091.6 20,510.3 20,963.3 10 Monetary authority 393.1 431.4 452.5 478.1 485.1 489.3 478.1 501.9 505.1 511.5 511.8 11 3,707.7 4,031.9 4,335.7 4,643.9 4,383.4 4,488.3 4,643.9 4,725.0 4,847.4 4,931.0 5,003.1 1? U.S.-chartered banks 3,175.8 3,450.7 3,761.2 4,078.9 3,847.6 3,944.3 4,078.9 4,171.3 4,295.4 4,368.2 4,419.3 N Foreign banking offices in United States 475.8 516.1 504.2 484.1 465.7 475.3 484.1 482.0 478.1 487.5 508.1 14 Bank holding companies 22.0 27.4 26.5 32.7 25.1 22.0 32.7 22.1 23.0 21.3 20.5 H Banks in U.S.-affiliated areas 34.1 37.8 43.8 48.3 45.0 46.7 48.3 49.6 51.0 54.0 55.3 16 Savings institutions 933.2 928.5 964.8 1,033.4 1,011.4 1,030.8 1,033.4 1,044.5 1,061.7 1,080.9 1,089.1 17 288.5 305.3 324.2 351.7 341.0 348.5 351.7 359.0 370.8 378.6 383.2 18 Bank personal trusts and estates 232.0 207.0 194.1 222.0 208.0 215.0 222.0 226.7 230.2 234.6 239.1 19 Life insurance companies 1,657.0 1,751.1 1,828.0 1,886.0 1,869.6 1,880.4 1,886.0 1,901.5 1,913.4 1,936.5 1,954.7 ?0 Other insurance companies 491.2 515.3 535.7 531.6 537.5 533.9 531.6 528.0 523.5 525.0 526.6 ?1 Private pension funds 627.0 674.6 731.0 775.9 762.0 763.5 775.9 787.6 793.8 811.0 816.4 77 State and local government retirement funds 568.2 632.0 703.6 753.4 728.9 738.9 753.4 767.2 772.4 764.4 766.5 n Money market mutual funds 634.3 721.9 965.9 1,147.8 1,001.8 1,049.7 1,147.8 1,217.1 1,159.4 1,212.5 1,297.1 ?4 820.2 901.1 1,025.9 1,073.1 1,083.7 1,083.0 1,073.1 1,053.7 1,073.9 1,088.1 1,099.2 ?5 Closed-end funds 101.1 98.3 102.8 105.9 104.3 105.1 105.9 106.7 107.4 108.2 109.0 76 Government-sponsored enterprises 807.9 902.2 1,163.9 1,399.5 1,268.5 1,339.1 1,399.5 1,426.6 1,483.8 1,532.8 1,602.9 71 Federally related mortgage pools 1,711.3 1,825.8 2,018.4 2,292.2 2,182.7 2,246.1 2,292.2 2,322.1 2,355.3 2,414.5 2,491.9 ?8 Asset-backed securities issuers (ABSs) 773.9 937.7 1,219.4 1,435.3 1,352.7 1,409.8 1,435.3 1,463.9 1,495.8 1,534.3 1,611.2 79 Finance companies 544.5 566.4 618.4 713.3 660.9 678.2 713.3 747.0 780.6 795.5 812.4 30 Mortgage companies 41.2 32.1 35.3 35.6 35.6 32.5 35.6 34.1 35.5 35.4 35.9 31 Real estate investment trusts (REITs) 30.4 50.6 45.5 42.9 45.3 44.7 42.9 38.8 38.2 37.3 36.0 V 167.7 182.6 189.4 154.7 158.8 166.8 154.7 201.1 189.3 243.5 225.8 33 Funding corporations 121.0 166.7 169.8 305.8 211.1 214.9 305.8 306.7 354.2 334.6 351.6 RELATION OF LIABILITIES TO FINANCIAL ASSETS 34 Total credit market debt 19,810.4 21,300.0 23,461.9 25,731.4 24,512.7 25,128.7 25,731.4 26,126.1 26,521.1 26,952.0 27,513.9 Other liabilities Official foreign exchange 53.7 48.9 60.1 50.1 50.9 52.1 50.1 49.4 46.5 44.9 46.1 36 Special drawing rights certificates 9.7 9.2 9.2 6.2 8.2 7.2 6.2 6.2 4.2 3.2 2.2 37 18.9 19.3 19.9 20.9 20.4 20.9 20.9 21.4 22.1 23.2 23.2 38 Foreign deposits 521.7 619.7 639.0 725.8 694.9 712.3 725.8 790.4 792.6 770.3 750.3 39 Net interbank liabilities 240.8 219.4 189.0 204.5 207.1 199.6 204.5 168.1 215.9 200.3 198.5 40 Checkable deposits and currency 1,244.8 1,286.1 1,333.4 1,484.8 1,353.1 1,353.8 1,484.8 1,392.9 1,409.7 1,385.7 1,413.7 41 Small time and savings deposits 2,377.0 2.474.1 2,626.5 2,671.2 2,644.6 2,665.9 2,671.2 2,728.0 2,738.8 2.790.9 2,864.2 4? Large time deposits 590.9 713.4 805.5 936.1 809.0 837.5 936.1 966.5 987.4 1,025.9 1,052.1 43 Money market fund shares 886.7 1,042.5 1,329.7 1,578.8 1,393.5 1,444.9 1,578.8 1,666.0 1,627.1 1,697.8 1,812.3 44 Security repurchase agreements 701.5 822.4 913.7 1,083.4 957.1 999.4 1,083.4 1,155.8 1,185.1 1,238.6 1,196.5 45 Mutual fund shares 2,342.4 2,989.4 3,610.5 4,553.4 4,049.1 3,931.5 4,553.4 4,863.3 4,759.6 4,815.0 4,432.8 46 358.1 469.1 572.3 676.6 586.5 593.1 676.6 803.7 780.5 805.8 812.1 47 Life insurance reserves 610.6 665.0 718.3 783.9 749.8 756.2 783.9 799.9 809.4 822.3 823.5 48 Pension fund reserves 6,582.4 7,725.5 8,760.0 9,747.7 9,294.3 8,959.6 9,747.7 9,952.3 9,869.2 10,021.9 9,847.5 49 Trade payables 1,809.3 1,941.4 1,970.3 2,167.6 2,030.8 2,097.9 2,167.6 2,198.3 2,229.9 2,269.9 2,314.1 50 Taxes payable 123.8 139.5 151.5 167.2 162.4 167.5 167.2 180.5 180.0 184.1 184.1 51 Investment in bank personal trusts 871.3 942.5 1,001.0 1,130.4 1,061.0 1,019.0 1,130.4 1,163.0 1,124.1 1,122.3 1,039.0 52 Miscellaneous 6,349.1 6,670.6 7,237.9 7,787.5 7,431.5 7,448.5 7,787.5 7,915.4 8,164.1 8,609.7 8,777.6 53 Total liabilities 45,502.9 50,097.8 55,409.7 61,507.5 58,017.0 58,395.6 61,507.5 62,947.3 63,467.3 64,783.9 65,103.6 Financial assets not included in liabilities (+) 54 Gold and special drawing rights 21.4 21.1 21.6 21.4 20.8 21.3 21.4 21.4 21.5 21.4 21.6 55 Corporate equities 10,255.8 13,201.3 15,427.8 19,576.3 17,060.4 16,214.9 19,576.3 20,232.0 19,258.1 19,066.7 17,168.8 56 Household equity in noncorporate business 3,889.2 4,164.4 4,414.7 4,704.5 4,548.9 4,623.1 4,704.5 4,732.2 4,779.2 4,835.0 4,915.7 Liabilities not identified as assets (—) 57 Treasury currency -6.1 -6.3 -6.4 -7.1 -6.6 -6.6 -7.1 -7.6 -7.9 -7.6 -8.0 58 Foreign deposits 437.0 538.3 548.2 615.0 584.7 591.5 615.0 667.4 650.9 623.0 590.0 59 Net interbank transactions -10.6 -32.2 -27.0 -25.5 -10.6 -13.2 -25.5 -13.9 -11.6 -17.6 -4.1 60 Security repurchase agreements 109.8 172.9 234.3 264.4 291.6 325.0 264.4 411.3 416.5 445.3 379.0 61 Taxes payable 76.9 92.6 102.0 95.3 112.2 96.5 95.3 89.1 103.0 93.7 96.2 62 Miscellaneous -1,517.9 -1,889.8 -2,434.3 -2,884.0 -2,673.2 -2,988.0 -2,884.0 -3,029.7 -3,035.6 -2,805.8 -3,126.0 Floats not included in assets (—) 63 Federal government checkable deposits -1.6 -8.1 -3.9 -9.9 -12.4 -10.2 -9.9 -6.5 -5.2 -7.8 -2.3 64 Other checkable deposits 30.1 26.2 23.1 22.3 22.1 14.5 22.3 18.7 22.5 15.5 24.0 65 Trade credit 171.8 133.5 94.5 145.9 19.2 36.2 145.9 94.7 62.3 51.5 133.3 66 Total identified to sectors as assets 60,380.0 68,457.3 76,743.2 87,593.4 81,320.0 81,209.2 87,593.4 89,709.3 89,331.2 90,316.8 89,127.7 1. Data in this table also appear in the Board's Z. 1 (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. L.l and L.5. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • May 2001 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures Monthly data seasonally adjusted, and indexes 1992=100, except as noted 2000 2001 MMeeaassuurree 11999988 11999999 22000000 June July Aug. Sept. Oct. Nov.r Dec/ Jan. Feb.p 1 Industrial production' 134.0 139.6 147.5 147.9 147.6 148.6 149.0 148.7 148.2 147.7 146.8 146.0 Market groups 2 Products, total 127.2 131.2 136.2 136.0 135.8 136.6 136.7 136.3 136.3 136.3 135.6 134.9 3 Final, total 129.3 133.3 138.7r 138.3 138.1 139.2 139.3 138.8 138.8 138.8 138.1 137.5 4 Consumer goods 118.4 120.8 123.0 124.2 122.9 123.8 123.8 122.7 122.4 122.8 121.7 121.2 5 Equipment 147.1 153.8 166.T 164.3 166.3 167.9 168.3 169.1 169.9 169.0 168.9 168.5 6 Intermediate 121.0 125.1 128.8 129.0 128.7 128.8 128.6 128.7 128.5 128.5 128.2 127.0 7 Materials 145.7 154.5 167.9 169.4 169.0 170.5 171.3 171.1 169.9 168.4 167.1 166.0 Industry groups 8 Manufacturing 138.2 144.8 153.6 153.8 153.7 154.6 155.1 154.9 154.1 152.9 152.0 151.3 9 Capacity utilization, manufacturing (percent)2.. 81.3 80.5 81.3 82.0 81.6 81.7 81.7 81.2 80.5 79.5 78.7 78.1 10 Construction contracts3 122.5r 135.2r 141.7r 146.0r 139.0r 138.0r 142.0r 149.0r 142.0 142.0 150.0 147.0 11 Nonagricultural employment, total4 123.5 126.3 128.9 129.1 129.1 129.0 129.2 129.3 129.3 129.4 129.6 129.7 12 Goods-producing, total 103.0 103.3 104.0 104.2 104.4 103.9 103.9 104.0 103.9 103.6 103.9 103.6 13 Manufacturing, total 99.0 97.6 97.0 97.3 97.6 97.0 96.7 96.7 96.6 96.4 95.9 95.4 14 Manufacturing, production workers 100.0 98.4 97.6 97.9 98.4 97.5 97.2 97.1 97.0 96.6 96.1 95.4 15 Service-producing 130.0 133.7 136.8 137.1 137.0 137.0 137.3 137.3 137.4 137.6 137.8 138.0 16 Personal income, total 186.5 196.6 209.0 208.9 209.5 210.1 212.5 212.1 212.5 213.4 214.6 n.a. 17 Wages and salary disbursements 184.6 196.9 210.1 209.8 211.0 211.3 212.7 214.0 214.6 215.0 216.6 n.a. 18 Manufacturing 152.3 157.4 164.2 164.3 165.8 164.9 165.1 166.6 166.9 165.4 165.9 n.a. 19 Disposable personal income5 182.7 191.9 202.0 202.1 202.5 202.9 205.2 204.4 204.6 205.4 206.4 n.a. 20 Retail sales5 178.4 194.7 209.9r 209.3 211.1 211.0 212.7 212.5 211.3 211.6 214.4 214.1 Prices6 21 Consumer (1982-84=100) 163.0 166.6 172.2 172.4 172.8 172.8 173.7 174.0 174.1 174.0 175.1 175.8 22 Producer finished goods (1982=100) 130.7 133.0 138.0 138.6 138.6 138.2 139.4 140.1r 139.9 139.7 141.2 141.5 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 December 2000. 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 2001 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 2000 2001 CCaatteeggoorryy 11999988 11999999 22000000 July Aug. Sept. Oct. Nov. Dec/ Jan/ Feb. HOUSEHOLD SURVEY DATA1 1 Civilian labor force2 137,673 139,368 140,863 140,546 140,724 140,847 141,000 141,136 141,489 141,955 141,751 Employment ? 128,085 130,207 131,903 131,603 131,622 131,954 132,223 132,302 132,562 132,819 132,680 3 Agriculture 3,378 3,281 3,305 3,295 3,317 3,356 3,241 3,176 3,274 3,179 3,135 Unemployment 4 6,210 5,880 5,655 5,648 5,785 5,537 5,536 5,658 5,653 5,956 5,936 5 Rate (percent of civilian labor force) 4.5 4.2 4.0 4.0 4.1 3.9 3.9 4.0 4.0 4.2 4.2 ESTABLISHMENT SURVEY DATA 6 Nonagricultural payroll employment4 125,865 128,786 131,417 131,607 131,528 131,723 131,789 131,842 131,878 132,102 132,237 7 Manufacturing 18,805 18,543 18,437 18,548 18,432 18,380 18,378 18,360 18,312 18,216 18,122 8 Mining 590 535 538 538 537 539 542 541 540 548 551 9 Contract construction 6,020 6,404 6,687 6,670 6,675 6,720 6,745 6,734 6,717 6,875 6,891 10 Transportation and public utilities 6,611 6,826 6,993 7,010 6,941 7,037 7,046 7,060 7,086 7,077 7,105 11 Trade 29,095 29,712 30,191 30,246 30,253 30,249 30,280 30,331 30,330 30,324 30,358 12 Finance 7,389 7,569 7,618 7,586 7,608 7,622 7,638 7,647 7,661 7,676 7,692 13 Service 37,533 39,027 40,384 40,403 40,572 40,685 40,696 40,764 40,797 40,884 40,979 14 Government 19,823 20,170 20,570 20,606 20,510 20,491 20,464 20,405 20,435 20,502 20,539 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 2000 2000 2000 SSeerriieess Ql Q2 Q3 Q4r Ql Q2 Q3 Q4r Ql Q2 Q3 Q4r Output (1992=100) Capacity (percent of 1992 output) Capacity utilization rate (percent)2 1 Total industry 144.4 147.1 148.4 148.2 176.1 178.1 180.1 182.1 82.0 82.6 82.4 81.4 2 Manufacturing 150.1 153.0 154.4 153.9 184.6 186.9 189.2 191.5 81.3 81.9 81.7 80.4 3 Primary processing3 173.5 178.6 180.3 178.8 203.0 206.9 211.2 216.0 85.4 86.4 85.4 82.8 4 Advanced processing4 137.3 139.0 140.3 140.3 172.7 174.1 175.2 176.2 79.5 79.8 80.1 79.6 Durable goods 186.7 192.9 196.7 196.6 228.5 233.3 238.3 243.6 81.7 82.7 82.5 80.7 6 Lumber and products 122.4 120.3 117.0 113.1 147.0 147.5 147.9 148.4 83.3 81.6 79.1 76.2 7 Primary metals 136.1 137.0 133.4 127.5 153.0 153.3 153.4 153.5 88.9 89.4 87.0 83.1 8 Iron and steel 135.0 136.1 130.5 121.5 152.8 153.1 153.4 153.6 88.4 88.9 85.1 79.1 9 Nonferrous 137.4 138.2 137.0 134.7 153.2 153.4 153.4 153.4 89.7 90.1 89.3 87.8 10 Industrial machinery and equipment 242.2 249.4 257.3 261.9 296.3 304.5 311.1 317.3 81.7 81.9 82.7 82.5 11 Electrical machinery 476.7 535.1 581.1 605.6 552.1 591.7 639.1 694.1 86.3 90.4 90.9 87.3 12 Motor vehicles and parts 171.8 175.9 170.8 159.7 207.0 208.2 209.2 210.1 83.0 84.5 81.7 76.0 13 Aerospace and miscellaneous transportation equipment . 93.7 92.9 93.5 94.8 130.7 130.7 130.4 130.2 71.7 71.1 7711..77 7722..88 14 Nondurable goods 116.3 116.7 116.2 115.4 143.8 144.1 144.4 144.6 80.9 80.9 80.5 79.8 15 Textile mill products 104.0 103.3 99.8 94.7 124.4 123.9 123.3 122.8 83.6 83.4 80.9 77.1 16 Paper and products 117.6 117.9 114.0 114.9 136.9 137.2 137.5 137.9 85.8 85.9 82.9 83.3 17 Chemicals and products 124.8 125.8 125.4 124.5 161.9 163.0 164.1 164.8 77.1 77.2 76.4 75.5 18 Plastics materials 141.6 140.9 137.6 131.0 151.5 151.6 151.9 152.3 93.5 93.0 90.5 86.0 19 Petroleum products 116.0 118.3 117.3 116.1 123.2 123.2 123.2 123.1 94.1 96.0 95.3 94.3 ?0 Mining 99.4 100.0 100.6 100.5 116.7 116.5 116.3 115.8 85.2 85.8 86.6 86.7 ?1 Utilities 117.4 120.7 121.0 123.9 131.2 132.3 133.4 134.5 89.5 91.2 90.7 92.1 22 Electric 120.5 124.3 123.9 128.0 129.5 130.9 132.3 133.8 93.1 94.9 93.7 95.6 1973 1975 Previous cycle5 Latest cycle6 2000 2000 2001 High Low High Low High Low Feb. Sept. Oct. Nov/ Dec/ Jan. Feb.p Capacity utilization rate (percent)2 1 Total industry 89.2 72.6 87.3 71.1 85.4 78.1 82.0 82.4 82.0 81.4 80.8 80.1 79.4 2 Manufacturing 88.5 70.5 86.9 69.0 85.7 76.6 81.2 81.7 81.2 80.5 79.5 78.7 78.1 3 Primary processing3 91.2 68.2 88.1 66.2 88.9 77.7 85.2 85.2 84.5 82.8 81.1 79.7 78.8 4 Advanced processing4 87.2 71.8 86.7 70.4 84.2 76.1 79.4 80.2 79.9 79.7 79.2 78.8 78.4 5 Durable goods 89.2 68.9 87.7 63.9 84.6 73.1 81.5 82.7 81.7 80.8 79.7 78.3 77.5 6 Lumber and products 88.7 61.2 87.9 60.8 93.6 75.5 83.2 78.9 77.5 76.3 75.0 73.3 73.6 7 Primary metals 100.2 65.9 94.2 45.1 92.7 73.7 88.1 87.3 84.1 82.9 82.3 80.5 80.0 8 Iron and steel 105.8 66.6 95.8 37.0 95.2 71.8 87.4 86.0 80.6 79.4 77.3 75.7 76.1 9 Nonferrous 90.8 59.8 91.1 60.1 89.3 74.2 89.0 89.0 88.2 87.1 88.1 86.0 84.6 10 Industrial machinery and equipment 96.0 74.3 93.2 64.0 85.4 72.3 81.7 83.1 83.0 82.5 8822..11 8800..77 7799..88 11 Electrical machinery 89.2 64.7 89.4 71.6 84.0 75.0 86.0 90.2 88.5 87.1 86.2 84.9 83.3 12 Motor vehicles and parts 93.4 51.3 95.0 45.5 89.1 55.9 82.3 83.8 79.7 76.2 72.1 65.3 65.1 13 Aerospace and miscellaneous transportation equipment 78.4 67.6 81.9 66.6 87.3 79.2 71.5 70.7 71.9 73.3 7733..44 7733..00 7722..44 14 Nondurable goods 87.8 71.7 87.5 76.4 87.3 80.7 80.9 80.3 80.4 79.9 79.1 79.1 78.7 15 Textile mill products 91.4 60.0 91.2 72.3 90.4 77.7 83.4 79.9 78.6 75.6 77.1 75.7 74.9 16 Paper and products 97.1 69.2 96.1 80.6 93.5 85.0 85.7 82.6 85.0 83.2 81.7 8800..44 80.4 17 Chemicals and products 87.6 69.7 84.6 69.9 86.2 79.3 77.1 76.3 76.4 75.7 74.5 7744..66 74.4 18 Plastics materials 102.0 50.6 90.9 63.4 97.0 74.8 92.6 89.8 90.5 87.7 79.8 82.5 81.6 19 Petroleum products 96.7 81.1 90.0 66.8 88.5 85.1 93.7 95.4 94.6 94.9 93.4 92.7 93.9 20 Mining 94.3 88.2 96.0 80.3 88.0 87.0 84.9 86.4 86.3 87.3 86.7 88.6 88.2 ?1 Utilities 96.2 82.9 89.1 75.9 92.6 83.4 91.1 91.0 89.5 90.7 96.3 92.8 90.4 22 Electric 99.0 82.7 88.2 78.9 95.0 87.1 93.5 93.9 93.1 95.1 98.6 95.0 92.4 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 December 2000. The recent annual revision is described in an article in the 4. Advanced processing includes foods, tobacco, apparel, furniture and fixtures, printing March 2001 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 • May 2001 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data seasonally adjusted 1992 2000 2001 GGrroouupp pro- 2000 por- avg. tion Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov.r Dec/ Jan. Feb.? Index (1992= 100) MAJOR MARKETS 1 Total index 100.0 147.5 144.3 145.2 146.3 147.2 147.9 147.6 148.6 149.0 148.7 148.2 147.7 146.8 146.0 2 Products 60.5 136.2 134.2 134.4 135.3 135.5 136.0 135.8 136.6 136.7 136.3 136.3 136.3 135.6 134.9 3 Final products 46.3 138.7 135.9 136.0 137.2 137.5 138.3 138.1 139.2 139.3 138.8 138.8 138.8 138.1 137.5 4 Consumer goods, total 29.1 123.0 122.8 122.2 123.2 123.5 124.2 122.9 123.8 123.8 122.7 122.4 122.8 121.7 121.2 S Durable consumer goods 6.1 160.8 162.6 162.1 164.7 163.8 164.4 158.7 160.0 162.8 157.3 154.3 153.6 149.0 149.7 6 Automotive products 2.6 153.2 154.8 155.3 157.6 157.9 157.8 149.4 153.8 156.7 148.0 143.6 140.8 132.4 134.7 7 Autos and trucks 1.7 166.9 169.0 170.3 173.7 175.7 174.8 160.5 169.8 172.7 159.1 153.0 144.1 133.5 137.3 8 Autos, consumer .9 114.0 116.3 115.1 118.5 119.7 118.1 113.6 120.3 120.5 107.8 103.0 94.3 99.4 99.0 y Trucks, consumer .7 221.6 223.7 227.3 230.7 233.7 233.2 209.8 221.8 227.1 212.0 204.3 194.7 170.6 178.1 10 Auto parts and allied goods .... .9 131.8 132.5 131.9 132.7 130.6 131.6 131.6 129.1 132.1 130.2 128.2 133.9 128.8 129.0 ii Other 3.5 167.1 169.1 167.7 170.6 168.5 169.8 166.7 165.2 167.7 165.4 163.7 165.1 164.2 163.4 12 Appliances, televisions, and air conditioners 1.0 332.7 336.1 332.3 341.1 334.6 348.2 322.3 325.0 340.5 332.5 332.7 343.9 341.4 342.7 13 Carpeting and furniture .8 129.7 129.7 128.3 131.8 130.8 130.1 131.5 128.6 131.9 129.8 125.4 127.3 124.0 123.5 14 Miscellaneous home goods 1.6 120.4 122.7 122.1 122.7 121.6 120.5 121.3 119.7 118.1 117.5 117.1 115.5 116.6 115.2 15 Nondurable consumer goods 23.0 114.1 113.5 112.9 113.6 114.1 114.8 114.5 115.2 114.7 114.5 114.6 115.3 114.9 114.1 16 Foods and tobacco 10.3 110.7 110.6 110.8 110.9 110.3 110.8 111.0 111.4 110.5 110.4 110.7 110.1 109.7 109.2 17 Clothing 2.4 85.0 87.5 87.2 87.5 86.8 85.1 85.6 84.2 83.1 82.7 83.2 82.4 82.5 80.7 18 Chemical products 4.5 137.0 133.5 134.9 136.5 138.5 139.3 137.4 139.4 138.4 139.0 138.5 139.0 140.1 140.1 19 Paper products 2.9 111.1 109.6 108.3 108.2 109.0 111.6 112.4 112.4 112.4 113.8 112.5 112.2 113.6 111.8 20 Energy 2.9 116.1 116.2 110.7 113.6 116.0 117.0 114.9 117.1 118.4 115.5 117.3 123.4 119.5 118.2 21 Fuels .8 113.0 111.0 114.9 112.1 113.1 113.4 112.6 113.1 115.8 113.0 115.5 112.3 111.5 112.4 22 Residential utilities 2.1 117.5 118.5 107.4 113.8 117.1 118.5 115.6 119.0 119.1 116.2 117.6 130.0 124.0 121.1 23 Equipment 17.2 166.1 159.8 161.3 162.8 163.1 164.3 166.3 167.9 168.3 169.1 169.9 169.0 168.9 168.5 24 Business equipment 13.2 194.3 187.0 188.9 191.1 191.6 192.8 195.0 197.8 199.5 200.0 200.6 199.4 198.6 198.1 25 Information processing and related 5.4 312.2 289.2 293.5 298.8 302.5 307.0 313.9 322.1 327.2 332.3 336.7 336.0 341.7 344.0 26 Computer and office equipment 1.1 1,157.6 1,019.5 1,044.0 1,062.0 1,087.8 1,130.8 1,182.8 1,229.0 1,264.1 1,286.4 1,305.0 1,318.3 1,333.4 1,348.0 27 Industrial 4.0 144.6 142.1 142.2 142.9 143.4 143.8 144.4 147.7 146.5 146.9 147.4 145.7 145.1 141.4 28 Transit 2.5 127.7 130.6 131.5 131.3 129.0 130.1 127.6 126.8 127.7 121.6 121.8 117.6 112.2 111.3 29 Autos and trucks 1.2 145.6 154.2 154.0 156.5 153.9 152.9 141.5 142.8 144.2 131.4 130.4 122.0 115.1 114.5 30 Other 1.3 145.7 138.5 142.9 146.7 145.8 142.8 148.1 144.8 149.3 154.2 148.6 153.9 150.6 155.5 31 Defense and space equipment 3.3 76.2 75.9 76.0 75.5 75.5 76.3 77.9 76.1 73.7 75.3 77.0 77.5 78.5 78.5 32 Oil and gas well drilling .6 131.8 124.6 126.7 126.7 130.3 130.8 136.2 137.1 132.8 136.5 138.9 139.1 146.7 146.1 33 Manufactured homes .2 116.2 133.8 131.7 127.2 122.9 121.9 116.8 115.5 109.3 98.8 90.9 83.5 73.5 74.8 34 Intermediate products, total 14.2 128.8 128.9 129.5 129.3 129.4 129.0 128.7 128.8 128.6 128.7 128.5 128.5 128.2 127.0 35 Construction supplies 5.3 143.2 143.4 144.6 144.4 143.1 143.4 143.8 142.7 143.1 142.3 141.6 141.5 141.6 140.3 36 Business supplies 8.9 120.3 120.3 120.6 120.4 121.3 120.5 119.8 120.6 120.0 120.7 120.7 120.7 120.2 119.1 37 Materials 39.5 167.9 162.4 164.7 166.1 168.4 169.4 169.0 170.5 171.3 171.1 169.9 168.4 167.1 166.0 38 Durable goods materials 20.8 227.7 215.4 220.0 222.7 227.6 230.3 230.5 233.8 235.7 235.0 232.9 230.9 228.0 226.6 39 Durable consumer parts 4.0 165.3 163.2 164.9 162.2 169.9 165.7 158.3 168.3 169.0 168.5 161.8 157.3 146.0 143.1 40 Equipment parts 7.6 478.6 416.6 434.2 451.9 466.8 486.2 499.9 505.7 512.1 515.9 521.4 525.5 529.5 531.0 41 Other 9.2 134.6 134.8 135.9 135.7 135.9 135.9 135.3 134.7 135.5 133.7 131.8 129.8 129.1 127.8 42 Basic metal materials 3.1 128.7 128.8 131.1 131.9 130.8 130.7 128.5 127.5 129.2 125.9 124.4 123.0 119.9 119.4 43 Nondurable goods materials 8.9 113.8 115.3 115.6 115.2 115.7 115.2 113.9 112.8 112.7 113.4 110.7 108.6 108.4 107.8 44 Textile materials 1.1 97.9 101.9 102.2 101.1 100.9 101.7 97.9 99.3 95.9 94.0 89.5 90.3 90.1 88.1 45 Paper materials 1.8 115.8 116.7 118.1 118.7 117.5 118.1 114.9 112.8 113.8 117.2 113.4 109.4 110.0 109.4 46 Chemical materials 3.9 117.0 118.6 118.6 118.1 119.8 118.4 117.0 116.8 116.3 115.9 113.7 109.8 110.7 110.1 47 Other 2.1 113.0 113.0 113.5 112.6 112.4 112.3 113.7 110.2 112.0 114.0 111.9 113.9 111.0 110.9 48 Energy materials 9.7 103.4 102.1 102.5 103.5 103.3 103.1 102.9 104.2 104.3 103.9 105.4 105.5 105.4 104.7 49 Primary energy 6.3 98.2 96.2 97.7 98.8 98.3 98.4 98.7 98.9 98.5 97.8 99.3 99.7 101.1 100.5 50 Converted fuel materials 3.3 114.4 114.6 112.3 113.0 113.7 112.4 110.8 115.1 116.6 117.2 118.7 117.8 113.3 112.5 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.1 147.2 143.8 144.8 145.7 146.7 147.5 147.5 148.4 148.7 148.8 148.4 148.2 147.5 146.6 52 Total excluding motor vehicles and parts 95.1 146.3 143.0 143.9 144.9 145.8 146.5 146.9 147.4 147.7 147.8 147.7 147.6 147.4 146.6 53 Total excluding computer and office equipment 98.2 140.5 137.8 138.6 139.6 140.4 141.0 140.5 141.4 141.6 141.2 140.8 140.2 139.4 138.5 54 Consumer goods excluding autos and trucks . 