Federal Reserve Bulletin, 2001-10

Volume 87 • Number 10 • October 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 633 THE U.S. SYSTEM FOR MEASURING however, that the Board believes that significant CROSS-BORDER INVESTMENT IN substantive changes must be made to the interim SECURITIES: A PRIMER WITH A final rules so that they reflect the words of the DISCUSSION OF RECENT DEVELOPMENTS statute and the intention of the Congress (Testimony before the Subcommittee on Financial The tremendous growth in cross-border securi- Institutions and Credit and the Subcommittee on ties investment in recent years has called atten- Capital Markets, Insurance, and Government tion to the systems used by the United States and Sponsored Enterprises of the House Committee other countries to measure international securion Financial Services, August 2, 2001). ties flows and holdings. Ideally, the data gathered by the United States could tell us the extent to which foreign investors hold U.S. securities, 661 ANNOUNCEMENTS the types of securities held, and the countries in Federal Open Market Committee directives and which the securities are held, for example, and discount rate changes. could identify trends in investment. This article looks at how well the data shed light on these Board issues statement following World Trade topics. Special attention is given to the system's Center and Pentagon terrorist attacks. design and the implications of the design for Federal Reserve and European Central Bank data analysis. Also discussed are anticipated agree on swap arrangement. changes to the system and international efforts to improve data collection systems worldwide. Federal Reserve and Bank of Canada augment swap facility. 651 INDUSTRIAL PRODUCTION AND CAPACITY Federal Reserve and Bank of England agree on UTILIZATION FOR AUGUST 2001 swap arrangement. Industrial production fell 0.8 percent in August, Federal Reserve encourages banks to work with to 141.5 percent of its 1992 average. Having customers affected by disaster. declined for eleven consecutive months, industrial production in August was nearly 5 percent Interagency advisory issued on bank balance below its level in August 2000. The rate of sheets and capital ratios. capacity utilization for total industry fell 0.7 per- Board approves final rule on financial subsidicentage point, to 76.2 percent, a level almost aries of state member banks. 6 percentage points below its 1967-2000 average. Board to purchase office building in Washington, D.C. 654 TESTIMONY OF FEDERAL RESERVE OFFICIALS Errata: Federal Reserve Bulletin table. Laurence H. Meyer, Member, Board of Governors, presents the views of the Federal Reserve 665 MINUTES OF THE FEDERAL OPEN MARKET on the interim final rules issued by the Securities COMMITTEE MEETING HELD and Exchange Commission (SEC) to implement ON JUNE 26-27, 2001 the securities provisions of the Gramm-Leach- At this meeting, the Committee voted to lower Bliley Act (GLB Act) and states that the Board its target for the federal funds rate by 25 basis believes that the manner in which the bank points, to 33A percent. In taking this action, the securities provisions of the GLB Act are imple- Committee continued to believe that the risks mented is critically important to the ability of were weighted mainly toward conditions that banks to continue to provide high-quality bank- might generate economic weakness in the foreing services to their customers. He states further, seeable future. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

673 LEGAL DEVELOPMENTS A66 INDEX TO STATISTICAL TABLES Various bank holding company, bank service corporation, and bank merger orders; and pend- A68 BOARD OF GOVERNORS AND STAFF ing cases. A70 FEDERAL OPEN MARKET COMMITTEE AND AI FINANCIAL AND BUSINESS STATISTICS STAFF; ADVISORY COUNCILS These tables reflect data available as of July 27, 2001. A72 FEDERAL RESERVE BOARD PUBLICATIONS A3 GUIDE TO TABULAR PRESENTATION A74 MAPS OF THE FEDERAL RESERVE SYSTEM A4 Domestic Financial Statistics A42 Domestic Nonfinancial Statistics A76 FEDERAL RESERVE BANKS, BRANCHES, A50 International Statistics AND OFFICES A63 GUIDE TO STATISTICAL RELEASES AND SPECIAL TABLES 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 • Stephen R. Malphrus • J. Virgil Mattingly, Jr. • Vincent R. Reinhart • Dolores S. Smith • Richard Spillenkothen • Richard C. Stevens • David J. Stockton The Federal Reser\<e 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

The U.S. System for Measuring Cross-Border Investment in Securities: A Primer with a Discussion of Recent Developments William L. Griever, Gary A. Lee, and Francis E. the availability, timeliness, and quality of data on Warnock, of the Board's Division of International cross-border securities holdings worldwide. Finance, prepared this article. Chad Cleaver provided research assistance. OVERVIEW OF THE U.S. SYSTEM One of the most striking developments in international finance in recent years has been the enormous The United States collects data on cross-border portexpansion in cross-border securities transactions and folio investment through the Treasury International holdings, accompanied by a decline in the relative Capital (TIC) reporting system.1 The detail of inforimportance of international bank lending. In the past mation collected and the frequency of collection vary decade, for example, the share of U.S. equities trans- depending on the type of investment being measured. actions involving foreign investors rose from less Cross-border holdings of long-term securities than 1 percent to more than 20 percent. In contrast, (original term to maturity of more than one year) are over the same period, the share of bank lending in measured at market value through periodic bench- U.S. cross-border positions decreased by half. Cross- mark surveys of custodians, issuers, and investors; border securities flows are now large enough to sig- data are collected at the security level (that is, infornificantly influence national markets and to affect the mation is reported separately for each security). overall health of the international financial system. Cross-border transactions in equities and long-term The shift in the nature of cross-border financing debt securities are measured at market value through has heightened interest in the quality and timeliness monthly reports filed by transactors (mainly brokerof the systems used by the United States and other dealers); data are collected at the aggregate level, by countries to measure international securities flows country (for simplicity, such data are referred to and holdings. Ideally, the U.S. measurement system throughout this article as aggregate data). should provide information on the size of cross- Foreign holdings of U.S. short-term securities are border holdings, the geographic composition of hold- measured in the aggregate, at face value, through ings, the types of securities held, the extent of foreign monthly reports filed by banks and brokers and quarownership of U.S. companies, and developing trends. terly reports filed by corporate borrowers.2 Some It should also help in understanding what drives portfolio flows into and out of the United States and 1. Portfolio investment is defined as ownership or control, by a the effect of these flows on exchange rates. As this single investor or an affiliated group, of less than 10 percent of the article will show, the data collected by the United voting equity of an incorporated business enterprise or an equivalent States can address some of these topics better than interest in an unincorporated enterprise. Ownership or control, by a single investor or an affiliated group, of 10 percent or more of the others. voting equity of an incorporated business enterprise or an equivalent The article is intended as a primer on the U.S. interest in an unincorporated enterprise is considered direct investsystem for measuring cross-border securities invest- ment. Direct investment is measured by the Department of Commerce's Bureau of Economic Analysis. This article deals only with ment. It begins with an overview of the data collecportfolio investment. tion system and a look at some recent trends in 2. U.S. securities are defined as securities issued by institutions cross-border holdings and transactions. It then dis- resident in the United States, with the exception of securities issued by cusses aspects of the system's design and implica- official international and regional organizations, which are categorized as foreign regardless of their location. Neither the currency in which a tions of the design for data interpretation. The article security is denominated nor the exchange on which a security trades concludes with a discussion of anticipated changes to determines whether a security is domestic or foreign. Thus, a security the U.S. system and of the way those changes are issued in Germany by a U.S.-resident firm that is denominated in euros is a U.S. security, while a security issued by a Canadian firm that being influenced by international efforts to improve trades in the United States and is denominated in U.S. dollars is a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

634 Federal Reserve Bulletin • October 2001 categories of short-term holdings are measured sepa- publishes selected data as well as compilations rately, while others are included indistinguishably in derived from TIC data in the Department of Com- "catch-all" categories of short-term liabilities. U.S. merce's Survey of Current Business. holdings of foreign short-term securities are measured in the aggregate, at face value, through monthly reports filed by banks and brokers and quarterly CROSS-BORDER HOLDINGS reports filed by custodians and investors; all such OF LONG-TERM SECURITIES holdings are commingled with other types of assets, such as time and demand deposits. Data Collection Measurement of cross-border activity in long-term securities is the focus of this article. For a description Benchmark surveys of cross-border holdings of longof the measurement of cross-border activity in short- term securities have been carried out at infrequent term securities and other types of assets and liabili- intervals. Surveys of foreign holdings of U.S. longties, see the box "TIC Reporting System for Portfolio term securities (known as liabilities surveys) have Investment Items Other Than Long-Term Securities." been conducted at approximately five-year intervals The monthly aggregate transactions reports and the since year-end 1974. Surveys of U.S. holdings of periodic benchmark surveys form a complementary foreign long-term securities (known as asset surveys) system. The monthly reports provide timely data on have been conducted as of the end of March 1994 cross-border securities transactions, but the informa- and year-end 1997.4 tion is less detailed than that provided by the bench- Both asset and liabilities surveys collect informamark surveys—and probably somewhat less accurate tion at the individual security level, thus allowing because the monthly reports collect aggregate rather for detailed editing and analysis of reported data. than security-level data. The surveys, while provid- Although both types of surveys are designed to be ing greater detail and presumably greater accuracy, as comprehensive as possible, the legal authority to cannot be produced in a time frame that could be collect data extends only to U.S.-resident entities, useful for immediate policymaking purposes. with implications that are discussed later. Data from the benchmark surveys, in combination with the monthly transactions data, are the primary source for the Bureau of Economic Analysis's esti- Liabilities Surveys mates of holdings in the annual international investment position presentation. The BEA also uses the Liabilities surveys collect data on foreign holdings of data in calculating investment income and financial U.S. long-term securities from two types of reporters: flows in the U.S. balance of payments. U.S.-resident firms that issue securities and U.S.- Data collected through the TIC system are pub- resident custodians (typically banks and brokerlicly available on the Department of the Treasury's dealers) that hold U.S. securities on behalf of foreign web site, at http://www.ustreas.gov/tic/.3 Time series owners. derived from the monthly and quarterly reports of Custodians are the primary source of data for liatransactions in long-term securities and holdings of bilities surveys because U.S.-resident firms that issue short-term securities and of other types of cross- securities usually have little information about the border financial transactions are posted, in aggregate actual owners of their securities. U.S. securities are form, with a two-month lag. Findings from the most typically registered on the books of the firms that recent benchmark surveys of holdings of long-term issue them in "street name"—that is, in the name of securities are also posted on the web site. the custodian of the securities—not in the name of Many of the TIC data aggregates are published in the actual investor. In contrast, custodians know if the Capital Movements section of the quarterly Trea- they are holding securities on behalf of a foreignsury Bulletin. Selected data aggregates are also pub- resident firm or individual. lished in the Federal Reserve Bulletin. The BEA Issuers report only foreign holdings that are registered directly on their books (that is, no U.S. custoforeign security. American Depositary Receipts (ADRs) are consid- dian is used) or debt securities they have issued in ered foreign securities because, although they are issued by U.S. unregistered "bearer" form. Unregistered securities institutions, their purpose is to serve as proxies to facilitate the trading of the foreign securities the ADRs represent. 3. The Department of the Treasury has the legal authority to collect 4. Several asset and liabilities surveys were conducted before the data on cross-border portfolio financial transactions and holdings. advent of the "modern" survey system in 1974. These surveys are However, Treasury has entrusted operational responsibility for the described in the box "History of the U.S. System for Measuring collection of these data to the Federal Reserve System. Cross-Border Securities Holdings." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The U.S. System for Measuring Cross-Border Investment in Securities 635 TIC Reporting System for Portfolio Investment Items Other Than Long-Term Securities The TIC system collects data on cross-border holdings of Banking firms. Data on U.S.-booked outstanding claims several types of portfolio capital besides the long-term and liabilities with foreign residents, including amounts of securities that are the focus of this article. short-term instruments held in custody for customers, are reported via a combination of monthly, quarterly, and semiannual reports.1 Amounts are reported by major type of Short-Term Instruments item (such as deposits and loans) and by major category of foreign "resident" (such as official institutions, unaffiliated This category encompasses such instruments as commercial foreign banks, own foreign banking offices, and "other" paper, U.S. Treasury bills, short-term obligations of U.S. foreigners as a group). government corporations and U.S. government-sponsored The data are collected from banks in the United States agencies, bankers and trade acceptances, and marketable (including branches and agencies of foreign-based banks), notes (including short-term tranches under medium-term other depository institutions, bank and financial holding note arrangements); certificates of deposit, regardless of companies, and securities brokers and dealers in the United maturity, are reported as marketable short-term instruments States. Currently, entities whose claims and liabilities posiif negotiable and as deposits if non-negotiable. Only U.S. tions with foreign residents total $50 million or more as of Treasury bills, short-term U.S. government agency issues, the reporting date (or at least $25 million with respect to a and U.S.-issued negotiable CDs that are held in custody for single country) must file reports. As of June 30, 2001, the foreigners are reported as distinct categories. Other short- 425 firms on the reporting panel reported aggregate claims term U.S. liabilities and all foreign short-term instruments of $1,284 billion and aggregate liabilities of $1,628 billion held by U.S. residents are not identified separately by type vis-a-vis foreigners. of instrument; rather, they are reported in aggregate categories of "other" liabilities and claims. Nonbanking firms. Data on claims and liabilities positions Short-term securities are debt instruments with an with unaffiliated foreigners are collected quarterly. The data original term to maturity of one year or less. Holdings are cover such instruments as loans and deposits as well as reported monthly or quarterly, in aggregate form, by commercial positions in such instruments as trade payables banks, broker-dealers, and nonfinancial firms. Amounts are and receivables. reported by country, at face value. Reporting at face value, The data are collected from importers and exporters, as opposed to market value, as is done for long-term securi- industrial and commercial concerns, insurance and other ties, is appropriate because prices of short-term securities financial entities (excluding depository institutions and typically do not fluctuate much. broker-dealers), and similar firms. Currently, all entities in Outstanding face amounts of expressly identified U.S. the reporting population whose quarter-end balance for short-term securities held by foreigners as of June 30, either claims or liabilities is $10 million or more must 2001, were as follows: Treasury bills, $156.4 billion; gov- report. As of June 30, 2001, the approximately 300 firms on ernment agency issues, $60.1 billion; and negotiable CDs, the reporting panel together reported outstanding claims on $24.9 billion. foreigners of $98 billion and liabilities to foreigners of $69 billion. Non-Securities 1. Monthly reports cover respondents' own dollar-denominated claims and liabilities and their custodial holdings of U.S. short-term instruments for foreign clients; quarterly reports cover respondents' own claims and liabili- The TIC system also collects data on non-securities—such ties denominated in foreign currencies and their custodial holdings of shortitems as deposits, loans, and trade receivables. Collection term instruments representing U.S. clients' claims on foreigners; and semiannual reports cover dollar-denominated claims and liabilities vis-a-vis procedures differ for banking and nonbanking firms. countries not listed separately on the monthly reporting forms. are issued abroad only (they have not been issued in report. For the most recent survey, conducted as of the United States since 1984), and purchasers are not March 31, 2000, firms with less than $20 million in required to identify themselves. U.S. entities usually total reportable foreign holdings were exempt.5 All do not have information about the owners of unregistered securities, and issuers are instructed to 5. The International Investment and Trade in Services Survey Act report such holdings as presumed foreign, country (22 U.S.C. 3101 et seq.) requires that comprehensive benchmark surveys of foreign portfolio investment in the United States be conunknown. ducted at least once every five years. After notification to relevant Reporting on the liabilities surveys (as on all TIC congressional committees, the most recent survey was conducted five years and three months after the previous survey to avoid imposing a surveys and reports) is mandatory, with both fines reporting requirement that coincided with respondents' Y2K-related and imprisonment possible for willful failure to efforts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

636 Federal Reserve Bulletin • October 2001 History of the U.S. System for Measuring Cross-Border Securities Holdings Early interest in measuring cross-border securities activities countries invaded by Germany or Japan.) The other survey focused primarily on foreign holdings of U.S. securities. took place in 1943, when the Treasury Department con- The first measurement effort was an 1853 Department of ducted the first survey of U.S. ownership of foreign assets, the Treasury survey of foreign holdings of U.S. public and in this case assets of all types. The primary purpose of the private securities conducted in response to congressional survey was to help U.S. residents recover or seek reparaconcern about the increasing level of U.S. debt held by tions for foreign assets that may have been confiscated or foreigners. The survey showed that foreigners owned destroyed during the war.1 $222 million in U.S. securities, 19 percent of total outstand- In 1945, the legal basis for the TIC system was widened ing U.S. securities at that time and 46 percent of outstanding by the Bretton Woods Agreements Act to enable the United federal government securities. An 1869 study by the Trea- States to comply with International Monetary Fund needs sury Special Commissioner of the Revenue showed U.S. for information on U.S. balance of payments and official indebtedness to foreign entities at $1.4 billion, including monetary reserves. $1 billion in U.S. government securities and $100 million in The first modern benchmark survey measured foreign state debt. holdings of U.S. long-term securities as of year-end 1974. In 1934, in connection with the banking emergency, the Prompting the survey initially was public concern about the United States began to collect monthly data on transactions possible effects on the economy of the rise in investments in in long-term securities and monthly and quarterly data on the United States by European and Japanese investors; later, other financial flows (such as bank and nonbank lending concern shifted to the oil-producing countries, which had and borrowing) and on holdings of short-term financial begun to accumulate substantial investable sums as a result instruments. This collection program, known as the Trea- of increased oil income. Without benchmark surveys, the sury International Capital (TIC) reporting system, began as TIC system could not accurately identify the countries that an expansion of a voluntary reporting program instituted in were holding U.S. securities or provide much information the late 1920s by the Federal Reserve Bank of New York to on the actual securities being purchased. obtain figures on U.S. banks' positions with foreigners. To address these shortcomings, Congress passed the For- In addition to the TIC system, surveys of foreign hold- eign Investment Study Act of 1974 (Public Law 93-479), ings of U.S. long-term securities continued intermittently. which evolved into the current enabling legislation, the The Department of Commerce conducted two surveys dur- International Investment and Trade in Services Survey Act ing the Depression to "provide ... an adequate statistical (22 U.S.C. 3101 et seq.). The latter act stipulates, among basis for estimating annual interest and dividend payments other things, that a comprehensive, benchmark survey of by the United States to investors residing in foreign coun- foreign portfolio investment in the United States be contries." Foreign holdings of U.S. securities were found to be ducted at least once every five years and that information $4.5 billion at the end of 1937, compared with $2.1 billion collected under the authority of the act be published for use at the end of 1934. by the general public and by U.S. government agencies. Two surveys were conducted during the World War II era. The first, by the Treasury Department, found foreign holdings of U.S. securities to be some $2.7 billion as of 1. The portion of the preceding discussion pertaining to surveys of foreign holdings of U.S. securities was drawn from Department of the Treasury, June 14, 1941. (As a wartime measure, the United States Report on Foreign Portfolio Investment in the United States as of December froze U.S. assets belonging to the Axis countries as well as 31, 1984, chap. 6. firms that are thought to have a reasonable likelihood custodians together accounted for approximately of meeting the reporting requirements are sent a copy 60 percent of the total (more than $2 trillion). of the survey instructions (1,445 firms for the most Some 2.2 million data records were received, the recent survey). In addition, notice is published in the vast majority in electronic form. Four custodians Federal Register, which constitutes legal notification reported more than 100,000 records each. The data of the survey's reporting requirements. were subjected to extensive verification checks, For the most recent liabilities survey, data were including comparison with information obtained from received from 208 custodians and 289 issuers. commercial and international sources to help verify Whereas issuers on average reported relatively low such items as price, currency of denomination, and levels of foreign holdings, many custodians reported amounts reported. The distributional pattern of each very high levels. Indeed, custodians accounted for submission was analyzed with respect to such vari- 94 percent of total reported foreign holdings, as mea- ables as the countries of foreign holders and the types sured in terms of market value, and the six largest of securities held. Questionable data were discussed Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The U.S. System for Measuring Cross-Border Investment in Securities 637 with respondents, and detected errors were corrected. in which foreign debt securities are denominated, Although most respondents provided high-quality though essential for calculating U.S. dollar equivadata, at the other extreme, some respondents were lents, is sometimes difficult. required to provide completely revised submissions. The security-level editing greatly improved the quality of data by enabling the detection and correction of Preliminary Findings from the many errors; for instance, 133,058 records with an March 2000 Liabilities Survey originally reported market value of $255 billion were excluded from the survey, most commonly because The most recent liabilities survey showed foreign they were determined to be foreign securities or U.S. holdings of U.S. long-term securities of $3.6 trillion short-term securities. at the end of March 2000, compared with $ 1.2 trillion measured by the year-end 1994 survey.6 The tripling of foreign holdings reflects substantial net purchases Asset Surveys of U.S. securities in the late 1990s as well as sizable gains in the value of U.S. equities over the period. Asset surveys employ the same general approach as liabilities surveys. Data are collected from two types of reporters, in this case, U.S.-resident custodians and Foreign Holdings, by Type of Instrument U.S. institutional investors. Custodians are again the and Country primary source of information, reporting 97 percent of total U.S. holdings of foreign long-term securities, The relative gains in U.S. equity prices helped shift by market value, on the most recent survey. Instituthe composition of foreign holdings of U.S. long-term tional investors, such as mutual funds, pension funds, securities over the five years between surveys, as insurance companies, endowments, and foundations, there was no corresponding appreciation in the value report in detail on their ownership of foreign securiof debt securities. In 1994, foreign investors held far ties only if they do not entrust the safekeeping of more US. debt than equity (table 1). By 2000, forthese securities to U.S.-resident custodians. If they do eigners' equity holdings were close to their holdings use U.S.-resident custodians, institutional investors of debt, though considerable differences remained report only the name(s) of the custodian(s) and the across countries. For example, of the countries listed amount(s) entrusted. in table 1, Canada and the European countries held The requirement that institutional investors iden- more equity than debt in 2000, while the Asian tify their U.S.-resident custodian(s) has the beneficial countries and the offshore financial centers of Berside effect of ensuring that all sizable U.S.-resident muda and the Cayman Islands held more debt than custodians holding foreign securities are included equity. in the survey, because any custodian identified by Over the past two decades, residents of Japan and an institutional investor is instructed to report. The the United Kingdom have consistently led residents requirement also makes it possible to check on surof other countries in terms of their holdings of U.S. vey accuracy, as the amount of foreign holdings each long-term securities. Holdings by residents of Japan custodian should report can be estimated by summing were the greatest in 1989 and 1994, while holdings the amounts that institutional investors have entrusted by residents of the United Kingdom were the largest to each custodian. in 1984 and 2000. The asset surveys receive approximately 60 per- Although the proportional increase in holdings cent fewer data records than the liabilities surveys, between 1994 and 2000 was relatively uniform across but in some ways the asset surveys are more difficult countries, the holdings of some countries rose specand more complex to conduct: Accurately pricing tacularly. For example, Luxembourg's holdings and categorizing the universe of foreign securities is increased twentyfold, and China's increased fivefold. far more challenging, as the commercial data used The magnitude of holdings by residents of Luxemto cross-check data on foreign securities are generally bourg in 2000 ($106 billion) relative to that country's less complete than like data for cross-checking data annual gross domestic product ($18 billion) highon U.S. securities; custodian data tend to have more lights an important shortcoming of the liabilities surerrors and omissions in asset surveys compared with liabilities surveys; and unexpected local market quirks can lead to misinterpretations of reported asset 6. The March 2000 data presented here are based on preliminary data. In addition, accurately determining the currency data. A full report on the March 2000 liabilities survey will be posted on the Department of the Treasury's web site in the near future. 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638 Federal Reserve Bulletin • October 2001 1. Market value of foreign holdings of U.S. long-term securities, by country, December 31, 1994, and March 31, 2000 Billions of dollars NOTE. In this and subsequent tables, components may not sum to totals because of rounding. vey data—their custodial center bias. Luxembourg is entrusted to U.S. custodians for safekeeping, an a major custodial center, and significant holdings are uncommon occurrence. attributed to that country that are actually holdings of residents of other countries. The source of this custodial center bias can be seen Foreign Holdings of U.S. Securities in Perspective in the following example. A resident of Germany may buy a U.S. security and place it in the custody of Comparison of foreign holdings of U.S. long-term a Swiss bank. The Swiss bank will then normally securities with other metrics provides perspective on employ a U.S.-resident custodian bank to act as its these holdings. One such standard is U.S. holdings of foreign subcustodian for the security to facilitate foreign securities: As of March 31, 2000, when forsettlement and custody operations. Because the legal eign holdings of U.S. long-term securities stood at authority to collect information by means of the $3.6 trillion, U.S. holdings of foreign long-term secusurveys extends only to U.S.-resident entities, the rities totaled an estimated $2 trillion. U.S.-resident bank acting as subcustodian for the Another measure is growth over time. Foreign Swiss bank will report the security on the survey. portfolio investment in U.S. securities began mod- And because the U.S. bank will typically know only estly, with the level of investment actually decreasing that it is holding the security on behalf of a Swiss between 1914 and 1934.7 Since 1934, the level of bank, it will report the security as Swiss held. investment has increased significantly, and the rate of Among the countries listed in table 1, the United increase has accelerated: Between 1934 and 1965, the Kingdom, Switzerland, the Cayman Islands, Luxemaverage annual rate of increase was approximately bourg, and Bermuda are financial centers where secu- 8 percent; it reached 14 percent between 1965 and rities owned by residents of other countries are held 1984 and was an impressive 17 percent between 1984 in custody. Although the benchmark surveys' country and March 2000. As previously noted, the increasing attribution of foreign investment in U.S. securities is level of investment reflects both gains in the value of clearly imperfect, the survey data have historically securities held and increases in foreign purchases of been better at determining country attribution than U.S. securities. the monthly flow data (as is discussed later). A third useful comparison is the value of foreign The $323 billion in debt securities categorized as holdings of various types of U.S. securities as a "Country unknown" in table 1 points to another difficulty in attributing ownership of U.S. securities to particular countries. Owners of U.S. debt securities issued abroad in the form of bearer (unregistered) 7. Estimates of foreign portfolio investment in the United States before the 1974 benchmark liabilities survey are from Cleona Lewis, securities need not identify themselves, and therefore America's Stake in International Investments (Brookings Institution, neither the issuers nor U.S. custodians typically have 1938); U.S. Department of the Treasury, Census of Foreign-Owned information about these owners. Thus, no country Assets in the United States (Government Printing Office, 1945); and various issues of US. Department of Commerce, Survey of Current attribution is possible unless the securities are Business. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The U.S. System for Measuring Cross-Border Investment in Securities 639 proportion of the total market value outstanding 2. Market value of foreign holdings of U.S. long-term securities, by type of security, selected years, (table 2). Between 1994 and 2000, the proportion of 1974-2000 U.S. securities held by foreign owners increased for Billions of dollars, except as noted every type of securitiy. The increase was greatest for Treasury securities, largely because of the very small Percent Total Foreign Year foreign increase in the value of long-term Treasury securities outstanding owned owned outstanding: Whereas the value of outstanding equi- Corporate equity ties more than tripled over the period and the value of outstanding corporate and municipal debt and 1974 663 25 3.8 1978 1,012 48 4.7 government agency debt increased substantially, 1984 1,899 105 5.5 1989 4,212 275 6.5 the value of outstanding Treasury securities barely 1994 7,183 398 5.5 increased. Thus, although the percentage increase in 2000 23,038 1,711 7.4 Sill the value of foreign holdings was less for Treasuries Corporate and municipal debt than for other types of securities, the proportion of 1974 458 n.a. n.a. Treasury securities held by foreigners increased 1978 680 7 1.0 1984 1,149 31 2.7 markedly. 1989 2,400 190 7.9 A final measure that puts foreign holdings of long- 1994 3,342 276 8.3 2000 5,404 712 13.2 term securities in perspective is the share of total U.S. Marketable U.S. Treasury securities portfolio liabilities to foreigners accounted for by W f K kt foreign holdings of U.S. securities. Over the past 1974 163 24 14.7 1978 326 39 12.0 decade, foreign holdings of U.S. securities have 1984 873 118 13.5 become an increasingly important component of U.S. 1989 1,599 333 20.8 1994 2,392 464 19.4 portfolio liabilities to foreigners, rising from 49 per- 2000 2,508 885 35.3 cent to 65 percent of the total from year-end 1989 to U.S. government corporation and federally sponsored agency securities year-end 2000. In contrast, the proportion of total U.S. portfolio liabilities accounted for by U.S. bank- 1974 106 n.a. n.a. 1978 188 5 2.7 ing liabilities declined over the period, from 36 per- 1984 529 13 2.5 cent to 19 percent. 1989 1,267 48 3.8 1994 2,199 107 4.9 200B0 p . 3,968 257 6.7 Combined market CROSS-BORDER TRANSACTIONS 1974 1,390 67 4.8 1978 2,206 99 4.5 IN LONG-TERM SECURITIES 1984 4,450 268 6.0 1989 9,478 847 8.9 1994 15,116 1,244 8.2 2000 34,918 3,576 10.2 Data Collection NOTE. For 2000, data are as of March 31; for all other years, December 31. n.a. Not available. Monthly reports of cross-border transactions in long- SOURCE. Data on amount outstanding for all categories except marketable Treasury securities are from Federal Reserve Statistical Release Z.l, Flow of term securities supplement the periodic benchmark Funds Accounts of the United States. Amount outstanding of marketable surveys. The monthly data are used in the construc- Treasury securities, which excludes Treasury bills, is from the Bureau of Public Debt, Monthly Statement of the Public Debt of the United States. tion of the U.S. balance of payments accounts, in the formulation of international financial and monetary policy, and in tracking developments in international The amount reported is the total payment made or markets. The monthly reporting panel comprises received (the value of the transaction plus or minus some 250 banks, securities dealers, and other enter- commissions and fees). Reporting is mandatory if prises in the United States that undertake transactions monthly transactions exceed an established threshold directly with foreign residents. (in lanuary 2001, the threshold was raised from Gross purchases and sales of U.S. securities are $2 million to $50 million). The threshold is applicareported in several categories—Treasury bonds and ble to either total purchases or total sales in a month; notes, federal agency issues, corporate and municipal once the threshold is reached for total purchases or debt, and corporate equities. Transactions in foreign total sales, all purchases and sales transactions during securities are reported in only two categories— that month must be reported. The gross dollar volume foreign debt and foreign equities. Aggregate trans- of all reported transactions for calendar year 2000 actions in U.S. issues by foreign official institutions was $22 trillion, and gross transactions are on pace to are reported separately. reach $26 trillion in 2001. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

640 Federal Reserve Bulletin • October 2001 3. Market value of U.S. cross-border transactions in long-term securities, by type of security, 1980-2001 Billions of dollars, annual rate Type of security 1980-89 1990-94 1995-99 2001 :H1 Gross foreign purchases and sales of U.S. securities 1,734 Debt 1,515 Treasury 1,408 Agency 45 Corporate 62 Equity 219 ir, Gross U.S. purchases and sales of foreign securities Debt Equity 83 NOTE. Figures for 2001 :H1 are based on data through June. aware of the implications of the TIC system's design Trends for data interpretation. In particular, the monthly transactions reports were designed to provide timely Cross-border financial flows skyrocketed over the information on movements of capital between the past decade (table 3). Transactions in both U.S. and United States and foreign countries, primarily for foreign long-term securities increased sharply, and balance of payments purposes. Thus, the system is annual trading volume in 2001 is projected (on the heavily influenced by balance of payments convenbasis of data for the first half of the year) to be four tions that might not be readily apparent to the casual times greater than in the early 1990s and thirteen user. Those conventions are discussed in some detail times greater than in the 1980s. Trading volume in all in this section. Also discussed are the implications of instruments has increased, although it is noteworthy the treatment of repurchase and securities lending that since the mid-1990s, transactions in U.S. Treaagreements. suries and in foreign debt have leveled off. In contrast, trading volume in other U.S. debt issues (agency and corporate) as well as U.S. and foreign equities has continued to increase. Country Attribution Associated with the increased trading volume has been a sharp increase in net acquisitions (table 4). At For balance of payments purposes, the monthly transan annual rate, both net foreign acquisitions of U.S. actions reports were designed to provide information long-term securities and net U.S. acquisitions of for- on the country through which a transaction was made, eign securities are running more than ten times and that country is not necessarily the same as the greater in 2001 than in the 1980s. Net foreign acqui- country in which the security's issuer, purchaser, or sitions of U.S. securities have increased sharply, sur- seller is resident. For example, if a German resident passing $400 billion in 2000. Within debt issues, purchases a U.S. corporate bond through a London there has been a distinct move from Treasury debt office, the transaction is reported as a U.K. purchase securities to agency and corporate debt as the supply of a U.S. corporate bond. Similarly, if a U.S. resident of Treasury issues has dwindled and agencies and purchases a Thai stock through an intermediary in some large corporations have increased issuance in Hong Kong, the trade is reported as a U.S. purchase response. Net U.S. acquisitions of foreign securities of a foreign stock through Hong Kong. This reporthave also increased, recently averaging about ing procedure results in a bias not only toward over- $100 billion a year, but have been much smaller than counting flows to countries that are major financial net foreign acquisitions of U.S. securities. Two trends centers but also toward undercounting flows to other in U.S. acquisitions of foreign securities are evident: countries. Users of the transactions data need to be a distinct decline in net purchases of foreign debt and aware of this bias. a sharp increase in the value of foreign equities The benchmark surveys similarly are not immune acquired in stock swaps (discussed later). to distortions in the attribution of holdings to particular countries. As discussed earlier, in the surveys of foreign holdings of U.S. securities, country attribu- NOTES CONCERNING THE SYSTEM'S DESIGN tion is somewhat distorted if multiple custodians are involved in the safekeeping of a security. The Users of the U.S. data on cross-border holdings of degree of error thus caused is unclear, though it is and transactions in long-term securities should be believed to be less than the trading center bias in the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The U.S. System for Measuring Cross-Border Investment in Securities 641 4. Market value of U.S. cross-border net acquisitions of long-term securities, by type of security, 1980-2001 Billions of dollars, annual rate Type of security 1980-89 1990-94 2000 2001 :H1 Net foreign acquisitions of U.S. 461 575 Debt 281 420 Treasury u -54 -22 Agency 4 153 163 Corporate 16 182 279 Equity 7 180 155 TIC 7 175 152 Stock swaps 0 5 3 Net U.S. of foreittr"n ssetcvuuriiituietsa 9 93 132 Debt | 4 J -16 Equity ... £89 148 TIC ... 74 Stock 74 NOTE. All data are from the TIC reporting system except those for stock swaps, which are from Security Data Corporation and the Bureau of Economic Analysis. Figures for 2001:H1 are based on data through June. monthly transactions data for foreign purchases of if they have no employees or any other recognizable U.S. securities. physical presence in that country. In the benchmark The one set of data for which the country attribu- surveys, any securities they issue are considered tion should be completely accurate is that from the liabilities of their "resident" country, even though benchmark survey of US. holdings of foreign securi- the proceeds may be used by and repaid by parent ties. The security-level data collected in that survey institutions in other countries. make it possible to determine precisely the residence of the foreign issuer. Definition of "Foreign Official Institution" Concept of Residency As noted earlier, data for foreign official institutions are collected separately from those for other entities, as the motivations of these institutions are believed to In balance of payments accounting, country attribube quite different from those of other transactors. The tion is based on residency, that is, on the physical term "foreign official institution" is narrowly location of an entity. Thus, the US. system defines defined, however, and should not be construed to foreign residents as individuals or institutions residbe synonymous with "government." For purposes ing outside the United States on a permanent or of the TIC system, the term refers only to central long-term basis, regardless of whether they are U.S. banks, ministries of finance, exchange stabilization citizens. U.S. residents are defined in a like manner. funds, and similar organizations. Excluded from the For instance, a US. citizen who retires to Spain is a category are many other government agencies as well foreigner for purposes of the data. U.S.-resident busias government-owned corporations, nationalized nesses are those physically located in the United commercial banks, and government-owned develop- States or legally created in the United States, even if ment banks. It should also be noted that the term they are subsidiaries or instrumentalities of foreign "private" is sometimes used loosely in U.S. governentities; foreign-resident businesses are similarly ment publications to refer to entities other than fordefined. Honda USA is considered a U.S. firm, while eign official institutions, when "non-foreign official" General Motors Canada is considered foreign. would be the more accurate term. Knowing that the U.S. system adheres to the balance of payments concept of residency is especially important when interpreting activity vis-a-vis offshore financial centers. In particular, some companies Treatment of Stock Swaps resident in one country create legal entities in another country solely for the purpose of issuing securities The monthly transactions reports were designed to (primarily to gain tax and regulatory advantages). capture flows of money associated with transactions These entities, known as foreign financing subsidi- in securities conducted through financial intermediararies or special purpose vehicles, are considered resi- ies. In recent years, securities have also been acquired dents of the country in which they were created, even through stock swaps, and in any analysis of net Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

642 Federal Reserve Bulletin • October 2001 securities flows, the TIC transactions data must be a $1 commission, the transaction is recorded as a $99 supplemented with information on these acquisitions. sale—the amount the foreigner received. If these Equity financing of cross-border mergers and transactions occur within the same month, the foracquisitions results in stock swaps—the exchange of eigner has no remaining position but the TIC transacstock in the target company for stock in the new firm tions data show a $2 net flow into U.S. equities. (in the case of a merger) or in the acquiring firm (in Because the TIC system records the actual paythe case of an acquisition). For example, when Brit- ment made or received, the inclusion of transaction ish Petroleum (a U.K. firm) acquired Amoco (a U.S. costs results in a slight overestimation of net purfirm) in an equity-financed deal worth a reported chases. For the official presentation of capital flows $48 billion, holders of stock in now-defunct Amoco data, the BEA adjusts the TIC data for estimated were given stock in newly formed BP Amoco, a U.K. transaction costs. firm. Thus, U.S. residents acquired approximately $48 billion in U.K. equities.8 Because the monthly transactions reports collect data on only market trans- Estimation of Holdings actions, this stock swap was not recorded by the transactions portion of the TIC system. Nonetheless, Although the transactions reports were designed pristock swaps do represent cross-border acquisitions of marily to capture balance of payments flows, the equities, and they do, appropriately, appear in the monthly data do have other uses. In particular, holdings data produced by the benchmark surveys. because of the timeliness of the monthly data—and As noted earlier, the value of foreign stocks the infrequency of benchmark surveys—the transacquired by U.S. residents in stock swap actions data have been used to estimate holdings arrangements has increased sharply in recent years. between surveys (see the appendix). Although esti- Indeed, the bulk of U.S. residents' acquisitions of mation is possible, the procedure is not without probforeign stocks in the past few years has been via lems. For example, because the transactions data are stock swaps (table 4). Moreover, subsequent sales of not collected at the individual security level, it is not foreign equities acquired through stock swaps—a clear which price index to use to revalue holdings. likely occurrence because the equities were in some Nor, in the case of U.S. holdings of foreign securities, sense involuntary acquisitions and investors seem to is the country of residence of the issuer known with prefer domestic equities—do register in the TIC certainty. transactions system. Therefore, any analysis of TIC Comparisons of estimated and measured bilateral data without consideration of stock swaps is incom- cross-border securities holdings indicate the extent of plete and potentially very misleading.9 the bias in the transactions data toward financial That said, there is some concern about the use of centers such as the United Kingdom and, to a lesser stock swap data because of the unknown quality of extent, the Caribbean. The bias does not necessarily the data. At this time, the U.S. government is not affect the quality of the aggregate transactions data compiling official data on these transactions, relying or analyses of overall foreign purchases of U.S. secuinstead on unverified data from nongovernmental rities or U.S. purchases of foreign securities. But the sources. bias has important implications for analyses that use bilateral transactions data, including studies of the determinants of capital flows between the United Inclusion of Transaction Costs States and a particular country or region and of the effect of such flows on any bilateral exchange rate. Because the monthly transactions reports were designed to capture the flow of money associated with securities transactions, they include not only the Treatment of Repurchase and value of securities bought or sold, but also the com- Securities Lending Agreements mission and taxes associated with each transaction. For example, if a foreign resident purchases $100 Repurchase agreements, or repos, are arrangements of U.S. equities and pays a $1 commission, the TIC whereby the owner of securities sells them for cash system records the transaction as a $101 purchase. with an agreement to repurchase them at a future time When a foreigner sells $100 of U.S. equities and pays (or under specified conditions) at an agreed-upon price. Although some market participants engage in 8. Less the value of Amoco stock held by foreigners. repos to gain control of certain securities, repos are 9. When the BEA publishes the official balance of payments data, often structured as cash loans for traders seeking to it augments the TIC transactions data with data on stock swaps. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The U.S. System for Measuring Cross-Border Investment in Securities 643 finance their portfolios, with the lenders receiving ing for this conceptual flaw in the U.S. system are to the securities as collateral against borrower default. have borrowers that resell these securities report a The securities typically used as collateral are Trea- "short" (or negative) position or to treat such "borsury securities and, to a lesser extent, government rowings" as outright purchases and sales. Neither agency and corporate debt securities. approach is a perfect solution. The first raises con- Securities lending agreements are similar to repur- cerns about whether "short" positions can be accuchase agreements in that the owner transfers title to rately measured. The second elicits reluctance to the securities with an agreement that a like quantity cease considering these transactions collateralized of the same or similar securities will be given back at loans because, in the economic sense, such treatment a future date or under agreed-upon conditions. Again, accurately characterizes their nature. the borrower provides collateral, but unlike in the Although the TIC system does not measure overall case of repos, in which securities are used as collat- levels of repo and securities lending transactions, eral, the collateral can be cash, other securities, or they are known to be substantial. For example, it has bank-issued letters of credit. Many market partici- been estimated that as of February 1999, approxipants engage in securities lending transactions to mately 41 percent of U.S. government securities were obtain securities needed to meet delivery obligations; on repo and another 14 percent were on loan.10 Given for example, brokers may need to cover a failed the magnitude of these activities, it is clear that trade, or investors may need to cover a "short" misreporting of data concerning these transactions position. Both equity and debt securities are involved either on the surveys or in the aggregate transactions in securities lending arrangements. reports could produce significantly inaccurate data. Repurchase and securities lending agreements The extent to which errors may be occurring because pose a problem for the TIC system. Although both of such activity is unknown but is of ongoing arrangements involve the outright sale of securities, concern. they are not so treated in the TIC system. Rather, because the return of the same or similar securities at Maintenance of Adequate Coverage a set price is pre-agreed and the economic risk of holding the securities continues to reside with the securities lender even while the lender does not own Although a significant and increasing level of the securities, the transactions are treated as collater- resources is devoted to collecting and editing the TIC alized loans. For the transactions reports, they are not data, U.S. cross-border financial flows are becoming recorded as purchases or sales of securities; for the increasingly difficult to measure accurately. In the benchmark surveys, lenders (or their custodians) are not-too-distant past, most cross-border financial instructed to report the securities as continuously transactions occurred through a relatively small and held, and borrowers (or their custodians) are in- readily identifiable group of banks and brokerstructed not to count them as holdings. (If such dealers. But the number and types of direct market transactions are undertaken by banks or brokers for participants continue to grow as regulatory impeditheir own accounts, they are recorded elsewhere in ments are removed, financial information is increasthe TIC system; otherwise, the transactions are not ingly available, and transaction costs decline. Mearecorded at all.) suring the activities of a diverse and changing group of market participants is much more difficult, espe- Complicating matters is the fact that borrowers of cially as the channels through which cross-border securities under repo or securities lending agreements securities transactions flow are continually evolving. have the right to resell the securities. In fact, in the In addition, advances in computerization and other case of securities lending, the purpose of the transactechnological developments in financial markets have tion is usually to obtain a security that is needed for allowed for the creation of diverse and complex sale to another party. Such reselling results in overfinancial instruments that are more difficult to meaestimation of cross-border securities activity even sure accurately. Together, these developments make if reporters follow instructions precisely and have all keeping up with the pace of change increasingly necessary information. For example, the resale of difficult. "borrowed" securities can result in two different foreign residents being reported on a liabilities survey as holding the same U.S. security, or it can result 10. Bank for International Settlements, Securities Lending Transin the same U.S. security being reported as having actions: Market Developments and Implications, joint report of the been purchased twice by foreign residents with no Technical Committee of the International Organization of Securities intervening sale. Possible approaches to compensat- Commissions and the Committee on Payment and Settlement Systems of the Group of Ten countries (July 1999), p. 13. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

644 Federal Reserve Bulletin • October 2001 FUTURE CHANGES IN THE MEASUREMENT OF To address the measurement mismatch, the IMF CROSS-BORDER INVESTMENT IN SECURITIES invited major industrial and financial center countries to participate in a coordinated effort to measure such Along with the dramatic growth in the volume and holdings. Twenty-nine countries, including the complexity of cross-border financial flows over the United States, joined in the effort, which became past twenty years has come growing recognition of known as the "coordinated portfolio investment surthe need for more comprehensive, more accurate, and vey."12 The survey found an additional $750 billion more timely data. To be most useful, the data should in cross-border holdings of securities. (Other, less be comparable across countries. To facilitate compa- direct benefits of the coordinated surveys are disrability, many efforts to improve data are being chan- cussed in the box "Collateral Benefits of Coordinated neled through international organizations such as the Portfolio Investment Surveys.") However, as the International Monetary Fund (IMF) and the Bank for measured worldwide gap between portfolio liabilities International Settlements, as well as the European and portfolio assets in long-term securities still stood Central Bank. at $1.7 trillion, work clearly remains to be done. Two major initiatives that will affect U.S. efforts to One of the key shortcomings of the first CPIS was collect statistics on cross-border securities holdings the lack of participation by countries recognized have been initiated under the auspices of the IMF: as offshore financial centers, whose holdings are coordinated portfolio investment surveys and the believed to be quite large but cannot be accurately external debt reporting system. Both initiatives will estimated (among those countries, only Bermuda parrequire that the United States expand its data collec- ticipated). For this and other reasons, it was decided tion activities and, in some cases, publish results to repeat the CPIS as of year-end 2001, to make a more promptly than in the past. major effort to increase survey participation, to measure holdings of short-term as well as long-term securities, and to produce survey results more Coordinated Portfolio Investment Surveys quickly. As of September 2001, it appears that participation in the year-end 2001 survey will be consider- The first coordinated portfolio investment survey ably greater, with sixty countries indicating their will- (CPIS), with data reported as of year-end 1997, was ingness to participate, including most of the major conducted out of concern that holdings of foreign offshore financial center countries. portfolio assets were being undercounted. World- For the United States, the upcoming CPIS will wide, measured holdings of portfolio liabilities were mark the first time that both short-term and longmuch higher than measured holdings of portfolio term securities are measured by a portfolio survey. assets, and the discrepancy was increasing yearly.11 The United States will also try to provide survey One suspected reason for the undercount was that results more promptly. In the past, survey results countries had placed greater emphasis on measuring have been produced with lags of at least a year foreign holdings of their domestic securities than because of the inherent complexity of the surveys, on measuring domestic holdings of foreign securities. the large amount of data collected, start-up problems This bias was due in part to concern about the pos- encountered by both reporters and compilers due to sible influence that foreign holdings might have on surveys being conducted at widely spaced intervals, the domestic economy. The history of the U.S. collec- and the three-month period between the survey "as tion system illustrates this mismatch in measurement of' date and the date when reporters must submit efforts: Modern U.S. surveys of foreign holdings of their data. All CPIS-participating countries will U.S. securities began in 1974, but the first modern attempt to provide results within nine months of the survey of US. holdings of foreign securities was not survey "as of" date, with the IMF publishing findconducted until 1994. A second possible explanation ings within three months thereafter. for the undercount is underreporting by domestic Although no decision has yet been made to conresidents so as to avoid taxes (domestic issuers of duct coordinated surveys after the upcoming survey, securities have no similar incentive to underreport their liabilities to foreigners). 12. The participating countries were Argentina, Australia, Austria, Belgium, Bermuda, Canada, Chile, Denmark, Finland, France, Ice- 11. See International Monetary Fund, Final Report of the Working land, Indonesia, Ireland, Israel, Italy, Japan, Korea, Malaysia, Nether- Party on Statistical Discrepancies in the World Current Account lands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Balance [Estava Report] (1987) and Final Report of the Working Thailand, United Kingdom, United States, and Venezuela. Survey Party on the Measurement of International Capital Flows [Godeaux results were published by the IMF in Results of the Coordinated Report] (1992). Portfolio Investment Survey (International Monetary Fund, 1999). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The U.S. System for Measuring Cross-Border Investment in Securities 645 Collateral Benefits of Coordinated Portfolio Investment Surveys Aside from the direct benefits to a country of periodically by the possibility of double-counting under certain measuring its residents' holdings of foreign securities, the coordinated portfolio investment surveys (CPIS), conducted Another area being studied is the reduction of reporting under the auspices of the International Monetary Fund, errors associated with repurchase and securities lending have had several significant, though indirect, beneficial agreements. These transactions can easily lead to doubleeffects. One of these is the spread of best practices. Data counting or undercounting of holdings. Major financial compilers for the participating countries, previously largely center countries are working together to better understand isolated from one another, have, as a result of the coordi- the mechanics of these transactions and to develop a comnated surveys, come into contact. This contact has afforded mon approach to obtaining better data. representatives of countries experienced in such surveys the The CPIS group is also exploring the possibility of creatopportunity to exchange ideas and discuss problems, and ing a centralized database of all exchange-traded securities for those less experienced to learn from others. Such con- that could be used by national compilers worldwide to help tact may well have encouraged some countries to improve conduct the coordinated surveys. Currently, CPIS surveys their procedures. Also, IMF support has made it possible for are conducted in two fundamentally different ways. Some some countries to assign additional resources to collection countries (including the United States) collect data securityefforts. by-security, which allows for detailed editing and analysis. The CPIS group is exploring the use of counterparty data Other countries collect data in the aggregate, which allows to supplement domestic survey data. Prompting the study is for the detection of only relatively egregious errors and the inherent gap in the measurement of holdings of foreign provides fewer opportunities for examining the structure securities resulting from the impracticality of surveying all and patterns of foreign securities holdings. Believing that resident entities. An example is an instance of a resident of the security-level approach produces more reliable results, Argentina purchasing a French security and entrusting the the International Monetary Fund and the European Central security's safekeeping to a custodian in the United States. Bank are exploring ways to make it easier for countries to Under current CPIS practice, such a holding will not be conduct security-level surveys. A centralized database could recorded. Argentine compilers will not detect the holding, facilitate security-level surveying by providing to participatas neither that country nor any other country attempts to ing countries, at little or no cost, information that could be directly measure individual investors' holdings (because of used to cross-check and supplement reported data. cost and privacy concerns). French compilers will probably As important as the spread of best practices and the group measure the holding as a liability to the United States. efforts toward improvement are, perhaps the most important However, U.S. compilers will not report the security on the benefit of the coordinated surveys is that many participating CPIS survey, as the survey measures holdings of foreign countries have begun to conduct portfolio asset surveys on securities by residents of the reporting country, and this is a regular basis, and others will begin to do so in the near a holding of a foreign security by a foreign resident. Thus, a future. Taken together, these efforts demonstrate the imporcross-border liability will be recorded without an offsetting tance of international cooperation and coordination to help asset being recorded. The possibility of closing this gap by national compilers understand the workings of an increashaving custodians in each country report holdings of ingly complex international financial system. Market parforeign securities by certain classes of nonresident inves- ticipants will continue to innovate and operate on a worldtors and exchanging the information with counter- wide basis, and national compilers, who must continually party countries is being investigated by the CPIS group. attempt to understand and adjust to these changes with The problem is complicated by the lack of legal relatively limited resources, are in a far better position to authority for such data collection in some cases and respond appropriately if they act cooperatively. it is likely that such surveys will become ongoing the external debt reporting system, is designed to activities. During discussions on the future of coordi- improve data on liabilities to foreigners. This system nated surveys, the United States committed to con- is part of the IMF's Special Data Dissemination ducting asset surveys at least once every three years Standard (SDDS), and all countries that subscribe to and to consider conducting them annually. the SDDS are obligated to provide required elements of the system.13 Although the system will measure a External Debt Reporting System 13. In September 2001, forty-nine countries were subscribers to the SDDS. A list of those countries is given at http://dsbb.imf.org/ The coordinated surveys are designed to improve country.htm. Additional information on the SDDS is available on the data on holdings of foreign assets. Another initiative, IMF web site, at http://dsbb.imf.org/sddsindex.htm. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

646 Federal Reserve Bulletin • October 2001 wide range of financial liabilities to foreigners, only debt be presented according to the institutional sector those aspects pertaining to the measurement and of the debtor, the maturity structure (short-term or reporting of foreign holdings of U.S. securities are long-term), and the type of financial instrument. The discussed here. TIC report forms that cover short-term instruments The external debt reporting system was developed do not easily comport with these attributions and will in large part in response to the financial crises of need to be modified. 1997-98 in Asia, Russia, and Brazil. These crises, which took most of the financial community by surprise, sparked an extensive postmortem in an attempt Other Changes under Consideration to discern the reasons these events were not more widely foreseen. Identified as a major contributing In addition to the enhancements to the U.S. reporting factor was the lack of key data that might have system associated with the CPIS and the external provided an early warning. debt reporting system, other possible changes are on The external debt reporting system was approved the horizon. The first broad-based review of the TIC by the IMF's executive board in March 2000 after system in more than twenty years has recently been prolonged discussion and is scheduled to become completed. The review has produced two recommenoperational in September 2003. The long lead-time is dations pertaining to cross-border securities measureintended to give national compilers time to make the ment: Portfolio asset surveys should be conducted necessary enhancements to their reporting systems, annually, and reporting on purchases and sales of which for many countries, including the United foreign securities should be based on the country of States, will be significant. the issuer of the security instead of the country of the The system requires quarterly reporting, with a foreign counterparty to the transaction. one-quarter lag, on both long-term and short-term The first recommendation is based on the belief debt securities held by foreigners (with long-term that the benchmark surveys give a more accurate securities defined as those with an original term picture of U.S. holdings of foreign securities than to maturity of more than of one year). Liabilities do calculations based on the monthly transactions are to be reported separately for four sectors: general reports. It is supported by the fact that both asset government, monetary authorities, banks, and surveys to date have measured greater holdings than "other." In addition to the required data, countries were predicted by estimates based on price- and are encouraged to provide other types of informa- exchange-rate-adjusted transactions data, and by rection. Most prominent among these encouraged ognition that it is increasingly easy for U.S. investors elements are data on forward debt service sche- to purchase or sell foreign securities without the dules and a breakdown of external debt in terms of assistance of a U.S. financial intermediary. domestic currency and foreign currency components, The second recommendation is based on the belief both of which the United States has decided to pro- (and supported by conversations with data users) that vide. for analytical purposes, information on which coun- To meet the requirements, the United States will try's securities U.S. residents are buying and selling begin to conduct liabilities surveys annually instead is more useful than information on where they are of at five-year intervals, and the surveys will, for the buying and selling foreign securities. Some major first time, collect data on foreign holdings of short- institutions that are primary reporters of such inforterm as well as long-term securities. These surveys mation have indicated that they envision no major will be somewhat scaled down from the previous problems in making the switch. The switch cannot be liabilities surveys, however, and will rely on estima- made for foreign purchases of U.S. securities, howtion as well as measurement in four out of every five ever, because U.S. reporters do not have information years to reduce costs to both respondents and compil- on the resident country of the actual buyer or seller, ers. The detailed, security-by-security data collected but know only the country in which the foreign by the surveys will be combined with the monthly transactor is located. aggregate transactions data to produce estimates of the required data for the quarters for which no survey data are available. CONCLUSION The U.S. monthly reporting system will also be enhanced to help meet SDDS requirements. Current The TIC data on cross-border securities activity are SDDS guidelines specify that components of external extremely useful in understanding the actions of both Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The U.S. System for Measuring Cross-Border Investment in Securities 647 U.S. and foreign investors. The monthly transactions APPENDIX: USING TRANSACTIONS DATA reports provide timely information on recent activity, TO ESTIMATE HOLDINGS and the benchmark surveys give detailed insight into cross-border investment patterns. Cross-border holdings of equity and long-term debt The system is able to address with some certainty at the end of a month can be estimated by adjusting questions concerning aggregate holdings, such as the the preceding month's holdings for estimated changes extent of foreign ownership of U.S. firms and the in prices and exchange rates, adding the current level of foreign securities in U.S. investors' port- month's (transaction-cost-adjusted) net purchases, folios, because this information is provided by and, in the case of equities, adding acquisitions security-level data collected via the benchmark through stock swaps. Specifically, cross-border holdsurveys. The security-level data can also provide a ings of a particular type of instrument (foreign equity, very accurate picture of the distribution of U.S. inves- foreign debt, U.S. equity, U.S. Treasury debt, U.S. tors' foreign portfolios by country; but they are less agency debt, or U.S. corporate or municipal debt) at accurate in the country attribution of foreign inves- the end of period t can be estimated by the equation tors in U.S. securities, because of a custodial center bias in the liabilities surveys. Finally, the bench- A,t = Ai, t-1 • JRi, t-1 mark surveys provide insight into the composition of cross-border holdings. However, because the surveys + NPI • [1 - (GPI + GS ,) • FG T T T are infrequent and involve considerable editing and + SS , „ processing, the data are not available on a timely T basis. where the subscript i denotes the foreign country. The monthly transactions reports, though provid- When estimating U.S. holdings of foreign securities, ing timely information on cross-border flows, must i denotes the country in which the security was be interpreted with some caution, primarily because issued; when estimating foreign holdings of U.S. that portion of the data collection system is governed securities, it denotes the country of the foreign invesby balance of payments conventions. For example, tor. The variables are defined as follows (definitions because the system was designed to capture market when estimating foreign holdings of U.S. securities transactions only, data on equities acquired through are given in parentheses): stock swaps are not collected, though they are important in analyses of portfolio flows. Moreover, because A , = Holdings of country V s securities by U.S. the system identifies the country of the transactor, the ; residents at the end of month t (holdings data contain a financial center bias that must be of U.S. securities by country V s residents accounted for in analyses of bilateral portfolio flows, at the end of month t) studies of the determinants of flows between the United States and any specific country or area, and Rj = Price index for revaluing holdings examinations of the effects of these flows on bilateral t exchange rates. Finally, it appears that the transac- NPJ , = Net purchases of country V s securities tions data may understate net U.S. purchases of forby U.S. residents during month t (net eign securities, especially equity issues, and that purchases of U.S. securities by country recent transactions data may have overstated net for- V s residents during month t) eign purchases of U.S. securities, especially debt instruments. GP^ = Gross purchases of country /'s securities As cross-border trading has grown in volume, t by U.S. residents during month t (gross complexity, and importance, the need to modify the purchases of U.S. securities by country U.S. system to produce more comprehensive, timely, V s residents during month t) and accurate data has become increasingly evident. Some enhancements and improvements have been decided on, and others are being considered. At the same time, the U.S. system is evolving from one that has operated largely in isolation from those in other NOTE. The discussion and data in this appendix are from F.E. Warcountries into one that is increasingly harmonized nock and C.A. Cleaver, "Financial Centers and the Geography of with, and affected by, international efforts to improve Capital Flows," International Finance Discussion Paper (Board of Governors of the Federal Reserve System, Division of International data on cross-border securities activities. Finance, forthcoming). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