27.4 120.6 120.3 119.6 120.5 120.7 121.5 120.9 121.3 121.2 120.7 120.6 121.5 120.9 120.2 55 Consumer goods excluding energy 26.2 123.9 123.5 123.6 124.4 124.4 125.0 123.9 124.5 124.4 123.6 122.9 122.5 121.9 121.4 56 Business equipment excluding autos and trucks 12.0 200.1 190.8 193.1 195.2 196.1 197.6 201.5 204.5 206.3 208.5 209.4 209.1 209.2 208.7 57 Business equipment excluding computer and office equipment 12.1 158.4 154.4 155.7 157.4 157.3 157.6 158.6 160.3 161.2 161.2 161.5 160.1 159.1 158.4 58 Materials excluding energy 29.8 188.5 181.5 184.6 186.0 189.3 190.7 190.3 191.8 193.0 192.8 190.4 188.2 186.4 185.2 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 Monthly data seasonally adjusted 1992 Group S co IC de Z p po ro r- - 2 a 0 v 0 g 0 . tion Apr. May July Aug. Sept. Nov.r Index (1992=100) MAJOR INDUSTRIES 59 Total index 100.0 147.5 144.3 145.2 146.3 147.2 147.9 147.6 148.6 149.0 148.7 148.2 147.7 146.8 146.0 60 Manufacturing 85.4 153.6 149.9 151.3 152.2 153.1 153.8 153.7 154.6 155.1 154.9 154.1 152.9 152.0 151.3 61 Primary processing 26.5 178.0 173.0 175.5 177.1 178.7 180.1 179.4 180.3 181.2 181.1 178.8 176.6 174.6 173.6 62 Advanced processing 58.9 139.3 137.1 137.9 138.5 139.1 139.4 139.5 140.5 140.8 140.5 140.5 139.8 139.4 138.9 63 Durable goods 45.0 193.5 186.3 188.9 191.0 193.0 194.6 194.7 196.9 198.4 197.6 196.7 195.5 193.4 192.6 64 Lumber and products "24 2.0 118.3 122.3 121.9 121.6 120.5 118.7 118.6 115.5 116.8 114.8 113.2 111.4 109.0 109.5 65 Furniture and fixtures 25 1.4 142.9 140.7 139.3 140.7 143.0 141.9 142.6 143.8 146.6 147.2 145.0 145.6 145.4 144.3 66 Stone, clay, and glass products 32 2.1 134.7 133.6 134.4 132.9 134.2 134.6 136.3 136.1 136.5 137.3 134.6 132.3 133.1 131.1 67 Primaiy metals 33 3.1 133.7 134.7 137.1 137.8 136.7 136.4 133.9 132.4 133.9 129.0 127.3 126.3 123.5 122.8 68 Iron and steel 331,2 1.7 131.1 133.5 136.9 136.8 135.9 135.5 129.9 129.7 131.9 123.7 122.0 118.9 116.4 116.9 69 Raw steel 331PT .1 120.9 121.7 125.8 127.3 127.1 128.2 126.4 123.9 117.7 115.6 106.3 104.6 108.3 108.6 70 Nonferrous 333-6,9 1.4 136.8 136.4 137.6 139.1 137.9 137.6 138.8 135.7 136.5 135.3 133.6 135.1 132.0 129.8 71 Fabricated metal products .. 34 5.0 135.6 135.8 135.6 135.9 136.2 135.7 136.1 136.3 136.0 136.0 134.7 133.2 133.7 131.9 72 Industrial machinery and equipment 35 8.0 252.8 242.1 245.8 247.2 249.9 250.9 253.9 257.9 260.0 261.5 261.9 262.2 259.3 258.2 73 Computer and office equipment 357 1.8 1,343.6 1,195.9 1,224.7 1,245.1 1,272.3 1,316.2 1,370.4 1,421.6 1,464.2 1,487.4 1,502.8 1,508.3 1,522.7 1,537.6 74 Electrical machinery 36 7.3 550.2 474.8 495.2 516.5 533.8 555.0 571.2 580.0 592.2 597.4 604.4 615.1 619.7 621.0 75 Transportation equipment.. . 37 9.5 131.0 130.7 131.9 132.1 133.6 133.5 128.0 132.4 132.4 129.2 126.8 122.9 115.9 115.4 76 Motor vehicles and parts . 371 4.9 170.5 170.3 172.5 174.1 177.6 176.1 163.1 173.9 175.5 167.2 160.1 151.8 137.6 137.4 77 Autos and light trucks . 371PT 2.6 153.0 155.1 156.0 159.2 161.1 160.1 147.8 156.4 158.8 145.8 140.1 131.5 123.7 126.7 78 Aerospace and miscellaneous transportation equipment 372-6,9 4.6 93.8 93.5 93.7 92.7 92.3 93.6 94.9 93.5 92.1 93.6 95.4 95.5 94.9 94.2 79 Instruments 38 5.4 122.2 119.7 120.2 121.5 121.3 122.2 122.6 123.3 123.7 123.5 124.6 123.2 124.9 125.2 80 Miscellaneous 39 1.3 130.8 130.9 130.6 130.9 130.7 130.5 132.1 130.8 130.9 131.1 130.2 129.4 130.4 128.7 81 Nondurable goods 40.4 116.9 116.3 116.6 116.7 116.7 116.7 116.3 116.3 116.0 116.3 115.5 114.4 114.4 113.9 82 Foods "20 9.4 114.7 114.1 114.9 114.7 114.2 114.9 115.0 115.1 114.6 114.8 115.0 114.2 113.4 113.2 83 Tobacco products 21 1.6 95.3 97.4 94.3 95.6 95.3 93.8 95.8 96.6 94.5 93.7 93.1 94.2 95.2 93.6 84 Textile null products 22 1.8 100.1 103.8 104.4 104.4 102.6 103.1 101.4 99.4 98.4 96.7 92.8 94.6 92.6 91.5 85 Apparel products 23 2.2 91.7 94.3 94.1 94.6 93.0 91.2 92.0 90.7 89.5 89.2 89.2 88.1 88.6 86.7 86 Paper and products 26 3.6 116.1 117.4 117.8 118.4 116.5 118.8 114.9 113.3 113.7 117.1 114.7 112.7 111.1 111.1 87 Printing and publishing .... 27 6.7 110.0 108.9 109.7 109.1 109.9 109.1 110.0 110.4 110.9 111.6 111.2 110.6 111.4 110.1 88 Chemicals and products .... 28 9.9 128.3 124.9 124.9 125.2 126.3 125.9 124.8 125.9 125.4 125.8 124.8 122.9 123.2 123.0 89 Petroleum products 29 1.4 117.1 115.5 118.9 117.2 118.9 118.8 117.0 117.6 117.4 116.5 116.9 114.9 114.1 115.6 90 Rubber and plastic products . 30 3.5 142.3 143.2 143.0 143.5 142.6 143.5 144.4 142.1 141.9 141.3 139.1 137.6 139.3 137.8 91 Leather and products 31 .3 69.7 71.4 70.6 70.0 70.5 69.3 70.0 68.8 69.8 68.6 68.9 66.9 66.9 65.5 92 Mining 6.9 100.0 99.1 100.4 99.9 99.6 100.4 100.5 101.0 100.4 100.1 101.1 100.2 102.3 101.8 93 Metal '"lO .5 96.8 99.1 99.7 98.8 95.7 97.5 92.9 95.8 99.3 96.3 93.7 92.8 92.6 91.6 94 Coal 12 1.0 108.9 102.6 110.1 112.6 112.2 113.6 110.3 109.3 107.0 110.2 108.6 106.1 115.2 110.7 95 Oil and gas extraction 13 4.8 95.0 94.0 94.6 94.0 94.3 94.8 95.7 96.3 95.7 95.1 96.6 95.9 97.5 97.4 96 Stone and earth minerals 14 .6 126.6 131.7 133.4 130.4 123.9 127.7 124.4 125.0 123.7 124.6 123.2 123.0 124.2 122.8 97 Utilities 7.7 120.5 119.5 114.7 118.7 121.6 121.7 119.1 122.1 121.7 120.0 121.9 129.8 125.5 122.6 98 Electric 49L3PT 6.2 124.0 121.0 119.7 122.8 125.2 124.8 121.1 126.1 124.7 124.2 127.3 132.4 128.0 125.0 99 Gas 492.3PT 1.6 109.2 113.1 98.3 104.4 108.7 110.5 111.0 108.4 110.5 105.8 104.5 119.4 115.7 113.3 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 80.5 152.6 148.7 150.1 151.0 151.7 152.6 153.2 153.5 153.9 154.3 153.8 153.1 115533..00 115522..33 101 Manufacturing excluding computer and office equipment 83.6 145.5 142.3 143.6 144.4 145.2 145.8 145.4 146.2 146.5 146.2 145.4 144.2 114433..33 142.6 102 Computers, communications equipment, and semiconductors 5.9 1,196.1 999.4 1,048.5 1,097.8 1,140.2 1,193.1 1,248.0 1,281.6 1,310.3 1,334.8 1,358.1 11,,337788..00 11,,339922..55 11,,440033..44 103 Manufacturing excluding computers and semiconductors 81.1 128.3 127.1 127.8 128.0 128.4 128.4 127.7 128.2 128.4 128.0 127.1 125.8 112244..99 124.3 104 Manufacturing excluding computers, communications equipment, and semiconductors 79.5 125.1 124.3 124.9 125.1 125.4 125.3 124.5 124.9 125.0 124.6 123.6 122.3 112211..33 112200..66 Gross value (billions of 1992 dollars, annual rates) Major Markets 105 Products, total 2,001.9 2,860.8 2,846.9 2,853.1 2,868.9 2,872.7 2,883.5 2,865.7 2,882.9 2,889.1 2,867.4 2,863.2 2,854.7 2,826.2 2,815.8 106 Final 1,552.1 2,203.2 2,183.5 2,186.3 2,202.8 2,205.6 2,218.6 2,202.8 2,220.5 2,228.1 2,205.4 2,203.7 2,195.2 2,169.0 2,163.9 107 Consumer goods 1,049.6 1,339.7 1,342.3 1,338.5 1,347.2 1,349.8 1,357.8 1,338.7 1,348.7 1,353.7 1,334.7 1,331.2 1,329.7 1,310.7 1,307.7 108 Equipment 502.5 865.7 846.2 854.0 862.2 862.2 867.3 872.8 880.8 883.3 880.9 883.3 875.3 868.9 866.8 109 Intermediate 449.9 657.3 662.3 665.6 665.0 666.0 663.9 661.8 661.5 660.2 661.0 658.6 658.5 656.0 650.8 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 December 2000. The recent annual revision is described in an article in the Historical Revision," Federal Reserve Bulletin, vol. 76 (April 1990), pp. 187-204. March 2001 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 • May 2001 2.14 HOUSING AND CONSTRUCTION Monthly figures at seasonally adjusted annual rates except as noted 2000 2001 IItteemm 11999988 11999999 22000000RR Apr. May June July Aug. Sept. Oct. Nov.r Dec.r Jan. Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 1,612 1,664 1,574 1,559 1,511 1,528 1,511 1,486 1,518 1,546 1,598 1,507 1,724 2 One-family 1,188 1,247 1,184 1,164 1,150 1,127 1,117 1,140 1,157 1,191 1,183 1,158 1,287 3 Two-family or more 425 417 391 395 361 401 394 346 361 355 415 349 437 4 Started 1,617 1,667 1,593 1,652 1,591 1,571 1,527 1,519 1,537 1,529 1,564 1,577 1,653 5 One-family 1,271 1,335 1,262 1,310 1,258 1,227 1,201 1,229 1,226 1,232 1,233 1,298 1,347 6 Two-family or more 346 332 331 342 333 344 326 290 311 297 331 279 306 7 Under coastruction at end of period1 971 993 975 1,029 1,023 1,024 1,020 1,016 1,009 1,011 1,009 1,005 1,021 8 One-family 659 679 655 703 697 696 691 692 689 691 686 683 699 9 Two-family or more 312 314 321 326 326 328 329 324 320 320 323 322 322 10 Completed 1,474 1,636 1,608 1,660 1,705 1,545 1,531 1,612 L,559R 1,546 1,589 1,578 1,460 11 One-family 1,160 1,307 1,282 1,354 1,377 1,222 1,216 1,266 L,215R 1,212 1,290 1,265 1,136 12 Two-family or more 315 329 326 306 328 323 315 346 344R 334 299 313 324 13 Mobile homes shipped 374 348 250 271 265 262 251 249 231 213 196 176 164 Merchant builder activity in one-family units 14 Number sold 886 907 903 865 875 827 914 860 924 940 890 986 933 15 Number for sale at end of period' 300 326 313 305 308 312 311 313 309 312 316 310 310 Price of units sold (thousands of dollars f 16 Median 152.5 160.0 169.0 163.1 165.0 159.9 168.6 165.0 171.5 176.0 174.0 159.9 166.9 17 Average 181.9 195.8 206.4 207.5 200.1 197.7 202.4 200.4 208.4 215.0 210.9 206.5 204.4 EXISTING UNITS (one-family) 18 Number sold 4,970R 5,205R 5,113 4,980R 5,190 5,180R 4,820R 5,240 5,160R 5,070R 5,300 4,940 5,200 Price of units sold (thousands of dollars)2 19 Median 128.4 133.3 139.0 136.1 137.6 140.2 143.3 143.2 141.6 138.6 139.5 139.7 137.1 20 Average 159.1 168.3 176.2 173.3 176.0 178.9 177.7 183.0 178.6 176.9 176.5 178.5 175.8 Value of new construction (millions of dollars)3 CONSTRUCTION 21 Total put in place 710,104 765,719 809,258 816,156 811,816 798,860 793,036 801,748 813,477 803,893r 808,948 811,535 829,411 22 Private 550,983 592,037 624,613 629,491 629,820 624,383 619,046 616,918 625,317 618,738r 624,580 625,141 639,196 23 Residential 314,058 348,584 359,315 368,948 367,653 363,756 355,196 350,783 351,682 348,076r 348,998 350,679 355,887 24 Nonresidential 236,925 243,454 265,297 260,543 262,167 260,627 263,850 266,135 273,635 270,662r 275,582 274,462 283,309 25 Industrial buildings 40,464 35,016 40,406 38,670 39,814 39,951 42,081 41,552 40,872 42,81 lr 46,894 40,716 47,056 26 Commercial buildings 95,753 103,759 114,898 115,042 113,381 112,834 112,114 115,279 118,445 117,039r 116,224 118,987 122,151 27 Other buildings 39,607 41,279 45,486 44,136 45,540 44,559 45,689 46,779 46,689 46,690r 46,060 44,974 47,124 28 Public utilities and other 61,101 63,400 64,507 62,695 63,432 63,283 63,966 62,525 67,629 64,122r 66,404 69,785 66,978 29 Public 159,121 173,682 184,645 186,665 181,995 174,477 173,990 184,830 188,160 185,155r 184,368 186,393 190,215 30 Military 2,538 2,122 2,255 2,180 2,246 2,157 2,100 2,331 2,418 l,880r 2,612 2,097 2,253 31 Highway 48,339 54,447 52,461 55,923 51,966 48,148 49,262 52,694 53,183 47,932r 46,825 48,073 49,067 32 Conservation and development 5,421 6,002 6,026 5,840 5,363 5,832 4,875 5,629 6,158 6,989r 5,603 6,330 7,398 33 Other 102,823 111,110 123,904 122,722 122,420 118,340 117,753 124,176 126,401 128,354r 129,328 129,893 131,497 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 2000 2000 2001 FFFeeebbb... 22000000 22000011 222000000111111 FFeebb.. FFeebb.. Mar. June Sept. Dec. Oct. Nov. Dec. Jan. Feb. CONSUMER PRICES2 (1982-84=100) 1 All items 3.2 3.5 5.6 2.4 3.3 2.3 .2 .2 .2 .6 .3 175.8 7 Food 1.8 3.0 2.4 1.9 4.1 2.1 .1 -.1 .5 .3 .5 171.3 3 Energy items 19.9 13.1 43.4 5.6 7.9 3.8 .5 .2 .3 3.9 -.2 132.0 4 All items less food and energy 2.2 2.7 2.9 2.2 2.9 2.0 .1 .3 .1 .3 .3 184.4 5 Commodities .3 .9 1.1 -.6 1.7 .0 -.1 .2 -.1 .1 .3 145.5 6 Services 2.9 3.6 3.9 3.4 3.2 3.2 .2 .3 .2 .4 .3 206.8 PRODUCER PRICES (1982=100) 7 Finished goods 4.0 4.0 7.9 2.3 2.0 2.9 .4 .1 .2 1.1 ..11 141.5 8 Consumer foods 1.4 2.6 2.7 3.3 -1.2 2.4 .7 ,2r -.4 .8 ..66 139.5 9 Consumer energy 24.8 18.4 53.1 6.5 6.4 13.8 1.5r ,9r .8 3.8 1.4 103.6 10 Other consumer goods 1.5 1.5 .8 1.3 2.4 .3 ,lr -,2r .2 .8 -.4 155.9 11 Capital equipment .4 .9 .9 1.5 1.7 .3 -.1 .0 .1 .3 -.3 139.7 Intermediate materials 12 Excluding foods and feeds 5.7 3.5 9.5 3.1 3.1 1.2 .2 .2 .8 -.1 132.3 13 Excluding energy 2.8 1.3 4.2 2.7 .3 -.6 .0 -.1 .0 .2 .1 137.3 Crude materials 14 -.6 7.1 15.0 -7.3 -8.2 36.0 3.1 1.3 3.4 2.2 -1.6 104.5 15 Energy 70.4 48.0 84.9 163.6 20.0 64.0 5.9r -6.9r 14.8 25.0 -23.3 148.3 16 Other 15.6 -10.0 9.9 -11.9 -8.8 -10.2 -.8r —2.2' .3 .5 -2.5 136.1 1. Not seasonally adjusted. SOURCE. U.S. Department of Labor, Bureau of Labor Statistics. 2. Figures for consumer prices are for all urban consumers and reflect a rental-equivalence measure of homeownership. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • May 2001 2.16 GROSS DOMESTIC PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 1999 2000 AAccccoouunntt 11999988 11999999 22000000rr Q4 Ql Q2 Q3 Q4r GROSS DOMESTIC PRODUCT 1 Total 8,790.2 9,299.2 9,963.1 9,559.7 9,752.7 9,945.7 10,039.4 10,114.4 By source 2 Personal consumption expenditures 5,850.9 6,268.7 6,757.3 6,446.2 6,621.7 6,706.3 6,810.8 6,890.2 3 Durable goods 693.9 761.3 820.3 787.6 826.3 814.3 824.7 815.8 4 Nondurable goods 1,707.6 1,845.5 2,010.0 1,910.2 1,963.9 1,997.6 2,031.5 2,046.9 5 Services 3,449.3 3,661.9 3,927.0 3,748.5 3,831.6 3,894.4 3,954.6 4,027.5 6 Gross private domestic investment 1,549.9 1,650.1 1,832.7 1,723.7 1,755.7 1,852.6 1,869.3 1,853.3 7 Fixed investment 1,472.9 1,606.8 1,778.2 1,651.0 1,725.8 1,780.5 1,803.0 1,803.5 8 Nonresidential 1,107.5 1,203.1 1,362.2 1,242.2 1,308.5 1,359.2 1,390.6 1,390.4 9 Structures 283.2 285.6 324.2 290.4 308.9 315.1 330.1 342.8 10 Producers' durable equipment 824.3 917.4 1,038.0 951.8 999.6 1,044.1 1,060.5 1,047.6 11 Residential structures 365.4 403.8 416.0 408.8 417.3 421.3 412.4 413.1 12 Change in business inventories 77.0 43.3 54.5 72.7 29.9 72.0 66.4 49.8 13 Nonfarm 76.4 43.6 55.8 71.8 32.4 72.2 67.5 51.0 14 Net exports of goods and services -151.5 -254.0 -370.7 -299.1 -335.2 -355.4 -389.5 -402.7 15 Exports 966.0 990.2 1,097.3 1,031.0 1,051.9 1,092.9 1,130.8 1,113.7 16 Imports 1,117.5 1,244.2 1,468.0 1,330.1 1,387.1 1,448.3 1,520.3 1,516.4 17 Government consumption expenditures and gross investment 1,540.9 1,634.4 1,743.7 1,688.8 1,710.4 1,742.2 1,748.8 1,773.6 18 Federal 540.6 568.6 595.2 591.6 580.1 604.5 594.2 602.0 19 State and local 1,000.3 1,065.8 1,148.6 1,097.3 1,130.4 1,137.7 1,154.6 1,171.6 By major type of product 20 Final sales, total 8,713.2 9,255.9 9,908.5 9,486.9 9,722.8 9,873.7 9,973.1 10,064.6 21 Goods 3,239.3 3,467.0 3,739.0 3,566.0 3,680.3 3,734.1 3,776.5 3,764.9 22 Durable 1,532.3 1,651.1 1,806.7 1,701.8 1,773.7 1,809.6 1,830.6 1,812.7 23 Nondurable 1,707.1 1,815.8 1,932.3 1,864.1 1,906.6 1,924.5 1,945.9 1,952.2 24 Services 4,673.0 4,934.6 5,254.1 5,050.3 5,135.2 5,231.4 5,281.6 5,368.0 25 Structures 800.9 854.3 915.6 870.7 907.4 908.2 915.0 931.7 26 Change in business inventories 77.0 43.3 54.5 72.7 29.9 72.0 66.4 49.8 27 Durable goods 45.8 27.2 37.2 47.5 20.7 48.3 39.2 40.7 28 Nondurable goods 31.2 16.1 17.3 25.2 9.2 23.7 27.2 9.0 MEMO 29 Total GDP in chained 1996 dollars 8,515.7 8,875.8 9,318.5 9,084.1 9,191.8 9,318.9 9369.5 9,393.7 NATIONAL INCOME 30 Total 7,038.1 7,469.7 8,002.0 7,680.7 7,833.5 7,983.2 8,088.5 8,102.8 31 Compensation of employees 4,984.2 5,299.8 5,638.2 5,421.1 5,512.2 5,603.5 5,679.6 5,757.5 32 Wages and salaries 4,192.8 4,475.1 4,769.4 4,583.5 4,660.4 4,740.1 4,804.9 4,872.0 33 Government and government enterprises 692.7 724.4 760.9 734.5 749.9 760.2 765.4 768.2 34 Other 3,500.1 3,750.7 4,008.5 3,849.0 3,910.5 3,980.0 4,039.5 4,103.9 35 Supplement to wages and salaries 791.4 824.6 868.8 837.7 851.8 863.3 874.7 885.5 36 Employer contributions for social insurance 305.9 323.6 344.8 330.3 337.8 342.9 347.1 351.5 37 Other labor income 485.5 501.0 524.0 507.4 514.0 520.5 527.6 534.0 38 Proprietors' income' 620.7 663.5 710.4 689.6 693.9 709.5 724.8 713.2 39 Business and professional' 595.2 638.2 687.8 657.9 674.8 688.1 693.1 695.2 40 Farm' 25.4 25.3 22.6 31.7 19.1 21.5 31.7 18.0 41 Rental income of persons2 135.4 143.4 140.0 146.2 145.6 140.8 138.1 135.4 42 Corporate profits' 815.0 856.0 946.2 893.2 936.3 963.6 970.3 914.7 43 Profits before tax3 758.2 823.0 925.6 870.7 920.7 942.5 945.1 894.1 44 Inventory valuation adjustment 17.0 -9.1 -12.9 -19.2 -25.0 -13.6 -4.5 -8.5 45 Capital consumption adjustment 39.9 42.1 33.5 41.6 40.6 34.7 29.7 29.1 46 Net interest 482.7 507.1 567.2 530.6 545.4 565.9 575.7 582.0 1. With inventory valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.48. 2. With capital consumption adjustment. SOURCE. U.S. 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 11999988 11999999 22000000 Q4 Qi Q2 Q3 Q4r PERSONAL INCOME AND SAVING 1 Total personal income 7391.0 7,789.6 8,281.7 7,972.3 8,105.8 8,242.1 8,349.0 8,429.7 2 Wage and salary disbursements 4,190.7 4,470.0 4,769.4 4,578.3 4,660.4 4,740.1 4,804.9 4,872.0 3 Commodity-producing industries 1,038.6 1,089.2 1,153.2 1,111.2 1,130.9 1,147.1 1,161.4 1,173.3 4 Manufacturing 756.6 782.4 815.9 795.1 802.8 813.1 821.4 826.4 Distributive industries 949.1 1,020.3 1,107.3 1,049.4 1,070.9 1,095.7 1,118.1 1,144.4 6 Service industries 1,510.3 1,636.0 1,748.0 1,683.2 1,708.6 1,737.2 1,760.1 1,786.2 7 Government and government enterprises 692.7 724.4 760.9 734.5 749.9 760.2 765.4 768.2 8 Other labor income 485.5 501.0 524.0 507.4 514.0 520.5 527.6 534.0 9 Proprietors' income1 620.7 663.5 710.4 689.6 693.9 709.5 724.8 713.2 in Business and professional1 595.2 638.2 687.8 657.9 674.8 688.1 693.1 695.2 11 Farm1 25.4 25.3 22.6 31.7 19.1 21.5 31.7 18.0 1? Rental income of persons" 135.4 143.4 140.0 146.2 145.6 140.8 138.1 135.4 n Dividends 351.1 370.3 396.6 380.2 386.9 392.6 399.7 407.2 14 Personal interest income 940.8 963.7 1,034.3 989.0 1,011.6 1,031.3 1,042.9 1,051.5 15 Transfer payments 983.0 1,016.2 1,067.8 1,027.4 1,046.9 1,066.1 1,074.2 1,084.0 16 Old-age survivors, disability, and health insurance benefits 578.0 588.0 622.4 592.8 607.9 624.3 627.2 630.4 17 LESS: Personal contributions for social insurance 316.2 338.5 360.7 345.9 353.4 358.8 363.1 367.6 18 EQUALS: Personal income 7,391.0 7,789.6 8,281.7 7,972.3 8,105.8 8,242.1 8,349.0 8,429.7 19 LESS: Personal tax and nontax payments 1,070.9 1,152.0 1,291.9 1,197.3 1,239.3 1,277.2 1,308.1 1,342.7 20 EQUALS: Disposable personal income 6,320.0 6,637.7 6,989.8 6,775.0 6,866.5 6,964.9 7,040.9 7,087.0 21 LESS: Personal outlays 6,054.7 6,490.1 6,998.3 6,674.1 6,855.6 6,944.3 7,054.7 7,138.6 22 EQUALS: Personal saving 265.4 147.6 -8.5 101.0 11.0 20.6 -13.8 -51.6 MEMO Per capita (chained 1996 dollars) ?3 Gross domestic product 31,474.2 32,511.9 33,836.1 33,153.5 33,485.6 33,874.7 3333,,998844..33 3333,,998855..99 74 Personal consumption expenditures 20,988.5 21,900.4 22,855.1 22,266.4 22,635.5 22,757.7 22,959.1 23,058.3 25 Disposable personal income 22,672.0 23,191.0 23,640.0 23,404.0 23,472.0 23,639.0 23,732.0 23,718.0 26 Saving rate (percent) 4.2 2.2 -.1 1.5 .2 .3 -.2 -.7 GROSS SAVING 27 Gross saving 1,654.4 1,717.6 1,825.1 1,746.3 1,777.0 1,844.5 1,854.7 1,824.2 28 Gross private saving 1,375.7 1,343.5 1,297.1 1,331.4 1,279.2 1,328.8 1,319.2 1,261.2 ?,9 265.4 147.6 -8.5 101.0 11.0 20.6 -13.8 -51.6 30 Undistributed corporate profits' 218.9 229.4 265.0 241.7 262.7 278.5 279.6 239.4 31 Corporate inventory valuation adjustment 17.0 -9.1 -12.9 -19.2 -25.0 -13.6 -4.5 -8.5 Capital consumption allowances 3? Corporate 624.3 676.9 739.4 694.8 711.5 731.1 775500..00 776655..22 33 Noncorporate 265.1 284.5 301.1 288.7 294.1 298.7 303.3 308.2 34 Gross government saving 278.7 374.1 528.0 414.9 497.7 515.7 535.5 563.0 35 Federal 137.4 217.3 351.6 238.4 333.0 339.9 354.1 379.3 36 Consumption of fixed capital 88.4 92.8 99.8 95.0 97.2 98.9 100.8 102.3 37 Current surplus or deficit (-), national accounts 49.0 124.4 251.8 143.3 235.8 240.9 253.3 277.0 38 State and local 141.3 156.8 176.4 176.6 164.7 175.8 181.4 183.7 39 Consumption of fixed capital 99.5 106.8 116.8 109.9 112.7 115.6 118.2 120.6 40 Current surplus or deficit (-), national accounts 41.7 50.0 59.6 66.6 52.0 60.1 63.2 63.1 41 Gross investment 1,629.6 1,645.6 1,741.3 1,678.5 1,699.3 1,771.9 1,752.8 1,741.3 47, Gross private domestic investment 1,549.9 1,650.1 1,832.7 1,723.7 1,755.7 1,852.6 1,869.3 1,853.3 43 Gross government investment 278.8 308.7 336.6 324.4 334.2 331.9 333.6 346.5 44 Net foreign investment -199.1 -313.2 -427.9 -369.6 -390.7 -412.5 -450.1 -458.5 45 Statistical discrepancy -24.8 -71.9 -83.7 -67.8 -77.7 -72.5 -101.8 -82.9 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 • May 2001 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data seasonally adjusted except as noted1 1999 2000 IItteemm ccrreeddiittss oorr ddeebbiittss 11999988 11999999 22000000 Q4 Ql Q2 Q3r Q4P 1 Balance on current account -217,138 -331,479 -435,377 -96,223 - 101,768r - 105,239r -113,110 -115,266 2 Balance on goods and services -166,898 -264,971 -368,480 -76,280 -85,260r — 88,745r -95,630 -98,853 3 Exports 932,977 956,242 1,069,531 249,653 255,936r 265,925r 275,411 272,256 4 Imports -1,099,875 -1,221,213 -1,438,011 -325,933 -341,196r — 354,670r -371,041 -371,109 5 Income, net -6,211 -18,483 -13,656 -5,683 -4,42 lr -4,160r -4,531 -541 6 Investment, net -1,036 -13,102 -8,142 -4,319 -3,050r -2,769r -3,184 864 7 Direct 67,728 62,704 83,776 16,275 17,026r 18,973r 21,537 26,241 8 Portfolio -68,764 -75,806 -91,918 -20,594 -20,076' —21,742r -24,721 -25,377 9 Compensation of employees -5,175 -5,381 -5,514 -1,364 - l,371r - l,391r -1,347 -1,405 10 Unilateral current transfers, net -44,029 -48,025 -53,241 -14,260 — 12,087r — 12,334r -12,949 -15,872 11 Change in U.S. government assets other than official reserve assets, net (increase, —) -422 2,751 -715 3,711 -131 -574 114 -124 12 Change in U.S. official reserve assets (increase, -) -6,783 8,747 -290 1,569 -554 2,020 -346 -1,410 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -147 10 -722 -178 -180 -180 -182 -180 15 Reserve position in International Monetary Fund -5,119 5,484 2,308 1,800 -237 2,328 1,300 -1,083 16 Foreign currencies -1,517 3,253 -1,876 -53 -137 -128 -1,464 -147 17 Change in U.S. private assets abroad (increase, —) -328,231 -441,685 -552,344 -120,162 — 178,262r -93,859r -93,188 -187,032 18 Bank-reported claims2 -35,572 -69,862 -110,173 -45,304 -55,511 18,320 -5,964 -67,018 19 Nonbank-reported claims -10,612 -92,328 -156,988 -24,428 -52,563 -36,507 -17,807 -50,111 20 U.S. purchases of foreign securities, net -135,995 -128,594 -123,606 -17,150 -27,236 -38,196 -33,242 -24,932 21 U.S. direct investments abroad, net -146,052 -150,901 -161,577 -33,280 -42,952r -37,476r -36,175 -44,971 22 Change in foreign official assets in United States (increase, +) -20,127 42,864 35,909 27,495 22,015 6,346 11,901 -4,353 23 U.S. Treasury securities -9,921 12,177 -11,377 5,122 16,198 -4,000 -9,001 -14,574 24 Other U.S. government obligations 6,332 20,350 40,909 6,730 8,107 10,334 14,272 8,196 25 Other U.S. government liabilities2 -3,550 -3,255 -2,540 89 -644 -781 -620 -495 26 Other U.S. liabilities reported by U.S. banks2 -9,501 12,692 5,790 14,427 -2,577 -111 6,938 1,540 27 Other foreign official assets3 -3,487 900 3,127 1,127 931 904 312 980 28 Change in foreign private assets in United States (increase, +) 502,362 710,700 916,521 157,072 214,623r 238,906r 183,424 279,564 29 U.S. bank-reported liabilities4 39,769 67,403 79,485 19,618 -8,824 46,943 -1,394 42,760 30 U.S. nonbank-reported liabilities -7,001 34,298 105,728 792 58,061 24,038 1,506 22,123 31 Foreign private purchases of U.S. Treasury securities, net 48,581 -20,464 -52,206 -17,191 -9,248 -20,597 -12,513 -9,848 32 U.S. currency flows 16,622 22,407 1,129 12,213 -6,847 989 757 6,230 33 Foreign purchases of other U.S. securities, net 218,075 331,523 465,858 92,250 132,416 87,107 122,387 123,948 34 Foreign direct investments in United States, net 186,316 275,533 316,527 49,390 49,065r 100,426r 72,681 94,351 35 Capital account transactions, net5 637 -3,500 680 -3,993 166 170 167 177 36 Discrepancy 69,702 11,602 35,616 30,531 43,91 lr —47,770r 11,038 28,444 37 Due to seasonal adjustment 5,738 5,873r —2,361r -9,215 5,710 38 Before seasonal adjustment 69,702 11,602 35,616 24,793 38,038 -45,409 20,253 22,734 MEMO Changes in official assets 39 U.S. official reserve assets (increase, -) -6,783 8,747 -290 1,569 -554 2,020 -346 -1,410 40 Foreign official assets in United States, excluding line 25 (increase, +) -16,577 46,119 38,449 27,406 22,659 7,127 12,521 -3,858 41 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22) -11,531 1,331 11,989 -1,673 6,109 1,913 3,803 164 1. Seasonal factors are not calculated for lines 11-16, 18-20, 22-35, and 38-41. and dealers. 2. Associated primarily with military sales contracts and other transactions arranged with 5. Consists of capital transfers (such as those of accompanying migrants entering or or through foreign official agencies. leaving the country and debt forgiveness) and the acquisition and disposal of nonproduced 3. Consists of investments in U.S. corporate stocks and in debt securities of private nonfinancial assets. corporations and state and local governments. SOURCE. U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current 4. Reporting banks included all types of depository institutions as well as some brokers Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A51 3.11 U.S. FOREIGN TRADE' Millions of dollars; monthly data seasonally adjusted 2000 2001 IItteemm 11999988 11999999 22000000 July Aug. Sept. Oct. Nov. Dec. Jan.? 1 Goods and services, balance -166,898 -264,971 -368,865 -32,129 -29,951 -33,546 -33,168 -32,875 -33,199 -33,262 2 Merchandise -246,854 -345,559 -449,853 -38,590 -36,750 -39,395 -39,954 -39,124 -39,569 -39,500 3 Services 79,956 80,588 80,988 6,461 6,799 5,849 6,786 6,249 6,370 6,238 4 Goods and services, exports 932,977 956,242 1,068,741 89,742 92,883 92,793 91,425 90,825 89,201 89,650 5 Merchandise 670,324 684,358 772,514 65,075 67,952 67,815 66,325 65,850 64,114 64,705 6 Services 262,653 271,884 296,227 24,667 24,931 24,978 25,100 24,975 25,087 24,945 7 Goods and services, imports 1,099,875 1,221,213 1,437,606 -121,871 -122,834 -126,339 -124,593 -123,700 -122,400 -122,912 8 Merchandise 917,178 1,029,917 1,222,367 -103,665 -104,702 -107,210 -106,279 -104,974 -103,683 -104,205 9 Services 182,697 191,296 215,239 -18,206 -18,132 -19,129 -18,314 -18,726 -18,717 -18,707 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 2000 2001 AAsssseett 11999977 11999988 11999999 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar.p 1 Total 69,954 81,761 71,516 65,333 66,256 65,257 65,523 67,647 67,542 66,486 64,222 2 Gold stock1 11,047 11,046 11,048 11,046 11,046 11,046 11,046 11,046 11,046 11,046 11,046 3 Special drawing rights2'3 10,027 10,603 10,336 10,371 10,316 10,169 10,369 10,539 10,497 10,641 10,379 4 Reserve position in International Monetary Fund2 18,071 24,111 17,950 13,798 13,685 13,528 13,491 14,824 15,079 14,107 13,177 5 Foreign currencies4 30,809 36,001 32,182 30,118 31,209 30,514 30,617 31,238 30,920 30,692 29,020 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 2000 2001 AAsssseett 11999977 11999988 11999999 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar.p 1 Deposits 457 167 71 78 139 115 104 215 199 196 70 Held in custody 2 U.S. Treasury securities2 620,885 607,574 632,482 628,001 611,641 595,591 591,071 594,094 594,694 603,906 609,440 3 Earmarked gold3 10,763 10,343 9,933 9,674 9,620 9,565 9,505 9,451 9,397 9,343 9,289 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 • May 2001 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 2000 2001 IItteemm 11999988 11999999 July Aug. Sept. Oct. Nov. Dec. Jan.P 1 Total' 759,928 806,318 848,281 850,445 849,206 850,116 849,049 845,926 867,344 By type 2 Liabilities reported by banks in the United States 125,883 138,847 141,163 138,259 143,670 146,452 147,631 144,650 155,294 3 U.S. Treasury bills and certificates3 134,177 156,177 160,093 159,781 155,498 155,101 155,061 153,010 158,967 U.S. Treasury bonds and notes 4 Marketable 432,127 422,266 433,190 433,639 427,013 419,863 414,896 415,964 418,190 5 Nonmarketable4 6,074 6,111 5,180 5,213 5,247 5,280 5,313 5,348 5,383 6 U.S. securities other than U.S. Treasury securities5 61,667 82,917 108,655 113,553 117,778 123,420 126,148 126,954 129,510 By area 7 Europe' 256,026 244,805 258,352 256,275 258,138 264,131 262,099 253,592 259,829 8 10,552 12,503 13,728 12,692 12,821 12,632 11,744 12,394 11,220 9 Latin America and Caribbean 79,503 73,518 74,246 76,983 77,568 77,526 78,742 76,812 80,577 10 Asia 400,631 463,703 487,417 490,110 486,890 481,344 481,094 488,168 499,924 11 10,059 7,523 8,656 8,707 8,466 8,323 8,012 9,165 8,965 12 Other countries 3,157 4,266 5,882 5,678 5,323 6,160 7,358 5,795 6,829 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 2000 IItteemm 11999977 11999988 11999999 Mar. June Sept. Dec. 1 Banks' liabilities 117,524 101,125 88,537 85,649 85,842 78,852r 76,120 ?. Banks' claims 83,038 78,162 67,365 63,492 67,862 60,355 56,867 3 Deposits 28,661 45,985 34,426 32,967 31,224 25,847 22,907 4 Other claims 54,377 32,177 32,939 30,525 36,638 34,508 33,960 5 Claims of banks' domestic customers2 8,191 20,718 20,826 21,753 18,802 19,123 29,782 1. Data on claims exclude foreign currencies held by U.S. monetary authorities. 2. Assets owned by customers of the reporting bank located in the United States that represent claims on foreigners held by reporting banks for the accounts of the domestic customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A53 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1 Payable in U.S. dollars Millions of dollars, end of period 2000 2001 IItteemm 11999988 11999999 22000000 July Aug. Sept. Oct. Nov. Dec. Jan.p BY HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners L,347,837R L,408,740R 1,523,669R L,480,320R L,444433R L,453,643R L,511,173R 1,525,179R 1,523,669R 1,568,401 ? Banks' own liabilities 884,939r 971,536r l,049,070r l,050,469r l,013,471r l,027,138r l,074,575r l,073,536r l,049,070r 1,085,661 3 Demand deposits 29,558 42,884 33,553 34,914 30,101 31,964 29,500 31,701 33,553 31,977 4 Time deposits 151,761 163,620 191,791 186,485 184,821 184,823 185,454 192,422 191,791 187,385 Other3 140,752 155,853 173,233 172,466 174,021 174,473 194,659 187,066 173,233 202,150 6 Own foreign offices4 562,868r 609,179r 650,493r 656,604r 624,528r 635,878r 664,962r 662,347r 650,493r 664,149 7 Banks' custodial liabilities5 462,898 437,204 474,599 429,851 431,062 426,505 436,598 451,643 474,599 482,740 8 U.S. Treasury bills and certificates6 183,494 185,676 177,742 182,699 180,925 174,604 173,984 173,896 177,742 182,276 9 Short-term agency securities7 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 56,565 10 Other negotiable and readily transferable instruments8 141,699 132,617 144,858 120,624 119,212 120,296 129,753 132,453 144,858 86,733 11 Other 137,705 118,911 151,999 126,528 130,925 131,605 132,861 145,294 151,999 157,166 12 Nonmonetary international and regional organizations9 . . 11,883 15,276 12,560 16,689 14,630 15,658 17,104 17,074 12,560 10,938 13 Banks' own liabilities 10,850 14,357 12,158 16,294 14,377 15,404 16,751 16,676 12,158 10,595 14 Demand deposits 172 98 41 30 26 19 48 30 41 327 IS Time deposits 5,793 10,349 6,264 10,305 9,062 7,627 5,918 6,542 6,264 5,641 16 Other3 4,885 3,910 5,853 5,959 5,289 7,758 10,785 10,104 5,853 4,627 17 Banks' custodial liabilities5 1,033 919 402 395 253 254 353 398 402 343 18 U.S. Treasury bills and certificates6 636 680 252 371 217 223 215 249 252 294 19 Short-term agency securities7 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 26 20 Other negotiable and readily transferable instruments8 397 233 149 21 26 26 138 147 149 2233 21 Other 0 6 1 3 10 5 0 2 1 0 ?? Official institutions10 260,060 295,024 297,660 301,256 298,040 299,168 301,553 302,692 297,660 314,261 73 Banks' own liabilities 80,256 97,615 97,052 94,275 92,255 95,709 102,654 102,110 97,052 103,446 74 Demand deposits 3,003 3,341 3,950 4,063 4,573 5,213 4,361 4,702 3,950 4,014 Time deposits2 29,506 28,942 35,638 35,537 32,639 36,699 34,035 35,335 35,638 33,026 26 Other3 47,747 65,332 57,464 54,675 55,043 53,797 64,258 62,073 57,464 66,406 77 Banks' custodial liabilities5 179,804 197,409 200,608 206,981 205,785 203,459 198,899 200,582 200,608 210,815 28 U.S. Treasury bills and certificates6 134,177 156,177 153,010 160,093 159,781 155,498 155,101 155,061 153,010 158,967 29 Short-term agency securities7 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 44,884 30 Other negotiable and readily transferable instruments8 44,953 41,182 47,360 46,363 45,644 47,660 43,753 44,828 47,360 5,837 31 Other 674 50 238 525 360 301 45 693 238 1,127 37 Banks" 885,336 900,379 981,552 954,566 920,591 926,474 963,643 973,539 981,552 1,008,148 33 Banks' own liabilities 676,057 728,492 789,052 791,432 753,503 761,767 797,391 794,924 789,052 809,779 34 Unaffiliated foreign banks 113,189 119,313 138,559 134,828 128,975 125,889 132,429 132,577 138,559 145,630 35 Demand deposits 14,071 17,583 15,532 17,508 11,959 12,918 12,160 12,834 15,532 14,297 36 Time deposits 45,904 48,140 67,498 60,703 62,841 59,958 64,301 68,828 67,498 70,896 37 Other3 53,214 53,590 55,529 56,617 54,175 53,013 55,968 50,915 55,529 60,437 38 Own foreign offices4 562,868 609,179 650,493 656,604 624,528 635,878 664,962 662,347 650,493 664,149 39 Banks' custodial liabilities5 209,279 171,887 192,500 163,134 167,088 164,707 166,252 178,615 192,500 198,369 40 U.S. Treasury bills and certificates6 35,359 16,796 15,919 12,657 12,251 10,667 9,972 10,285 15,919 14,484 41 Short-term agency securities7 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 7,439 42 Other negotiable and readily transferable instruments8 45,332 45,695 35,104 34,018 33,893 32,679 34,261 34,643 35,104 30,757 43 Other 128,588 109,396 141,477 116,459 120,944 121,361 122,019 133,687 141,477 145,689 44 Other foreigners 190,558 198,061 231,897 207,809 211,272 212,343 228,873 231,874 231,897 235,054 45 Banks' own liabilities 117,776 131,072 150,808 148,468 153,336 154,258 157,779 159,826 150,808 161,841 46 Demand deposits 12,312 21,862 14,030 13,313 13,543 13,814 12,931 14,135 14,030 13,339 47 Time deposits2 70,558 76,189 82,391 79,940 80,279 80,539 81,200 81,717 82,391 77,822 48 Other3 34,906 33,021 54,387 55,215 59,514 59,905 63,648 63,974 54,387 70,680 49 Banks' custodial liabilities5 72,782 66,989 81,089 59,341 57,936 58,085 71,094 72,048 81,089 73,213 50 U.S. Treasury bills and certificates6 13,322 12,023 8,561 9,578 8,676 8,216 8,696 8,301 8,561 8,531 51 Short-term agency securities7 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 4,216 52 Other negotiable and readily transferable instruments8 51,017 45,507 62,245 40,222 39,649 39,931 51,601 52,835 62,245 50,116 53 Other 8,443 9,459 10,283 9,541 9,611 9,938 10,797 10,912 10,283 10,350 MEMO 54 Negotiable time certificates of deposit in custody for foreigners 27,026 30,345 34,088 26,186 25,911 25,991 27,164 25,854 34,088 31,389 55 Repurchase agreements7 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 93,821 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. Data available beginning January 2001. ble and readily transferable instruments." 8. Principally bankers acceptances, commercial paper, and negotiable time certificates of 3. Includes borrowing under repurchase agreements. deposit. 4. For U.S. banks, includes amounts owed to own foreign branches and foreign subsidiar- 9. Principally the International Bank for Reconstruction and Development, the Interies consolidated in quarterly Consolidated Reports of Condition filed with bank regulatory American Development Bank, and the Asian Development Bank. Excludes "holdings of agencies. For agencies, branches, and majority-owned subsidiaries of foreign banks, consists dollars" of the International Monetary Fund. principally of amounts owed to the head office or parent foreign bank, and to foreign 10. Foreign central banks, foreign central governments, and the Bank for International branches, agencies, or wholly owned subsidiaries of the head office or parent foreign bank. Settlements. 5. Financial claims on residents of the United States, other than long-term securities, held 11. Excludes central banks, which are included in "Official institutions." by or through reporting banks for foreign customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 International Statistics • May 2001 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1—Continued Payable in U.S. dollars Millions of dollars, end of period 2000 2001 IItteemm 11999988 11999999 22000000 July Aug. Sept. Oct. Nov. Dec. Jan. AREA 56 Total, all foreigners 1,347,837 1,408,740 1,523,669 1,480320 1,444,533 1,453,643 1,511,173 1,525,179 1,523,669 1,568,401 57 Foreign countries 1,335,954 1393,464 1,511,108 1,463,671 1,429,903 1,437,985 1,494,069 1,508,105 1,511,108 1,557,462 58 Europe 427,375 441,810 449,152 479,531 454,624 463,391 483,826 471,979 449,152 476,418 59 Austria 3,178 2,789 2,724 3,239 2,783 2,541 2,037 2,671 2,724 2,366 60 Belgium12 42,818 44,692 33,401 33,282 31,281 29,828 29,648 32,389 33,401 7,356 61 Denmark 1,437 2,196 3,001 3,521 3,689 3,429 3,001 3,531 3,001 3,391 62 Finland 1,862 1,658 1,412 1,751 1,618 1,512 1,418 1,874 1,412 1,155 63 France 44,616 49,790 37,840 42,379 42,723 39,693 41,736 43,534 37,840 48,385 64 Germany 21,357 24,753 35,535 26,484 25,893 26,212 28,633 27,084 35,535 30,250 65 Greece 2,066 3,748 2,013 2,917 3,455 3,331 3,445 3,344 2,013 1,888 66 Italy . , 7,103 6,775 5,079 5,700 5,566 5,959 5,594 5,521 5,079 4,997 67 Luxembourg n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 27,092 68 Netherlands 10,793 8,143 7,485 12,313 13,087 10,311 14,450 13,283 7,485 8,504 69 Norway 710 1,327 2,305 2,337 1,636 3,501 4,102 5,159 2,305 4,762 70 Portugal 3,236 2,228 2,404 2,169 2,144 2,244 2,262 2,379 2,404 2,571 71 Russia 2,439 5,475 19,020 14,960 14,252 15,970 17,260 20,022 19,020 17,233 72 Spain 15,781 10,426 7,801 8,829 8,791 8,421 9,270 6,900 7,801 8,129 73 Sweden 3,027 4,652 6,498 5,100 5,992 6,209 6,247 7,362 6,498 5,648 74 Switzerland 50,654 63,485 74,732 76,255 77,578 88,276 97,151 86,154 74,732 83,096 75 Turkey 4,286 7,842 7,548 8,341 7,999 8,173 8,492 4,525 7,548 7,783 76 United Kingdom 181,554 172,687 169,484 196,978 173,798 175,663 173,254 172,281 169,484 179,363 77 Channel Islands & Isle of Man13 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 406 78 Yugoslavia14 233 286 276 277 277 275 270 279 276 287 79 Other Europe and other former U.S.S.R.15 30,225 28,858 30,594 32,699 32,062 31,843 35,556 33,687 30,594 31,756 80 Canada 30,212 34,214 31,059 37,231 33,722 33,869 34,367 31,252 31,059 23,927 81 Latin America 121,327 117,495 121,719 117,727 119,261 120,099 121,417 121,353 121,719 118,930 82 Argentina 19,014 18,633 19,493 19,092 17,552 18,560 18,746 17,886 19,493 18,936 83 Brazil 15,815 12,865 10,953 11,950 12,351 11,537 10,204 11,663 10,953 10,542 84 Chile 5,015 7,008 5,895 5,440 5,296 5,346 5,105 5,327 5,895 5,647 85 Colombia 4,624 5,669 4,555 4,627 4,735 4,658 4,945 4,560 4,555 4,552 86 Ecuador 1,572 1,956 2,119 2,219 2,082 2,074 2,084 2,059 2,119 2,157 87 Guatemala 1,336 1,626 1,637 1,730 1,659 1,671 1,667 1,678 1,637 1,581 88 Mexico 37,157 30,717 33,157 33,379 33,291 33,878 36,054 33,856 33,157 33,723 89 Panama 3,864 4,415 4,292 3,353 3,561 3,661 3,788 3,980 4,292 3,615 90 Peru 840 1,142 1,435 1,097 1,065 1,091 1,153 1,194 1,435 1,355 91 Uruguay 2,486 2,386 3,006 2,179 2,541 2,567 2,512 2,944 3,006 2,798 92 Venezuela 19,894 20,192 24,779 21,462 23,909 23,997 24,288 25,963 24,779 26,996 93 Other Latin America16 9,710 10,886 10,398 11,199 11,219 11,059 10,871 10,243 10,398 7,028 94 Caribbean 433,539 461,200 580,562 523,062 510,847 513,720 533,961 560,281 580,562 601,776 95 Bahamas 118,085 135,811 189,454 167,569 173,061 167,671 178,113 176,823 189,454 186,180 96 Bermuda 6,846 7,874 9,695 7,074 8,157 8,100 8,730 8,404 9,695 9,487 97 British West Indies17 302,486 312,278 374,107 339,700 321,573 331,097 340,926 368,175 374,107 0 98 Caymen Islands17 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 384,280 99 Cuba 62 75 90 124 92 89 94 88 90 130 100 Jamaica 577 520 815 725 915 830 680 722 815 792 101 Netherlands Antilles 5,010 4,047 5,496 7,164 6,373 5,159 4,614 5,318 5,496 6,565 102 Trinidad and Tobago 473 595 905 706 676 774 804 751 905 797 103 Other Caribbean16 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 13,545 104 307,960 319,489 306,412 285,018 291,017 286,551 299,164 301,595 306,412 315,245 China 105 Mainland 13,441 12,325 16,538 9,385 11,769 11,830 13,719 15,835 16,538 27,451 106 Taiwan 12,708 13,603 17,690 13,156 14,675 15,140 18,289 17,630 17,690 19,865 107 Hong Kong 20,900 27,701 26,768 25,675 26,749 26,583 25,784 25,924 26,768 27,013 108 India 5,250 7,367 4,532 5,712 5,547 5,838 5,548 5,173 4,532 4,197 109 Indonesia 8,282 6,567 8,524 7,342 7,318 7,310 7,589 8,375 8,524 8,536 110 Israel 7,749 7,488 8,055 5,794 5,951 7,132 6,668 6,538 8,055 7,666 111 Japan 168,563 159,075 150,434 147,549 146,382 142,782 150,196 149,679 150,434 148,810 112 Korea (South) 12,524 12,988 7,967 8,618 8,819 9,043 6,684 6,689 7,967 7,155 113 Philippines 3,324 3,268 2,430 1,649 1,679 1,822 1,676 2,334 2,430 1,769 114 Thailand 7,359 6,050 3,129 3,900 3,504 3,330 3,178 3,477 3,129 3,157 115 Middle Eastern oil-exporting countries18 15,609 21,314 23,760 22,195 21,968 21,851 23,856 23,732 23,760 22,425 116 Other 32,251 41,743 36,585 34,043 36,656 33,890 35,977 36,209 36,585 37,201 117 8,905 9,468 10,836 9,739 9,607 9,821 9,663 9,515 10,836 10,552 118 Egypt 1,339 2,022 2,622 1,780 1,615 1,544 1,546 1,655 2,622 2,552 119 Morocco 97 179 139 118 109 112 121 100 139 157 120 South Africa 1,522 1,495 1,011 792 708 842 767 853 1,011 843 121 Congo (formerly Zaire) 5 14 4 5 7 5 4 4 4 10 122 Oil-exporting countries19 3,088 2,914 4,052 4,258 4,470 4,499 4,405 4,027 4,052 4,317 123 Other 2,854 2,844 3,008 2,786 2,698 2,819 2,820 2,876 3,008 2,673 174 Other Countries 6,636 9,788 11,368 11,363 10,825 10,534 11,671 12,130 11,368 10,614 125 Australia 5,495 8,377 10,090 10,346 9,825 9,507 10,562 10,961 10,090 8,854 126 New Zealand20 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 1,032 127 All other 1,141 1,411 1,278 1,017 1,000 1,027 1,109 1,169 1,278 728 128 Nonmonetary international and regional organizations . . 