648 Federal Reserve Bulletin • October 2001 GSI = Gross sales of country V s securities ers. For transaction costs in equities, we use estimates t by U.S. residents during month t of commissions and fees charged institutional inves- (gross sales of U.S. securities by country tors provided by Elkins-McSherry. For transaction /'s residents during month t) costs in U.S. debt securities, we use half the bid-ask spread and rely on estimates of spreads provided by 7] = Adjustment factor for transaction costs market participants of 5 basis points (BP) on U.S. Treasury debt, 10 BP on U.S. agency debt, and 25 BP SSi = Country Vs equities acquired by U.S. on U.S. corporate debt. And for transaction costs in t residents through stock swaps during foreign debt securities, we use information on bidmonth t (U.S. equities acquired by ask spreads from the Bank for International Settlecountry V s residents through stock ments and J.P. Morgan if it is available; if it is not swaps during month t). available, we assume spreads of 25 BP for industrial countries and 50 BP for emerging market countries. The use of this procedure is illustrated by estimating holdings of foreign securities by U.S. residents as Aggregate Estimates of December 31, 1997, from measured holdings on March 31, 1994, and holdings of U.S. securities by As estimated by the equation, aggregate foreign holdresidents of other countries as of March 31, 2000, ings of U.S. long-term securities as of March 31, from measured holdings on December 31, 1994. 2000, totaled almost $4.2 trillion, 16 percent higher Data for some of the variables are readily avail- than the amount measured by the benchmark survey able: Initial values of Aj are given by the 1994 bench- as of the same date (table A.l).14 Much of the differmark surveys, and purchases and sales figures are ence is due to overestimation of foreign holdings of from the monthly transactions reports; data on equi- U.S. debt securities, which in turn is due to the large ties acquired through stock swaps are from Securities amount of net purchases ($1.4 trillion). The estimate Data Corporation. of foreign holdings of U.S. equities, in contrast, is very close to the amount measured by the benchmark Appropriate values for two of the variables are survey, especially considering the large valuation unknown: the price index for revaluing holdings and adjustment.15 transaction costs incurred by investors in cross-border transactions. The price index used for revaluing hold- The apparent overcounting of net foreign purings should reflect the composition of cross-border chases of U.S. debt securities has at least three posholdings. Unfortunately, the compositions can be determined only for survey dates, as the monthly 14. Official year-end estimates of cross-border holdings are pubtransactions data do not indicate which equities and lished by the BEA in its presentation of the international investment debt securities U.S. and foreign investors are trading. position; the BEA does not publish quarterly estimates. Our estimates Having little information to rely on, we revalue would differ from the BEA's for many reasons. For example, the BEA might choose different price indexes or use different assumptions equity holdings using MSCI indexes, because they about transaction costs. are typically composed of the larger, more actively 15. The $184 billion difference between estimated and measured traded equities—the type of equities foreigners might equity holdings could be due to just a 19 percent overestimation of the cumulative valuation adjustment on foreigners' holdings of U.S. equibe more likely to hold. For revaluing debt holdings, ties over the five-year period, a small amount given the 240 percent we use indexes from J.R Morgan and Lehman Broth- increase in U.S. stock prices over the period. A.l. Measured and estimated value of foreign holdings of U.S. long-term securities, by type of security, March 31, 2000 Billions of dollars December 31, January 1995-March 2000 March 31, 2000 •••ffffffiiiSSSfffiiilll®®®®®® 1994 •HIHII . 1 Estimated Estimated ffflllHHH TTTyyyppp HHH eee ooofff sss HHH eeecccuuurrriiitttyyy BBB MMMMHHHeasurHHHed IIIN et purchases T costs Stock swaps a V d a ju lu s a tm tio e n n t (1+2- Measured less measured 3 + 4 + 5) (6-7) --- --- HHH ;;; 111®®® SSSiiiHHH (1) (2) • (3) • (4) (5) (6) (7) (8) Debt 846 1,444 16 ... 3 2,277 1,865 412 Equity 398 314 14 66 1,132 1,895 1,711 184 1,244 1,758 30 66 1,135 4,172 3,576 596 . . . Not applicable. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The U.S. System for Measuring Cross-Border Investment in Securities 649 A.2. Measured and estimated value of U.S. holdings of foreign long-term securities, by type of security, December 31, 1997 Billions of dollars March 31, April 1994-December 1997 December 31, 1997 1994 BBB Estimated Estimated TTTyyypppeee ooofff ssseeecccuuurrriiitttyyy Measured Net purchases Transaction Stock swaps Valuation (1 + 2 - Measured less measured costs adjustment 3+4 + 5) (6-7) (1) (2) (3) (4) (5) (6) (8) 304 159 7 ... 48 504 547 -43 Equity 567 181 8 5 228 973 1,208 -235 Total 871 340 15 5 276 1,477 1,755 -278 . Not applicable. sible explanations. The first is associated with asset- (table A.2). Doubling the valuation adjustments for backed securities. Many U.S. debt securities are debt and equity holdings would bring the estimates in backed by pools of loans (such as residential mort- line with the measured amounts, but it is unlikely that gages, automobile loans, or credit card receivables) the valuation adjustments used are off by a factor of placed in trust. On these securities, both the principal two over the almost-four-year period between asset and the interest are repaid on a regular basis (usually surveys. Rather, it seems likely that net purchases monthly), so the amount of principal held by foreign of foreign securities are being undercounted in the (and domestic) owners of these securities decreases monthly transactions data, perhaps because an evereach month. If these principal paydowns are not growing number of U.S. investors are participating accurately captured in the transactions data, holdings directly in foreign securities markets as a result of of asset-backed securities will be overstated. Over- improvements in international communications and counting of securities involved in repurchase and their transactions are not recorded in the monthly TIC securities lending agreements is a second possible reports.16 Automatic purchases, such as with diviexplanation for the apparent overcounting of net for- dends reinvestment plans (or DRIPs), are also likely eign purchases of debt securities, although the pos- undercounted. sible magnitude of the error is unknown. The third possible explanation is a failure to report redemptions of foreign-held securities. 16. This observation has also been made by Lois Stekler, in "Ade- Whereas foreign holdings of U.S. securities are quacy of International Transactions and Position Data for Policy overestimated, U.S. holdings of foreign securities as Coordination," in W. Branson, J. Frenkel, and M. Goldstein, eds., International Policy Coordination and Exchange Rate Fluctuations of year-end 1997—the date of the most recent asset (National Bureau of Economic Research and University of Chicago survey—are underestimated, by almost $300 billion Press, 1990). A.3. Measured and estimated value of U.S. holdings of foreign long-term securities, December 31, 1997 Billions of dollars Equity Total CCoouunnttrryy oorr rreeggiioonn WWSSiiMM 11 fftt//SSaammmmSS IISSBBHHSShhhhppRRHHII rrSSmm Measured Estimated Measured Estimated Measured Estimated ** .. ,, "" Financial centers United Kingdom. 68 218 244 272 311 Caribbean 49 32 71 57 Hon§ Kong 0 28 27 32 27 Industrial countries Euro area 110 376 256 492 366 Other Europe 24 125 99 153 123 Japan 36 136 94 166 130 Canada 91 71 73 178 164 Emerging markets Asia 26 30 14 60 40 Latin America 83 89 77 178 160 41 86 57 153 99 504 1,208 973 1,755 1,477 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

650 Federal Reserve Bulletin • October 2001 A.4. Measured and estimated value of foreign holdings of U.S. long-term securities, March 31, 2000 Billions of dollars Financial centers United Kingdom Caribbean ... Hong Kong . Industrial Euro area Other Europe Japan . Canada Emerging markets Asia Latin America Country unknown Total Not applicable. Bilateral Estimates Holdings of U.S. equities show a similar pattern, with the overestimation of U.K. holdings totaling Because benchmark surveys of U.S. holdings of for- $175 billion. Estimated holdings of U.S. securities in eign securities accurately indicate the country of the the Caribbean financial centers are also too high. For issuer, deviations of estimated holdings from mea- the other countries included in table A.4, the estisured holdings by country are due to the limitations mates are somewhat closer to the measured amounts, of the transactions data resulting from current TIC with the exceptions of U.S. debt held in Japan and reporting conventions. For U.S. holdings of foreign emerging Asia and U.S. equities held in Japan, debt securities, the estimates, by country, are rela- "Other Europe," and Latin America. tively close to the measured amounts; holdings of The fact that the bilateral transactions data appear U.K. debt are overestimated by 17 percent, but, over- to be biased toward financial centers must be acall, the estimates are roughly in line with the survey knowledged in any analysis of bilateral capital flows. data (table A.3). U.S. holdings of U.K. equities are An obvious solution is to exclude financial centers also overestimated, but U.S. holdings of equities from (such as the United Kingdom) from the analysis. But most other areas are underestimated, in some cases this solution is unsatisfactory, as other countries (such strikingly so. For example, holdings of equities issued as euro area countries) are also affected. For example, by companies in the euro area and lapan are under- if many transactions between the euro area and the estimated by more than 30 percent. United States go through the United Kingdom, how Because of the bias in benchmark surveys of for- should studies of the determinants of flows between eign holdings of U.S. securities toward custodial cen- the euro area and the United States, or of the effects ters, the country attribution in the liabilities survey of capital flows on the dollar-euro exchange rate, be data is not perfect. That said, the figures show a interpreted? • substantial overestimation of holdings of U.S. securities by financial centers (table A.4). Indeed, estimated U.K. holdings of U.S. debt based on transactions data are more than three times the measured amount.17 17. Some portion of the measured holdings labeled "Country unknown" may be attributable to bearer bonds held by U.K. residents. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

651 Industrial Production and Capacity Utilization for August 2001 Released for publication September 14 August 2000. Manufacturing output declined 1.0 percent in August, mining output decreased 0.4 percent, Industrial production fell 0.8 percent in August, to and utilities production rose 1.6 percent. The rate of 141.5 percent of its 1992 average. Having declined capacity utilization for total industry fell 0.7 percentfor eleven consecutive months, industrial production age point, to 76.2 percent, a level almost 6 percentage in August was nearly 5 percent below its level in points below its 1967-2000 average. Industrial production Ratio scale, 1992 = 100 Capacity utilization Percent of capacity J I J I I L 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 12-month percent change Percent of capacity Industrial production Capacity utilization 1100 90 Total industrial production Primary processing 55 85 ++ 00 Excluding high-tech industries Advanced processing 75 55 1 1 1 1 1 1 I 1 1 1 1 1 1 1 1995 1997 1999 2001 1995 1997 1999 2001 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

652 Federal Reserve Bulletin • October 2001 Industrial production and capacity utilization, August 2001 Industrial production, index, 1992=100 Percent change Category 2001 2001' Aug. 2000 to Mayr Juner July Aug.i May1" June1" Julyr Aug.' Aug. 2001 Total 144.2 142.7 142.6 141.5 -.3 -1.0 -.1 -4.8 Previous estimate 144.2 143.0 142.8 -.3 -.9 -.1 Major market groups Products, total2 133.7 132.5 132.5 131.3 -.1 -.9 .0 -.9 -3.9 Consumer goods ... 122.2 121.6 122.1 121.2 .1 -.5 .4 -.8 -2.1 Business equipment 191.9 187.7 187.1 184.1 -.7 -2.2 -.3 -1.6 -6.9 Construction supplies 139.3 139.2 138.8 138.1 -.3 -.1 -.3 -.5 -3.2 Materials 163.3 161.2 160.8 159.9 -.5 -1.3 -.3 -.5 -6.2 Major industry groups Manufacturing 149.2 147.4 147.5 146.1 -.2 -1.2 .0 -1.0 -5.5 Durable 190.1 187.4 187.6 185.5 .0 -1.4 .1 -1.2 -5.8 Nondurable 112.2 111.2 111.1 110.3 -.6 -.8 -.1 -.7 -5.2 Mining 103.8 103.4 102.3 101.8 .3 -.4 -1.1 -.4 .8 Utilities 119.5 119.6 118.8 120.7 -1.1 .1 -.7 1.6 -1.1 Capacity utilization, percent MMMEEEMMMOOO CCCaaapppaaaccciiitttyyy,,, pppeeerrrccceeennnttt 2000 2001 ccchhhaaannngggeee,,, AAvveerraaggee,, LLooww,, HHiigghh,, AAAuuuggg... 222000000000 11996677--0000 11998822 11998888--8899 tttooo Aug. May1" Juner July' Aug.P AAAuuuggg... 222000000111 Total 82.1 71.1 85.4 82.6 78.0 77.1 76.9 76.2 3.1 Previous estimates .. 78.0 77.2 77.0 Manufacturing 81.1 69.0 85.7 81.7 76.6 75.6 75.5 74.6 3.5 Advanced processing 80.6 71.0 84.2 80.2 77.2 76.1 76.1 75.1 2.0 Primary processing . 82.2 65.7 88.3 85.4 76.7 75.6 75.4 74.7 6.0 Mining 87.4 80.3 88.0 86.9 90.3 90.0 89.2 88.9 -1.4 Utilities 87.6 75.9 92.6 91.5 87.2 87.0 86.1 87.2 3.8 seasonally adjusted 2. Contains components in addition to those shown. monthly data. r Revised. 1. Change from preceding month. p Preliminary. MARKET GROUPS the past month's decline. The output of information processing equipment, which includes computers, The output of consumer goods fell 0.8 percent in also fell again; it has declined more than 4 percent August after a 0.4 percent increase in July. The since May and about 8 percent since the end of 2000. The production of defense and space equipment fell production of durable consumer goods dropped 0.9 percent, erasing a similarly sized gain in July, 1.5 percent as sizable decreases in the output of and the output of construction supplies fell 0.5 perautomotive products and miscellaneous consumer cent further. The production of business supplies goods more than offset a bounceback in the prodecreased 0.4 percent, its eighth decline in the past duction of appliances and home electronics such as nine months. audio-visual equipment; the output of home comput- The output of industrial materials decreased ers contracted again. The production of nondurable 0.5 percent. Widespread declines in the production consumer goods fell 0.6 percent. The output for all of durable and nondurable materials outweighed an of the major non-energy categories declined; the proincrease in the output of energy materials. Overall, duction of consumer energy products increased the production of industrial materials has fallen 0.3 percent and has changed little, on balance, over 6.2 percent since August 2000. the past year. In August, the overall consumer energy increase was held down by a decline in gasoline production. The production of business equipment, which fell INDUSTRY GROUPS 1.6 percent, was nearly 7 percent lower than it was in August 2000; decreases in transit equipment and in Manufacturing output, which was unchanged in July, industrial and other equipment accounted for most of fell 1.0 percent in August and was 5V2 percent lower Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Industrial Production and Capacity Utilization 653 than in August 2000. The production of durable goods fell 1.2 percent, and cutbacks were widespread Discontinuation of "Industrial Production across the major sectors. Declines were particularly and Capacity Utilization" in the sharp in industrial machinery and in motor vehicles Federal Reserve Bulletin and parts. Electrical machinery fell 0.9 percent and has fallen about 12 percent so far in 2001; the pro- "Industrial Production and Capacity Utilization" will not duction of communications equipment and semicon- be reprinted in the Federal Reserve Bulletin after the ductors remained especially weak. The output of December 2001 issue. The Federal Reserve's monthly G.17 statistical release, "Industrial Production and nondurables fell 0.7 percent, and production declined Capacity Utilization," which this section of the Bulletin for nearly all major groups. The overall factory opersummarizes each month, is available on the Board's web ating rate fell 0.9 percentage point, to 74.6 percent, site (www.federalreserve.gov/releases/gl7/); historical with decreases both in advanced-processing and data back to 1919 are also available on the web site. The primary-processing industries. data are also available in paper copies and on diskettes At mines, production fell 0.4 percent, and the from Publications Services, Mail Stop 127, Board of utilization rate decreased to 88.9 percent but Governors of the Federal Reserve System, Washingremained above its long-run average. The output of ton, DC 20551 (tel. 202-452-3244). utilities increased 1.6 percent, nearly reversing the * * * ** cumulative decline over the preceding three months, Other reprints will also be eliminated from the Bulletin and was about 1 percent below its year-ago level. The after December 2001: congressional testimony, the operating rate at utilities rose 1.1 percentage points, FOMC minutes, the quarterly report "Treasury and Fedto 87.2 percent. eral Reserve Foreign Exchange Operations," and the annual report "Open Market Operations," both by the Federal Reserve Bank of New York (the text portion REVISION OF INDUSTRIAL PRODUCTION AND of "Open Market Operations" will be reprinted in the CAPACITY UTILIZATION Board's Annual Report rather than in the Bulletin). The documents are widely distributed when originally pub- On November 27, the Federal Reserve Board will lished, and several sources for historical information are publish revisions to the index of industrial production available. (IP), to the related measures of capacity and capacity utilization, and to the index of industrial use of electric power. The updated measures will reflect the nonmetallic minerals (except fuels) for 1999 and incorporation of newly available, more comprehen- 2000 will also be introduced. The updating will sive source data typical of annual revisions. The new include revisions to the monthly indicator for each source data are for recent years, primarily 1999 and industry (either physical product data, production- 2000, although data from 1992 onward will be sub- worker hours, or electric power usage) and to seaject to revision. sonal factors. Industrial production and capacity utilization will Capacity and capacity utilization will be revised to continue to be based on the 1987 Standard Industrial incorporate preliminary data from the 2000 Survey of Classification (SIC) until the 2002 annual revision, Plant Capacity of the Bureau of the Census, which after which they will be constructed from the North covers manufacturing, along with other new data on American Industrial Classification System (NAICS). capacity from the U.S. Geological Survey, the Depart- The new NAICS-related production indexes will be ment of Energy, and other organizations. The statisbased on annual output measures that are constructed tics on the industrial use of electric power will incorby reclassifying the establishments in historical Cen- porate additional information received from utilities suses of Manufactures and Mineral Industries under for the past few years and will include some data NAICS; annual output indexes constructed this way from the 1997 Census of Manufactures and the 1998 will maximize the reliability and historical consis- and 1999 Annual Survey of Manufactures. tency of the IP industry detail. Once the revision is published, it will be The updating of source data for IP in the 2001 made available on the Board's web site annual revision will include annual data from the (www.federalreserve.gov/releases/gl7). The revised 1999 Bureau of the Census Annual Survey of Manu- data will also be available through the web site of the factures and from selected editions of its 1999 and Department of Commerce. Further information on 2000 Current Industrial Reports. Annual data from these revisions is available from the Board's Industhe U.S. Geological Survey regarding metallic and trial Output Section (telephone 202-452-3197). • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

654 Testimony of Federal Reserve Officials Testimony of Laurence H. Meyer, Member, Board of and effective rules, allows for meaningful comment Governors of the Federal Reserve System, before the and the collection of much needed information Subcommittee on Financial Institutions and Con- regarding the practical effects of the SEC's rules on sumer Credit and the Subcommittee on Capital Mar- the traditional activities of banks. Most importantly, kets, Insurance, and Government Sponsored Enter- we look forward to engaging in a constructive diaprises of the Committee on Financial Services, U.S. logue with the Commission and its staff and to assist- House of Representatives, August 2, 2001 ing them in modifying the substance of the rules in a manner that both gives effect to the Congress' intent I appreciate the opportunity to present the views of and does not disrupt the traditional customer relationthe Federal Reserve on the interim final rules issued ships and activities of banks. by the Securities and Exchange Commission (SEC Before highlighting some of the most significant or Commission) to implement the bank securities provisions of the interim final rules that we believe provisions of the Gramm-Leach-Bliley Act (GLB must be modified, a brief background of the treat- Act). The manner in which these rules are imple- ment of banks under the Securities Exchange Act of mented is extremely important to banks and their 1934 and the purposes of the GLB Act's bank securicustomers and well deserves your attention. ties provisions is useful. As the banking agencies detailed in our official comment to the Commission on the rules, we believe they are, in a number of critical areas, inconsistent HISTORY OF THE BANK EXCEPTION with the language and purposes of the GLB Act, and AND BANK SECURITIES ACTIVITIES create an overly complex, burdensome, and unnecessary regulatory regime. The rules as currently drafted In 1934, the Congress first adopted a federal scheme would disrupt the traditional operations of banks and requiring all entities that act as securities brokers impose significant and unwarranted costs on banks or dealers to register with the SEC. The Securiand their customers. ties Exchange Act of 1934, however, specifically In our comment letter, the banking agencies also exempted all banks from the definitions of "broker" objected to the Commission adopting the rules in and "dealer" and, accordingly, did not require banks final form and making them effective beginning Octo- providing securities services to their customers to ber 1 of this year. The banking agencies urged the register with the SEC as broker-dealers. Although Commission to treat the interim final rules as pro- the ability of banks to underwrite, deal in, and purposed rules and to give banks sufficient time after chase securities was limited by the Glass-Steagall modified rules are adopted by the Commission to Act of 1933, banks continued to have the ability to implement systems and make other changes neces- buy and sell securities for the account of their cussary to comply with the rules. tomers and to buy and sell securities for their own We support the Commission's recent actions to account when specifically authorized by law. The extend the public comment period on the rules until Congress recognized that these permissible securities September 4, 2001, and to extend the effective date of activities were already supervised and examined by the interim final rules and the statutory provisions the appropriate federal and state banking authorities that they implement until at least May 12, 2002. We and that subjecting these activities to an additional also support the Commission's statement that it will layer of regulation was not necessary or appropriate. further extend the effective date for an appropriate In fact, one of the primary purposes of the Securities period of time to provide banks with a sufficient Exchange Act of 1934 was to subject nonbank stocktransition period to come into compliance with any brokers and securities traders to the type of governrevised rules the Commission ultimately adopts. We ment supervision and examination that was already believe these procedural steps are both necessary and applied under the banking laws to banks. appropriate to ensure that the public comment pro- Long before 1934 and since, banks have offered cess, which is so critical to the development of fair their customers securities services in a variety of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

655 circumstances in connection with their banking ance with these fiduciary principles. These examinaactivities. For example, banks have long bought and tions frequently are conducted by examiners who sold securities for their trust and fiduciary customers. have received special training in trust and fiduciary These services are an essential part of the trust and law and practice, and the federal banking agencies fiduciary operations of banks—operations that have assign banks engaged in fiduciary activities separate long been considered a core banking function. Banks ratings under the Uniform Interagency Trust Rating that have discretionary investment authority over a System. These ratings are based on an evaluation of, trust or fiduciary account purchase and sell securities among other things, the capability of management; for the account to ensure that the account is properly the adequacy of the bank's operations, controls, and diversified and managed in the manner required by audits; the bank's compliance with applicable law, the governing trust agreement and applicable fidu- fiduciary principles, and the documents governing ciary principles. Banks also provide investment the account; and the management of fiduciary assets. advice concerning securities, real estate, and other assets to nondiscretionary fiduciary accounts and have long been able to execute securities transactions GLB ACT for these accounts. Another core banking function is providing cus- It was in the context of this existing regulatory frametody and safekeeping services. The five largest global work that the Congress, during consideration of the custodians are banks; and banks, both large and GLB Act, reviewed the blanket exception for banks small, act as trusted custodians for the securities, real from the definitions of "broker" and "dealer" in the estate, and other assets of customers. One of the most Securities Exchange Act. This review of the blanket recognizable custody services provided by banks is exception was not undertaken because abuses or for Individual Retirement Accounts (IRAs). Under concerns existed concerning the traditional securiapplicable Internal Revenue Service regulations, ties activities of banks. In fact, banks generally have banks may act as custodians for IRAs, and bank- conducted their securities activities responsibly and offered custodial IRAs provide consumers through- in accordance with bank regulatory requirements and out the nation with a convenient and economical way other applicable law, including the antifraud provito buy and sell securities for retirement purposes on a sions of the federal securities laws. tax-deferred basis. Banks, as part of their customary Rather, the review of the bank exception was banking activities and as an accommodation to their undertaken to address a concern that, if the blanket customers, also have long permitted customers that exception for banks was retained at the same time hold securities in custody accounts at the bank to that the barriers hindering the affiliation of banks and buy and sell securities related to the account. These securities broker-dealers were removed, securities services allow customers to avoid the unnecessary firms might acquire a bank and move the securities expense of having to establish a separate securities activities of the broker-dealer into the bank in order account at a broker-dealer to effect such trades. Other to avoid SEC supervision and regulation. Some parsecurities services traditionally offered by banks ties also expressed concern that banks might in the include "sweeping" deposit funds into overnight future significantly expand their securities activities investment vehicles, such as money market mutual outside the services traditionally provided customers funds, privately placing securities for customers, and under the blanket exception. The Congress sought providing transfer agency services to issuers and to balance these concerns with the desire to ensure benefit plans. that banks could continue to provide their custom- Banks have offered these services to their custom- ers the securities services that they had traditionally ers without significant concerns for years. It is impor- provided as part of their customary banking activitant, moreover, to highlight that these activities are ties, without significant problems, and subject to the not unregulated—they are supervised, regulated, and effective supervision and regulation of the banking examined by the relevant federal and state banking agencies. agencies. In the trust and fiduciary area, these pro- The end result, the GLB Act, replaced the blanket tections are enhanced and supplemented by well- exception for banks from the definitions of "broker" developed principles of state and federal trust and and "dealer" with fifteen exceptions tailored to allow fiduciary law that provide customers with strong pro- the continuation of key bank securities activities. tections against conflicts of interest and other poten- These exceptions were broadly drafted and were tial abuses. Bank examiners regularly examine a intended to ensure that banks could continue to probank's trust and fiduciary departments for compli- vide their customers with most, if not all, of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

656 Federal Reserve Bulletin • October 2001 services that they traditionally had received from to operate a full-scale brokerage operation out of banks. For example, these statutory exceptions per- their trust department, the GLB Act established two mit banks, subject to certain conditions, to continue limitations. First, a bank relying on the trust and to (1) buy and sell securities for their trust and fiduciary exception must be "chiefly compensated" fiduciary customers, (2) buy and sell securities for for the securities transactions it effects for its trust their custodial clients as part of their customary bank- and fiduciary customers on the basis of certain types ing activities, (3) establish so-called "networking" of traditional trust and fiduciary fees specified in the arrangements with registered broker-dealers to offer act. Second and importantly, the act prohibits the securities services to the bank's customers, (4) sweep bank from publicly soliciting securities brokerage deposit funds into shares of no-load money market business other than in conjunction with its trust mutual funds, (5) privately place securities with activities. The Congress did not expect that these sophisticated investors, (6) issue and sell to qualified compensation requirements and advertising restricinvestors securities that are backed by assets pre- tions would interfere with the traditional trust and dominantly originated by the bank, its affiliates, or in fiduciary activities of banks, nor were these provithe case of consumer-related receivables, a syndicate sions intended to grant the SEC broad authority to formed by the bank and other banks, and (7) broker regulate or "push out" the trust and fiduciary activisecurities in up to 500 transactions per year that are ties of banks. In fact, the Conference Report for the not otherwise exempt. GLB Act specifically states that the "Conferees expect that the SEC will not disturb traditional bank trust activities" under this exception.1 INTERIM FINAL RULES ADOPTED BY THE SEC The interpretation of this exception currently reflected in the interim final rules, however, would The interim final rules as currently written are, in significantly disrupt the customary trust and fiduciary many respects, not consistent with the language or activities of banks and is at odds with both the purposes of the GLB Act and would impose unneces- language and purposes of the exception. Most imporsary costs and burdens on banks and their customers. tantly, the interim final rules provide that a bank In the interest of time, I will focus only on some of qualifies for the exception only if each of its trust our most significant concerns with the substantive and fiduciary accounts independently meets the act's provisions of the rules. A more detailed discussion of "chiefly compensated" requirement. We strongly our numerous concerns is included in the comment believe that the act's "chiefly compensated" requireletter issued jointly by the Federal Reserve, the OCC, ment was intended to apply to a bank's aggregate and the FDIC. trust and fiduciary activities and not on an accountby-account basis. An approach focused on the bank's aggregate trust and fiduciary activities is consistent Trust and Fiduciary Activities with the nature and operations of bank trust departments and would—in conjunction with the act's pro- We are most concerned with the provisions of the hibition on banks publicly soliciting brokerage busiinterim final rules that implement the statutory excep- ness apart from their trust and fiduciary activities— tion for the trust and fiduciary activities of banks. In effectively prevent banks from running a full-scale our judgment, these provisions would significantly brokerage operation out of their trust departments. disrupt the trust and fiduciary customer relationships The account-by-account approach adopted by the and activities of banks. As I noted above, trust and interim final rules, on the other hand, is both unworkfiduciary activities are part of the core functions of able and overly burdensome. First, this approach banks, and banks have long bought and sold securi- appears premised on the notion that an individual ties for their trust and fiduciary customers under the trust or fiduciary account that engages in a significant strong protections afforded by fiduciary laws and number of securities transactions during a year is not under the supervision and examination of the banking a traditional trust and fiduciary account. This premise agencies. is flawed, however. It is entirely natural for a bank to In light of this history, the GLB Act specifically engage in numerous securities transactions for a trust permits banks to effect transactions in a trustee capac- or fiduciary account. For example, there may be numerous securities transactions for an account when ity and to effect transactions in a fiduciary capacity in a trust is initially established and the assets provided any department of the bank that is regularly examined by bank examiners for compliance with fiduciary principles. To ensure that banks did not attempt 1. See H.R. Conf. Rep. No. 106-434 at 164 (1999). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Testimony of Federal Reserve Officials 657 by the grantor are initially invested or when the take advantage of the exemption only if it signifiinvestment strategy of a fiduciary account is altered cantly limits its receipt of fees that would otherwise to reflect changes in the beneficiary's investment be permissible under the GLB Act. objective. An account-by-account approach also does The rules also impose restrictions on the trust and not accommodate the complex, multi-account rela- fiduciary activities of banks that simply are not found tionships that a bank's trust department is frequently in the statute and that are not consistent with the called upon to establish to achieve the individual- nature of the trust and fiduciary operations of banks. ized wealth preservation and transfer goals of its For example, although the statutory exception is, by customers. its terms, available for all accounts where a bank acts The account-by-account approach also proves too as trustee, the rules suggest that the SEC will review much. To put this in context, a moderately sized trust bank-trustee relationships and may determine that department may have on the order of 10,000 separate some of these relationships do not qualify for the trust and fiduciary accounts and a large trust depart- exception. Accordingly, the rules not only cast doubt ment may have more than 100,000 such accounts. on whether banks may continue to effect securities Under the account-by-account approach adopted by transactions for a wide variety of traditional trust the interim final rules, changes in the amount of accounts, such as self-directed personal trust accounts compensation received during a year from a single and charitable trusts, but also suggest that the SEC trust or fiduciary account could cause a bank and intends to review and regulate the types of trust its entire trust operation to become an unregistered relationships that banks may have with customers. broker-dealer, thereby opening the bank to the threat The interim final rules also place restrictions on when of enforcement action by the SEC and, after Janu- a bank will be deemed to be acting in a "fiduciary ary 1, 2003, suits by private parties for the rescission capacity" that were not included in the statute or of securities contracts entered into by the bank. Such contemplated by the Congress. a result is unreasonable, especially because a bank Finally, the rules interpret the statute's examinawould not be able to determine an account's compli- tion requirement in a manner that will effectively ance with the rules' "chiefly compensated" require- prevent many banks from taking advantage of the ment until the end of a year and then may have only statutory trust and fiduciary exception at all. As I a single day to restructure its operations if the com- mentioned earlier, the Congress required that any pensation from one account did not meet the rules' securities transactions under the exception be effected requirements. either in the bank's trust department or in another The proposed account-by-account approach also department that is regularly examined by bank examwould impose significant and unnecessary burdens iners for compliance with fiduciary principles and on banks. Most banks do not have the systems in standards. These requirements ensure that the cusplace to track the various categories of compensation tomer's relationship with the bank continues to be that they receive from each individual trust and fidu- subject to the fiduciary examination programs of ciary account. In order to comply with the rules and the banking agencies that have effectively protected to continue providing traditional trust and fiduciary customers for years. services, banks would have to establish complex and The interim final rules, however, allow a bank to costly systems and procedures for monitoring the effect transactions for a trust or fiduciary account amount and types of fees received from each trust only if all aspects of the transaction—including assoand fiduciary account, and these costs likely would ciated data processing and settlement—occur in a be passed on to consumers. department regularly examined by bank examiners The Commission recognized the significant bur- for compliance with fiduciary principles and standens imposed by the rules' account-by-account dards. Many bank trust and fiduciary departments requirement and used its discretionary authority outsource securities settlement and processing funcunder other provisions of the securities laws to adopt tions to a third party or affiliate, or delegate these an exemption for banks that comply with certain functions to other departments of the bank to achieve conditions established by the Commission. These cost and operational efficiencies. The customer relaconditions, however, require the bank to establish tionship is fully protected by trust and fiduciary prinprocedures to ensure that each trust and fiduciary ciples in this case, while the mechanics of the transaccount complies with the rules' chiefly compensated action are handled in the most cost-efficient manner. requirement, effectively maintaining the account-by- However, banks that have structured their operations account approach from which the exemption was in these ways would be prohibited by the rules from supposed to provide relief. In addition, a bank may taking advantage of the exception granted by the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

658 Federal Reserve Bulletin • October 2001 Congress, even though their relationships with cus- of the banking agencies. Banks also provide benefit tomers are maintained in a trust or fiduciary depart- plans with custodial and administrative services, ment and regularly examined by bank examiners for including securities execution and recordkeeping sercompliance with fiduciary principles. vices, under the direction and supervision of the In our view, the end result of these narrow interpre- plan's fiduciaries. These bank-offered services allow tations and burdensome requirements is that banks plan administrators to obtain securities execution and will be forced to significantly restructure their tradi- other administrative services in a cost-effective mantional trust and fiduciary activities, and some banks ner, thereby reducing plan expenses and benefiting may well be required to cease providing these tradi- plan beneficiaries. tional banking services to customers. In addition, The Commission, however, has stated that the cuscustomers that have chosen to establish relationships tody exception does not allow a bank to effect securiwith banks will be forced to terminate these relation- ties transactions for its custodial IRA or benefit plan ships or have duplicate accounts at the bank and a accounts. This position essentially reads the explicit broker-dealer, resulting in increased costs and bur- authorization adopted by the Congress out of the den.2 We do not believe that this was the result statute, is completely contrary to the purposes of the intended by the Congress. act, and would disrupt long-standing relationships between banks and their customers. In addition, the interpretation of the custody excep- Custodial and Safekeeping Activities tion adopted by the Commission would prohibit banks from executing securities transactions for their Another of the exceptions included by the Congress custodial customers on an accommodation basis. in the GLB Act was designed to protect the custodial Banks, as part of their customary banking activities, and safekeeping services that banks have long pro- have for many years effected securities transactions vided as part of their customary banking activities. In as an accommodation to their custodial clients. These particular, the act allows banks, as part of their cus- customer-driven transactions occur only upon the tomary banking activities, to provide safekeeping and order of the customer and allow the customer to custody services with respect to securities and to avoid having to go through the unnecessary expense provide custodial and other related administrative of establishing a separate account with a brokerservices to Individual Retirement Accounts and pen- dealer to effect occasional securities trades associated sion, retirement, and other similar benefit plans.3 In with the customer's custodial assets at the bank. this area, as well, the Commission has interpreted the In an effort to mitigate the adverse impact of these exception in a manner that is inconsistent with the interpretations on the banking industry, the Commislanguage and purposes of the act and that prevents or sion proposed two exemptions that would permit significantly disrupts the customary banking relation- small banks, on one hand, and all banks, on the other ships and activities that Congress sought to preserve. hand, to continue to accept orders from their custo- In particular, as I noted a moment ago, the act dial clients. These SEC-granted exemptions, which explicitly permits banks to continue providing custo- could be revoked or modified by the SEC at any time dial and related administrative services to IRAs and in the future, would not be necessary if the rules gave benefit plans. This language was added to the bill effect to the language and purposes of the custody during the House-Senate Conference to resolve any exception adopted by the Congress. Furthermore, ambiguity concerning the ability of banks to continue these exemptions are subject to numerous and burto provide securities execution services to their custo- densome restrictions that were not contemplated dial IRA customers and to benefit plans that receive by the act and that will make it difficult, if not custodial and administrative services from the bank. impossible, for many banks to take advantage of the Bank-offered custodial IRAs provide consumers exemptions. throughout the United States with a convenient and economical way of investing for retirement on a tax-deferred basis, and banks have long executed Third-Party Networking Arrangements securities transactions for these accounts subject to IRS requirements and the supervision and regulation The GLB Act also permits banks to establish so-called "networking" arrangements with registered 2. The GLB Act already requires that banks send any U.S. securi- broker-dealers, under which the broker-dealer makes ties trades for a trust or fiduciary account to a registered broker-dealer securities brokerage services available to the bank's for execution. See 15 U.S.C. §78c(a)(4)(C). customers. One provision of the statutory exception 3. See 15 U.S.C. §78c(a)(4)(B)(viii). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Testimony of Federal Reserve Officials 659 permits bank employees who are not registered repre- of the SEC's interpretations of the scope of the sentatives of the broker-dealer to receive a nominal, exceptions it has chosen to address do not comport one-time cash fee for the referral of customers to the with the unambiguous words of the GLB Act and the broker-dealer so long as payment of the fee is not legislative intent of the Congress, we are concerned contingent on whether the referral results in a securi- about the manner in which the SEC will interpret the ties transaction. other exceptions. The Board fears that if the SEC This exception was intended to reflect and codify does not adopt rules concerning the scope of all of the arrangements that the SEC staff has sanctioned in the exceptions, it will aggressively interpret some no-action letters issued to the banking and securities of the exceptions through enforcement actions and industries concerning networking arrangements.4 no-action letters, without banks and other members These letters, like the statutory exception, permit of the public having the opportunity to comment on bank employees to receive a nominal, one-time fee these interpretations. for the referral of customers to the broker-dealer and The interim final rules also fail to provide any cure do not attempt to establish a rigid mechanism for or leeway periods to banks that are attempting in determining what constitutes a "nominal" fee in good faith to comply with the exceptions when they every circumstance. This flexible approach has discover that some of their securities transactions worked well for both the banking and securities do not comply with the exceptions due to inadvertent industries and has not, to our knowledge, caused errors or unforeseen circumstances. Given the comsignificant problems. plexity of the exceptions, it is expected that banks Despite the success of this flexible approach, the that are attempting to conform their securities activiinterim final rules establish a rigid and complex ties to the exceptions will identify some securities approach for determining whether a referral fee is transactions that do not meet the terms of the excep- "nominal." In addition, the rules impose, or request tions. In some circumstances, banks will not even be comment on, other restrictions on referral fees that able to confirm that their securities transactions will were not authorized by the Congress. For example, comply with an exception at the time they are conthe rules provide that a referral fee is nominal if it ducted. For example, banks will not be able to condoes not exceed one hour of the gross cash wages of firm that they meet the "chiefly compensated" stanthe employee receiving the fee. By pegging permis- dard in the trust and fiduciary exception until they sible fees to the hourly wage of each employee, the review all of their compensation earned at the end of rules create significant administrative problems and the year. For these reasons, the Board believes that may conflict with state privacy requirements that the SEC must provide banks that have adopted polirestrict access to information concerning an employ- cies reasonably designed to comply with the excepee's salary. Although the rules also allow a bank to tions a reasonable period of time to cure any inadvertpay referral fees in the form of "points" in a bonus ent or unforeseen violations. This period of time must program, the rules require that any points awarded at least be long enough for a bank to establish an must not only be nominal, but also must be the lowest affiliated broker-dealer to which nonqualifying secuamount awarded for any product or service covered rities activities can be transferred. by the bonus program. Thus, for example, the points awarded for a securities referral could not exceed the amount of points awarded for a safe deposit referral, Preserving Regulatory Roles Established even if the points awarded for the securities referral by the Congress were nominal in amount. On a broader level, we also are concerned that several aspects of the rules appear to reflect an attempt Failure to Address All Exceptions or Adopt by the Commission to regulate the banking activities Cure or Leeway Periods of banks. For example, as I mentioned earlier, the interim final rules seek to limit the traditional trust, The interim final rules also fail to address the scope fiduciary, and custodial activities of banks and would of a majority of the exceptions to the definitions of indirectly give the Commission the ability to regulate "broker" and "dealer" that were adopted in the GLB the scope and nature of these activities. Similarly, Act. Given the fact that the Board believes that many there is language in the adopting release concerning the networking exception that would appear to impose restrictions on employee bonus programs 4. See Chubb Securities Corp., 1993 SEC No-Act. LEXIS 1204 operated by banks in general, even where the affected (Nov. 24, 1993). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

660 Federal Reserve Bulletin • October 2001 employees have no connection with any networking arrangement established with a broker-dealer. Discontinuation of "Testimony In addition, NASD Rule 3040, which is referenced of Federal Reserve Officials" in the in the preamble to the rules, purportedly provides the Federal Reserve Bulletin Commission and the NASD the authority to review all the securities activities engaged in by an employee "Testimony of Federal Reserve Officials" will not be who is both an employee of a bank and a broker- reprinted in the Federal Reserve Bulletin after the dealer, including those securities transactions that are December 2001 issue. When testimony is released to the public, it is simultaneously placed on the Board's conducted as part of the bank's traditional banking web site (www.federalreserve.gov/boarddocs/testimony/), activities and protected by one of the GLB Act's which also has testimony back to 1996. Paper copies of exceptions. We anticipate that such dual employee testimony are also available by mail from Publications arrangements will become more common, as banks Services, Mail Stop 127, Board of Governors of the seek to modify their activities to ensure compliance Federal Reserve System, Washington, DC 20551 (tel. with the GLB Act. We believe that subjecting these 202-452-3244). activities, which the Congress has identified as part of the business of banking, to dual regulation by both the banking agencies and the SEC would be incon- Other reprints will also be eliminated from the Bulletin sistent with the principles of functional regulation after December 2001: the monthly report on industrial and subject banks to unnecessary and duplicative production and capacity utilization, the FOMC minutes, regulation. the quarterly report "Treasury and Federal Reserve Foreign Exchange Operations" and the annual report "Open Market Operations," both by the Federal Reserve Bank of New York (the text portion of "Open Market CONCLUSION Operations" will be reprinted in the Board's Annual Report rather than in the Bulletin). The documents are The Board believes that the manner in which the widely distributed when originally published, and several bank securities provisions of the GLB Act are imple- sources for historical information are available. mented is critically important to the ability of banks to continue to provide high-quality banking services to their customers. We appreciate the steps the SEC has taken to extend the public comment period on the interim final rules and delay the effective date of the rules and the statute. However, the Board believes that significant substantive changes must be made to the interim final rules so that they reflect the words of the statute and the intention of the Congress. The Board stands ready to work with the SEC and the banking industry in revising the interim final rules. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

661 Announcements FOMC DIRECTIVES AND CHANGES IN THE In an unscheduled announcement, the Federal DISCOUNT RATE Open Market Committee on September 17, 2001, decided to lower its target for the federal funds rate by 50 basis points to 3 percent. In a related action, the The Federal Open Market Committee at its meeting Board of Governors approved a 50 basis point reducon August 21, 2001, decided to lower its target for tion in the discount rate to 7}h percent. The Federal the federal funds rate by 25 basis points to VA per- Reserve will continue to supply unusually large volcent. In a related action, the Board of Governors umes of liquidity to the financial markets, as needed, approved a 25 basis point reduction in the discount until more normal market functioning is restored. As rate to 3 percent. The action by the FOMC brings the a consequence, the FOMC recognizes that the actual decline in the target federal funds rate since the federal funds rate may be below its target on occasion beginning of the year to 300 basis points. in these unusual circumstances. Household demand has been sustained, but busi- Even before the tragic events of September 11, ness profits and capital spending continue to weaken employment, production, and business spending and growth abroad is slowing, weighing on the U.S. remained weak, and last week's events have the economy. The associated easing of pressures on labor potential to damp spending further. Nonetheless, the and product markets is expected to keep inflation long-term prospects for productivity growth and the contained. economy remain favorable and should become Although long-term prospects for productivity evident once the unusual forces restraining demand growth and the economy remain favorable, the Com- abate. For the foreseeable future, the Committee conmittee continues to believe that against the back- tinues to believe that against the background ground of its long-run goals of price stability and of its long-run goals of price stability and sustainable sustainable economic growth and of the information economic growth and of the information curcurrently available, the risks are weighted mainly rently available, the risks are weighted mainly toward conditions that may generate economic weak- toward conditions that may generate economic ness in the foreseeable future. weakness. In taking the discount rate action, the Federal The Federal Reserve Board also approved discount Reserve Board approved requests submitted by the rate requests submitted by the boards of directors of boards of directors of the Federal Reserve Banks of the Federal Reserve Banks of Boston, New York, Boston, New York, Philadelphia, Richmond, Chi- Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Kansas City, Dallas, and San Francisco. cago, Minneapolis, Kansas City, Dallas, and San Francisco. Subsequently, the Federal Reserve Board approved The Board also approved action by the board of on August 22, 2001, action by the board of directors directors of the Federal Reserve Bank of St. Louis, of the Federal Reserve Bank of Minneapolis, decreasdecreasing the discount rate at that bank from 3 pering the discount rate at the bank from 3 lA percent to cent to 2Vi percent, effective Tuesday, September 18, 3 percent, effective immediately. 2001. The Federal Reserve Board also approved action by the board of directors of the Federal Reserve Bank of St. Louis, decreasing the discount rate at that bank from 3'/ 4 percent to 3 percent, effective Thursday, BOARD STATEMENT FOLLOWING WORLD TRADE August 23, 2001. CENTER AND PENTAGON TERRORIST ATTACKS The Federal Reserve Board approved on August 23, 2001, actions by the boards of directors of the On September 11, 2001, the Federal Reserve System Federal Reserve Banks of Cleveland and Atlanta, announced that it is open and operating and that decreasing the discount rate at the banks from the discount window is available to meet liquidity 3'/ percent to 3 percent, effective immediately. needs. 4 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

662 Federal Reserve Bulletin • October 2001 SWAP ARRANGEMENT BETWEEN THE FEDERAL FEDERAL RESERVE ENCOURAGES BANKS TO RESERVE AND THE EUROPEAN CENTRAL BANK WORK WITH CUSTOMERS AFFECTED BY DISASTER In order to facilitate the functioning of financial markets and provide liquidity in dollars, the Federal On September 14, 2001, the Federal Reserve encour- Reserve and the European Central Bank (ECB) on aged state member banks and bank holding compa- September 13, 2001, agreed on a swap arrangement. nies to work with customers who directly or indi- Under the agreement, the ECB would be eligible rectly have been affected by the events of September to draw up to $50 billion, receiving dollar deposits 11. at the Federal Reserve Bank of New York; in The Federal Reserve has had a longstanding policy exchange, the Federal Reserve Bank of New York of encouraging bankers to work flexibly with customwill receive euro deposits of an equivalent amount at ers, whether companies or individuals, who have the ECB. been affected by disasters. In particular, banking The ECB will make these dollar deposits available organizations are encouraged to take prudent steps to to national central banks of the Eurosystem, which make credit available to sound borrowers, taking into will use them to help meet the dollar liquidity needs account current conditions in considering adjustof European banks, whose U.S. operations have been ments to the original terms and conditions of customaffected by the recent disturbances in the United ers' loans or transactions. States. This swap line will expire in thirty days. Conducted in a prudent way, such practices are consistent with safe and sound banking practice and promote the public interest by assisting in recovery. Banking organizations can work cooperatively with FEDERAL RESERVE AND BANK OF CANADA their borrowers by, for example, extending the terms AUGMENT SWAP FACILITY of repayment or otherwise restructuring the borrower's debt obligations. Such cooperative efforts can The Federal Reserve and the Bank of Canada on ease pressures on borrowers, improve their capacity September 14, 2001, agreed to a temporary augmento service debt, and strengthen the organization's tation of their existing swap facility in order to faciliability to collect on its loans. tate the functioning of financial markets and provide Organizations may also ease documentation liquidity in U.S. dollars. requirements or credit-extension terms for new loans, Under the terms of the augmented facility, the consistent with prudent banking practices, and may Bank of Canada would be able to draw up to $10 bilconsider providing additional time or grace periods lion in exchange for Canadian dollars. The U.S. dolbefore assessing late fees or initiating default or lar proceeds would, if necessary, be made available to penalty pricing, particularly on consumer loans. Such Canadian banks to facilitate the settlement of their easing should help to assist customers affected by U.S. dollar transactions. This temporary arrangement temporary disruptions in the marketplace and will expire in thirty days. transportation-related services. SWAP ARRANGEMENT BETWEEN THE FEDERAL RESERVE AND BANK OF ENGLAND INTERAGENCY ADVISORY ON BANK BALANCE SHEETS AND CAPITAL RATIOS The Federal Reserve and the Bank of England on September 14, 2001, agreed to establish a temporary The Federal Reserve Board on September 14, 2001, swap facility in order to facilitate the functioning of joined the Federal Deposit Insurance Corporation, the financial markets and provide liquidity in U.S. Office of the Comptroller of the Currency, and the dollars. Office of Thrift Supervision to issue an interagency Under the terms of the facility, the Bank of advisory to banking institutions following the disas- England would be able to draw up to $30 billion in ter of September 11. It is as follows: exchange for sterling. The U.S. dollar proceeds Market responses in the aftermath of the tragic would, if necessary, be made available to banks in the events of September 11 could lead to temporary United Kingdom to facilitate the settlement of their balance sheet growth at some banking organizations, U.S. dollar transactions. This temporary arrangement including thrift institutions. This growth could occur will expire in thirty days. if, for example, during this period corporate borrow- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 663 ers make unusual draws on their existing lines of comment. The rule continues to allow qualifying credit or request new lines in response to a perceived state member banks to use a streamlined notice proceneed for extra liquidity, or if a banking organization dure to establish a financial subsidiary. The final rule were to receive unusually large deposit inflows. will become effective thirty days after publication in Absent other factors, increases in extensions of credit the Federal Register. or large deposit inflows would likely result in an increase in total assets. Banking organizations should prepare for the pos- BOARD TO PURCHASE OFFICE BUILDING IN sible effects on their balance sheets that may occur WASHINGTON DC due to significantly increased lending or deposit inflows. Some organizations that experience signifi- The Federal Reserve Board announced on August 20, cant asset growth may also experience a temporary 2001, that it has contracted to purchase from Mackdecline in their regulatory capital ratios as a result of Cali Realty Corporation of Cranford, New Jersey, an responding to customers' needs over this period. If an eight-story, 173,390 square-foot office building organization believes such a situation could arise, located at 1709 New York Avenue, N.W., Washingmanagement is urged to contact its primary supervi- ton, D.C., for $67 million. sor to discuss how to address it in light of the The Board is currently leasing 71 percent of this institution's overall financial condition. building. The planned purchase will reduce costs in Any questions on this statement should be directed the long run by freeing the Board from lease to the banking organization's primary supervisor. payments. Legislation authorizing the purchase was enacted in December 2000. The Board owns two other buildings in the District of Columbia: the Marriner S. APPROVAL OF FINAL RULE ON FINANCIAL Eccles Building, at 20th and C Streets, N.W., and the SUBSIDIARIES OF STATE MEMBER BANKS adjacent William McChesney Martin, Jr., Building. The Federal Reserve Board announced on August 13, 2001, the approval of a final rule relating to financial subsidiaries of state member banks. ERRATA: FEDERAL RESERVE BULLETIN TABLE The Gramm-Leach-Bliley Act and rule permit qualifying state member banks to establish financial In table 4.411 "Lender Share and Dollar Volume of subsidiaries and thereby engage in certain activities Residential-Mortgage Originations, 1993-2000," that have been determined to be financial in nature or which appeared in the September 2001 issue (vol. 87, incidental to financial activities. p. All), a miscalculation resulted in an error in one The final rule is substantially similar to the interim of the data cells. The corrected version of the table is rule that the Board adopted last year and issued for shown on page 664. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

664 Federal Reserve Bulletin • October 2001 4.411 LENDER SHARE AND DOLLAR VOLUME OF RESIDENTIAL-MORTGAGE ORIGINATIONS. 1993-20001 Mortgage companies YYeeaarr SSaavviinnggss iinnssttiittuuttiioonnss:: CCoommmmeerrcciiaall bbaannkkss CCrreeddiitt uunniioonnss DDoollllaarr vvoolluummee or S u s b a s v i i d n i g a s r i i e n s s t o i f t u b ti a o n n k s s 1 Independently owned4 ((bbiilllliioonnss ooff ddoollllaarrss)) Conventional one- to four-famih 1 1993 23 18 19 37 3 842 2 1994 26 21 19 31 3 539 3 1995 26 21 25 26 2 444 4 1996 26 21 25 26 3 555 5 1997 25 18 26 28 2 630 6 1998 24 16 30 28 2 1,163 7 1999 21 21 29 26 3 960 8 2000 21 23 29 25 2 783 FHA, VA, and RHS one- to four-famih 9 1993 9 5 26 59 1 151 10 1994 10 6 29 54 1 86 11 1995 10 7 34 49 1 95 12 1996 10 6 33 50 1 95 13 1997 9 6 37 48 1 101 14 1998 7 5 38 49 1 150 15 1999 6 6 41 46 1 133 16 2000 5 8 41 45 1 110 Total, one- to four-famih 17 1993 21 16 20 40 3 993 18 1994 24 19 20 34 3 625 19 1995 24 19 26 30 2 519 20 1996 24 19 26 29 2 650 21 1997 23 17 28 30 2 731 22 1998 22 15 31 30 7 1,313 23 1999 19 19 31 29 2 1,093 24 ">000 19 21 31 27 2 894 Total, multifamilv 25 1993 63 23 6 9 0 13 26 1994 62 30 4 5 0 15 27 1995 51 41 4 4 0 13 28 1996 50 38 6 7 0 16 29 1997 47 36 6 11 0 20 30 1998 41 36 10 13 0 28 31 1999 37 30 8 25 0 32 32 2000 39 38 8 15 0 27 Total, residential 33 1993 22 16 20 40 3 1,006 34 1994 25 19 20 33 3 640 35 1995 24 19 26 29 2 532 36 1996 24 19 26 29 2 666 37 1997 24 17 27 30 2 751 38 1998 22 15 31 30 2 1,341 39 1999 20 20 30 29 2 1,125 40 2000 19 22 30 27 2 921 NOTE. Coverage of depository institutions declined in 1997 because of an increase in the 2. Includes savings and loan associations and savings banks. asset size threshold for exempt institutions from $10 million to $28 million. Data for years 3. Includes mortgage company subsidiaries of a bank holding company or a service prior to 2000 have been revised from those previously published as a consequence of the corporation. recategorization of some institutions. 4. Coverage of independently owned mortgage companies expanded in 1993 when those 1. Based on the dollar volume of originations reported under the Home Mortgage Disclo- companies with less than $10 million in assets but with 100 or more home-purchase sure Act. Originations insured or guaranteed by the Rural Housing Service (RHS) include the originations were iincluded. former Farmers Home Administration. SOURCE. Home Mortgage Disclosure Act. 1990-2000. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

665 Minutes of the Meeting of the Federal Open Market Committee Held on June 26-27, 2001 A meeting of the Federal Open Market Committee Mr. Madigan, Associate Director, Division was held in the offices of the Board of Governors of Monetary Affairs, Board of Governors of the Federal Reserve System in Washington, D.C., Messrs. Oliner and Struckmeyer, Associate Directors, beginning on Tuesday, June 26, 2001, at 2:00 p.m. Division of Research and Statistics, and continuing on Wednesday, June 27, 2001, at Board of Governors 9:00 a.m. Messrs. Freeman1 and Whitesell, Assistant Directors, Present: Divisions of International Finance and Monetary Mr. Greenspan, Chairman Affairs, Board of Governors Mr. McDonough, Vice Chairman Mr. Ferguson Ms. Kusko1 and Mr. Sichel,2 Senior Economists, Mr. Gramlich Division of Research and Statistics, Mr. Hoenig Board of Governors Mr. Kelley Mr. Meyer Mr. Nelson,1 Senior Economist, and Ms. Garrett, Ms. Minehan Economist, Division of Monetary Affairs, Mr. Moskow Board of Governors Mr. Poole Mr. Fleischman,2 Economist, Division of Research Messrs. Jordan, McTeer, Santomero, and Stern, and Statistics, Board of Governors Alternate Members of the Federal Open Market Committee Ms. Low, Open Market Secretariat Assistant, Division of Monetary Affairs, Messrs. Broaddus, Guynn, and Parry, Presidents of Board of Governors the Federal Reserve Banks of Richmond, Atlanta, and San Francisco respectively Ms. Pianalto, First Vice President, Federal Reserve Bank of Cleveland Mr. Kohn, Secretary and Economist Mr. Bernard, Deputy Secretary Messrs. Beebe, Eisenbeis, and Goodfriend, Mses. Krieger and Mester, Messrs. Rolnick, Mr. Gillum, Assistant Secretary Rosenblum, and Steindel, Senior Vice Ms. Fox, Assistant Secretary Presidents, Federal Reserve Banks of Mr. Mattingly, General Counsel San Francisco, Atlanta, Richmond, New York, Mr. Baxter, Deputy General Counsel Philadelphia, Minneapolis, Dallas, and New York Ms. Johnson, Economist respectively Mr. Stockton, Economist Mr. Altig, Vice President, Federal Reserve Bank of Messrs. Fuhrer, Hakkio, Howard, Hunter, Lindsey, Cleveland Rasche, Reinhart, Slifman, and Wilcox, Associate Economists Mr. Fernald,3 Economist, Federal Reserve Bank of Chicago Mr. Kos, Manager, System Open Market Account By unanimous vote, the minutes of the meeting of Ms. Smith and Mr. Winn, Assistants to the Board, Office of Board Members, Board of Governors the Federal Open Market Committee held on May 15, 2001, were approved. Mr. Ettin, Deputy Director, Division of Research and Statistics, Board of Governors 1. Attended portion of meeting relating to staff presentations. 2. Attended portion of meeting relating to productivity Mr. Simpson, Senior Adviser, Division of Research developments. and Statistics, Board of Governors 3. Attended Tuesday's session only. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

666 Federal Reserve Bulletin • October 2001 The Manager of the System Open Market Account tors, and the production of high-tech equipment conreported on recent developments relating to foreign tinued to plummet. The motor vehicle industry was exchange markets. There were no open market opera- one of the few sectors to record a rise in production. tions in foreign currencies for the System's account The further contraction in production in May brought in the period since the previous meeting. the rate of utilization of manufacturing capacity to its The Manager also reported on developments in lowest level since 1983. domestic financial markets and on System open mar- Growth of consumer spending seemed to have ket transactions in government securities and federal slowed in the second quarter, reflecting the deceleraagency obligations during the period May 15, 2001, tion in personal income, the rise in unemployment, through June 26, 2001. By unanimous vote, the Com- and the earlier decline in household net worth. Nomimittee ratified these transactions. nal retail sales were up only slightly in May after a The Committee then turned to a discussion of the brisk rise in April, and the average rate of increase economic and financial outlook and the implementa- over the two months was somewhat slower than that tion of monetary policy over the intermeeting period of the first quarter. ahead. A summary of the economic and financial Low mortgage rates continued to provide supinformation available at the time of the meeting and port to residential building activity in April and of the Committee's discussion is provided below, May despite a weakening labor market and sluggish followed by the domestic policy directive that was growth in personal income. Total housing starts in approved by the Committee and issued to the Federal April-May remained at the high first-quarter level, as Reserve Bank of New York. stronger single-family starts offset a slower pace of The information reviewed at this meeting sug- multifamily starts. Sales of new and existing homes gested that economic activity continued to grow slipped in April (latest data) after both reached nearlittle, if at all, in the second quarter. Employment fell record levels in March. somewhat over the first two months of the quarter, Business spending on equipment and software industrial output dropped sharply, and the limited declined further early in the second quarter in available information suggested that both probably response to sluggish sales, an erosion of earnings and continued to decline in June. Expansion in consumer corporate cash flows, and an uncertain outlook for spending appeared to have slowed and business pur- future sales and earnings. Shipments of nondefense chases of equipment and software had fallen appre- capital goods slumped in April, and the weakness ciably, though homebuilding had been well main- in incoming orders suggested that shipments would tained. Energy prices had been relatively flat recently, fall further in coming months. Fleet sales of cars at a high level, and core price inflation had moderated and trucks, which had been among the few areas of a little. strength in business equipment expenditures in the Private nonfarm payroll employment fell slightly first quarter, also slowed. By contrast, nonresidential further in May after a sharp drop in April and lack- construction remained robust, though the level of luster growth in the first quarter. Manufacturing activity slipped a little in April and slightly higher recorded additional widespread job losses in May, vacancy rates and smaller increases in rents sugand there were signs that weakness in employment gested that the profitability of new nonresidential was spreading to related sectors, notably wholesale investment might be lessening. Strength was particutrade and help-supply services. By contrast, construc- larly evident in outlays for industrial structures, partly tion employment rebounded in May, retracing part of reflecting construction of electric power plants and its large April loss, and hiring in finance, insurance, facilities for cogeneration of power by industrial and real estate remained brisk. The unemployment companies, and in continuing strong oil and gas rate edged lower in May, to 4.4 percent, but initial exploration activity. unemployment insurance claims and other data sug- Business inventories on a book-value basis edged gested persisting softening in the labor market in that higher in April after a sizable runoff in the first month. quarter. Excluding motor vehicles, manufacturing The rapid contraction in industrial production con- stocks were little changed in April, but shipments tinued unabated in May, with manufacturing output were down sharply and the aggregate inventoryregistering an eighth consecutive monthly drop. shipments ratio for the sector remained on a steep Moreover, output from electric utility plants fell, upward trend, with many industries facing sizable and mining activity slowed further in May following inventory overhangs. In the wholesale sector, invena strong first-quarter gain. Within manufacturing, tories rose in step with sales; the sector's inventorydecreases in output were widely spread across sec- sales ratio was unchanged in April and remained at Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 667 the top of its range for the past twelve months. Retail the continuing weakness of the economic expansion inventories continued to decline in April, and the and the lack of evidence that output growth had sector's inventory-sales ratio decreased further and stabilized or was about to rebound, coupled with a was near the middle of its range for the past twelve climate of fragile business and consumer confidence. months. In addition, the members believed that the balance The U.S. trade deficit in goods and services contin- of risks remained weighted toward conditions that ued to shrink in April. The value of exports fell, with could generate economic weakness in the foreseeable most of the drop occurring in capital goods, notably future. computers and semiconductors. The value of imports Federal funds traded at rates near the Committee's also decreased but by slightly more than exports, target level over the intermeeting period. Other shortreflecting sizable declines in capital and consumer term market rates declined somewhat following the goods that were partly offset by increases in oil and Committee's announcement of the easing action and automotive products. Recent information indicated subsequently moved down noticeably further in that economic growth in the euro area and the United response to weaker-than-expected news on economic Kingdom in the first quarter was at about the reduced activity and corporate earnings. Yields on long-term pace seen in the fourth quarter, and growth likely Treasury and investment-grade corporate securities stayed relatively slow more recently. Expansion in fell appreciably during the intermeeting interval, but Canada appeared to have weakened recently after a rates on speculative-grade bonds rose sharply in slight pickup in the first quarter. In Japan, the contrac- response to the adverse earnings news. The pessimistion in economic activity that began early in the year tic earnings reports also weighed on equity prices, appeared to have continued into the second quarter. which edged lower on balance. Most of the developing countries, with the notable In foreign exchange markets, the trade-weighted exception of China, also were experiencing an eco- value of the dollar in terms of many of the major nomic slowdown that was related at least in part to foreign currencies increased slightly over the interweaker external demand. meeting interval, as the dollar's appreciation against Core price inflation had moderated a little recently the euro and other European currencies more than after a pickup earlier in the year. The core consumer offset the U.S. dollar's further decline against the price index (CPI) rose relatively slowly in April and Canadian dollar. European currencies weakened in May, and the increase in that index during the past response to disappointing data on economic activity, twelve months was about the same as that during with inflation concerns seen as constraining counterthe previous twelve-month period. The core personal vailing monetary easing actions. The dollar also was consumption expenditure (PCE) chain-type price up slightly on net in terms of an index of the currenindex presented a similar picture, with inflation in cies of other important trading partners. The real was April and May a little lower than earlier in the year adversely affected by Brazil's internal problems and and no change in inflation on a year-over-year basis. spillovers from Argentina's financial difficulties, Core producer price inflation for finished goods while the Mexican peso benefited from continued also was subdued in the April-May period but edged foreign interest in Mexican investments and from higher on a year-over-year basis. There also were high oil prices. indications that upward pressures on energy prices The broad monetary aggregates continued to grow had abated somewhat. In particular, the return of rapidly in the second quarter, reflecting the effects of some domestic refineries to operation after main- lower opportunity costs of holding liquid deposits tenance or breakdowns and a surge in imports had and money market mutual funds, a buildup in deposreplenished gasoline stocks, and as a result wholesale its associated with extensive mortgage financing and retail gasoline prices had retreated recently. With activity, and a flight to liquidity and safety from regard to labor costs, average hourly earnings of pro- volatile equity markets. The debt of domestic nonduction or nonsupervisory workers continued to rise financial sectors expanded at a moderate pace on in April and May at the relatively brisk rate that had balance through May. prevailed over the past year. The staff forecast prepared for this meeting sug- At its meeting on May 15, 2001, the Committee gested that after a period of very slow growth assoadopted a directive that called for maintaining condi- ciated in large part with an inventory correction, a tions in reserve markets consistent with a decrease of sizable decline in capital spending, and a related 50 basis points in the intended level of the federal sharp contraction in manufacturing output, the ecofunds rate, to about 4 percent. The members gener- nomic expansion would gradually regain strength ally agreed that this action was necessary in light of over the forecast horizon and move back to a rate Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