11,883 15,276 12,561 16,689 14,630 15,658 17,104 17,074 12,561 10,939 179 International21 10,221 12,876 11,288 15,295 13,118 14,387 16,133 16,068 11,288 9,024 130 Latin American regional22 594 1,150 740 786 1,146 888 582 523 740 1,493 131 Other regional23 1,068 1,250 533 608 366 383 389 483 533 422 12. Before January 2001, combined data reported for Belgium-Luxembourg. 18. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab 13. Before January 2001, data included in United Kingdom. Emirates (Trucial States). 14. Since December 1992, has excluded Bosnia, Croatia, and Slovenia. 19. Comprises Algeria, Gabon, Libya, and Nigeria. 15. Includes the Bank for International Settlements and European Central Bank. Since 20. Before January 2001, included in "All other." December 1992, has included all parts of the former U.S.S.R. (except Russia), and Bosnia, 21. Principally the International Bank for Reconstruction and Development. Excludes Croatia, and Slovenia. "holdings of dollars" of the International Monetary Fund. 16. Before January 2000, "Other Latin America" and "Other Caribbean" were reported as 22. Principally the Inter-American Development Bank. combined "Other Latin America and Caribbean." 23. Asian, African, Middle Eastern, and European regional organizations, except the Bank 17. Beginning January 2001, Cayman Islands replaced British West Indies in the data for International Settlements, which is included in "Other Europe." series. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A55 3.18 BANKS' OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States1 Payable in U.S. dollars Millions of dollars, end of period 2000 2001 AArreeaa oorr ccoouunnttrryy 11999988 11999999 22000000 July Aug. Sept. Oct. Nov. Dec. Jan. 1 Total, all foreigners 734,995 793,139 911,879 846,338 813,193 856,474 879,626 882,419 911,879 958,982 2 Foreign countries 731,378 788,576 907,193 842,452 809,416 851,609 874,403 878,579 907,193 955,755 3 Europe 233,321 311,686 383,876 358,004 327,433 359,889 365,709 371,894 383,876 422,081 4 Austria 1,043 2,643 2,941 2,479 1,956 2,584 2,809 2,681 2,941 3,664 5 Belgium2 7,187 10,193 5,540 6,464 5,843 6,368 6,044 5,060 5,540 4,635' 6 Denmark 2,383 1,669 3,312 3,349 3,278 3,403 3,093 3,462 3,312 3,402 7 Finland 1,070 2,020 7,402 2,897 2,701 3,561 4,927 6,517 7,402 6,772 8 France 15,251 29,142 40,303 25,845 23,229 27,062 34,217 34,547 40,303 43,290 9 Germany 15,923 29,205 36,973 30,452 31,804 33,229 33,017 32,160 36,973 39,739 10 Greece 575 806 658 754 557 516 628 876 658 526 11 Italy 7,284 8,496 7,629 6,447 7,358 6,215 6,482 6,738 7,629 6,308 12 Luxembourg n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 2,737 13 Netherlands 5,697 11,810 17,294 13,159 14,999 15,507 16,165 15,975 17,294 18,864 14 Norway 827 1,000 5,012 2,401 1,448 4,474 4,655 6,159 5,012 2,971 15 Portugal 669 1,571 1,382 1,454 1,273 1,480 1,574 1,249 1,382 1,109 16 Russia 789 713 517 718 666 643 647 663 517 518 17 Spain 5,735 3,796 2,848 4,767 3,566 3,208 3,360 2,593 2,848 3,807 18 Sweden 4,223 3,264 9,301 8,404 8,761 8,501 8,504 8,815 9,301 10,353 19 Switzerland 46,874 79,158 82,383 94,550 87,172 100,345 103,818 107,986 82,383 102,545 20 Turkey 1,982 2,617 3,175 2,735 2,855 2,821 2,831 3,260 3,175 3,300 21 United Kingdom 106,349 115,971 148,875 143,459 123,360 132,503 122,829 125,223 148,875 156,804 72 Channel Islands & Isle of Man3 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 670 23 Yugoslavia4 53 50 50 49 49 49 49 49 50 50 24 Other Europe and other former U.S.S.R.5 9,407 7,562 8,281 7,621 6,558 7,420 10,060 7,881 8,281 9,965 25 Canada 47,037 37,206 40,068 40,420 37,934 37,618 38,648 39,291 40,068 41,587 76 Latin America 79,976r 74,040r 76,614r 71,632' 72,499' 72,664' 73,692' 74,399' 76,614 74,482' 27 Argentina 9,552 10,894 11,546 10,660 10,597 10,840 11,166 11,468 11,546 11,317 78 Brazil 16,184 16,987 20,567 18,199 18,555 19,038 20,202 19,840 20,567 20,372 79 Chile 8,250 6,607 5,816 6,069 5,985 5,953 5,756 5,772 5,816 6,223 30 Colombia 6,507 4,524 4,370 3,909 3,953 3,851 3,846 3,938 4,370 3,816 31 Ecuador 1,400 760 635 610 607 623 639 629 635 563 37 Guatemala 1,127 1,135 1,246 1,215 1,277 1,226 1,245 1,247 1,246 1,364 33 Mexico 21,212 17,899 17,430 16,412 16,825 16,808 16,723 16,945 17,430 17,589 34 Panama 3,584 3,387 2,935 2,981 2,882 2,781 2,668 2,839 2,935 2,774 35 Peru 3,275 2,529 2,808 2,488 2,487 2,697 2,653 2,713 2,808 2,689 36 Uruguay 1,126 801 675 649 111 728 663 677 675 641 37 Venezuela 3,089 3,494 3,520 3,357 3,410 3,390 3,321 3,451 3,520 3,298 38 Other Latin America6 4,670 5,023 5,066 5,083 5,144 4,729 4,810 4,880 5,066 3,836 39 Caribbean 262,678 281,128r 319,512' 279,690' 282,931' 290,974' 300,805' 301,544' 319,512 317,826 40 Bahamas 96,455 99,066 114,090 92,959 95,577 99,278 100,445 96,718 114,090 109,275 41 Bermuda 5,011 8,007 9,343 6,906 4,684 6,265 8,426 8,324 9,343 8,473 42 British West Indies7 153,749 167,189 189,315 172,232 175,936 178,744 184,812 188,994 189,315 0 43 Caymen Islands7 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 185,105 44 Cuba 0 0 0 0 3 0 0 0 0 117 45 Jamaica 239 295 355 299 305 337 379 355 355 357 46 Netherlands Antilles 6,779 5,982 5,801 6,652 5,804 5,770 6,158 6,554 5,801 9,076 47 Trinidad and Tobago 445 589 608 642 622 580 585 599 608 658 48 Other Caribbean6 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 4,765 49 Asia 98,607 75,143 78,762 83,129 79,028 81,584 87,682 83,359 78,762 90,285 China 50 Mainland 1,261 2,110 1,606 1,822 1,601 1,519 1,912 1,644 1,606 1,558 51 Taiwan 1,041 1,390 2,247 922 790 2,475 3,691 2,483 2,247 1,037 52 Hong Kong 9,080 5,903 6,715 5,777 5,403 6,019 6,540 6,454 6,715 7,419 53 India 1,440 1,738 2,178 2,014 2,038 2,006 1,787 1,736 2,178 1,885 54 Indonesia 1,942 1,776 1,914 1,940 1,880 1,982 2,009 1,958 1,914 2,075 55 Israel 1,166 1,875 2,729 1,982 2,281 1,116 1,551 1,911 2,729 2,343 56 Japan 46,713 28,641 35,109 31,210 32,499 35,240 35,773 36,467 35,109 38,901 57 Korea (South) 8,289 9,426 7,784 18,915 16,924 14,375 18,589 16,189 7,784 18,736 58 Philippines 1,465 1,410 1,784 1,802 1,483 1,495 1,473 1,758 1,784 1,217 59 Thailand 1,807 1,515 1,381 1,051 1,059 1,071 1,046 1,221 1,381 1,170 60 Middle Eastern oil-exporting countries8 16,130 14,267 10,091 10,367 10,006 9,961 9,867 8,487 10,091 10,546 61 Other 8,273 5,092 5,224 5,327 3,064 4,325 3,444 3,051 5,224 3,398 62 Africa 3,122 2,268 2,151 2,505 2,215 2,597 2,291 1,977 2,151 2,176 63 Egypt 257 258 201 217 186 176 201 184 201 170 64 Morocco 372 352 204 272 247 254 252 235 204 182 65 South Africa 643 622 366 411 358 372 322 341 366 492 66 Congo (formerly Zaire) 0 24 0 0 0 0 0 0 0 19 67 Oil-exporting countries9 936 276 471 751 616 913 656 342 471 582 68 Other 914 736 909 854 808 882 860 875 909 731 69 Other countries 6,637 7,105 6,210 7,072 7,376 6,283 5,576 6,115 6,210 7,318 70 Australia 6,173 6,824 5,961 6,891 7,036 6,036 5,238 5,937 5,961 6,894 71 New Zealand10 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 283 72 All other 464 281 249 181 340 247 338 178 249 141 73 Nonmonetary international and regional organizations" . . 3,617 4,563 4,686 3,886 3,777 4,865 5,223 3,840 4,686 3,363 1. Reporting banks include all types of depository institutions as well as some brokers and 6. Before January 2001, "Other Latin America" and "Other Caribbean" were reported as dealers. combined "Other Latin America and Caribbean." 2. Before January 2001, combined data reported for Belgium-Luxembourg. 7. Beginning 2001, Cayman Islands replaced British West Indies in the data series. 3. Before January 2001, data included in United Kingdom. 8. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab 4. Since December 1992, has excluded Bosnia, Croatia, and Slovenia. Emirates (Trucial States). 5. Includes the Bank for International Settlements and European Central Bank. Since 9. Comprises Algeria, Gabon, Libya, and Nigeria. December 1992, has included all parts of the former U.S.S.R. (except Russia), and Bosnia, 10. Before January 2001, included in "All other." Croatia, and Slovenia. 11. Excludes the Bank for International Settlements, which is included in "Other Europe." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A56 International Statistics • May 2001 3.19 BANKS' OWN AND DOMESTIC CUSTOMERS' CLAIMS ON FOREIGNERS Reported by Banks in the United States' Payable in U.S. dollars Millions of dollars, end of period 2000 2001 TTyyppee ooff ccllaaiimm 11999999 22000000 July Aug. Sept. Oct. Nov. Dec. Jan.P 1 Total 875,891 944,937 1,102,595 1,025,751 1,102,595 2 Banks' claims 734,995 793,139 911,879 846,338 813,193 856,474 879,626 882,419 911,879 958,982 3 Foreign public borrowers 23,542 35,090 38,327 48,478 41.459 40,437 49,693 49,373 38,327 52,987 4 Own foreign offices2 484,535 529,682 630,105 574,063 560,852 592,647 603,873 610,839 630,105 645,069 5 Unaffiliated foreign banks 106,206 97,186 99,622 85,739 78,562 87,144 83,035 82,962 99,622 102,166 6 Deposits 27,230 34,538 23,886 21,856 21,822 23,765 23,598 23,756 23,886 23,607 7 Other 78,976 62,648 75,736 63,883 56,740 63,379 59,437 59,206 75,736 78,559 8 All other foreigners 120,712 131,181 143,825 138,058 132,320 136,246 143,025 139,245 143,825 158,760 9 Claims of banks' domestic customers3 140,896 151,798 190,716 169,277 190,716 10 Deposits 79,363 88,006 99,846 87,108 99,846 11 Negotiable and readily transferable instruments4 47,914 51,161 78,147 70,334 78,147 12 Outstanding collections and other claims 13,619 12,631 12,723 11,835 12,723 MEMO 13 Customer liability on acceptances 4,520 4,553 4,258 4,701 4,258 14 Banks' loans under resale agreements5 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 85,307 15 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States6 39,978 31,125 53,153 46,337 55,293 57,784 53,848 55,899 53,153 59,893 1. For banks' claims, data are monthly; for claims of banks' domestic customers, data are branches, agencies, or wholly owned subsidiaries of the head office or parent foreign bank. for quarter ending with month indicated. 3. Assets held by reporting banks in the accounts of their domestic customers. Reporting banks include all types of depository institution as well as some brokers and 4. Principally negotiable time certificates of deposit, bankers acceptances, and commercial dealers. paper. 2. For U.S. banks, includes amounts due from own foreign branches and foreign subsidiar- 5. Data available beginning January 2001. ies consolidated in quarterly Consolidated Reports of Condition filed with bank regulatory 6. 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. principally of amounts due from the head office or parent foreign bank, and from foreign 3.20 BANKS' OWN CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Banks in the United States' Payable in U.S. Dollars Millions of dollars, end of period 2000 MMaattuurriittyy,, bbyy bboorrrroowweerr aanndd aarreeaa22 11999977 11999988 11999999 Mar. June Sept. Dec. 276,550 250,418 267,082 256,536 268,904 263,383 281,208 1 Total By borrower 205,781 186,526 187,894 175,413 181,814 174,650 187,815 2 Maturity of one year or less 12,081 13,671 22,811 23,438 24,849 23,646 21,399 i Foreign public borrowers 193,700 172,855 165,083 151,975 156,965 151,004 166,416 4 All other foreigners 70,769 63,892 79,188 81,123 87,090 88,733 93,393 5 Maturity of more than one year 8,499 9,839 12,013 12,850 15,900 16,238 16,258 6 Foreign public borrowers 62,270 54,053 67,175 68,273 71,190 72,495 7777,,113355 7 All other foreigners By area Maturity of one year or less 58,294 68,679 80,842 74,011 71,492 69,447 72,754 8 Europe 9,917 10,968 7,859 8,408 7,344 8,225 7,995 9 Canada 97,207 81,766 69,498 62,912 66,096 65,881 77,282 10 Latin America and Caribbean 33,964 18,007 21,802 23,003 29,091 23,791 22,755 11 2,211 1,835 1,122 957 1,520 1,594 1,168 12 Africa 4,188 5,271 6,771 6,122 6,271 55,,771122 55,,886611 13 All other1 Maturity of more than one year 13,240 14,923 22,951 23,952 25,417 27,589 33,681 14 Europe 2,525 3,140 3,192 3,126 3.323 3,261 3,712 15 Canada 42,049 33,442 39,051 39,714 42,291 41,168 41,870 16 Latin America and Caribbean 10,235 10,018 11,257 11,612 12,550 13,132 10,154 17 1,236 1,232 1,065 965 924 895 891 18 Africa 1,484 1,137 1,672 1,754 22,,558855 22,,668888 33,,008855 19 All other3 1. Reporting banks include all types of depository institutions as well as some brokers and 2. Maturity is time remaining until maturity, dealers. 3. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A57 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. and Foreign Offices of U.S. Banks1 Billions of dollars, end of period 1998 1999 2000 Area or country 11999966 11999977 Dec. Mar. June Sept. Dec. Mar. June Sept. Dec.p 1 Total 645.8 721.8 1051.6 981.9 930.4 930.4 934.5 949.4 989.6 952.9 1034.5 2 G-10 countries and Switzerland 228.3 242.8 217.7 208.9 224.0 208.2 232.3 278.5 320.0 286.9 312.6 3 Belgium and Luxembourg 11.7 11.0 10.7 15.6 16.2 15.7 14.3 14.2 13.8 13.0 14.3 4 France 16.6 15.4 18.4 21.6 20.7 20.0 29.0 27.1 32.6 29.1 29.9 5 Germany 29.8 28.6 30.9 34.7 32.1 37.4 38.7 37.3 31.5 37.8 45.2 6 Italy 16.0 15.5 11.5 17.8 16.4 15.0 18.1 20.0 20.8 18.8 21.3 7 Netherlands 4.0 6.2 7.8 10.7 13.3 11.7 12.3 17.1 16.1 17.6 18.7 8 Sweden 2.6 3.3 2.3 4.0 2.6 3.6 3.0 3.9 3.5 4.3 3.7 9 Switzerland 5.3 7.2 8.5 7.8 8.3 8.8 10.3 10.1 13.8 10.9 13.5 10 United Kingdom 104.7 113.4 85.4 56.2 74.7 52.3 68.2 107.8 144.3 118.7 125.9 11 Canada 14.0 13.7 16.8 15.9 17.1 17.9 16.3 17.5 18.3 18.7 16.9 12 Japan 23.7 28.6 25.4 24.6 22.6 25.7 22.1 23.5 25.4 18.1 23.1 13 Other industrialized countries 66.1 65.5 69.0 80.1 79.7 71.7 68.4 62.8 75.2 73.8 75.3 14 Austria 1.1 1.5 1.4 2.8 2.8 3.0 3.5 2.6 2.8 3.5 4.1 15 Denmark 1.5 2.4 2.2 3.4 2.9 2.1 2.6 1.5 1.2 1.8 1.9 16 Finland .8 1.3 1.4 1.5 .9 .9 .9 .8 1.2 2.8 1.5 17 Greece 6.7 5.1 5.9 6.5 5.9 6.6 6.0 5.7 6.8 6.4 8.3 18 Norway 8.0 3.6 3.2 3.1 3.0 3.8 3.3 3.0 4.6 8.5 8.3 19 Portugal .9 .9 1.4 1.4 1.2 1.2 1.0 1.0 2.0 1.5 2.0 20 Spain 13.3 12.6 13.7 15.7 16.6 15.1 12.1 11.3 12.2 10.5 10.6 21 Turkey 2.7 4.5 4.8 5.2 4.9 4.7 4.8 5.1 5.6 5.6 6.0 22 Other Western Europe 4.9 8.3 10.4 10.2 10.3 9.2 6.8 8.3 8.0 8.4 6.7 23 South Africa 2.0 2.2 4.4 4.8 4.7 4.0 3.8 4.8 4.5 4.2 3.7 24 Australia 24.0 23.1 20.3 25.4 26.6 21.1 23.5 18.6 26.3 20.5 22.2 25 OPEC2 19.8 26.0 27.1 26.2 26.2 30.1 31.4 28.9 32.3 31.8 29.6 26 Ecuador 1.1 1.3 1.3 1.2 1.1 .9 .8 .7 .7 .6 .6 27 Venezuela 2.4 2.5 3.2 3.5 3.2 3.0 2.8 3.0 2.9 2.9 2.5 28 Indonesia 5.2 6.7 4.7 4.5 5.0 4.4 4.2 3.9 4.1 4.4 4.6 29 Middle East countries 10.7 14.4 17.0 16.7 16.5 21.4 23.1 21.1 24.0 22.7 21.1 30 African countries .4 1.2 1.0 .4 .5 .5 .5 .2 .7 1.2 .8 31 Non-OPEC developing countries 130.3 139.2 143.4 146.4 148.6 144.6 149.4 154.8 158.3 149.6 145.7 Latin America 32 Argentina 14.3 18.4 23.1 24.4 22.8 22.8 23.2 22.4 21.6 21.4 21.4 33 Brazil 20.7 28.6 24.7 24.2 25.2 23.5 27.7 28.1 28.3 28.5 28.8 34 Chile 7.0 8.7 8.3 8.6 8.2 7.7 7.4 8.2 8.1 7.4 7.6 35 Colombia 4.1 3.4 3.2 3.3 3.1 2.7 2.5 2.5 2.4 2.4 2.4 36 Mexico 16.2 17.4 18.9 19.7 18.5 19.4 18.7 18.3 20.5 17.5 15.7 37 Peru 1.6 2.0 2.2 2.2 2.1 1.8 1.7 1,9 2.1 2.1 2.0 38 Other 3.3 4.1 5.4 5.3 5.5 5.5 5.9 6.5 6.7 6.3 6.5 Asia China 39 Mainland 2.5 3.2 3.0 5.0 5.3 3.3 3.6 4.6 3.8 3.4 2.9 40 Taiwan 10.3 9.5 13.3 11.8 12.6 12.3 12.0 12.6 12.6 12.8 10.8 41 India 4.3 4.9 5.5 5.5 6.7 7.0 7.7 7.9 8.2 5.8 9.1 42 Israel .5 .7 1.1 1.1 2.0 1.0 1.8 3.3 1.5 1.1 2.7 43 Korea (South) 21.5 15.6 13.7 13.7 15.3 16.0 15.2 17.4 21.2 21.0 15.1 44 Malaysia 6.0 5.1 5.6 5.9 6.0 6.1 6.1 6.5 6.8 6.9 7.1 45 Philippines 5.8 5.7 5.1 5.4 5.7 5.8 6.2 5.3 5.3 4.7 5.1 46 Thailand 5.7 5.4 4.7 4.5 4.2 4.0 4.1 4.3 4.0 3.9 4.0 47 Other Asia 4.1 4.3 2.9 3.0 2.8 2.9 2.9 2.6 2.5 2.3 2.4 Africa 48 Egypt .7 .9 1.3 1.4 1.4 1.3 1.4 1.4 1.3 1.1 1.1 49 Morocco .7 .6 .5 .5 .5 .5 .4 .3 .3 .4 .3 50 Zaire .1 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 51 Other Africa3 .9 .8 1.0 .9 1.0 1.0 1.0 .9 .9 .8 .7 52 Eastern Europe 6.9 9.1 5.5 6.8 5.7 5.4 5.2 6.3 9.4 9.0 10.1 53 Russia4 3.7 5.1 2.2 2.0 2.1 2.0 1.6 1.7 1.5 1.4 1.0 54 Other 3.2 4.0 3.3 4.8 3.7 3.4 3.6 4.7 7.9 7.6 9.1 55 Offshore banking centers 135.1 140.2 93.9 83.0 66.0 79.1 59.9 42.0 52.4 50.6 69.9 56 Bahamas 20.5 24.2 35.4 22.0 10.4 18.2 13.7 2.4 .5 .6 6.9 57 Bermuda 4.5 9.8 4.6 3.9 5.7 8.2 8.0 7.3 6.3 6.3 9.0 58 Cayman Islands and other British West Indies 37.2 43.4 12.8 13.9 7.2 6.3 1.3 .0 5.1 5.9 14.6 59 Netherlands Antilles 26.1 14.6 2.6 2.7 1.3 9.1 1.7 2.5 2.6 1.9 1.9 60 Panama5 2.0 3.1 3.9 3.9 3.9 3.9 3.9 3.4 3.3 2.5 3.2 61 Lebanon 62 Hong Kong, China 21.9 32^2 233 22^8 22.0 22.4 2L0 22^2 20J 20.6 18^8 63 Singapore 16.7 12.7 11.1 13.5 15.2 10.6 10.1 4.1 13.6 12.7 15.2 64 Other6 .1 .1 .2 .2 .1 .2 .1 .1 .1 .1 .2 65 Miscellaneous and unallocated7 59.6 99.1 495.1 430.4 380.2 391.2 387.9 376.1 342.1 351.1 391.2 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 • May 2001 3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States Millions of dollars, end of period 1999 2000 TTyyppee ooff lliiaabbiilliittyy,, aanndd aarreeaa oorr ccoouunnttrryy 11999977 11999988 11999999 Sept. Dec. Mar. June Sept. Dec. 1 Total 57,382 46,570 53,044 52,979 53,044 53,489 70,534 76,644 74,107 2 Payable in dollars 41,543 36,668 37,605 36,296 37,605 35,614 47,864 51,451 49,424 3 Payable in foreign currencies 15,839 9,902 15,415 16,683 15,415 17,875 22,670 25,193 24,683 By type 4 Financial liabilities 26,877 19,255 27,980 27,422 27,980 29,180 44,068 49,895 47,419 5 Payable in dollars 12,630 10,371 13,883 12,231 13,883 12,858 22,803 26,159 25,246 6 Payable in foreign currencies 14,247 8,884 14,097 15,191 14,097 16,322 21,265 23,736 22,173 7 Commercial liabilities 30,505 27,315 25,064 25,557 25,064 24,309 26,466 26,749 26,688 8 Trade payables 10,904 10,978 12,857 12,651 12,857 12,401 13,764 13,918 14,305 y Advance receipts and other liabilities 19,601 16,337 12,207 12,906 12,207 11,908 12,702 12,831 12,383 10 Payable in dollars 28,913 26,297 23,722 24,065 23,722 22,756 25,061 25,292 24,178 n Payable in foreign currencies 1,592 1,018 1,318 1,492 1,318 1,553 1,405 1,457 2,510 By area or country Financial liabilities 12 Europe 18,027 12,589 23,241 21,695 23,241 24,050 30,332 36,175 34,172 13 Belgium and Luxembourg 186 79 31 50 31 4 163 169 147 14 France 1,425 1,097 1,659 1,675 1,659 1,849 1,702 1,299 1,480 15 Germany 1,958 2,063 1,974 1,712 1,974 1,880 1,671 2,132 2,168 16 Netherlands 494 1,406 1,996 2,066 1,996 1,970 2,035 2,040 2,016 17 Switzerland 561 155 147 133 147 97 137 178 104 18 United Kingdom 11,667 5,980 16,521 15,096 16,521 16,579 21,463 28,601 26,362 19 Canada 2,374 693 284 344 284 313 714 249 411 20 Latin America and Caribbean 1,386 1,495 892 1,180 892 846 2,874 3,447 4,125 21 Bahamas 141 7 1 1 1 1 78 105 6 22 Bermuda 229 101 5 26 5 1 1,016 1,182 1,739 23 Brazil 143 152 126 122 126 128 146 132 148 24 British West Indies 604 957 492 786 492 489 463 501 406 25 Mexico 26 59 25 28 25 22 26 35 26 26 Venezuela 1 2 0 0 0 0 0 0 2 27 Asia 4,387 3,785 3,437 3,622 3,437 3,275 9,453 9,320 7,965 28 Japan 4,102 3,612 3.142 3,384 3,142 2,985 6,024 4,782 6,216 29 Middle Eastern oil-exporting countries1 27 0 4 3 4 4 5 7 11 30 Africa 60 28 28 31 28 28 33 48 52 31 Oil-exporting countries2 0 0 0 0 0 0 0 0 0 32 All other3 643 665 98 550 98 668 662 656 694 Commercial liabilities 33 Europe 10,228 10,030 9,262 9,265 9,262 8,646 9,293 9,411 9,625 34 Belgium and Luxembourg 666 278 140 128 140 78 178 201 293 35 France 764 920 672 620 672 539 711 716 979 36 Germany 1,274 1,392 1,131 1,201 1,131 914 948 1,023 1,046 37 Netherlands 439 429 507 535 507 648 562 424 299 38 Switzerland 375 499 626 593 626 536 565 647 502 39 United Kingdom 4,086 3,697 3,071 3,175 3,071 2,661 2,982 2,951 2,845 40 Canada 1,175 1,390 1,775 1,753 1,775 2,024 2,053 1,889 1,932 41 Latin America and Caribbean 2,176 1,618 2,310 1,957 2,310 2,286 2,607 2,443 2,381 42 Bahamas 16 14 22 24 22 9 10 15 31 43 Bermuda 203 198 152 178 152 287 300 377 281 44 Brazil 220 152 145 120 145 115 119 167 114 45 British West Indies 12 10 48 39 48 23 22 19 76 46 Mexico 565 347 887 704 887 805 1,073 1,079 841 47 Venezuela 261 202 305 182 305 193 239 124 284 48 14,966 12,342 9,886 10,428 9,886 9,681 10,965 11,133 10,974 49 Japan 4,500 3,827 2,609 2,689 2,609 2,274 2,200 1,998 2,752 50 Middle Eastern oil-exporting countries' 3,111 2,852 2,551 2,618 2,551 2,308 3,489 3,706 2,831 51 Africa 874 794 950 959 950 943 950 1,220 940 52 Oil-exporting countries2 408 393 499 584 499 536 575 663 475 53 Other3 1,086 1,141 881 1,195 881 729 598 653 836 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 1999 2000 Type of claim, and area or country 11999977 11999988 11999999 Sept. Dec. Mar. June