668 Federal Reserve Bulletin • October 2001 around the staff's current estimate of the growth of consumption; and the growing indications of weakthe economy's potential output. The period of sub- ness in foreign economies that could limit demand par expansion was expected to foster an appreciable for exports. In an environment of diminished preseasing of pressures on resources and some modera- sures in product and labor markets and of lower tion in core price inflation. Despite the substantial energy costs, members commented that price presmonetary easing that had been implemented already sures were likely to remain contained, at least over and the fiscal stimulus, including federal tax rebates, the near to intermediate term. that was in train, the forecast anticipated that sluggish In preparation for the mid-year monetary policy hiring and the decline in household wealth would report to Congress, the members of the Board of restrain the growth of both consumer spending and Governors and the presidents of the Federal Reserve housing demand. Business fixed investment, notably Banks provided individual projections of the growth outlays for equipment and software, would be weaker of GDP, the rate of unemployment, and the rate of for a while but would return to relatively robust inflation for the years 2001 and 2002. The forecasts growth after a period of adjustment of capital stocks of the rate of expansion in real GDP had central to more desirable levels. The gradual strengthening tendencies of I A to 2 percent for 2001, suggesting of investment, together with a projected improvement at least a little acceleration in the second half of the in foreign economies that was seen as providing year, and 3 to 3'A percent for 2002. The civilian rates some support for U.S. exports, would foster the of unemployment associated with these forecasts had pickup in growth of demand and output. central tendencies of 43A to 5 percent in the fourth In the Committee's discussion of current and pro- quarter of 2001 and 43A to 5'A percent in the fourth spective economic developments, members noted quarter of 2002. Forecasts of the rate of inflation, as that by some measures overall economic activity measured by the chain price index for personal conremained at a reasonably high level. However, recent sumption expenditures, were centered on a range of data indicated that growth of spending and output 2 to 21/2 percent for this year and PA to 2Vi percent in was quite sluggish and below the pace many mem- 2002. bers had anticipated at the time of the previous meet- Continuing softness in the expansion of economic ing. Weakness in business spending for equipment activity was mirrored in anecdotal reports of business and software, efforts to reduce excess inventories, conditions in much of the nation. Typical regional and the ongoing adaptation to lower equity prices reports referred to slowing increases in economic in the United States and around the world were likely activity from an already reduced pace or to the persisto hold back economic activity in the short run. tence of sluggish business activity and generally Nonetheless, the members continued to anticipate a downbeat business sentiment. Manufacturing continstrengthening as the year progressed and during 2002, ued to display particular weakness. However, actions fostered to a large extent by the lagged effects on to reduce excess inventories or to address problems spending of the substantial easing in monetary policy relating to overcapacity in some sectors of the econsince early this year, the stimulus from recently omy, including telecommunications and other highenacted tax cuts, and the positive effects on house- tech industries, were under way and were likely hold and business purchasing power of some recent to exert a decreasing drag on economic activity over reductions in energy prices. In addition, the abate- coming quarters as corrective adjustments were comment and eventual turnaround of the downward pleted. Financial conditions, while generally supportadjustments to capital spending and inventories ive of greater spending, presented a mixed picture in would add impetus to economic growth going for- some respects. Short- and intermediate-term interest ward. It was noted, however, that the unique charac- rates had fallen substantially this year, and long-term teristics of the current cyclical experience, including yields had moved down late last year. But equity the heavy concentration of weakness in business prices were only holding their own after a substantial expenditures and manufacturing output, increased decline earlier and the dollar had appreciated. Though the uncertainty that surrounded any forecast. Most of lenders were cautious about marginally creditworthy the members believed that the risks to the expansion, firms, most businesses were finding ample credit notably for the nearer term, remained to the downside available at attractive terms. of current forecasts. Potential sources of shortfalls In their comments about developments in key secincluded the effects of possible further increases in tors of the economy, members noted that overall unemployment on consumer and business confidence; business activity had been supported, at least to this the risks of disappointing business earnings that could point, by the relative strength of household demand. damp investment and, through lower equity prices, Growth in consumer spending for goods and ser- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 669 vices, while moderating appreciably since earlier in however, the prospects for an upturn in investment the year, had nonetheless held up unexpectedly well outlays seemed favorable in the context of profit given the adverse wealth effects associated with the opportunities associated with expectations of contindeclines in stock market prices, relatively high levels ued elevated rates of technological progress and rapid of consumer indebtedness, and job losses in a grow- declines in the prices of new equipment. In this ing number of industries. Members referred in par- regard the members reviewed several staff reports ticular to the persisting strength in demand for light that generally concluded that the growth of producmotor vehicles, which evidently was boosted by tivity in the years ahead was highly likely to remain continuing sales incentives and attractive financing appreciably stronger than it had been from the midterms. Looking ahead, the outlook for consumer 1970s to the mid-1990s, though how much stronger spending was subject to a number of downside risks was an open question. With regard to the outlook that included the possibility of rising unemployment for nonresidential construction activity, members and further weakness in the stock market, which referred to signs of developing weakness in some could damp consumer confidence as well as income commercial real estate markets, but there were few and wealth. However, some further growth in con- reports of overbuilding and the construction of comsumer spending remained the most likely prospect for mercial facilities was being well maintained in other the balance of the year in light of the impetus pro- parts of the country. On balance, further modest vided by monetary and fiscal policy and the apparent growth in nonresidential construction, though well stabilization in consumer sentiment in recent months below the average pace in recent quarters, was seen after its earlier decline. as a likely prospect. Housing activity remained at a high level as attrac- Business efforts to bring their inventories into tive mortgage interest rates evidently continued to better alignment with sales were a key factor in the counterbalance the negative effects on consumer atti- deceleration of overall economic activity in recent tudes of somewhat weaker labor markets and reduced quarters and in forecasts that the upturn in economic stock market wealth. While housing activity in a activity would be relatively limited over the balance number of areas continued to be described as fairly of the year. Net inventory liquidation appeared to robust, members noted that residential sales and con- have diminished in the current quarter from its pace struction had slipped in some parts of the nation. earlier in the year, but inventory-sales ratios had Even so, given existing backlogs and the continued risen further in recent months, especially for highavailability of attractive mortgage rates, nationwide tech equipment. Accordingly, liquidation was not housing construction was expected to remain near its likely to abate substantially further for some time. currently elevated level. With regard to the foreign sector of the economy, The near-term outlook for business fixed invest- members commented that economic activity had softment seemed less promising. The weakness in spend- ened more than anticipated in many nations that were ing for new equipment and software had played a important trading partners, with clearly negative key role in the softening of the overall expansion of implications for U.S. exports. Major Latin American economic activity in recent quarters, and a material countries were experiencing particularly severe ecopickup in such expenditures did not appear likely nomic difficulties, but growth was slowing or ecountil the latter part of this year or early next year. nomic activity declining in many industrial countries Indeed, anecdotal reports from many business firms as well. At the same time, a number of important U.S. indicated that they were delaying at least some equip- industries were subject to increased domestic comment and software outlays until evidence of an upturn petition from foreign imports. While growth abroad in their sales and earnings began to accumulate. could be expected to rebound next year, responding Caution was especially pronounced among high-tech in part to faster expansion in the U. S. economy, the firms, many of which had experienced major cut- nearer-term outlook for U.S. and indeed world trade backs in the demand for their products and services. was less favorable. An analysis prepared for this meeting suggested that In their review of the outlook for inflation, memin the aggregate the apparent overhang of excess bers generally anticipated that increases in consumer capital might not be large, but the dimensions and prices would remain relatively subdued over the next duration of the adjustment in spending on capital several quarters. Factors underlying that assessment goods were a major source of uncertainty in the included the emergence of less taut conditions in outlook, and there was some risk of substantially labor markets, relatively low capacity utilization rates greater weakness in investment spending than was in manufacturing, and the persistence of highly comforecast for coming months. Beyond the nearer term, petitive conditions in most product markets that made Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

670 Federal Reserve Bulletin • October 2001 it very difficult for business firms to preserve or of the monetary aggregates, and the ready availability increase their profit margins by raising prices. More- of finance to most borrowers—policy had become over, energy prices recently had declined appreciably, stimulative. Such a policy stance was appropriate for and the earlier inflationary effects of energy price a time to counter the various forces holding back increases on a broad range of costs and prices economic expansion. But much of the lagged effects appeared to have begun to subside as a result. Infla- of the Committee's earlier easing actions had not yet tion expectations that currently appeared by various been felt in the economy, and they would be supplemeasures and survey results to be essentially flat or mented in coming quarters by the implementation even to have declined a bit were reinforcing the of the recently legislated tax cut stimulus. In these factors holding down price increases. Some nega- circumstances, a smaller move than those undertaken tives in the inflation outlook also were noted, such as earlier this year would have the advantage of reducsome increase in labor compensation including rapid ing the odds on adding to inflation pressures later and advances in health care costs, and a consequent of underlining the Committee's assessment of its squeeze on profit margins that was exacerbated by policy stance. In the view of a number of members, a cyclical decline in productivity gains. Labor pres- the Committee might well be near the end of its sures on business costs might persist for a time in easing cycle. At the same time, several emphasized lagged response to earlier advances in headline con- that they did not want to rule out further easing later sumer price inflation and labor productivity, but their if warranted by the tenor of incoming economic effects would tend to diminish or to be offset over information. time if, in line with the members' forecasts, pressures All except one of the members accepted a proposal on labor resources continued to ease. Some members to retain the Committee's press statement that the expressed concern about the longer-run prospects for risks would continue to be weighted toward ecowages and prices if the stimulative stance of monenomic weakness after today's easing move. The tary policy was maintained too long and allowed member who opposed additional policy easing demand pressures to outrun the economy's potential. expressed strong reservations about such a statement In the Committee's discussion of policy for the because in his view it likely would be interpreted as intermeeting period ahead, all but one of the mem- an intention to ease policy further, which was conbers supported both some further easing of reserve trary to his own assessment that a more neutral conditions consistent with a 25 basis point reduction outlook regarding the future course of policy was in the target federal funds rate and the retention of desirable. In the view of most members, however, the the Committee's public statement that the risks were weakness of the recent information relating to the weighted toward excessively soft economic perfor- performance of the economy was consistent with mance. The information received since the May unbalanced risks at least insofar as it pertained to the meeting suggested a somewhat weaker economic per- outlook for the rest of this year, and their primary formance than most had anticipated, and the mem- policy concern at this point remained the strength of bers were persuaded that in the absence of firm economic activity rather than potentially worsening evidence that the deceleration in the economic expan- inflation over the longer term. sion had run its course a further easing action was At the conclusion of this discussion, the Commitneeded at this point to help stabilize the economy. tee voted to authorize and direct the Federal Reserve With greater slack in labor and product markets, and Bank of New York, until it was instructed otherwith inflation expectations contained, an added eas- wise, to execute transactions in the System Account ing ran very little risk of exacerbating price pres- in accordance with the following domestic policy sures, provided the Committee was prepared to firm directive: the stance of policy promptly if and when demand pressures threatened to intensify. One member was The Federal Open Market Committee seeks monetary persuaded that policy had already become so expan- and financial conditions that will foster price stability and sionary that further easing ran an unacceptable risk of promote sustainable growth in output. To further its longrun objectives, the Committee in the immediate future exacerbating inflation over time. seeks conditions in reserve markets consistent with A smaller easing move than those the Committee reducing the federal funds rate to an average of around had been making earlier this year was deemed desir- 33A percent. able by the members in light of the substantial easing that already had been implemented since the start of The vote encompassed approval of the sentence this year. By a number of measures—including the below for inclusion in the press statement to be level of real federal funds rates, the robust growth released shortly after the meeting: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Minutes of the Federal Open Market Committee 671 Against the background of its long-run goals of price Vincent R. Reinhart to the position of economist for stability and sustainable economic growth and of the infor- the period until the first regularly scheduled meeting mation currently available, the Committee believes that in 2002, with the understanding that in the event the risks continue to be weighted mainly toward conditions that may generate economic weakness in the foreseeable of the discontinuance of his official connection with future. the Board of Governors he would cease to have any official connection with the Federal Open Market Votes for this action: Messrs. Greenspan, McDonough, Committee. Ferguson, Gramlich, Hoenig, Kelley, Meyer, Ms. Minehan, and Mr. Moskow. Vote against this action: Donald L. Kohn Mr. Poole. Secretary Mr. Poole dissented because he believed that FOMC actions this year had already established a highly stimulative monetary policy stance. The M2 Discontinuation of "Minutes of the and MZM measures of money had risen at annual Federal Open Market Committee" rates in excess of 10 percent and 20 percent respecin the Federal Reserve Bulletin tively over the past six months, and the real federal funds rate was very likely below its equilibrium "Minutes of the Federal Open Market Committee" will level. Other more qualitative information on financial not be reprinted in the Federal Reserve Bulletin after conditions pointed in the same direction. Economic the December 2001 issue. When the minutes are forecasts were that the economy's growth would released to the public, they are simultaneously placed on resume later this year and the fact that long-term the Board's web site (www.federalreserve.gov/fomc/ interest rates had not declined since December also default.htm), which also has minutes back to 1996; indicated that the market anticipated a revival of they are also reprinted in the Board's Annual Report faster economic growth before long. Given the lags (www.federalreserve.gov/boarddocs/RptCongress/). in monetary processes, he believed that adding fur- Paper copies of the minutes are also available by mail from Publications Services, Mail Stop 127, Board of ther monetary policy stimulus raised an undue risk Governors of the Federal Reserve System, Washingof fostering higher inflation in the future. Moreover, ton, DC 20551 (tel. 202-452-3244). against this background, he was especially concerned that a statement that the Committee continued to ^ # >}j ^t view the balance of risks as weighted toward weak- Other reprints will also be eliminated from the Bulletin ness would be read in the market as a sign that the after December 2001: the monthly report on industrial Committee was likely to ease further in the near term. production and capacity utilization, congressional testi- He thought future developments were equally likely mony, the quarterly report "Treasury and Federal Reserve to warrant an action in either direction, and he did not Foreign Exchange Operations" and the annual report think the Committee should take a step that probably "Open Market Operations," both by the Federal Reserve would cause expectations of further easing to become Bank of New York (the text portion of "Open Market embedded in market interest rates. Operations" will be reprinted in the Board's Annual Report rather than in the Bulletin). The documents are It was agreed that the next meeting of the Commitwidely distributed when originally published, and several tee would be held on Tuesday, August 21, 2001. sources for historical information are available. The meeting adjourned at 12:25 p.m. NOTATION VOTE By notation vote completed on August 16, 2001, the Committee members voted unanimously to elect Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

673 Legal Developments FINAL RULE—AMENDMENT TO REGULATION H 208.76 What Federal Reserve approvals are necessary for financial subsidiaries? The Board of Governors is amending 12 C.F.R. Part 208, 208.77 Definitions. its Regulation H (Membership of State Banking Institutions in the Federal Reserve System: Financial Subsidiar- Subpart G—Financial Subsidiaries of State Member ies), implementing the financial subsidiary provisions of Banks the Gramm-Leach-Bliley Act for state member banks. The Gramm-Leach-Bliley Act authorizes state member banks Section 208.71—What are the requirements to that comply with the requirements of the rule to control, or invest in or control a financial subsidiary? hold an interest in, a financial subsidiary which may conduct certain financial activities that are not permissible for (a) In general. A state member bank may control, or hold the parent bank to conduct directly. The final rule is suban interest in, a financial subsidiary only if: stantially similar to the interim rule that the Board adopted (1) The state member bank and each depository instiin March 2000. tution affiliate of the state member bank are well Effective September 16, 2001, 12 C.F.R. Part 208 is capitalized and well managed; amended as follows: (2) The aggregate consolidated total assets of all financial subsidiaries of the state member bank do Part 208—Membership of State Banking not exceed the lesser of: Institutions in the Federal Reserve System (i) 45 percent of the consolidated total assets of (Regulation H) the parent bank; or (ii) $50 billion, which dollar amount shall be 1. The authority citation for Part 208 is revised to read as adjusted according to an indexing mechafollows: nism jointly established by the Board and the Secretary of the Treasury; Authority. 12 U.S.C. 24, 24a, 36, 92a, 93a, 248(a), 248(c), (3) The state member bank, if it is one of the largest 321- 338a, 37Id, 461, 481-486, 601, 611, 1814, 100 insured banks (based on consolidated total 1816, 1818, 1820(d)(9), 18230), 1828(o), 1831, assets as of the end of the previous calendar year), 1831o, 183 lp-1, 1831r-l, 1831w, 1835a, meets the debt rating or alternative requirement of 1843(1)(2), 1882, 2901-2907, 3105, 3310, 3331paragraph (b) of this section, if applicable; and 3351, and 3906-3909; 15 U.S.C. 78b, 781(b), (4) The Board or the appropriate Reserve Bank has 781(g), 781(i), 78o-4(c)(5), 78q, 78q-l, and 78w; approved the bank to acquire the interest in or 31 U.S.C. 5318; 42 U.S.C. 4012a, 4104a, control the financial subsidiary under section 4104b, 4106 and 4128. 208.76. 2. Subpart G is revised to read as follows: (b) Debt rating or alternative requirement for 100 largest Subpart G—Financial Subsidiaries of State Member insured banks. Banks (1) General. A state member bank meets the debt rating or alternative requirement of this para- 208.71 What are the requirements to invest in or control graph (b) if: a financial subsidiary? (i) The bank has at least one issue of eligible 208.72 What activities may a financial subsidiary debt outstanding that is currently rated in one conduct? of the three highest investment grade rating 207.73 What additional provisions are applicable to state categories by a nationally recognized statistimember banks with financial subsidiaries? cal rating organization; or 208.74 What happens if the state member bank or a (ii) If the bank is one of the second 50 largest depository institution affiliate fails to continue to insured banks (based on consolidated total meet certain requirements? assets as of the end of the previous calendar 208.75 What happens if the state member bank or any of year), the bank has a current long-term issuer its insured depository institution affiliates receives credit rating from at least one nationally recless than a "satisfactory"CRA rating? ognized statistical rating organization that is Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

674 Federal Reserve Bulletin • October 2001 within the three highest investment grade rat- (1) The bank must not consolidate the assets and ing categories used by the organization. liabilities of any financial subsidiary with those of (2) Financial subsidiaries engaged in financial activi- the bank. ties only as agent. This paragraph (b) does not (2) For purposes of determining the bank's risk-based apply to a state member bank if the financialsub- capital ratios under Appendix A of this part, the sidiaries of the bank engage in financial activities bank must— described in sections 208.72(a)(1) and (2) only in (i) Deduct 50 percent of the aggregate amount an agency capacity and not directly or indirectly as of its outstanding equity investment (includprincipal. ing retained earnings) in all financial subsidiaries from both the bank's Tier 1 capital and Section 208.72—What activities may a financial Tier 2 capital; and subsidiary conduct? (ii) Deduct the entire amount of the bank's outstanding equity investment (including re- (a) Authorized activities. A financial subsidiary of a state tained earnings) in all financial subsidiaries member bank may engage in only the following activ- from the bank's risk-weighted assets. ities: (3) For purposes of determining the bank's leverage (1) Any financial activity listed in section 225.86(a), capital ratio under Appendix B of this part, the (b), or (c) of the Board's Regulation Y (12 CFR bank must— 225.86(a), (b), or (c)); (i) Deduct 50 percent of the aggregate amount (2) Any activity that the Secretary of the Treasury, in of its outstanding equity investment (includconsultation with the Board, has determined to be ing retained earnings) in all financial subsidfinancial in nature or incidental to a financial activ- iaries from the bank's Tier 1 capital; and ity and permissible for financial subsidiaries pur- (ii) Deduct the entire amount of the bank's outsuant to Section 5136A(b) of the Revised Statutes standing equity investment (including reof the United States (12 U.S.C. 24a(b)); and tained earnings) in all financial subsidiaries (3) Any activity that the state member bank is permit- from the bank's average total assets. ted to engage in directly (subject to the same terms (4) For purposes of determining the bank's ratio of and conditions that govern the conduct of the tangible equity to total assets under section activity by the state member bank). 208.43(b)(5), the bank must deduct the entire (b) Impermissible activities. Notwithstanding para- amount of the bank's outstanding equity investgraph (a) of this section, a financial subsidiary may not ment (including retained earnings) in all financial engage as principal in the following activities: subsidiaries from the bank's tangible equity and (1) Insuring, guaranteeing, or indemnifying against total assets. loss, harm, damage, illness, disability or death (5) If the deduction from Tier 2 capital required by (except to the extent permitted under applicable paragraph (a)(2)(i) of this section exceeds the state law and section 302 or 303(c) of the Gramm- bank's Tier 2 capital, any excess must be deducted Leach-Bliley Act (15 U.S.C. 6712 or 6713(c)); from the bank's Tier 1 capital. (2) Providing or issuing annuities the income of which (b) Financial statement disclosure of capital deduction. is subject to tax treatment under section 72 of the Any published financial statement of a state member Internal Revenue Code of 1986 (26 U.S.C. 72); bank that controls or holds an interest in a financial (3) Real estate development or real estate investment, subsidiary must, in addition to providing information unless otherwise expressly authorized by applicaprepared in accordance with generally accepted acble state and Federal law; and counting principles, separately present financial infor- (4) Any merchant banking or insurance company inmation for the bank reflecting the capital deduction vestment activity permitted for financial holding and adjustments required by paragraph (a) of this companies by section 4(k)(4)(H) or (I) of the Bank section. Holding Company Act (12 U.S.C. 1843(k)(4)(H) and (I)). (c) Safeguards for the bank. A state member bank that establishes, controls or holds an interest in a financial Section 208.73—What additional provisions are subsidiary must: applicable to state member banks with financial (1) Establish and maintain procedures for identifying subsidiaries ? and managing financial and operational risks within the state member bank and the financial (a) Capital deduction required. A state member bank that subsidiary that adequately protect the state memcontrols or holds an interest in a financial subsidiary ber bank from such risks; and must comply with the following rules in determining (2) Establish and maintain reasonable policies and its compliance with applicable regulatory capital stan- procedures to preserve the separate corporate idendards (including the well capitalized standard of sec- tity and limited liability of the state member bank tion 208.71(a)(1)): and the financial subsidiary. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 675 (d) Application of Sections 23A and 23B of the Federal itory institution affiliate and the area(s) of noncom- Reserve Act. For purposes of sections 23A and 23B of pliance. the Federal Reserve Act (12 U.S.C. 371c, 371c-l): (3) Execution of agreement. Within 45 days after re- (1) A financial subsidiary of a state member bank ceiving a notice from the Board under paragraph shall be deemed an affiliate, and not a subsidiary, (a)(1) of this section, or such additional period of of the bank; time as the Board may permit, the: (2) The restrictions contained in section 23A(a)(l)(A) (i) State member bank must execute an agreeof the Federal Reserve Act (12 U.S.C. ment acceptable to the Board to comply with 371c(a)(l)(A)) shall not apply with respect to cov- all applicable capital, management, asset and ered transactions between the bank and any indi- safeguard requirements; and vidual financial subsidiary of the bank; (ii) Any relevant depository institution affiliate of (3) The bank's investment in a financial subsidiary the state member bank must execute an shall not include retained earnings of the financial agreement acceptable to its appropriate Fedsubsidiary; eral banking agency to comply with all appli- (4) Any purchase of, or investment in, the securities cable capital and management requirements. of a financial subsidiary by an affiliate of the bank (4) Agreement requirements. Any agreement required will be considered to be a purchase of, or invest- by paragraph (a)(3)(i) of this section must: ment in, such securities by the bank; and (i) Explain the specific actions that the state (5) Any extension of credit by an affiliate of the bank member bank will take to correct all areas of to a financial subsidiary of the bank will be consid- noncompliance; ered to be an extension of credit by the bank to the (ii) Provide a schedule within which each action financial subsidiary if the Board determines that will be taken; and such treatment is necessary or appropriate to pre- (iii) Provide any other information the Board may vent evasions of the Federal Reserve Act and the require. Gramm-Leach-Bliley Act. (5) Imposition of limits. Until the Board determines that the conditions described in the notice under (e) Application of anti-tying prohibitions. A financial subparagraph (a)(1) of this section are corrected: sidiary of a state member bank shall be deemed a (i) The Board may impose any limitations on the subsidiary of a bank holding company and not a subconduct or activities of the state member sidiary of the bank for purposes of the anti-tying bank or any subsidiary of the bank as the prohibitions of section 106 of the Bank Holding Com- Board determines to be appropriate under the pany Act Amendments of 1970 (12 U.S.C. 1971 circumstances and consistent with the puret seq.). poses of section 121 of the Gramm-Leach- Bliley Act, including requiring the Board's Section 208.74—What happens if the state member prior approval for any financial subsidiary of bank or a depository institution affiliate fails to the bank to acquire any company or engage continue to meet certain requirements? in any additional activity; and (ii) The appropriate Federal banking agency for (a) Qualifications and safeguards. The following proce- any relevant depository institution affiliate dures apply to a state member bank that controls or may impose any limitations on the conduct or holds an interest in a financial subsidiary. activities of the depository institution or any (1) Notice by Board. If the Board finds that a state subsidiary of that institution as the agency member bank or any of its depository institution determines to be appropriate under the circumaffiliates fails to continue to be well capitalized stances and consistent with the purposes of and well managed, or the state member bank is not section 121 of the Gramm-Leach-Bliley Act. in compliance with the asset limitation set forth in (6) Divestiture. The Board may require a state memsection 208.71(a)(2) or the safeguards set forth in ber bank to divest control of any financial subsidsection 208.73(c), the Board will notify the state iary if the conditions described in a notice under member bank in writing and identify the areas of paragraph (a)(1) of this section are not corrected noncompliance. The Board may provide this no- within 180 days of receipt of the notice or such tice at any time before or after receiving notice additional period of time as the Board may permit. from the state member bank under paragraph Any divestiture must be completed in accordance (a)(2) of this section. with any terms and conditions established by the (2) Notification by state member bank. A state mem- Board. ber bank must notify the appropriate Reserve Bank (7) Consultation. The Board will consult with all relein writing within 15 calendar days of becoming vant Federal and state regulatory authorities in aware that any depository institution affiliate of the taking any action under this paragraph (a). bank has ceased to be well capitalized or well (b) Debt rating or alternative requirement. If a state memmanaged. The notification must identify the depos- ber bank does not continue to meet any applicable debt Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

676 Federal Reserve Bulletin • October 2001 rating or alternative requirement of section 208.71(b), or (2) through an existing financial subsidiary unthe bank may not, directly or through a subsidiary, less the state member bank files a notice (in letter purchase or acquire any additional equity capital of form, with enclosures) with the appropriate Reany financial subsidiary until the bank restores its serve Bank. compliance with the requirements of that section. For purposes of this paragraph (b), the term "equity capi- (b) Contents of Notice. Any notice required by paratal "includes, in addition to any equity instrument, any graph (a) of this section must: debt instrument issued by the financial subsidiary if the (1) In the case of a notice filed under paragraph (a)( 1) debt instrument qualifies as capital of the subsidiary of this section, describe the transaction(s) through under any Federal or state law, regulation or interpreta- which the bank proposes to acquire control of, or tion applicable to the subsidiary. an interest in, the financial subsidiary; (2) Provide the name and head office address of the Section 208.75—What happens if the state member financial subsidiary; bank or any of its insured depository institution (3) Provide a description of the current and proposed affiliates receives less than a "satisfactory "CRA activities of the financial subsidiary and the sperating? cific authority permitting each activity; (4) Provide the capital ratios as of the close of the (a) Limits on establishment of financial subsidiaries and previous calendar quarter for all relevant capital expansion of existing financial subsidiaries. If a state measures, as defined in section 38 of the Federal member bank, or any insured depository institution Deposit Insurance Act (12 U.S.C. 183 lo), for the affiliate of the bank, has received less than a "satisfac- bank and each of its depository institution affilitory "rating in meeting community credit needs in its ates; most recent examination under the Community Rein- (5) Certify that the bank and each of its depository vestment Act of 1977 (12 U.S.C. 2901 et seq.): institution affiliates was well capitalized at the (1) The state member bank may not, directly or indi- close of the previous calendar quarter and is well rectly, acquire control of any financial subsidiary; capitalized as of the date the bank files its notice; and (6) Certify that the bank and each of its depository (2) Any financial subsidiary controlled by the state institution affiliates is well managed as of the date member bank may not commence any additional the bank files its notice; activity or acquire control, including all or sub- (7) Certify that the bank meets the debt rating or stantially all of the assets, of any company. alternative requirement of section 208.71(b), if applicable; and (b) Exception for certain activities. The prohibition in (8) Certify that the bank and its financial subsidiaries paragraph (a)(2) of this section does not apply to any are in compliance with the asset limit set forth in activity, or to the acquisition of control of any com- section 208.71(a)(2) both before the proposal and pany that is engaged only in activities, that the state on a pro forma basis. member bank is permitted to conduct directly and that are conducted on the same terms and conditions that (b) Insurance activities. govern the conduct of the activity by the state member (1) If a notice filed under paragraph (a) of this section bank. relates to the initial affiliation of the bank with a company engaged in insurance activities, the no- (c) Duration of prohibitions. The prohibitions described tice must describe the type of insurance activity in paragraph (a) of this section shall continue in effect that the company is engaged in or plans to conduct until such time as the state member bank and each and identify each state where the company holds insured depository institution affiliate of the state mem- an insurance license and the state insurance regulaber bank has achieved at least a "satisfactory"rating tory authority that issued the license. in meeting community credit needs in its most recent (2) The appropriate Reserve Bank will send a copy of examination under the Community Reinvestment Act. any notice described in paragraph (c)(1) of this section to the appropriate state insurance regula- Section 208.76—What Federal Reserve approvals tory authorities and provide such authorities with are necessary for financial subsidiaries? an opportunity to comment on the proposal. (a) Notice requirements. (d) Approval procedures. A notice filed with the appropri- (1) A state member bank may not acquire control of, ate Reserve Bank under paragraph (a) of this section or an interest in, a financial subsidiary unless it will be deemed approved on the fifteenth day after files a notice (in letter form, with enclosures) with receipt of a complete notice by the appropriate Reserve the appropriate Reserve Bank. Bank, unless prior to that date the Board or the appro- (2) A state member bank may not engage in any priate Reserve Bank notifies the bank that the notice is additional activity pursuant to section 208.72(a)(1) approved, that the notice will require additional re- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 677 view, or that the bank does not meet the requirements (3) Subsidiaries of financial subsidiaries. A financial of this subpart. Any notification of early approval of a subsidiary includes any company that is directly or notice must be in writing. indirectly controlled by the financial subsidiary. (f) Long-term Issuer Credit Rating. The term "long-term Section 208.77—Definitions. issuer credit rating" means a written opinion issued by a nationally recognized statistical rating organization The following definitions shall apply for purposes of this of the bank's overall capacity and willingness to pay subpart: on a timely basis its unsecured, dollar-denominated (a) Affiliate, Company, Control, and Subsidiary. The terms financial obligations maturing in not less than one "affiliate", "company", "control", and "subsidiary" year. have the meanings given those terms in section 2 of (g) Well Capitalized. the Bank Holding Company Act of 1956 (12 U.S.C. (1) Insured depository institutions. An insured depos- 1841). itory institution is "well capitalized" if it has and (b) Appropriate Federal Banking Agency, Depository Inmaintains at least the capital levels required to be stitution, Insured Bank and Insured Depository Instituwell capitalized under the capital adequacy regulation. The terms "appropriate Federal banking tions or guidelines adopted by the institution's agency", "depository institution", "insured bank" appropriate Federal banking agency under section and "insured depository institution" have the mean- 38 of the Federal Deposit Insurance Act ings given those terms in section 3 of the Federal (12 U.S.C. 1831o). Deposit Insurance Act (12 U.S.C. 1813). (2) Uninsured depository institutions. A depository (c) Capital-related definitions. institution the deposits of which are not insured by (1) The terms "Tier 1 capital", "tangible equity", the Federal Deposit Insurance Corporation is "risk-weighted assets" and "total assets" have "well capitalized" if the institution has and mainthe meanings given those terms in section 208.41 tains at least the capital levels required for an of this part. insured depository institution to be well capital- (2) The terms "Tier 2 capital" and "average total ized. assets" have the meanings given those terms in Appendix A and Appendix B of this part, respec- (h) Well Managed. tively. (1) In general. The term "well managed" means: (d) Eligible Debt. The term "eligible debt" means unse- (i) Unless otherwise determined in writing by cured debt with an initial maturity of more than the appropriate Federal banking agency, the 360 days that: institution has received a composite rating of (1) Is not supported by any form of credit enhance- 1 or 2 under the Uniform Financial Institument, including a guarantee or standby letter of tions Rating System (or an equivalent rating credit; and under an equivalent rating system) and at (2) Is not held in whole or in any significant part by least a rating of 2 for management (if such any affiliate, officer, director, principal share- rating is given) in connection with its most holder, or employee of the bank or any other recent examination or subsequent review by person acting on behalf of or with funds from the the institution's appropriate Federal banking bank or an affiliate of the bank. agency (or the appropriate state banking (e) Financial Subsidiary. agency in an examination described in sec- (1) In general. The term "financial subsidiary" means tion 10(d) of the Federal Deposit Insurance any company that is controlled by one or more Act (12 U.S.C. 1820(d)); or insured depository institutions other than: (ii) In the case of any depository institution that (i) A subsidiary that engages only in activities has not been examined by its appropriate that the state member bank is permitted to Federal banking agency or been subject to an engage in directly and that are conducted on examination by its appropriate state banking the same terms and conditions that govern agency that meets the requirements of secthe conduct of the activities by the state tion 10(d) of the Federal Deposit Insurance member bank; or Act (18 U.S.C. 1820(d)), the existence and (ii) A subsidiary that the state member bank is use of managerial resources that the approprispecifically authorized by the express terms ate Federal banking agency determines are of a Federal statute (other than section 9 of satisfactory. the Federal Reserve Act (12 U.S.C. 335)), (2) Merged depository institutions. and not by implication or interpretation, to (i) Merger involving well managed institutions. control, such as by section 25 or 25A of the A depository institution that results from the Federal Reserve Act (12 U.S.C. 601-604a, merger of two or more depository institutions 611-631) or the Bank Service Company Act that are well managed will be considered to (12 U.S.C. 1861 etseq.). be well managed unless the appropriate Fed- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

678 Federal Reserve Bulletin • October 2001 eral banking agency for the resulting deposi- proposal and all comments received in light of the factors tory institution determines otherwise, set forth in section 3 of the BHC Act. (ii) Merger involving a poorly rated institution. CIBC, with consolidated assets of $183 billion, is the A depository institution that results from the second largest banking organization headquartered in Canmerger of a well managed depository institu- ada.2 Through Amicus Holdings, CIBC owns CIBC Nation with one or more depository institutions tional Bank, Maitland, Florida ("CIBC National"), and that are not well managed or that have not Amicus FSB, Cicero, Illinois ("Amicus Bank"). CIBC been examined shall be considered to be well National, with total assets of $428 million, controls demanaged if the appropriate Federal banking posits of $ 132 million, representing less than 1 percent of agency for the resulting depository institution total deposits of insured depository institutions in Florida determines that the institution is well managed. ("state deposits").3 Amicus Bank, with total assets of $185.6 million, controls deposits of $44.5 million, representing less than 1 percent of state deposits in Illinois. ORDERS ISSUED UNDER BANK HOLDING COMPANY CIBC also operates a state-licensed branch in Chicago, ACT Illinois; agencies in New York, New York, and Los Angeles, California; and a representative office in Houston, Orders Issued Under Section 3 of the Bank Holding Texas. In addition, CIBC engages in a broad range of Company Act permissible nonbanking activities in the United States. Juniper became a bank holding company in May 2001.4 Canadian Imperial Bank of Commerce Juniper currently operates, and purchases certain receiv- Toronto, Canada ables from, the Internet-based credit card division of Columbus Bank & Trust, Columbus, Georgia, and CIBC CIBC World Markets Inc. has stated that Juniper Bank would use the proceeds from Toronto, Canada CIBC's proposed investment in Juniper to acquire the credit card division's assets and liabilities and for other CIBC Delaware Holdings Inc. purposes. New York, New York Interstate Analysis Amicus Holdings Inc. Falls Church, Virginia Section 3(d) of the BHC Act allows the Board to approve an application by a bank holding company to acquire Order Approving Acquisition of Shares of a Bank control of a bank located in a state other than the home Holding Company state of such bank holding company if certain conditions are met. For purposes of the BHC Act, the home state of Canadian Imperial Bank of Commerce ("CIBC"), CIBC CIBC is Florida, and Juniper Bank is located in Delaware.5 World Markets Inc. ("World Markets"), CIBC Delaware All the conditions for an interstate acquisition enumerated Holdings Inc. ("Delaware Holdings"), and Amicus Hold- in section 3(d) are met in this case.6 Based on a review of ings Inc. ("Amicus Holdings") (collectively, "Applicants"), all bank holding companies within the meaning of the Bank Holding Company Act ("BHC Act"), have re- 2. Asset and ranking data for CIBC are as of April 30, 2001, and quested the Board's approval under section 3 of the BHC reflect exchange rates as of that date. Act (12 U.S.C. § 1842(a)(3)) to acquire a majority of the 3. Asset and deposit data for CIBC National and Amicus Bank are voting shares of Juniper Financial Corp. ("Juniper"), also as of March 31, 2001. State deposit data are as of June 30, 2000. In this context, depository institutions include commercial banks, sava bank holding company, and thereby acquire control of ings banks, and savings associations. Juniper's wholly owned subsidiary, Juniper Bank, both in 4. See Juniper Financial Corp., 87 Federal Reser\'e Bulletin 466 Wilmington, Delaware.1 (2001). Notice of the proposal, affording interested persons an 5. A bank holding company's home state is that state in which the opportunity to submit comments, has been published total deposits of all banking subsidiaries of such company were the largest on the later of July 1, 1966, or on the date on which the (66 Federal Register 34,933 (2001)). The time for filing company became a bank holding company. 12U.S.C.§ 1841(o)(4)(C). comments has expired, and the Board has considered the New York remains the home state of CIBC for purposes of the International Banking Act, 12 U.S.C. §3101 et seq. ("IBA"), and Regulation K. For purposes of section 3(d) of the BHC Act, the Board considers a bank to be located in the states in which the bank operates 1. Applicants propose to acquire 95 percent of the Series C Pre- a branch or is chartered or headquartered. ferred Stock of Juniper and up to 51 percent of Juniper's total voting 6. See 12 U.S.C. §§ 1842(d)(1)(A) & (B), 1842(d)(2)(A) & (B). shares. Applicants have stated that the Juniper shares would be CIBC is adequately capitalized and adequately managed, as defined acquired either by Delaware Holdings or by Amicus Holdings. Ami- by applicable law. In addition, on consummation of the proposal, cus Holdings is a wholly owned subsidiary of Delaware Holdings. CIBC would control less than 10 percent of the total amount of CIBC and World Markets own 17.6 percent and 82.4 percent, respec- deposits of insured depository institutions in the United States. All tively, of the voting shares of Delaware Holdings. CIBC owns all the other requirements under section 3(d) of the BHC Act are met in this voting shares of World Markets. case. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 679 all the facts of record, the Board is permitted to approve finds that the OSFI continues to supervise CIBC in substanthe proposal under section 3(d) of the BHC Act. tially the same manner as it supervised Canadian banks at the time of those previous determinations. Based on this Competitive Considerations finding and all the facts of record, the Board concludes that CIBC continues to be subject to comprehensive supervi- CIBC and Juniper do not compete directly in any banking sion on a consolidated basis by its home country supervimarket. Based on all the facts of record, the Board con- sor. cludes that consummation of the proposal would not have a In addition, section 3 of the BHC Act requires the Board significantly adverse effect on competition or on the con- to determine that a foreign banking organization has procentration of banking resources in any relevant banking vided adequate assurances that it will make available to the market. Board such information on its operations and activities and those of its affiliates that the Board deems appropriate to Financial, Managerial, and Supervisory Considerations determine and enforce compliance with the BHC Act.10 The Board has reviewed the restrictions on disclosure in The BHC Act requires the Board to consider the financial relevant jurisdictions in which CIBC operates and has and managerial resources and future prospects of the com- communicated with relevant government authorities conpanies and banks involved in acquisition proposals and to cerning access to information. In addition, CIBC previconsider certain supervisory factors.7 In assessing the fi- ously has committed to make available to the Board such nancial and managerial strength of CIBC and its subsidiar- information on the operations of CIBC and its affiliates that ies, the Board has reviewed information provided by CIBC, the Board deems necessary to determine and enforce comconfidential supervisory and examination information, and pliance with the BHC Act, the IBA, and other applicable publicly reported and other financial information. In addi- federal law. CIBC also previously has committed to cooption, the Board has consulted with relevant supervisory erate with the Board to obtain any waivers or exemptions authorities in Canada. The capital ratios of CIBC exceed that may be necessary to enable CIBC to make such the minimum levels that would be required under the Basle information available to the Board. In light of these com- Capital Accord and are considered equivalent to the capital mitments, the Board concludes that CIBC has provided ratios that would be required of a U.S. banking organiza- adequate assurances of access to any appropriate information. Juniper is, and on consummation of the proposal tion that the Board may request. Based on these and all the would remain, well capitalized. In light of these and all the facts of record, the Board concludes that the supervisory facts of record, the Board concludes that the financial and factors it is required to consider are consistent with apmanagerial resources and future prospects of Applicants proval. and Juniper are consistent with approval. Section 3 of the BHC Act also provides that the Board Convenience and Needs Considerations may not approve an application involving a foreign banking organization unless it is "subject to comprehensive In acting on a proposal under section 3 of the BHC Act, the supervision or regulation on a consolidated basis by the Board is required to consider the effect of the proposal on appropriate authorities in the bank's home country."8 The the convenience and needs of the community to be served home country supervisor of CIBC is Canada's Office of the and to take into account the records of the relevant deposi- Superintendent of Financial Institutions ("OSFI"), which tory institutions under the Community Reinvestment Act is responsible for the prudential supervision and regulation ("CRA").11 The Board has carefully considered the conveof federally regulated Canadian financial institutions. In nience and needs factor and the CRA performance records approving applications under the BHC Act and the IBA, of CIBC's U.S. subsidiary depository institutions in light of the Board previously has determined that Canadian banks, all the facts of record, including a submission the Board including CIBC, are subject to comprehensive consoli- received from a commenter.12 dated supervision by the OSFI.9 In this case, the Board 7. 12 U.S.C. § 1842(c)(2). 8. 12 U.S.C. § 1842(c)(3)(B). Under Regulation Y, the Board uses Bulletin 442 (1997); National Bank of Canada, 82 Federal Reserve the standards enumerated in Regulation K to determine whether a Bulletin 769 (1996); Bank of Montreal, 80 Federal Reserve Bulletin foreign bank that has applied under section 3 of the BHC Act is 925 (1994). subject to consolidated home country supervision. See 12 C.F.R. 10. 12 U.S.C. § 1842(c)(3)(A). § 225.13(a)(4). Regulation K provides that a foreign bank will be 11. 12 U.S.C. § 2901 etseq. considered to be subject to comprehensive supervision or regulation 12. Commenter asserts that CIBC National and Amicus Bank lack on a consolidated basis if the Board determines that the bank is adequate plans to help meet the CRA-related needs of their communisupervised and regulated in such a manner that its home country ties. The Board has reviewed the current CRA plans of CIBC National supervisor receives sufficient information on the worldwide operations and Amicus Bank and has consulted with the Office of the Comptrolof the bank, including its relationship to any affiliates, to assess the ler of the Currency ("OCC") and OTS, respectively, about these bank's overall financial condition and its compliance with law and institutions. In addition, in acting on Juniper's application to become a regulations. See 12 C.F.R. 211.24(c)(1) bank holding company, the Board reviewed the CRA plan of Juniper 9. See Canadian Imperial Bank of Commerce, 85 Federal Reserve Bank and consulted with the Federal Deposit Insurance Corporation Bulletin 733 (1999); Royal Bank of Canada, 83 Federal Reserve ("FDIC"), which is the bank's primary federal supervisor. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

680 Federal Reserve Bulletin • October 2001 Amicus Bank received a "satisfactory" rating from its CIBC has indicated that 19.5 percent of these locations are primary federal supervisor, the Office of Thrift Supervision in LMI census tracts, and that CIBC National has never ("OTS"), at its most recent evaluation for CRA perfor- closed a branch or a banking pavilion. CIBC has repremance, as of August 1998 ("1998 Amicus Bank Evalua- sented that CIBC National offers customers a selection of tion").13 In the 1998 Amicus Bank Evaluation, examiners financial products, including free checking with no miniidentified no violations of the substantive provisions of the mum balance and mutual funds with a $100 minimum antidiscrimination laws. CIBC National commenced opera- investment. tions in October 1999 and has not yet been examined for CIBC also has indicated that CIBC National employees CRA performance. serve on the boards of directors of several community development corporations and other nonprofit agencies, CRA Performance of CIBC National. and that CIBC National has presented homebuying and financial literacy seminars to underserved populations. Lending. According to data provided by CIBC, from January 1 through August 13, 2001, CIBC National has pur- CRA Performance of Amicus Bank. chased 268 home purchase loans, and 74.6 percent of these loans were to low- and moderate-income ("LMI") individ- Lending. The 1998 Amicus Bank Evaluation examined the uals and 38.4 percent were in LMI census tracts. CIBC has CRA performance of the institution under the standards represented that CIBC National offers a full range of af- applicable to small savings associations.15 Examiners refordable mortgage products through correspondent lenders, ported that the bank's loan-to-deposit ratio during the including programs that offer low and/or flexible downpay- evaluation period averaged 85.2 percent, which approximents. mated the 86.3 percent ratio for similarly sized institutions CIBC has reported that CIBC National's community in the central United States during the same period.16 The development loans and loan commitments totaled more bank originated $35.6 million in mortgage loans from than $10.5 million for the period from January 1, 2000, January 1, 1996, through June 30, 1998, a loan origination through July 31, 2001. These loans include a $5 million level that examiners considered to be extremely high for an line of credit to a community reinvestment corporation institution of Amicus Bank's asset size. ("CRC") for construction financing of an affordable hous- Examiners characterized the institution's record of lending development and two LMI multifamily housing loans ing in low- and moderate-income ("LMI") geographies as totaling more than $2.2 million that CIBC National pur- acceptable, noting that, during the evaluation period, Amichased from a CRC. cus Bank originated 49 percent of its HMDA-reportable Investment. CIBC has stated that CIBC National made loans in moderate income census tracts, compared with the qualified community development investments of more 16.8 percent of these originations in such tracts by all than $3.4 million from January 1, 2000, through July 31, lenders in 1996.17 Examiners reported that the institution 2001. CIBC National's purchase of securities backed by originated 56.1 percent of its HMDA-reportable loans durmortgage loans to LMI areas or LMI borrowers accounted ing the evaluation period to LMI borrowers, compared for almost $2.2 million of this total. with 31.9 percent for lenders in the aggregate in the institu- Service. CIBC National currently operates through its tion's assessment area in 1996. Examiners also stated that main office and 122 banking pavilions in supermarkets.14 Amicus Bank offered a number of flexible mortgage products to assist LMI borrowers, including loans with down payments of 3 percent of the home purchase price, and loan 13. CIBC acquired control of Amicus Bank on April 14, 2000. See terms that permitted the use of affordable housing grants to Canadian Imperial Bank of Commerce, 86 Federal Reserve Bulletin fund portions of down payments. 424 (2000). At the time of the evaluation, Amicus Bank was operating Data from CIBC indicate that Amicus Bank originated as St. Anthony Bank, A Federal Savings Bank. 202 home purchase loans from January 1, 2000, through 14. Commenter contends that CIBC National and Amicus Bank August 13, 2001. Approximately 72.7 percent of these have not properly delineated their CRA assessment areas. CIBC National and Amicus Bank operate primarily through the Internet and loans were made to LMI borrowers, and 51.5 percent were through supermarket-based banking pavilions that accept deposits at made in LMI census tracts. CIBC has stated that Amicus automated teller machines ('ATMs"). CRA regulations require that an Bank continues to offer low-down payment mortgage loans institution's assessment area include the geographies in which the and also plans to introduce the same selection of affordable institution's main office, branches, and deposit-taking ATMs are located. See, e.g., 12 C.F.R 25.41(c)(2) & 563e.41(c)(2). CIBC has mortgage products currently offered by CIBC National. represented that CIBC National and Amicus Bank comply with this CIBC also has represented that from January 1 through requirement by including in their assessment area each area in which August 13, 2001, Amicus Bank had originated two comthe respective institution establishes and operates a branch or a munity development loans in 2001, totaling more than deposit-taking ATM. In connection with past CRA examinations, OTS has reviewed the adequacy of Amicus Bank's assessment area. In addition, in acting on CIBC National's charter application, the OCC considered the bank's plans for meeting CRA-related community 15. 12 C.F.R. 563e.26. needs. The Board also notes that the OCC and the OTS, respectively, 16. The evaluation period was from November 1, 1995, through will review the adequacy of the assessment areas of CIBC National July 31, 1998. and Amicus Bank in connection with regular CRA examinations of 17. HMDA-reportable loans refers to loans reportable under the the institutions. Home Mortgage Disclosure Act, 12 U.S.C. § 2801 et seq. ("HMDA"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 681 $550,000 and had approved an additional $4.1 million in Board deems to be appropriate to determine and enforce such loans. CIBC's compliance with applicable federal statutes. If any Investment. Before its acquisition by CIBC in 2000, restrictions on access to information on the operations or Amicus Bank qualified as a small savings association for activities of CIBC and its affiliates subsequently interfere CRA evaluation purposes and, accordingly, was not evalu- with the Board's ability to obtain information to determine ated under the investment test. CIBC has represented that and enforce compliance by CIBC or its affiliates with Amicus Bank has made a total of $114,000 in donations to applicable federal statutes, the Board may require terminacommunity development organizations during the first tion of any of CIBC's direct or indirect activities in the seven months of 2001, and that the bank also is considering United States. All the commitments and conditions on making equity investments in certain community develop- which the Board relied in granting its approval, including ment organizations. the commitments and conditions specifically described Service. Amicus Bank currently operates through its above, are deemed to be conditions imposed in writing by main office, two branches, and 64 banking pavilions in the Board in connection with its findings and decision and, supermarkets. CIBC has stated that 22.4 percent of these as such, may be enforced in proceedings under applicable locations are in LMI census tracts, and that Amicus Bank law. has never closed a branch or a banking pavilion. CIBC also The transaction shall not be consummated before the has represented that Amicus Bank employees serve on the fifteenth calendar day after the effective date of this order, boards of directors of several community organizations and or later than three months after the effective date of this have conducted seminars for individuals seeking employ- order, unless the Board or the Federal Reserve Bank of ment. New York, acting pursuant to delegated authority, extends such period for good cause. Conclusion on Convenience and Needs Factor By order of the Board of Governors, effective August 17, 2001. The Board has considered carefully the entire record in its review of the convenience and needs factor under the BHC Voting for this action: Chairman Greenspan, Vice Chairman Fergu- Act.18 Based on all the facts of record, including the son, and Governors Kelley, Meyer, and Gramlich. relevant CRA performance evaluations, the public comment received, and information provided by CIBC, the ROBERT DEV. FRIERSON Deputy Secretary of the Board Board concludes that considerations relating to convenience and needs, including the CRA performance records First Western Bancorp, Inc. of the banks involved in the proposal, are consistent with Huron, South Dakota approval. Order Approving the Acquisition of a Bank Holding Conclusion Company Based on the foregoing and in light of all the facts of First Western Bancorp, Inc. ("First Western") has rerecord, the Board has determined that the application quested the Board's approval under section 3 of the Bank should be, and hereby is, approved. The Board's approval Holding Company Act ("BHC Act") (12 U.S.C. § 1842) to is specifically conditioned on compliance by Applicants acquire at least 74.8 percent of the voting shares of Ameriwith all the commitments made in connection with the application. The Board's approval also is specifically con- can Bank Shares, Inc. "American"), and thereby acquire ditioned on CIBC's compliance with the commitments it American's subsidiary bank, American State Bank previously made regarding access to information and on ("American Bank"), both in Rapid City, South Dakota. the Board's receiving access to information on the opera- Notice of the proposal, affording interested persons an tions or activities of CIBC and any of its affiliates that the opportunity to submit comments, has been published (66 Federal Register 33,543 (2001)). The time for filing comments has expired and the Board has considered the 18. Commenter contends that CIBC and Juniper would market proposal and all comments received in light of the factors credit cards to unsophisticated customers and asserts that such market- set forth in section 3 of the BHC Act. ing would constitute predatory lending. CIBC has indicated that First Western, with total consolidated assets of $477 Juniper focuses its marketing efforts on potential credit-card custommillion, operates subsidiary banks in South Dakota and ers who have high credit scores. There is no indication in the record that CIBC or Juniper have acted, or intend to act, in a predatory or Nebraska. First Western operates the 12th largest deposiabusive manner in extending credit. Amicus Bank, CIBC National, tory organization in South Dakota, controlling deposits of and Juniper Bank each has policies in place to comply with all $327.9 million, representing approximately 2.5 percent of applicable fair lending laws. In acting on charter and related applicatotal deposits in insured depository institutions in the state tions, the OCC and the FDIC, respectively, considered the proposed ("state deposits").1 American, with total consolidated aspolicies of CIBC National and Juniper Bank for compliance with fair lending and other laws. In connection with regular compliance examinations, the primary federal regulators of Amicus Bank, CIBC National, and Juniper Bank will monitor the compliance of each institution with fair lending laws. 1. Asset, state deposit, and ranking data are as of June 30, 2000. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

682 Federal Reserve Bulletin • October 2001 sets of $137 million, operates the 23rd largest depository mately 19.2 percent of market deposits. American operates institution in South Dakota, controlling $107.5 million in the sixth largest depository institution in the market, condeposits, representing less than 1 percent of total state trolling $107.5 million in deposits, representing approxideposits. After consummation of the proposal, First West- mately 6.3 percent of market deposits. On consummation ern would control the ninth largest depository organization of the proposed acquisition, First Western would continue in South Dakota, controlling deposits of $435.4 million, to operate the second largest depository organization in the representing approximately 3.4 percent of state deposits. Rapid City market, controlling $435.4 million in deposits, representing approximately 25.5 percent of market depos- Competitive Considerations its. The HHI would increase by 241 points to 1958, and the market would become highly concentrated. Section 3 of the BHC Act prohibits the Board from approv- Several mitigating factors indicate that the increase in ing a proposal that would result in a monopoly or would be market concentration, as measured by the HHI, is not in furtherance of any attempt to monopolize the business of likely to have a significantly adverse effect on competition. banking in any relevant market. The BHC Act also prohib- A large number of financial institutions, relative to the size its the Board from approving a proposal that would sub- of total market deposits, would compete in the Rapid City stantially lessen competition or tend to create a monopoly market. At least 10 banking organizations, other than First in any relevant banking market, unless the Board finds that Western, and one thrift institution would remain in the marthe anticompetitive effects clearly are outweighed in the ket. In addition, four of the other banking organizations would public interest by the probable effect of the proposal in each control more than 10 percent of market deposits. meeting the convenience and needs of the community to be The Rapid City market also has recently experienced served.2 de novo entry. In 2000, a banking organization entered the First Western and American compete directly in the market by establishing a new branch. The Rapid City Rapid City, South Dakota, banking market ("Rapid City market, which includes one of the two Metropolitan Statismarket").3 The Board has carefully reviewed the competi- tical Areas ("MSAs") in South Dakota, also appears to be tive effects of the proposal in this market in light of all the attractive for future entry.6 From 1990 to 2000, the populafacts of record. In particular, the Board has considered the tion growth rate in the Rapid City market and the Rapid projected increase in the concentration of total deposits in City MSA exceeded the statewide rate. In addition, the insured depository institutions in this market ("market population growth rate for the Rapid City MSA is prodeposits")4 as measured by the Herfindahl-Hirschman In- jected to increase by more than twice the projected statedex ("HHI") under the Department of Justice Merger wide rate from 2000 to 2005. Guidelines ("DOJ Guidelines"),5 the number of competi- The Board also has considered the competitive effect of tors that would remain in the market, and other characteris- credit unions operating in the Rapid City market. Sixteen tics of the market. credit unions operate in the market and together control First Western operates the second largest depository more than 20 percent of market deposits, which is more organization in the Rapid City market, controlling than twice the national average of 8.5 percent for market $327.9 million in market deposits, representing approxi- deposits controlled by credit unions. The largest credit union controls more than 12 percent of market deposits and offers a full range of retail banking products. The credit 2. 12 U.S.C. § 1842(c)(1). union's membership is open to all persons who live, work, 3. The Rapid City market is defined as Bennett, Butte, Custer, Fall worship, or attend school in three counties, or in a large River, Haakon, Jackson, Lawrence, Pennington, and Shannon Counties, and the southwestern portion of Meade County, all in South town in a fourth county, in the banking market. More than Dakota. 60 percent of the residents in the Rapid City market are 4. Market share data for the Rapid City market are as of June 30, potential members of this credit union. 2000. These data are based on calculations in which the deposits of The Board believes that the foregoing considerations, thrift institutions are included at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to including the number and strength of competitors that become, significant competitors of commercial banks. See Midwest would remain in the Rapid City market after consumma- Financial Group, 75 Federal Reserve Bulletin 386 (1989); National tion of the proposal, the structure and attractiveness of that City Corporation, 70 Federal Reserve Bulletin 743 (1984). Thus, the market, and other factors mitigate the potential anticom- Board has regularly included thrift deposits in the calculation of petitive effects of the proposal. The Board also has considmarket shares on a 50-percent weighted basis. See, e.g., First Hawaiian, Inc., 77 Federal Resen'e Bulletin 52 (1991). ered the views of the Department of Justice and other 5. Under the DOJ Guidelines, 49 Federal Register 26,823 (1984), a banking agencies. The Department of Justice has advised market in which the post-merger HHI is above 1800 is considered to the Board that consummation of the proposal would not be highly concentrated. The Department of Justice has informed the likely have a significantly adverse effect on competition in Board that a bank merger or acquisition generally will not be chalany relevant banking market. The Federal Deposit Insurlenged (in the absence of other factors indicating anticompetitive ance Corporation ("FDIC") and the Office of the Compeffects) unless the post-merger HHI is at least 1800 and the merger or acquisition increases the HHI by at least 200 points. The Department of Justice has stated that the higher than normal HHI thresholds for screening bank mergers or acquisitions for anticompetitve effects implicitly recognize the competitive effects of limited-purpose lenders 6. The Rapid City MSA consists of one county in the Rapid City and other nondepository financial institutions. market, Pennington County. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 683 troller of the Currency ("OCC") have been afforded an order, unless such period is extended for good cause by the opportunity to comment and have not objected to the Board or the Federal Reserve Bank of Minneapolis, acting consummation of the proposal. pursuant to delegated authority. Based on these and all the facts of record, the Board By order of the Board of Governors, effective August 9, concludes that consummation of the proposal is not likely 2001. to result in any significantly adverse effects on competition or on the concentration of banking resources in the Rapid Voting for this action: Chairman Greenspan, Vice Chairman Fergu- City banking market, or in any other relevant banking son, and Governors Kelley, Meyer, and Gramlich. market, and that competitive factors are consistent with approval. ROBERT DEV. FRIERSON Deputy Secretary of the Board Financial, Managerial, and Other Considerations Orders Issued Under Sections 3 and 4 of the Bank Holding Company Act Section 3 of the BHC Act also requires the Board to consider the financial and managerial resources and future First Union Corporation prospects of the companies and banks involved in the Charlotte, North Carolina proposal, the convenience and needs of the communities to be served, and certain supervisory factors. The Board has Wachovia Corporation reviewed carefully these factors in light of all the facts of Winston-Salem, North Carolina record, including supervisory reports of examination assessing the financial and managerial resources of the orga- Order Approving the Merger of Bank Holding nizations and confidential financial information provided Companies by First Western. Based on these and all the facts of record, the Board concludes that the financial and managerial First Union Corporation ("First Union"), a bank holding resources and future prospects of First Western, American, company within the meaning of the Bank Holding Comand their subsidiary banks are consistent with approval, as pany Act ("BHC Act"), has requested the Board's apare the other supervisory factors that the Board must conproval under section 3 of the BHC Act (12 U.S.C. § 1842) sider under the BHC Act. to merge with Wachovia Corporation ("Wachovia") and In considering the convenience and needs factor, the thereby acquire Wachovia's subsidiary banks,1 including Board has reviewed the records of performance of the its lead subsidiary bank, Wachovia Bank, National Associsubsidiary banks of First Western and American under the Community Reinvestment Act (12 U.S.C. § 2901 et seq.).1 ation, Winston-Salem, North Carolina ("Wachovia Bank").2 First Union also has requested the Board's ap- Based on all the facts of record, the Board concludes that proval under sections 4(c)(8) and 4(j) of the BHC Act convenience and needs considerations, including the CRA (12 U.S.C. §§ 1843(c)(8) and 1843(j)) and section performance records of the relevant institutions, are consis- 225.24 of the Board's Regulation Y to acquire Wachovia's tent with approval of the proposal. subsidiary savings association, Atlantic Savings Bank, Based on the foregoing and all the facts of record, the FSB, Hilton Head Island, South Carolina ("Atlantic"). In Board has determined that the application should be, and addition, First Union has filed notices under section 25A of hereby is, approved. The Board's approval of the proposal the Federal Reserve Act (12 U.S.C. §§611-631), section is conditioned on compliance by First Western with the 4(c)(13) of the BHC Act (12 U.S.C. § 1843(c)(13)), and commitments made in connection with the application. For subpart A of the Board's Regulation K (12CFR 211, purposes of this action, the commitments and conditions subpart A) to acquire an Edge corporation and certain relied on in reaching this decision are conditions imposed foreign investments controlled by Wachovia.3 in writing by the Board and, as such, may be enforced in proceedings under applicable law. The transaction shall not be consummated before the fifteenth calendar day after the effective date of this order, 1. First Union also has requested the Board's approval to exercise an option to purchase up to 19.9 percent of Wachovia's common stock or later than three months after the effective date of this if certain events occur. Wachovia holds a substantially similar option to acquire up to 19.9 percent of First Union. Both options would expire on consummation of the proposed merger. 7. The subsidiary banks of First Western and American received 2. Wachovia's other subsidiary banks are Republic Security Bank, "outstanding" or "satisfactory" ratings at their most recent CRA West Palm Beach, Florida, and The First National Bank of Atlanta performance examinations: The First Western Bank Custer, Custer, (d/b/a Wachovia Bank Card Services, Inc.), New Castle, Delaware. South Dakota, and The First Western Bank Sturgis, Sturgis, South First Union also proposes to acquire Wachovia Acquisition Corpora- Dakota, received "outstanding" ratings from the FDtC, as of Decem- tion 2001-01, Winston-Salem, North Carolina, which is an intermediber 1, 1999; The First Western Bank Wall, Wall, South Dakota, also ate bank holding company that holds shares of Republic. received an "outstanding" rating from the FDIC, as of February 1, 3. First Union and Wachovia are financial holding companies within 1999; First Western Bank, N.A., Atkinson, Nebraska, received a the meaning of the BHC Act. In addition to the proposed acquisitions "satisfactory" rating from the OCC, as of April 20, 1998; and described above for which First Union has sought the Board's ap- American Bank received an "outstanding" rating from the Federal proval or provided prior notice, First Union would acquire the remain- Reserve Bank of Minneapolis, as of February 24, 1997. der of Wachovia's nonbanking companies in accordance with section Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

684 Federal Reserve Bulletin • October 2001 Notice of the proposal, affording interested persons an force compliance with the BHC Act and other applicable opportunity to submit comments, has been published federal banking laws.7 In addition, the Board is permitted (66 Federal Register 27,144, and 29,326 (2001)). The time to approve an acquisition that involves banks in a state for filing comments has expired, and the Board has consid- outside the acquiring bank holding company's home state ered the proposal and all comments received during the only if certain specified conditions are met. comment period in light of the factors set forth in sections Based on this consideration and subject to First Union's 3 and 4 of the BHC Act.4 commitments and the conditions established by the Board First Union, with total consolidated assets of as described below, the Board has concluded that First $252.9 billion, is the sixth largest commercial banking Union's proposal satisfies the criteria set out in the BHC organization in the United States, controlling approxi- Act. Accordingly, the Board has determined to approve the mately 4.1 percent of total banking assets of insured com- applications and notices filed by First Union, subject to the mercial banks in the United States ("total U.S. banking fulfillment of First Union's commitments and the condiassets").3 First Union operates subsidiary banks in Con- tions established herein by the Board. The Board's review necticut, Delaware, Florida, Georgia, Maryland, New Jer- as discussed in this order is limited to applying the statusey, New York, North Carolina, Pennsylvania, South Caro- tory factors set out in the BHC Act to the proposal as lina, Tennessee, Virginia, and Washington, D.C., which currently constituted and presented to the Board, and the control $136.2 billion in total deposits, representing ap- Board expresses no view on any matter regarding this proximately 3.4 percent of total deposits in all insured transaction other than those statutory factors. depository institutions in the United States ("total U.S. insured deposits").6 Interstate Analysis Wachovia, with total consolidated assets of $75.6 billion, is the 15th largest commercial banking organization Section 3(d) of the BHC Act allows the Board to approve in the United States, controlling approximately 1.3 percent an application by a bank holding company to acquire of total U.S. banking assets. Wachovia's subsidiary banks control of a bank located in a state other than the bank and savings association operate in six Southeastern states holding company's home state if certain conditions are and in Delaware, and control $39.8 billion in deposits, met. For purposes of the BHC Act, the home state of First representing approximately 1 percent of total U.S. insured Union is North Carolina,8 and the subsidiary banks of deposits. Wachovia are located in Delaware, Florida, Georgia, North On consummation of the proposal and after accounting Carolina, South Carolina, Tennessee, and Virginia.9 The for the proposed divestitures discussed in this order, the Board has reviewed the interstate banking laws of each combined organization would become the fourth largest state in which First Union would acquire banking operacommercial banking organization in the United States, tions and consulted with the appropriate banking regulator with total consolidated assets of $328.5 billion, represent- in each of those states about the permissibility of the ing approximately 5.4 percent of total U.S. banking assets, proposed transaction under applicable state law. and would control total deposits of $174.5 billion, repre- All the conditions enumerated in section 3(d) for an senting approximately 4.4 percent of total U.S. insured interstate acquisition are met in this case. First Union is at deposits. The combined organization would be named least adequately capitalized and adequately managed, as Wachovia Corporation ("New Wachovia"), would be defined by applicable law.10 In addition, the subsidiary headquartered in Charlotte, and would have a significant banks of Wachovia that First Union would acquire in an presence throughout the Mid-Atlantic and Southeast re- interstate transaction have been in existence for the minigions of the United States. mum period of time required by applicable law." On The Board is required to review each proposal filed consummation of the proposal, and after accounting for the under the BHC Act using standards specified in the Act. proposed divestitures, New Wachovia and its affiliates These standards relate to the competitive impact of the would control less than 10 percent of the total amount of proposal, the financial and managerial resources and future deposits in insured depository institutions in the United prospects of the companies and banks concerned, the convenience and needs of the community to be served, and the availability of information needed to determine and en- 7. See 12 U.S.C. § 1842(c). The BHC Act requires review of additional factors in cases involving the acquisition of a bank by a foreign bank. 8. A bank holding company's home state is that state in which the 4(k) of the BHC Act and the post-transaction notice procedures of total deposits of all banking subsidiaries of the company were the section 225.87 of Regulation Y. largest on the later of July 1, 1966, or the date on which the company 4. SunTrust Banks, Inc., Atlanta, Georgia, filed a number of com- became a bank holding company. 12 U.S.C. § 1841(o)(4)(c). ments on the proposal, all of which were withdrawn prior to the 9. For purposes of section 3(d), the Board considers a bank to be Board's consideration of the proposal. located in the states in which the bank is chartered, headquartered, or 5. Asset data are as of March 31, 2001, and ranking data are as of operates a branch. December 31, 2000. 10. See 12 U.S.C. §§ 1841 (o)( 1 )(B), 1841(o)(9). and 1842(d)(1)(A). 6. Deposit data are as of June 30, 2000. An "insured depository 11. See 12 U.S.C. § 1842(d)(1)(B). Each of Wachovia's subsidiary institution" is any bank or savings association whose deposits are depository institutions has been in existence for at least five years and, insured by the Federal Deposit Insurance Corporation. 12U.S.C. therefore, may be acquired without regard to any state age require- § 1813(c)(2). ment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 685 States and less than 30 percent, or the applicable percent- compete directly in light of all the facts of record, includage established by state law, of total deposits in each state ing the number of competitors that would remain in the in which the insured depository institutions of both First market, the relative share of total deposits in depository Union and Wachovia are located.12 All other requirements institutions in the market ("market deposits") that New of section 3(d) would be met on consummation of the Wachovia would control,17 the concentration level of marproposal.13 Accordingly, based on all the facts of record, ket deposits and the increase in this level as measured by section 3(d) of the BHC Act does not prohibit the Board the HHI under the DOJ Guidelines,18 the size and likely from approving the proposed transaction. effect of the proposed divestiture in relevant banking markets, and other characteristics of the markets.19 As more fully discussed below, of the 60 banking mar- Competitive Considerations kets in which First Union and Wachovia compete, after accounting for the proposed divestitures the proposal Section 3 of the BHC Act prohibits the Board from approv- would be consistent with threshold levels established by ing a proposal that would result in a monopoly or would be the DOJ Guidelines in 54 banking markets. These in furtherance of any attempt to monopolize the business of 54 banking markets are discussed in the Appendices. Each banking in any relevant banking market. The BHC Act also of the six remaining markets is discussed in detail below. prohibits the Board from approving a proposed bank acquisition that would substantially lessen competition in any relevant banking market, unless the Board finds that the A. Certain Banking Markets without Divestitures anticompetitive effects of the proposal clearly are outweighed in the public interest by the probable effect of the Consummation of the proposal would be consistent with proposal in meeting the convenience and needs of the the DOJ Guidelines in 44 banking markets without any community to be served.14 First Union and Wachovia have depository institutions that compete directly in sixty banking markets in six states.15 To reduce the potential that the proposal would 17. Deposit and market share data are as of June 30, 2000, and have have adverse eifects on competition, First Union has combeen adjusted to reflect mergers and acquisitions that occurred through mitted to divest 38 branches (the "divestiture branches"), June 27. 2001. The data are based on calculations in which the with at least $1.5 billion in deposits, in 13 banking markets deposits of thrift institutions, which include savings banks and savings (the "divestiture markets").16 The Board has reviewed associations, are weighted at 50 percent. The Board previously has carefully the competitive effects of the proposal in each of indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. See, e.g., Midthe banking markets in which First Union and Wachovia west Financial Group, 75 Federal Reserve Bulletin 386 (1989); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Thus, the Board regularly has included thrift deposits in the market 12. See 12 U.S.C. § 1842(d)(2). share calculation on a 50-percent weighted basis. See, e.g., First 13. The Board contacted the relevant state banking commissioners Hawaiian, Inc., 11 Federal Reserve Bulletin 52 (1991). about, and considered First Union's compliance with, applicable state 18. Under the DOJ Guidelines, a market is considered unconcencommunity reinvestment laws. See 12 U.S.C. § 1842(d)(3). trated if the post-merger HHI is under 1000, moderately concentrated 14. 12 U.S.C. § 1842(c)(1). if the post-merger HHI is between 1000 and 1800, and highly concen- 15. These markets are described in Appendix A and include the trated if the post-merger HHI is more than 1800. The Department of market in which Wachovia's savings association, Atlantic, competes Justice has informed the Board that a bank merger or acquisition directly with First Union's lead subsidiary bank, First Union National generally will not be challenged (in the absence of other factors Bank. indicating anticompetitive effects) unless the post-merger HHI is at 16. First Union has committed that prior to consummating the least 1800 and the merger increases the HHI by more than 200 points. proposed merger it will execute an agreement consistent with this The Department of Justice has stated that the higher than normal HHI order to sell the divestiture branches in each divestiture market to thresholds for screening bank mergers for anticompetitive effects either (a) an out-of-market banking organization, (b) an in-market implicitly recognize the competitive effects of limited-purpose lenders banking organization in a transaction in which both the change in and and other nondepository financial institutions. resulting Herfindahl-Hirschman Index ("HHI") level are within the 19. Two commenters expressed concern about the competitive Department of Justice Guidelines ("DOJ Guidelines"), 49 Federal effects of the proposal in a number of markets and encouraged the Register 26,823 (1984), or (c) in the case of Winston-Salem only, in a Board to scrutinize the competitive effects of the proposal in the transaction that would cause the change in the market HHI to be 201 relevant banking markets in light of numerous factors. These compoints or less. First Union also has committed to divest total deposits menters provided market share data they had compiled for several in each of the 13 divestiture markets of at least the amounts discussed banking markets and claimed that the proposal would have anticomin this order. First Union further has committed to sell the divestiture petitive effects in those and other banking markets. These commenters branches within 180 days of the consummation date of the proposed asserted, based on the combined market shares of First Union and merger and to execute a trust agreement approved by the Board prior Wachovia in those markets, that the proposed transaction would to consummation of the proposed merger. The trust agreement will exceed the DOJ Guidelines in many of the banking markets. After provide that if the divestiture branches are not sold within 180 days of reviewing First Union's initial divestiture proposal, one of these consummation of the proposed merger, New Wachovia would transfer commenters expressed concern that the proposal would still exceed the unsold branches to an independent trustee that has been instructed the DOJ Guidelines and/or have anticompetitive eifects in a number of to sell such branches to an alternate purchaser or purchasers in banking markets identified by the commenters. As described above, accordance with the terms of this order and without regard to price. the Board has considered the resulting market share in each market Both the trustee and any alternate purchaser must be deemed suitable along with the other relevant indicators of the likely competitive by the Board. effects of the proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

686 Federal Reserve Bulletin • October 2001 divestiture by First Union.20 After consummation of the whether other factors either mitigate the competitive efproposal, one of these banking markets would remain fects of the proposal or indicate that the proposal would unconcentrated and thirty-one would be moderately con- have a significantly adverse effect on competition in the centrated as measured by the HHI.21 The remaining market. The number and strength of factors necessary to 12 banking markets would be highly concentrated as mea- mitigate the competitive effects of a proposal depend on sured by the HHI, but the increase in the HHI would be the level and size of the increase in concentration in a less than the 200-point threshold level, which would be banking market.25 In each of these markets, the Board has consistent with the DOJ Guidelines.22 identified a number of factors that indicate the proposal would not have a significantly adverse effect on competi- B. Certain Banking Markets with Divestitures tion despite the increase in and resulting level of the HHI or the resulting market share. After accounting for the divestitures First Union has pro- Asheville. First Union operates the largest depository posed to mitigate the potential for adverse competitive institution in the Asheville banking market, controlling effects, consummation of the merger would be consistent deposits of $1 billion, representing approximately with the DOJ Guidelines in ten of the banking markets in 27.9 percent of market deposits.26 Wachovia operates the which divestitures are proposed.23 Three of these markets second largest depository institution in the market, controlwould remain moderately concentrated on consummation ling deposits of 812.7 million, representing 22.7 percent of of the proposal. The Hickory, North Carolina, market market deposits. To mitigate competitive effects, First would remain moderately concentrated and the HHI would Union proposes to divest 12 branches with at least increase less than 200 points. In the Savannah, Georgia- $433,877,000 in deposits in the Asheville market to an South Carolina, and Wilkes, North Carolina, banking mar- out-of-market banking organization. On consummation of kets, the change in the HHI would be slightly more than the proposal and after accounting for the proposed divesti- 200 points, but the resulting moderately concentrated level tures, New Wachovia would operate the largest depository would remain below 1800. The remaining seven banking institution in the banking market, controlling deposits of markets would be highly concentrated on consummation of $1.4 billion, representing approximately 38.5 percent of the transaction, but the change in the HHI in each of these market deposits. The HHI would increase by 334 points to markets would be 200 points or less.24 2014.27 A number of factors indicate that the proposal is not C. Six Banking Markets in which Special Scrutiny is likely to have significantly adverse competitive effects in Appropriate the Asheville banking market. Most important is the structure of the market after consummation of the proposal. In The proposal would exceed the DOJ Guidelines in three addition to New Wachovia, at least eleven banks and four banking markets in which no divestitures are proposed. savings associations would remain in the market, and an These markets are Durham-Chapel Hill and Statesville, out-of-market purchaser of the divestiture branches would both in North Carolina, and Richmond, Virginia. The pro- become the third largest competitor, controlling 12.1 perposal also would exceed the DOJ Guidelines in three cent of market deposits. The second largest competitor in markets in which divestitures are proposed: Asheville, the market would control 14.9 percent of market deposits Elizabeth City, and Winston-Salem, all in North Carolina. and operates 19 branches in the market. The fourth and For each of these six markets, the Board has considered fifth largest competitors in the Asheville market control 20. The etfects of the proposal on the concentration of banking resources in these markets are described in Appendix B. 25. See, NationsBank Corporation, 84 Federal Reserve Bulletin 129 21. The unconcentrated market would be the Washington, D.C., (1998). banking market. The moderately concentrated banking markets would 26. Unless otherwise noted, deposit figures have been rounded to be Brevard, Fort Myers, Fort Pierce, Gainesville, Miami-Fort Lauder- the nearest million dollars and market share percentages have been dale, Ocala, Orlando, Tampa Bay, and West Palm Beach, all in rounded to the nearest one-tenth of 1 percent. Florida; Atlanta and Dalton, both in Georgia; and Augusta in Georgia 27. In calculating the competitive effect of the proposed merger in and South Carolina; Burlington, Greensboro-High Point, Raleigh, and the Asheville market, the Board has adjusted the June 30, 2000, Wilmington, all in North Carolina; Beaufort, Charleston, Columbia, Summary of Deposit ("SOD") data for First Union to account for two Florence, Greenville, Greenwood, and Myrtle Beach-Conway, all in incorrectly reported branches. First Union has argued that further South Carolina; and Charlottesville, Fredericksburg, Harrisonburg. adjustments should be made. In particular, First Union has contended Martinsville, Newport News-Hampton, Norfolk-Portsmouth, Pulaski- that certain deposits at its branches in the Asheville market should not Radford, and Winchester, all in Virginia. be included in calculations of the competitive effect of the proposal in 22. These markets are Wilmington, in Delaware and Maryland; that market because, according to First Union, these deposits originate Charlotte-Rock Hill, Dare, Fayetteville, Greenville, Monroe, Moore, from outside the market. This deposit adjustment would be inconsis- Robeson, Rocky Mount, and Stanly, all in North Carolina; George- tent with prior Board practice, which has been to rely to the extent town, South Carolina; and Abingdon, Virginia. possible on the most recent publicly reported SOD data when calculat- 23. The structural characteristics of these markets are described in ing deposit market shares in a particular market. In addition, for such Appendix C. an adjustment to produce a meaningful and balanced result, the 24. These markets are Haywood, Jackson, and Salisbury, all in deposits of all other depository institutions in the Asheville market North Carolina; York, South Carolina; and Bedford, Roanoke, and would have to be reviewed and adjusted similarly, requiring data not available from the SOD. Smyth, all in Virginia. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 687 8.7 percent and 5.7 percent of market deposits, respec- banking market. The second, third, and fourth largest detively. pository institutions in the market control approximately In addition, the Asheville banking market is attractive 23.4 percent, 11.6 percent, and 10.7 percent of market for entry. Four firms have entered the market de novo in the deposits, respectively. The Elizabeth City market also aplast five years. Deposits in the market increased by pears to be somewhat attractive for entry, as one competi- 30 percent from June 1997 to June 2000, which exceeded tor has entered the market since 1998. Moreover, the the nationwide increase in deposits during the same period. average rate of deposit growth in the market exceeded the Moreover, in 2000, the average level of per capita income average rate of deposit growth in the non-MSA portions of in the market exceeded the average per capita income North Carolina and in the United States as a whole from levels for Metropolitan Statistical Areas ("MSAs") in June 1997 to June 2000. North Carolina and for the United States as a whole. Statesville. First Union operates the third largest deposi- Durham-Chapel Hill. First Union operates the sixth larg- tory institution in the Statesville banking market, controlest depository institution in the Durham-Chapel Hill bank- ling deposits of $129 million, representing approximately ing market, controlling deposits of $280 million, represent- 16.7 percent of market deposits. Wachovia operates the ing 6.5 percent of market deposits. Wachovia operates the sixth largest depository institution in the market, controlsecond largest depository institution in the market, control- ling deposits of $61 million, representing approximately ling deposits of $661 million, representing 15.4 percent of 7.9 percent of market deposits. On consummation of the market deposits. On consummation of the proposal, New proposal, New Wachovia would operate the second largest Wachovia would operate the second largest depository depository institution in the banking market, controlling institution in the banking market, controlling deposits of deposits of $191 million, representing approximately $942 million, representing 22 percent of market deposits. 24.7 percent of market deposits. The HHI would increase The HHI would increase by 201 points to 2186. by 265 points to 1850. A number of factors indicate that the proposal would not A number of factors demonstrate that the proposal is not have a significantly adverse effect on competition in the likely to have a significantly adverse effect on competition Durham-Chapel Hill banking market. Thirteen banks, in- in the Statesville banking market. Seven banks, including cluding the bank that would be owned by New Wachovia, the bank that would be owned by New Wachovia, and one and two savings associations would remain in the market. thrift organization would remain in the market. The largest One remaining competitor would be larger than New and third largest competitors in the banking market control Wachovia, and the third, fourth, and fifth largest competi- 26 percent and 18.2 percent of market deposits, respectors each would control more than 9 percent of market tively. Three other banking organizations in the market deposits. have market shares that exceed 7 percent. In addition to the favorable structure of the Durham- In addition, several factors indicate that the Statesville Chapel Hill market, several factors indicate that the market market is attractive for entry. One competitor has entered is attractive for entry. Since June 2000, one bank has the market de novo since September 1998. In addition, entered the market through expansion of its branch net- between 1996 and 1999, the population of the Statesville work. Moreover, in 2000, the average per capita income in banking market increased at a rate almost three times the Durham-Chapel Hill banking market exceeded the av- greater than the average rate of increase for the non-MSA erage per capita income in North Carolina's MSAs. counties in North Carolina. Moreover, the average per Elizabeth City. First Union operates the third largest capita income level in the market exceeded the average depository institution in the Elizabeth City banking market, level of per capita income for North Carolina's non-MSA controlling deposits of $64 million, representing 12 percent counties. of market deposits. Wachovia operates the second largest Winston-Salem. First Union operates the third largest depository institution in the market, controlling deposits of depository institution in the Winston-Salem banking mar- $120 million, representing 22.5 percent of market deposits. ket, controlling deposits of $464 million, representing ap- To mitigate competitive effects in the Elizabeth City mar- proximately 4.6 percent of market deposits. Wachovia opket, First Union proposes to divest one branch with at least erates the second largest depository institution in the $17,420,000 in the market to an out-of-market banking market, controlling deposits of $3.9 billion, representing organization. On consummation of the proposal and after approximately 38.1 percent of market deposits. To mitigate accounting for the proposed divestitures, New Wachovia competitive effects in the Winston-Salem market, First would operate the largest depository institution in the bank- Union proposes to divest six branches with at least ing market, controlling deposits of $166 million, represent- $204,597,000 in deposits in the market either to an ining approximately 31.3 percent of market deposits. The market banking organization, provided that the change in HHI would increase by 336 points to 1889. the HHI is 201 points or less, or to an out-of-market A number of factors indicate that the proposal is not banking organization. On consummation of the proposal, likely to have a significantly adverse effect on competition and after accounting for the proposed divestiture to a in the Elizabeth City banking market. A divestiture to an banking organization with existing operations in the out-of-market firm would not reduce the number of com- Winston-Salem market, New Wachovia would operate the petitors in the market. In addition to New Wachovia, seven largest depository institution in the banking market, conbanks and two savings associations would remain in the trolling deposits of $4.1 billion, representing approxi- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

688 Federal Reserve Bulletin • October 2001 mately 40.7 percent of market deposits. The HHI would The Board has reviewed carefully all the facts of record, increase by 201 points to 3268.28 including public comments on the competitive effects of Several factors indicate that the proposal is not likely to the proposal and, for the reasons discussed in this order, have a significantly adverse effect on competition in the has concluded that consummation of the proposal would Winston-Salem banking market. Fifteen banks, including not have a significantly adverse affect on competition or on New Wachovia's bank, and two savings associations would the concentration of banking resources in any of the remain in the market. In addition, the Winston-Salem bank- 60 banking markets in which First Union and Wachovia ing market is attractive for entry. Three banking organiza- compete directly or in any other relevant banking market. tions entered the market de novo in 1996 and 1997, and Accordingly, based on all the facts of record and subject to three additional firms have entered the market de novo completion of the proposed divestitures, the Board has since 1998. The market also is one of the largest banking determined that competitive factors are consistent with markets in the state, and in 2000, the per capita income in approval of the proposal. the market exceeded the average per capita income level for all MSAs in North Carolina. Financial, Managerial, and Other Supervisory Factors Richmond. First Union operates the fourth largest depository institution in the Richmond banking market, control- Section 3 of the BHC Act requires the Board to consider ling deposits of $1.8 billion, representing approximately the financial and managerial resources and future prospects 12.9 percent of market deposits. Wachovia operates the of the companies and banks involved in the proposal and second largest depository institution in the market, control- certain other supervisory factors. The Board has considling deposits of $2.3 billion, representing approximately ered these factors carefully in light of all the facts of 16.8 percent of market deposits. On consummation of the record, including reports of examination and other confiproposal, New Wachovia would operate the largest deposi- dential supervisory information assessing the financial and tory institution in the banking market, controlling deposits managerial resources of the organizations and other inforof $4.1 billion, representing approximately 29.7 percent of mation provided by First Union and Wachovia. The Board market deposits. The HHI would increase by 435 points to also has considered carefully public comments submitted 1864. regarding financial and managerial considerations. A number of factors, particularly the structure of the In evaluating financial factors in expansion proposals by Richmond banking market, indicate that the proposal is not banking organizations, the Board consistently has considlikely to have a significantly adverse effect on competition ered capital adequacy to be especially important.29 The in the market. In addition to New Wachovia's bank, Board notes that First Union, Wachovia, and all their twenty-two banks and three savings associations would subsidiary depository institutions are and on consummaremain in the banking market. The second, third, and tion of the proposal would remain well capitalized, as fourth largest depository institutions in the market control defined in the relevant regulations of the federal banking approximately 24.9 percent, 15.3 percent, and 8.7 percent agencies. The proposed acquisition is structured as an of market deposits, respectively. The Richmond banking exchange of shares of Wachovia for shares of First Union, market also is attractive for entry, as evidenced by the and neither First Union nor Wachovia would incur any de novo entry of eight depository institutions in the market debt as a result of the transaction. since 1998. The Board also has considered the managerial resources of First Union and Wachovia and the examination reports D. Views of Other Agencies and Conclusion of the federal banking agencies that supervise these organizations, including their subsidiary depository institutions.30 The Department of Justice also has conducted a detailed First Union, Wachovia, and all their subsidiary depository review of the potential competitive effects of the proposal. institutions are well managed,31 and New Wachovia would The Department has advised the Board that, in light of the select its senior management from among the senior execuproposed divestitures, consummation of the proposal tives of First Union and Wachovia, thus providing the would not be likely to have a significantly adverse effect on competition in any relevant banking market. The Office of 29. See, e.g., Chemical Banking Corporation, 82 Federal Reserve the Comptroller of the Currency ("OCC") and the Federal Bulletin 239 (1996). Deposit Insurance Corporation ("FDIC") have been af- 30. One commenter alleged that First Union had not successfully forded an opportunity to comment and have not objected to integrated several recently acquired bank holding companies, and that consummation of the proposal. First Union lost customers and did not realize projected levels of cost savings and earnings. 31. First Union has assigned a portion of its option to acquire shares of Wachovia to one of its subsidiary banks. First Union National Bank ("FUNB") holds only 1 percent of the option, which is not exercis- 28. If First Union sold the divestiture branches in the Winston- able unless and until certain events occur and would expire on Salem banking market to an out-of-market banking organization, the consummation of the proposed merger. Moreover, First Union has HHI would increase by 183 points to 3250. In calculating the compet- stated that if the option were exercised, at no time would FUNB own itive effect of the proposed merger in the Winston-Salem market, the shares of Wachovia. Exercise of the option may be done only in Board has adjusted the June 30, 2000, SOD data for First Union to accordance with the Glass-Steagall Act as well as the BHC Act and account for one incorrectly reported branch. the Board's regulations issued thereunder. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 689 combined organization with officers that are experienced Among these commenters, 16 members of Congress and and knowledgeable in the operations and markets of both several nonprofit organizations commended First Union companies. In addition, First Union and its subsidiary and Wachovia for their CRA ratings and for a recently depository institutions have remained well managed during announced $35-bilIion community lending and investment and after integration with a number of acquired organiza- initiative by New Wachovia (the "Community Initiative"). tions. The appropriate federal banking agencies previously Several nonprofit organizations representing minority indihave found that First Union, Wachovia, and their subsidiar- viduals asserted that one or both institutions have favorable ies each have appropriate risk management systems in records of promoting diversity among their workforce and place, and New Wachovia would retain these systems to their vendors. Commenters also related favorable experiidentify and manage various types of financial risk. More- ences working in partnership with one or both institutions over, First Union and Wachovia have indicated that they on programs to fund construction of affordable housing, to are devoting significant managerial resources to address all assist first-time homebuyers, or to support the development aspects of the merger process. of microenterprises. Several nonprofit organizations also Based on the foregoing and all the facts of record, cited with approval the service of employees of one or both including confidential reports of examination and other institutions as board members or volunteers with their supervisory information and the plans for integrating the organizations. two companies, the Board has concluded that consider- Fifteen commenters either opposed the proposal, reations relating to the financial and managerial resources of quested that the Board approve the merger subject to First Union, Wachovia, and their respective banking sub- conditions that the commenter suggested, or expressed sidiaries are consistent with approval, as are the other concerns about the records of First Union, Wachovia, or supervisory factors the Board must consider under sec- both in meeting the convenience and needs of the commution 3 of the BHC Act. nities they serve. Some of these commenters criticized the Community Initiative and expressed disappointment with Convenience and Needs Considerations the results of a similar initiative that First Union announced in 1998, in connection with its merger with Core- In acting on proposals under section 3 of the BHC Act, and States Financial Corp., Philadelphia. Pennsylvania ("Coreon proposals to acquire a savings association, the Board is States"). Commenters also expressed concern that the required to consider the effects of the proposal on the proposal would result in branch closings that would adconvenience and needs of the communities to be served versely affect LMI or predominantly minority communiand take into account the records of the relevant depository ties. institutions under the Community Reinvestment Act Based on data submitted under the Home Mortgage ("CRA").32 The CRA requires the federal financial super- Disclosure Act, 12 U.S.C. § 2801 et seq. ("HMDA"), sevvisory agencies to encourage financial institutions to help eral commenters also alleged that First Union and Wachomeet the credit needs of local communities in which they via engaged in disparate treatment of minority individuals operate, consistent with safe and sound operation, and in home mortgage lending. Commenters also criticized the requires the appropriate federal supervisory agency to take lending practices of First Union's subprime lending subsidinto account an institution's record of meeting the credit iaries, particularly The Money Store, Inc., Union, New needs of its entire community, including low- and Jersey ("Money Store"), and raised objections to First moderate-income ("LMI") neighborhoods, in evaluating Union's credit relationships with other subprime lenders.34 bank expansion proposals. The Board has carefully considered the convenience and needs factor and the CRA perfor- B. CRA Performance Examinations mance records of the subsidiary depository institutions of First Union and Wachovia in light of all the facts of record, As provided in the CRA, the Board has evaluated the including public comments received on the effect the pro- records of both First Union and Wachovia in serving the posal would have on the communities to be served by the convenience and needs of their communities in light of combined organization. examinations by the appropriate federal supervisors of the CRA performance records of the relevant institutions. An A. Summary of Public Comments institution's most recent CRA performance evaluation is a particularly important consideration in the applications pro- The Board received 57 public comments on the proposal. cess because it represents a detailed on-site evaluation of Thirty-four supported the proposal or remarked favorably on First Union's or Wachovia's CRA-related activities.33 34. Two commenters expressed concerns about the proposal based 32. 12 U.S.C. § 2901 et seq. on unfavorable experiences with First Union or Wachovia or their 33. The Board also received a letter cosigned by 32 members of the subsidiaries in particular business dealings. The Board has reviewed Congressional Black Caucus and another cosigned by 21 members of these comments in light of the facts of record, including information the Committee on Financial Services of the U.S. House of Representa- provided by First Union. The Board has provided copies of these tives. Both letters urged the Board to make CRA performance a comments to the appropriate federal supervisors of the subsidiaries critical factor in its consideration of the proposal. involved for their consideration. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

690 Federal Reserve Bulletin • October 2001 the institution's CRA performance by its primary federal performance evaluation by the OCC, as of May 1997 supervisor.35 ("1997 FUNB Evaluation").39 First Union Bank of Dela- In recent years, First Union and Wachovia have acquired ware, Wilmington, Delaware ("FUBDE"), received a "satother banking organizations and consolidated their subsid- isfactory" rating at its most recent CRA performance evaliary banks.36 The most recent CRA performance evalua- uation by the FDIC, as of December 1998 ("1998 FUBDE tions of their respective lead subsidiary banks predate the Evaluation").40 current structure of the organizations. Therefore, the Board All of Wachovia's insured depository subsidiaries also has consulted with the appropriate supervisors of the sub- received either "outstanding" or "satisfactory" ratings at sidiary insured depository institutions, and has carefully the most recent examinations of their CRA performance.41 evaluated information submitted by First Union and Wachovia Bank, Winston-Salem, North Carolina, which is Wachovia about the CRA performance of these institutions Wachovia's lead bank and now represents approximately since the dates of their most recent CRA performance 93 percent of the total consolidated assets controlled by evaluations.37 Wachovia, received an "outstanding" rating at its most All of First Union's subsidiary banks received ratings of recent CRA performance evaluation by the OCC, as of "satisfactory" or better at the most recent examinations of June 1997 ("1997 Wachovia Bank Evaluation"). their CRA performance.38 In particular, First Union's lead Examiners noted no evidence of prohibited discriminabank, First Union National Bank, Charlotte, North Caro- tion or other illegal credit practices at any of the insured lina ("FUNB"), which now accounts for approximately 91 depository institutions involved in this proposal and found percent of the total consolidated assets of First Union, no substantive violations of the fair lending laws. Examinreceived an "outstanding" rating at its most recent CRA ers also reviewed the assessment areas delineated by the insured depository subsidiaries of First Union and Wachovia and did not report that these assessment areas were unrea- 35. Interagency Questions and Answers Regarding Community Re- sonable or reflected an arbitrary exclusion of LMI areas. investment., 65 Federal Register 25,088 and 25,107 (2000) ("Interagency Questions and Answers"). C. First Union's CRA Performance Record 36. In connection with the First Union-CoreStates transaction, First Union entered into agreements with a number of community organiza- CRA Record of FUNB. tions, including organizations representing specific Pennsylvania communities served by CoreStates and First Union banks. Two comment- Lending. The 1997 FUNB Evaluation reported that ers on the current proposal have criticized provisions in certain of FUNB and its affiliates originated $1.2 billion of HMDAthese agreements that they believe severely restrict the ability of community organizations and their members to protest applications by First Union. In the course of its review of the First Union-CoreStates proposal, the Board considered provisions of an agreement between 39. At the time of the 1997 FUNB Evaluation, FUNB was named First Union and a Pennsylvania community organization that First First Union National Bank of North Carolina and primarily served Union stated were representative of provisions governing protests by communities in North Carolina. After the 1997 FUNB Evaluation, but organizations with an agreement with First Union. First Union con- before First Union's merger with CoreStates, First Union merged tended that such provisions do not limit the ability of a party to an almost all of its subsidiary banks with and into FUNB. As the Board agreement to comment to a federal banking agency in the examination has noted previously, before that consolidation, banks accounting for process or as part of a CRA evaluation, or to include comments in more than 88 percent of First Union's total banking assets had First Union's public CRA file. In addition, First Union asserted that received "outstanding" ratings from their primary federal supervisors the provisions do not limit a party's ability to comment on applica- at their most recent CRA performance examinations, and First Union's tions involving the acquisition of a bank or branch in the party's home other banks had received "satisfactory" ratings from their primary state, or restrict the party's ability to protest any application if First federal supervisors at their most recent CRA performance examina- Union is not in substantial compliance with the agreement. The Board tions. See First Union Corporation, 84 Federal Reserve Bulletin 489 is not a party to such agreements, which are private matters between (1998). In 1998, CoreStates Bank, N.A., Philadelphia, Pennsylvania, the parties to such agreements, and does not have the statutory and CoreStates Bank of Delaware, N.A., Wilmington, Delaware, the authority to enforce or to dissolve agreements between private parties. subsidiary banks of CoreStates, were consolidated with and into Moreover, as noted above, the Board has received substantial com- FUNB. Before their consolidation into FUNB, CoreStates Bank, N.A., ment from the public on this proposal. had received an "outstanding" CRA performance rating from the 37. Two commenters asserted that the CRA evaluations of the lead OCC, as of September 1997, and CoreStates Bank of Delaware, N.A. subsidiary banks of First Union and Wachovia are outdated because had received a "satisfactory" CRA performance rating from the OCC, each was conducted in 1997. In keeping with the guidance in the as of August 1997. Interagency Questions and Answers and the Board's precedent, and as 40. In June 2000, FUBDE was merged with and into First Union explained more fully below, the Board has also considered extensive Home Equity Bank, N.A., Charlotte, North Carolina ("FUHEB"), and information submitted by First Union and Wachovia regarding the the resulting bank was renamed First Union National Bank of Delarecord of CRA performance of the subsidiary insured depository ware. FUHEB also had received a "satisfactory" CRA performance institutions of each since the previous CRA evaluations. rating from the OCC, as of May 1997. 38. First Union Direct Bank, N.A., Augusta, Georgia ("Direct 41. Republic Security Bank ("Republic") received an "outstand- Bank"), is a limited-purpose credit card bank that has not been ing" rating at its most recent CRA performance evaluation by the examined for CRA performance since it opened for business in June Federal Reserve Bank of Atlanta in February 1999. Wachovia ac- 1997. First Union sold its credit card portfolio in the third quarter of quired Republic in March 2001. First National Bank of Atlanta 2000, and has indicated its expectation that Direct Bank will qualify ("FNBA") received a "satisfactory" rating at its most recent CRA for treatment as a special purpose bank for purposes of the CRA. See performance evaluation by the OCC in June 1997. In addition, Atlan- 12 C.F.R. 25.11(b)(3). First Union Trust Co., N.A., Wilmington, Del- tic received an "outstanding" rating at its most recent CRA perforaware, is a trust company and, therefore, is currently treated as a mance evaluation by the Office of Thrift Supervision in March 2001 special purpose bank for purposes of the CRA. ("2001 Atlantic Evaluation"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 691 related loans in FUNB's assessment areas during the pe- Loan, the Neighborhood Development Mortgage, and the riod covered by the evaluation.42 Examiners stated that the Community Partnership Mortgage, all mentioned in the geographic distribution of mortgage lending by FUNB and 1997 FUNB Evaluation. First Union's other two propriits affiliates reflected satisfactory penetration in each of etary affordable mortgage products involved partnerships FUNB's assessment areas. In 1995, FUNB and its affiliates between First Union and three nonprofit organizations to originated 12 percent of their HMDA-related loans in LMI originate home mortgages in economically underserved census tracts, which compared favorably with the areas.45 First Union also has stated that in its assessment 12.7 percent of originations for such loan products by all area in 2000, it originated more than $395 million in FHA lenders in LMI census tracts. In the twelve-month period loans and more than $94 million in VA loans. ending October 31, 1996, FUNB and its affiliates origi- In connection with the 1997 Evaluation, examiners noted nated 16 percent of their HMDA-related loans in LMI that FUNB engaged in lending to small businesses, includcensus tracts. ing businesses in LMI census tracts.46 As of October 1996, First Union has further improved its performance since FUNB had originated 18 percent of its loans to small the 1997 FUNB Evaluation. The current geographic distri- businesses, totaling $42 million, in LMI census tracts. bution of First Union's mortgage lending reflects a favor- From January 1995 through October 1996, the bank also able degree of penetration in its assessment areas. In 2000, made approximately $7 million in loans through programs First Union originated more than 74,900 HMDA-related sponsored by the Small Business Administration ("SBA"). loans, of which 17.2 percent were in LMI census tracts, In 2000, First Union originated more than 29,900 small and 34.2 percent were made to LMI borrowers. By compar- business loans in its assessment area, and 17.8 percent of ison, of all HMDA-related loans originated in 2000 in First these loans were made to businesses in LMI census tracts.47 Union's assessment areas by all lenders, 13.1 percent were By comparison, 15.9 percent of all small business loans originated in LMI areas and 31.9 percent were made to originated in First Union's assessment areas by all lenders LMI borrowers.43 in 2000 were in LMI areas. First Union has stated that it In the 1997 FUNB Evaluation, Examiners reported that also offers loans secured by residential property to small FUNB offered several proprietary programs, including its business owners otherwise lacking collateral, and that from Affordable Home Mortgage Loan and its Neighborhood 1998 through 2000, it originated almost 5,400 such loans, Development Mortgage, which featured flexible mortgage totaling more than $1.16 billion. First Union also has terms for LMI borrowers. Examiners also cited FUNB's represented that it originated $245 million in SBA loans Community Partnership Mortgage, under which the bank during the year 2000. offered affordable mortgage loans in conjunction with non- Community development lending by FUNB during the profit organizations. Moreover, FUNB participated in period covered by the 1997 FUNB Evaluation totaled government-sponsored affordable housing programs, and 78 projects, supporting affordable housing efforts, small during the evaluation period made mortgage loans totaling business loan pools, and economic rehabilitation programs $52.6 million through programs sponsored by the Federal for depressed urban areas, that represented approximately Housing Administration ("FHA"), the Veterans Adminis- $31 million in loans. These activities included a tration ("VA"), the Federal National Mortgage Association $2.6 million loan to the East Carolina Community Devel- ("Fannie Mae"), and the United States Department of opment Corporation to construct a 44-unit apartment com- Housing and Urban Development ("HUD"). plex for the elderly in Morehead, North Carolina, and a First Union has represented that in 1999 and 2000, its $5 million commitment to the Charlotte-Mecklenburg mortgage loan originations through its five proprietary Housing Partnership for development of affordable housing affordable home mortgage loan products totaled $1.6 billion 44 These products included the Affordable Mortgage iaries, FUNB and First Union Mortgage Corporation, Charlotte, North 42. The evaluation covered the period from January 1, 1995 through Carolina, originated 97 percent of these refinancing loans. First Union October 31, 1996. In this context, "HMDA-related loans" includes has stated that this distribution of refinancing loans among First Union home purchase mortgage loans, home improvement loans, and refi- subsidiaries for African Americans corresponds to the distributions of nancings of such loans. loan refinancings among First Union subsidiaries for nonminorities 43. One commenter criticized First Union's level of mortgage and for Hispanics. lending in 1999 to Hispanics in the Charlotte MSA. Hispanics ac- 45. One commenter objected to First Union's decision to curtail or counted for 0.8 percent of the population of the Charlotte MSA as of discontinue its participation in certain specific affordable mortgage 1990. Data show that First Union originated 27 HMDA-related loans lending programs in First Union's assessment areas in the Northeast. to Hispanics in the Charlotte MSA in 1999 and 33 such loans in 2000. Although the Board has recognized that banks help serve the banking These 60 loans accounted for 0.9 percent of all HMDA-related loans needs of communities by making a variety of products and services originated by First Union in the Charlotte MSA in 1999 and 2000. available, the CRA does not require an institution to participate in any 44. Several commenters contended that in 1999, First Union fo- specific loan programs or provide any specific types of products and cused on minority applicants for mortgage loan refininancings for services in its assessment area. subprime loans by FUHEB, rather than granting such applicants prime 46. In this context, "loans to small businesses" means loans to loans through other First Union subsidiaries. First Union has repre- businesses with gross annual revenues of $1 million or less. A "small sented that in 1999, it originated nearly 4500 mortgage loan refinanc- business loan" means a loan in an amount of $1 million or less. ings to African Americans, of which FUHEB originated slightly more 47. One commenter criticized First Union's record of originating that 3 percent. First Union has indicated that its prime lending subsid- small business loans in low-income areas in New York and Delaware. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

692 Federal Reserve Bulletin • October 2001 for LMI households in the City of Charlotte and Mecklen- Examiners also noted FUNB's involvement in programs burg County. to teach financial management skills to students in elemen- First Union has represented that its community develop- tary, middle, and high schools. First Union has represented ment lending in 1998, 1999, and 2000 totaled more than that its automated teller machines feature Spanish language $1.29 billion, more than 89 percent of which was in First instructions, and that it is in the process of developing a Union's designated assessment areas. In 1998, this lending comprehensive Spanish language financial website. included a $10 million credit to the National Consumer First Union has stated that in 2000, it launched its Cooperative Bank for an alfordable housing development Communities First initiative, which provides free computer loan pool and a $7.5 million construction loan for a library training to individuals who might otherwise remain unto be used primarily by LMI individuals in Nashville. In trained, and offers computer equipment to community 1999, these loans included a $8.5 million credit for renova- groups for use by low-income individuals and others. First tion of an office/warehouse building in an economically Union also has represented that its employees provided distressed area of the Washington, D.C., metropolitan area, more than 33,000 hours of service on the boards of commuand a $9.6 million loan to provide alfordable housing in nity organizations from 1998 through 2000. LMI neighborhoods in metropolitan Atlanta. First Union's community development loans in 2000 included a CRA Record of FUBDE. $7.6 million credit to a nonprofit organization in the Greensboro, North Carolina, area to provide community Lending. As part of the 1998 FUBDE Evaluation, examinservices to LMI families, and a S5 million loan to a ers rated the lending activities of FUBDE "low satisfactoprovider of Head Start and Early Head Start services in the ry."30 Examiners reported that FUBDE and its affiliates Allentown, Pennsylvania, area. made $17.6 million in HMDA-related loans in FUBDE's Investment. First Union has reported that its qualified assessment area during the evaluation period and found community development investments for the period Janu- that the distribution of these loans reflected adequate geoary 1, 1997, through September 30, 2000, totaled more graphic penetration in the assessment area.51 Examiners than $1 billion. First Union has represented further that noted that 8.8 percent of these loans were made to borrowlow-income housing tax credits accounted for almost ers in LMI tracts, a percentage somewhat lower than the $720 million of this total and led to the creation of more percentage of loans that all lenders made in the assessment than 24,000 housing units. First Union also has stated that area in 1996 and 1997.S2 Examiners also stated that from its direct investments during this period have totaled $144 million and include investments in minority-owned banks and institutions certified by the Department of the minimizing adverse effects on the residents of communities affected Treasury as Community Development Financial Institutions. by a closure. Wachovia's policy requires that, before a final decision is Service. Examiners reported that FUNB provided bank- made to close a branch, management must conduct an impact study to ing services to all segments of its assessment area, noting assess a closure's likely effects on individuals living and working in the branch's community. The policy requires the impact study to that approximately 25 percent of FUNB's 237 branches consider customer patterns, the proximity of other Wachovia branches, were in LMI census tracts.48 During the evaluation period, and alternative methods for delivery of banking services. FUNB closed twenty-five branches, including five in LMI As noted, the most recent CRA performance evaluations of First census tracts, and examiners concluded that these closures Union's and Wachovia's insured subsidiary depository institutions have each concluded that the institutions' records of opening and had not adversely affected the level of services available in closing offices have not adversely a U.S.C. § 1831 r-1 affected the level LMI areas.49 of services available in LMI neighborhoods in the institutions' local communities. The Board notes that the appropriate federal institutions" local communities. The Board also has considered that federal 48. One commenter contended that the level of physical appearance law requires an insured depository institution to provide notice to the of, and services provided in, First Union branches in predominantly public and to the appropriate federal supervisory agency before closminority neighborhoods was not equivalent to that of First Union ing a branch. See 12 U.S.C. § 1831 r-1. The Board notes that the branches in predominantly nonminority neighborhoods. In the 1997 appropriate federal supervisory for each of New Wachovia's subsid- FUNB Evaluation, examiners concluded that FUNB provided banking iary banks will, in the course of conducting CRA performance examiservices to all segments of its assessment areas. nations, continue to review the branch closing record of these institu- 49. Four commenters expressed concern about the effect of possible tions. branch closings that might result from this proposal. One of these 50. Although FUBDE received a rating of "low satisfactory" under commenters asserted that the record of recent branch closures in North the lending test in connection with the 1998 FUBDE Evaluation, Carolina by First Union and Wachovia should cause the Board to examiners assigned it an overall CRA rating of "satisfactory." The carefully consider the likelihood of future branch closures. First Union CRA regulations of the federal banking agencies require that, in has stated that it has not completed its analysis to determine which assigning a rating to the institution's overall performance under the branches, if any, may be designated for closure or consolidation in CRA. examiners consider the institution's performance under each of connection with the acquisition of Wachovia, and that consolidation of the three component tests. See, e.g., 12C.F.R. 25.28(a). As noted the current branch networks of the insured subsidiary depository below, FUBDE received "high satisfactory" ratings on the other institutions of First Union and Wachovia would not begin before components of its CRA performance evaluation. November 2002. 51. The 1998 FUBDE Evaluation period was from January 1. 1996, The Board has reviewed the branch closing policies of First Union through September 30, 1998. and Wachovia. First Union's policy requires that the company con- 52. In the first nine months of 1998, FUBDE and its affiliates made sider possible alternatives to financial center closings, including ad- 35.6 percent of their HMDA loans in FUBDE's assessment area to justment of hours, services, and facilities, and examine methods of LMI borrowers, and this ratio compared favorably with the percent- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 693 January 1996 through December 22, 1998, FUBDE origi- Examiners also noted that FUBDE provided financial semnated $16.9 million in loans under First Union's propri- inars and counseling to firs-time homebuyers in LMI areas, etary affordable mortgage programs. and that FUBDE employees served on the boards of four Data indicate that from 1998 through 2000, First Union local nonprofit organizations involved in community develoriginated more than 2,800 HMDA-related loans in its opment activities. assessment area in Delaware, and of these, 43.4 percent were to LMI borrowers and 11.6 percent were made in D. Wachovia's CRA Performance Record LMI census tracts. By comparison, of the more than 71,200 HMDA-related loans made in First Union's assessment CRA Record of Wachovia Bank. area in Delaware in 1998 through 2000, 39 percent were to LMI borrowers and 10.8 percent were in LMI census Lending. The 1997 Wachovia Bank Evaluation stated tracts. that Wachovia maintained a good and increasing level of In connection with the 1998 FUBDE Evaluation, exam- home purchase and home improvement lending in Wachoiners noted that the percentage of loans to small businesses via Bank's assessment areas during the evaluation period.53 had increased significantly during the evaluation period. Examiners described as "very good" or "excellent" the Examiners found that 53.6 percent of FUBDE's business distribution of Wachovia's HMDA-related loans to borrowlending during the evaluation period was to small busi- ers in low-income census tracts during the evaluation penesses. Examiners also reported that more than 68 percent riod, and also reported that Wachovia's other HMDAof the small business loans that FUBDE extended during related lending statistics were reasonable. the evaluation period were in amounts of $100,000 or less. Since that examination, Wachovia has represented that it FUBDE also originated 49 SBA loans, totaling $8.2 mil- originated almost 58,700 HMDA-related loans from 1998 lion. through 2000, totaling more than $8.6 billion. Of these Data indicate that from 1998 through 2000, First Union loans, 9.7 percent were secured by properties in LMI originated almost 1,130 small business loans in its assess- census tracts and 25.8 percent were extended to LMI ment area in Delaware, and of these, approximately borrowers. 24 percent were to businesses in LMI census tracts. By The 1997 Wachovia Bank Evaluation noted that Wachocomparison, of the more than 27,230 small business loans via offered special types of loans with terms modified to by all lenders in First Union's assessment area in Delaware meet community credit needs. Wachovia made some of in 1998 through 2000, approximately 14 percent were in these loans under its Neighborhood Revitalization Program LMI census tracts. ("NRP"), which was open to applicants with 70 percent or The 1998 FUBDE Evaluation also concluded that less of HUD median family income, and required lower FUBDE sustained an adequate level of community devel- down payments and permitted higher debt-to-income ratios opment lending. FUBDE's qualified community develop- than conventional home mortgage loans.54 During the evalment lending during the evaluation period totaled uation period, Wachovia's NRP loans in North Carolina, $3.96 million, which included a $1.5 million loan commit- South Carolina, and Georgia totaled $164 million.55 In the ment to a community development financial institution, 1997 evaluation, examiners also described Wachovia as an and a $1.2 million commitment to a community develop- active participant in government loan programs, noting that ment corporation to finance construction of affordable mul- Wachovia had originated more than $97 million in FHA tifamily housing in Delaware. loans and more than $129 million in VA loans during the Investment. FUBDE received a rating of "high satisfac- examination period. Examiners reported that Wachovia tory" for its qualified investments during the evaluation also participated in loan programs of Fannie Mae, the period, which totaled slightly over $2 million. Examiners North Carolina Housing Finance Authority, and the Farmreported that FUBDE had made grants to community orga- ers Home Administration. nizations that serve community development purposes and Information from Wachovia indicates that the institution noted FUBDE's $1.95 million equity fund commitment originated $186 million in NRP loans from January 1999 with the Delaware Community Investment Corporation, an through March 22, 2001. Wachovia has represented that it entity which had as of the date of the evaluation indirectly continues to participate in Fannie Mae, FHA, and VA funded construction of 723 units of affordable rental hous- lending programs and that from 1998 through 2000, it ing in Delaware. originated more than $125 million in FHA loans and more Service. Examiners rated FUBDE "high satisfactory" under the service test. The evaluation reported that 21 percent of FUBDE's 24 branches were in LMI census 53. The 1997 Wachovia Bank Evaluation covered 1995 and 1996. tracts, and that the closing of one branch and the consolida- 54. HUD median family income refers to the median family income tion of two other branches did not appear to have adversely for states, metropolitan portions of states, and nonmetropolitan poraffected accessibility in LMI areas or for LMI individuals. tions of states, as calculated by the HUD. 55. One commenter criticized Wachovia's record of lending to minority applicants in coastal regions of South Carolina. Wachovia has represented that in 1998, 1999, and 2000, it originated a total of ages of aggregate HMDA loans by all lenders to LMI borrowers in more than $35 million in home mortgage loans to minority borrowers 1996 and 1997. in metropolitan areas on the South Carolina coast. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