Sept. Dec. 1 Total 68,128 77,462 76,669 67,566 76,669 84,266 80,725 94,803 90,951 2 Payable in dollars 62,173 72,171 69,170 60,456 69,170 74,331 72,294 82,872 81,176 3 Payable in foreign currencies 5,955 5,291 7,472 7,110 7,472 9,935 8,431 11,931 9,775 By type 4 Financial claims 36,959 46,260 40,231 33,877 40,231 47,798 44,303 58,303 53,031 5 Deposits 22,909 30,199 18,566 15,192 18,566 23,316 17,462 30,928 23,374 6 Payable in dollars 21,060 28,549 16,373 13,240 16,373 21,442 15,361 27,974 21,015 7 Payable in foreign currencies 1,849 1,650 2,193 1,952 2,193 1,874 2,101 2,954 2,359 8 Other financial claims 14,050 16,061 21,665 18,685 21,665 24,482 26,841 27,375 29,657 9 Payable in dollars 11,806 14,049 18,593 15,718 18,593 19,659 22,384 20,541 25,142 10 Payable in foreign currencies 2,244 2,012 3,072 2,967 3,072 4,823 4,457 6,834 4,515 11 Commercial claims 31,169 31,202 36,438 33,689 36,438 36,468 36,422 36,500 37,920 12 Trade receivables 27,536 27,202 32,629 29,397 32,629 31,443 31,277 31,530 33,458 13 Advance payments and other claims 3,633 4,000 3,809 4,292 3,809 5,025 5,145 4,970 4,462 14 Payable in dollars 29,307 29,573 34,204 31,498 34,204 33,230 34,549 34,357 35,019 15 Payable in foreign currencies 1,862 1,629 2,207 2,191 2,207 3,238 1,873 2,143 2,901 By area or country Financial claims 16 Europe 14,999 12,294 13,023 13,878 13,023 16,789 18,254 23,706 23,136 17 Belgium and Luxembourg 406 661 529 574 529 540 317 304 296 18 France 1,015 864 967 1,212 967 1,835 1,292 1,477 1,206 19 Germany 427 304 504 549 504 669 576 696 848 20 Netherlands 677 875 1,229 1,067 1,229 1,981 1,984 2,486 1,396 21 Switzerland 434 414 643 559 643 612 624 626 699 22 United Kingdom 10,337 7,766 7,561 8,157 7,561 9,044 11,668 16,191 15,900 23 Canada 3,313 2,503 2,553 3,172 2,553 3,175 5,799 7,517 4,576 24 Latin America and Caribbean 15,543 27,714 18,206 12,749 18,206 21,945 14,874 21,691 19,317 25 Bahamas 2,308 403 1,593 755 1,593 1,299 655 1,358 1,353 26 Bermuda 108 39 11 524 11 11 34 22 19 27 Brazil 1,313 835 1,476 1,265 1,476 1,646 1,666 1,568 1,827 28 British West Indies 10,462 24,388 12,099 7,263 12,099 15,814 7,751 15,722 12,596 29 Mexico 537 1,245 1,798 1,791 1,798 1,979 2,048 2,280 2,448 30 Venezuela 36 55 48 47 48 65 78 101 87 31 Asia 2,133 3,027 5,457 3,205 5,457 4,430 3,923 4,002 4,697 32 Japan 823 1,194 3,262 1,250 3,262 2,021 1,410 1,726 1,631 33 Middle Eastern oil-exporting countries 11 9 23 5 23 29 42 85 80 34 Africa 319 159 286 251 286 232 320 284 411 15 16 15 12 15 15 39 3 57 35 Oil-exporting countries 652 563 706 622 706 1,227 1,133 1,103 894 36 All other3 Commercial claims 12,120 13.246 16,389 14,367 16,389 16,118 15,928 16,486 15,938 37 Europe 328 238 316 289 316 271 425 393 452 38 Belgium and Luxembourg 1,796 2,171 2,236 2,375 2,236 2,520 2,692 2,921 3,095 39 France 1,614 1,822 1,960 1,944 1,960 2,034 1,906 2,159 1,982 40 Germany 597 467 1,429 617 1,429 1,337 1,242 1,310 1,729 41 Netherlands 554 483 610 714 610 611 563 684 763 42 Switzerland 3,660 4,769 5,827 4,789 5,827 5,354 4,929 5,193 4,502 43 United Kingdom 44 Canada 2,660 2,617 2,757 2,638 2,757 3,088 3,250 2,953 3,505 45 Latin America and Caribbean 5,750 6,296 5,959 5,879 5,959 5,899 5,792 5,788 5,842 46 Bahamas 27 24 20 29 20 15 48 75 37 47 Bermuda 244 536 390 549 390 404 381 387 376 48 Brazil 1,162 1,024 905 763 905 849 894 981 956 49 British West Indies 109 104 181 157 181 95 51 55 137 50 Mexico 1,392 1,545 1,678 1,613 1,678 1,529 1,565 1,612 1,507 51 Venezuela 576 401 439 365 439 435 466 379 326 52 Asia 8,713 7,192 9,165 8,579 9,165 9,101 9,173 8,986 9,636 53 Japan 1,976 1,681 2,074 1,823 2,074 2,082 1,882 2,074 2,791 54 Middle Eastern oil-exporting countries 1,107 1,135 1,625 1,479 1,625 1,533 1,241 1,199 1,024 55 Africa 680 711 631 682 631 716 766 895 671 56 Oil-exporting countries2 119 165 171 221 171 82 160 392 179 57 Other3 1,246 1,140 1,537 1,544 1,537 1,546 1,513 1,392 2,328 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 • May 2001 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 2001 2000 2001 Transaction, and area or country 1999 2000 Jan.- Jan. July Aug. Sept. Oct. Nov. Dec. Jan. US. corporate securities STOCKS 1 Foreign purchases 2,340,659 3,605,196 301,650 271,572 286,819 297,677 339,995 284,909 286,161 301,650 2 Foreign sales 2,233,137 3,430,306 277,706 255,999 262,546 289,118 323,659 275,855 275,034 277,706 3 Net purchases, or sales (—) 107,522 174,890 23,944 15,573 24,273 8,559 16,336 9,054 11,127 23,944 4 Foreign countries 107,578 174,903 23,906 15,563 24,249 8,603 16,338 9,068 11,145 23,906 5 Europe 98,060 164,656 12,329 13,349 15,678 10,014 14,040 7,485 10,779 12,329 6 France 3,813 5,727 243 1,292 575 -565 1,757 408 40 243 7 Germany 13,410 31,752 2,380 371 2,670 643 1,383 988 777 2,380 8 Netherlands 8,083 4,915 2,206 554 594 792 -135 323 1,691 2,206 9 Switzerland 5,650 11,960 70 1,702 1,114 780 488 -598 -684 70 10 United Kingdom 42,902 58,736 3,064 6,460 7,098 5,163 6,283 3,210 7,773 3,064 11 Channel Islands & Isle of Man1 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. -13 12 Canada -335 5,956 1,490 -166 1,267 -924 194 1,477 1,468 1,490 13 Latin America and Caribbean 5,187 -17,812 5,445 1,363 4,907 -3,406 -4,400 -2,979 -2,759 5,529 14 Middle East2 -1,066 9,189 -554 98 908 52 754 340 277 -554 15 Other Asia 4,445 12,494 5,565 815 1,789 2,707 5,840 3,310 1,451 5,565 16 Japan 5,723 2,070 1,002 492 568 2,467 2,640 662 1,615 1,002 17 Africa 372 415 -362 -124 I -56 -27 80 -45 -362 18 Other countries 915 5 -7 228 -302 216 -63 -645 -26 -7 19 Nonmonetary international and regional organizations -56 -11 38 10 24 -42 -2 -14 -18 38 BONDS3 20 Foreign purchases 854,692 1,206,662 138,295 87,580 107,808 106,384 103,028 114,686 117,904 138,295 21 Foreign sales 602,100 871,418 111,327 67,010 69,514 76,225 71,686 77,596 90,143 111,327 22 Net purchases, or sales (—) 252,592 335,244 26,968 20,570 38,294 30,159 31,342 37,090 27,761 26,968 23 Foreign countries 252,994 335,348 27,065 20,482 38,215 30,161 31,356 37,224 27,759 27,065 24 Europe 140,674 179,706 17,397 7,789 21,618 17,058 16,965 16,522 16,560 17,397 25 France 1,870 2,216 405 85 334 -819 347 272 138 405 26 Germany 7,723 4,067 2,450 154 1,185 44 433 537 -78 2,450 27 Netherlands 2,446 1,130 664 -575 850 -818 848 183 275 664 28 Switzerland 4,553 3,833 321 1,003 757 333 350 483 -89 321 29 United Kingdom 106,344 140,152 11,251 4,003 15,909 15,950 12,503 12,952 12,825 11,251 30 Channel Islands & Isle of Man1 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 107 31 Canada 6,043 13,287 376 943 1,965 811 897 1,179 414 376 32 Latin America and Caribbean 58,783 59,443 4,969 4,743 3,829 6,338 5,018 6,600 4,126 6,636 33 Middle East1 1,979 2,076 726 264 54 -702 -54 437 1,077 726 34 Other Asia 42,817 78,280 3,514 6,601 10,562 6,777 8,215 11,839 5,535 3,514 35 Japan 17,541 38,842 910 3,320 5,664 3,573 3,690 7,435 2,932 910 36 Africa 1,411 938 29 10 37 49 58 25 76 29 37 Other countries 1,287 1,618 54 132 150 -170 257 622 -29 54 38 Nonmonetary international and regional organizations -402 -70 -97 88 110 -2 -14 -134 2 -97 Foreign securities 39 Stocks, net purchases, or sales (-) 15,640 -9,297 -2,940 -14,970 672 10,217 3,011 5,563 -3,195 -2,940 40 Foreign purchases 1,177,303 1,802,452 148,111 136,467 142,850 148,664 152,872 141,600 135,417 148,111 41 Foreign sales 1,161,663 1,811,749 151,051 151,437 142,178 138,447 149,861 136,037 138,612 151,051 42 Bonds, net purchases, or sales (-) -5,676 -3,878 -1,360 -6,488 -2,812 265 -3,443 8,434 -1,175 -1,360 43 Foreign purchases 798,267 959,408 120,666 68,425 74,803 92,179 98,519 94,938 83,721 120,666 44 Foreign sales 803,943 963,286 122,026 74,913 77,615 91,914 101,962 86,504 84,896 122,026 45 Net purchases, or sales (—), of stocks and bonds .... 9,964 -13,175 —4,300 -21,458 -2,140 10,482 -432 13,997 -4,370 —4,300 46 Foreign countries 9,679 — 13,311 -4,011 -21,217 -1,986 10,307 -599 13,758 -3,951 -4,011 47 Europe 59,247 -23,609 -4,878 -23,431 -5,786 6,353 -3,879 7,373 -4,452 -4,878 48 Canada -999 -3,856 767 255 910 -1,122 1,813 574 -1,357 767 49 Latin America and Caribbean -4,726 -15,116 863 -979 -892 585 1,010 -521 -205 641 50 Asia -42,961 25,975 -1,005 2,977 3,159 3,842 -73 5,742 1,872 -1,005 51 Japan -43,637 21,886 164 4,119 1,478 2,063 -1,262 2,067 1,824 164 52 Africa 710 947 -70 532 -50 48 14 -28 -4 -70 53 Other countries -1,592 2,348 312 -571 673 601 516 618 195 312 54 Nonmonetary international and regional organizations 285 150 -289 -241 -154 179 167 239 -419 -289 1. Before January 2001, these data were included in United Kingdom. 3. Includes state and local government securities and securities of U.S. government 2. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, agencies and corporations. Also includes issues of new debt securities sold abroad by U.S. Saudi Arabia, and United Arab Emirates (Trucial States). 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 2001 2000 2001 AArreeaa oorr ccoouunnttrryy 11999999 22000000 Jan.— July Aug. Sept. Oct. Nov. Dec. Jan.P Jan. 1 Total estimated -9,953 -53,790 -9,064 -6,061 -114 -8,516 -3,038 -14,106 -9,789 -9,064 2 Foreign countries -10,518 -53,329 -8,531 -5,746 -117 -8,741 -3,223 -13,959 -9,904 -8,531 3 Europe -38,228 -50,704 -5,000 -6,351 3,707 -1,284 -3,707 -10,991 -6,850 -5,000 4 Belgium2 -81 73 164 -138 138 -127 320 53 -96 164 5 Germany 2,285 -7,304 -873 -2,199 -36 -1,738 1,424 -2,185 -1,065 -873 6 Luxembourg2 n.a. n.a. 411 n.a. n.a. n.a. n.a. n.a. n.a. 411 7 Netherlands 2,122 2,140 -793 -584 91 836 183 264 -1,622 -793 8 Sweden 1,699 1,082 218 114 56 214 -118 -104 328 218 9 Switzerland -1,761 -10,326 755 -1,398 -338 -959 -57 -301 64 755 10 United Kingdom -20,232 -33,669 -2,695 -4,372 3,054 -1,865 -3,793 -6,035 -4,199 -2,695 11 Channel Islands and Isle of Man3 n.a. n.a. -98 n.a. n.a. n.a. n.a. n.a. n.a. -98 12 Other Europe and former U.S.S.R -22,260 -2,700 -2,089 2,226 742 2,355 -1,666 -2,683 -260 -2,089 13 Canada 7,348 -308 -2,067 -872 222 1,417 160 -1,173 -1,492 -2,067 14 Latin America and Caribbean -7,523 -4,914 2,407 1,415 245 -4,979 3,963 -507 -245 2,407 15 Venezuela 362 1,288 227 89 45 314 152 251 300 227 16 Other Latin America and Caribbean 1,661 -11,581 3,261 1,261 61 -4,936 3,030 -1,262 -1,746 3,261 17 Netherlands Antilles -9,546 5,379 -1,081 65 139 -357 781 504 1,201 -1,081 18 Asia 29,359 1,639 -4,641 -488 -4,918 -3,319 -4,688 -1,289 -458 -4,641 19 Japan 20,102 10,580 -4,261 672 367 1,717 1,608 4,445 -3,855 -4,261 20 Africa -3,021 -414 -91 4 9 -139 -6 -16 -44 -91 21 Other 1,547 1,372 861 546 618 -437 1,056 17 -815 861 22 Nonmonetary international and regional organizations 565 -461 -533 -315 3 225 185 -147 115 -533 23 International 190 -483 -275 -333 15 391 39 -146 24 -275 24 Latin American regional 666 76 1 -1 -10 1 28 -1 6 1 MEMO 25 Foreign countries -10,518 -53,329 -8,531 -5,746 -117 -8,741 -3,222 -13,959 -9,904 -8,531 26 Official institutions -9,861 -6,302 2,226 -639 449 -6,626 -7,150 -4,967 1,068 2,226 27 Other foreign -657 -47,027 -10,757 -5,107 -566 -2,115 3,928 -8,992 -10,972 -10,757 Oil-exporting countries 28 Middle East4 2,207 3,483 -176 267 217 -1,030 -724 -888 48 -176 29 Africa5 0 0 -6 0 0 0 0 0 0 -6 1. Official and private transactions in marketable U.S. Treasury securities having an 3. Before January 2001, these data were included in United Kingdom. original maturity of more than one year. Data are based on monthly transactions reports. 4. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Excludes nonmarketable U.S. Treasury bonds and notes held by official institutions of foreign Emirates (Trucial States). countries. 5. Comprises Algeria, Gabon, Libya, and Nigeria. 2. Before January 2001, combined data reported for Belgium and Luxembourg. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A62 International Statistics • May 2001 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 2001 IItteemm 11999988 11999999 22000000 Oct. Nov. Dec. Jan. Feb. Mar. Exchange rates COUNTRY/CURRENCY UNIT 1 Australia/dollar2 62.91 64.54 58.15 52.80 52.18 54.66 55.52 53.38 50.31 2 Austria/schilling 12.379 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 3 Belgium/franc 36.31 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 4 Brazil/real 1.1605 1.8207 1.8301 1.8813 1.9483 1.9632 1.9561 2.0060 2.0955 5 Canada/dollar 1.4836 1.4858 1.4855 1.5125 1.5426 1.5219 1.5032 1.5216 1.5587 6 China, P.R./yuan 8.3008 8.2783 8.2784 8.2785 8.2774 8.2771 8.2776 8.2771 8.2775 7 Denmark/krone 6.7030 6.9900 8.0953 8.7276 8.6992 8.3059 7.9629 8.1103 8.2229 8 European Monetary Union/euro3 n.a. 1.0653 0.9232 0.8525 0.8552 0.8983 0.9376 0.9205 0.9083 9 Finland/markka 5.3473 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 10 France/franc 5.8995 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 11 Germany/deutsche mark 1.7597 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 12 Greece/drachma 295.70 306.30 365.92 398.29 397.94 379.58 n.a. n.a. 366.52 13 Hong Kong/dollar 7.7467 7.7594 7.7924 7.7977 7.7991 7.7991 7.7998 7.7999 7.7999 14 India/rupee 41.36 43.13 45.00 46.43 46.82 46.78 46.61 46.56 46.65 15 Ireland/pound2 142.48 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 16 Italy/lira 1,736.85 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 17 Japan/yen 130.99 113.73 107.80 108.44 109.01 112.21 116.67 116.23 121.51 18 Malaysia/ringgit 3.9254 3.8000 3.8000 3.8000 3.8000 3.8000 3.8000 3.8000 3.8000 19 Mexico/peso 9.152 9.553 9.459 9.537 9.508 9.467 9.769 9.711 9.599 70 Netherlands/guilder 1.9837 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 71 New Zealand/dollar2 53.61 52.94 45.68 40.01 39.90 42.97 44.42 43.45 41.82 22 Norway/krone 7.5521 7.8071 8.8131 9.3794 9.3524 9.0616 8.7817 8.9180 8.9859 23 Portugal/escudo 180.25 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 24 Singapore/dollar 1.6722 1.6951 1.7250 1.7525 1.7478 1.7361 1.7380 1.7435 1.7732 ?5 South Africa/rand 5.5417 6.1191 6.9468 7.4902 7.6889 7.6439 7.7786 7.8214 7.8980 26 South Korea/won 1,400.40 1,189.84 1,130.90 1,131.10 1,156.54 1,216.94 1,272.63 1,252.85 1,291.41 77 Spain/peseta 149.41 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 78 Sri Lanka/rupee 65.006 70.868 76.964 79.291 80.381 82.030 85.833 87.136 85.730 79 Sweden/krona 7.9522 8.2740 9.1735 9.9930 10.0965 9.6604 9.4910 9.7518 10.0516 30 Switzerland/franc 1.4506 1.5045 1.6904 1.7745 1.7779 1.6855 1.6305 1.6686 1.6908 31 Taiwan/dollar 33.547 32.322 31.260 31.846 32.433 33.123 32.673 32.330 32.622 37 Thai land/bah t 41.262 37.887 40.210 43.334 43.791 43.246 43.149 42.665 43.988 33 United Kingdom/pound2 165.73 161.72 151.56 145.06 142.58 146.29 147.75 145.25 144.45 34 Venezuela/bolivar 548.39 606.82 680.52 692.86 695.77 698.85 700.02 703.36 706.06 Indexes4 NOMINAL 35 Broad (January 1997= 100)5 116.48 116.87 119.93 123.27 124.21 123.28 123.14 123.77 125.91 36 Major currencies (March 1973= 100)6 95.79 94.07 98.34 102.24 103.08 101.26 100.24 101.44 103.98 37 Other important trading partners (January 1997= 100)7 126.03 129.94 130.26 131.99 132.87 133.61 135.01 134.52 135.56 REAL 38 Broad (March 1973= 100)5 99.20 98.52 102.18 105.23 105.73 104.85r 105.27r 106.04r 108.66 39 Major currencies (March 1973= 100)6 97.23 96.66 102.85 107.30 108.12 106.17 105.95r 107.43' 110.60 40 Other important trading partners (March 1973= 100)7 108.11 107.23 107.68 109.07r 109.19r 109.65r 110.94r 110.8 LR 112.90 1. Averages of certified noon buying rates in New York for cable transfers. Data in this 4. Starting with the February 2001 Bulletin, revised index values resulting from the annual table also appear in the Board's G.5 (405) monthly statistical release. For ordering address, revision of data that underlie the calculated trade weights are reported. For more information see inside front cover. on the indexes of foreign exchange value of the dollar, see Federal Reserve Bulletin, vol. 84 2. U.S. cents per currency unit. (October 1998), pp. 811-818. 3. The euro is reported in place of the individual euro area currencies. By convention, the 5. Weighted average of the foreign exchange value of the U.S. dollar against the currencies rate is reported in U.S. dollars per euro. The bilateral currency rates can be derived from the of a broad group of U.S. trading partners. The weight for each currency is computed as an euro rate by using the fixed conversion rates (in currencies per euro) as shown below: average of U.S. bilateral import shares from and export shares to the issuing country and of a measure of the importance to U.S. exporters of that country's trade in third country markets. 6. Weighted average of the foreign exchange value of the U.S. dollar against a subset of Euro equals broad index currencies that circulate widely outside the country of issue. The weight for each 13.7603 Austrian schillings 1936.27 Italian lire currency is its broad index weight scaled so that the weights of the subset of currencies in the 40.3399 Belgian francs 40.3399 Luxembourg francs index sum to one. 5.94573 Finnish markkas 2.20371 Netherlands guilders 7. Weighted average of the foreign exchange value of the U.S. dollar against a subset of 6.55957 French francs 200.482 Portuguese escudos broad index currencies that do not circulate widely outside the country of issue. The weight 1.95583 German marks 166.386 Spanish pesetas for each currency is its broad index weight scaled so that the weights of the subset of .787564 Irish pounds 340.750 Greek drachmas currencies in the index sum to one. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A63 Guide to Statistical Releases and Special Tables STATISTICAL RELEASES—List Published Semiannually, with Latest Bulletin Reference Issue Page Anticipated schedule of release dates for periodic releases December 2000 A72 SPECIAL TABLES—Data Published Irregularly, with Latest Bulletin Reference Title and Date Issue Page Assets and liabilities of commercial banks March 31, 2000 August 2000 A64 June 30, 2000 November 2000 A64 September 30, 2000 February 2001 A64 December 31, 2000 May 2001 A64 Terms of lending at commercial banks May 2000 August 2000 A66 August 2000 November 2000 A66 November 2000 February 2001 A66 February 2001 May 2001 A66 Assets and liabilities of U.S. branches and agencies of foreign banks March 31, 2000 August 2000 A72 June 30, 2000 November 2000 A72 September 30, 2000 February 2001 A72 December 31,2000 May 2001 A72 Pro forma balance sheet and income statements for priced service operations March 31, 2000 August 2000 A76 June 30, 2000 November 2000 A76 September 30, 2000 February 2001 A76 Residential lending reported under the Home Mortgage Disclosure Act 1998 September 1999 A64 1999 September 2000 A64 Disposition of applications for private mortgage insurance 1998 September 1999 A73 1999 September 2000 A73 Small loans to businesses and farms 1998 September 1999 A76 1999 September 2000 A76 Community development lending reported under the Community Reinvestment Act 1998 September 1999 A79 1999 September 2000 A79 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 Special Tables • May 2001 4.20 DOMESTIC AND FOREIGN OFFICES Insured Commercial Bank Assets and Liabilities Consolidated Report of Condition, December 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 DDoommeessttiicc IItteemm TToottaall ttoottaall Total Domestic Over 100 Under 100 1 Total assets3 6,164,193 5,429,062 4,311,426 3,576,296 1,579,256 273,510 2 Cash and balances due from depository institutions 362,532 264,805 282,029 184,302 67,119 13,384 3 Cash items in process of collection, unposted debits, and currency and coin n.a. n.a. 141,958 138,903 34,177 n.a. 4 Cash items in process of collection and unposted debits n.a. n.a. n.a. 107,768 22,563 n.a. 5 Currency and coin n.a. n.a. n.a. 31,135 11,615 n.a. 6 Balances due from depository institutions in the United States n.a. n.a. 38,280 25,048 22,668 n.a. 7 Balances due from banks in foreign countries and foreign central banks n.a. n.a. 87,930 6,573 1,084 n.a. 8 Balances due from Federal Reserve Banks n.a. n.a. 13,860 13,778 9,189 n.a. 