694 Federal Reserve Bulletin • October 2001 than $90 million in VA loans in its combined assessment ment corporation that has provided more than $230 million area. in financing to community development projects. Examiners stated that Wachovia Bank was an active Investment. Wachovia's community development investsmall business lender in 1996, making more than 17,000 ments during the evaluation period totaled $168 million, business loans in amounts of $100,000 or less, and making and included investments of $8.5 million in low-income more than 7,000 loans to small businesses. Wachovia has housing tax credits for affordable housing initiatives in represented that from 1998 through 2000, it originated North Carolina and South Carolina. Wachovia has stated more than 67,400 in small business loans, totaling more that its community development investments from 1998 than $6.1 billion.56 Approximately 18.2 percent of these through June 2001 total $197 million. loans by number were to businesses in LMI census tracts, Service. At the time of the 1997 evaluation, Wachovia and 63.4 percent by number were to small businesses. Bank maintained 462 branches in North Carolina, South The 1997 evaluation noted that Wachovia Bank offered Carolina, and Georgia, and 22 percent of these branches flexible underwriting criteria through its proprietary Small were in LMI census tracts. Examiners stated that Wachovia Business Loan Program, and, in 1996, originated loans Bank's record of opening and closing banking offices had totaling more than $12 million through this program in not adversely affected the level of services in LMI neigh- North Carolina, South Carolina, and Georgia. Examiners borhoods. Examiners reported that Wachovia closed 35 also reported that Wachovia Bank originated 164 SB A branches from January 1, 1996, through March 31, 1997, loans totaling more than $29.5 million during the evalua- including 12 in LMI census tracts. Management stated in tion period. Wachovia has represented that in 2000, it the course of the evaluation that some of the closures were originated $21.2 million of SBA loans, and was the largest attributable to consolidations that had resulted from acqui- SBA lender in North Carolina and South Carolina, the sitions. Examiners found that Wachovia Bank personnel second largest SBA lender in Virginia, and the fourth were properly following Wachovia's bank closure policy, largest SBA lender in Georgia. and that the branch closure analyses required by the policy Examiners described Wachovia's level of participation had resulted in the installation of automated teller main community development activities as exceptional. chines near the sites of several closed branches and the Wachovia's community development lending during the decision to continue to operate a branch in South Carolina. evaluation period in North Carolina, South Carolina, and Georgia totaled $308 million. Examiners cited Wachovia's CRA Record of FNBA. role as a leader of a consortium of Atlanta banks that formed a $20 million loan pool to finance multifamily FNBA engages primarily in issuing credit cards for Wachohousing for LMI individuals in the greater Atlanta area. via and has been designated as a limited purpose bank by Wachovia also provided more than $50 million in financ- the OCC for purposes of assessing its CRA performance.58 ing for affordable multifamily housing units in Georgia The performance test for limited purpose banks evaluates (Atlanta), and in North Carolina (Greensboro, Charlotte, an institution's record of community development lending, Carrboro, and Asheville), and funded $22.5 million in investments, and services in its designated assessment arredevelopment projects in Georgia (Cartersville and At- ea.59 lanta) and in seven South Carolina municipalities. Examiners characterized the level of FNBA's complex Wachovia has represented that its community develop- community development loans and investments as very ment lending for a three-year period ending in December good. During the evaluation period of March 1995 through 2000 totaled a little more than $2 billion.57 In 1997, June 1997, FNBA made or committed to make community Wachovia established a proprietary community develop- development loans and investments totaling approximately $3.1 million, which examiners noted was equivalent to 33 percent of FNBA's total net income for 1995 and 1996. 56. One commenter asserted that First Union and Wachovia have FNBA made a number of these community development not adequately addressed the needs of disadvantaged rural areas for agricultural credit. Data show that in 2000, First Union originated 353 investments through the Delaware Community Investment farm loans of $500,000 or less ("small loans to farms") in its Corporation ("DCIC"), a multibank community developassessment area, of which 4.2 percent were in LMI census tracts. In ment corporation initiating affordable housing projects in 2000, Wachovia originated 347 small loans to farms in its assessment FNBA's assessment area. Examiners noted that FNBA's area, of which 19 percent were in LMI census tracts. First Union and financial commitment to DCIC compared favorably with Wachovia represent that they participate in the U.S. Department of Agriculture's Farm Services Agency programs, which provide exten- financial commitments by other limited purpose banks sions of credit to small farmers otherwise unable to qualify for participating in DCIC. conventional loans. First Union and Wachovia also state that they currently provide funds in conjunction with a U.S. Department of Agriculture grant to assist an organization of African-American farmers establish a cooperative that would facilitate processing of agricultural commodities into market-ready products. 58. A "limited purpose bank" is a bank that (i) offers only a narrow 57. One commenter criticized the level of Wachovia's community product line, such as credit card loans, to a regional or broader market development efforts in the Horry County area of South Carolina. and (ii) has been designated as a limited purpose bank by the appropri- Wachovia has represented that it provides technical assistance and ate federal banking agency. 12C.F.R. 25.12(o). In June 1996, the funding to several community development corporations, housing OCC designated FNBA as a limited purpose bank. authorities, and nonprofit organizations in this area. 59. 12C.F.R. 25.25(a) & (e). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 695 FNBA's community development lending during the Examiners stated that Atlantic offered a number of credit evaluation period totaled more than $1.3 million, which products designed to meet the credit needs of LMI individincluded $629,000 in loans and loan commitments to a uals. During the evaluation period of January 1999 through DCIC loan pool to develop more than 1000 units of afford- March 2001, Atlantic originated 56 mortgage loans totalable housing. Examiners also noted a $350,000 commit- ing more than $4.8 million through its Atlantic Advantage ment by FNBA to a DCIC loan pool to rehabilitate com- program.60 Atlantic also participated in the First-Time mercial properties in economically distressed areas targeted Homebuyer's Program of the Federal Home Loan Bank of for revitalization. Atlanta, and from January 2000 through April 12, 2001, FNBA's community development investments during the originated or committed to originate 14 loans totaling more evaluation period totaled more than $1.7 million. Examin- than $ 1 million through this program. In addition, examiners noted that FNBA committed to invest $450,000 in a ers noted Atlantic's participation in loan guarantee pro- DCIC low-income housing tax credit investment fund to grams through a rural housing program, which featured create 289 affordable housing units. FNBA also maintained flexible debt-to-income ratios and did not require downpaya $100,000 deposit in a credit union primarily serving LMI ments. individuals and purchased $935,000 in Delaware mortgage Examiners reported that Atlantic originated six commurevenue bonds that funded 400 mortgages to LMI first-time nity development loans during the evaluation period, totalhomebuyers. In addition, FNBA provided $259,000 to ing more than $2.9 million. Five of the loans financed the various community development organizations. purchase or construction of 25 units of rental housing Examiners reported that FNBA employees served on affordable to LMI individuals. The remaining loan financed committees and boards of directors of a number of organi- the renovation of an office building which was in an zations involved in community development efforts. FNBA economically underserved portion of Atlantic's assessment also was a founding contributor to a University of Dela- area, to house several minority-owned enterprises and the ware training program for individuals involved in commu- Community Development Corporation of Hilton Head, nity development and provided funding and technical assis- South Carolina ("Hilton Head CDC"). tance to a foundation developing prototype rehabilitation Investment. Examiners rated Atlantic "outstanding" unplans for homes in FBNA's assessment area. der the investment test and described its level of qualified Wachovia has represented that FBNA funded a total of investments as highly responsive to the community develmore than $943,000 in community development loans and opment needs of LMI individuals. In December 1999, investments through DCIC from 1998 through 2000. Atlantic purchased a $1 million housing revenue bond Wachovia has stated that in 1998, FBNA committed to from a South Carolina state agency. Atlantic also made lend or invest $500,000 in a DCIC-sponsored urban re- more than $73,000 in financial contributions in 1999 and newal loan fund intended to provide short-term financing 2000 to community organizations that provided affordable for property acquisition and site control for urban renewal housing initiatives and social services to LMI individuals. and revitalization projects in Delaware. Wachovia also has More than $38,000 of these contributions were made purrepresented that in 2000, FBNA committed to invest suant to Atlantic's Awards for Community Excellence $500,000 in a low-income housing tax credit equity fund program, an initiative examiners described as innovative. sponsored by DCIC. Sen'ice. Atlantic received a rating of "outstanding" Wachovia has noted that FBNA maintained a $100,000 under the service test based on what examiners considered deposit in a Wilmington community development credit to be a very high level of community development serunion from 1998 through 2000. In addition, Wachovia has vices. Since its previous evaluation, Atlantic had hired a stated FBNA made $371,000 during 1998, 1999, and 2000. special affordable housing loan officer, who provides credit Wochovia also has indicated that FBNA employees con- management and individual budgeting counseling to LMI tinue to serve on committee and boards of directors of applicants to assist them in the mortgage application proseveral organizations involved in community development. cess. Employees of Atlantic participated in first-time homebuyer seminars offered in conjunction with the Hilton Head CDC and offered financial education and small business CRA Record of Atlantic. education classes. Examiners also noted the service of Atlantic executives on the boards of a number of commu- Lending. Atlantic reported assets of $496.9 million as of nity organizations, including several dealing with afford- March 31, 2001. In the 2001 Atlantic Evaluation, examin- able housing or community development matters. ers rated the lending activities of Atlantic "high satisfactory." Examiners noted that 1-4 unit residential mortgages represented 75 percent of Atlantic's total assets as of December 31, 2000, compared with 47.3 percent of assets for Atlantic's peer group. In 2000, Atlantic originated 13.2 percent of its HMDA-related loans in its assessment 60. The Atlantic Advantage product features a minimum downpayment of 3 percent and a flexible total debt-to-income ratio of area to moderate-income borrowers, although moderate- 43 percent, and permits the borrower to borrow half of a downpayincome families accounted for an estimated 12.8 percent of ment and closing costs from a relative or government housing assisall families in this area. tance program. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

696 Federal Reserve Bulletin • October 2001 E. HMDA Data and Fair Lending Record lower than the percentage for lenders in the aggregate in each of the five states examined. The percentage of Wacho- The Board also has carefully considered the lending via's HMDA-related loans to African Americans in 2000 records of First Union and Wachovia in light of comments exceeded the percentages for lenders in the aggregate only on 1999 HMDA data reported by the organizations' subsid- for Virginia, and the percentage to Hispanics was lower iaries.61 Data indicate that the number of applications for than the percentages for lenders in the aggregate in all five HMDA-related loans has decreased from 1998 to 2000 for states. Wachovia's denial disparity ratios in 2000 for Afri- First Union and Wachovia, as it has for lenders in the can Americans and for Hispanics were higher than the aggregate.62 denial disparity ratios of lenders in the aggregate in all five Data indicate that in 2000, in 11 of the 13 states in its states. assessment area, First Union originated a higher percent- The Board is concerned when the record of an institution age of HMDA-related loans in LMI areas and to LMI indicates disparities in lending and believes that all banks borrowers than did lenders in the aggregate. However, the are obligated to ensure that their lending practices are percentages of First Union's HMDA-related loans to Afri- based on criteria that ensure not only safe and sound can Americans in 2000 were lower than the percentages for lending but also equal access to credit by creditworthy lenders in the aggregate in 10 of the 13 states in First applicants regardless of their race or income level.64 The Union's assessment area, and the percentages to Hispanics Board recognizes, however, that HMDA data alone provide were lower than the percentages for lenders in the aggre- an incomplete measure of an institution's lending in its gate in 8 of the 13 states. First Union's denial disparity community because these data cover only a few categories ratios for African Americans in 2000 were lower than the of housing-related lending. HMDA data, moreover, prodenial disparity ratios of lenders in the aggregate in 7 of the vide only limited information about the covered loans.65 13 states, and were almost identical in two others.63 First HMDA data, therefore, have limitations that make them an Union's denial disparity ratios for Hispanics in 2000 were inadequate basis, absent other information, for concluding equal to or lower than the denial disparity ratios of lenders that an institution has not assisted adequately in meeting its in the aggregates in 5 of the 13 states. community's credit needs or has engaged in illegal lending Year 2000 HMDA data indicate that the percentage of discrimination. Wachovia's HMDA-related loans to LMI borrowers was Because of the limitations of HMDA data, the Board has considered these data carefully in light of other information. As discussed, examiners found the insured depository 61. Commenters criticized First Union's record of home mortgage institutions involved in this transaction to be in compliance lending to minority applicants in 28 MSAs in First Union's assesswith fair lending laws at the most recent examinations of ment area and in five other MSAs. Commenters also criticized Wachovia's record of home mortgage lending to minorities in five MSAs in these institutions and discovered no evidence of prohibited Wachovia's assessment area. A commenter criticized First Union's discrimination or other illegal credit practices.66 In conloan denial rate for LMI borrowers in four MSAs in First Union's assessment area and in one MSA outside the assessment area. In addition to considering the analysis provided by commenters, the Board performed a comprehensive analysis of First Union's HMDA 64. Two commenters alleged that First Union has indirectly supdata for the years 1998, 1999, and 2000 in each of the states in which ported predatory lending through its business relationships with three it operates as well as the home MSAs of First Union, Wachovia, and subprime lenders that the commenters characterized as predatory the former CoreStates. Specifically, the Board analyzed HMDA data lenders. First Union has stated that it provides warehouse lending for First Union's assessment areas in each of the 13 states in which it facilitates and other financing arrangements to subprime lenders, and maintains branches, including the District of Columbia, and in the that it underwrites securitizations of mortgage loans, including Charlotte, Philadelphia, and Winston-Salem MSAs. The Board also subprime loans. First Union has represented that its due diligence analyzed Wachovia's HMDA data for 1998, 1999, and 2000 on a before providing financing or underwriting a securitization includes state-by-state basis for Wachovia's assessment areas in five of the investigation of the lender's underwriting guidelines, loan processing seven states in which it maintains branches and in the Charlotte and procedures, and compliance programs to check that the lender's Winston-Salem MSAs. policies conform to consumer lending regulations. First Union has 62. Several commenters asserted that FUHEB did not adequately stated that it also typically conducts an on-site sampling of loans to collect or report data on the race of applicants for HMDA-related verify repayment ability and appraisal accuracy, and to check for loans. First Union has represented that in 2000, FUHEB received indicators of fraud. First Union has represented that neither it nor its more than 80,000 applications in 2000 for HMDA-related loans, and subsidiaries or affiliates have a role, formal or otherwise, in the that 75 percent of these applications were received by mail, telephone, lending practices or credit review processes of any unaffiliated lender. or the Internet. The Board notes that HMDA regulations do not 65. For example, the data do not account for the possibility that an require lenders to inquire about the race of individuals making mort- institution's outreach efforts may attract a larger proportion of margingage loan applications by telephone, nor are lenders required to report ally qualified applicants than other institutions attract and do not the race of applicants who apply for a mortgage loan by mail and do provide a basis for an independent assessment of whether an applicant not provide race information. See 12 C.F.R. Pt. 202, App. B. The who was denied credit was, in fact, creditworthy. Credit history Board also notes that the OCC has reviewed FUHEB's compliance problems and excessive debt levels relative to income (reasons most with data collection and reporting requirements under HMDA as part frequently cited for a credit denial) are not available from HMDA of the agency's periodic consumer compliance examinations of data. HMDA data also may be incomplete and may not identify all FUHEB, and will continue to do so in the future for First Union applicants with regard to income level, ethnicity, or other demo- National Bank of Delaware, which was formed by the June 2000 graphic factors. merger of FUBDE with and into FUHEB. 66. A Georgia State legislator commented that Wachovia actively 63. The denial disparity ratio compares the denial rate for minority opposed legislation intended to combat predatory lending. The contenloan applicants with the denial rate for nonminority applicants. tion contains no allegations of illegality or action that would affect the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 697 junction with the 1997 FUNB Evaluation, examiners re- relating to the convenience and needs factor, including the viewed a sample of more than 1000 HMDA-related appli- CRA performance records of the relevant depository instications received by First Union's mortgage company and tutions, are consistent with approval of the proposal.68 subsidiary banks in 1995 and did not detect any instances of racial discrimination. Examiners also sampled 350 of Nonbanking Activities First Union's automobile loan applications and did not detect any instances of gender discrimination. In conjunc- First Union also has filed notice under sections 4(c)(8) and tion with the 1997 Wachovia Bank Evaluation, examiners 4(j) of the BHC Act to acquire Atlantic and thereby engage reviewed a sample of approximately 250 HMDA-related in the activity of operating a savings association.69 New applications, and almost 400 applications for other types of Wachovia would engage through Atlantic in accepting loans, and detected no instances of disparate treatment or deposits and offering a full line of banking products, inillegal credit practices based on race or gender. cluding home mortgage loans.70 The Board has determined The record also indicates that First Union and Wachovia by regulation that the activity of owning, controlling, or have taken a number of affirmative steps to ensure compli- operating a savings association is permissible for a bank ance with fair lending laws. First Union has represented holding company, provided that the savings association that its fair lending program includes the use of logistic engages only in taking deposits, making loans, and engagregression analysis of lending data, review of policies and ing in other activities that are permissible for a bank procedures, testing by mystery customers, and regular holding company to conduct under section 4(c)(8) of the training of employees. First Union also has stated that it BHC Act. First Union has committed to operate Atlantic in established a subprime fair lending program to address accordance with the Board's rules. customer complaints, broker relationships and servicing In order to approve First Union's notice to acquire issues associated with First Union's subprime lending. Atlantic, the Board is required by section 4(j)(2)(A) of the Wachovia has represented that its fair lending compliance BHC Act to determine that the acquisition "can reasonably program features reviews of underwriting criteria, second be expected to produce benefits to the public . . . that analyses of rejected applications, regression modeling of outweigh possible adverse effects, such as undue concenportfolios, and ongoing training, among other strategies. tration of resources, decreased or unfair competition, con- The Board also has considered the HMDA data in light of flicts of interests, or unsound banking practices."71 First Union's and Wachovia's overall lending records, As part of its evaluation of these factors, the Board which demonstrate that the organizations' subsidiary banks considers the financial condition and managerial resources significantly assist the communities that they serve in meet- of the notificant, its subsidiaries, and the companies to be ing their credit needs, including LMI areas in those com- acquired, and the effect of the proposed transaction on munities. those resources. For the reasons discussed above and based on all the facts of record, the Board has concluded that F. Conclusion on Convenience and Needs Factor financial and managerial considerations are consistent with approval of the notice. In addition, as noted above, Atlantic The Board has carefully considered all facts of record, received a "satisfactory" performance rating from the OTS including the public comments received, responses to com- at its most recent CRA examination, as of January 1, 1999. ments, and reports of examinations of the CRA perfor- The Board also has considered the competitive effects of mance of the institutions involved, in reviewing the propos- the proposed acquisition of Atlantic by First Union. Atlanal's effect on the convenience and needs of the communities to be served by the combined organization.67 Based on all the facts of record and for the reasons dis- 68. Two commenters criticized the New Wachovia Community cussed above, the Board concludes that considerations Initiative and several commenters contended that First Union has not made adequate progress in fulfilling a pledge made in connection with the First Union-CoreStates transaction. The Board notes that the CRA requires that, in considering an acquisition proposal, the Board caresafety and soundness of the institutions involved in the proposal and is fully review the actual performance records of the relevant depository outside the limited statutory factors that the Board is authorized to institutions in helping to meet the credit needs of their communities. consider when reviewing an application under the BHC Act. See Neither the CRA nor the federal banking agencies' CRA regulations Western Bancshares, Inc., v. Board of Governors, 480 F.2d 749 (10th require depository institutions to make pledges concerning future Cir. 1973). performance under the CRA. The Board also notes that future activi- 67. Several commenters criticized the subprime lending practices of ties of New Wachovia's subsidiary banks will be reviewed by the Money Store and contended, among other things, that Money Store appropriate federal supervisors in future performance examinations, charged excessive interest rates and fees, particularly when lending to and that their CRA performance records will be considered by the low-income, minority, and elderly borrowers. Commenters also as- Board in any subsequent applications by New Wachovia to acquire a serted that a number of Money Store loans were originated in connec- depository institution. tion with builders who failed to provide home improvement services 69. As discussed above, First Union intends to use the postas contracted. HUD, the Department of Justice, and the Federal Trade transaction notice provisions of Regulation Y that apply to financial Commission have responsibility for reviewing compliance with the holding companies to acquire the remaining nonbanking companies fair lending laws of nondepository institutions like Money Store, and Wachovia controls under sections 4(c)(8) and 4(k) of Regulation Y. the Board has forwarded copies of commenters' assertions to those 70. Atlantic controls one subsidiary, Atlantic Mortgage Company of agencies. First Union has stated that Money Store stopped originating South Carolina, Inc., which is inactive. loans as of June 2000. 71. 12 U.S.C. § 1843(j)(2)(A). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

698 Federal Reserve Bulletin • October 2001 tic has its headquarters and two branches in the Beaufort Conclusion banking market, where it directly competes with First Union. Atlantic also has a loan production office in Based on the foregoing and after considering all the facts Charleston, where FUNB operates branches. The Board of record, the Board has determined that the application considered this presence in its analysis of the competitive and notices should be, and hereby are, approved.74 In effects of the transaction discussed above.72 reaching its conclusion, the Board has considered all the For the reasons discussed above, the Board has con- facts of record in light of the factors that it is required to cluded that the proposal, including First Union's acquisi- consider under the BHC Act and other applicable stattion of Atlantic, would not have any significantly adverse utes.75 The Board's approval specifically is conditioned on competitive effects in the Beaufort or Charleston markets, compliance by First Union with all the commitments made or in any other relevant banking market. Based on all the in connection with the application and notices, including facts of record, the Board, therefore, concludes that it is the branch divestiture commitments discussed in this order, unlikely that significantly adverse competitive effects and the conditions set forth in this order and the abovewould result from First Union's acquisition of Atlantic. noted Board regulations and orders. The Board's approval First Union has indicated that the combined strengths of of the nonbanking aspects of the proposal also is subject to First Union and Wachovia would create a stronger and all the conditions set forth in Regulation Y, including those more geographically diversified organization that could in sections 225.7 and 225.25(c) of Regulation Y (12 C.F.R. offer customers of both organizations a wider range of 225.7 and 225.25(c)), and the Board's authority to require products through a stronger and more efficient operational such modification or termination of the activities of a bank network. The Board has concluded that the ownership of Atlantic within the framework of Regulation Y and Board prece- 74. Several commenters requested that the Board hold a public dent is not likely to result in any significantly adverse meeting or hearing on the proposal. Section 3(b) of the BHC Act does effects, such as undue concentration of resources, de- not require the Board to hold a public hearing on an application unless creased or unfair competition, conflicts of interests, or the appropriate supervisory authority for the bank to be acquired makes a timely written recommendation of denial of the application. unsound banking practices, that would outweigh the public The Board has not received such a recommendation from the appropribenefits of the proposal, such as increased customer conveate supervisory authorities. Under its rules, the Board, in its discretion, nience and gains in efficiency. Accordingly, based on all also may hold a public meeting or hearing on a section 3 application the facts of record the Board has determined that the to acquire a bank if a meeting or hearing is necessary or appropriate to balance of public benefits the Board must consider under clarify factual issues related to the application and to provide an opportunity for testimony. 12 C.F.R. 225.16(e). Section 4 of the BHC section 4(j) of the BHC Act is favorable and consistent Act and the Board's rules thereunder provide for a hearing on a notice with approval of the notice. to acquire a nonbanking company if there are disputed issues of First Union also has provided notice under section 25A material fact that cannot be resolved in some other manner. 12 U.S.C. of the Federal Reserve Act and section 211.4 of the Board's § 1843(c)(8); 12 C.F.R. § 225.25(a). The Board has considered carefully the commenters' requests in light of all the facts of record. Regulation K (12 C.F.R. 211.4) of its intention to acquire The Board extended the comment period in this case to allow Wachovia International Banking Corporation, an inactive commenters additional time to submit comments. In the Board's view, Edge corporation controlled by Wachovia. In addition, commenters have had ample opportunity to submit their views, and First Union has given notice under section 4(c)(13) of the numerous commenters have submitted written comments that have BHC Act and section 211.5 of Regulation K (12 C.F.R. been considered carefully by the Board in acting on the proposal. The commenters' requests fail to demonstrate why their written comments 211.5) to acquire certain foreign investments held by do not present their views adequately. For these reasons, and based on Wachovia.73 The Board concludes that all the factors it is all the facts of record, the Board has determined that a public meeting required to consider under the Federal Reserve Act, the or hearing is not required or warranted in this case. Accordingly, the BHC Act, and the Board's Regulation K in connection requests for a public meeting or hearing on the proposal are denied. 75. Numerous commenters requested that the Board delay action or with this proposal are consistent with approval. extend the comment period on the proposal, and the Board extended the comment period for those commenters who requested extensions. The Board has accumulated a significant record in this case, including reports of examination, supervisory information, public reports and information, and considerable public comment. In the Board's view, for the reasons discussed previously, commenters have had ample opportunity to submit their views and, in fact, have provided substantial written submissions that have been considered carefully by the 72. For purposes of analyzing the competitive effects of the pro- Board in acting on the proposal. As noted above, the Board extended posal, the deposits of Atlantic were weighted at 100 percent in all the comment period in this case to allow commenters to provide relevant markets because it is a depository institution controlled by a additional comments. Moreover, the BHC Act and Regulation Y commercial banking organization. require the Board to act on proposals submitted under those provisions 73. These investments are in WSH Holdings, Ltd., Grand Cayman within certain time periods. 12 U.S.C. §§ 1842(b) and 1843(j)(l); Islands, Cayman Islands; and in Banco Wachovia, S.A., and Wachovia 12 C.F.R. 225.15(d) and 225.24(d). Based on a review of all the facts International Servicos Ltd., both in Sao Paolo, Brazil. First Union of record, the Board has concluded that the record in this case is intends to rely on the post-transaction notice procedures of Regulation sufficient to warrant Board action at this time and that a further delay Y that apply to financial holding companies to acquire Wachovia in considering the proposal, an additional extension of the comment International Securities, Limited, London, England, which Wachovia period, or a denial of the proposal on the grounds discussed above or currently holds under Regulation K. See 12 C.F.R. 225.86 and 225.87. for informational insufficiency is not warranted. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 699 holding company or any of its subsidiaries as the Board Miami- Broward and Dade Counties. finds necessary to ensure compliance with, and to prevent Ft. Lauderdale evasion of, the provisions of the BHC Act and the Board's Ocala Marion County and the town of Citrus regulations and orders issued thereunder. These commit- Springs in Citrus County. ments and conditions are deemed to be conditions imposed Orlando Orange, Osceola, and Seminole Counties; in writing by the Board in connection with its findings and the western half of Volusia County; and decision and, as such, may be enforced in proceedings the towns of Clermont and Groveland in under applicable law. Lake County. The acquisition of the subsidiary banks of Wachovia Tampa Bay Hernando, Hillsborough, Pasco, and Pinelmay not be consummated before the fifteenth calendar day las Counties. after the effective date of this order, and the proposal may West Palm Palm Beach County east of Loxahatchee not be consummated later than three months after the Beach and the towns of Indiantown, and Hobe effective date of this order, unless such period is extended Sound in Martin County. for good cause by the Board or by the Federal Reserve Bank of Richmond, acting pursuant to delegated authority. D. Georgia By order of the Board of Governors, effective August 13, 2001. Atlanta Bartow, Cherokee, Clayton, Cobb, Coweta, DeKalb, Douglas, Fayette, For- Voting for this action: Chairman Greenspan, Vice Chairman Fergu- syth, Fulton, Gwinnett, Henry, Newton, son, and Governors Kelley, Meyer, and Gramlich. Paulding, Rockdale, and Walton Counties; Hall County, excluding the town of Cler- ROBERT DEV. FRIERSON mont; and the towns of Auburn and Deputy Secretary of the Board Winder in Barrow County. Augusta Columbia, McDuffie, and Richmond (GA-SC) Counties in Georgia; and Aiken and Edgefield Counties in South Carolina. Appendix A Dal ton Murray and Whitfield Counties. Savannah Bryan, Chatham, and Effingham Counties. Banking Markets in which First Union and Wachovia Compete Directly E. North Carolina Asheville The Asheville RMA and the non-RMA A. Delaware portions of Buncombe and Henderson Counties. Wilmington New Castle County in Delaware and Cecil Burlington The Burlington RMA and the non-RMA (DE-MD) County in Maryland. portion of Alamance County. Charlotte- The Charlotte RMA and the non-RMA B. The District of Columbia Rock Hill portion of Carbarrus County in North (NC-SC) Carolina. Washington The Washington, D.C. Ranally Metro Area Dare Dare County. (DC-MD- ("RMA"); the non-Ranally Metro Area Durham- The Durham RMA and the non-RMA por- VA-WV) ("non-RMA") portions of Fauquier and Chapel Hill tions of Chatham, Durham, and Orange Loudon Counties in Virginia; Calvert, Counties. Charles, and St. Mary's Counties in Mary- Elizabeth City Camden, Pasquotank, and Perquimans land; and the independent cities of Alexan- Counties. dria, Fairfax, Falls Church, and Manassas, Fayetteville The Fayetteville RMA and the non-RMA all in Virginia; and Jefferson County, in portion of Cumberland County. West Virginia. Greensboro- The Greensboro-High Point RMA and the High Point non-RMA portions of the counties of Da- C. Florida vidson, excluding the portion in the Winston-Salem RMA, and Randolph. Brevard Brevard County. Greenville The Greenville RMA and the non-RMA Fort Myers Lee County, excluding the towns on portion of Pitt County. Gasparilla Island; and the town of Im- Haywood Haywood County, excluding the portion in mokalee in Collier County. the Asheville RMA. Fort Pierce St. Lucie and Martin Counties, excluding Hickory The Hickory RMA and the non-RMA porthe towns of Indiantown and Hobe Sound tion of Alexander, Burke, and Caldwell in Martin County. Counties. Gainesville Alachua, Gilchrist, and Levy Counties. Jackson Jackson County. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

700 Federal Reserve Bulletin • October 2001 Martinsville The Martinsville RMA; and the non-RMA Bedford Bedford County, excluding the portions in (NC-VA) portion of Henry County and the indepen- the Lynchburg and Roanoke RMAs; and dent city of Martinsville, both in Virginia. the independent city of Bedford. Monroe Anson County and Union County, exclud- Charlottesville The Charlottesville RMA; the independent ing the portion of Union County located in city of Charlottesville; the non-RMA porthe Charlotte RMA. tion of Albemarle County; and Fluvanna, Moore Moore County. Greene, and Nelson Counties. Raleigh The Raleigh RMA and the non-RMA por- Fredericksburg Caroline, King George, Spotsylvania, and tions of Franklin, Johnston, and Wake Stafford Counties, excluding the portion of Counties; and Harnett County, excluding Stafford County in the Washington, D.C. the portion in the Fayetteville RMA. RMA; the independent city of Fredericks- Robeson Robeson County, excluding the portion in burg; and the towns of Colonial Beach, the Fayetteville RMA. Leedstown, Oak Grove, and Potomac Beach in Westmoreland County. Rocky Mount The Rocky Mount RMA and the non- Harrisonburg The independent city of Harrisonburg and RMA portions of Edgecombe, Nash and Rockingham County. Wilson Counties. Newport The Newport News-Hampton RMA; the Salisbury The Salisbury RMA and the non-RMA News- non-RMA portions of James City and portion of Rowan County, excluding the Hampton Matthews Counties; and the independent portion in the Charlotte RMA. cities of Hampton, Newport News, Poquo- Stanly Stanly County. son, and Williamsburg. Statesville Iredell County, excluding the portions in Norfolk- The Norfolk-Portsmouth RMA, the indethe Charlotte and Hickory RMAs. Portsmouth pendent Portsmouth cities of Chesapeake, Wilkes Wilkes County. (VA-NC) Norfolk, Portsmouth, Suffolk, and Virginia Wilmington The Wilmington RMA; Pender County; Beach, all in Virginia; and Currituck Brunswick County, excluding the portion County in North Carolina. in the Myrtle Beach-Conway RMA. Pulaski- Montgomery and Pulaski Counties and the Winston- The Winston-Salem RMA and the non- Radford independent city of Radford. Salem RMA portions of Davie and Stokes Coun- Richmond The Richmond RMA, the non-RMA porties. tions of Chesterfield, Dinwiddie, Goochland, Hanover, Henrico, Powhatan and F. South Carolina Prince George Counties; the independent cities of Colonial Heights, Hopewell, Pe- Beaufort Beaufort County. tersburg, and Richmond; and Charles City, Charleston The Charleston RMA and the non-RMA King and Queen, King William, and New portions of Berkeley and Charleston Coun- Kent Counties. ties. Roanoke The Roanoke RMA; the non-RMA por- Columbia The Columbia RMA and the non-RMA tions Botetourt and Roanoke Counties; the portion of Lexington and Richland Counindependent cities of Roanoke and Salem; ties. and the town of Boones Mill in Franklin Florence The Florence RMA and the non-RMA por- County. tion of Florence Counties. Smyth Smyth County. Georgetown Georgetown County, excluding the portion Winchester The independent city of Winchester, in the Myrtle Beach-Conway RMA. (VA-WV) Clarke and Frederick Counties, and the Greenville The Greenville RMA and the non-RMA town of Strasburg in Shenandoah County, portion of Greenville and Pickens Coun- all in Virginia; and Hampshire County in ties. West Virginia. Greenwood The Greenwood RMA and the non-RMA portion of Greenwood County. Appendix B Myrtle Beach- The Myrtle Beach-Conway RMA and the Conway non-RMA portion of Horry County. Certain Banking Markets without Divestitures York York County, excluding portion in the Charlotte RMA. Delaware G. Virginia Wilmington First Union operates the eighth largest de- Abingdon Washington County, excluding the portion pository institution in the market, controlin the Johnson City-Kingsport-Bristol ling deposits of approximately $1 billion, RMA. representing 2.3 percent of market depos- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 701 its.1 Wachovia operates the thirtieth largest in the market, controlling deposits of depository institution in the market, $466 million, representing 14 percent of controlling deposits of approximately market deposits. The HHI would increase $477,000, representing less than 1 percent by 46 points to 1405. of market deposits. On consummation of Gainesville First Union operates the largest depository the proposal, New Wachovia would oper- institution in the market, controlling ate the eighth largest depository institution deposits of $470 million, representing in the market, controlling deposits of 23.3 percent of market deposits. Wachovia approximately $1 billion, representing operates the sixteenth largest depository 2.3 percent of market deposits. The HHI institution in the market, controlling dewould remain unchanged at 2390. posits of $22 million, representing 1.1 percent of market deposits. On consummation of the proposal, New Wachovia would op- Florida erate the largest depository institution in the market, controlling deposits of Brevard First Union operates the second largest deposi- $491 million, representing 24.4 percent of tory institution in the market, controlling market deposits. The HHI would increase deposits of $910 million representing by 50 points to 1321. 22.3 percent of market deposits. Wachovia Miami-Fort First Union operates the second largest operates the fifth largest depository institu- Lauderdale depository institution in the market, contion in the market, controlling deposits of trolling deposits of $9.1 billion, represent- $249 million, representing 6.1 percent of ing 15.9 percent of market deposits. market deposits. On consummation of the Wachovia operates the fourteenth largest proposal, New Wachovia would operate depository institution in the market, conthe largest depository institution in the trolling deposits of $940 million, repremarket, controlling deposits of $1.2 bilsenting 1.6 percent of market deposits. On lion, representing 28.4 percent of market consummation of the proposal, New deposits. The HHI would increase by Wachovia would operate the second larg- 272 points to 1752. est depository institution in the market, Fort Myers First Union operates the second largest controlling deposits of $10 billion, repredepository institution in the market, consenting 17.5 percent of market deposits. trolling deposits of $963 million, repre- The HHI would increase by 52 points to senting 16.8 percent of market deposits. 1096. Wachovia operates the eighteenth largest Ocala First Union operates the fourth largest dedepository institution in the market, conpository institution in the market, controltrolling deposits of $26 million, representling deposits of $230 million, representing ing less than 1 percent of market deposits. 8.8 percent of market deposits. Wachovia On consummation of the proposal, New operates the fifteenth largest depository in- Wachovia would operate the second largstitution in the market, controlling deposits est depository institution in the market, of $17 million, representing less than controlling deposits of $988 million, repre- 1 percent of market deposits. On consumsenting 17.2 percent of market deposits. mation of the proposal, New Wachovia The HHI would increase by 15 points to would operate the fourth largest depository 1476. institution in the market, controlling Fort Pierce First Union operates the fourth largest dedeposits of $246 million, representing pository institution in the market, control- 9.5 percent of market deposits. The HHI ling deposits of $404 million, representing would increase by 12 points to 1398. 12.2 percent of market deposits. Wachovia Orlando First Union operates the third largest deoperates the tenth largest depository instipository institution in the market, controltution in the market, controlling deposits ling deposits of $2.1 billion, representing of $62 million, representing 1.9 percent of 14.4 percent of market deposits. Wachovia market deposits. On consummation of the operates the twelfth largest depository inproposal, New Wachovia would operate stitution in the market, controlling deposits the fourth largest depository institution of $171 million, representing 1.2 percent of market deposits. On consummation of the proposal, New Wachovia would oper- 1. All deposit figures in the millions have been rounded to the ate the third largest depository institution nearest million, and all deposit figures in the billions have been in the market, controlling deposits of rounded to the nearest hundred million. All percentages have been $2.3 billion, representing 15.6 percent of rounded to the nearest one-tenth of 1 percent. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

702 Federal Reserve Bulletin • October 2001 market deposits. The HHI would increase lion, representing 29 percent of market by 35 points to 1672. deposits. The HHI would increase by Tampa Bay First Union operates the second largest 367 points to 1652. depository institution in the market, con- Dalton First Union operates the eighth largest detrolling deposits of $4 billion, representing pository institution in the market, control- 13.3 percent of market deposits. Wachovia ling deposits of $79 million, representing operates the thirty-first largest depository 5.8 percent of market deposits. Wachovia institution in the market, controlling de- operates the second largest depository inposits of $88 million, representing less stitution in the market, controlling deposits than 1 percent of market deposits. On con- of $268 million, representing 19.6 percent summation of the proposal, New Wacho- of market deposits. On consummation of via would operate the second largest de- the proposal, New Wachovia would operpository institution in the market, ate the largest depository institution in the controlling deposits of $4 billion, repre- market, controlling deposits of $347 milsenting 13.6 percent of market deposits. lion, representing 25.4 percent of market The HHI would increase by 8 points to deposits. The HHI would increase by 1347. 227 points to 1583. West Palm First Union operates the second largest Beach depository institution in the market, con- North Carolina trolling deposits of $3.2 billion, representing 18.1 percent of market deposits. Burlington First Union operates the seventh largest Wachovia operates the third largest depos- depository institution in the market, conitory institution in the market, controlling trolling deposits of $101 million, repredeposits of $1.7 billion, representing senting 6.1 percent of market deposits. 9.6 percent of market deposits. On con- Wachovia operates the third largest depossummation of the proposal, New Wacho- itory institution in the market, controlling via would operate the largest depository deposits of $235 million, representing institution in the market, controlling 14.1 percent of market deposits. On condeposits of $4.9 billion, representing summation of the proposal, New Wacho- 27.6 percent of market deposits. The HHI via would operate the largest depository would increase by 346 points to 1381. institution in the market, controlling deposits of $335 million, representing Georgia 20.2 percent of market deposits. The HHI would increase by 171 points to 1335. Atlanta First Union operates the fourth largest de- Charlotte- First Union operates the second largest pository institution in the market, control- Rock Hill depository institution in the market, conling deposits of $6.8 billion, representing trolling deposits of $7.4 billion, represent- 12.7 percent of market deposits. Wachovia ing 18.3 percent of market deposits. operates the third largest depository insti- Wachovia operates the fourth largest detution in the market, controlling deposits pository institution in the market, controlof $8.3 billion, representing 15.6 percent ling deposits of $1.6 billion, representing of market deposits. On consummation of 4 percent of market deposits. On consumthe proposal, New Wachovia would oper- mation of the proposal, New Wachovia ate the largest depository institution in the would operate the second largest deposimarket, controlling deposits of $15.1 bil- tory institution in the market, controlling lion, representing 28.3 percent of market deposits of $9.1 billion, representing deposits. The HHI would increase by 22.3 percent of market deposits. The HHI 396 points to 1472. would increase by 147 points to 4002. Augusta First Union operates the largest depository Dare First Union operates the fifth largest deinstitution in the market, controlling pository institution in the market, controldeposits of $779 million, representing ling deposits of $23 million, representing 19.7 percent of market deposits. Wachovia 4.1 percent of market deposits. Wachovia operates the fifth largest depository institu- operates the second largest depository intion in the market, controlling deposits of stitution in the market, controlling deposits $367 million, representing 9.3 percent of of $111 million, representing 19.5 percent market deposits. On consummation of the of market deposits. On consummation of proposal, New Wachovia would operate the proposal, New Wachovia would operthe largest depository institution in the ate the second largest depository institumarket, controlling deposits of $1.1 bil- tion in the market, controlling deposits of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 703 $134 million, representing 23.7 percent of Moore First Union operates the fifth largest demarket deposits. The HHI would increase pository institution in the market, controlby 161 points to 2984. ling deposits of $65 million, representing Fayetteville First Union operates the sixth largest de- 6 percent of market deposits. Wachovia pository institution in the market, control- operates the third largest depository instiling deposits of $95 million, representing tution in the market, controlling deposits 5.8 percent of market deposits. Wachovia of $85 million, representing 7.9 percent of operates the fifth largest depository institu- market deposits. On consummation of the tion in the market, controlling deposits of proposal, New Wachovia would operate $131 million, representing 8 percent of the third largest depository institution market deposits. On consummation of the in the market, controlling deposits of proposal, New Wachovia would operate $150 million, representing 13.8 percent of the fourth largest depository institution market deposits. The HHI would increase in the market, controlling deposits of by 94 points to 2145. $226 million, representing 13.8 percent of Raleigh First Union operates the sixth largest demarket deposits. The HHI would increase pository institution in the market, controlby 93 points to 2041. ling deposits of $746 million, representing Greensboro- First Union operates the fifth largest de- 8.8 percent of market deposits. Wachovia High Point pository institution in the market, control- operates the largest depository institution ling deposits of $714 million, representing in the market, controlling deposits of 9 percent of market deposits. Wachovia $1.6 billion, representing 18.5 percent of operates the second largest depository in- market deposits. On consummation of the stitution in the market, controlling deposits proposal, New Wachovia would operate of $1.4 billion, representing 17.1 percent the largest depository institution in the of market deposits. On consummation of market, controlling deposits of $2.3 bilthe proposal, New Wachovia would oper- lion, representing 27.2 percent of market ate the largest depository institution in the deposits. The HHI would increase by market, controlling deposits of $2.1 bil- 324 points to 1547. lion, representing 26.1 percent of market Robeson First Union operates the ninth largest dedeposits. The HHI would increase by pository institution in the market, control- 307 points to 1407. ling deposits of approximately $371,000, Greenville First Union operates the ninth largest de- representing less than 1 percent of market pository institution in the market, control- deposits. Wachovia operates the fifth largling deposits of $24 million, representing est depository institution in the market, 2.2 percent of market deposits. Wachovia controlling deposits of $38 million, repreoperates the second largest depository in- senting 5.9 percent of market deposits. On stitution in the market, controlling deposits consummation of the proposal, New of $269 million, representing 24.2 percent Wachovia would operate the fifth largest of market deposits. On consummation of depository institution in the market, conthe proposal, New Wachovia would oper- trolling deposits of $39 million, representate the largest depository institution in the ing 5.9 percent of market deposits. The market, controlling deposits of $293 mil- HHI would increase by 1 point to 2418. lion, representing 26.3 percent of market Rocky Mount First Union operates the fourth largest dedeposits. The HHI would increase by pository institution in the market, control- 104 points to 1897. ling deposits of $191 million, representing Monroe First Union operates the ninth largest de- 9.2 percent of market deposits. Wachovia pository institution in the market, control- operates the third largest depository instiling deposits of $28 million, representing tution in the market, controlling deposits 2.9 percent of market deposits. Wachovia of $194 million, representing 9.4 percent operates the eighth largest depository insti- of market deposits. On consummation of tution in the market, controlling deposits the proposal, New Wachovia would operof $50 million, representing 5.2 percent of ate the third largest depository institution market deposits. On consummation of the in the market, controlling deposits of proposal, New Wachovia would operate $385 million, representing 18.6 percent of the fourth largest depository institution market deposits. The HHI would increase in the market, controlling deposits of by 173 points to 2006. $77 million, representing 8.1 percent of Stanly First Union operates the third largest demarket deposits. The HHI would increase pository institution in the market, controlby 30 points to 1898. ling deposits of $ 106 million, representing Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

704 Federal Reserve Bulletin • October 2001 15.7 percent of market deposits. Wachovia senting 5.6 percent of market deposits. operates the seventh largest depository in- Wachovia operates the largest depository stitution in the market, controlling deposits institution in the market, controlling of $32 million, representing 4.8 percent of deposits of $1.3 billion, representing market deposits. On consummation of the 23.2 percent of market deposits. On conproposal, New Wachovia would operate summation of the proposal, New Wachothe second largest depository institution via would operate the largest depository in the market, controlling deposits of institution in the market, controlling $138 million, representing 20.6 percent of deposits of $1.6 billion, representing market deposits. The HHI would increase 28.8 percent of market deposits. The HHI by 152 points to 1811. would increase by 260 points to 1769. Wilmington First Union operates the sixth largest de- Florence First Union operates the sixth largest depository institution in the market, control- pository institution in the market, controlling deposits of $149 million, representing ling deposits of $88 million, representing 5.6 percent of market deposits. Wachovia 6.7 percent of market deposits. Wachovia operates the second largest depository in- operates the largest depository institution stitution in the market, controlling deposits in the market, controlling deposits of of $405 million, representing 15.1 percent $283 million, representing 21.4 percent of of market deposits. On consummation of market deposits. On consummation of the the proposal, New Wachovia would oper- proposal, New Wachovia would operate ate the second largest depository institu- the largest depository institution in the tion in the market, controlling deposits of market, controlling deposits of $371 mil- $554 million, representing 20.7 percent of lion, representing 28.1 percent of market market deposits. The HHI would increase deposits. The HHI would increase by by 169 points to 1603. 285 points to 1339. Georgetown First Union operates the eighth largest de- South Carolina pository institution in the market, controlling deposits of $2 million, representing Beaufort First Union operates the ninth largest de- less than 1 percent of market deposits. pository institution in the market, control- Wachovia operates the third largest deposling deposits of $63 million, representing itory institution in the market, controlling 3.9 percent of market deposits. Wachovia deposits of $69 million, representing operates the largest depository institution 16.5 percent of market deposits. On conin the market, controlling deposits of summation of the proposal, New Wacho- $485 million, representing 29.6 percent of via would operate the third largest deposimarket deposits. On consummation of the tory institution in the market, controlling proposal, New Wachovia would operate deposits of $71 million, representing the largest depository institution in the 16.9 percent of market deposits. The HHI market, controlling deposits of $548 mil- would increase by 14 points to 2160. lion, representing 33.4 percent of market Greenville First Union operates the third largest dedeposits. The HHI would increase by pository institution in the market, control- 228 points to 1749. ling deposits of $834 million, representing Charleston First Union operates the ninth largest de- 12.6 percent of market deposits. Wachovia pository institution in the market, control- operates the fourth largest depository instiling deposits of $138 million, representing tution in the market, controlling deposits 3.7 percent of market deposits. Wachovia of $744 million, representing 11.2 percent operates the largest depository institution of market deposits. On consummation of in the market, controlling deposits of the proposal, New Wachovia would oper- $847 million, representing 22.5 percent of ate the largest depository institution in the market deposits. On consummation of the market, controlling deposits of $1.6 bilproposal, New Wachovia would operate lion, representing 23.8 percent of market the largest depository institution in the deposits. The HHI would increase by market, controlling deposits of $985 mil- 282 points to 1400. lion, representing 26.2 percent of market Greenwood First Union operates the second largest deposits. The HHI would increase by depository institution in the market, con- 165 points to 1389. trolling deposits of $115 million, repre- Columbia First Union operates the seventh largest senting 14.4 percent of market deposits. depository institution in the market, con- Wachovia operates the sixth largest depostrolling deposits of $320 million, repre- itory institution in the market, controlling Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 705 deposits of $80 million, representing of $79 million, representing 4.7 percent of 10.1 percent of market deposits. On con- market deposits. On consummation of the summation of the proposal, New Wacho- proposal, New Wachovia would operate via would operate the largest depository the sixth largest depository institution institution in the market, controlling de- in the market, controlling deposits of posits of $195 million, representing $124 million, representing 7.5 percent of 24.5 percent of market deposits. The HHI market deposits. The HHI would increase would increase by 290 points to 1439. by 26 points to 1447. Myrtle First Union operates the twelfth largest Harrisonburg First Union operates the third largest de- Beach- depository institution in the market, con- pository institution in the market, control- Conway trolling deposits of S37 million, represent- ling deposits of $191 million, representing ing 1.4 percent of market deposits. Wacho- 15.3 percent of market deposits. Wachovia via operates the third largest depository operates the eighth largest depository instiinstitution in the market, controlling tution in the market, controlling deposits deposits of $334 million, representing of $79 million, representing 6.3 percent of 12.4 percent of market deposits. On con- market deposits. On consummation of the summation of the proposal, New Wacho- proposal, New Wachovia would operate via would operate the third largest deposi- the largest depository institution in the tory institution in the market, controlling market, controlling deposits of $270 mildeposits of $371 million, representing lion, representing 21.7 percent of market 13.8 percent of market deposits. The HHI deposits. The HHI would increase by would increase by 34 points to 1162. 194 points to 1416. Martinsville First Union operates the sixth largest de- Virginia pository institution in the market, controlling deposits of $55 million, representing Abingdon First Union operates the sixth largest de- 4.7 percent of market deposits. Wachovia pository institution in the market, control- operates the ninth largest depository instiling deposits of $31 million, representing tution in the market, controlling deposits 5.3 percent of market deposits. Wachovia of $33 million, representing 2.8 percent of operates the second largest depository in- market deposits. On consummation of the stitution in the market, controlling deposits proposal, New Wachovia would operate of $96 million, representing 16.2 percent the fourth largest depository institution of market deposits. On consummation of in the market, controlling deposits of the proposal, New Wachovia would oper- $88 million, representing 7.5 percent of ate the second largest depository institu- market deposits. The HHI would increase tion in the market, controlling deposits of by 26 points to 1783. $127 million, representing 21.5 percent of Newport First Union operates the sixth largest demarket deposits. The HHI would increase News- pository institution in the market, controlby 172 points to 2032. Hampton ling deposits of $251 million, representing Charlottesville First Union operates the tenth largest de- 7.4 percent of market deposits. Wachovia pository institution in the market, control- operates the third largest depository instiling deposits of $29 million, representing tution in the market, controlling deposits 1.4 percent of market deposits. Wachovia of $364 million, representing 10.8 percent operates the largest depository institution of market deposits. On consummation of in the market, controlling deposits of the proposal, New Wachovia would oper- $476 million, representing 23.7 percent of ate the third largest depository institution market deposits. On consummation of the in the market, controlling deposits of proposal, New Wachovia would operate $615 million, representing 18.2 percent of the largest depository institution in the market deposits. The HHI would increase market, controlling deposits of $505 mil- by 159 points to 1485. lion, representing 25.1 percent of market Norfolk- First Union operates the fifth largest dedeposits. The HHI would increase by Portsmouth pository institution in the market, control- 67 points to 1642. ling deposits of $542 million, representing Fredericksburg First Union operates the ninth largest de- 7.2 percent of market deposits. Wachovia pository institution in the market, control- operates the second largest depository inling deposits of $46 million, representing stitution in the market, controlling deposits 2.8 percent of market deposits. Wachovia of $1.1 billion, representing 15 percent of operates the seventh largest depository in- market deposits. On consummation of the stitution in the market, controlling deposits proposal, New Wachovia would operate Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

706 Federal Reserve Bulletin • October 2001 the largest depository institution in the 12.5 percent of market deposits. Wachovia market, controlling deposits of $1.7 bil- operates the second largest depository inlion, representing 22.2 percent of market stitution in the market, controlling deposits deposits. The HHI would increase by of $555 million, representing 19.1 percent 216 points to 1349. of market deposits. First Union proposes Pulaski- First Union operates the third largest de- to divest to a suitable in-market or out-of- Radford pository institution in the market, control- market competitor three branches in the ling deposits of $108 million, representing market, with deposits of $148 million, rep- 8.2 percent of market deposits. Wachovia resenting 5.1 percent of market deposits. operates the eighth largest depository insti- After the proposed merger and divestiture, tution in the market, controlling deposits New Wachovia would operate the largest of $88 million, representing 6.7 percent of depository institution in the market, conmarket deposits. On consummation of the trolling deposits of $770 million, repreproposal, New Wachovia would operate senting 26.5 percent of market deposits. the third largest depository institution in The HHI would increase by no more than the market, controlling deposits of 207 points to no more than 1795. $195 million, representing 14.9 percent of market deposits. The HHI would increase by 110 points to 1716. North Carolina Washington, First Union operates the third largest de- D.C. pository institution in the market, control- Haywood First Union operates the second largest ling deposits of $5.8 billion, representing depository institution in the market, con- 9.9 percent of market deposits. Wachovia trolling deposits of $110 million, repreoperates the fourteenth largest depository senting 28.4 percent of market deposits. institution in the market, controlling de- Wachovia operates the fifth largest deposiposits of $1.3 billion, representing 2.2 per- tory institution in the market, controlling cent of market deposits. On consummation deposits of $41 million, representing of the proposal, New Wachovia would op- 10.5 percent of market deposits. First erate the third largest depository institution Union proposes to divest to a suitable outin the market, controlling deposits of of-market competitor one branch in the $7.1 billion, representing 12.1 percent of market, with deposits of 41 million, repremarket deposits. The HHI would increase senting 10.5 percent of market deposits. by 44 points to 894. After the proposed merger and divestiture, Winchester First Union operates the fifth largest de- New Wachovia would operate the second pository institution in the market, control- largest depository institution in the market, ling deposits of $109 million, representing controlling deposits of $110 million, repre- 7.9 percent of market deposits. Wachovia senting 28.4 percent of market deposits. operates the sixth largest depository insti- The HHI would remain unchanged at tution in the market, controlling deposits 2116. of $100 million, representing 7.3 percent Hickory First Union operates the second largest of market deposits. On consummation of depository institution in the market, conthe proposal, New Wachovia would opertrolling deposits of $532 million, repreate the second largest depository institusenting 15.7 percent of market deposits. tion in the market, controlling deposits of Wachovia operates the sixth largest depos- $209 million, representing 15.2 percent of itory institution in the market, controlling market deposits. The HHI would increase by 115 points to 1640. deposits of $229 million, representing 6.8 percent of market deposits. First Union proposes to divest to a suitable in-market or out-of-market competitor 2 branches in Appendix C the market, with deposits of $86 million, representing 2.5 percent of market depos- Certain Markets with Divestitures its. After the proposed merger and divestiture, New Wachovia would operate the Georgia largest depository institution in the market, controlling deposits of $677 million, repre- Savannah First Union operates the fourth largest de- senting 20 percent of market deposits. The pository institution in the market, control- HHI would increase by no more than ling deposits of $363 million, representing 186 points to no more than 1443. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 707 Jackson First Union operates the third largest de- South Carolina pository institution in the market, controlling deposits of $42 million, representing York First Union operates the second largest 15.8 percent of market deposits. Wachovia depository institution in the market, conoperates the largest depository institution trolling deposits of $52 million, representin the market, controlling deposits of ing 20.1 percent of market deposits. $94 million, representing 35.7 percent of Wachovia operates the fifth largest deposimarket deposits. First Union proposes to tory institution in the market, controlling divest to a suitable in-market or out-of- deposits of $24 million, representing market competitor one branch in the mar- 9.2 percent of market deposits. First Union ket, with deposits of $36 million, repre- proposes to divest to a suitable in-market senting 13.6 percent of market deposits. or out-of-market competitor one branch in After the proposed merger and divestiture, the market, with deposits of $28 million, New Wachovia would operate the largest representing 10.7 percent of market deposdepository institution in the market, con- its. After the proposed merger and divestitrolling deposits of $100 million, repre- ture, New Wachovia would operate the senting 37.8 percent of market deposits. second largest depository institution in the The HHI would increase by no more than market, controlling deposits of $48 mil- 194 points to 2234. lion, representing 18.5 percent of market deposits. The HHI would increase by no Salisbury First Union operates the fourth largest demore than 34 points to no more than 2499. pository institution in the market, controlling deposits of $82 million, representing Virginia 8.1 percent of market deposits. Wachovia operates the third largest depository insti- Bedford First Union operates the largest depository tution in the market, controlling deposits institution in the market, controlling deof $167 million, representing 16.6 percent posits of $95 million, representing of market deposits. First Union proposes 29.8 percent of market deposits. Wachovia to divest to a suitable in-market or outoperates the third largest depository instiof-market competitor one branch in the tution in the market, controlling deposits market, with deposits of $37 million, repof $50 million, representing 15.5 percent resenting 3.7 percent of market deposits. of market deposits. First Union proposes After the proposed merger and divestiture, to divest to a suitable in-market or out-of- New Wachovia would operate the second market competitor one branch in the marlargest depository institution in the market, ket, with deposits of $50 million, reprecontrolling deposits of $212 million, representing 15.5 percent of market deposits. senting 21 percent of market deposits. The After the proposed merger and divestiture, HHI would increase by no more than New Wachovia would operate the largest 173 point to no more than 1863. depository institution in the market, con- Wilkes First Union operates the largest depository trolling deposits of $95 million, representinstitution in the market, controlling de- ing 29.8 percent of market deposits. The posits of $153 million, representing 25 per- HHI would increase by no more than cent of market deposits. Wachovia oper- 82 points to no more than 1927. ates the second largest depository Roanoke First Union operates the largest depository institution in the market, controlling de- institution in the market, controlling posits of $105 million, representing deposits of $2.6 billion, representing 17.2 percent of market deposits. First 51.5 percent of market deposits. Wachovia Union proposes to divest to a suitable in- operates the third largest depository instimarket or out-of-market competitor one tution in the market, controlling deposits branch in the market, with deposits of of $326 million, representing 6.4 percent $60 million, representing 9.8 percent of of market deposits. First Union proposes market deposits. After the proposed to divest to a suitable in-market or out-ofmerger and divestiture, New Wachovia market competitor seven branches in the would operate the largest depository insti- market, with deposits of $326 million, reptution in the market, controlling deposits resenting 6.4 percent of market deposits. of $199 million, representing 32.5 percent After the proposed merger and divestiture, of market deposits. The HHI would in- New Wachovia would operate the largest crease by no more than 227 points to no depository institution in the market, conmore than 1787. trolling deposits of $2.6 billion, represent- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

708 Federal Reserve Bulletin • October 2001 ing 51.5 percent of market deposits. The Bank engages in commercial, retail, and investment HHI would increase by no more than banking activities through more than 220 domestic 89 points to no more than 2963. branches and offices. Bank also engages in leasing, con- Smyth First Union operates the third largest de- sumer finance, mutual and investment fund management, pository institution in the market, control- asset securitization, and stock brokerage activities through ling deposits of $75 million, representing its domestic subsidiaries. Outside of Peru, Bank operates 18.7 percent of market deposits. Wachovia branches in New York and the Bahamas, and representaoperates the fourth largest depository insti- tive offices in Chile and Colombia. In addition, Bank owns tution in the market, controlling deposits subsidiary banks in Bolivia and the Bahamas. of $45 million, representing 11.2 percent The proposed agency would offer trade-related and other of market deposits. First Union proposes corporate banking services to Bank's existing international to divest to a suitable in-market or out-of- customers. It also would offer private banking services to market competitor one branch in the mar- individuals and corporations. ket, with deposits of $45 million, repre- In order to approve an application by a foreign bank to senting 11.2 percent of market deposits. establish an agency in the United States, the IBA and After the proposed merger and divestiture, Regulation K require the Board to determine that the New Wachovia would operate the third foreign bank applicant engages directly in the business of largest depository institution in the market, banking outside the United States and has furnished to the controlling deposits of $75 million, repre- Board the information it needs to assess the application senting 18.7 percent of market deposits. adequately. The Board also shall take into account whether The HHI would increase by no more than the foreign bank and any foreign bank parent are subject to 162 points to no more than 2618. comprehensive supervision or regulation on a consolidated basis by its home country supervisor (12 U.S.C. § 3105(d)(2); 12 C.F.R. 211.24).3 The Board may also take ORDERS ISSUED UNDER INTERNATIONAL BANKING into account additional standards as set forth in the IBA ACT and Regulation K (12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. 211.24(c)(2)-(3)). Banco de Credito del Peru The IBA includes a limited exception to the general Lima, Peru requirement relating to comprehensive, consolidated supervision (12 U.S.C. § 3105(d)(6)). This exception provides Order Approving Establishment of an Agency that, if the Board is unable to find that a foreign bank seeking to establish a branch, agency, or commercial lend- Banco de Credito del Peru ("Bank"), Lima, Peru, a foreign ing company is subject to comprehensive supervision or bank within the meaning of the International Banking Act regulation on a consolidated basis by the appropriate au- ("IBA"), has applied under section 7(d) of the IBA thorities in its home country, the Board may nevertheless (12 U.S.C. § 3105(d)) to establish an agency in Miami, approve an application by such foreign bank if: Florida. The Foreign Bank Supervision Enhancement Act of 1991, which amended the IBA, provides that a foreign bank must obtain the approval of the Board to establish an agency in the United States. Notice of the application, affording interested persons an nia, an unaffiliated holding company for investment management opportunity to comment, has been published in a newspa- companies, owns 9.8 percent of Credicorp's shares. Credicorp's reper of general circulation in Miami, Florida (Miami Her- maining shares are widely held, with no single shareholder or shareald, March 7, 1997). The time for filing comments has holding group controlling more than 5 percent. In addition to Bank, Credicorp owns banks in the Cayman Islands, Colombia, and expired, and the Board has considered the application and El Salvador, that respectively have offices in the United States, Panall comments received. ama, and Venezuela. Bank, with total consolidated assets of $6.4 billion, is the 3. In assessing this standard, the Board considers, among other largest and oldest banking group in Peru.1 Approximately factors, the extent to which the home country supervisors: (i) Ensure that the bank has adequate procedures for monitoring and 90 percent of Bank's shares are owned by Credicorp, Ltd. controlling its activities worldwide; ("Credicorp"), a holding company incorporated in Bermu- (ii) Obtain information on the condition of the bank and its subsidda.2 Bank's remaining shares are traded on the Lima Stock iaries and offices through regular examination reports, audit reports, or Exchange and are widely held. otherwise; (iii) Obtain information on the dealings with and relationship between the bank and its affiliates, both foreign and domestic; 1. Unless otherwise indicated all data are as of March 31, 2001. (iv) Receive from the bank financial reports that are consolidated on 2. Credicorp's shares are publicly traded in the United States and a worldwide basis or comparable information that permits analysis of Peru. Approximately 16 percent of Credicorp's shares are owned by the bank's financial condition on a worldwide consolidated basis; Mr. Dionisio Romero, the current chairman and chief executive otficer (v) Evaluate prudential standards, such as capital adequacy and risk of Credicorp, and his family. Atlantic Security Holding Corporation, a asset exposure, on a worldwide basis. These are indicia of comprehenwholly owned Credicorp subsidiary, owns 10.8 percent of Credicorp's sive, consolidated supervision. No single factor is essential, and other shares, and the Capital Group Companies, Inc., Los Angeles, Califor- elements may inform the Board's determination. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 709 (i) The appropriate authorities in the home country of the The Superintendency requires consolidated financial foreign bank are actively working to establish arrange- statements, including information on banks' foreign ments for the consolidated supervision of such bank; and branches and domestic and foreign subsidiaries, to be (ii) All other factors are consistent with approval submitted annually by an external auditor approved by the (12 U.S.C. § 3105(d)(6)(A)). In deciding whether to exer- Superintendency. Auditors also are required to submit an cise its discretion to approve an application under authority opinion letter and an unpublished report on the bank's of this exception, the Board shall also consider whether the internal controls and loan portfolio. foreign bank has adopted and implemented procedures to Peruvian law extends the Superintendency's regulatory combat money laundering. The Board also may take into jurisdiction to financial conglomerates.5 For organizations account whether the home country of the foreign bank is such as Credicorp, whose top-tier companies are not domideveloping a legal regime to address money laundering or ciled in Peru but whose consolidated operations are preis participating in multilateral efforts to combat money dominately in Peru, the supervised companies within the laundering (12 U.S.C. § 3105(d)(6)(B)). organization (including Bank, in Credicorp's case) are As noted above, Bank engages directly in the business of required to provide the Superintendency with financial and banking outside the United States. Bank also has provided other information necessary to supervise the group on a the Board with information necessary to assess the applica- consolidated basis.6 In addition, the Superintendency coortion through submissions that address the relevant issues. dinates with relevant foreign authorities (in Bank's case, With respect to supervision by Bank's home country the supervisors of Bank's foreign bank affiliates) for purauthorities, the Board has considered the following infor- poses of information-sharing and arranging for on-site mation. Bank is supervised by the Peruvian Superinten- examinations by Superintendency examiners. The Superindency of Banks and Insurance ("Superintendency"). The tendency may order Bank to take measures to reduce risks Superintendency is primarily responsible for the regulation arising from within the conglomerate, including limiting and supervision of Peruvian financial institutions, includ- operations with affiliates or involving common customers. ing their foreign offices, subsidiaries, and affiliates. The Such actions also may be taken when, due to a lack of Superintendency issues and promulgates supervisory regu- information, the Superintendency determines that it cannot lations concerning asset quality, capital adequacy, liquidity, adequately evaluate the risks incurred by Bank. consolidated financial statements, loan classifications and Credicorp monitors the activities and operations of its loan loss reserves, transactions with affiliates and related subsidiaries, including Bank, through regular internal reparties, and credit, market, and operational risks, among porting requirements and annual internal audits. Credicorp other matters. The Superintendency is responsible for mon- has adopted uniform internal control and auditing policies itoring, inspecting, and assessing the management, opera- and procedures applicable to all companies in the group. tions, and asset quality of financial institutions. In addition, Bank's audit department serves as a centralized internal the Superintendency monitors compliance by financial in- audit department for the group and reports directly to stitutions with applicable laws and regulations and may Credicorp's board of directors. Internal audits are conorder preventive measures and impose sanctions on finan- ducted annually and include an evaluation of internal concial institutions. trol systems and procedures, a review of financial state- The Superintendency conducts on-site examinations of ments, and monitoring for compliance with policies and financial institutions annually and may conduct special targeted examinations if circumstances merit such inspections. During these reviews, the Superintendency evaluates must be made on terms no more favorable than those available to the information on the institutions' foreign offices and domes- public. tic and foreign affiliates. For off-site monitoring purposes, 5. A "financial conglomerate" consists of a group of companies, the Superintendency requires extensive reporting from the related through control or ownership, carrying out financial, insurance, or securities activities. Regulations implementing the 1996 institutions it supervises, including daily, monthly, quar- Banking Law's provisions on financial conglomerates became effecterly, and semiannual data covering, among other matters, tive in June 2000. consolidated financial condition, liquidity, capital ade- 6. Bank is required to submit quarterly and annual consolidated quacy, internal audit findings, and transactions with affili- financial statements for the conglomerate and for any consolidated ates and related parties.4 group within the conglomerate (considering financial companies as one group and insurance companies as another) and reports on consolidated shareholders' equity, capital requirements, consolidated limits, investments, and reinsurance operations. It also must provide informa- 4. Under Peruvian law, the maximum amount that a financial tion on the conglomerate's methods for identifying and controlling institution may lend to a borrower on an aggregate basis ranges, risks, the relationship between shareholders, members, directors, mandepending on the type of collateral, from 10 percent to 30 percent of agers, principal officers and advisors of the conglomerate, and the total capital. The total amount of loans to directors, employees, or structure of the property and management of the conglomerate. The close relatives of such persons may not exceed 7 percent of a bank's annual financial statements must be audited, and external auditors paid-in capital and reserves, and all loans made to any related party must evaluate the procedures used in preparing and the reasonableness borrower may not exceed 0.35 percent of paid-in capital (i.e., of the consolidated financial statements, significant accounting prac- 5 percent of the overall 7 percent limit). In addition, the aggregate tices, internal controls, and compliance with applicable legal limits. amount of loans, investments, and contingencies granted to related Bank's internal auditing division is required to include in its annual party borrowers, considered as an economic group, may not exceed internal controls report to the Superintendency an analysis of the 75 percent of a bank's effective capital. All loans to related parties conglomerate's means of identifying and controlling risks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

710 Federal Reserve Bulletin • October 2001 procedures for the prevention of money laundering. The the extent that the provision of such information to the proposed agency would be subject to annual internal audits Board may be prohibited by law, Bank and Credicorp have and the same internal reporting requirements as Bank's committed to cooperate with the Board to obtain any existing New York branch. necessary consents or waivers that might be required from The Peruvian government has taken steps to combat third parties for disclosure of such information. In addition, money laundering. In the past decade, Peru has enacted subject to certain conditions, the Superintendency may and strengthened legislation to prevent money laundering, share information on Bank's operations with other superviand the Superintendency has issued implementing regula- sors, including the Board. In light of these commitments tions. The regulations generally require each financial insti- and other facts of record, and subject to the condition tution to establish a system of money laundering preven- described below, the Board concludes that Bank and Credition incorporating employee training, a "know your corp have provided adequate assurances of access to any customer" policy and monitoring system, a system for necessary information that the Board may request. detecting, reporting, and preventing suspicious transac- On the basis of all the facts of record, and subject to the tions, and a designated individual responsible for compli- commitments made by Bank and Credicorp, as well as the ance. Each financial institution's anti-money laundering terms and conditions set forth in this order, the Board has policies and procedures are subject to review by external determined that Bank's application to establish an agency auditors and the Superintendency. should be, and hereby is, approved. Should any restrictions Bank and Credicorp have implemented policies and pro- on access to information on the operations or activities of cedures throughout their worldwide operations to detect Bank and its affiliates subsequently interfere with the and prevent money laundering, incorporating the Board's ability to obtain information to determine and institution-specific recommendations of the Financial Ac- enforce compliance by Bank or its affiliates with applicable tion Task Force. These policies and procedures include a federal statutes, the Board may require or recommend "know your customer" policy, which focuses both on the termination of any of Bank's direct or indirect activities in initial establishment of the customer relationship as well as the United States. Approval of this application also is on-going maintenance of customer information in order to specifically conditioned on compliance by Bank and its identify possible illegal transactions. affiliates with the commitments made in connection with Based on all the facts of record, the Board has deter- this application and with the conditions in this order.7 The mined that Bank's home country supervisory authority is commitments and conditions referred to above are condiactively working to establish arrangements for the consoli- tions imposed in writing by the Board in connection with dated supervision of Bank, and that considerations relating its decision and may be enforced in proceedings under to the steps taken by Bank and its home country to combat 12 U.S.C. § 1818 against Bank and its affiliates. money laundering are consistent with approval under this By order of the Board of Governors, effective August 9, standard. 2001. The Board has also taken into account the additional standards set forth in the IBA (12 U.S.C. § 3105(d)(3)-(4); Voting for this action: Chairman Greenspan, Vice Chairman Fergu- 12 C.F.R. 211.24(c)(2)). The Superintendency has no ob- son, and Governors Kelley, Meyer, and Gramlich. jection to establishment of the proposed agency. ROBERT DEV. FRIERSON Bank must comply with the minimum capital standards Deputy Secretary of the Board of the Basel Capital Accord ("Accord"), as implemented by Peru. Bank's capital is in excess of the minimum levels that are required by the Accord and is considered equiva- DePfa Bank AG lent to the capital that would be required of a U.S. banking Wiesbaden, Germany organization. Managerial and other financial resources of Bank are also considered consistent with approval, and Order Approving Establishment of a Representative Office Bank appears to have the experience and capacity to support the proposed agency. Bank has established controls DePfa Bank AG ("Bank"), Wiesbaden, Germany, a forand procedures for the proposed agency to ensure complieign bank within the meaning of the International Banking ance with U.S. law, as well as controls and procedures for Act ("IBA"), has applied under section 10(a) of the IBA its worldwide operations generally. (12 U.S.C. § 3107(a)) to establish a representative office in With respect to access to information about Bank's New York, New York. The Foreign Bank Supervision operations, the Board has reviewed the restrictions on Enhancement Act of 1991, which amended the IBA, prodisclosure in relevant jurisdictions in which Bank operates and has communicated with relevant government authorities regarding access to information. Bank and Credicorp 7. The Board's authority to approve the establishment of the prohave committed to make available to the Board such infor- posed agency parallels the continuing authority of the State of Florida mation on the operations of Bank and any of its affiliates to license offices of a foreign bank. The Board's approval of this that the Board deems necessary to determine and enforce application does not supplant the authority of the State of Florida, or its agent, the Florida Department of Banking and Finance ("Departcompliance with the IBA, the Bank Holding Company Act ment"), to license the proposed office of Bank in accordance with any of 1956, as amended, and other applicable federal law. To terms or conditions that the Department may impose. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 711 vides that a foreign bank must obtain the approval of the As noted above, Bank engages directly in the business of Board to establish a representative office in the United banking outside the United States. Bank also has provided States. the Board with information necessary to assess the applica- Notice of the application, affording interested persons an tion through submissions that address the relevant issues. opportunity to submit comments, has been published in a With respect to supervision by home country authorities, newspaper of general circulation in New York, New York the Board previously has determined, in connection with (The New York Times, December 5, 2000). The time for applications involving other German banks, that those filing comments has expired, and all comments have been banks were subject to home country supervision on a considered. consolidated basis.4 Bank and DePfa Deutsche are super- Bank, with total consolidated assets of approximately vised by the German Federal Banking Supervisory Office $26 billion,1 is primarily engaged in financing commercial on substantially the same terms and conditions as the other and residential real estate development. Bank operates banks. Based on all the facts of record, it has been detertwenty-six offices in Germany and six branches in other mined that Bank and DePfa Deutsche are subject to comcountries in Europe. In the United States, Bank owns prehensive supervision and regulation on a consolidated DePfa USA Inc., New York, New York, which engages in basis by their home country supervisor. investment advisory activities. The additional standards set forth in section 7 of the IBA Bank is a wholly owned subsidiary of DePfa Deutsche and Regulation K (see 12 U.S.C. § 3105(d)(3)-(4); Pfandbriefbank AG ("DePfa Deutsche"), Wiesbaden, Ger- 12 C.F.R. 211.24(c)(2)) have also been taken into account. many.2 DePfa Deutsche, with total consolidated assets of The German Federal Banking Supervisory Office has noob- $147 billion, is the eleventh largest bank in Germany. jection to the establishment of the proposed representative DePfa Deutsche is primarily engaged in public sector and office. property finance. With respect to the financial and managerial resources of The proposed representative office would research and Bank, taking into consideration Bank's record of operaanalyze regional market conditions and property trends, tions in its home country, its overall financial resources, and assist Bank in various phases of its property financing and its standing with its home country supervisor, financial business. and managerial factors are consistent with approval of the In acting on an application to establish a representative proposed representative office. Bank appears to have the office, the IBA and Regulation K provide that the Board experience and capacity to support the proposed represenshall take into account whether the foreign bank engages tative office and has established controls and procedures directly in the business of banking outside of the United for the proposed representative office to ensure compliance States and has furnished to the Board the information it with U.S. law. needs to assess the application adequately. The Board also With respect to access to information on Bank's operashall take into account whether the foreign bank and any tions, the restrictions on disclosure in relevant jurisdictions foreign bank parent is subject to comprehensive supervi- in which Bank operates have been reviewed and relevant sion or regulation on a consolidated basis by its home government authorities have been communicated with recountry supervisor (12 U.S.C. set 3107(a)(2); 12 C.F.R. garding access to information. Bank and its parent have 211.24(d)(2)).3 In addition, the Board may take into committed to make available to the Board such informaaccount additional standards set forth in the IBA and tion on the operations of Bank and any of their affiliates Regulation K (12 U.S.C. § 3105(d)(3)-(4); 12 C.F.R. that the Board deems necessary to determine and enforce 211.24(c)(2)). compliance with the IBA, the Bank Holding Company Act of 1956, as amended, and other applicable federal law. To the extent that the provision of such information to the Board may be prohibited by law or otherwise, Bank and its 1. Unless otherwise indicated, data are as of December 31, 2000. parent have committed to cooperate with the Board to 2. DePfa-Holding Verwaltungsgesellschaft, a German financial enobtain any necessary consents or waivers that might be terprise, owns 40 percent of DePfa Deutsche. No other person owns more than 10 percent of DePfa Deutsche. required from third parties for disclosure of such informa- 3. In assessing this standard, the Board considers, among other tion. In addition, subject to certain conditions, the German factors, the extent to which the home country supervisors: Federal Banking Supervisory Office may share information (i) Ensure that the bank has adequate procedures for monitoring and on Bank's operations with other supervisors, including the controlling its activities worldwide; (ii) Obtain information on the condition of the bank and its subsid- Board. In light of these commitments and other facts of iaries and offices through regular examination reports, audit reports, or record, and subject to the condition described below, it has otherwise; been determined that Bank has provided adequate assur- (iii) Obtain information on the dealings with and relationship between the bank and its affiliates, both foreign and domestic; (iv) Receive from the bank financial reports that are consolidated on a worldwide basis or comparable information that permits analysis of the bank's financial condition on a worldwide consolidated basis; 4. See Deutsche Hyp Deutsche Hypothekenbank, 86 Federal Re- (v) Evaluate prudential standards, such as capital adequacy and risk serve Bulletin 658 (2000); Deutsche Bank AG, 85 Federal Reserve asset exposure, on a worldwide basis. These are indicia of comprehen- Bulletin 509 (1999); Westdeutsche ImmobilienBank, 85 Federal Resive, consolidated supervision. No single factor is essential, and other serve Bulletin 346 (1999); Commerzbank AG, 85 Federal Reserve elements may inform the Board's determination. Bulletin 336 (1999). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

712 Federal Reserve Bulletin • October 2001 ances of access to any necessary information that the commitments made in connection with this application and Board may request. with the conditions in this order.6 The commitments and On the basis of all the facts of record, and subject to the conditions referred to above are conditions imposed in commitments made by Bank and its parent companies, and writing by the Board in connection with its decision and the terms and conditions set forth in this order, Bank's may be enforced in proceedings against Bank and its application to establish the representative office is hereby affiliates under 12 U.S.C. § 1818. approved.5 Should any restrictions on access to informa- By order, approved pursuant to authority delegated by tion on the operations or activities of Bank or any of its the Board, effective August 9, 2001. affiliates subsequently interfere with the Board's ability to obtain information to determine and enforce compliance by ROBERT DEV. FRIERSON Bank or its affiliates with applicable federal statutes, the Dupty Secretary of the Board Board may require or recommend termination of any of Bank's direct and indirect activities in the United States. 6. The Board's authority to approve the establishment of the pro- Approval of this application also is specifically conditioned posed representative office parallels the continuing authority of the on compliance by Bank and its parent companies with the State of New York to license offices of a foreign bank. The Board's approval of this application does not supplant the authority of the State of New York or its agent, the New York State Banking Depart- 5. Approved by the Director of the Division of Banking Supervision ment ("Department"), to license the proposed office of Bank in and Regulation, with the concurrence of the General Counsel, pursu- accordance with any terms or conditions that the Department may ant to authority delegated by the Board. impose. INDEX OF ORDERS ISSUED OR ACTIONS TAKEN BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (APRIL 1, 2001 - JUNE 30, 2001) Bulletin Volume Applicant Merged or Acquired Bank of Activity Date of Approval and Page Amplicon, Inc., California First National Bank, April 23, 2001 87, 821 Santa Ana, California Santa Ana, California Banco de Bogota S.A., To establish an agency June 11, 2001 87, 552 Santafe de Bogota, D.E., Colombia in Miami, Florida Banco Pastor S.A., To establish an agency June 28, 2001 87, 555 A Coruna, Spain in Miami, Florida Bank Austria Aktiengesellschaft, To establish federal branches in June 4, 2001 87, 556 Vienna, Austria Greenwich, Connecticut, and New York, New York BB&T Corporation, F&M National Corporation, June 25, 2001 87, 545 Winston-Salem, North Carolina Winchester, Virginia CB&T Bancshares, Inc., Citizens Bank & Trust Company, May 21, 2001 87, 465 Vivian, Louisiana Vivian, Louisiana Central State Bank, Commercial Federal Bank, June 25, 2001 87, 551 Muscatine, Iowa A Federal Savings Bank, Omaha, Nebraska Countrywide Credit Industries, Inc., Treasury Bank, Ltd., April 11, 2001 87, 419 Calabasas, California Washington, D.C. Countrywide Financial Holding Company, Inc., Calabasas, California Effinity Financial Corporation, Alexandria, Virginia Juniper Financial Corporation, First Bank CBC, May 9, 2001 87, 466 Wilmington, Delaware Maryville, Missouri Old Kent Bank, National Association, Old Kent Bank, May 14, 2001 87, 471 Jonesville, Michigan Grand Rapids, Michigan Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 713 Index of Orders—Continued Bulletin Volume Applicant Merged or Acquired Bank of Activity Date of Approval and Page RHEINHYP Rheinische To establish a representative office in June 4, 2001 87, 558 Hypothekenbank AG, New York, New York Frankfurt am Mai, Germany Royal Bank of Canada, Centura Banks, Inc., May 21, 2001 87, 467 Montreal, Canada Rocky Mount, North Carolina Rock Merger Subsidiary, Inc., Centura Bank, Raleigh, North Carolina Rocky Mount, North Carolina 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 Central Alabama Bancshares, Inc., First Community Bank of Central Alabama, August 2, 2001 Wetumpka, Alabama Wetumpka, Alabama 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 Chester Valley Bancorp, Inc., To engage in activities that are financial Philadelphia August 3, 2001 Downingtown, Pennsylvania in nature or incidental to a financial activity Allegiant Bancorp, Inc., Southside Bancshares Corp., St. Louis, Missouri St. Louis, Missouri South Side National Bank in St. Louis, St. Louis, Missouri Bank of Ste. Genevieve, Sainte Genevieve, Missouri Bank of St. Charles County, St. Charles, Missouri State Bank of Jefferson County, St. Louis August 15, 2001 DeSoto, Missouri American Community Financial, American Community Bank & Trust, Chicago August 17, 2001 Inc., Woodstock, Illinois Woodstock, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

714 Federal Reserve Bulletin • October 2001 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date BancStar, Inc., Pacific BancStar, Inc., St. Louis July 26, 2001 St. Louis, Missouri St. Louis, Missouri Bank Star, Pacific, Missouri St. Centennial First Financial Services, Palomar Community Bank, San Francisco July 31, 2001 Redlands, California Escondido, California Central National Bank, NBT, National Association, New York August 9, 2001 Canajoharie, New York Norwich, New York Citizens State Bancorporation, Ideal Bancshares, Inc., Minneapolis August 7, 2001 Grafton, North Dakota West Fargo, North Dakota Walhalla Bank Holding Company, Walhalla, North Dakota Columbia Trust Bancorp, Columbia Trust Bank, San Francisco August 14, 2001 Pasco, Washington Pasco, Washington Douglas County Bancshares, Inc., Neighborhood National Bank, Minneapolis August 8, 2001 Alexandria, Minnesota Alexandria, Minnesota First Banks, Inc., Charter Pacific Bank, St. Louis August 16, 2001 St. Louis, Missouri Agoura Hills, California First Banks America, Inc., St. Louis, Missouri J.P. Morgan Chase & Co., Chase Interim National Bank, New York August 13, 2001 New York, New York Pittsburgh, Pennsylvania Live Oak Financial Corp., Live Oak State Bank, Dallas August 2, 2001 Dallas, Texas Dallas, Texas Live Oak Delaware Financial Corp., Wilmington, Delaware Madison Bancshares, Inc., Madison Bank, Atlanta August 8, 2001 Palm Harbor, Florida Palm Harbor, Florida Maryland Bankcorp, Inc., Maryland Bank & Trust Company, Richmond August 2, 2001 Lexington Park, Maryland N.A., Lexington Park, Maryland Millennium Bancorp, Inc., Millennium Bank, Kansas City August 15, 2001 Edwards, Colorado Edwards, Colorado NBOG Bancorporation, Inc., National Bank of Gainesville, Atlanta August 14, 2001 Gainesville, Georgia Gainesville, Georgia NBT Bancorp Inc., CNB Financial Corp., New York August 9, 2001 Norwich, New York Canajoharie, New York Newnan Coweta Bancshares, Inc., Newnan Coweta Bank, Atlanta August 2, 2001 Newnan, Georgia Newnan, Georgia Peoples Home Holding, Inc., The Peoples Bank, St. Louis August 3, 2001 Greenbrier, Arkansas Portland, Arkansas Quad City Holdings, Inc., Cedar Rapids Bank and Trust Company, Chicago August 8, 2001 Moline, Illinois Cedar Rapids, Iowa Regents Bancshares, Inc., Regents Bank, N.A., San Francisco August 6, 2001 Vancouver, Washington La Jolla, California Speer Bancshares, Inc., State Bank of Speer, Chicago August 3, 2001 Speer, Illinois Speer, Illinois Sweetwater Financial Group, Inc., Georgian Bank, Atlanta August 13, 2001 Powder Springs, Georgia Powder Springs, Georgia The 2000 Williams Investment FNB Newton Bankshares, Inc., Atlanta August 9, 2001 Company, LLC, Covington, Georgia Atlanta, Georgia First Nation Bank, Covington, Georgia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 715 Section 3—Continued Applicant(s) Bank(s) Reserve Bank Effective Date Trafalgar Holdings, LLC, Regents Bancshares, Inc., San Francisco August 6, 2001 Vancouver, Washington Vancouver, Washington TransCommunity Bankshares Bank of Powhatan, N.A., Richmond August 3, 2001 Incorporated, Powhatan, Virginia Powhatan, Virginia Trust B Created Under Item V of FNB Newton Bankshares, Inc. Atlanta August 9, 2001 the Last Will and Testament of Covington, Georgia John Rufus Williams, Fist Nation Bank, Atlanta, Georgia Covington, Georgia West End Financial Corp., Gogebic Range Bank, Minneapolis August 3, 2001 Bessemer, Michigan Bessemer, Michigan YNB Financial Services Corp., Yakima National Bank, San Francisco August 6, 2001 Yakima, Washington Yakima, Washington Section 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date Gideon Bancshares Company, To continue providing securities St. Louis August 10, 2001 Dexter, Missouri brokerage activities to the customers of Gideon's subsidiary banks Jones Bancorp, Inc., G.W. Jones Mortgage Company, Chicago August 15, 2001 Marcellus, Michigan St. Joseph, Michigan Hasten Bancshares, Harrington Financial Group, Inc., Chicago August 8, 2001 Indianapolis, Indiana Overland Park, Kansas Danvers Bancorp, Inc., Revere, MHC, Boston August 6, 2001 Danvers, Massachusetts Revere, Massachusetts RFS Bancorp, Inc., Revere, Massachusetts Revere Federal Savings Bank, Revere, Massachusetts RNB Corporation, Independent Bankers Life Reinsurance Chicago August 13, 2001 Brazil, Indiana Company of Indiana Ltd, Brazil, Indiana Sections 3 and 4 Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date MB-MidCity, Inc., MB Financial, Inc., Chicago August 16, 2001 Chicago, Illinois Chicago, Illinois Manufacturers National Corporation, Chicago, Illinois Manufacturers Bank, Chicago, Illinois MidCity Financial Corporation, Chicago, Illinois First National Bank of Elmhurst, Elmhurst, Illinois Mid-City National Bank of Chicago, Chicago, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

716 Federal Reserve Bulletin • October 2001 Sections 3 and 4—Continued Applicant(s) Nonbanking Activity/Company Reserve Bank Effective Date First National Bank of Morton Grove, Morton Grove, Illinois Union Bank and Trust Company, Oklahoma City, Oklahoma Abrams Centre Bancshares, Inc., Dallas, Texas Abrams Centre National Bank, Dallas, Texas Summit MFR Leasing LLC, Cincinnati, Ohio Sentry Lease Equity Pool 2000-1, LLC, Salt Lake City, Utah APPLICATIONS APPROVED UNDER BANK MERGER ACT By Federal Reserve Banks Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to the Reserve Banks. Applicant(s) Bank(s) Reserve Bank Effective Date 1st Financial Bank, The Rio Grande County Bank, Kansas City August 15, 2001 Overland Park, Kansas Del Norte, Colorado 1st Source Bank, Citizens Financial Services F.S.B., Chicago July 27, 2001 South Bend, Indiana Munster, Indiana First Virginia Bank, State Bank, Richmond August 17, 2001 Falls Church, Virginia Remington, Virginia PENDING CASES INVOLVING THE BOARD OF GOVERNORS This list of pending cases does not include suits against the York, to acquire control of Dime Bancorp, Inc. and to Federal Reserve Banks in which the Board of Governors is not thereby acquire its wholly owned subsidiary, The Dime named a party. Savings Bank of New York, FSB, both of New York, New York. The petition was dismissed on the parties' stipulation on July 23, 2001. Laredo National Bancshares, Inc. v. Whalen v. Board of Governors, No. 99CVQ00940-D3 (District Court, 341st Judi- Nelson v. Greenspan, No. 99-215(EGS) (D.D.C., amended cial District, Webb County, Texas, filed July 26, 2001). complaint filed December 8, 2000). Employment discrimi- Third-party petition seeking indemnification from Board in nation action. On August 15, 2001, the district court granted the Board's motion to dismiss or, in the alternative, for connection with claim asserted against defendant Whalen summary judgment. for tortious interference with a contract. Radfar v. United States, No. 1 :()1CV 1292 (PLF) (D.D.C., Howe u Bank for International Settlements, No. 00CV12485 complaint filed June 11, 2001). Action under the Federal RCL (D. Mass., filed December 7, 2000). Action seeking Tort Claims Act for injury on Board premises. damages in connection with gold market activities and the Artis v. Greenspan, No. 01-CV-0400(ESG) (D.D.C., complaint repurchase of privately-owned shares of the Bank for Interfiled February 22, 2001. Employment discrimination action. national Settlements. On August 15, 2001, the district court consolidated the Individual Reference Services Group, Inc., v. Board of Goveraction with Artis v. Greenspan, No. 99-CV-2073. nors, et al. No. 01-5175 (D.C. Cir., filed May 25, 2001); Dime Bancorp, Inc. v. Board of Governors, No. 00-4249 Trans Union (2d Cir., filed December 11, 2000). Petition for review of a LLC v. Federal Trade Commission, et al., No. 01-5202 (D.C. Board order dated September 27, 2000, approving the appli- Cir., filed June 4, 2001). Appeals of district court order cations of North Fork Corporation, Inc., Melville, New entered April 30, 2001, upholding an interagency rule re- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 717 garding Privacy of Consumer Finance Information. On ment plan for certain Board employees. On March 30, June 21, 2001, the court consolidated these cases with Reed 2001, the district court granted in part and denied in part the Elsevier Inc. v. Board of Governors, No. 00-1289 (D.C. Board's motion to dismiss. Cir., filed June 30, 2000), and related petitions for review Guerrero v. United States, No. CV-F-99-6771 (OWW) (E.D. filed against other federal agencies challenging the same Cal., filed November 29, 1999). Prisoner suit. rules. On June 28, 2001, the court denied the appellants' Artis v. Greenspan, No. 1:99CV02073 (EGS) (D.D.C., filed emergency motion for an injunction pending appeal. On August 3, 1999). Employment discrimination action. August 1, 2001, all appeals and petitions other than Trans Fraternal Order of Police v. Board of Governors, No. Union LLC were dismissed on the motion of the appellants 1:98CV03116 (WBB) (D.D.C., filed December 22, 1998). and petitioners. Declaratory judgment action challenging Board labor prac- Albrecht v. Board of Governors, No. 00-CV-317 (CKK) tices. On February 26, 1999, the Board filed a motion to (D.D.C., filed February 18, 2000). Action challen the retire- dismiss the action. 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 US. Treasury— DOMESTIC FINANCIAL STATISTICS Types and ownership A28 U.S. government securities Money Stock and Bank Credit dealers—Tran s action s 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 finance companies—Owned and managed A10 Condition and Federal Reserve note statements receivables A11 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— A36 Terms Assets and Liabilities A15 All commercial banks in the United States Flow of Funds A16 Domestically chartered commercial banks A17 Large domestically chartered commercial banks A37 Funds raised in U.S. credit markets A19 Small domestically chartered commercial banks A39 Summary of financial transactions A20 Foreign-related institutions A40 Summary of credit market debt outstanding A41 Summary of financial assets and liabilities Financial Markets A22 Commercial paper and bankers dollar DOMESTIC NONFINANCIAL STATISTICS acceptances outstanding A22 Prime rate charged by banks on short-term Selected Measures business loans 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 fiscal and financing operations A47 Consumer and producer prices A26 U.S. budget receipts and outlays A48 Gross domestic product and income A27 Federal debt subject to statutory limitation A49 Personal income and saving Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

90 Federal Reserve Bulletin • October 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 U.S. liabilities to foreign official A63 GUIDE TO STATISTICAL RELEASES AND institutions SPECIAL TABLES Reported by Banks in the United States SPECIAL TABLES A52 Liabilities to, and claims on, foreigners A53 Liabilities to foreigners A64 Pro forma balance sheet and income statement A55 Banks' own claims on foreigners for priced service operations, June 30, 2001 A56 Banks' own and domestic customers' claims on foreigners A66 INDEX TO STATISTICAL TABLES A56 Banks' own claims on unaffiliated foreigners A57 Claims on foreign countries—Combined domestic offices and foreign branches Reported by Nonbanking Business Enterprises in the United States A58 Liabilities to unaffiliated foreigners A59 Claims on unaffiliated foreigners Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A3 Guide to Tabular Presentation SYMBOLS AND ABBREVIATIONS c Corrected G-10 Group of Ten e Estimated GDP Gross domestic product n.a. Not available GNMA Government National Mortgage Association n.e.c. Not elsewhere classified GSE Government-sponsored enterprise 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 NAICS North American Industry Classification System ABS Asset-backed security NOW Negotiable order of withdrawal ATS Automatic transfer service OCDs Other checkable deposits BIF Bank insurance fund OPEC Organization of Petroleum Exporting Countries CD Certificate of deposit OTS Office of Thrift Supervision CMO Collateralized mortgage obligation PMI Private mortgage insurance CRA Community Reinvestment Act of 1977 POs Principal only, stripped, mortgage-back securities FAMC Federal Agriculture Mortgage Corporation REIT Real estate investment trust FFB Federal Financing Bank REMICs Real estate mortgage investment conduits FHA Federal Housing Administration RHS Rural Housing Service FHLBB Federal Home Loan Bank Board RP Repurchase agreement FHLMC Federal Home Loan Mortgage Corporation RTC Resolution Trust Corporation FmHA Farmers Home Administration SCO Securitized credit obligation FNMA Federal National Mortgage Association SDR Special drawing right FSA Farm Service Agency SIC Standard Industrial Classification FSLIC Federal Savings and Loan Insurance Corporation TIIS Treasury inflation-indexed securities G-7 Group of Seven VA Department of Veterans Affairs GENERAL INFORMATION In many of the tables, components do not sum to totals because of include not fully guaranteed issues) as well as direct obligarounding. tions of the Treasury. Minus signs are used to indicate (1) a decrease, (2) a negative "State and local government" also includes municipalities, figure, or (3) an outflow. special districts, and other political subdivisions. "U.S. government securities" may include guaranteed issues of U.S. government agencies (the flow of funds figures also Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A4 Domestic Financial Statistics • October 2001 1.10 RESERVES, MONEY STOCK, AND DEBT MEASURES Percent annual rate of change, seasonally adjusted1 2000 2001 2001 MMoonneettaarryy oorr ccrreeddiitt aaggggrreeggaattee Q3 Q4 Qi Q2 Mar. Apr. May Juner July Reserws of depository institutions~ 1 Total -8.3 -8.7 -2.1 1.7 -18.8 16.6 3.1 -3.5 25.6 2 Required -8.6 -10.4 -3.5 3.3 -18.0 20.8 11.5 -14.4 25.0 3 Nonborrowed -9.9 -6.4 .5 .6 -19.0 16.9 -1.9 -4.0 24.1 4 Monetary base3 2.5 2.8 6.4 5.4 2.6 7.1 6.3 5.6 11.6 Concepts of money and debt4 5 Ml -3.7 -3.3 5.1 5.6 13.8 5.4 -.6 6.6 13.2 6 M2 5.6 6.3 10.7 10.2 14.4 10.4 5.2 9.6 8.5 7 M3 9.0r 7.3r 12.6r 14.1r 9.8r 18.2r 14.0r 13.1 6.8 8 Debt 4.6 4.6r 4.8 4.7 6.1 4.0r 4.3r 4.3 n.a. Nontransaction components 9 In M25 8.5 9.1 12.3 11.5 14.6 11.9 6.8 10.5 7.2 10 In M3 only6 17.0r 9.8r 16.9r 23.0r -,6r 36.0r 33.7r 20.7 3.1 Time and savings deposits Commercial banks 11 Savings, including MMDAs 11.8 12.0 17.4 20.4 19.7 20.4r 18.0 18.9 12.3 12 Smalltime7 10.5 5.6 2.5 -8.31 -6.9 -9.0 -8.9 -11.7 -16.3 13 Large time8'9 11.5 4.1 -1.3 -3.T -47.0 35. r 9.8r 5.6 -8.8 Thrift institutions 14 Savings, including MMDAs 3.1 .4 6.4 21.8 23.6 10.2 32.1 24.4 23.1 15 Small time7 10.8 9.5 6.4 .7 -3.4 1.0 7.2 -7.2 -11.7 16 Large time8 23.2 14.0 11.9 1 l.3r 2.3 20.2 19.9 -10.9 19.7 Money market mutual funds 17 Retail 3.9 11.6 16.9 11.2 24.6 18.1 -11.8 12.1 14.0 18 Institution-only 29.0 18.6 49.8 54.8 40.7 42.4 67.2 44.1 8.1 Repurchase agreements and eurodollars 19 Repurchase agreements10 11.7r 2.r — 7. lr 21.r -17.3r 76.6r 10.2r 4.4 -11.6 20 Eurodollars10 .6 10.3 3.1 -10.7r 14.7 -54.5r 13.3r 8.8 41.1 Debt components4 21 Federal -7.3 -8.0 -5.4 -6.6 1.2 -10.0' -15.8r 2.7 n.a. 22 Nonfederal 7.6 7.6r 7.2 7.2 7.3r 7.2 8.7r 4.6 n.a. 1. Unless otherwise noted, rates of change are calculated from average amounts outstand- depository institutions, and (4) eurodollars (overnight and term) held by U.S. residents at ing during preceding month or quarter. foreign branches of U.S. banks worldwide and at all banking offices in the United Kingdom 2. Figures incorporate adjustments for discontinuities, or "breaks," associated with and Canada. Excludes amounts held by depository institutions, the U.S. government, money regulatory changes in reserve requirements. (See also table 1.20.) market funds, and foreign banks and official institutions. Seasonally adjusted M3 is calculated 3. The seasonally adjusted, break-adjusted monetary base consists of (1) seasonally by summing large time deposits, institutional money fund balances, RP liabilities, adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjusted 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 nonlinancial vault cash exceeds their required reserves) the seasonally adjusted, break-adjusted difference sectors—the federal sector (U.S. government, not including government-sponsored enterbetween current vault cash and the amount applied to satisfy current reserve requirements. prises or federally related mortgage pools) and the nonfederal sectors (state and local 4. Composition of the money stock measures and debt is as follows: governments, households and nonprofit organizations, nonfinancial corporate and nonfarm Ml: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of noncorporate businesses, and farms). Nonfederal debt consists of mortgages, tax-exempt and depository institutions, (2) travelers checks of nonbank issuers, (3) demand deposits at all corporate bonds, consumer credit, bank loans, commercial paper, and other loans. The data, commercial banks other than those owed to depository institutions, the U.S. government, and which are derived from the Federal Reserve Board's flow of funds accounts, are breakforeign banks and official institutions, less cash items in the process of collection and Federal adjusted (that is, discontinuities in the data have been smoothed into the series) and Reserve float, and (4) other checkable deposits (OCDs). consisting of negotiable order of month-averaged (that is, the data have been derived by averaging adjacent month-end levels). withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, 5. Sum of (1) savings deposits (including MMDAs), (2) small time deposits, and (3) retail credit union share draft accounts, and demand deposits at thrift institutions. Seasonally money fund balances, each seasonally adjusted separately. adjusted Ml is computed by summing currency, travelers checks, demand deposits, and 6. Sum of (1) large time deposits, (2) institutional money fund balances, (3) RP liabilities OCDs, each seasonally adjusted separately. (overnight and term) issued by depository institutions, and (4) eurodollars (overnight and M2: Ml plus (1) savings (including MMDAs), (2) small-denomination time deposits (time term) of U.S. addressees, each seasonally adjusted separately. deposits—including retail RPs—in amounts of less than $100,000), and (3) balances in retail 7. Small time deposits—including retail RPs—are those issued in amounts of less than money market mutual funds. Excludes individual retirement accounts (IRAs) and Keogh $100,000. All IRA and Keogh account balances at commercial banks and thrift institutions balances at depository institutions and money market funds. Seasonally adjusted M2 is are subtracted from small time deposits. calculated by summing savings deposits, small-denomination time deposits, and retail money 8. Large time deposits are those issued in amounts of $100,000 or more, excluding those fund balances, each seasonally adjusted separately, and adding this result to seasonally booked at international banking facilities. adjusted Ml. 9. Large time deposits at commercial banks less those held by money market funds, M3: M2 plus (1) large-denomination time deposits (in amounts of $100,000 or more). (2) depository institutions, the U.S. government, and foreign banks and official institutions. balances in institutional money funds, (3) RP liabilities (overnight and term) issued by all 10. Includes both overnight and term. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Money Stock and Bank Credit A5 1.11 RESERVES OF DEPOSITORY INSTITUTIONS AND RESERVE BANK CREDIT1 Millions of dollars Average of Average of daily figures for week ending on date indicated daily figures Factor 2001 2001 May June July June 13 June 20 June 27 July 4 July 11 July 18 July 25 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 585,031 587,457' 593,722 585,179 587,588 586,991 594,395 591,402 591,868 595.806 U.S. government securities2 1 Bought outright—System account3 526,810 532,187 534,518 531,105 532,906 535,009 534,046 532,767 534,240 553355,,882222 3 Held under repurchase agreements 0 0 0 0 0 0 0 0 0 0 Federal agency obligations 4 Bought outright 10 10 10 10 1100 1100 1100 1100 1100 1100 5 Held under repurchase agreements 0 0 0 0 0 0 0 0 0 0 6 Repurchase agreements—triparty4 21.907 18,444 21,095 17,643 17,286 14,931 22.186 20,694 19,729 21,843 7 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions X Adjustment credit 129 105 113 268 57 14 27 150 164 115566 9 Seasonal credit 80 119 177 106 122 138 148 161 176 193 10 Special Liquidity Facility credit 0 0 0 0 0 0 0 0 0 0 1 1 Extended credit 0 0 0 0 0 0 0 0 0 0 P Float -91 539 521 455 1,002 147 1,184 841 368 92 13 Other Federal Reserve assets 36,187 36,052R 37,287 35,592 36,205 36,742 36,794 36,779 37,182 37.691 14 Gold stock 11,046 11,044 11,044 11,045 11,044 11.044 11,044 11.044 11,044 1 1,044 Is; 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 32,488 32,612' 32,700 32,593R 32,618R 32.644R 32,670 32,684 32,698 32,712 ABSORBING RESERVE FUNDS 17 Currency in circulation 591.535 594,536R 601,087 594,278'' 594,018' 593,979' 598,386 601,487 601,089 600.585 18 Reverse repurchase agreements—triparty4 0 0 0 0 0 0 0 0 0 0 19 Treasury cash holdings 514 469 421 481 463 444 440 439 412 407 Deposits, other than reserve balances, with Federal Reserve Banks 20 Treasury 5,149 5,605 5,127 4,878 5.194 6,748 6,444 4,796 4,937 4.923 21 Foreign 100 88 92 85 101 79 122 77 75 107 22 Service-related balances and adjustments 6,946 7,185 7,338 7,008 7,204 7,299 7,572 7,284 7,076 7,498 23 Other 350 298 302 311 284 279 285 283 325 303 24 Other Federal Reserve liabilities and capital 17,971 18,027 17,889 18.130 18,065 18.100 17.725 17,581 17,927 18,056 25 Reserve balances with Federal Reserve Banks3 . . . 8,199 7,106R 7,408 5,846 8,121 5.952R 9,334 5.382 5,967 9,883 End-of-month figures Wednesday figures May June July June 13 June 20 June 27 July 4 July 11 July 18 July 25 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit outstanding 591,914 595,L37R 600,662 589,447 584.961 591,383 593,106 597.469 592.568 610.260 U.S. government securities" 2 Bought outright—System account 527,562 535,110 535,578 531,874 534,482 535.191 532.954 532,818 536.102 536.392 3 Held under repurchase agreements 0 0 0 0 0 0 0 0 0 0 Federal agency obligations 4 Bought outright 10 10 10 10 1100 1100 1100 1100 1100 1100 Held under repurchase agreements 0 0 0 0 0 0 0 0 0 0 6 Repurchase agreements—triparty4 30,310 23,250 26.350 20,500 13,750 19,505 20,350 27,500 16,850 35,050 7 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions X Adjustment credit 67 3 3 29 83 10 8 2277 227700 1188 9 Seasonal credit 86 146 197 111 128 142 149 162 191 194 10 Special Liquidity Facility credit 0 0 0 0 0 0 0 0 0 0 1 1 Extended credit 0 0 0 0 0 0 0 0 0 0 P Float -998 -374R 917 1,104 43 -417 3,153 -315 1,766 621 13 Other Federal Reserve assets 34,877 36,992' 37,606 35,820 36,465 36,942 36,481 37,267 37,379 37,976 14 Gold stock 11,046 11,044 11,044 11,044 11,044 11,044 11,044 11,044 11,044 11,044 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 32,562 32,670R 32,726 32,593' 32,618' 32,644R 32,670 32,684 32,698 32.712 ABSORBING RESERVE FUNDS 17 Currency in circulation 595,911 596,674' 604,179 595.384R 595.172R 596.044R 601,661 602,013 601,833 602.010 IX Reverse repurchase agreements—triparty4 0 0 0 0 0 0 0 0 0 0 19 Treasury cash holdings 510 444 418 466 444 444 417 413 406 418 Deposits, other than reserve balances, with Federal Reserve Banks 20 Treasury 4,396 7,188 5.592 4,729 6,758 6,857 5,684 5,444 5,619 4,717 85 102 84 82 133 73 79 81 70 79 9T Service-related balances and adjustments 7,044 1,512' 7,364 7,008 7,204 7,299 7,572 7,284 7,083 7.498 13 Other 321 271 330 288 266 279 302 259 321 291 24 Other Federal Reserve liabilities and capital 17.845 17,583 18.219 17,766 17,851 17.869 17,748 17,786 17,690 17,855 25 Reserve balances with Federal Reserve Banks~ . . . 11,609 1 L,217R 10,446 9,560 2,996 8,406R 5,558 10,115 5,488 23,348 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 US. 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 • October 2001 1.12 RESERVES AND BORROWINGS Depository Institutions' Millions of dollars Prorated monthly averages of biweekly averages RReesseerrvvee ccllaassssiiffiiccaattiioonn 1998 1999 2000 2001 Dec. Dec. Dec. Jan. Feb. Mar. Apr. May June July 1 Reserve balances with Reserve Banks- 9.026 5.262 7.159 7,190 6.615 6,737 6,863 7.610 7,058 7,673 2 Total vault cash1 44.294 60.619 45.229 47.683 48.517 44,104 43.656 43,263 43,133 43,908 3 36,183 36.392 31.381 32.601 32,734 30,978 31,728 31,772 31,175 31.623 4 Surplus vault cash' 8.111 24.227 13,848 15.083 15,783 13,127 11.929 11,491 11,958 12,285 5 Total reserves6 45,209 41.654 38,540 39.791 39.349 37.715 38,591 39,382 38,233 39,296 6 Required reserves 43.695 40.357 37.216 38.538 37.917 36,329 37,314 38.363 36.873 37,890 7 Excess reserve balances at Reserve Banks7 1.514 1,297 1.325 1.253 1.432 1,385 1,277 1.019 1.360 1.406 8 Total borrowing at Reserve Banks 117 320 210 73 51 58 51 213 229 283 9 Adjustment 101 179 99 39 30 38 15 134 110 109 10 Seasonal 15 67 111 34 21 20 35 79 120 174 11 Special Liquidity Facility* 0 74 0 0 12 Extended credit' 0 0 0 0 0 0 0 0 0 0 Biweekly averages of daily figures for two-week periods ending on dates indicated 2001 Apr. 4 Apr. 18 May 2 May 16 May 30 June 13 June 27r July 11 July 25 Aug. 8 1 Reserve balances with Reserve Banks" 7.287 6,326 7,350 7.159 8.159 6,756 7,275 7,357'' 7,936 7,639 2 Total vault cash' 44,424 43,409 43,690 42.645 43.900 42,155 43,811 44,209 43.325 44,716 3 Applied vault cash4 31.523 31.199 32.413 31.031 32,530 30.268' 31,963 31,432' 31.482 32,303 4 Surplus vault caslr 12,902 12.210 11.277 11.615 11,370 1 l,888r 11.848 12.777 11.843 12.413 5 Total reserves6 38,809 37,525 39.763 38.189 40.689 37,024r 39,238 38.789r 39,418 39,942 6 Required reserves 37,062 36,329 38.549 37.302 39,582 35.775r 37,818 37,227' 38,028 38.783 7 Excess reserve balances at Reserve Banks7 1.747 1,196 1,214 887 1,107 1.248r 1,420 1,562' 1,389 1.159 8 Total borrowing at Reserve Banks 60 42 59 346 97 295 166 244 344 214 9 Adjustment 42 4 20 267 13 195 36 89 159 27 10 Seasonal 18 38 39 79 85 101 130 155 185 188 11 Special Liquidity Facility8 12 Extended credit' 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 X. 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 w ith 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 A 7 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per year Current and previous levels Adjustment credit Seasonal credit2 Extended credit3 9/ O 7/ n 0 1 Effective date 9/ O 7/ n 0 1 9/ O 7/ n 0 1 Effective date 8/21/01 8/21/01 8/21/01 8/23/01 8/21/01 8/23/01 8/21/01 8/23/01 8/22/01 8/21/01 8/21/01 8/21/01 Range of rates for adjustment credit in recent years Range (or F.R. Bank Range (or F.R. Bank Range (or F.R. Ba level)—All of Effective date level)—All of Effective date level)—All of F.R. Banks N.Y. F.R. Banks N.Y. F.R. Banks N.Y. In effect Dec. 31, 1981 1991—Feb. 1 6-6.5 6 2001—Jan. 3 5.75-6.00 5.75 4 6 6 4 5.50-5.75 5.50 1982—July 20 11.5-12 11.5 Apr. 30 5.5-6 5.5 5 5.50 5.50 23 11.5 11.5 May 2 5.5 5.5 31 5.00-5.50 5.00 Aug. 2 11-11.5 11 Sept. 13 5-5.5 5 Feb. 1 5.00 5.00 3 11 11 17 5 5 Mar. 20 4.50-5.00 4.50 16 10.5 10.5 Nov. 6 4.5-5 4.5 21 4.50 4.50 27 10-10.5 10 7 4.5 4.5 Apr. 18 4.00-4.50 4.00 30 10 10 Dec. 20 3.5^1.5 3.5 20 4.00 4.00 Oct. 12 9.5-10 9.5 24 3.5 3.5 May 15 3.50-4.00 3.50 13 9.5 9.5 17 3.50 3.50 Nov. 22 9-9.5 9 1992—July 2 3-3.5 3 June 27 3.25-3.50 3.25 26 9 9 7 3 3 29 3.25 3.25 Dec. 14 8.5-9 9 Aug. 21 3.00-3.25 3.00 15 8.5-9 8.5 1994—May 17 3-3.5 3.5 23 3.00 3.00 17 8.5 8.5 18 3.5 3.5 Aug. 16 3.5-4 4 IInn eeffffeecctt SSeepptt.. 77,, 22000011 3.00 3.00 1984—Apr. 9 8.5-9 9 18 4 4 13 9 9 Nov. 15 4-4.75 4.75 Nov. 21 8.5-9 8.5 17 4.75 4.75 26 8.5 8.5 Dec. 24 8 8 1995—Feb. 1 4.75-5.25 5.25 9 5.25 5.25 1985—Mav 20 7.5-8 7.5 2 4 7.5 7.5 1996—Jan. 31 5.00-5.25 5.00 Feb. 5 5.00 5.00 1986—Mar. 7 7-7.5 7 10 7 7 1998—Oct. 15 4.75-5.00 4.75 Apr. 21 6.5-7 6.5 16 4.75 4.75 23 6.5 6.5 Nov. 17 4.50-4.75 4.50 July 11 6 6 19 4.50 4.50 Aug. 21 5.5-6 5.5 22 5.5 5.5 1999—Aug. 24 4.50-4.75 4.75 26 4.75 4.75 1987—Sept. 4 5.5-6 6 Nov. 16 4.75-5.00 4.75 II 6 6 18 5.00 5.00 1988—Aug. 9 6-6.5 6.5 2000—Feb. 2 5.00-5.25 5.25 II 6.5 6.5 4 5.25 5.25 Mar. 21 5.25-5.50 5.50 1989—Feb. 24 6.5-7 7 23 5.50 5.50 27 7 7 May 16 5.50-6.00 5.50 19 6.00 6.00 1990—Dec. 19 6.5 6.5 1. Available on a short-term basis to help depository institutions meet temporary needs for practices involve only a particular institution, or to meet the needs of institutions experiencing funds that cannot be met through reasonable alternative sources. The highest rate established difficulties adjusting to changing market conditions over a longer period (particularly at times for loans to depository institutions may be charged on adjustment credit loans of unusual size of deposit disintermediation). The discount rate applicable to adjustment credit ordinarily is that result from a major operating problem at the borrower's facility. charged on extended-credit loans outstanding less than thirty days; however, at the discretion 2. Available to help relatively small depository institutions meet regular seasonal needs for of the Federal Reserve Bank, this time period may be shortened. Beyond this initial period, a funds that arise from a clear pattern of intrayearly movements in their deposits and loans and flexible rate somewhat above rates charged on market sources of funds is charged. The rate that cannot be met through special industry lenders. The discount rate on seasonal credit takes ordinarily is reestablished on the first business day of each two-week reserve maintenance into account rates charged by market sources of funds and ordinarily is reestablished on the period, but it is never less than the discount rate applicable to adjustment credit plus 50 basis first business day of each two-week reserve maintenance period; however, it is never less than points. the discount rate applicable to adjustment credit. 4. For earlier data, see the following publications of the Board of Governors: Banking and 3. May be made available to depository institutions when similar assistance is not Monetary Statistics, 1914-1941, and 1941-1970; and the Annual Statistical Digest, 1970reasonably available from other sources, including special industry lenders. Such credit may 1979, and 1980-1989. See also the Board's Statistics: Releases and Historical Data web be provided when exceptional circumstances (including sustained deposit drains, impaired pages (http://www.federalreserve.gOv/reIeases/H 15/data.htm). access to money market funds, or sudden deterioration in loan repayment performance) or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Nonfinancial Statistics • October 2001 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1 Type of deposit Net transaction accounts 1 $0 million-$42.8 million1. 12/28/00 2 More than $42.8 million4 . 12/28/00 3 Nonpersonal time deposits' 12/27/90 4 Eurocurrency liabilities6. . . 12/27/90 1. Required reserves must be held in the form of deposits with Federal Reserve Banks succeeding calendar year by 80 percent of the percentage increase in the total reservable or vault cash. Nonmember institutions may maintain reserve balances with a Federal liabilities of all depository institutions, measured on an annual basis as of June 30. No Reserve Bank indirectly, on a pass-through basis, with certain approved institutions. For corresponding adjustment is made in the event of a decrease. The exemption applies only to previous reserve requirements, see earlier editions of the Annual Report or the Federal accounts that would be subject to a 3 percent reserve requirement. Effective with the reserve Reserve Bulletin. Under the Monetary Control Act of 1980, depository institutions maintenance period beginning December 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 A 9 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS1 Millions of dollars 2000 2001 TTyyppee ooff ttrraannssaaccttiioonn aanndd mmaattuurriittyy 11999988 11999999 22000000 Dec. Jan. Feb. Mar. Apr. May June U.S. TREASURY SECURITIES2 Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 3,550 0 8,676 509 520 2,683 579 308 624 22,,116655 ? Gross sales 0 0 0 0 0 0 0 0 0 0 Exchanges 450,835 464,218 477,904 39,428 40,769 42,767 46,712 38.317 47,112 40,363 4 For new bills 450,835 464,218 477,904 39,428 40,769 42.767 46,712 38,317 47,112 40,363 5 Redemptions 2,000 0 24,522 228 228 638 211 3,537 3,939 0 Others within one year 6 Gross purchases 6,297 11.895 8,809 1,420 0 1,605 67 3,027 2,174 1,410 7 Gross sales 0 0 0 0 0 0 0 0 0 0 8 Maturity shifts 46,062 50,590 62,025 0 10,296 5,609 0 12,204 8,117 0 9 Exchanges -49,434 -53,315 -54.656 0 -6,667 -6,799 0 -7,000 -8,965 0 10 Redemptions 2,676 1,429 3,779 0 2,422 1,529 0 4.368 2,287 0 One to five years 1 1 Gross purchases 12,901 19,731 14,482 1,045 925 2,983 1,883 4,480 2.685 1,428 12 Gross sales 0 0 0 0 0 0 0 0 0 0 13 Maturity shifts -37,777 —44,032 -52,068 0 -10,296 -2,784 0 -12.204 -1,913 0 14 Exchanges 37,154 42.604 46,177 0 6,667 4,945 0 7,000 6,508 0 Five to ten years 15 Gross purchases 2,294 4,303 5,871 771 1,283 0 0 1,390 657 0 IFI Gross sales 0 0 0 0 0 0 0 0 0 0 17 Maturity shifts -5,908 -5,841 -6,801 0 0 -1,855 0 0 -5.130 0 18 Exchanges 7,439 7,583 6,585 0 0 971 0 0 2,457 0 More than ten years 19 Gross purchases 4,884 9,428 5,833 0 296 495 1,000 913 1,241 1.419 20 Gross sales 0 0 0 0 0 0 0 0 0 0 21 Maturity shifts -2,377 -717 -3,155 0 0 -971 0 0 -1,074 0 22 Exchanges 4.842 3,139 1,894 0 0 883 0 0 0 0 All maturities 23 Gross purchases 29,926 45,357 43,670 3.745 3,024 7,766 3,529 10,118 7,380 6.422 24 Gross sales 0 0 0 0 0 0 0 0 0 0 25 Redemptions 4,676 1,429 28,301 1,145 2,650 2,166 211 7,905 6,226 0 Matched transactions 26 Gross purchases 4,430,457 4,413,430 4,399,257 345,680 356,250 320,060 396,029 381.667 398,039 367.462 27 Gross sales 4,434,358 4,431,685 4,381,188 348,917 352,336 322,056 395.151 381,895 397,600 366,411 Repurchase agreements 28 Gross purchases 512,671 281,599 0 0 0 0 0 0 0 0 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 -637 4,289 3.604 4,196 1,984 1,592 7,472 FEDERAL AGENCY OBLIGATIONS Outright transactions 31 Gross purchases 0 0 0 0 0 0 0 0 0 0 32 Gross sales 25 0 0 0 0 0 0 0 0 0 33 Redemptions 322 157 51 0 0 120 0 0 0 0 Repurchase agreements 34 Gross purchases 284,316 360,069 0 0 0 0 0 0 0 0 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 -120 0 0 0 0 Reverse repurchase agreements 37 Gross purchases 0 0 0 0 0 0 0 0 0 0 38 Gross sales 0 0 0 0 0 0 0 0 0 0 Repurchase agreements 39 Gross purchases 0 304,989 890.236 95,470 104,930 67,655 86,472 85,166 120,135 65,005 40 Gross sales 0 164,349 987,501 79,365 129,385 62,910 88,142 82,154 1 14,832 72,065 41 Net change in triparty obligations 0 140,640 -97,265 16,105 -24,455 4,745 -1,670 3,012 5,303 -7.060 42 Total net change in System Open Market Account . . . 27,538 135,780 -63,877 15,468 -20,166 8,229 2,526 4,996 6,895 412 1. Sales, redemptions, and negative figures reduce holdings of the System Open Market 2. Transactions exclude changes in compensation for the effects of inflation on the principal Account; all other figures increase such holdings. of inflation-indexed securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic Nonfinancial Statistics • October 2001 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements1 Millions of dollars Wednesday End of month AAAccccccooouuunnnttt 2001 2001 June 27 July 4 July 11 July 18 July 25 May 31 June 30 July 31 Consolidated condition statement ASSETS 1 Gold certificate account 11,044 11.044 11.044 11.044 11,044 11.046 11,044 11,044 2 Special drawing rights certificate account 2,200 2.200 2.200 2.200 2.200 2.200 2.200 2,200 3 1,120 1.092 1,063 1.079 1,092 1,075 1,126 1,109 Loans 4 To depository institutions 152 157 189 461 212 154 150 201 .1 Other 0 0 0 0 0 0 0 0 6 Acceptances held under repurchase aereements 0 0 0 0 0 0 0 0 Tripartx Obligations 7 Repurchase agreements—triparty" 19,505 20.350 27.500 16,850 35.050 30.310 23.250 26.350 Federal a%enc\ obligations3 8 Bought outright 10 10 10 10 10 10 10 10 9 Held under repurchase agreements 0 0 0 0 0 0 0 0 10 Total U.S. Treasury securities3 535,191 532,954 532,818 536,102 536,392 527,562 535,110 535,578 11 Bought outrieht4 535.191 532.954 532.818 536,102 536.392 527,562 535.1 10 535,578 1? Bills 181,211 180.728 179,604 179,999 180.278 177,911 181.126 180,184 13 254,225 252.428 252.565 255,355 255.362 251.415 254,228 254.627 14 Bonds 99,754 99.798 100.648 100.748 100.752 98.236 99,756 100.767 15 Held under repurchase agreements 0 0 0 0 0 0 0 0 16 Total loans and securities 554,858 553,471 560,517 553,423 571,664 558,035 558,519 562,139 17 Items in process of collection 7,888 13.594 8,027 9.475 7.160 7.670 5.573 10.421 18 Bank premises 1.505 1.510 1.512 1.513 1.514 1,504 1,509 1,505 Other assets 19 Denominated in foreign currencies3 14.782 14.439 14.593 14,652 14.779 14,759 14.428 14,665 20 All other6 20.490 20.209 20.805 21,049 21,520 18,441 20.667 21.251 21 Total assets 613,887 617,559 619,761 614,436 630,973 614,730 615,066 624,333 LIABILITIES 22 Federal Reserve notes 564.964 570.500 570.805 570.621 570.808 564,934 565.574 572.980 23 Reverse repurchase aereements—tripartv" 0 0 0 0 0 0 0 0 24 Total deposits 23,675 18,886 23,677 18,467 35,204 24,040 26,208 23,733 2.5 Depository institutions 16.466 12.822 17.893 12.458 30.118 19.238 18,647 17,727 26 U.S. Treasurv—General account 6.857 5.684 5.444 5.619 4,717 4,396 7.188 5,592 27 Foreign Official accounts 73 79 81 70 79 85 102 84 28 Other 279 302 259 321 291 321 271 330 79 Deferred credit items 7,380 10.426 7.493 7.658 7.106 7.910 5.701 9.401 30 Other liabilities and accrued dividends7 3,305 3.071 3.071 3.030 3.068 3,467 3,140 3,076 31 Total liabilities 599,324 602,882 605,046 599,776 616,186 600,351 600,623 609,191 CAPITAL ACCOUNTS 31 Capital paid in 7.139 7.143 7.143 7,153 7.153 7.070 7,143 7.164 33 Surplus 6.671 6.598 6.677 6,721 6.729 6,557 6,584 6,723 34 Other capital accounts 753 936 894 786 905 751 716 1.256 35 Total liabilities and capital accounts 613,887 617.559 619,761 614,436 630,973 614,730 615,066 624,333 MEMO 36 Marketable U.S. Treasurv 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) 736,246 735.350 735.520 737,247 738.458 736,954 735.805 738.388 38 LESS: Held by Federal Reserve Banks 171,282 164.851 164.714 166.627 167.650 172,020 170,231 165,409 39 Federal Reserve notes, net 564,964 570.500 570.805 570,621 570.808 564,934 565,574 572.980 Collateral held against notes, net 40 Gold certificate account 11.044 11.044 11,044 11.044 11.044 11.046 11,044 11,044 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 0 0 0 0 0 0 0 43 U.S. Treasury and agency securities 551.721 557.256 557.562 557.377 557,564 551.689 552.330 559.736 44 Total collateral 570,500 564,964 570,805 570,621 570,808 564,934 565,574 572,980 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 month1 TTTyyypppeee ooofff hhhooollldddiiinnnggg aaannnddd mmmaaatttuuurrriiitttyyy 2001 2001 June 27 July 4 July 11 July 18 July 25 May 31 June 30 July 31 1 Total loans 152 157 189 461 212 154 150 201 2 Within fifteen days2 146 23 50 452 205 132 114 160 3 Sixteen days to ninety days 6 134 140 9 7 21 36 41 4 91 days to 1 year 0 0 0 0 0 0 0 0 5 Total U.S. Treasury securities3 535,191 532,954 532,818 536,102 536,392 527,562 535,108 535,578 Within fifteen days2 21,211 10,993 14,493 20,951 21,082 4,645 10,105 13,674 7 Sixteen days to ninety days 115,867 124,830 119,377 112,501 111,414 115,568 126,214 111,161 8 Ninety-one days to one year 123,266 124,036 124,865 126,909 128,145 135,422 123.941 135,091 9 One year to five years 141,089 139,331 139,333 144,849 144,849 139,658 141,089 144.732 10 Five years to ten years 57,526 57,529 57,666 53,804 53,809 57,508 57,527 53,824 11 More than ten years 76,232 76,234 77,084 77,088 77,092 74,762 76,232 77.095 12 Total federal agency obligations 10 10 10 10 10 10 10 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 10 10 10 10 10 10 10 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. Denotes last calendar day of the month, but data reflect last business day of the month. 3. Includes compensation that adjusts for the eifects of inflation on the principal of 2. Holdings under repurchase agreements are classified as maturing within fifteen days in inflation-indexed securities, accordance with maximum maturity of the agreements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A12 Domestic Nonfinancial Statistics • October 2001 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 2000 2001 IItteemm 11999977 11999988 11999999 22000000 DDeecc.. DDeecc.. DDeecc.. DDeecc.. Dec. Jan. Feb. Mar. Apr. May June1 July Seasonally adjusted AADDJJUUSSTTEEDD FFOORR CCHHAANNGGEESS IINN RREESSEERRVVEE RREEQQUUIIRREEMMEENNTTSS'' 11 TToottaall rreesseerrvveess33 46.85 45.18 41.78 38.51 38.51 38.83 38.87 38.26 38.79 38.89 38.77 39.60 22 NNoonnbboorrrroowweedd rreesseerrvveess44 46.52 45.07 41.46 38.30 38.30 38.75 38.82 38.20 38.74 38.68 38.55 39.32 33 NNoonnbboorrrroowweedd rreesseerrvveess pplluuss eexxtteennddeedd ccrreeddiitt55 46.52 45.07 41.46 38.30 38.30 38.75 38.82 38.20 38.74 38.68 38.55 39.32 44 RReeqquuiirreedd rreesseerrvveess 45.16 43.67 40.48 37.18 37.18 37.57 37.43 36.87 37.51 37.87 37.41 38.20 55 MMoonneettaarryy bbaassee66 479.47 513.49 593.09 583.96 583.96 589.39 591.12 592.42 595.92 599.06 601.88 607.68 Not seasonally adjusted 6 Total reserves7 48.01 45.31 41.89 38.60 38.60 39.78 39.38 37.76 38.66 39.46 38.33 39.41 7 Nonborrowed reserves 47.69 45.19 41.57 38.39 38.39 39.70 39.33 37.71 38.61 39.25 38.10 39.13 8 Nonborrowed reserves plus extended credit5 47.69 45.19 41.57 38.39 38.39 39.70 39.33 37.71 38.61 39.25 38.10 39.13 9 Required reserves8 46.33 43.80 40.59 37.27 37.27 38.52 37.95 36.38 37.38 38.44 36.97 38.01 10 Monetary base9 484.98 518.27 600.72 590.20 590.20 591.50 589.04 591.36 594.92 598.57 601.69 608.22 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS10 11 Total reserves" 47.92 45.21 41.65 38.54 38.54 39.79 39.35 37.72 38.59 39.38 38.23 39.30 12 Nonborrowed reserves 47.60 45.09 41.33 38.33 38.33 39.72 39.30 37.66 38.54 39.17 38.00 39.01 13 Nonborrowed reserves plus extended credit5 47.60 45.09 41.33 38.33 38.33 39.72 39.30 37.66 38.54 39.17 38.00 39.01 14 Required reserves 46.24 43.70 40.36 37.22 37.22 38.54 37.92 36.33 37.31 38.36 36.87 37.89 15 Monetary base1- 491.79 525.06 608.02 597.12 597.12 598.38 595.59 598.20 601.84 605.48 608.83 615.56 16 Excess reserves13 1.69 1.51 1.30 1.33 1.33 1.25 1.43 1.39 1.28 1.02 1.36 1.41 17 Borrowings from the Federal Reserve .32 .12 .32 .21 .21 .07 .05 .06 .05 .21 .23 .28 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 elfect 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 2001 1997 1998 1999 2000 IItteemm Dec. Dec. Dec. Dec. Apr. May June' July Seasonally adjusted Measures2 1 Ml 1,073.4 1,097.0 1,124.8 1,088.2 1,118.1 1.117.5 1,123.6 1,136.0 7 M2 4,031.9 4,385.9 4,653.3 4,945.1 5,145.5 5,167.6r 5.209.0 5,246.0 3 M3 5,430.8 6,030.8 6,530.9r 7,111.5r 7,437.9r 7.524.4r 7,606.6 7,649.8 4 Debt 15,223.2 16,246.1 17,315.0r 18,222.6r 18,502.6r 18,568.3' 18.634.3 n.a. Ml components Currency3 424.3 459.2 516.7 529.9 542.6 546.0' 554488..55 554.2 6 Travelers checks4 8.1 8.2 8.2 8.0 7.8 8.0 8.2 8.6 7 Demand deposits5 395.4 379.4 356.1 311.3 312.9 312.4 310.8 313.4 8 Other checkable deposits6 245.7 250.1 243.7 239.0 254.8 251.1 256.0 259.9 Nontransaction components 9 In M2 2,958.5 3,288.9 3,528.5 3,856.9 4,027.4 4,050.1 4,085.5 4,110.0 10 In M3 only8 1,399.0 1,645.0 l,877.7r 2,166.3r 2,292.4' 2,356.8r 2,397.5 2,403.7 Commercial banks 11 Savings deposits, including MMDAs 1,021.1 1,185.8 1,287.0 1,421.7 i,5i7.r 1.539.9' 1,564.2 1,580.2 12 Small time deposits9 625.5 626.4 635.2 699.6 690.7 685.6 678.9 669.7 13 Large time deposits'0- " 517.4 575.2 648.3 726.6 697.2r 702.9 706.2 701.0 Thrift institutions 14 Savings deposits, including MMDAs 376.8 414.1 449.3 451.9 475.1 487.8 497.7 507.3 Small time deposits9 342.9 325.8 320.9 346.6 349.9 352.0 349.9 346.5 16 Large time deposits10 85.5 88.7 91.3 103.2 108.6 110.4 109.4 111.2 Money market mutual funds 17 Retail 592.1 736.8 836.2 937.2 994.6 984.8 994.7 1,006.3 18 Institution-only 391.8 531.8 623.5 768.3 919.4 970.9 1,006.6 1,013.4 Repurchase agreements and eurodollars 19 Repurchase agreements'" 254.3 297.5 334411,,22rr 371.2r 337788..22rr 338811..44'' 382.8 379.1 20 Eurodollars'" 150.0 151.8 173.3 197.1 189.0r 191.1' 192.5 199.1 Debt components 21 Federal debt 3,800.6 3,751.2 3,660.3 3,400.5 3,347.3r 33,,330033..33rr 3,310.6 n.a. 22 Nonfederal debt 11,422.6 12,494.9 13,654.8r 14,822.lr 15,155.3r 15,265.0r 15.323.7 n.a. Not seasonally adjusted Measures2 7.3 Ml 1,096.9 1,120.4 1,148.3 1,112.4 1,123.2 1,111.5 1,123.0 1,135.9 74 M2 4,053.2 4,408.2 4,677.3 4,973.7 5,209.5 5,143.6 5,191.8 5,219.7 25 M3 5,456.2 6,062.9 6,568.4r 7,156.4r 7,500.5r 7,500.2r 7,576.6 7,591.7 26 Debt 15,218.9 16,241.4 17,310.4' 18,215.2r 18,471.6' 18,493.9r 18,551.1 n.a. MI components 27 Currency3 428.1 463.3 521.5 535.2 543.0 546.1 549.2 554.8 28 Travelers checks4 8.3 8.4 8.4 8.1 7.9 8.0 8.0 8.2 29 Demand deposits5 412.4 395.9 371.7 326.6 313.0 307.2 309.6 314.6 30 Other checkable deposits6 248.2 252.8 246.6 242.5 259.3 250.2 256.1 258.2 Nontransaction components 31 In M27 2,956.3 3,287.8 3.529.1 3,861.3 4,086.2 4,032.0' 4,068.7 4,083.7 32 In M3 only8 1,403.0 1,654.8 l,891.1r 2,182.7r 2,291,0r 2,356.7r 2,384.8 2,372.0 Commercial banks 33 Savings deposits, including MMDAs 1,020.4 1,186.0 1,288.5 1,426.4 1,542.2 l,535.5r 1,566.8 1,578.8 34 Small time deposits9 625.3 626.5 635.4 699.8 691.2 683.3 675.3 667.9 35 Large time deposits10- " 516.8 574.5 647.7 725.9 702.0 708.7 709.3 699.2 Thrift institutions 36 Savings deposits, including MMDAs 376.5 414.2 449.8 453.4 482.9 486.4 498.6 506.8 37 Small time deposits9 342.8 325.8 321.0 346.8 350.2 350.8 348.0 345.6 38 Large time deposits10 85.4 88.6 91.2 103.1 109.4 111.3 109.9 110.9 Money market mutual funds 39 Retail 591.3 735.2 834.3 935.0 1,019.6 976.0 980.2 984.6 40 Institution-only 398.9 543.7 638.4 786.2 915.3 957.1 985.0 986.2 Repurchase agreements and eurodollars 41 Repurchase agreements'2 249.5 293.4 333377..77rr 368.1r 337744..77'' 386.7' 387.6 379.0 42 Eurodollars'2 152.3 154.5 176.0 199.5 189.6' 192.9r 193.0 196.8 Debt components 43 Federal debt 3,805.8 3,754.9 3,663.2 3.403.5 3,341.0 3,262.9 3,252.0 n.a. 44 Nonfederal debt 11,413.1 12,486.5 13,647.2r 14,811.7r 15,130.5' 15,231,0r 15,299.0 n.a. Footnotes appear on following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 DomesticN onfinancial Statistics • October 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: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of adjusted (that is, discontinuities in the data have been smoothed into the series) and depository institutions; (2) travelers checks of nonbank issuers; (3) demand deposits at all month-averaged (that is, the data have been derived by averaging adjacent month-end levels). commercial banks other than those owed to depository institutions, the U.S. government, and 3. Currency outside the U.S. Treasury, Federal Reserve Banks, and vaults of depository foreign banks and official institutions, less cash items in the process of collection and Federal institutions. Reserve float; and (4) other checkable deposits (OCDs). consisting of negotiable order of 4. Outstanding amount of U.S. dollar-denominated travelers checks of nonbank issuers. withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, Travelers checks issued by depository institutions are included in demand deposits. credit union share draft accounts, and demand deposits at thrift institutions. Seasonally 5. Demand deposits at commercial banks and foreign-related institutions other than those adjusted Ml is computed by summing currency, travelers checks, demand deposits, and owed to depository institutions, the U.S. government, and foreign banks and official institu- OCDs, each seasonally adjusted separately. tions, less cash items in the process of collection and Federal Reserve float. M2: Ml plus (1) savings deposits (including MMDAs), (2) small-denomination time 6. Consists of NOW and ATS account balances at all depository institutions, credit union deposits (time deposits—including retail RPs—in amounts of less than $100,000). and (3) share draft account balances, and demand deposits at thrift institutions. balances in retail money market mutual funds. Excludes individual retirement accounts 7. Sum of (1) savings deposits (including MMDAs), (2) small time deposits, and (3) retail (IRAs) and Keogh balances at depository institutions and money market funds. Seasonally money fund balances. adjusted M2 is calculated by summing savings deposits, small-denomination time deposits, 8. Sum of (1) large time deposits. (2) institutional money fund balances, (3) RP liabilities and retail money fund balances, each seasonally adjusted separately, and adding this result to (overnight and term) issued by depository institutions, and (4) eurodollars (overnight and seasonally adjusted M1. 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 Liabilities' A. All commercial banks Billions of dollars Monthly averages Wednesday figures Account 2000 2001 2001 Julyr Jan.1 Feb.1 Mar.1 Apr.1 May' Juner July- July 4 July 11 July 18 July 25 Seasonally adjusted Assets 1 Bank credit 5,063.8 5,264.3 5.274.3 5,285.3 5,317.1 5,323.6 5,317.7 5,314.2 5,292.7 5,296.8 5,299.8 5,321.2 2 Securities in bank credit 1,307.2 1.356.7 1,350.9 1.345.7 1.364.2 1,370.9 1.380.0 1,386.0 1,373.7 1,367.2 1,374.5 1,388.0 3 U.S. government securities . . 814.1 785.1 776.1 757.1 763.3 765.8 764.1 771.5 763.1 764.6 762.3 775.1 4 Other securities 493.1 571.6 574.8 588.6 600.8 605.1 615.9 614.5 610.5 602.6 612.2 612.9 5 Loans and leases in bank credit 3,756.6 3,907.6 3,923.4 3.939.6 3,952.9 3,952.7 3,937.7 3,928.1 3,919.0 3,929.6 3,925.4 3,933.2 6 Commercial and industrial . . 1,068.9 1.101.6 1,106.6 1,104.5 1,099.8 1,096.7 1,079.8 1,069.4 1,066.1 1,068.5 1,071.0 1,072.0 7 Real estate 1,610.7 1.659.4 1.670.6 1,678.9 1,688.4 1,698.7 1,701.1 1,706.8 1,702.1 1.712.1 1,709.7 1.703.4 8 Revolving home equity . . 119.0 132.2 133.9 135.8 137.2 138.5 139.7 141.3 140.5 140.7 141.2 141.5 9 Other 1.491.7 1,527.3 1,536.7 1,543.0 1,551.1 1.560.2 1,561.4 1,565.6 1,561.6 1,571.4 1,568.5 1,561.9 10 Consumer 520.1 546.8 546.1 544.5 549.4 553.1 550.9 548.5 547.1 548.1 549.3 552.0 11 Security1 153.8 169.9 168.2 174.1 179.4 167.8 171.5 169.5 171.1 168.4 164.6 171.3 12 Other loans and leases 403.0 429.9 432.0 437.7 435.9 436.4 434.4 433.9 432.7 432.5 430.7 434.5 13 Interbank loans 240.3 270.3 267.4 276.1 290.3 284.3 270.0 273.3 258.6 265.0 273.9 286.8 14 Cash assets4 285.4 273.4 265.5 270.2 287.8 280.6 272.7 285.4 281.8 276.0 274.3 305.0 15 Other assets5 389.3 411.1 413.1 428.1 418.7 413.2 406.8 415.9 414.0 415.2 415.8 413.0 16 Total assets6 5,917.5 6,154.4 6,155.3 6,194.8 6,248.3 6,236.2 6,201.9 6,223.1 6,181.8 6,187.5 6,198 J 6,260.1 Liabilities 17 Deposits 3,728.1 3.892.4 3,891.4 3.925.5 3,991.3 4,005.1 4.038.1 4,061.2 4.090.7 4,046.2 4.030.2 4,060.3 18 Transaction 611.0 608.2 607.7 606.8 608.8 612.4 6(X).2 605.1 592.5 582.3 601.9 642.4 19 Nontransaction 3,117.1 3.284.2 3,283.6 3,318.7 3,382.5 3,392.7 3,437.8 3,456.1 3,498.2 3.463.9 3,428.2 3.417.9 20 Large time 917.0 941.8 937.0 934.8 950.8 965.5 978.4 972.1 993.3 977.8 963.6 965.7 21 Other 2.200.1 2.342.4 2,346.6 2,383.8 2,431.7 2,427.2 2,459.4 2,483.9 2,505.0 2,486.1 2,464.6 2,452.2 22 Borrowings 1,216.0 1,264.6 1,259.7 1,244.1 1,283.6 1.252.2 1,218.9 1,229.6 1,207.8 1,219.3 1,221.3 1,249.4 23 From banks in the U.S 387.6 397.3 396.3 395.7 406.8 386.6 385.3 393.2 387.2 392.4 392.5 398.1 24 From others 828.4 867.3 863.4 848.4 876.9 865.7 833.6 836.4 820.6 826.9 828.8 851.3 25 Net due to related foreign offices . . . 237.1 221.2 219.4 233.3 190.0 207.4 184.4 190.8 159.5 196.1 203.6 196.0 26 Other liabilities 3<X).2 365.1 343.4 352.1 349.6 338.8 349.5 328.2 328.0 319.0 332.2 324.8 27 Total liabilities 5,481.4 5,743.4 5,713.9 5,754.8 5,814.5 5,803.5 5,790.8 5,809.8 5,786.0 5.780.5 5,787.2 5,830.5 28 Residual (assets less liabilities)7 . 436.2 411.0 441.4 439.9 433.8 432.7 411.1 413.3 395.9 406.9 411.0 429.6 Not seasonally adjusted ets 29 Bank credit 5 044.0 5,279.1 5,269.3 5,272.5 5,309.4 5,312.8 5,310.5 5,293.5 5,296.5 5,275.4 5,279.8 5,284.2 30 Securities in bank credit 1,297.8 1,361.9 1,352.7 1,349.8 1.365.8 1,370.1 1,379.3 1,376.9 1,370.0 1,359.8 1,364.1 1,375.2 31 US. government securities 808.9 787.3 777.9 763.0 768.2 766.7 764.4 767.4 762.4 762.0 757.5 768.6 Other securities 488.9 574.6 574.8 586.8 597.6 603.4 614.9 609.5 607.6 597.7 606.7 606.7 Loans and leases in bank credit . . 3,746.1 3,917.3 3,916.6 3,922.7 3,943.7 3,942.7 3,931.2 3,916.6 3,926.6 3,915.6 3,915.7 3,909.0 Commercial and industrial 1,067.8 1,098.9 1,105.9 1,106.0 1,104.5 1,099.0 1,082.1 1,068.6 1,074.5 1,068.6 1,070.7 1,066.5 Real estate 1,609.9 1,658.5 1,664.0 1,671.4 1,684.0 1.699.1 1,700.5 1,705.9 1.702.7 1,711.4 1,708.7 1,700.9 Revolving home equity 119.4 131.4 132.8 134.2 136.2 138.6 139.9 141.7 140.8 141.1 141.7 142.0 Other 1,490.5 1,527.1 1,531.3 1,537.2 1,547.8 1,560.5 1,560.6 1,564.2 1,561.8 1,570.3 1.567.1 1,559.0 Consumer 517.5 551.2 546.7 540.7 546.3 550.9 548.2 546.0 545.4 544.2 546.6 549.6 Credit cards and related plans. 197.3 218.2 213.3 209. i 214.5 219.2 217.0 215.9 215.2 213.6 215.8 219.9 Other 320.2 332.9 333.5 331.6 331.8 331.7 331.2 330.0 330.2 330.6 330.8 329.7 Security1 147.1 177.7 171.0 170.1 175.1 161.8 167.0 161.8 164.2 158.2 158.6 161.7 Other loans and leases 403.8 431.0 428.9 434.4 433.9 432.0 433.5 434.3 439.9 433.3 431.0 430.3 43 Interbank loans 235.2 272.4 269.2 283.5 296.3 277.6 267.7 265.5 268.8 260.9 265.5 265.1 44 Cash assets4 276.3 289.4 266.6 260.2 283.0 278.3 269.0 276.4 300.3 265.6 265.7 277.4 45 Other assets5 387.7 413.0 412.2 427.3 418.6 413.5 407.6 414.4 419.9 415.0 414.2 406.4 46 Total assets 5,882.0 6,189.5 6,152.3 6,178.6 6,242.0 6,216.7 6,1893 6,1843 6,220.1 6,151.5 6,159.8 6,167.5 Liabilities 47 Deposits 3,700.6 3,907.2 3.908.3 3,935.8 4,010.5 3,993.1 4,019.1 4,029.6 4,107.1 4,021.7 3,998.2 3,990.7 48 Transaction 605.0 620.0 599.6 600.8 615.0 602.7 599.8 598.8 625.7 575.7 593.5 610.4 49 Nontransaction 3,095.7 3,287.3 3,308.7 3,335.0 3,395.5 3,390.4 3,419.3 3,430.8 3.481.4 3,446.0 3,404.6 3,380.4 50 Large time 904.8 954.8 948.7 938.0 952.1 964.2 968.9 958.3 973.9 962.8 950.4 953.5 51 Other 2,190.9 2,332.4 2,360.1 2,397.0 2,443.4 2,426.2 2,450.4 2,472.5 2,507.5 2,483.2 2.454.2 2,426.9 52 Borrowings 1,206.2 1,281.9 1,263.3 1,242.4 1,284.4 1,257.3 1,219.7 1,220.2 1,208.1 1,211.7 1,215.1 1,233.8 53 From banks in the U.S 384.5 403.5 400.7 399.3 410.0 389.7 386.1 389.9 388.4 390.5 389.8 391.5 54 From others 821.8 878.3 862.6 843.2 874.3 867.6 833.6 830.3 819.7 821.1 825.3 842.3 55 Net due to related foreign offices 231.0 225.4 225.5 232.2 183.0 206.5 180.6 184.4 155.3 187.0 196.0 187.5 56 Other liabilities 296.5 367.6 347.4 350.8 344.7 339.5 347.4 323.8 324.9 312.4 326.8 320.2 57 Total liabilities 5,434.3 5,782.0 5,744.5 5,7613 5,822.6 5,796.4 5,766.8 5,758.0 5,795.4 5,732.8 5,736.1 5,7323 58 Residual (assets less liabilities)7 447.7 407.5 407.8 417.3 419.5 420.3 422.4 426.3 424.7 418.7 423.6 435.2 Footnotes appear on p. A2I. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Financial Statistics • October 2001 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'—Continued B. Domestically chartered commercial banks Billions of dollars Monthly averages Wednesday figures AAAccccccooouuunnnttt 2000 2001 2001 Julyr Jan.r Feb.r Mar.r Apr/ Mayr Juner July July 4 July 11 July 18 July 25 Seasonally adjusted Assets 1 Bank credit 4,487.6 4,649.5 4,665.9 4,662.6 4,690.9 4,713.3 4,716.3 4,721.7 4,699.7 4,708.3 4.712.5 4,728.7 2 Securities in bank credit 1,103.6 1,147.1 1,150.8 1,138.4 1,143.1 1,155.8 1,162.8 1,167.3 1,152.8 1,150.1 1,156.7 1,170.5 3 U.S. government securities 736.1 718.5 711.7 689.0 689.1 696.8 697.0 704.7 693.7 698.4 695.7 708.7 4 Other securities 367.5 428.6 439.1 449.3 454.0 458.9 465.9 462.6 459.1 451.6 461.0 461.8 5 Loans and leases in bank credit2 3.384.0 3,502.4 3,515.1 3,524.3 3,547.8 3,557.5 3,553.4 3,554.4 3,546.9 3,558.2 3,555.7 3,558.3 6 Commercial and industrial 865.3 887.1 889.8 884.7 881.3 880.1 871.0 865.4 863.0 866.0 866.4 867.1 7 Real estate 1,592.7 1,641.0 1,651.9 1,660.4 1,670.6 1,680.9 1,683.5 1,689.0 1,684.5 1,694.5 1,692.1 1,685.5 8 Revolving home equity 119.0 132.2 133.9 135.8 137.2 138.5 139.7 141.3 140.5 140.7 141.2 141.5 9 Other 1,473.6 1,508.8 1,518.0 1,524.6 1.533.4 1,542.4 1,543.8 1,547.8 1,543.9 1,553.8 1,550.8 1,544.0 10 Consumer 520.1 546.8 546.1 544.5 549.4 553.1 550.9 548.5 547.1 548.1 549.3 552.0 11 Security1 70.2 64.8 62.9 67.0 78.7 75.1 80.7 83.3 85.3 82.4 81.9 85.7 12 Other loans and leases 335.7 362.7 364.4 367.7 367.7 368.4 367.4 368.2 367.0 367.3 366.0 367.9 13 Interbank loans 216.8 241.1 239.0 245.6 262.2 253.8 246.5 251.0 236.6 241.3 249.6 264.8 14 Cash assets4 240.9 231.9 223.9 229.6 249.3 243.8 237.5 249.9 247.9 240.3 238.3 268.3 15 Other assets5 347.3 375.2 377.9 391.7 379.0 375.9 369.5 384.0 381.2 383.0 382.6 381.3 16 Total assets6 5,231.7 5,433.4 5,442.0 5,465.1 5,516.2 5,521.6 5,504.7 5,541.2 5,500.5 5,507.7 5,517.7 5,577.6 Liabilities 17 Deposits 3,338.0 3,505.8 3.510.8 3.547.2 3,597.2 3,596.4 3,618.9 3,648.1 3,662.1 3,627.5 3,622.6 3,651.1 18 Transaction 599.9 598.1 597.4 597.3 598.0 601.6 590.3 595.4 581.9 572.3 592.5 633.4 19 Nontransaction 2,738.1 2,907.7 2,913.4 2,949.9 2,999.2 2,994.8 3,028.5 3,052.7 3,080.2 3,055.3 3,030.1 3,017.7 20 Large time 540.3 567.5 568.9 568.2 569.8 569.9 571.5 571.2 577.6 571.6 567.8 567.8 21 Other 2.197.8 2,340.2 2,344.5 2,381.6 2,429.3 2,424.8 2,457.1 2,481.6 2,502.6 2,483.7 2,462.3 2,449.9 22 Borrowings 1.012.6 1,021.1 1,021.2 1.010.7 1,043.1 1,032.8 1,002.5 1,017.5 986.8 1,016.6 1,016.6 1,036.3 23 From banks in the U.S 366.5 372.2 373.8 371.2 380.9 365.1 361.0 369.1 357.4 371.5 371.8 373.0 24 From others 646.0 649.0 647.4 639.5 662.1 667.7 641.4 648.4 629.4 645.1 644.8 663.2 25 Net due to related foreign offices .... 216.8 217.7 214.6 211.4 185.5 211.8 204.1 207.1 198.3 208.7 209.0 209.2 26 Other liabilities 225.6 285.3 266.3 269.3 261.0 253.4 265.9 249.5 249.4 241.7 251.1 244.7 27 Total liabilities 4,793.0 5,029.9 5,012.9 5,038.6 5,086.7 5,094.4 5,091.3 5,122.3 5,096.5 5,094.6 5,099.3 5,141.3 28 Residual (assets less liabilities)7 438.7 403.5 429.0 426.5 429.5 427.2 413.4 418.9 404.0 413.1 418.4 436.3 Not seasonally adjusted Assets 29 Bank credit 4,472.1 4,656.3 4.657.6 4,654.7 4,686.2 4,707.2 4,712.8 4,705.5 4,706.0 4,692.8 4,694.6 4,698.3 30 Securities in bank credit 1,094.2 1.152.3 1,152.6 1,142.5 1.144.7 1,155.0 1,162.1 1,158.2 1,149.1 1,142.6 1,146.4 1,157.8 31 U.S. government securities 730.9 720.7 713.4 694.9 694.0 697.7 697.3 700.6 693.0 695.9 690.8 702.2 32 Other securities 363.4 431.6 439.2 447.5 450.7 457.3 464.8 457.6 456.1 446.7 455.5 455.6 33 Loans and leases in bank credit2 3,377.8 3,504.0 3,505.1 3,512.3 3,541.5 3,552.2 3,550.6 3,547.3 3,557.0 3,550.2 3,548.3 3,540.5 34 Commercial and industrial 864.9 882.7 886.9 885.1 887.7 885.4 874.4 865.3 871.2 867.0 866.4 862.8 35 Real estate 1,591.8 1,640.0 1,645.4 1,653.0 1,666.3 1,681.3 1,682.9 1,688.1 1,685.0 1,693.8 1,691.0 1,683.0 36 Revolving home equity 119.4 131.4 132.8 134.2 136.2 138.6 139.9 141.7 140.8 141.1 141.7 142.0 37 Other 1,472.5 1,508.6 1,512.6 1,518.8 1,530.0 1,542.7 1,543.0 1,546.4 1,544.2 1,552.7 1,549.4 1,541.1 38 Consumer 517.5 551.2 546.7 540.7 546.3 550.9 548.2 546.0 545.4 544.2 546.6 549.6 39 Credit cards and related plans. 197.3 218.2 213.3 209.1 214.5 219.2 217.0 215.9 215.2 213.6 215.8 219.9 40 Other 320.2 332.9 333.5 331.6 331.8 331.7 331.2 330.0 330.2 330.6 330.8 329.7 41 Security3 66.2 67.4 64.7 68.9 75.7 69.9 78.1 78.4 81.1 76.6 77.2 79.5 42 Other loans and leases 337.4 362.8 361.3 364.5 365.4 364.7 367.1 369.5 374.3 368.7 367.1 365.5 43 Interbank loans 211.7 243.1 240.8 252.9 268.3 247.1 244.1 243.2 246.7 237.2 241.3 243.0 44 Cash assets4 233.3 245.3 224.8 221.1 246.0 242.5 234.8 242.1 267.3 231.3 231.1 242.1 45 Other assets5 346.7 375.8 376.1 390.4 379.7 376.7 371.7 383.3 388.4 383.6 381.8 375.8 46 Total assets5 5,202.9 5,456.6 5,434.7 5,454.6 5,515.2 5,508.3 5,498.2 5,509.0 5,543.5 5,479.9 5,483.7 5,493.9 Liabilities 47 Deposits 3,319.2 3,510.7 3,519.6 3,553.1 3.613.6 3,583.2 3,607.1 3,626.7 3,692.5 3,615.1 3,600.1 3,589.7 48 Transaction 593.7 609.6 589.5 591.6 604.8 592.2 590.1 589.0 614.6 565.7 584.0 601.5 49 Nontransaction 2,725.5 2,901.1 2,930.1 2.961.5 3.008.8 2,990.9 3,017.0 3,037.7 3,077.9 3,049.5 3,016.1 2,988.3 50 Large time 536.8 570.9 572.2 566.7 567.7 567.1 568.8 567.5 572.7 568.6 564.2 563.7 51 Other 2.188.6 2,330.2 2,357.9 2,394.8 2,441.1 2,423.9 2,448.1 2,470.2 2,505.2 2,480.8 2,451.9 2,424.6 52 Borrowings 1,002.8 1,038.4 1,024.9 1,009.0 1,043.8 1,037.9 1,003.3 1,008.1 987.1 1,008.9 1,010.5 1,020.7 53 From banks in the U.S 363.4 378.4 378.2 374.8 384.2 368.3 361.8 365.8 358.6 369.6 369.1 366.4 54 From others 639.4 660.0 646.7 634.2 659.6 669.6 641.4 642.3 628.5 639.3 641.3 654.3 55 Net due to related foreign offices . . . 213.7 218.6 217.4 210.3 183.1 214.1 203.4 204.0 195.1 203.1 204.9 207.9 56 Other liabilities 223.2 286.3 268.8 268.0 258.2 255.6 265.4 246.6 246.7 236.7 247.3 243.3 57 Total liabilities 4,758.9 5,054.0 5,030.7 5,040.4 5,098.6 5,090.8 5,079.2 5,085.4 5,121.3 5,063.8 5,062.7 5,061.6 58 Residual (assets less liabilities)7 444.0 402.6 404.0 414.2 416.6 417.5 419.1 423.5 422.2 416.0 421.0 432.3 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities A17 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities1—Continued C. Large domestically chartered commercial banks Billions of dollars Monthly averages Wednesday figures AAAccccccooouuunnnttt 2000 2001 2001 July Jan. Feb. Mar. Apr. May June July July 4 July 11 July 18 July 25 Seasonally adjusted 1 Bank credit 2.539.0r 2.585.8r 2,5951/ 2,600.8" 2,623.5 2,636.3 2,635.1 2,626.4 2,619.4 2,619.0 2,620.0 2,625.2 ? Securities in bank credit 586.7 597.0" 599.9" 595.8" 603.3 613.4 617.1 614.1 604.4 600.2 606.5 614.5 U.S. government securities 370.6 358.1' 354.0" 343.4" 347.5 355.6 353.8 354.2 347.0 351.6 347.9 354.6 4 Trading account 22.9 34.2 37.5 35.4 33.7 35.3 35.1 38.3 34.1 38.6 39.4 38.1 Investment account 347.6 323.9" 316.6" 308.0" 313.8 320.3 318.7 315.9 312.8 313.1 308.6 316.5 6 Other securities 216.1 238.9 245.9 252.3 255.8 257.8 263.3 259.9 257.4 248.6 258.6 259.8 7 Trading account 99.1 126.0 129.3 132.5 135.9 137.0 143.5 140.8 140.3 130.6 139.0 140.4 8 Investment account 117.0 112.9 116.6 119.9 119.9 120.8 119.8" 119.2 117.2 118.0 119.6 119.5 9 State and local government . 26.1 27.1 27.6 28.1 28.4 28.1 27.9 27.8 27.5 27.8 27.8 28.0 10 Other 90.9 85.8 89.0 91.8 91.5 92.7 92.0 91.4 89.7 90.2 91.7 91.5 11 Loans and leases in bank credit2 . . . l,952.3r 1,988.8 1,995.1 2,005.0 2,020.2 2,022.9 2,018.0 2.012.2 2,015.0 2.018.7 2,013.6 2.010.8 12 Commercial and industrial 589.2 594.9 595.2 589.4 586.2 585.1 574.6 566.0 565.6 566.9 566.2 567.1 n Bankers acceptances 1.0 .8 .8 .8 .8 .8 .7 .0 n.a. n.a. n.a. n.a. 14 Other 588.2 594.1 594.5 588.5 585.3 584.3 573.8 566.0 565.6 566.9 566.2 567.1 15 Real estate 821.7 825.1 831.4 839.7 846.5 852.3 850.8" 849.4 849.3 856.1 852.3 844.7 16 Revolving home equity 78.3 86.3 87.6 89.5 90.5 91.2 91.4 91.7 91.7 91.4 91.7 91.6 17 Other 743.4 738.9 743.8 750.1 755.9 761.1 759.5 757.8 757.7 764.7 760.6 753.1 18 Consumer 231.8 244.2 246.3 247.7 249.4 251.8 253.7 253.4 253.9 253.9 255.5 254.0 19 Security1 63.7" 57.8 55.4 59.0 70.3 66.6 72.3 74.8 77.1 74.0 73.3 77.1 20 Federal funds sold to and repurchase agreements with broker-dealers 43.6r 41.7 39.5 43.7 53.8 49.4 54.7 59.6 59.8 57.6 57.9 62.6 7] Other 20.2 16.1 16.0 15.3 16.5 17.3 17.6 15.2 17.3 16.4 15.4 14.5 22 State and local government 12.4 12.8 12.9 13.0 13.0 13.0 13.3 14.3 14.3 14.2 14.3 14.2 23 Agricultural 9.5 10.1 10.3 10.4 10.4 10.7 10.5 10.2 10.2 10.2 10.2 10.2 24 Federal funds sold to and repurchase agreements with others 13.0 25.9 26.3 26.1 23.0 23.6 25.5 30.8 28.2 32.0 2299..77 3300..44 25 All other loans 84.4 86.7 85.8 86.8 87.8 85.5 84.8 82.0 85.0 80.2 80.8 81.4 26 Lease-financing receivables 126.5 131.2 131.6 133.0 133.7 134.3 132.5 131.4 131.4 131.2 131.4 131.6 27 Interbank loans 144.6 155.2 142.4 138.7 146.8 132.7 128.8 133.6 122.7 127.9 130.6 142.1 28 Federal funds sold to and repurchase aareements with commercial banks 75.8 80.3 71.6 71.6 8833..33"" 72.3 71.6 70.6 66.4 65.0 68.7 75.8 29 Other 68.8 74.9 70.7 67.0 63.5 60.4 57.2 63.0 56.3 62.8 62.0 66.3 30 Cash assets4 146.2 147.0 138.2 142.6 145.4 139.8 135.5 146.1 144.0 139.2 137.6 161.0 31 Other assets5 244.9" 261.6" 264.0" 273.9" 271.1' 268.7" 257.0" 263.1 258.6 262.8 263.9 264.0 32 Total assets6 3,039.2 3,U2Jr 3,101.6r 3,118.1r 3,148.9r 3,139.7r 3,118.8r 3,131.1 3,107.0 3,110.7 3,114.1 3,154.2 Liabilities 33 Deposits 1.666.2 1,694.9 1.688.3 1,714.9 1,739.9 1,730.8 1,735.4 1.747.0 1,760.6 1,736.1 1.729.3 1.747.1 34 Transaction 307.3 302.5 300.2 303.5 303.4 304.3 299.8 305.8 298.0 293.3 304.2 326.9 35 Nontransaction 1,358.9 1,392.4 1,388.1 1,411.4 1,436.5 1,426.5 1,435.5 1,441.2 1,462.7 1,442.8 1.425.1 1,420.2 36 Large time 268.5 271.4 266.8 269.1 269.0 271.3 274.8 271.2 278.6 273.0 267.9 267.8 37 Other 1,090.4 1.121.1 1,121.3 1,142.3 1,167.5 1,155.2 1,160.8 1,170.0 1,184.0 1,169.9 1,157.2 1,152.4 38 Borrowings 677.8r 680.6" 683.2" 680.6" 709.3" 695.2" 666.8" 680.6 653.9 682.2 680.1 695.2 39 From banks in the U.S 204.6r 215.1" 216.8" 220.8' 231.1" 213.8" 211.3" 218.9 210.0 223.3 222.1 219.2 40 From others 473.2r 465.5' 466.4" 459.7" 478.2" 481.5" 455.5" 461.7 443.9 458.8 457.9 476.1 41 Net due to related foreign offices 216.8 200.9 197.9" 196.1 172.7" 195.2" 190.9" 192.4 187.2 191.6 195.3 197.2 42 Other liabilities 181.r 232.4" 212.8" 213.5' 205.0" 196.6" 208.6" 191.6 192.0 185.0 192.9 185.4 43 Total liabilities 2,741.9r 2,808.8" 2,7823" 2,805.0r 2,826.8r 2,817.8r 2,801.8" 2,811.5 2,793.8 2,794.9 2,797.5 2,825.0 44 Residual (assets less liabilities)7 297.3r 303.3" 319.4" 313.1" 322.1" 322.0" 317.0" 319.6 313.3 315.8 316.6 329.2 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Nonfinancial Statistics • October 2001 1.26 COMMERCIAL BANKS IN THE UNITED STATES Assets and Liabilities'—Continued C. Large domestically chartered commercial banks—Continued Billions of dollars Monthly averages Wednesday figures AAAccccccooouuunnnttt 2000 2001 2001 July Jan. Feb. Mar. Apr. May June July July 4 July 11 July 18 July 25 Not seasonally adjusted Assets 45 Bank credit 2,523.5' 2,596.9" 2,597.8r 2,597.2" 2,619.1 2,629.7 2,629.7 2,610.1 2,617.8 2,603.1 2,602.7 2,598.5 46 Securities in bank credit 577.6 602.7r 603.7r 597.6" 602.2 611.1 614.8 605.2 599.5 592.1 596.4 602.4 47 U.S. government securities 365.7 360.9" 357.7' 347.1" 349.7 354.9 352.5 350.3 345.1 348.4 343.3 348.7 48 Trading account 22.6 34.5 37.9 35.8 34.0 35.2 35.0 37.9 33.9 38.2 38.9 37.5 49 Investment account 343. r 326.4r 319.9" 311.2" 315.7 319.7 317.5 312.4 311.1 310.2 304.5 311.2 50 Mortgage-backed securities . . 217.9 225,7r 221,6r 219.9" 227.4" 234.2" 230.5" 230.7 228.0 228.2 222.7 230.8 51 Other 125.2 100.6r 98.3r 91.3" 88.2" 85.6" 87.0" 81.7 83.1 82.0 81.7 80.4 52 One vear or less 31.7 29.6r 31.8r 31.6" 30.9" 27.8' 26.2" 21.8 23.2 22.2 21.2 20.8 53 One to five years 55.7 38.7 37.3 34.3 31.4 31.2 34.3 34.2 33.4 33.4 34.1 34.6 54 More than five years . . . 37.8 32.3 29.2 25.4 25.9 26.6 26.5 25.8 26.5 26.4 26.5 25.1 55 Other securities 212.0 241.9 246.0 250.5 252.5 256.2 262.3 254.9 254.5 243.7 253.1 253.6 56 Trading account 97.2 127.6 129.3 131.5 134.2 136.1 142.9 138.1 138.6 128.0 136.0 137.0 57 Investment account 114.7 114.3 116.6 119.0 118.4 120.0 119.4 116.9 115.8 115.6 117.0 116.6 58 State and local government . . 25.6 27.5 27.6 27.9 28.0 28.0 27.8 27.3 27.2 27.2 27.2 27.4 59 Other 89.2 86.8 89.0 91.1 90.3 92.1 91.6 89.6 88.7 88.4 89.8 89.3 60 Loans and leases in bank credit2 . . l,945.8r 1,994.2 1,994.1 1,999.6 2,016.9 2,018.7 2,015.0 2,004.9 2,018.3 2,011.0 2,006.3 1,996.1 61 Commercial and industrial 589.0 591.4 594.1 590.1 590.4 587.9 576.2 566.0 570.6 567.2 566.4 564.5 62 Bankers acceptances 1.0 .8 .8 .8 .8 .8 .7 .0 n.a. n.a. n.a. n.a. 63 Other 588.0 590.6 593.3 589.3 589.6 587.1 575.4 566.0 570.6 567.2 566.4 564.5 64 Real estate 820.5 825.8 828.1 833.9 842.5 851.8" 849.5 848.0 848.1 855.2 851.0 842.1 65 Revolving home equity 78.9 85.4 86.6 88.1 89.6 91.1 91.6 92.4 92.0 92.0 92.4 92.4 66 Other 453.2 446.2 445.7 449.8 456.1 462.1 457.7 455.4 455.5 462.8 458.3 449.2 67 Commercial 288.4 294.1 295.8 296.0 296.8 298.7 300.2 300.3 300.5 300.5 300.3 300.5 68 Consumer 230.1 247.8 248.4 247.4 250.0 252.3 253.2 251.7 252.6 252.0 253.5 252.4 69 Credit cards and related plans. . 73.3 83.5 83.2 82.7 84.7 87.0 88.0 87.3 87.8 87.1 88.5 88.5 70 Other 156.9 164.3 165.3 164.7 165.4" 165.3 165.2 164.3 164.8 164.9 165.0 163.9 71 Security3 59.9" 60.4 57.2 60.7 67.3 61.8 69.9 70.1 72.8 68.3 68.8 71.5 72 Federal funds sold to and repurchase agreements with broker-dealers .... 4400..99"" 43.6 40.8 45.0 51.5 45.7 52.9 55.9 56.4 53.2 54.4 58.1 73 Other 19.0 16.8 16.5 15.7 15.8 16.0 17.0 14.3 16.4 15.1 14.4 13.5 74 State and local government .... 12.4 12.8 12.9 13.0 13.0 13.0 13.3 14.3 14.3 14.2 14.3 14.2 75 Agricultural 9.7 10.1 10.1 10.2 10.3 10.6 10.5 10.3 10.4 10.4 10.3 10.3 76 Federal funds sold to and repurchase agreements with others 13.0 25.9 26.3 26.1 23.0 23.6 25.5 30.8 28.2 32.0 29.7 30.4 77 All other loans 85.3 86.7 84.0 84.8 86.6 84.0 84.8 82.8 90.2 80.9 81.5 79.7 78 Lease-financing receivables .... 126.0 133.3 132.9 133.4 133.8 133.7 132.1 130.9 131.2 130.9 130.8 130.8 79 Interbank loans 144.5 156.7 141.2 139.8 148.9 135.0 133.2 133.4 133.2 127.1 131.2 135.9 80 Federal funds sold to and repurchase agreements with commercial banks 75.8 81.0 71.1 72.2 84.4 73.5 74.0 70.5 72.1 64.7 69.0 72.6 81 Other 68.7 75.7 70.2 67.6 64.4 61.5 59.2 62.9 61.1 62.5 62.2 63.4 82 Cash assets4 140.0 157.8 140.1 137.7 145.7 139.9 134.0 139.6 154.2 131.5 133.1 141.9 83 Other assets5 244.3r 262.2r 262.2r 272.5" 271.8" 269.5' 259.2" 262.5 265.8 263.4 263.1 258.4 84 Total assets6 3,016.'/ 3,136.5" 3,103.5" 3,109.4r 3,147.8r 3,136.4r 3,118.3" 3,107.7 3,133.1 3,087.2 3,092.2 3,096.9 Liabilities 85 Deposits 1,658.3 1,701.1 1,6%. 1 1,713.4 1,749.0 1,724.0 1,734.9 1,738.7 1,785.2 1,732.6 1,721.9 1,713.1 86 Transaction 302.9 311.4 297.2 299.8 310.7 300.0 299.9 300.9 319.0 287.0 299.0 305.3 87 Nontransaction 1,355.4 1.389.7 1,398.9 1,413.5 1,438.3 1,424.0 1,435.0 1,437.8 1,466.2 1,445.5 1,422.9 1,407.8 88 Large time 265.1 274.7 270.1 267.5 266.9 268.5 272.1 267.6 273.8 270.0 264.3 263.7 89 Other 1,090.3 1.115.0 1,128.9 1,146.0 1,171.4 1,155.5 1,162.8 1,170.3 1,192.4 1,175.6 1,158.6 1,144.1 90 Borrowings 668. r 697.91 686.8r 678.9" 710.0" 700.3" 667.7" 671.2 654.2 674.6 674.0 679.7 91 From banks in the U.S 201.5r 221,4r 221.2r 224.5" 234.3" 216.9" 212.1' 215.6 211.2 221.5 219.5 212.6 92 From nonbanks in the U.S 466.6" 476.5r 465.6r 454.5" 475.6" 483.4" 455.5" 455.6 443.0 453.1 454.5 467.1 93 Net due to related foreign offices . . . 