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) n.a. 36,153 n.a. 13,810 17,063 5,280 10 Total securities, held-to-maturity (amortized cost) and available-for-sale (fair value) 1,057,966 n.a. 607,087 n.a. 384,256 66,623 11 U.S. Treasury securities 74,346 n.a. 48,481 n.a. 21,161 4,703 12 U.S. government agency and corporation obligations (excludes mortgage-backed securities) 219,116 n.a. 79,628 n.a. 110044,,444422 3355,,004466 13 Issued by U.S. government agencies 4,964 n.a. 2,504 n.a. 1,835 625 14 Issued by U.S. government-sponsored agencies 214,152 n.a. 77,124 n.a. 102,607 34,421 15 Securities issued by states and political subdivisions in the United States 92,210 n.a. 32,488 n.a. 48,383 11,339 16 General obligations 65,688 n.a. 21,277 n.a. 36,279 8,131 17 Revenue obligations 25,858 n.a. 10,786 n.a. 11,908 3,164 18 Industrial development and similar obligations 665 n.a. 425 n.a. 195 44 19 Mortgage-backed securities (MBS) 463,632 n.a. 309,407 n.a. 142,213 12,012 20 Pass-through securities 292,325 n.a. 209,659 n.a. 74,537 8,129 21 Guaranteed by GNMA 70,775 n.a. 41,942 n.a. 25,772 3,062 7.7 Issued by FNMA and FHLMC 218,986 n.a. 166,193 n.a. 47,776 5,017 23 Privately issued 2,564 n.a. 1,524 n.a. 990 50 24 Other mortgage-backed securities (includes CMOs, REMICs, and stripped MBS) 171,307 n.a. 99,747 n.a. 67,676 3,884 25 Issued or guaranteed by FNMA, FHLMC, or GNMA 108,811 n.a. 67,451 n.a. 37,802 3,557 26 Collateralized by MBS issued or guaranteed by FNMA, FHLMC, or GNMA 4,313 n.a. 3,524 n.a. 681 108 27 All other mortgage-backed securities 58,183 n.a. 28,772 n.a. 29,192 219 28 Other debt securities 168,087 n.a. 109,201 n.a. 56,719 2,167 29 Other domestic debt securities n.a. n.a. 51,928 n.a. 52,404 n.a. 30 Foreign debt securities n.a. n.a. 57,273 n.a. 4,316 n.a. 31 Equity securities 40,575 n.a. 27,882 n.a. 11,337 1,356 32 Investments in mutual funds and other equity securities with readily determinable fair value 13,827 n.a. 10,473 n.a. 3,035 319 33 All other equity securities 26,748 n.a. 17,410 n.a. 8,302 1,036 34 Federal funds sold and securities purchased under agreements to resell 279,437 224,703 220,201 165,467 46,497 12,739 35 Total loans and lease-financing receivables, gross 3,776,942 3,486,494 2,588,085 2,297,637 1,017,294 171,563 36 LESS: Unearned income on loans 2,829 2,216 1,473 859 1,111 245 37 Total loans and leases (net of unearned income) 3,774,113 3,484,279 2,586,613 2,296,779 1,016,183 171,317 38 LESS: Allowance for loan and lease losses 62,848 n.a. 43,925 n.a. 16,610 2,313 39 LESS: Allocated transfer risk reserves 146 n.a. 145 n.a. 1 0 40 EQUALS: Total loans and leases, net 3,711,119 n.a. 2,542,543 n.a. 999,572 169,004 Total loans and leases, gross, by category 41 Loans secured by real estate 1,658,136 1,626,129 987,539 955,532 569,886 100,710 42 Construction and land development n.a. 160,666 n.a. 87,281 63,777 9,608 43 Farmland n.a. 34,016 n.a. 6,656 16,018 11,342 44 One- to four-family residential properties n.a. 908,626 n.a. 595,849 265,194 47,583 45 Revolving, open-end loans, extended under lines of credit n.a. 127,488 n.a. 93,783 30,944 2,761 46 n.a. 781,138 n.a. 502,066 234,250 44,822 47 Multifamily (five or more) residential properties n.a. 60,135 n.a. 33,552 24,267 2,315 48 Nonfarm nonresidential properties n.a. 462,686 n.a. 232,194 200,630 29,862 49 Loans to depository institutions 120,444 104,838 109,092 93,485 11,252 101 50 Commercial banks in the United States n.a. n.a. 76,849 76,389 10,983 n.a. 51 Other depository institutions in the United States n.a. n.a. 10,111 9,990 170 n.a. 52 Banks in foreign countries n.a. n.a. 22,131 7,107 98 n.a. 53 Loans to finance agricultural production and other loans to farmers 47,841 46,919 13,552 12,630 18,466 15,823 54 Commercial and industrial loans 1,041,930 879,104 836,977 674,152 174,424 30,528 55 U.S. addressees (domicile) n.a. n.a. 684,508 663,458 173,623 n.a. 56 Non-U.S. addressees (domicile) n.a. n.a. 152,469 10,693 801 n.a. 57 Acceptances of other banks 1.548 933 1,465 849 77 7 58 U.S. banks n.a. n.a. 381 328 n.a. n.a. 59 n.a. n.a. 1,084 521 n.a. n.a. 60 Loans to individuals for household, family, and other personal expenditures (includes purchased paper) 587,985 543,657 346,427 302,099 219,486 22,073 61 Credit cards and related plans 232,682 n.a. 132,415 n.a. 99,490 777 62 Other (includes single payment and installment) 355,303 n.a. 214,012 n.a. 119,996 21,296 63 Obligations (other than securities) of states and political subdivisions in the United States (includes nonrated industrial development obligations) 20,950 20,937 14,133 14,120 6,030 787 64 All other loans 132,555 104,384 124,238 96,067 7,511 806 65 Loans to foreign governments and official institutions n.a. n.a. 6,362 1,669 21 n.a. 66 Other loans n.a. n.a. 117,875 94,397 7,490 n.a. 67 Loans for purchasing and carrying securities n.a. n.a. n.a. 16,722 1,424 n.a. 68 All other loans (excludes consumer loans) n.a. n.a. n.a. 77,676 6,066 n.a. 69 Lease-financing receivables 165,553 159,594 154,662 148,704 10,162 728 70 Assets held in trading accounts 304,196 n.a. 303,581 n.a. 604 1 71 Premises and fixed assets (including capitalized leases) 75,022 n.a. 46,917 n.a. 22,730 5,376 72 Other real estate owned 3,170 n.a. 1,697 n.a. 1,175 297 73 Investments in unconsolidated subsidiaries and associated companies 6,475 n.a. 6,051 n.a. 373 52 74 Customers' liability on acceptances outstanding 8,055 n.a. 7,862 n.a. 191 2 75 Net due from own foreign offices, Edge Act and agreement subsidiaries, and IBFs n.a. 24,805 n.a. 24,805 n.a. n.a. 76 Intangible assets 99,813 n.a. 85,505 n.a. 13,449 859 77 All other assets 256,409 n.a. 207,955 n.a. 43,291 5,164 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, December 31, 2000 Millions of dollars except as noted Banks with domestic Banks with foreign offices' offices only2 DDoommeessttiicc IItteemm TToottaall ttoottaall Total Domestic Over 100 Under 100 78 Total liabilities, limited-life preferred stock, and equity capital 6,164,193 n.a. 4,311,426 n.a. 1,579,256 273,510 79 Total liabilities 5,644,358 4,909,227 3,965,434 3,230,304 1,434,622 244301 80 Total deposits 4,146,787 3,440,035 2,759,158 2,052,406 1,156,621 231,008 81 Individuals, partnerships, and corporations 3,703,713 3,195,491 2,426,142 1,917,920 1,069,742 207,829 82 U.S. government n.a. 8,513 n.a. 7,454 915 143 83 States and political subdivisions in the United States n.a. 160,201 n.a. 73,968 67,384 18,849 84 Commercial banks in the United States 101,924 37,444 92,823 28,343 8,021 1,079 85 Other depository institutions in the United States n.a. 8,392 n.a. 3,616 3,330 1,446 86 Foreign banks, governments, and official institutions 138,725 12,688 137,986 11,949 728 12 87 Banks n.a. n.a. 105,331 10,576 726 n.a. 88 Governments and official institutions n.a. n.a. 32,655 1,372 2 n.a. 89 Certified and official checks 18,532 17,306 10,382 9,156 6,500 1,650 90 Total transaction accounts n.a. 670,848 n.a. 393,237 212,690 64,921 91 Individuals, partnerships, and corporations n.a. 564,126 n.a. 325,901 181,831 56,394 92 U.S. government n.a. 2,174 n.a. 1,639 466 69 93 States and political subdivisions in the United States n.a. 47,637 n.a. 22,742 18,446 6,449 94 Commercial banks in the United States n.a. 27,545 n.a. 22,900 4,380 265 95 Other depository institutions in the United States n.a. 2,772 n.a. 1,940 750 83 96 Foreign banks, governments, and official institutions n.a. 9,288 n.a. 8,960 317 11 97 Banks n.a. n.a. n.a. 8,181 316 n.a. 98 Governments and official institutions n.a. n.a. n.a. 779 2 n.a. 99 Certified and official checks n.a. 17,306 n.a. 9,156 6,500 1,650 100 Demand deposits (included in total transaction accounts) n.a. 525,217 n.a. 350,891 139,474 34,852 101 Individuals, partnerships, and corporations n.a. 445,723 n.a. 292,358 121,785 31,579 102 U.S. government n.a. 2,061 n.a. 1,599 404 59 103 States and political subdivisions in the United States n.a. 20,619 n.a. 13,987 5,426 1,206 104 Commercial banks in the United States n.a. 27,467 n.a. 22,899 4,304 264 105 Other depository institutions in the United States n.a. 2,759 n.a. 1,939 739 82 106 Foreign banks, governments, and official institutions n.a. 9,282 n.a. 8,954 317 11 107 Banks n.a. n.a. n.a. 8,181 316 n.a. 108 Governments and official institutions n.a. n.a. n.a. 773 2 n.a. 109 Certified and official checks n.a. 17,306 n.a. 9,156 6,500 1,650 110 Total nontransaction accounts n.a. 2,769,187 n.a. 1,659,169 943,931 166,087 111 Individuals, partnerships, and corporations n.a. 2,631,366 n.a. 1,592,020 887,911 151,435 112 U.S. government n.a. 6,339 n.a. 5,815 449 75 113 States and political subdivisions in the United States n.a. 112,564 n.a. 51,226 48,939 12,400 114 Commercial banks in the United States n.a. 9,899 n.a. 5,443 3,642 814 115 Other depository institutions in the United States n.a. 5,620 n.a. 1,676 2,580 1,363 116 Foreign banks, governments, and official institutions n.a. 3,400 n.a. 2,989 411 0 117 Banks n.a. n.a. n.a. 2,396 411 n.a. 118 Governments and official institutions n.a. n.a. n.a. 593 0 n.a. 119 Federal funds purchased and securities sold under agreements to repurchase 465,202 436,256 379,844 350,898 82,123 3,235 120 Demand notes issued to the U.S. Treasury 14,210 14,210 12,763 12,763 1,381 66 121 Trading liabilities 211,663 n.a. 211,552 n.a. 111 1 122 Other borrowed money 532,303 483,216 363,086 313,999 161,634 7,583 123 Banks' liability on acceptances executed and outstanding 8,142 5,968 7,948 5,775 192 2 124 Notes and debentures subordinated to deposits 86,397 n.a. 82,380 n.a. 3,990 27 125 Net due to own foreign offices, Edge Act and agreement subsidiaries, and IBFs n.a. 193,946 n.a. 193,946 n.a. n.a. 126 All other liabilities 179,654 n.a. 148,703 n.a. 28,571 2,380 127 Total equity capital 519,835 n.a. 345,992 n.a. 144,634 29,209 MEMO 128 Trading assets at large banks4 304,133 146,583 303,581 146,032 552 n.a. 129 U.S. Treasury securities (domestic offices) n.a. 14,099 n.a. 14,092 6 n.a. 130 U.S. government agency corporation obligations n.a. 12,549 n.a. 12,431 118 n.a. 131 Securities issued by states and political subdivisions in the United States n.a. 1,469 n.a. 1,315 153 n.a. 132 Mortgage-backed securities n.a. 6,286 n.a. 6,184 102 n.a. 133 Other debt securities n.a. 25,437 n.a. 25,437 0 n.a. 134 Other trading assets n.a. 15,645 n.a. 15,540 106 n.a. 135 Trading assets in foreign banks 157,549 0 157,549 0 0 n.a. 136 Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity contracts 71,099 71,099 71,033 71,033 67 n.a. 137 Total individual retirement (IRA) and Keogh plan accounts n.a. 168,960 n.a. 81,290 76,450 11,220 138 Total brokered deposits n.a. 189,469 n.a. 85,637 101,439 2,393 139 Fully insured brokered deposits n.a. 135,839 n.a. 49,220 84.450 2,169 140 Issued in denominations of less than $100,000 n.a. 27,231 n.a. 7,240 18,864 1,128 141 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. 108,609 n.a. 41,980 65,587 1,041 142 Money market deposit accounts (MMDAs) n.a. 991,097 n.a. 674,269 290,340 26,487 143 Other savings deposits (excluding MMDAs) n.a. 422,359 n.a. 266,637 136,539 19,184 144 Total time deposits of less than $100,000 n.a. 792,164 n.a. 387,259 321,134 83,771 145 Total time deposits of $100,000 or more n.a. 563,567 n.a. 331,003 195,919 36,645 146 All negotiable order of withdrawal (NOW) accounts n.a. 143,582 n.a. 42,236 71,881 29,466 147 Number of banks 8,289 8,289 160 n.a. 2,963 5,166 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 intra-office 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 olf-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 • May 2001 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, March 31, 2001 A. Commercial and industrial loans made by all commercial 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 r c e a t r n i a g v t t e e ) e 2 o ( f m l d o il o a l l i n l o a s n r s s ) (tho d u o s s l i l a z a n e r d s s ) of ma D tu a r y i s t y3 S c e o c l u la re te 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 7.19 102,426 652 341 39.9 9.8 30.9 75.4 2 Minimal risk 6.23 7,961 1,628 289 28.7 8.5 66.5 84.3 3 Low risk 6.54 18,663 1,061 350 23.0 18.4 44.8 75.4 4 Moderate risk 7.28 30,661 551 460 37.0 9.6 34.8 88.4 5 Other 7.97 19,725 444 283 42.7 5.9 22.1 74.3 By maturity/repricing interval6 6 Zero interval 7.87 23,771 398 329 62.8 9.8 4.3 67.6 7 Minimal risk 6.92 330 224 822 22.3 12.8 69.2 95.8 8 Low risk 7.45 1,817 414 427 58.6 36.7 10.8 90.0 9 Moderate risk 8.34 5,372 236 460 51.2 15.4 9.9 93.1 10 Other 9.48 2,776 136 467 73.7 12.4 2.6 95.4 11 Daily 6.88 31,747 863 270 29.7 43.0 69.5 12 Minimal risk 6.12 4,629 10,347 293 38.2 4.1 70.1 85.0 13 Low risk 6.37 5,633 2,887 271 7.1 6.5 59.3 69.7 14 Moderate risk 6.96 9,812 831 377 25.8 13.2 37.3 79.9 15 Other 7.42 5,881 596 146 45.5 4.8 18.6 50.6 16 2 to 30 days 6.94 30,576 1,452 301 23.5 5.6 44.0 87.0 17 Minimal risk 6.18 2,261 4,632 231 9.5 5.3 72.8 95.3 18 Low risk 6.40 7,093 1,650 341 12.6 12.3 56.5 86.4 19 Moderate risk 6.92 11,384 1,683 384 32.0 3.1 46.1 95.4 20 Other 7.76 7,707 201 27.5 2.1 27.0 79.2 21 31 to 365 days 7.22 9,465 425 480 35.3 8.0 33.1 80.5 22 Minimal risk 6.63 673 369 129 26.9 44.1 26.4 39.1 23 Low risk 6.48 2,416 551 312 19.3 12.2 24.8 77.0 24 Moderate risk 7.38 2,633 356 719 52.3 1.5 43.5 92.8 25 Other 7.94 2,692 874 495 36.2 3.9 38.1 90.1 26 More than 365 days 2,391 178 71.2 14.0 8.5 66.9 27 Minimal risk .. . 8.13 61 94 57.3 33.9 2.0 61.8 28 Low risk 8.30 564 233 61.8 17.4 1.7 87.5 29 Moderate risk .. 8.32 1,190 220 75.2 15.2 8.3 58.6 30 Other 9.53 319 155 83.9 8.0 25.0 61.2 Weighted- Weighted- average average risk maturity/ rating5 repricing interval Days SIZE OF LOAN (thousands of dollars) 31 1-99 9.45 2,760 3.3 178 83.7 27.8 77.7 32 100-999 8.63 10,194 3.2 93 70.2 17.7 83.8 33 1,000-9,999 7.50 31,000 3.0 53 38.0 7.4 28.3 79.1 34 10,000 or more 6.66 58,472 2.7 28 33.6 8.9 37.5 71.9 BASE RATE OF LOAN4 35 Prime7 9.20 18,266 3.3 70.2 19.4 1.2 73.2 36 Fed funds 6.34 21,400 2.7 33.9 9.4 21.6 56.8 37 Other domestic 6.55 12,320 2.3 12.6 19.8 72.4 67.1 38 Foreign 6.95 30,156 2.8 28.0 3.6 49.8 87.0 39 Other 7.00 20,284 3.1 53.2 4.9 14.3 85.0 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, March 31, 2001—Continued B. Commercial and industrial loans made by all domestic 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 r t n a iv t t e e ) ^ ' o ( f m d il o l l i l o a n r s s ) (tho d u o s ll a a n r d s s ) of Days S c e o c l u la 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 RISK 1 All commercial and industrial loans 7.50 65,881 441 506 42.7 13.2 27.3 77.4 2 Minimal risk 6.27 5,183 1,132 434 43.9 13.1 78.6 88.5 3 Low risk 6.64 13,811 822 467 30.7 23.6 41.0 81.1 4 Moderate risk 7.46 23,932 446 580 39.9 10.8 29.0 89.3 5 Other 8.64 9,851 238 532 66.2 9.2 12.8 86.7 By malurity/repricing interval6 6 Zero interval 8.43 17,661 304 429 52.5 12.3 5.6 56.7 7 Minimal risk 6.91 327 224 789 22.0 12.9 69.8 95.8 8 Low risk 7.42 1,777 410 426 59.1 37.5 11.0 89.9 9 Moderate risk 8.33 5,212 233 464 51.6 15.8 9.6 93.6 10 Other 9.47 2,547 128 449 77.4 13.6 2.8 95.0 11 Daily 7.05 19,806 560 437 36.8 12.4 46.5 87.2 12 Minimal risk 6.12 3,223 10,303 420 54.9 5.9 93.0 95.1 13 Low risk 6.40 3,399 1,952 437 11.6 7.5 74.7 98.5 14 Moderate risk 7.01 8,068 706 452 30.1 13.5 42.6 81.8 15 Other 8.26 2,398 254 374 59.0 10.5 8.9 71.8 16 2 to 30 days 7.09 17,983 976 494 30.1 8.1 34.9 93.0 17 Minimal risk 6.12 1,075 3,039 453 19.8 11.0 74.9 97.9 18 Low risk 6.54 4,948 1,266 464 17.5 16.2 48.4 84.9 19 Moderate risk 7.16 7,345 1,238 585 30.8 3.4 34.1 98.8 20 Other 8.25 3,192 475 449 56.0 3.3 17.6 93.5 21 31 to 365 days 7.32 6,415 303 646 47.2 11.7 17.5 76.8 22 Minimal risk 6.95 490 273 145 37.0 60.6 8.2 23.2 23 Low risk 6.51 1,983 466 360 22.9 14.8 16.0 77.1 24 Moderate risk 7.59 1,906 269 962 61.4 1.7 22.9 90.8 25 Other 8.38 1,200 493 74.6 8.7 27.0 88.6 26 More than 365 days 8.47 2,357 175 70.8 14.2 7.1 66.5 27 Minimal risk . . . 8.13 61 94 57.3 33.9 2.0 61.8 28 Low risk 8.30 564 233 61.8 17.4 1.7 87.5 29 Moderate risk . . 8.29 1,155 214 74.5 15.6 5.5 57.3 30 Other 9.53 319 155 83.9 8.0 25.0 61.2 Weighted- Weighted- average average risk maturity/ rating5 repricing interval Days SIZE OF LOAN (thousands of dollars) 31 1-99 9.45 2,718 3.2 84.0 27.8 77.5 32 100-999 8.76 9,049 3.2 73.5 17.6 83.4 33 1,000-9,999 7.78 20,863 2.9 42.4 8.2 21.4 77.0 34 10,000 or more 6.82 33,251 2.5 31.2 13.9 38.9 76.1 BASE RATE OF LOAN4 35 Prime7 9.23 16,537 3.3 62 72.1 15.5 1.3 71.1 36 Fed funds 6.26 8,282 2.3 12 42.6 23.6 33.3 57.2 37 Other domestic 9,605 2.3 23 15.8 25.4 64.9 85.3 38 Foreign 7.10 17,751 2.7 56 36.7 4.8 34.1 81.2 39 Other 7.39 13,706 3.0 124 34.0 6.5 19.8 86.8 Footnotes appear at end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 Special Tables • May 2001 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, March 31, 2001—Continued C. Commercial and industrial loans made by large domestic banks' 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 l o o u 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 t e y e 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 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 Days S c e o c l u la r t e e d r a b l y Callable p S r u e p p b e a n je y a c m l t t y e t n o t c M om ad m e it u m nd en er t LOAN RISK5 1 All commercial and industrial loans 7.36 59,378 776 496 39.3 12.4 29.4 77.6 2 Minimal risk 6.12 4,886 4,752 437 41.6 12.4 83.1 91.2 3 Low risk 6.46 12,482 1,897 448 26.8 25.2 45.0 82.1 4 Moderate risk 7.31 21,872 783 572 36.6 9.8 30.5 90.7 5 Other 8.55 8,613 355 520 64.2 7.4 12.3 88.1 By maturity/repricing interval6 6 Zero interval 8.34 14,689 578 432 48.3 8.4 5.8 50.9 7 Minimal risk 6.42 251 956 906 10.5 6.2 86.4 98.5 8 Low risk 7.23 1,251 1,115 387 62.9 48.6 13.4 99.1 9 Moderate risk 8.12 4,177 352 472 45.9 10.9 10.4 95.4 10 Other 9.43 1,952 215 473 78.0 7.9 2.1 97.1 11 Daily 6.99 19,252 631 435 35.6 12.5 47.8 87.6 12 Minimal risk 6.11 3,222 10,685 420 54.9 5.9 93.1 95.1 13 Low risk 6.36 3,336 2,917 432 11.1 7.6 76.1 98.6 14 Moderate risk 6.93 7,773 854 451 28.0 13.7 44.1 82.5 15 Other 8.21 2,296 282 372 57.3 10.9 9.2 71.1 16 2 to 30 days 7.06 17,184 1,280 508 28.8 7.9 35.7 93.5 17 Minimal risk 6.10 1,054 5,574 458 18.6 11.2 76.4 99.1 18 Low risk 6.53 4,850 1,565 470 16.9 16.3 49.3 85.2 19 Moderate risk 7.15 7,144 1,666 599 30.5 3.3 33.9 98.9 20 Other 8.23 2,996 585 446 53.8 3.0 17.0 94.8 21 31 to 365 days 6.93 5,152 1,761 660 41.9 12.1 18.7 79.4 22 Minimal risk 5.81 318 1,790 120 8.3 80.1 12.3 20.1 23 Low risk 6.08 1,677 2,126 371 13.8 17.2 18.6 79.2 24 Moderate risk 7.26 1,631 1,854 934 60.1 1.3 21.0 95.4 25 Other 8.36 1,021 1,368 1,006 76.4 5.6 26.3 90.4 26 More than 365 days 8.07 1,466 741 56.8 17.4 5.2 73.8 27 Minimal risk . . . 7.13 33 394 22.0 60.5 3.6 84.6 28 Low risk 7.49 232 703 9.0 30.0 1.1 99.2 29 Moderate risk .. 8.01 910 1,130 70.8 17.3 4.8 62.7 30 Other 9.64 154 75.6 3.9 14.2 89.6 Weighted- Weighted- average average risk maturity/ rating5 repricing interval Days SIZE OF LOAN (thousands of dollars) 31 1-99 9.16 1,381 3.4 83.4 29.4 1.9 87.2 32 100-999 8.64 6,454 3.3 69.4 16.1 4.2 86.5 33 1,000-9,999 7.73 18,795 3.0 39.8 7.4 22.8 76.7 34 10,000 or more 6.81 32,748 2.5 31.2 13.8 39.2 75.9 BASE RATE OF LOAN4 35 Prime7 9.20 13,319 3.4 69.9 12.9 .5 69.8 36 Fed funds 6.25 8,256 2.3 42.4 23.6 33.4 57.1 37 Other domestic 6.46 9,462 2.3 14.6 25.6 65.8 85.6 38 Foreign 7.05 16,593 2.7 35.4 5.0 34.9 80.4 39 Other 7.19 11,748 3.0 27.7 3.7 22.1 90.4 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, March 31, 2001—Continued D. Commercial and industrial loans made by small domestic banks' Weighted- Amount of loans (percent) Weighted- Amount of Average loan average average loans size maturity3 ( l e p o f e a f r e n 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 RISK3 1 All commercial and industrial loans 8.79 6,503 593 74.0 20.3 8.4 75.9 2 Minimal risk 8.81 297 368 82.8 24.0 4.2 44.7 3 Low risk 8.33 1,330 130 643 66.8 8.2 3.4 71.9 4 Moderate risk 9.05 2,060 80 74.2 22.1 12.9 74.5 5 Other 9.27 1,237 72 79.9 22.2 16.0 77.2 By maturity/repricing interval6 6 Zero interval 8.91 2,972 91 409 73.3 31.5 4.6 7 Minimal risk 8.52 76 63 371 60.1 35.1 15.0 8 Low risk 7.87 527 164 533 50.1 11.0 5.3 68.2 9 Moderate risk 9.16 1,034 98 433 74.7 35.7 6.3 86.3 10 Other 9.62 595 55 370 75.3 32.2 5.1 87.9 11 Daily 9*. 06 554 114 81.0 7.9 12 Minimal risk * 13 Low risk 8.54 62 104 36.9 3.3 1.2 92.8 14 Moderate risk 8.99 295 126 456 87.1 9.1 2.3 63.4 15 Other 9.37 102 78 421 95.5 2.4 1.4 87.6 16 2 to 30 days 7.65 17 Minimal risk 18 Low risk 7.18 122 147 47.2 10.7 4.4 69.9 19 Moderate risk 7.54 200 122 111 42.5 8.0 40.2 92.1 20 Other 196 123 494 90.2 7.2 26.7 74.0 21 31 to 365 days 8.87 1,262 69 590 69.2 10.2 12.7 66.1 22 Minimal risk 9.04 172 106 191 90.0 24.6 .6 29.0 23 Low risk 306 88 303 72.6 1.6 1.8 66.2 24 Moderate risk 275 44 1,127 69.2 3.7 34.1 63.4 25 Other 179 106 254 64.2 26.4 31.0 78.2 26 More than 365 days 9.12 78 93.7 8.9 54.4 27 Minimal risk .. . 9.34 27 49 100.0 1.5 34.1 28 Low risk 331 158 8.6 2.1 79.2 29 Moderate risk . . 9.34 245 53 88.3 9.5 8.1 37.4 30 Other 9.43 165 99 91.7 11.7 35.2 34.6 Weighted- Weighted- average average risk maturity/ rating5 repricing interval Days SIZE OF LOAN (thousands of dollars) 31 1-99 9.76 1,337 3.1 322 84.6 26.2 67.4 32 100-999 9.03 2,595 3.0 207 83.7 21.4 75.6 33 1,000-9,999 8.29 2,068 2.7 189 65.9 15.7 9.1 79.9 34 10,000 or more 7.01 503 2.5 34 29.0 17.9 16.0 83.9 BASE RATE OF LOAN4 35 Prime7 9.36 3,217 3.0 95 81.1 26.1 4.8 76.4 36 Fed funds 8.47 26 3.7 633 82.6 17.0 29.2 94.1 37 Other domestic 8.24 143 2.3 434 93.3 9.5 5.1 68.7 38 Foreign 7.72 1,158 2.9 247 55.4 1.3 22.3 93.1 39 Other 8.54 1,958 2.7 360 71.8 22.8 6.1 65.2 Footnotes appear at end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Special Tables • May 2001 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, March 31, 2001—Continued E. Commercial and industrial loans made by U.S. branches and agencies of foreign banks' Weighted- Amount of loans (percent) Weighted- Amount of Average loan average average loans size maturity3 ( l e p o f e a f r e n c c e t r n i a v t t e ) 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 Days S c e o c l u la r t e e d r a b l y p S r u e p p b e a n je y a c m l t t y e t n o t c M om ad m e it u m nd en er t LOAN RISK5 1 All commercial and industrial loans 6.63 36,544 4,748 34.8 37.5 71.9 2 Minimal risk 6.16 2,778 8,990 .2 44.1 76.4 3 Low risk 6.24 4,852 6,148 1.3 3.9 55.5 59.2 4 Moderate risk 6.66 6,729 3,494 26.7 5.1 55.6 85.3 5 Other 7.31 9,874 3,273 19.2 2.5 31.5 62.0 By maturity/repricing interval6 6 Zero interval 7 Minimal risk 8 Low risk 8.71 40 673 572 36.6 5.0 1.5 94.9 9 Moderate risk 8.82 161 398 155 37.5 .9 22.5 76.6 10 Other 9.60 228 428 924 32.6 99.4 11 Daily 6.59 11,941 8,455 3 37.0 40.1 12 Minimal risk 6.14 1,406 10,447 1 17.5 61.9 13 Low risk 6.33 2,234 10,672 10 .3 5.0 35.9 25.9 14 Moderate risk 6.74 1,744 4,605 2 5.6 11.8 12.8 70.8 15 Other 6.84 3,484 8,190 36.2 .9 25.3 36.0 16 2 to 30 days 6.73 12,594 4,776 14.1 57.1 78.4 17 Minimal risk 6.22 1,187 8,817 .3 70.9 92.9 18 Low risk 6.09 2,145 5,492 1.3 3.5 75.0 89.7 19 Moderate risk 6.48 4,039 4,862 34.1 2.6 67.9 89.4 20 Other 7.40 4,515 4,155 7.4 1.3 33.7 69.2 21 31 to 365 days 7.03 3,050* 2,664 10.2 65.9 88.3 22 Minimal risk * 23 Low risk 6.34 433 3.341 90 2.9 65.0 76.3 24 Moderate risk 6.83 727 2.445 82 28.3 97.4 98.0 25 Other 7.59 1,492 2.320 153 5.4 47.1 91.3 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 8.99 41 3.7 63.6 29.0 12.1 94.1 32 100-999 7.65 1,145 3.4 44.0 17.9 34.7 87.4 33 1,000-9,999 6.91 10,137 3.2 28.8 5.8 42.4 83.5 34 10,000 or more 6.46 25,221 3.0 36.7 2.3 35.6 66.4 BASE RATE OF LOAN4 35 Prime7 8.96 1,729 3.4 51.8 57.2 .4 93.5 36 Fed funds 6.39 13,118 3.1 28.4 .4 14.2 56.5 37 Other domestic 6.79 2,715 2.2 1.5 99.2 2.6 38 Foreign 6.75 12,405 2.9 15.5 1.9 72.2 95.2 39 Other 6.20 6,577 4.6 93.3 1.6 2.7 81.3 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 50 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 0.13 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 8.52 percent for all banks; 8.50 percent for rate and the federal funds rate; foreign money market rates; and other base rates not included large domestic banks, 8.61 percent for small domestic banks; and 8.50 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 • May 2001 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, December 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 o u t F d a s i l n g I o B n F ly s inc T I l B o u t F d a s i l n g I o B n F ly s inc T I l B o u t F d a s i l n g I o B n F ly s 1 Total assets4 984,296 185,168 825,972 159,638 26,474 7,161 42,008 3,812 2 Claims on nonrelated parties 785,032 78,408 645,211 71,169 25,855 2,275 41,997 176 3 Cash and balances due from depository institutions 77,024 34,714 75,100 34,210 772 196 335 135 4 Cash items in process of collection and unposted debits 1,950 0 1,893 0 6 0 11 0 5 Currency and coin (U.S. and foreign) 17 n.a. 12 n.a. 1 0 n.a. 6 Balances with depository institutions in United States 5522,,556622 1166,,333344 5511,,005522 1166,,005566 641 122 186 10 / U.S. branches and agencies of other foreign banks (including IBFs) 45,697 15,661 44,586 15,409 490 121 169 10 8 Other depository institutions in United States (including IBFs) .. . 66,,886655 673 66,,446655 647 152 1 17 0 9 Balances with banks in foreign countries and with foreign central banks 22,124 18,380 21,865 18,154 82 74 128 125 10 Foreign branches of U.S. banks 800 719 699 619 0 0 100 100 11 Banks in home country and home-country central banks 7,609 6,630 7,591 6,619 8 8 1 0 12 All other banks in foreign countries and foreign central banks .... 13,716 11,031 13,575 10,916 74 66 27 25 13 Balances with Federal Reserve Banks 371 n.a. 278 n.a. 42 n.a. 9 n.a. 14 Total securities and loans 454,332 37,480 364,336 31,014 24,209 2,024 28,665 32 15 Total securities, book value 110,895 3,944 103,055 3,476 1,192 420 4,782 12 16 U.S. Treasury 12,115 n.a. 11,826 n.a. 45 n.a. 231 n.a. 17 Obligations of U.S. government agencies and corporations 45,319 n.a. 42.963 n.a. 200 11,,993311 n.a. 18 Other bonds, notes, debentures, and corporate stock (including state and local securities) 53,461 3,944 48,267 3,476 947 420 2,619 12 19 Securities of foreign governmental units 9,637 1,870 9,454 1,809 149 48 12 12 20 All Other 43,823 2,075 38.813 1,667 799 373 2,607 0 21 Federal funds sold and securities purchased under agreements to resell 111,185 4,098 108,074 3,971 291 12 1,372 0 22 U.S. branches and agencies of other foreign banks 11,183 2,654 10,890 2,558 41 4 100 0 23 Commercial banks in United States 13,220 172 12,619 163 238 8 4 0 24 Other 86,782 1,271 84,565 1,250 12 0 1,269 0 25 Total loans, gross 343,820 33,580 261,573 27,581 23,061 11,,660055 23,899 20 26 LESS: Unearned income on loans 383 44 292 43 43 11 16 0 27 EQUALS: Loans, net 343,436 33,536 261,280 27,538 23,018 1,604 23,883 20 Total loans, gross, by category 28 Real estate loans 17,155 68 12,393 68 3,032 0 135 0 29 Loans to depository institutions 25,703 15,810 19,097 11,697 2,007 1,392 182 16 30 Commercial banks in United States (including IBFs) 6,804 2,529 4,736 1,466 1,590 1,003 2 0 31 U.S. branches and agencies of other foreign banks 4,799 2,439 2,966 1,376 1,528 1,003 1 0 32 Other commercial banks in United States 2,005 90 1,770 90 62 0 1 0 33 Other depository institutions in United States (including IBFs) 15 0 0 0 0 0 0 0 34 Banks in foreign countries 18,884 13,281 14,361 10,231 416 389 180 16 35 Foreign branches of U.S. banks 294 257 291 254 0 0 0 0 36 Other banks in foreign countries 18,590 13,024 14,070 9,977 416 389 180 16 37 Loans to other financial institutions 51,033 2,001 40,619 1,814 1,261 0 5,271 0 38 Commercial and industrial loans 221,808 13,446 164,652 11,905 16,175 191 17,032 0 39 U.S. addressees (domicile) 182,063 42 135,663 42 14,866 0 14,733 0 40 Non-U.S. addressees (domicile) 39,745 13,404 28,989 11,864 1,308 191 2,299 0 41 Acceptances of other banks 565 13 141 13 26 0 398 0 42 U.S. banks 8 0 5 0 3 0 0 0 43 Foreign banks 557 13 136 13 23 0 398 0 44 Loans to foreign governments and official institutions (including foreign central banks) 3,975 2,158 3,368 2,021 139 22 259 3 4b Loans for purchasing or carrying securities (secured and unsecured) . . . 14,969 0 14,638 0 0 0 5 0 46 All other loans 7,967 86 6,410 63 421 0 230 0 47 Lease financing receivables (net of unearned income) 644 0 255 0 0 0 388 0 48 U.S. addressees (domicile) 644 0 255 0 0 0 388 0 49 Non-U.S. addressees (domicile) 0 0 0 0 0 0 0 0 50 Trading assets 106,624 644 65,832 644 54 0 9,725 0 51 All other assets 35,868 1,472 31,870 1,330 528 43 1,900 9 52 Customers' liabilities on acceptances outstanding 1,402 n.a. 1,019 n.a. 178 166 53 U.S. addressees (domicile) 702 n.a. ^ 522 n.a. 169 7 54 Non-U.S. addressees (domicile) 700 n.a. 497 n.a. 9 n.a. 159 55 Other assets including other claims on nonrelated parties 34,466 1,472 30,851 1,330 351 43 1,734 9 56 Net due from related depository institutions5 199,264 106,760 180,761 88,469 619 4,886 11 3,636 57 Net due from head office and other related depository institutions5. . . 119999,,226644 n.a. 118800,,776611 n.a. 619 nn..aa.. 11 nn..aa.. 58 Net due from establishing entity, head office, and other related depository institutions5 n.a. 106,760 n.a. 88,469 n.a. 4,886 n.a. 3,636 59 Total liabilities4 984,296 185,168 825,972 159,638 26,474 7,161 42,008 3,812 60 Liabilities to nonrelated parties 867,955 169,823 752,840 145,183 11,580 7,016 34,866 3,779 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, December 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 t F 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 388,659 123,950 333,058 111,077 3,106 1,300 13,413 2,535 62 Individuals, partnerships, and corporations 283,873 10,702 238,095 5,537 2,652 180 12,407 13 63 U.S. addressees (domicile) 267,017 3 228,054 3 948 0 12,370 0 64 Non-U.S. addressees (domicile) 16,855 10,699 10,041 5,534 1,704 180 36 13 65 Commercial banks in United States (including IBFs) 53,671 15,394 47,773 15,049 314 99 621 101 66 U.S. branches and agencies of other foreign banks 25,606 14,189 21,948 13,854 0 99 140 101 67 Other commercial banks in United States 28,065 1,206 25,825 1,195 314 0 481 0 68 Banks in foreign countries 6,647 69,358 6,471 66,776 13 121 0 812 69 Foreign branches of U.S. banks 1,727 3,628 1,727 3,474 0 20 0 134 70 Other banks in foreign countries 4,919 65,731 4,744 63,302 13 101 0 677 71 Foreign governments and official institutions (including foreign central banks) 22,053 28,471 19,672 23,690 12 900 338833 11,,661100 72 All other deposits and credit balances 22,178 25 20,846 25 105 0 0 0 73 Certified and official checks 237 n.a. 201 n.a. 9 n.a. 1 n.a. 74 Transaction accounts and credit balances (excluding IBFs) 8,798 n.a. 6,978 n.a. 325 n.a. 208 n.a. 75 Individuals, partnerships, and corporations 6,884 n.a. 5,267 n.a. 299 n.a. 206 n.a. 76 U.S. addressees (domicile) 4,623 n.a. 3,910 n.a. 191 n.a. 204 n.a. 77 Non-U.S. addressees (domicile) 2,261 n.a. 1,356 n.a. 108 n.a. 2 n.a. 78 Commercial banks in United States (including IBFs) 153 n.a. 150 n.a. 0 n.a. 0 n.a. 79 U.S. branches and agencies of other foreign banks 79 n.a. 78 n.a. 0 n.a. 0 n.a. 80 Other commercial banks in United States 74 n.a. 72 n.a. 0 n.a. 0 n.a. 81 Banks in foreign countries 813 n.a. 690 n.a. 13 n.a. 0 n.a. 82 Foreign branches of U.S. banks 12 n.a. 12 n.a. 0 n.a. 0 n.a. 83 Other banks in foreign countries 801 n.a. 678 n.a. 13 n.a. 0 n.a. 84 Foreign governments and official institutions (including foreign central banks) 597 n.a. 555599 n.a. 3 n.a. 00 n.a. 85 All other deposits and credit balances 114 n.a. 110 n.a. 1 n.a. 0 n.a. 86 Certified and official checks 237 n.a. 201 n.a. 9 n.a. 1 n.a. 87 Demand deposits (included in transaction accounts and credit balances) 8,196 n.a. 6,643 n.a. 256 n.a. 220055 n.a. 88 Individuals, partnerships, and corporations 6,409 n.a. 5,057 n.a. 230 n.a. 203 n.a. 89 U.S. addressees (domicile) 4,439 n.a. 3,851 n.a. 169 n.a. 201 n.a. 90 Non-U.S. addressees (domicile) 1,970 n.a. 1,205 n.a. 61 n.a. 2 n.a. 91 Commercial banks in United States (including IBFs) 129 n.a. 127 n.a. 0 n.a. 0 n.a. 92 U.S. branches and agencies of other foreign banks 73 n.a. 72 n.a. 0 n.a. 0 n.a. 93 Other commercial banks in United States 57 n.a. 55 n.a. 0 n.a. 0 n.a. 94 Banks in foreign countries 787 n.a. 665 n.a. 13 n.a. 0 n.a. 95 Foreign branches of U.S. banks 1 n.a. 1 n.a. 0 n.a. 0 n.a. 96 Other banks in foreign countries 786 n.a. 664 n.a. 13 n.a. 0 n.a. 97 Foreign governments and official institutions (including foreign central banks) 590 n.a. 552 n.a. 3 n.a. 00 n.a. 98 All other deposits and credit balances 43 n.a. 41 n.a. 0 n.a. 0 n.a. 99 Certified and official checks 237 n.a. 201 n.a. 9 n.a. 1 n.a. 100 Nontransaction accounts (including MMDAs, excluding IBFs) 379,861 n.a. 326,080 n.a. 2,781 n.a. 13,204 n.a. 101 Individuals, partnerships, and corporations 276,989 n.a. 232,828 n.a. 2,353 n.a. 12,200 n.a. 102 U.S. addressees (domicile) 262,395 n.a. 224,143 n.a. 757 n.a. 12,166 n.a. 10.3 Non-U.S. addressees (domicile) 14,594 n.a. 8,685 n.a. 1,596 n.a. 34 n.a. 104 Commercial banks in United States (including IBFs) 53,518 n.a. 47,623 n.a. 314 n.a. 621 n.a. 105 U.S. branches and agencies of other foreign banks 25,527 n.a. 21,870 n.a. 0 n.a. 140 n.a. 106 Other commercial banks in United States 27,991 n.a. 25,753 n.a. 314 n.a. 481 n.a. 107 Banks in foreign countries 5,834 n.a. 5,781 n.a. 0 n.a. 0 n.a. 108 Foreign branches of U.S. banks 1,715 n.a. 1,715 n.a. 0 n.a. 0 n.a. 109 Other banks in foreign countries 4,119 n.a. 4,065 n.a. 0 n.a. 0 n.a. 110 Foreign governments and official institutions (including foreign central banks) 21,456 n.a. 1199,,111122 n.a. 9 n.a. 338833 n.a. 111 All other deposits and credit balances 22,064 n.a. 20,736 n.a. 105 n.a. 0 n.a. 112 IBF deposit liabilities n.a. 123,950 n.a. 111,077 n.a. 1,300 n.a. 2,535 113 Individuals, partnerships, and corporations n.a. 10,702 n.a. 5,537 n.a. 180 n.a. 13 114 U.S. addressees (domicile) n.a. 3 n.a. 3 n.a. 0 n.a. 0 115 Non-U.S. addressees (domicile) n.a. 10,699 n.a. 5,534 n.a. 180 n.a. 13 116 Commercial banks in United States (including IBFs) n.a. 15,394 n.a. 15,049 n.a. 99 n.a. 101 117 U.S. branches and agencies of other foreign banks n.a. 14,189 n.a. 13,854 n.a. 99 n.a. 101 118 Other commercial banks in United States n.a. 1,206 n.a. 1,195 n.a. 0 n.a. 0 119 Banks in foreign countries n.a. 69,358 n.a. 66,776 n.a. 121 n.a. 812 120 Foreign branches of U.S. banks n.a. 3,628 n.a. 3,474 n.a. 20 n.a. 134 121 Other banks in foreign countries n.a. 65,731 n.a. 63,302 n.a. 101 n.a. 677 122 Foreign governments and official institutions (including foreign central banks) n.a. 28,471 n.a. 23,690 n.a. 900 n.a. 1,610 123 All other deposits and credit balances n.a. 25 n.a. 25 n.a. 0 n.a. 0 Footnotes appear at end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 Special Tables • May 2001 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, December 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 o u t F d a s i l n g I o B n F ly s inc T I l B o u t F d a s i 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 175,938 20,281 165,764 14, $82 836 384 3,337 1,209 125 U.S. branches and agencies of other foreign banks 12,861 3,246 10,796 2,354 420 291 845 201 176 Other commercial banks in United States 12,139 484 10,954 279 240 30 420 175 177 Other 150,938 16,551 144,014 12,249 176 63 2,072 833 128 Other borrowed money 79,224 23,399 61,651 17,197 5,920 5,276 5,694 19 179 Owed to nonrelated commercial banks in United States (including IBFs) 12.693 4,336 10,523 3,180 1,363 1,092 314 2 no Owed to U.S. offices of nonrelated U.S. banks 5,585 696 4,955 592 176 104 207 0 131 Owed to U.S. branches and agencies of nonrelated foreign banks 7,108 3,640 5,568 2, >88 1,187 9 88 107 2 132 Owed to nonrelated banks in foreign countries 17,196 13,676 13,098 9,756 3,152 3,114 22 17 133 Owed to foreign branches of nonrelated U.S. banks 1,089 744 867 545 199 199 0 0 134 Owed to foreign offices of nonrelated foreign banks 16,107 12,932 12,231 9,211 2,953 2,915 22 17 135 Owed to others 49,335 5,387 38,031 4,261 1,406 1,070 5,358 0 136 All other liabilities 100,184 2,193 81,289 2,026 418 57 9,887 16 137 Branch or agency liability on acceptances executed and outstanding 1,782 n.a. 1,156 n.a. 178 n.a. 402 n.a. 138 Trading liabilities 67,247 38 52,926 38 44 0 8,254 0 139 Other liabilities to nonrelated parties 31,156 2,155 27,208 1, ?88 196 57 1,231 16 140 Net due to related depository institutions5 116,341 15,345 73,132 14,455 14,894 144 7,142 32 141 Net due to head office and other related depository institutions .... 116,341 n. a. 73,132 n. a. 14,894 n. a. 7,142 n. a. 142 Net due to establishing entity, head office, and other related depository institutions5 n.a. 15,345 n.a. 14,455 n.a. 144 n.a. 32 MEMO 143 Non-interest-bearing balances with commercial banks in United States 1,208 0 1,128 0 37 0 6 0 144 Holding of own acceptances included in commercial and industrial loans 1,806 • 1,360 -• 147 • 207 • 145 Commercial and industrial loans with remaining maturity of one year or less (excluding those in nonaccrual status) 108,210 76,589 8,494 8,658 146 Predetermined interest rates 57,483 n.a. 38,777 n.a. 3,915 n a. 6,230 n. a. 147 Floating interest rates 50,727 37,812 4,579 2,429 148 Commercial and industrial loans with remaining maturity of more than one year (excluding those in nonaccrual status) 111,112 86,076 7,607 8,273 149 Predetermined interest rates 28,793 20,898 1,036 4,812 150 Floating interest rates 82,319 65,178 6,571 3,461 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, December 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 t F d a s i l n g I o B n F ly s exc T I l B o u t F d a s i l n g I o B n F ly s exc T I l B o u t F 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)))) 380,535 n.a. 328,249 n.a. 2,609 n.a. 13,129 n.a. 111155552222 TTTTiiiimmmmeeee ddddeeeeppppoooossssiiiittttssss ooooffff $$$$ 111100000000,,,,000000000000 oooorrrr mmmmoooorrrreeee 373,632 n.a. 321,399 n.a. 2,591 n.a. 13,126 n.a. 111155553333 TTTTiiiimmmmeeee CCCCDDDDssss iiiinnnn ddddeeeennnnoooommmmiiiinnnnaaaattttiiiioooonnnnssss ooooffff $$$$111100000000,,,,000000000000 oooorrrr mmmmoooorrrreeee wwwwiiiitttthhhh rrrreeeemmmmaaaaiiiinnnniiiinnnngggg mmmmaaaattttuuuurrrriiiittttyyyy ooooffff mmmmoooorrrreeee tttthhhhaaaannnn 11112222 mmmmoooonnnntttthhhhssss 6,903 n.a. 6,850 n.a. 18 n.a. 2 n.a. All states2 New York California Illinois inc T I l B o u t F d a s i l n g I o B n F ly s inc T I l B o u t F d a s i l n g I o B n F ly s inc T I l B o u t F d a s i l n g I o B n F ly s inc T I l B o u t F 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 28,837 n.a. 24,459 n.a. 3,107 n.a. 422 n.a. 111155555555 NNNNuuuummmmbbbbeeeerrrr ooooffff rrrreeeeppppoooorrrrttttssss ffffiiiilllleeeedddd6666 340 177 69 28 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. 11, 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. 11 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

76 Federal Reserve Bulletin • May 2001 Index to Statistical Tables References are to pages A3-A75, although the prefix " " is omitted in this index. ACCEPTANCES, bankers (See Bankers acceptances) Federal agency obligations, 5, 9-11, 28, 29 Assets and liabilities (See also Foreigners) Federal credit agencies, 30 Commercial banks, 15-21, 64-65 Federal finance Domestic finance companies, 32, 33 Debt subject to statutory limitation, and types and ownership of Federal Reserve Banks, 10 gross debt, 27 Foreign banks, U.S. branches and agencies, 72-5 Receipts and outlays, 25, 26 Foreign-related institutions, 20 Treasury financing of surplus, or deficit, 25 Automobiles Treasury operating balance, 25 Consumer credit, 36 Federal Financing Bank, 30 Production, 44, 45 Federal funds, 23, 25 Federal Home Loan Banks, 30 Federal Home Loan Mortgage Corporation, 30, 34, 35 BANKERS acceptances, 5, 10, 22, 23 Federal Housing Administration, 30, 34, 35 Bankers balances, 15-21, 72-5. (See also Foreigners) Federal Land Banks, 35 Bonds (See also U.S. government securities) Federal National Mortgage Association, 30, 34, 35 New issues, 31 Federal Reserve Banks Rates, 23 Condition statement, 10 Business activity, nonfinancial, 42 Discount rates (See Interest rates) Business loans (See Commercial and industrial loans) U.S. government securities, 5, 10, 11, 27 Federal Reserve credit, 5, 6, 10, 12 CAPACITY utilization, 43 Federal Reserve notes, 10 Capital accounts Federally sponsored credit agencies, 30 Commercial banks, 15-21, 64-65 Finance companies Federal Reserve Banks, 10 Assets and liabilities, 32 Certificates of deposit, 23 Business credit, 33 Commercial and industrial loans Loans, 36 Commercial banks, 15-21, 64-65, 66-71 Paper, 22, 23 Weekly reporting banks, 17, 18 Float, 5 Commercial banks Flow of funds, 37-41 Assets and liabilities, 15-21, 64-65 Foreign banks, U.S. branches and agencies, 72-5 Commercial and industrial loans, 15-21, 64-65, 66-71 Foreign currency operations, 10 Consumer loans held, by type and terms, 36, 66—71 Foreign deposits in U.S. banks, 5 Real estate mortgages held, by holder and property, 35 Foreign exchange rates, 62 Terms of lending, 64-65 Foreign-related institutions, 20 Time and savings deposits, 4 Foreign trade, 51 Commercial paper, 22, 23, 32 Foreigners Condition statements (See Assets and liabilities) Claims on, 52, 55-7, 59 Construction, 42, 46 Liabilities to, 51^*, 58, 60, 61 Consumer credit, 36 Consumer prices, 42 Consumption expenditures, 48, 49 GOLD Corporations Certificate account, 10 Stock, 5, 51 Profits and their distribution, 32 Government National Mortgage Association, 30, 34, 35 Security issues, 31, 61 Gross domestic product, 48, 49 Cost of living (See Consumer prices) Credit unions, 36 Currency in circulation, 5, 13 HOUSING, new and existing units, 46 Customer credit, stock market, 24 INCOME, personal and national, 42, 48, 49 DEBT (See specific types of debt or securities) Industrial production, 42, 44 Demand deposits, 15—21 Insurance companies, 27, 35 Depository institutions Interest rates Reserve requirements, 8 Bonds, 23 Reserves and related items, 4-6, 12, 64-65 Commercial banks, 66-71 Deposits (See also specific types) Consumer credit, 36 Commercial banks, 4, 15-21, 64-65 Federal Reserve Banks, 7 Federal Reserve Banks, 5, 10 Money and capital markets, 23 Discount rates at Reserve Banks and at foreign central banks and Mortgages, 34 foreign countries (See Interest rates) Prime rate, 22, 66-71 Discounts and advances by Reserve Banks (See Loans) International capital transactions of United States, 50-61 Dividends, corporate, 32 International organizations, 52, 53, 55, 58, 59 Inventories, 48 Investment companies, issues and assets, 32 EMPLOYMENT, 42 Investments (See also specific types) Euro, 62 Commercial banks, 4, 15-21, 66-71 Federal Reserve Banks, 10, 11 FARM mortgage loans, 35 Financial institutions, 35 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A77 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, 64-65, 66-71 Savings deposits (See Time and savings deposits) Federal Reserve Banks, 5-7, 10, 11 Savings institutions, 35, 36, 37^41 Financial institutions, 35 Securities (See also specific types) Foreign banks, U.S. branches and agencies, 72 Federal and federally sponsored credit agencies, 30 Insured or guaranteed by United States, 34, 35 Foreign transactions, 60 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 Mutual savings banks (See Thrift institutions) TAX receipts, federal, 26 Thrift institutions, 4. (See also Credit unions and Savings NATIONAL defense outlays, 26 institutions) National income, 48 Time and savings deposits, 4, 13, 15-21, 64-65 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 Bank 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