213.7 201.8 200.8 194.9 170.3 197.5 190.3 189.2 184.0 186.0 191.1 195.9 94 Other liabilities 178.6r 233.4r 215.3r 212.2" 202.2" 198.8" 208.1" 188.7 189.3 179.9 189.0 184.0 95 Total liabilities 2,7X8.7r 2,834.2" 2,799.0" 2,799.4" 2,831.5" 2,820.7" 2,800.9" 2,787.9 2,812.7 2,773.1 2,775.9 2,772.7 96 Residual (assets less liabilities)7 298.2r 302.3'' 304.4" 310.1" 316.3" 315.8" 317.3" 319.9 320.4 314.1 316.2 324.2 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions—Assets and Liabilities 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 2001 2001 July' Jan.' Feb.' Mar.' Apr.' May' June' July July 4 July 11 July 18 July 25 Seasonally adjusted Assets 1 Bank credit 1.948.6 2,063.7 2.070.9 2.061.9 2.067.4 2,077.0 2.081.2 2.095.3 2,080.3 2.089.3 2.092.4 2,103.5 7 Securities in bank credit 516.9 550.1 550.8 542.6 539.8 542.4 545.8 553.2 548.4 549.8 550.2 556.0 U.S. government securities 365.5 360.4 357.6 345.6 341.6 341.2 343.2 350.5 346.8 346.8 347.7 354.1 4 Other securities 151.4 189.7 193.2 197.0 198.2 201.1 202.6 202.7 201.6 203.1 202.5 201.9 Loans and leases in bank credit2 1.431.7 1.513.6 1.520.0 1,519.3 1.527.6 1,534.7 1,535.4 1,542.1 1.531.9 1.539.5 1.542.2 1.547.5 6 Commercial and industrial 276.1 292.3 294.5 295.4 295.2 295.0 296.5 299.4 297.4 299.1 300.2 300.0 7 Real estate 770.9 815.8 820.6 820.7 824.2 828.7 832.6 839.6 835.1 838.4 839.8 840.8 X Revolving home equitv 40.7 45.9 46.3 46.3 46.7 47.4 48.3 49.6 48.9 49.3 49.5 49.9 9 Other 730.2 769.9 774.2 774.4 777.5 781.3 784.4 790.0 786.3 789.1 790.2 790.9 in Consumer 288.3 302.5 299.8 296.8 300.0 301.2 297.2 295.1 293.1 294.2 293.9 298.0 11 Security-' 6.5 7.0 7.5 8.0 8.4 8.5 8.4 8.5 8.2 8.4 8.6 8.6 p Other loans and leases 89.9 96.0 97.6 98.4 99.9 101.3 100.8 99.5 98.0 99.5 99.7 100.1 n Interbank loans 72.2 85.9 96.6 106.9 115.5 121.1 117.6 117.4 113.9 113.4 119.0 122.7 I4 Cash assets4 94.7 84.9 85.7 87.0 103.9 104.1 102.0 103.8 103.9 101.2 100.7 107.3 15 Other assets5 102.4 113.6 113.9 117.8 107.8 107.2 112.4 120.8 122.6 120.2 118.7 117.3 16 Total assets6 2,192.5 2321.3 2340.3 2347.0 2367.3 2381.9 2386.0 2,410.1 2393.4 2397.0 2,403.6 2,423.4 Liabilities 17 Deposits 1.671.8 1,810.9 1,822.5 1,832.3 1,857.3 1,865.6 1,883.5 1,901.2 1.901.4 1,891.5 1.893.3 1.904.0 18 Transaction 292.6 295.6 297.2 293.8 294.6 297.3 290.5 289.6 283.9 279.0 288.2 306.5 19 Nontransaction 1,379.2 1,515.3 1.525.3 1,538.5 1,562.7 1,568.3 1,593.0 1.611.5 1,617.5 1,612.5 1.605.0 1.597.5 ?o Large time 271.8 296.2 302.1 299.1 300.8 298.6 296.7 300.0 299.0 298.7 299.9 300.0 7] Other 1.107.4 1,219.1 1,223.2 1,239.3 1,261.9 1.269.6 1,296.3 1.311.6 1,318.5 1,313.8 1,305.1 1.297.5 ?7 Borrowings 334.7 340.5 338.0 330.1 333.8 337.6 335.6 336.9 332.9 334.4 336.5 341.0 From banks in the U.S 161.9 157.0 157.0 150.4 149.8 151.4 149.7 150.2 147.4 148.1 149.7 153.8 74 From others 172.8 183.5 181.0 179.7 184.0 186.2 185.9 186.7 185.5 186.2 186.9 187.2 25 Net due to related foreign offices .... 0.0 16.8 16.7 15.4 12.8 16.6 13.1 14.7 11.1 17.1 13.7 12.0 26 Other liabilities 44.6 52.9 53.5 55.8 56.0 56.8 57.3 57.9 57.3 56.7 58.3 59.3 27 Total liabilities 2,051.1 2,221.1 2,230.7 2,233.6 2,259.9 2,276.6 2,289.6 2310.7 2302.7 2,299.7 2301.8 2316.3 28 Residual (assets less liabilities)5 141.4 100.2 109.7 113.4 107.4 105.3 96.4 99.3 90.7 97.3 101.8 107.1 Not seasonally adjusted Assets 79 Bank credit 1,948.6 2,059.4 2.059.8 2,057.5 2,067.1 2.077.5 2.083.1 2.095.4 2.088.3 2.089.7 2,091.9 2.099.8 30 Securities in bank credit 516.6 549.6 548.9 544.8 542.5 543.9 547.4 553.0 549.6 550.5 550.0 555.4 31 U.S. government securities 365.2 359.8 355.7 347.8 344.3 342.8 344.8 350.3 347.9 347.4 347.5 353.5 37 Other securities 151.4 189.7 193.2 197.0 198.2 201.1 202.6 202.7 201.6 203.1 202.5 201.9 33 Loans and leases in bank credit2 1.432.0 1,509.9 1,510.9 1.512.7 1.524.6 1,533.6 1.535.7 1.542.4 1.538.7 1,539.2 1,541.9 1,544.4 34 Commercial and industrial 275.9 291.3 292.8 295.1 297.3 297.6 298.3 299.3 3(X).6 299.8 3(X).0 298.3 35 Real estate 771.4 814.2 817.3 819.1 823.8 829.4 833.4 840.1 837.0 838.5 840.0 840.9 36 Revolving home equity 40.5 45.9 46.2 46.1 46.6 47.5 48.2 49.3 48.8 49.1 49.2 49.5 37 Other 730.9 768.3 771.1 773.0 777.2 782.0 785.1 790.7 788.1 789.4 790.8 791.3 38 Consumer 287.4 303.3 298.3 293.3 296.3 298.6 295.0 294.3 292.8 292.2 293.2 297.2 39 Credit cards and related plans. . 124.0 134.8 130.1 126.4 129.8 132.2 129.0 128.6 127.4 126.5 127.4 131.4 40 Other 163.4 168.6 168.2 167.0 166.4 166.4 166.0 165.7 165.4 165.7 165.8 165.8 41 Security' 6.3 7.0 7.5 8.2 8.4 8.2 8.2 8.2 8.3 8.3 8.4 8.0 42 Other loans and leases 91.0 94.0 95,0 96.9 98.8 99.9 100.8 100.4 100.1 100.4 100.4 100.0 4^ Interbank loans 67.2 86.4 99.5 113.2 119.4 112.1 110.9 109.8 113.6 110.0 110.1 107.1 44 Cash assets4 93.3 87.5 84.7 83.4 100.4 102.6 100.8 102.5 113.2 99.9 98.0 1(X).2 45 Other assets' 102.4 113.6 113.9 117.8 107.8 107.2 112.4 120.8 122.6 120.2 118.7 117.3 46 Total assets6 2,186.0 2320.1 2331.2 2345.2 2367.4 2371.9 2380.0 2,401.2 2,410.4 2392.7 2391.5 2396.9 Liabilities 47 Deposits 1.660.9 1.809.6 1.823.5 1.839.7 1.864.6 1.859.2 1.872.2 1,888.0 1.907.3 1,882.5 1,878.3 1.876.6 48 Transaction 290.8 298.2 292.3 291.8 294.1 792 2 290.2 288.1 295.5 278.6 285.0 296.1 49 Nontransaction 1.370.1 1,511.4 1.531.1 1,547.9 1.570.5 1,567.0 1.582.0 1.599.9 1,611.7 1,603.9 1.593.2 1.580.5 50 Large time 271.8 296.2 302.1 299.1 300.8 298.6 296.7 300.0 299.0 298.7 299.9 300.0 51 Other 1.098.3 1,215.2 1,229.0 1.248.8 1,269.7 1,268.3 1,285.3 1.299.9 1.312.7 1,305.3 1,293.3 1,280.5 57 Borrowings 334.7 340.5 338.0 330.1 333.8 337.6 335.6 336.9 332.9 334.4 336.5 341.0 53 From banks in the U.S 161.9 157.0 157.0 150.4 149.8 151.4 149.7 150.2 147.4 148.) 149.7 153.8 54 From others 172.8 183.5 181.0 179.7 184.0 186.2 185.9 186.7 185.5 186.2 186.9 187.2 55 Net due to related foreign offices .... 0.0 16.8 16.7 15.4 12.8 16.6 13.1 14.7 11.1 17.1 13.7 12.0 56 Other liabilities 44.6 52.9 53.5 55.8 56.0 56.8 57.3 57.9 57.3 56.7 58.3 59.3 57 Total liabilities 2,040.2 2,219.8 2,231.6 2,241.0 2,267.1 2,270.2 2,278.2 2,297.6 2308.6 2,290.7 2,286.8 2,288.9 58 Residual (assets less liabilities) 145.8 100.3 99.6 104.2 100.3 101.7 101.7 103.7 101.8 102.0 104.7 108.0 Footnotes appear on p. A21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Nonfinancial Statistics • October 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 2001 2001 Julyr Jan. Feb. Mar." Apr." May" June' July July 4 July 11 July 18 July 25 Seasonally adjusted Assets 1 Bank credit 576.1 614.8' 608.5" 622.7 626.2 610.3 601.5 592.5 593.0 588.5 587.4 592.4 2 Securities in bank credit 203.6 209.6r 2a). 1' 207.4 221.0 215.1 217.2 218.7 220.9 217.2 217.7 217.5 3 U.S. aovernment securities 78.1 66.6' 64.5" 68.1 74.2 69.0 67.1 66.8 69.4 66.2 66.6 66.3 4 Other securities 125.5 143.0" 135.7' 139.3 146.8 146.1 150.1 151.9 151.5 151.0 151.1 151.1 5 Loans and leases in bank credit2 . . . 372.5 405.2" 408.3 415.3 405.1 395.2 384.3 373.7 372.1 371.4 369.6 375.0 6 Commercial and industrial 203.6 214.5" 216.8 219.7 218.5 216.6 208.7 204.0 203.0 202.5 204.6 205.0 / Real estate 18.1 18.5 18.6 18.5 17.7 17.8 17.6 17.8 17.6 17.6 17.7 17.9 Security1 83.6 105.1 105.3 107.1 100.7 92.7 90.9 86.2 85.8 86.0 82.7 85.6 y Other loans and leases 67.3 67.2 67.6 70.0 68.2 68.0 67.0 65.7 65.6 65.2 64.6 66.5 ID Interbank loans 23.6 29.2 28.4 30.5 28.1 30.5 23.5 22.3 22.0 23.7 24.2 22 1 ii Cash assets4 44.5 41.5 41.6" 40.5 38.5 36.7 35.2 35.5 33.9 35.7 36.0 36.7 12 Other assets3 42.1 35.9" 35.2' 36.3 39.8 37.4 37.3 31.9 32.8 32.2 33.2 31.7 13 Total assets6 685.9 721.0r 7133 729.7 732.2 714.6 697.2 681.9 681.4 679.8 680.5 682.5 Liabilities 14 Deposits 390.0 386.7 380.6 378.2 394.1 408.7 419.2 413.1 428.6 418.6 407.6 409.2 15 Transaction 11.1 10.2 10.3 9.5 10.8 10.8 9.9 9.7 10.6 10.0 9.5 9.0 16 Nontransaction 378.9 376.5 370.3 368.8 383.3 397.9 409.3 403.4 418.0 408.6 398.1 400.2 17 Borrowings 203.4 243.5 238.4 233.4 240.6 219.4 216.4 212.1 221.0 202.7 204.7 213.1 18 From banks in the U.S 21.1 25.1 22.5 24.5 25.9 21.4 24.2 24.1 29.8 20.9 20.7 25.1 19 From others 182.3 218.3 216.0 208.9 214.7 198.0 192.2 188.0 191.2 181.8 184.0 188.0 20 Net due to related foreign offices 20.3 3.5 4.8 21.8 4.5 -4.4 -19.7 -16.3 -38.8 -12.6 -5.4 -13.1 21 Other liabilities 74.6 79.8" 77.2" 82.8 88.6 85.4 83.6 78.7 78.7 77.2 81.1 80.1 22 Total liabilities 688.4 7135" TOO^ 716.2 727.8 709.1 699.5 687.5 689.5 686.0 687.9 689.2 23 Residual (assets less liabilities)7 -2.5 7.5" 12.4" 13.5 4.3 5.4 -2.3 -5.6 -8.1 -6.2 -7.4 -6.7 Not seasonally adjusted Assets 24 Bank credit 571.9 622.8" 611.7" 617.8 623.3 605.6 597.7 588.0 590.5 582.5 585.2 586.0 25 Securities in bank credit 203.6 209.6' 200.1" 207.4 221.0 215.1 217.2 218.7 220.9 217.2 217.7 217.5 26 U.S. government securities 78.1 66.6" 64.5" 68.1 74.2 69.0 67.1 66.8 69.4 66.2 66.6 66.3 27 Trading account 12.0 11.4 10.4 9.5 14.8 13.8 13.8 13.6 16.0 13.2 13.7 13.5 28 Investment account 66.1 55.3" 54.0" 58.5 59.4 55.2 53.3 53.2 53.4 53.0 52.9 52.8 29 Other securities 125.5 143.0" 135.7" 139.3 146.8 146.1 150.1 151.9 151.5 151.0 151.1 151.1 30 Trading account 81.4 96.4 90.8 94.6 99.6 99.3 105.6 107.7 107.9 107.3 107.2 106.8 31 Investment account 44.1 46.6' 44.9" 44.7 47.3 46.8 44.4 44.2 43.6 43.7 43.9 44.3 32 Loans and leases in bank credit2 . . . 368.3 413.2 411.6" 410.4 402.2 390.5 380.5 369.3 369.6 365.4 367.4 368.5 33 Commercial and industrial 202.9 216.1 219.0 220.9 216.8 213.6 207.6 203.3 203.3 201.6 204.4 203.7 34 Real estate 18.1 18.5 18.6 18.5 17.7 17.8 17.6 17.8 17.6 17.6 17.7 17.9 35 Security' 80.9 110.3 106.3 101.1 99.3 91.9 88.9 83.4 83.0 81.6 81.4 82.1 36 Other loans and leases 66.4 68.3 67.7 69.9 68.4 67.2 66.4 64.8 65.6 64.5 64.0 64.8 37 Interbank loans 23.6 29.2 28.4 30.5 28.1 30.5 23.5 22.3 22.0 23.7 24.2 22.1 38 Cash assets4 43.0 44.1 41.8 39.1 37.0 35.8 34.2 34.3 33.0 34.3 34.6 35.3 39 Other assets5 41.0 37.1" 36.1' 36.9 38.9 36.8 36.0 31.1 31.5 31.4 32.4 30.7 40 Total assets6 679.1 732.9r 717.6 724.0 726.9 708.4 691.0 675.4 676.7 671.6 676.1 673.6 Liabilities 41 Deposits 381.4 396.6 388.8 382.7 397.0 409.9 412.1 402.9 414.6 406.5 398.0 401.0 42 Transaction 11.2 10.4 10.1 9.2 10.2 10.4 9.7 9.8 11.1 10.0 9.5 8.9 43 Nontransaction 370.2 386.2 378.7 373.5 386.7 399.4 402.3 393.1 403.5 396.5 388.5 392.1 44 Borrowings 203.4 243.5 238.4 233.4 240.6 219.4 216.4 212.1 221.0 202.7 204.7 213.1 45 From banks in the U.S 21.1 25.1 22.5 24.5 25.9 21.4 24.2 24.1 29.8 20.9 20.7 25.1 46 From others 182.3 218.3 216.0 208.9 214.7 198.0 192.2 188.0 191.2 181.8 184.0 188.0 47 Net due to related foreign offices .... 17.3 6.8 8.0 22.0 -.1 -7.6 -22.9 -19.6 -39.7 -16.0 -8.8 -20.3 48 Other liabilities 73.3 81.3' 78.6' 82.8 86.5 83.9 82.1 77.2 78.3 75.8 79.5 76.9 49 Total liabilities 675.4 728.1r 713.8" 720.9 724.0 705.6 687.7 672.6 674.1 669.0 673.4 670.7 50 Residual (assets less liabilities)7 3.8 4.8" 3.8" 3.1 2.9 2.9 3.3 2.8 2.5 2.6 2.6 2.9 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 Liabilities'—Continued F. Memo items Billions of dollars Monthly averages Wednesday figures AAAccccccooouuunnnttt 2000 2001 2001 Julyr Jan. Feb. Mar.r Apr.'" Mayr June1 July July 4 July 11 July 18 July 25 Not seasonally adjusted MEMO Large domestically chartered banks, adjusted for mergers 1 Revaluation gains on off-balance-sheet items8 63.2 79.6r Ill' 80.8 79.9 82.0 87.2 77.6 80.5 69.0 77.1 75.1 2 Revaluation losses on off-balancesheet items8 62.9 82.5 81.0 79.8 74.9 74.7 81.5 70.3 72.3 63.5 71.1 67.9 3 Mortgage-backed securities9 248.1 255.0r 251,5r 251.7 258.3 265.2 261.4 260.8 258.0 258.0 253.2 261.2 4 Pass-through 177.3 188.4' I84.5r 186.5 194.6 200.1 200.1 199.3 197.5 197.4 193.2 198.3 5 CMO, REMIC, and other 70.8 66.6r 65.2 63.7 65.1 61.3 61.6 60.6 60.6 60.0 62.9 6 Net unrealized gains (losses) on available-for-sale securities10 .... -12.4 .9' 2.8r 3.6 .4 -1.5 -1.7 -1.0 -2.1 -1.8 -1.1 -1.2 7 Off-shore credit to U.S. residents". . . . 22.2 23.0 22.7 22.6 21.7 21.0 20.6 20.2 20.5 20.1 20.1 20.1 8 Securitized consumer loans12 87.3 82.4 80.8 80.2 78.8 77.0 76.7 76.3 76.9 76.8 75.5 77.1 9 Credit cards and related plans 72.4 68.5 67.3 67.3 66.4 65.0 65.3 64.9 65.7 65.7 64.5 65.1 10 Other 15.0 13.9 13.4 12.9 12.4 12.0 11.5 11.4 11.2 11.0 10.9 12.0 11 Securitized business loans12 17.0 18.4 18.6 18.7 18.8 19.8 20.4 20.2 20.4 20.2 20.1 20.1 Small domestically chartered commercial banks, adjusted for mergers 12 Mortgage-backed securities9 200.6 211.6r 216.4r 222.9 230.8 235.2 238.3 245.2 242.5 243.1 242.4 247.4 13 Securitized consumer loans12 221.4 231.5 235.6 238.5 240.7 241.7 247.6 251.4 251.0 250.7 250.7 250.8 14 Credit cards and related plans 212.5 222.4 226.8 229.9 232.1 233.3 239.1 242.8 242.3 242.1 242.1 242.2 15 Other 8.9 9.1 8.9 8.7 8.6 8.4 8.5 8.6 8.7 8.6 8.6 8.5 Foreign-related institutions 16 Revaluation gains on off-balancesheet items8 41.2 52.0 49.4 52.7 56.5 56.3 57.2 54.9 55.3 53.7 55.8 54.7 17 Revaluation losses on off-balancesheet items8 38.2 49.0 47.0 49.7 52.1 51.8 52.0 49.8 50.0 48.6 50.7 50.0 18 Securitized business loans'2 23.9 23.2 22.4 21.5 19.8 18.0 17.2 17.1 17.3 17.3 17.2 16.7 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 made 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 • October 2001 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING A. Commercial Paper Millions of dollars, seasonally adjusted, end of period Year ending December 2001 IItteemm 1996 1997 1998 1999 2000 Jan. Feb. Mar. Apr. May June 1 All issuers 775,371 966,699 1,163,303 1,403,023 1,615,341 1,566,104 1,544,572 1,511,354 1,519,528 1,501,113 1,468,919 Financial companies' 2 Dealer-placed paper, total" 361,147 513,307 614,142 786,643 973,060 976,735 977,791 978,225 995,072 986.369 982,216 3 Directly placed paper, total' 229,662 252,536 322,030 337,240 298,848 270,922 263,554 249,420 247,333 245,768 244,520 4 Nonfinancial companies4 184,563 200,857 227,132 279,140 343,433 318,447 303,227 283,711 277,123 268,976 242,183 1. Institutions engaged primarily in commercial, savings, and mortgage banking; sales, 3. As reported by financial companies that place their paper directly with investors. personal, and mortgage financing; factoring, finance leasing, and other business lending; 4. Includes public utilities and firms engaged primarily in such activities as communicainsurance underwriting; and other investment activities. tions, construction, manufacturing, mining, wholesale and retail trade, transportation, and 2. Includes all financial-company paper sold by dealers in the open market. services. B. Bankers Dollar Acceptances' Millions of dollars, not seasonally adjusted, year ending September2 Item 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 1. 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 Loans' Percent per year Average Average Rate rate rate 1998—Jan. 1 8.50 1998 8.35 1999-—Jan. ... 7.75 2000-—July ... Sept. 30 8.25 1999 8.00 Feb. .. 7.75 Aug. .. Oct. 16 8.00 2000 9.23 Mar. .. 7.75 Sept. . Nov. 18 7.75 Apr. .. 7.75 Oci 1998—Jan. 8.50 May .. 7.75 Nov. .. 1999—July 1 8.00 Feb. 8.50 June .. 7.75 Dec. .. Aug. 25 8.25 Mar. 8.50 July ... 8.00 Nov. 17 8.50 Apr. 8.50 Aug. .. 8.06 2001-—Jan. ... May 8.50 Sept. 8.25 Feb. .. 2000—Feb. 3 8.75 June 8.50 Oct 8.25 Mar. .. Mar. 22 9.00 July 8.50 Nov. .. 8.37 Apr. .. May 17 9.50 Aug. 8.50 Dec. .. 8.50 May .. Sept. 8.49 June .. 2001—Jan. 4 9.00 Oct. 8.12 2000-—Jan. ... 8.50 July ... Feb. 1 8.50 Nov. 7.89 Feb. .. 8.73 Aug. .. Mar. 21 8.00 Dec. 7.75 Mar. 8.83 Apr. 19 7.50 Apr. 9.00 May 16 7.00 May 9.24 June 28 6.75 June 9.50 Aug. 22 6.50 Sept. 18 6.00 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 2001, week ending IItteemm 11999988 11999999 22000000 Apr. May June July June 29 July 6 July 13 July 20 July 27 MONEY MARKET INSTRUMENTS 1 Federal funds1'2'3 5.35 4.97 6.24 4.80 4.21 3.97 3.77 3.91 3.89 3.67 3.76 3.81 2 Discount window borrowing""4 4.92 4.62 5.73 4.28 3.73 3.47 3.25 3.46 3.25 3.25 3.25 3.25 Commercial paper,'5'6 Nonfinancial 3 1 -month 5.40 5.09 6.27 4.71 4.06 3.82 3.71 3.69 3.74 3.71 3.70 3.69 4 2-month 5.38 5.14 6.29 4.54 3.98 3.73 3.63 3.63 3.71 3.65 3.63 3.59 5 3-month 5.34 5.18 6.31 4.44 3.93 3.67 3.59 3.59 3.67 3.62 3.58 3.54 Financial 6 1-month 5.42 5.11 6.28 4.74 4.08 3.84 3.73 3.72 3.76 3.73 3.72 3.73 7 2-month 5.40 5.16 6.30 4.57 4.00 3.75 3.66 3.66 3.73 3.69 3.65 3.62 8 3-month 5.37 5.22 6.33 4.47 3.96 3.69 3.62 3.60 3.69 3.64 3.61 3.56 Commercial paper (historicalj-1-5-7 9 1-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. 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)1f5'S 12 1 -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. 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 acceptances''"5'1 15 3-month 5.39 5.24 6.23 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 marketiM 17 1-month 5.49 5.19 6.35 4.77 4.11 3.86 3.76 3.73 3.79 3.77 3.75 3.74 18 3-month 5.47 5.33 6.46 4.53 4.02 3.74 3.66 3.68 3.75 3.69 3.65 3.62 19 6-month 5.44 5.46 6.59 4.41 4.01 3.74 3.70 3.69 3.81 3.72 3.67 3.63 20 Eurodollar deposits, 3-month1" 5.45 5.31 6.45 4.55 4.01 3.73 3.66 3.67 3.74 3.68 3.65 3.62 U.S. Treasury hills Secondary market''5 21 3-month 4.78 4.64 5.82 3.87 3.62 3.49 3.51 3.47 3.57 3.54 3.49 3.48 22 6-month 4.83 4.75 5.90 3.85 3.62 3.45 3.45 3.44 3.50 3.47 3.45 3.41 23 1-year .. ... 4.80 4.81 5.78 3.80 3.60 3.37 3.39 3.38 3.48 3.41 3.36 3.35 Auction high "' 24 3-month 4.81 4.66 5.66 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 25 6-month 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 maturities'3 27 1-year 5.05 5.08 6.11 3.98 3.78 3.58 3.62 3.60 3.70 3.62 3.60 3.59 28 2-year 5.13 5.43 6.26 4.23 4.26 4.08 4.04 4.10 4.21 4.10 4.02 3.95 29 3-year 5.14 5.49 6.22 4.42 4.51 4.35 4.31 4.38 4.47 4.36 4.30 4.25 30 5-year 5.15 5.55 6.16 4.76 4.93 4.81 4.76 4.82 4.91 4.83 4.72 4.69 31 7-year 5.28 5.79 6.20 5.03 5.24 5.14 5.06 5.14 5.25 5.14 5.00 4.96 32 10-year 5.26 5.65 6.03 5.14 5.39 5.28 5.24 5.29 5.41 5.31 5.17 5.16 33 20-year 5.72 6.20 6.23 5.78 5.92 5.82 5.75 5.81 5.91 5.83 5.69 5.67 34 30-year 5.58 5.87 5.94 5.65 5.78 5.67 5.61 5.66 5.74 5.67 5.55 5.55 Composite 33 More than 10 years (long-term) 5.69 6.14 6.41 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 4.93 5.28 5.58 5.14 5.15 5.03 4.79 5.05 5.08 5.06 5.01 4.99 37 Baa 5.14 5.70 6.19 5.96 5.94 5.82 5.81 5.84 5.86 5.87 5.78 5.74 38 Bond Buyer series15 5.09 5.43 5.71 5.27 5.29 5.20 5.20 5.21 5.26 5.22 5.17 5.14 CORPORATE BONDS 39 Seasoned issues, all industries16 6.87 7.45 7.98 7.63 7.69 7.56 7.51 7.54 7.62 7.57 7.46 7.45 Rating group 40 Aaa 6.53 7.05 7.62 7.20 7.29 7.18 7.13 7.17 7.24 7.19 7.09 7.08 41 Aa 6.80 7.36 7.83 7.43 7.50 7.34 7.27 7.32 7.40 7.35 7.23 7.20 42 A 6.93 7.53 8.11 7.82 7.88 7.73 7.65 7.70 7.77 7.72 7.61 7.58 43 Baa 7.22 7.88 8.36 8.07 8.07 7.97 7.97 7.98 8.08 8.03 7.93 7.91 MEMO Dividend-price ratio17 44 Common stocks 1.49 1.25 1.15 1.32 1.23 1.27 1.30 1.29 1.27 1.32 1.30 1.32 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. 8. An average of offering rates on paper directly placed by finance companies. Series 17. Standard & Poor's corporate series. Common stock ratio is based on the 500 stocks in ended August 29, 1997. the price index. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 DomesticN onfinancial Statistics • October 2001 1.36 STOCK MARKET Selected Statistics 2000 2001 IInnddiiccaattoorr 11999999 22000000 Nov. Dec. Jan. Feb. Mar. Apr. May June July Prices and trading volume (averages of daily figures) Common stock prices (indexes) 1 New York Stock Exchange (Dec. 31, 1965 = 50) 550.65 619.52 643.71 646.64 645.44 650.55 648.05 603.44 607.06 644.44 630.86 613.36 2 Industrial 684.35 775.29 809.40 800.88 792.66 796.74 799.38 744.21 747.48 798.94 782.73 756.04 3 Transportation 468.61 491.62 414.73 434.92 457.53 471.21 482.26 452.36 455.22 477.21 458.60 469.80 4 Utility 190.52 284.82 478.99 455.66 444.16 440.36 424.53 395.34 400.49 414.69 382.98 374.11 5 Finance 516.65 530.97 552.48 600.45 621.62 634.17 626.41 583.38 587.88 618.74 622.17 614.54 6 Standard & Poor's Corporation (1941-43 = 10i' 1,085.50 1,327.33 1,427.22 1,375.04 1,330.93 1,335.63 1,305.75 1,185.85 1,189.84 1,270.37 1,238.71 1,204.45 7 American Stock Exchange (Aug. 31, 1973 = 50)2 682.69 770.90 922.22 892.60 870.16 898.18 923.99 891.22 891.18 940.73 923.06 892.74 Volume of trading (thousands of shares) 8 New York Stock Exchange 666,534 799,554 1,026,867 1,015,606 1,183,149 1.299,986 1,117,977 1,251,569 1,247,382 1,091,366 1,152,193 1.120,074 9 American Stock Exchange 28,870 32,629 51,437 58,541 73,759 72,312 70,648 81,666 77,612 66,103 62,395 56,735 Customer financing (millions of dollars, end-of-period balances) 10 Margin credit at broker-dealers 140,980 228,530 198,790 219,110 198,790 197,110 186,810 165,350 166,940 174,180 170,000 165,250 Free credit balances at brokers4 11 Margin accounts5 40,250 55,130 100,680 96,730 100,680 90,380 99,390 106,300 97,470 91,990 98,430 97,950 12 Cash accounts 62,450 79,070 84,400 74,050 84,400 81,380 78,660 77,520 77,460 76,260 75,270 73,490 Margin requirements (percent of market value and effective date)6 Mar. 11, 1968 June 8, 1968 May 6, 1970 Dec. 6, 1971 Nov. 24, 1972 Jan. 3, 1974 13 Margin stocks 70 80 65 55 65 50 14 Convertible bonds 50 60 50 50 50 50 15 Short sales 70 80 65 55 65 50 1. In July 1976 a financial group, composed of banks and insurance companies, was added 6. Margin requirements, stated in regulations adopted by the Board of Governors pursuant to the group of stocks on which the index is based. The index is now based on 400 industrial to the Securities Exchange Act of 1934, limit the amount of credit that can be used to stocks (formerly 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and purchase and carry "margin securities" (as defined in the regulations) when such credit is 40 financial. collateralized by securities. Margin requirements on securities are the difference between the 2. On July 5, 1983, the American Stock Exchange rebased its index, effectively cutting market value (100 percent) and the maximum loan value of collateral as prescribed by the previous readings in half. Board. Regulation T was adopted effective Oct. 15, 1934; Regulation U, effective May 1, 3. Since July 1983, under the revised Regulation T, margin credit at broker-dealers has 1936; Regulation G, effective Mar. 11, 1968; and Regulation X, effective Nov. 1, 1971. included credit extended against stocks, convertible bonds, stocks acquired through the On Jan. 1, 1977, the Board of Governors for the first time established in Regulation T the exercise of subscription rights, corporate bonds, and government securities. Separate report- initial margin required for writing options on securities, setting it at 30 percent of the current ing of data for margin stocks, convertible bonds, and subscription issues was discontinued in market value of the stock underlying the option. On Sept. 30, 1985, the Board changed the April 1984. required initial margin, allowing it to be the same as the option maintenance margin required 4. Free credit balances are amounts in accounts with no unfulfilled commitments to by the appropriate exchange or self-regulatory organization; such maintenance margin rules brokers and are subject to withdrawal by customers on demand. must be approved by the Securities and Exchange Commission. 5. Series initiated in June 1984. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A25 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Fiscal year Calendar year TTTyyypppeee ooofff aaaccccccooouuunnnttt ooorrr ooopppeeerrraaatttiiiooonnn 2001 11999988 11999999 22000000 Feb. Mar. Apr. May June July U.S. budget1 1 Receipts, total 1.721,798 1,827,302 2,025,218 110.481 130.071 331,796 125.590 202,887 127.842 2 On-budget 1,305,999 1,382,986 1,544,634 70,555 84,120 278,611 84,759 151,482 89,473 3 Off-budget 415,799 444,468 480,584 39,926 45,951 53,185 40.831 51.405 38,369 4 Outlays, total 1,652,619 1,702,875 1,788,826 158,649 180,733 141,999 153,508 171,025 125,022 5 On-budget 1,336,015 1,382,097 1,458,061 123,573 145,182 109,938 118.517 167,796 92,145 6 Off-budget 316,604 320,778 330,765 35,076 35,550 32,062 34.992 3,229 32,877 7 Surplus or deficit ( —), total 69,179 124,579 236,392 -48,168 -50,662 189,796 -27,919 31,862 2,820 8 On-budget -30,016 889 86,573 -53,018 -61,062 168.673 -33,758 -16,314 -2,672 9 Off-budget 99,195 123,690 149.819 4,850 10,401 21,123 5,839 48,176 5,492 Source of financing (total) 10 Borrowing from the public -51,211 -88,674 -222,672 15,100 32,557 -135,572 -20,608 -1,212 -7,463 11 Operating cash (decrease, or increase [—]) 4,743 -17,580 3,799 45,717 -7,171 -36,846 58,856 -37,413 20,589 12 Other2 -22,711 -18,325 -17,519 -12,649 25,276 -17,378 -10,329 6,763 -15,946 MEMO 13 Treasury operating balance (level, end of period) 38,878 56,458 52,659 21,113 28,284 65,130 6,274 43,687 23,098 14 Federal Reserve Banks 4,952 6,641 8,459 4,956 5,657 7.894 4,396 7,188 5,592 15 Tax and loan accounts 33,926 49,817 44,199 16,158 22,627 57,236 1,878 36,498 17,506 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 • October 2001 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS1 Millions of dollars Fiscal year Calendar year SSSooouuurrrccceee ooorrr tttyyypppeee 1999 2000 2001 2001 11999999 22000000 H2 HI H2 HI May June July RECEIPTS 1 All sources 1,827,302 2,025,218 892,266 1,089,763 952,942 1,120,040 125,590 202,887 127,842 2 Individual income taxes, net 879,480 1,004,462 425,451 550,208 458,679 580,632r 47,787r 93,676 60,466 3 Withheld 693,940 780,397 372,012 388,526 395,572 402,417 63,237 53,125 65,601 4 Nonwithheld 308,185 358,049 68,302 281,103 77,732 308,418 13,753 43,804 5,029 5 Refunds 122,706 134,046 14,841 119,477 14,628 113300,,225566rr 2299,,221133rr 3,263 10,165 Corporation income taxes 6 Gross receipts 216,324 235,655 110,111 119,166 123,962 102,947 6,453 31,563 5,036 / Refunds 31,645 28,367 13,996 13,781 15,776 20,262 2,000 1,617 2.328 8 Social insurance taxes and contributions, net . . . 611,833 652,852 292,551 353,514 310.122 379,878 61.437 66,732 52,154 9 Employment taxes and contributions2 580,880 620,451 280,059 333,584 297,665 359,648 52,210 66,039 49,672 10 Unemployment insurance 26,480 27,640 10,173 17,562 10,097 17,842 8,786 344 2.128 11 Other net receipts3 4,473 4,761 2,319 2,368 2,360 2,387 441 349 355 12 Excise taxes 70,414 68,865 34,262 33,532 35,501 32,490 4,390 5,965 5,733 13 Customs deposits 18,336 19,914 10,287 9,218 10,676 9,370 1,501 1,571 1,755 14 Estate and gift taxes 27,782 29,010 14,001 15,073 13.216 15,471 2,465 2,058 2,099 15 Miscellaneous receipts4 34,929 42,826 19,569 22,831 16,556 19,517 3,559 2,939 2,926 OUTLAYS 16 All types 1,702,875 1,788,826 882,465 892,947 894,905 948,750 153,508 171,025 125,322 17 National defense 274,873 294,494 149,573 143,476 147,651 153,154 26,028 29,382 22,153 18 International affairs 15,243 17,216 8,530 7,250 11,902 6,522 -1,490 2,318 413 19 General science, space, and technology 18,125 18,637 10,089 9,601 10,389 10,073 1,892 1,821 1,642 20 Energy 912 -1,060 -90 -893 -595 -244 -25 536 -117 21 Natural resources and environment 23,970 25,031 12,100 10,814 12,907 11,059 2,136 1,915 1,757 22 Agriculture 23,011 36,641 20,887 11,164 20,977 10,832 711 893 240 23 Commerce and housing credit 2,649 3,211 7,353 -2,497 4,408 -1,539 -907 33 -13,479 24 Transportation 42,531 46,854 23,199 21,054 25,841 23,810 4,850 4,643 4,327 25 Community and regional development 11.870 10,629 6,806 5,050 5,962 5,265 928 1,205 1,598 26 Education, training, employment, and social services 56,402 59,201 27,532 31,234 29,263 35,698 5,907 6,502 4,291 27 Health 141,079 154,534 74,490 75,871 81,413 87,427 14,954 15,768 14,094 28 Social security and Medicare 580.488 606,549 295,030 306,966 307,473 328,072 55,876 61.115 52,621 29 Income security 237.707 247,895 113,504 133,915 113,212 146,913 22,005 21,667 17,282 30 Veterans benefits and services 43,212 47.083 23,412 23,174 22,615 23,171 2,865 5,619 2,150 31 Administration of justice 25,924 27,820 13,459 13,981 14,635 14,694 2,450 2,320 2,202 32 General government 15,771 13,454 7,010 6,198 6,461 8,887 849 2,669 625 33 Net interest5 229,735 223,218 112,420 115,545 104,685 107,824 18,363 15,912 17,287 34 Undistributed offsetting receipts6 -40,445 -42,581 -22,850 -19,346 -24,070 -22,865 -3,882 -3,294 -3,765 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 A27 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars, end of month 1999 2000 2001 IItteemm June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 1 Federal debt outstanding 5,668 5,685 5,805 5,802 5,714 5,702 5,690 5,801 5,754 2 Public debt securities 5,639 5,656 5,776 5,773 5,686 5,674 5,662 5,774 5,727 3 Held by public 3,685 3,667 3,716 3,688 3,496 3,439 3,414 3,434 3,274 4 Held by agencies 1,954 1,989 2,061 2,085 2,190 2,236 2,249 2,339 2,453 5 Agency securities 29 29 29 28 28 28 27 27 27 6 Held by public 28 28 28 28 28 28 27 27 27 7 Held by agencies 1 1 1 0 0 0 0 0 0 8 Debt subject to statutory limit 5,552 5,568 5,687 5,687 5,601 5,592 5,581 5,693 5,645 9 Public debt securities 5,552 5,568 5,687 5,686 5,601 5,591 5,580 5,692 5,645 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 2001 TTyyppee aanndd hhoollddeerr 11999977 11999988 11999999 22000000 Q3 Q4 Ql Q2 1 Total gross public debt 5,502.4 5,614.2 5,776.1 5,662.2 5,674.2 5,662.2 5,773.7 5,726.8 By type 2 Interest-bearing 5,494.9 5,605.4 5,766.1 5,618.1 5,622.1 5,618.1 5,752.0 5,682.8 3 Marketable 3,456.8 3,355.5 3,281.0 2,966.9 2,992.8 2,966.9 2,981.9 2,822.3 4 Bills 715.4 691.0 737.1 646.9 616.2 646.9 712.0 620.1 5 Notes 2,106.1 1,960.7 1,784.5 1,557.3 1,611.3 1,557.3 1,499.0 1,441.0 6 Bonds 587.3 621.2 643.7 626.5 635.3 626.5 627.9 616.9 7 Inflation-indexed notes and bonds' 33.0 67.6 100.7 121.2 115.0 121.2 128.0 129.3 8 Nonmarketable2 2,038.1 2,249.9 2,485.1 2,651.2 2,629.3 2,651.2 2,770.0 2,860.5 9 State and local government series 124.1 165.3 165.7 151.0 153.3 151.0 152.9 153.3 10 Foreign issues3 36.2 34.3 31.3 27.2 25.4 27.2 24.7 24.0 11 Government 36.2 34.3 31.3 27.2 25.4 27.2 24.7 24.0 12 Public .0 .0 .0 .0 .0 .0 .0 .0 13 Savings bonds and notes 181.2 180.3 179.4 176.9 177.7 176.9 177.4 178.4 14 Government account series4 1,666.7 1,840.0 2,078.7 2,266.1 2,242.9 2,266.1 2,360.3 2,474.7 15 Non-interest-bearing 7.5 8.8 10.0 44.2 52.1 44.2 46.5 44.0 By holder5 16 U.S. Treasury and other federal agencies and trust funds 1,657.1 1,828.1 2,064.2 2,270.2 2,226.5 2,270.2 2,357.0 2,469.1 17 Federal Reserve Banks6 430.7 452.1 478.0 511.7 511.4 511.7 523.9 535.1 18 Private investors 3,414.6 3,334.0 3,233.9 2,880.4 2,936.2 2,880.4 2,892.9 2,722.6 19 Depository institutions 300.3 237.3 246.4 199.1 218.3 199.1 187.3 192.2 20 Mutual funds 321.5 343.3 348.4 338.7 324.3 338.7 348.8 352.4 21 Insurance companies 176.6 141.7 123.4 110.2 113.8 110.2 101.9 92.9 22 State and local treasuries7 239.3 269.3 266.8 236.2 241.9 236.2 224 216.5 Individuals 23 Savings bonds 186.5 186.6 186.4 184.8 184.3 184.8 184.8 186 24 Pension funds 360.5 356.8 349.7 333.4 340.4 333.4 326.5 230.2 25 Private 143.5 139.1 138.5 137.7 139.7 137.7 131.2 129.2 26 State and local 216.9 217.7 211.2 195.7 200.7 195.7 195.3 191 27 Foreign and international8 1,241.6 1,278.7 1,268.7 1,201.3 1,224.9 1,201.3 1,196.1 1,167.1 28 Other miscellaneous investors7'9 589.5 499.0 412.8 145 235.1 145 250.9 n.a. 1. The U.S. 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 Domestic Financial Statistics • October 2001 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions1 Millions of dollars, daily averages 2001 2001, week ending IItteemm Apr. May June May 30 June 6 June 13 June 20 June 27 July 4 July 11 July 18 July 25 OUTRIGHT TRANSACTIONS By type of security 1 U.S. Treasury bills 32,414 23,093 26,141 34,425 34,861 19,936 26,042 23,775 30,377 27,768 29,590 23,622 Treasury coupon securities by maturity 2 Three years or less n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 118,453 91.633 97,837 86,805 3 More than three but less than or equal to six years n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 83,923 64,438 63,566 58,615 4 More than six but less than or equal to eleven years n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 58.180 46,626 51,906 54,098 5 More than eleven n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 17,804 14,140 16,488 16,533 6 Inflation-indexed' 1,847 1,833 1,384 1.633 974 1,532 1,048 1,542 2,284 4,228 2,020 1,485 Federal agency and governmentsponsored enterprises 7 Discount notes 61,242 55,738 53,216 56,532 51,465 44,842 56,196 56,276 62,549 51,438 59,603 53,512 Coupon securities by maturity 8 Three years or less n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 1122,,888800 1111,,110044 1100,,338844 1122,,221188 9 More than three but less than or equal to six years n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 8,360 10.663 6,535 5,842 10 More than six but less than or equal to eleven years n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 7,640 4,612 8,647 6,589 11 More than eleven n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 736 458 1,192 1,332 12 Mortgage-backed 107,684 100,310 96,113 72,304 108.791 137,587 80.404 69,699 72,376 141,762 94,954 66.830 Corporate securities 13 One year or less n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 85,207 78.254 77,765 69,968 14 More than one year n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 17,686 10.464 14,028 18,994 By type of counterparty With interdealer broker 15 U.S. Treasury 152,513 151,800 130,715 144,299 135,599 115,835 129.802 137,422 143,664 120,382 124,550 111,000 16 Federal agency and government-sponsored enterprise . . 12,924 12,451 14,142 10,856 14,572 14,838 14,236 14,597 10,174 8,839 11,428 9,803 17 Mortgage-backed 34,441 32,101 30,517 26,367 34,030 38,899 26,013 28,115 19,806 35,719 25,910 24,016 18 Corporate n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 2,036 509 878 1,116 With other 19 U.S. Treasury 145,077 142,180 129,696 136,662 150.441 103,960 120,638 132,829 167,355 128,451 136,857 130,158 20 Federal agency and government-sponsored enterprise . . 75,208 70,798 70,510 69,211 67,554 60,977 75,087 73,238 81,991 69,436 74,933 69,689 21 Mortgage-backed 73,244 68,209 65,596 45,937 74.761 98,689 54,392 41,585 52,570 106.043 69.044 42,814 22 Corporate n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 100,856 88,209 90,914 87,846 1. The figures represent purchases and sales in the market by the primary U.S. government 2. Outright Treasury inflation-indexed securities (TIIS) transactions are reported at princisecurities dealers reporting to the Federal Reserve Bank of New York. Outright transactions pal value, excluding accrued interest, where principal value reflects the original issuance par include all U.S. government, federal agency, government-sponsored enterprise, mortgage- amount (unadjusted for inflation) times the price times the index ratio. backed, and corporate securities scheduled for immediate and forward delivery, as well as all Note: Major changes in the report form filed by primary dealers induced a break in the U.S. Government securities traded on a when-issued basis between the announcement and dealer data series as of the week ending July 4, 2001. Current weekly data may be found at the issue date. Data do not include transactions under repurchase and reverse repurchase (resale) Federal Reserve Bank of New York web site (http://www.newyorkfed.org/pihome/statistics) agreements. Averages are based on the number of trading days in the week. under the Primary Dealer heading. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A29 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing' Millions of dollars 2001 2001, week ending IItteemm Apr. May June May 30 June 6 June 13 June 20 June 27 July 4 July 11 July 18 NET OUTRIGHT POSITIONS2 By type of security 1 U.S. Treasury bills 30,544 -332 3,445 590 9,269 4,271 -485 -15 7,110 77,,001166 33,,663300 Treasury coupon securities by maturity 2 Three years or less n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. --1166,,996699 --1177,,224422 --1177,,225522 3 More than three but less than or equal to six years n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. -15,221 -18,066 -17,139 4 More than six but less than or equal to eleven years n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. -16,118 -18,140 -18,931 5 More than eleven n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 10,239 9,644 10,399 6 Inflation-indexed 4,196 4,128 3,491 3,762 4,181 3,120 3,439 3,770 2,451 1,872 2,179 Federal agency and governmentsponsored enterprise securities 7 Discount notes 49,374 51,428 55,075 56,934 55.382 61,718 54,516 48,710 55,120 4499,,440088 5511,,553322 Coupon securities by maturity 8 Three years or less n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 2233,,662255 2266,,998866 2222,,227799 9 More than three but less than or equal to six years n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. -3,096 -458 -1,020 10 More than six but less than or equal to eleven years n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 2,472 2,849 55,,009999 11 More than eleven n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 4,190 4,063 3,854 12 Mortgage-backed 12,181 16,811 17,928 21,585 20,369 17,004 17,128 19,231 14,027 8,874 10,645 Corporate securities n One year or less n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 16,541 1144,,224444 1155,,222211 14 More than one year n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 23,106 26,100 26,716 FINANCING3 Securities in U.S. Treasury 15 Overnight and continuing 510,993 534,843 532,146 16 Term 711,949 722,028 746,996 Federal agency and governmentsponsored enterprises 17 Overnight and continuing 110,263 111,565 108,715 18 Term 159,641 165,053 162,392 Mortgage-backed securities 19 Overnight and continuing 20.813 23,216 21,796 20 Term 197,977 199,037 195,696 Corporate securities 21 Overnight and continuing 34,229 34,131 34,851 22 Term 14,179 13,428 13,286 MEMO: Repurchase agreements 23 Overnight and continuing 366,382 383,190 365,246 383,646 387,199 374,728 360,779 354,160 335,502 353,063 342,573 24 Term 925,786 953,256 1,031,773 973,678 1,001,600 1,024,000 1,055,391 1,072,853 959,291 992,190 1,001,645 Securities out U.S. Treasury 25 Overnight and continuing 482,344 533,787 524,882 26 Term 665,178 657,251 678,441 Federal agency and governmentsponsored enterprises 27 Overnight and continuing 192,185 215,948 218,060 28 Term 137,932 117,200 119,367 Mortgage-backed securities 29 Overnight and continuing 222,096 242,794 259,777 30 Term 117,555 95,570 99,190 Corporate securities 31 Overnight and continuing 77,335 80,130 83,145 32 Term 15,523 9,349 9,893 MEMO: Reverse repurchase agreements 33 Overnight and continuing 869,117 865,375 890,043 852,035 900,477 899,998 903,325 879,205 840,245 941,099 962,203 34 Term 852,132 877,681 934,264 895,796 915,611 934,937 958,305 979,348 808,711 854,252 888,912 1. Data for positions and financing are obtained from reports submitted to the Federal 3. Figures cover financing involving U.S. government, federal agency, government- Reserve Bank of New York by the U.S. government securities dealers on its published list of sponsored enterprise, mortgage-backed, and corporate securities. Financing transactions for primary dealers. Weekly figures are close-of-business Wednesday data. Positions for calendar Treasury inflation-indexed securities (TIIS) are reported in actual funds paid or received, days of the report week are assumed to be constant. Monthly averages are based on the except for pledged securities. TIIS that are used as pledged securities are reported at par number of calendar days in the month. value, which is the value of the security at original issuance (unadjusted for inflation). 2. Net outright positions include all U.S. government, federal agency, government- Note. Major changes in the report form filed by primary dealers included a break in many sponsored enterprise, mortgage-backed, and corporate securities scheduled for immediate and series as of the week ending July 4, 2001. Current weekly data may be found at the Federal forward delivery, as well as U.S. government securities traded on a when-issued basis Reserve Bank of New York web site (http://www.newyorkfed.org/pihome/statistics) under between the announcement and issue date. the Primary Dealer heading. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic Nonfinancial Statistics • October 2001 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 2001 AAggeennccyy 11999977 11999988 11999999 22000000 Jan. Feb. Mar. Apr. May 1 Federal and federally sponsored agencies 1,022,609 1,296,477 1,616,492 1,851,632 n.a. 1,917,503 1,919,761 n.a. 2 Federal agencies 27.792 26,502 26.376 25,666 25,426 25,141 25.063 25,024 3 Defense Department' 6 6 6 6 6 6 6 6 4 Export-Import Bank-' 552 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5 Federal Housing Administration4 102 205 126 255 275 291 307 315 n.a. 6 Government National Mortgage Association certificates of participation5 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. 8 Tennessee Valley Authority 27,786 26,496 26,370 25.660 25,420 25,135 25,057 25,018 9 United States Railway Association6 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 1,873,199 1.892,362 1,894,698 n.a. 11 Federal Home Loan Banks 313,919 382.131 529,005 594,404 604,904 598,586 602.824 595,562 12 Federal Home Loan Mortgage Corporation 169.200 287,396 360,711 426,899 446,997 455,623 461,338 478,447 490,442 13 Federal National Mortgage Association 369,774 460,291 547,619 642,700 654,200 668,200 666,600 682,500 693.600 14 Farm Credit Banks8 63.517 63.488 68,883 74,181 73,925 73.647 74,174 74,456 75.363 15 Student Loan Marketing Association 37.717 35.399 41.988 45.375 50,669 53,886 47,322 48,468 48,255 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 debt" 49,090 44,129 42,152 40,575 39,348 38,924 39,341 39,065 Lending to federal and federally sponsored agencies 20 Export-Import Bank3 552 f f f f f f 21 Postal Service6 n.a. 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. 2 2 3 4 T U e n n it n e e d s s S ee ta t V es a l R le a y i l A w u ay th o A r s it s y o ciation6 n n . . a a . . 1 I iI 1 I 1 1 • I •I iI n.a. Other lending14 25 Farmers Home Administration 13.530 9,500 6.665 5,275 5,155 5.155 5,155 5.155 26 Rural Electrification Administration 14.898 14,091 14.085 13,126 13.197 13.281 13,371 13.371 2/ Other 20.110 20,538 21.402 22,174 20,996 20,488 20,815 20.539 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 Dec. Jan. Feb. Mar. Apr. May June July 1 All issues, new and refunding1 262,342 215,427 180,403 15,348 11,255 19,829 24,495 16,985 26,248 29,298 19,232 Br txpe of issue 2 General obligation 87,015 73,308 64,475 5,060 6,256 9,389 7,668 6,890 8,385 9,691 5,836 3 Revenue 175.327 142,120 115,928 10,288 4,999 10,441 16,827 10,094 17,863 19,606 13,396 Bv type of issuer 4 State 23,506 16,376 19,944 1,640 1,738 3,268 1,893 1,900 3,123 2,905 2,029 5 Special district or statutory authority" 178.421 152,418 111,695 1,053 7,061 11,011 17,280 113,344 17,281 20,672 11,784 6 Municipality, county, or township 60,173 46,634 39,273 3,165 2,456 5,550 5,323 3,740 5,845 5,721 5,419 7 Issues for new capital 160,568 161,065 154,257 13,286 8,758 13,384 15,387 12,264 20,002 20,044 15,015 By use of proceeds X Education 36,904 36,563 38,665 2,919 2,786 3,102 5,343 3.731 5,714 6,460 3,379 9 Transportation 19.926 17,394 19,730 1,381 780 2,411 1,219 1,381 2,522 1,258 3,160 10 Utilities and conservation 21,037 15,098 11,917 1,307 678 1,335 1,677 1,447 2,969 3,191 1,055 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 7,122 615 63 281 396 436 422 443 508 13 Other purposes 42,450 47,896 47,309 4,264 3,013 4,742 4,368 3,010 4,736 5,047 3,803 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 22000000 oorr iissssuueerr Nov. Dec. Jan. Feb. Mar. Apr. May June 1 All issues' 1,128,491 1,072,866 942,198 95,595 61,378 125,894 96,206 139,267 92,778 164,563r 123,742 2 Bonds2 1,001,736 941,298 807,281 84,094 58,713 118,372 88,806 127,956 86,274 154,623 102,476 BY type of offering .3 Sold in the United States 923,771 818,683 684,484 76,383 57,189 115,583 86,146 118,779 81,156 146,164 96,382 4 Sold abroad 77,965 122,615 122,798 7,712 1,525 2,789 2,660 9,177 5,1 17 8,459 6,094 MEMO 5 Private placements, domestic n.a. n.a. n.a. 5,534 3,709 26 1,897 652 0 2,563 3.146 By industry group 6 Nonfinancial 307,711 293,963 242,452 25,784 18,219 44,443 34,604 44,385 33,549 67.142 34,996 7 Financial 694.025 647,335 564,829 58,310 40,495 73,928 54,201 83,571 52,725 87,481 67,480 8 Stocks3 182,055 223,968 283,717 23,901 15,065 7,522 7,400 11,311 6,504 9,940r 20,240 By type of offering 9 Public 126.755 131,568 134,917 11,501 2,665 7,522 7,400 11,311 6,504 9,940r 20,240 10 Private placement4 55,300 92,400 148,800 12,400 12,400 n.a. n.a. n.a. n.a. n.a. n.a. By industry group 1 1 Nonfinancial 74,113 110,284 118,369 10.794 2,146 4,356 4,463 7,718 4,822 6,809 16,573 12 Financial 52,642 21.284 16,548 707 519 3,166 2,937 3,593 1.682 3,131r 3,667 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 olfering 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 • October 2001 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Assets1 Millions of dollars 2000 2001 IItteemm 11999999 22000000 Dec. Jan. Feb. Mar. Apr. May Juner July 1 Sales of own shares2 1,791,894 2,279,315 170,255 206,765 148,362 162,548 152,327 158,361 139,270 138,421 2 Redemptions of own shares 1,621,987 2,057,277 160,918 171,819 141,663 175,633 130,454 132,574 125.097 129,022 3 Net sales3 169,906 222,038 9,337 34,946 6,699 -13,085 21,873 25,787 14,173 9,399 4 Assets4 5,233,191 5,123,747 5,123,747 5,280,222 4,879,229 4,594,182 4,910,568 4,956,982 4,888,874 4,825,083 5 Cash5 219,189 277,386 277,386 280,472 274,077 241,518 247,169 237,487 240,199 240,262 6 Other 5,014,002 4,846,361 4,846,361 4,999,750 4,605,152 4,352,664 4,663,399 4,719,495 4,648,675 4,584,821 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 2001 AAccccoouunntt 11999988 11999999 22000000 Q3 Q4 Qi Q2 Q3 Q4 Ql Q2 1 Profits with inventory valuation and capital consumption adjustment 777.4 825.2 876.4 800.2 857.6 870.3 892.8 895.0 847.6 789.8 n.a. 2 Profits before taxes 721.1 776.3 845.4 765.8 825.0 844.9 862.0 858.3 816.5 755.7 n.a. 3 Profits-tax liability 238.8 253.0 271.5 250.7 267.3 277.0 280.4 274.9 253.5 236.8 n.a. 4 Profits after taxes 482.3 523.3 573.9 515.1 557.7 567.8 581.6 583.4 563.0 518.9 n.a. 5 Dividends 348.7 343.5 379.6 342.2 349.6 361.5 373.7 386.2 397.0 405.2 412.3 6 Undistributed profits 133.6 179.8 194.3 172.9 208.1 206.3 207.9 197.2 165.9 113.7 n.a. 7 Inventory valuation 18.3 -2.9 -12.4 -17.7 -21.0 -23.8 -14.8 -3.6 -7.3 -1.9 n.a. 8 Capital consumption adjustment 38.0 51.7 43.4 52.1 53.6 49.2 45.5 40.4 38.4 36.0 31.8 SOURCE. U.S. Department of Commerce, Survey of Current Business. 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities1 Billions of dollars, end of period; not seasonally adjusted 1999 2000 2001 AAccccoouunntt 11999988 11999999 22000000 Q4 Ql Q2r Q3 Q4 Ql' Q2 ASSETS 1 Accounts receivable, gross" 711.7 811.5 915.6 811.5 848.7 884.4 900.1 915.6 910.7 929.9 9 Consumer 261.8 279.8 296.1 279.8 285.4 294.1 301.9 296.1 287.2 290.7 3 Business 347.5 405.2 471.1 405.2 434.6 454.1 455.7 471.1 471.7 481.8 4 Real estate 102.3 126.5 148.3 126.5 128.8 136.2 142.4 148.3 151.8 157.4 5 LESS; Reserves for unearned income 56.3 53.5 60.0 53.5 54.0 57.0 58.8 60.0 60.2 61.9 6 Reserves for losses 13.8 13.5 15.1 13.5 14.0 14.4 14.2 15.1 15.6 16.0 7 Accounts receivable, net 641.6 744.6 840.5 744.6 780.7 813.1 827.1 840.5 834.9 852.0 8 All other 337.9 406.3 461.8 406.3 412.7 419.4 441.4 461.8 475.5 486.2 9 Total assets 979.5 1,150.9 1,302.4 1,150.9 1,193.4 1,232.4 1,268.4 1,302.4 1,310.4 1,338.2 LIABILITIES AND CAPITAL 10 Bank loans 26.3 35.1 35.6 35.1 28.5 33.3 35.4 35.6 41.4 45.2 11 Commercial paper 231.5 227.9 235.2 227.9 230.2 234.2 215.6 235.2 178.2 177.3 Debt 12 Owed to parent 61.8 123.8 146.5 123.8 145.1 136.8 144.3 146.5 138.4 145.9 13 Not elsewhere classified 339.7 397.0 463.8 397.0 412.0 445.1 465.5 463.8 501.8 504.6 14 All other liabilities 203.2 222.7 279.7 222.7 247.6 249.6 269.2 279.7 299.7 309.8 15 Capital, surplus, and undivided profits 117.0 144.5 141.6 144.5 130.1 135.3 138.3 141.6 150.8 155.5 16 Total liabilities and capital 979.5 1,150.9 1,302.4 1,150.9 1,193.4 1,234.4 1,268.4 1,302.4 1,310.4 1,338.2 I. Includes finance company subsidiaries of bank holding companies but not of retailers 2. Before deduction for unearned income and losses. Excludes pools of securitized assets, and banks. Data are amounts carried on the balance sheets of finance companies; securitized pools are not shown, as they are not on the books. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Market and Corporate Finance A33 1.52 DOMESTIC FINANCE COMPANIES Owned and Managed Receivables1 Billions of dollars, amounts outstanding 2001 TTyyppee ooff ccrreeddiitt 11999988 11999999 22000000 Jan. Feb. Mar. Apr. May June Seasonally adjusted 1 Total 875.8 993.9 1,145.2 1,156.7 1,159.7 l,158.6r l,171.3r l,170.9r n.a. 1 Consumer 352.8 385.3 439.3 443.8 447.1 449.8r 456.2r 454.0r n.a. 3 Real estate 131.4 154.7 174.9 177.7 179.0 177.7 182.5 184.4 n.a. 4 Business 391.6 453.9 531.0 535.2 533.6 531.1 532.6 532.5 n.a. Not seasonally adjusted 5 Total 884.0 1,003.2 1,156.0 1,156.7 1,159.7 l,163.1r l,173.6r l,174.1r 6 Consumer 356.1 388.8 443.4 443.9 445.1 445.7r 450.9r 451.4r 7 Motor vehicles loans 103.1 114.7 122.5 117.5 118.5 118.9r 126.9r 127.6' 8 Motor vehicle leases 93.3 98.3 102.9 103.3 102.4 101.3 101.9 101.7 9 Revolving- 32.3 33.8 38.3 37.1 36.9 35.6 36.0 37.5 10 Other3 33.1 33.1 32.4 32.4 32.0 31.3 28.1r 26.4' Securitized assets4 11 Motor vehicle loans 54.8 71.1 97.1 103.9 105.2 108.1 106.1 107.8 12 Motor vehicle leases 12.7 9.7 6.6 6.3 6.9 6.6 7.0 6.9 13 Revolving 8.7 10.5 27.5 27.6 27.6 27.6 28.8 27.8 14 Other 18.1 17.7 16.0 15.8 15.5 16.2 16.0 15.7 15 Real estate 131.4 154.7 174.9 177.7 179.0 177.7 182.5 184.4 16 One- to four-family 75.7 88.3 105.4 108.2 109.5 108.1 112.3 114.4 17 Other 26.6 38.3 42.9 43.2 43.4 43.8 43.8 43.9 Securitized real estate assets4 18 One- to four-family 29.0 28.0 24.7 24.4 24.2 23.9 23.8 23.6 19 Other .1 .2 1.9 1.9 1.9 1.9 2.6 2.6 n.a. 20 Business 396.5 459.6 537.7 535.1 535.6 539.7 540.2 538.2 21 Motor vehicles 79.6 87.8 95.2 93.6 93.6 91.9 91.0 90.8 22 Retail loans 28.1 33.2 31.0 30.8 30.7 30.5 29.9 29.8 23 Wholesale loans5 32.8 34.7 39.6 38.2 37.6 35.8 35.3 35.2 24 Leases 18.7 19.9 24.6 24.6 25.3 25.6 25.8 25.8 2.1 Equipment 198.0 221.9 267.3 265.6 262.5 264.6 267.5 268.0 26 Loans 50.4 52.2 56.2 56.3 55.6 57.1 57.1 57.1 2/ Leases 147.6 169.7 211.1 209.3 206.9 207.5 210.4 210.9 28 Other business receivables6 69.9 95.5 108.6 110.4 114.5 115.2 113.5 112.1 Securitized assets4 29 Motor vehicles 29.2 31.5 37.8 37.3 37.2 40.0 40.3 40.0 30 Retail loans 2.6 2.9 3.2 3.1 2.9 2.8 3.1 3.0 31 Wholesale loans 24.7 26.4 32.5 32.1 31.7 34.5 34.6 34.3 32 Leases 1.9 2.1 2.2 2.2 2.6 2.6 2.6 2.7 33 Equipment 13.0 14.6 23.1 22.5 22.2 22.5 22.2 21.6 34 Loans 6.6 7.9 15.5 14.7 14.5 14.6 14.4 13.9 35 Leases 6.4 6.7 7.6 7.8 7.8 7.9 7.8 7.7 36 Other business receivables6 6.8 8.4 5.6 5.6 5.6 5.6 5.7 5.7 NOTE. This table has been revised to incorporate several changes resulting from the before deductions for unearned income and losses. Components may not sum to totals benchmarking of finance company receivables to the June 1996 Survey of Finance Compa- because of rounding. nies. In that benchmark survey, and in the monthly surveys that have followed, more detailed 2. Excludes revolving credit reported as held by depository institutions that are subsidiarbreakdowns have been obtained for some components. In addition, previously unavailable ies of finance companies. data on securitized real estate loans are now included in this table. The new information has 3. Includes personal cash loans, mobile home loans, and loans to purchase other types of resulted in some reclassification of receivables among the three major categories (consumer, consumer goods, such as appliances, apparel, boats, and recreation vehicles. real estate, and business) and in discontinuities in some component series between May and 4. Outstanding balances of pools upon which securities have been issued; these balances June 1996. are no longer carried on the balance sheets of the loan originator. Includes finance company subsidiaries of bank holding companies but not of retailers and 5. Credit arising from transactions between manufacturers and dealers, that is, floor plan banks. Data in this table also appear in the Board's G.20 (422) monthly statistical release. For financing. ordering address, see inside front cover. 6. Includes loans on commercial accounts receivable, factored commercial accounts, and 1. Owned receivables are those carried on the balance sheet of the institution. Managed receivable dealer capital; small loans used primarily for business or farm purposes; and receivables are outstanding balances of pools upon which securities have been issued; these wholesale and lease paper for mobile homes, campers, and travel trailers. balances are no longer carried on the balance sheets of the loan originator. Data are shown Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A34 Domestic Nonfinancial Statistics • October 2001 1.53 MORTGAGE MARKETS Mortgages on New Homes Millions of dollars except as noted 2001 IItteemm 11999988 11999999 22000000 Jan. Feb. Mar. Apr. May June July Terms and yields in primary and secondary markets PRIMARY MARKETS Terms1 1 Purchase price (thousands of dollars) 195.2 210.7 234.5 238.7 245.0 244.5 240.8 241.4 250.6 242.9 2 Amount of loan (thousands of dollars) 151.1 161.7 177.0 181.6 185.4 182.9 181.5 181.4 188.7 182.7 3 Loan-to-price ratio (percent) 80.0 78.7 77.4 78.2 77.9 77.2 77.6 77.6 77.3 77.3 4 Maturity (years) 28.4 28.8 29.2 29.4 29.0 28.8 28.5 28.6 28.7 28.8 5 Fees and charges (percent of loan amount)2 .89 .77 .70 .71 .70 .66 .71 .69 .66 .66 Yield (percent per year) 6 Contract rate1 6.95 6.94 7.41 7.09 6.99 6.94 6.96 7.02 7.02 7.01 7 Effective rate1'3 7.08 7.06 7.52 7.20 7.10 7.04 7.07 7.12 7.12 7.11 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 6.57 6.61 6.41 6.53 6.61 6.55 6.49 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 414,515 523,941 610,122 623,950 632,850 n.a. n.a. n.a. n.a. n.a. 12 I HA/VA insured 33,770 55,318 61,539 62,970 63,337 n.a. n.a. n.a. n.a. n.a. 13 Conventional 380,745 468,623 548,583 560,980 569,513 n.a. n.a. n.a. n.a. n.a. 14 Mortgage transactions purchased (during period) 188,448 195,210 154,231 20,598 17,230 20,899 24,015 16,825 24,430 26,082 Mortgage commitments (during period) 15 Issued7 193,795 187,948 163,689 27,325 25,471 n.a. n.a. n.a. n.a. n.a. 16 To sell8 1,880 5,900 11,786 766 835 n.a. n.a. n.a. n.a. n.a. FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period f 1/ Total 255,010 324,443 385,693 391,679 407,086 421,655 430,960 437,582 443,810 454,485 18 FHA/VA insured 785 1,836 3,332 3,307 3,319 3,329 2,878 2,785 2,738 2.689 19 Conventional 254,225 322,607 382,361 388,372 403,767 418,326 428,082 434,797 441,072 451,796 Mortgage transactions (during period) 20 Purchases 267,402 239,793 174,043 15,658 16,536 24,648 n.a. n.a. n.a. n.a. 21 Sales 250,565 233,031 166,901 15,364 15,549 23,367 31,219 33,670 38,133 44.574 22 Mortgage commitments contracted (during period)9 281,899 228,432 169,231 18,685 17,664 26,682 32,758 39,897 37,312 43,788 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 OUTSTANDING' Millions of dollars, end of period 2000 2001 TTyyppee ooff hhoollddeerr aanndd pprrooppeerrttyy 11999977 11999988 11999999 Ql Q2 Q3 Q4 Ql 1 All holders 5,198,237 5,698,389 6,326,415 6,426,515 6,592,329 6,744,667 6,889,962 7,016,475 By ftpe of property 2 One- to four-family residences 3,968,218 4,348,553 4,773,876 4,832,886 4,962,031 5,087.538 5,193,000 55,,228844,,888866 3 Multifamily residences 302,642 330,718 372,619 387,188 390,753 399,232 409,216 418,762 4 Nonfarm. nonresidential 837,077 922,612 1,076,958 1,102,565 1,133,107 1,149,940 1,178,909 1,202,752 5 90,300 96,506 102,962 103,875 106,437 107,957 108,836 110,075 By type of holder 6 Major financial institutions 2,084,000 2,195,869 2,396,265 2,458,194 2,550,201 2,606,592 2,621,076 2,667,125 7 Commercial banks2 1,245,334 1,338,273 1,496,844 1,548,224 1.615,794 1,650,294 1,661,600 1,688,869 8 One to four-family 745,777 798,009 880,208 905,270 949,223 968,831 966,609 978,227 9 Multifamily 50,705 54,174 67,666 72,509 75,795 77,031 77,821 79,890 in Nonfarm, nonresidential 421,865 457,054 517,130 537.772 557,059 570,513 583,153 596,518 11 Farm 26,987 29,035 31,839 32.673 33,717 33.919 34,016 34,234 p Savinsis institutions3 631,826 643,957 668,634 680.745 701,992 721,563 723,534 741,114 13 One- to four-family 520,782 533,895 549,046 560.018 578,612 595,518 595,053 608,289 14 Multifamily 59,540 56,847 59,168 57,790 59,174 60,077 61,094 62,666 IS Nonfarm, nonresidential 51,150 52,798 59,945 62.444 63,688 65,437 66,852 69,589 16 Farm 354 417 475 493 518 531 535 569 17 Life insurance companies 206,840 213,640 230,787 229,225 232,415 234,735 235,942 237,142 18 One to four-family 7.187 6,590 5,934 5,567 5,237 4,907 4,904 4,800 19 Multifamily 30,402 31,522 32,818 32.634 33,121 33,478 33,681 33,867 70 Nonfarm, nonresidential 158,779 164,004 179,048 178,043 180,701 182,646 183,757 184,774 21 Farm 10,472 11,524 12,987 12,981 13,356 13,704 13,600 13,701 22 Federal and related agencies 286,194 293,602 322,132 322.917 332,642 336,682 343,962 346,276 23 Government National Mortgage Association 8 7 7 7 7 6 6 6 24 One to four-family 8 7 7 7 7 6 6 6 25 Multifamily 0 0 0 0 0 0 0 0 76 Farmers Home Administration4 41,195 40,851 73,871 72.899 72,896 73,009 73,323 73,361 77 One- to four-family 17,253 16,895 16,506 16.456 16,435 16,444 16,372 16,297 78 Multifamily 11,720 11,739 11,741 11,732 11,729 11,734 11,733 11,725 ->9 Nonfarm, nonresidential 7,370 7,705 41,355 40.509 40,554 40,665 41,070 41,247 30 Farm 4,852 4,513 4,268 4.202 4,179 4,167 4,148 4,093 31 Federal Housing and Veterans' Administrations 3,811 3,674 3,712 3.794 3.845 3,395 3,507 2,873 37 One to four-family 1,767 1.849 1,851 1.847 1,832 1,327 1,308 1,276 33 Multifamily 2,044 1,825 1,861 1.947 2,013 2,068 2,199 1,597 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 724 361 152 98 72 82 45 50 40 One to four-family 117 58 25 16 12 13 7 8 41 Multifamily 140 70 29 19 14 16 9 10 47 Nonfarm, nonresidential 467 233 98 63 46 53 29 32 43 Farm 0 0 0 0 0 0 0 0 44 Federal National Mortgage Association 161,308 157,675 151,500 150,312 153,507 152,815 155,363 156,294 45 One- to four-family 149,831 147,594 141,195 139,986 142,478 141,786 144,150 145.014 46 Multifamily 11,477 10,081 10,305 10,326 11,029 11,029 11.213 11,280 47 Federal Land Banks 30,657 32,983 34,187 34,142 34,830 35,549 36,326 37,072 48 One- to four-family 1,804 1,941 2,012 2,009 2,049 2,092 2,137 2.181 49 Farm 0 0 0 0 0 0 0 0 50 Federal Home Loan Mortgage Corporation 48,454 57,085 56,676 57,009 56,972 57,046 59,240 60.110 51 One- to four-family 42,629 49,106 44,321 43,384 42,892 42.138 42,871 42,771 52 Multifamily 5,825 7,979 12,355 13,625 14,080 14.908 16,369 17,339 53 Mortgage pools or trusts5 2,232,848 2.581,969 2.947,760 2,983,365 3,034,691 3,115,138 3,231,195 3,305,311 54 Government National Mortgage Association 536,879 537,446 582,263 589.192 590,708 602,628 611.629 601,540 55 One- to four-family 523,225 522,498 565.189 571,506 572,661 584.152 592,700 581,760 56 Multifamily 13,654 14,948 17,074 17.686 18,047 18,476 18,929 19,780 57 Federal Home Loan Mortgage Corporation 579,385 646,459 749,081 757,106 768,641 790.891 822,310 833,616 58 One- to four-family 576,846 643,465 744,619 752,607 763,890 786,007 816,602 827,769 59 Multifamily 2,539 2,994 4,462 4,499 4,751 4,884 5,708 5,847 60 Federal National Mortgage Association 709,582 834,517 960,883 975,815 995,815 1,020,828 1,057,750 1,099,049 61 One to four-family 687,981 804,204 924,941 932,178 957.584 981,206 1.016,398 1.055,412 62 Multifamily 21,601 30,313 35,942 43,637 38.231 39,622 41,352 43,637 63 Farmers Home Administration4 2 1 0 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 2 1 0 0 0 0 0 0 68 Private mortgage conduits 407,000 563,546 655,533 661,252 679,527 700,792 739,506 771,106 69 One to four-family6 310,659 405,153 455,021 455,623 464,593 477.899 499,834 523,300 70 Multifamily 20,907 33,754 42.226 43,069 44,290 45,991 49.322 50,639 71 Nonfarm, nonresidential 75,434 124,639 158,287 162,560 170,644 176,901 190,350 197,167 72 Farm 0 0 0 0 0 0 0 0 73 Individuals and others7 595,195 626,949 660,258 662,039 674,794 686,254 693,729 697,763 74 One- to four-family 382,315 416,335 441,205 442,006 454,314 470,762 478.118 481,485 75 Multifamily 72,088 74,462 76,740 77,466 78,179 79,587 79,566 80,268