78 Federal Reserve Bulletin • May 2001 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 MICHELLE A. SMITH, Assistant to the Board DAVID H. HOWARD, Deputy Director DONALD J. WINN, Assistant to the Board VINCENT R. REINHART, Deputy Director WINTHROP P. HAMBLEY, Deputy Congressional Liaison THOMAS A. CONNORS, Associate Director JOHN LOPEZ, Special Assistant to the Board DALE W. HENDERSON, Associate Director BOB STAHLY MOORE, Special Assistant to the Board RICHARD T. FREEMAN, Assistant Director ROSANNA PIANALTO-CAMERON, Special Assistant to the Board WILLIAM L. HELKIE, Assistant Director DAVID W. SKIDMORE, Special Assistant to the Board STEVEN B. KAMIN, Assistant Director DIANE E. WERNEKE, Special Assistant to the Board RALPH W. TRYON, Assistant Director LEGAL DIVISION DIVISION OF RESEARCH AND STATISTICS J. VIRGIL MATTINGLY, JR., General Counsel DAVID J. STOCKTON, Director SCOTT G. ALVAREZ, Associate General Counsel EDWARD C. ETTIN, Deputy Director RICHARD M. ASHTON, Associate General Counsel DAVID WILCOX, Deputy Director KATHLEEN M. O'DAY, Associate General Counsel WILLIAM R. JONES, Associate Director ANN E. MISBACK, Assistant General Counsel MYRON L. KWAST, Associate Director SANDRA L. RICHARDSON, Assistant General Counsel STEPHEN D. OLINER, Associate Director STEPHEN L. SICILIANO, Assistant General Counsel PATRICK M. PARKINSON, Associate Director KATHERINE H. WHEATLEY, Assistant General Counsel LAWRENCE SLIFMAN, Associate Director CHARLES S. STRUCKMEYER, Associate Director OFFICE OF THE SECRETARY MARTHA S. SCANLON, Deputy Associate Director JENNIFER J. JOHNSON, Secretary JOYCE K. ZICKLER, Deputy Associate Director ROBERT DEV. FRIERSON, Associate Secretary WAYNE S. PASSMORE, Assistant Director BARBARA R. LOWREY, Associate Secretary and Ombudsman DAVID L. REIFSCHNEIDER, Assistant Director JANICE SHACK-MARQUEZ, Assistant Director DIVISION OF BANKING ALICE PATRICIA WHITE, Assistant Director SUPERVISION AND REGULATION 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, Senior Associate Director ROGER T. COLE, Senior Associate Director DIVISION OF MONETARY AFFAIRS WILLIAM A. RYBACK, Senior Associate Director DONALD L. KOHN, Director GERALD A. EDWARDS, JR., Associate Director DAVID E. LINDSEY, Deputy Director STEPHEN M. HOFFMAN, JR., Associate Director BRIAN F. MADIGAN, Associate Director JAMES V. HOUPT, Associate Director RICHARD D. PORTER, Deputy Associate Director JACK P. JENNINGS, Associate Director WILLIAM C. WHITESELL, Assistant Director MICHAEL G. MARTINSON, Associate Director NORMAND R.V. BERNARD, Special Assistant to the Board MOLLY S. WASSOM, Associate Director HOWARD A. AMER, Deputy Associate Director DIVISION OF CONSUMER NORAH M. BARGER, Deputy Associate Director AND COMMUNITY AFFAIRS BETSY CROSS, Deputy Associate Director RICHARD A. SMALL, Deputy Associate Director DOLORES S. SMITH, Director DEBORAH P. BAILEY, Assistant Director GLENN E. LONEY, Deputy Director BARBARA J. BOUCHARD, Assistant Director SANDRA F. BRAUNSTEIN, Assistant Director ANGELA DESMOND, Assistant Director MAUREEN P. ENGLISH, Assistant Director JAMES A. EMBERSIT, Assistant Director ADRIENNE D. HURT, Assistant Director CHARLES H. HOLM, Assistant Director IRENE SHAWN MCNULTY, Assistant Director HEIDI WILLMANN RICHARDS, Assistant Director WILLIAM G. SPANIEL, Assistant Director DAVID M. WRIGHT, Assistant Director SIDNEY M. SUSSAN, Adviser WILLIAM C. SCHNEIDER, JR., Project Director, National Information Center Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A79 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, Associate Director MANAGEMENT DIVISION KENNETH D. BUCKLEY, Assistant Director STEPHEN J. CLARK, Associate Director, Finance Function TILLENA G. CLARK, 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 CHRISTINE M. FIELDS, Assistant Director, Human Resources MARSHA W. REIDHILL, Assistant Director Function JEFF J. STEHM, Assistant Director SHEILA CLARK, EEO Programs Director DIVISION OF SUPPORT SERVICES OFFICE OF THE INSPECTOR GENERAL BARRY R. SNYDER, Inspector General ROBERT E. FRAZIER, Director GEORGE M. LOPEZ, Assistant Director DONALD L. ROBINSON, Deputy Inspector General DAVID L. WILLIAMS, Assistant Director DIVISION OF INFORMATION TECHNOLOGY RICHARD C. STEVENS, Director MARIANNE M. EMERSON, Deputy Director MAUREEN T. HANNAN, Associate Director RAYMOND H. MASSEY, Associate Director GEARY L. CUNNINGHAM, Assistant Director WAYNE A. EDMONDSON, Assistant Director Po KYUNG KIM, Assistant Director SUSAN F. MARYCZ, 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

80 Federal Reserve Bulletin • May 2001 Federal Open Market Committee and Advisory Councils FEDERAL OPEN MARKET COMMITTEE MEMBERS ALAN GREENSPAN, Chairman WILLIAM J. MCDONOUGH, Vice Chairman ROGER W. FERGUSON, JR. EDWARD W. KELLEY, JR. MICHAEL H. MOSKOW EDWARD M. GRAMLICH LAURENCE H. MEYER WILLIAM POOLE THOMAS M. HOENIG CATHY E. MINEHAN ALTERNATE MEMBERS JERRY L. JORDAN ANTHONY M. SANTOMERO JAMIE B. STEWART, JR. ROBERT D. MCTEER, JR. GARY H. STERN STAFF DONALD L. KOHN, Secretary and Economist JEFFREY C. FUHRER, Associate Economist NORMAND R.V. BERNARD, Deputy Secretary CRAIG S. HAKKIO, Associate Economist LYNN S. Fox, Assistant Secretary DAVID H. HOWARD, Associate Economist GARY P. GILLUM, Assistant Secretary WILLIAM C. HUNTER, Associate Economist J. VIRGIL MATTINGLY, JR., General Counsel DAVID E. LINDSEY, Associate Economist THOMAS C. BAXTER, JR., Deputy General Counsel ROBERT H. RASCHE, Associate Economist KAREN H. JOHNSON, Economist VINCENT R. REINHART, Associate Economist DAVID J. STOCKTON, Economist LAWRENCE SLIFMAN, Associate Economist CHRISTINE M. CUMMING, Associate Economist DAVID WILCOX, Associate Economist PETER R. FISHER, Manager, System Open Market Account FEDERAL ADVISORY COUNCIL DOUGLAS A. WARNER, III, President LAWRENCE K. FISH, Vice President LAWRENCE K. FISH, First District ALAN G. MCNALLY, 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 CAMDEN R. FINE, Tenth District L. M. BAKER, JR., Fifth District RICHARD W. EVANS, JR., Eleventh District L. PHILLIP HUMANN, Sixth District LINNET F. DEILY, Twelfth District JAMES ANNABLE, Co-Secretary WILLIAM J. KORSVIK, Co-Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

CONSUMER ADVISORY COUNCIL LAUREN ANDERSON, New Orleans, Louisiana, Chairman DOROTHY BROADMAN, San Francisco, California, Vice Chairman ANTHONY S. ABB ATE, Saddlebrook, New Jersey ANNE S. LI, Trenton, New Jersey TERESA A. BRYCE, St. Louis, Missouri J. PATRICK LIDDY, Cincinnati, Ohio MALCOLM BUSH, Chicago, Illinois OSCAR MARQUIS, Park Ridge, Illinois MANUEL CASANOVA, JR., Brownsville, Texas JEREMY NOWAK, Philadelphia, Pennsylvania CONSTANCE K. CHAMBERLIN, Richmond, Virginia NANCY PIERCE, Kansas City, Missouri ROBERT M. CHEADLE, Oklahoma City, Oklahoma MARTA RAMOS, San Juan, Puerto Rico MARY ELLEN DOMEIER, New Ulm, Minnesota RONALD A. REITER, San Francisco, California LESTER W. FIRSTENBERGER, Evansville, Indiana ELIZABETH RENUART, Boston, Massachusetts JOHN C. GAMBOA, San Francisco, California RUSSELL W. SCHRADER, San Francisco, California EARL JAROLIMEK, Fargo, North Dakota FRANK TORRES, JR., Washington, District of Columbia WILLIE M. JONES, Boston, Massachusetts GARY S. WASHINGTON, Chicago, Illinois M. DEAN KEYES, St. Louis, Missouri ROBERT L. WYNN II, Madison, Wisconsin THRIFT INSTITUTIONS ADVISORY COUNCIL THOMAS S. JOHNSON, New York, New York, President MARK H. WRIGHT, San Antonio, Texas, Vice President TOM R. DORETY, Tampa, Florida JAMES F. MCKENNA, Brookfield, Wisconsin RONALD S. ELIASON, Provo, Utah CHARLES C. PEARSON, JR., Harrisburg, Pennsylvania D. R. GRIMES, Alpharetta, Georgia HERBERT M. SANDLER, Oakland, California CORNELIUS D. MAHONEY, Westfield, Massachusetts EVERETT STILES, Franklin, North Carolina KAREN L. MCCORMICK, Port Angeles, Washington CLARENCE ZUGELTER, Kansas City, Missouri Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

82 Federal Reserve Bulletin • May 2001 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, 2000. THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A MULTI- FEDERAL RESERVE BULLETIN. Monthly. $25.00 per year or $2.50 COUNTRY MODEL, May 1984. 590 pp. $14.50 each. each in the United States, its possessions, Canada, and INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. Mexico. Elsewhere, $35.00 per year or $3.00 each. 440 pp. $9.00 each. ANNUAL STATISTICAL DIGEST: period covered, release date, num- FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. ber of pages, and price. December 1986. 264 pp. $10.00 each. 1981 October 1982 239 pp. $ 6.50 FINANCIAL SECTORS IN OPEN ECONOMIES: EMPIRICAL ANALY- 1982 December 1983 266 pp. $ 7.50 SIS AND POLICY ISSUES. August 1990. 608 pp. $25.00 each. 1983 October 1984 264 pp. $11.50 RISK MEASUREMENT AND SYSTEMIC RISK: PROCEEDINGS OF A 1984 October 1985 254 pp. $12.50 JOINT CENTRAL BANK RESEARCH CONFERENCE. 1996. 1985 October 1986 231 pp. $15.00 578 pp. $25.00 each. 1986 November 1987 288 pp. $15.00 1987 October 1988 272 pp. $15.00 1988 November 1989 256 pp. $25.00 EDUCATION PAMPHLETS 1980-89 March 1991 712 pp. $25.00 Short pamphlets suitable for classroom use. Multiple copies are 1990 November 1991 185 pp. $25.00 available without charge. 1991 November 1992 215 pp. $25.00 1992 December 1993 215 pp. $25.00 1993 December 1994 281 pp. $25.00 Consumer Handbook on Adjustable Rate Mortgages 1994 December 1995 190 pp. $25.00 Consumer Handbook to Credit Protection Laws 1990-95 November 1996 404 pp. $25.00 A Guide to Business Credit for Women, Minorities, and Small Businesses Series on the Structure of the Federal Reserve System SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SERIES OF The Board of Governors of the Federal Reserve System CHARTS. Weekly. $30.00 per year or $.70 each in the United The Federal Open Market Committee States, its possessions, Canada, and Mexico. Elsewhere, $35.00 per year or $.80 each. Federal Reserve Bank Board of Directors Federal Reserve Banks REGULATIONS OF THE BOARD OF GOVERNORS OF THE FEDERAL 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. Welcome to the Federal Reserve FEDERAL RESERVE REGULATORY SERVICE. Loose-leaf; updated When Your Home is on the Line: What You Should Know monthly. (Requests must be prepaid.) About Home Equity Lines of Credit Consumer and Community Affairs Handbook. $75.00 per year. Keys to Vehicle Leasing (also available in Spanish) Monetary Policy and Reserve Requirements Handbook. $75.00 Looking for the Best Mortgage (also available in Spanish) per year. 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

A83 STAFF STUDIES: Only Summaries Printed in the 164. THE 1989-92 CREDIT CRUNCH FOR REAL ESTATE, by James T. Fergus and John L. Goodman, Jr. July 1993. BULLETIN 20 pp. Studies and papers on economic and financial subjects that are of 167. A SUMMARY OF MERGER PERFORMANCE STUDIES IN BANKgeneral interest. Requests to obtain single copies of the full text or ING, 1980-93, AND AN ASSESSMENT OF THE "OPERATING to be added to the mailing list for the series may be sent to PERFORMANCE" AND "EVENT STUDY" METHODOLOGIES, Publications Services. 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 LATIONS: AN ANALYSIS OF EXPERIENCE WITH THE TRUTH of print. Staff Studies 165-174 are available on line at IN SAVINGS ACT, by Gregory Elliehausen and Barbara R. www.federalreserve.gov/pubs/staffstudies. Lowrey. December 1997. 17 pp. 171. THE COST OF BANK REGULATION: A REVIEW OF THE EVI- 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUBSIDI- DENCE, by Gregory Elliehausen. April 1998. 35 pp. ARIES OF BANK HOLDING COMPANIES, by Nellie Liang and 172. USING SUBORDINATED DEBT AS AN INSTRUMENT OF MAR- Donald Savage. February 1990. 12 pp. KET DISCIPLINE, by Study Group on Subordinated Notes 160. BANKING MARKETS AND THE USE OF FINANCIAL SER- and Debentures, Federal Reserve System. December 1999. VICES BY SMALL AND MEDIUM-SIZED BUSINESSES, by 69 pp. Gregory E. Elliehausen and John D. Wolken. September 173. IMPROVING PUBLIC DISCLOSURE IN BANKING, by Study 1990. 35 pp. Group on Disclosure, Federal Reserve System. March 2000. 162. EVIDENCE ON THE SIZE OF BANKING MARKETS FROM MORT- 35 pp. GAGE LOAN RATES IN TWENTY CITIES, by Stephen A. 174. BANK MERGERS AND BANKING STRUCTURE IN THE UNITED Rhoades. February 1992. 11 pp. STATES, 1980-98, by Stephen Rhoades. August 2000. 33 pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

84 Federal Reserve Bulletin • May 2001 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

A85 1-A 2-B 3-C 4-D 5-E ME Pittsburgh Baltimore MD i I / wv inati •Charloiu- Buffalo /* I NJ NY KY BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 6-F 7-G 8-H KY / Birmingham. n. ) w. «§ Mpsville 1 TN • Memphis ATLANTA CHICAGO ST. LOUIS 9-1 Jft \ . / , MM MI WI MINNEAPOLIS 10-J 12-L VY 'Co-.-' r. • ir Omaha* \l \Nk\ Denver NM < )klahoma City KANSAS CITY 11-K KZ DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

86 Federal Reserve Bulletin • May 2001 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 Barbara L. Walter1 PHILADELPHIA 19105 Charisse R. Lillie Anthony M. Santomero Glenn A. Schaeffer William H. Stone, Jr. CLEVELAND* 44101 David H. Hoag Jerry L. Jordan Robert W. Mahoney Sandra Pianalto Cincinnati 45201 George C. Juilfs Barbara B. Henshaw Pittsburgh 15230 Charles E. Bunch 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 James F. Goodmon Dan M. Bechter1 ATLANTA 30303 John F. Wieland Jack Guynn Paula Lovell Patrick K. Barron James M. McKee Birmingham 35283 Catherine Sloss Crenshaw Andre T. Anderson Jacksonville 32231 Julie K. Hilton Robert J. Slack Miami 33152 Mark T. Sodders James T. Curry III Nashville 37203 Whitney Johns Martin Melvyn K. Purcell1 New Orleans 70161 Ben Tom Roberts 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 Charles W. Mueller William Poole Walter L. Metcalfe, Jr. W. LeGrande Rives Little Rock 72203 Vick M. Crawley Robert A. Hopkins Louisville 40232 Roger Reynolds Thomas A. Boone Memphis 38101 Gregory M. Duckett Martha Perine Beard MINNEAPOLIS 55480 James J. Howard Gary H. Stern Ronald N. Zwieg James M. Lyon Helena 59601 Thomas O. Markle Samuel H. Gane KANSAS CITY 64198 Terrence P. Dunn Thomas M. Hoenig Jo Marie Dancik Richard K. Rasdall Denver 80217 Kathryn A. Paul Carl M. Gambs1 Oklahoma City 73125 Patricia B. Fennell Kelly J. Dubbert Omaha 68102 Gladys Styles Johnston Steven D. Evans DALLAS 75201 H. B. Zachry, Jr. Robert D. McTeer, Jr. Patricia M. Patterson 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 Nelson C. Rising Robert T. Parry George M. Scalise John F. Moore Los Angeles 90051 William D. Jones Mark L. Mullinix2 Portland 97208 Nancy Wilgenbusch Raymond H. Laurence1 Salt Lake City 84125 H. Roger Boyer 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

A87 Publications of Interest FEDERAL RESERVE REGULATORY SERVICE To promote public understanding of its regulatory func- The Payment System Handbook deals with expedited tions, the Board publishes the Federal Reserve Regu- funds availability, check collection, wire transfers, and latory Service, a four-volume loose-leaf service con- risk-reduction policy. It includes Regulations CC, J, and taining all Board regulations as well as related statutes, EE, related statutes and commentaries, and policy interpretations, policy statements, rulings, and staff statements on risk reduction in the payment system. opinions. For those with a more specialized interest in For domestic subscribers, the annual rate is $200 for the Board's regulations, parts of this service are pub- the Federal Reserve Regulatory Service and $75 for lished separately as handbooks pertaining to monetary each handbook. For subscribers outside the United policy, securities credit, consumer affairs, and the pay- States, the price including additional air mail costs is ment system. $250 for the service and $90 for each handbook. These publications are designed to help those who The Federal Reserve Regulatory Service is also availmust frequently refer to the Board's regulatory materi- able on CD-ROM for use on personal computers. For a als. They are updated monthly, and each contains cita- standalone PC, the annual subscription fee is $300. For tion indexes and a subject index. network subscriptions, the annual fee is $300 for 1 con- The Monetary Policy and Reserve Requirements current user, $750 for a maximum of 10 concurrent Handbook contains Regulations A, D, and Q, plus users, $2,000 for a maximum of 50 concurrent users, related materials. and $3,000 for a maximum of 100 concurrent users. The Securities Credit Transactions Handbook con- Subscribers outside the United States should add $50 tains Regulations T, U, and X, dealing with exten- to cover additional airmail costs. For further informasions of credit for the purchase of securities, together tion, call (202) 452-3244. with related statutes, Board interpretations, rulings, All subscription requests must be accompanied by a and staff opinions. Also included is the Board's list of check or money order payable to the Board of Goverforeign margin stocks. nors of the Federal Reserve System. Orders should be The Consumer and Community Affairs Handbook addressed to Publications Services, mail stop 127, Board contains Regulations B, C, E, G, M, P, Z, AA, BB, and of Governors of the Federal Reserve System, Washing- DD, and associated materials. ton, DC 20551. GUIDE TO THE FLOW OF FUNDS ACCOUNTS A new edition of Guide to the Flow of Funds Accounts and describes how the series is derived from source is now available from the Board of Governors. The new data. The Guide also explains the relationship between edition incorporates changes to the accounts since the the flow of funds accounts and the national income and initial edition was published in 1993. Like the earlier product accounts and discusses the analytical uses of publication, it explains the principles underlying the flow of funds data. The publication can be purchased, flow of funds accounts and describes how the accounts for $20.00, from Publications Services, Board of Goverare constructed. It lists each flow series in the Board's nors of the Federal Reserve System, Washington, DC flow of funds publication, "Flow of Funds Accounts of 20551. the United States" (the Z.l quarterly statistical release), Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

88 Federal Reserve Bulletin • May 2001 Federal Reserve Statistical Releases Available on the Commerce Department's Economic Bulletin Board The Board of Governors of the Federal Reserve Sys- For further information regarding a subscription to tem makes some of its statistical releases available to the economic bulletin board, please call (202) 482the public through the U.S. Department of Com- 1986. The releases transmitted to the economic bullemerce's economic bulletin board. Computer access tin board, on a regular basis, are the following: to the releases can be obtained by subscription. Reference Number Statistical release Frequency of release H.3 Aggregate Reserves Weekly/Thursday H.4.1 Factors Affecting Reserve Balances Weekly/Thursday H.6 Money Stock Weekly/Thursday H.8 Assets and Liabilities of Insured Domestically Chartered Weekly/Monday and Foreign Related Banking Institutions H.10 Foreign Exchange Rates Weekly/Monday H.15 Selected Interest Rates Weekly/Monday G.5 Foreign Exchange Rates Monthly/end of month G.17 Industrial Production and Capacity Utilization Monthly/midmonth G.19 Consumer Installment Credit Monthly/fifth business day Z. 1 Flow of Funds Quarterly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis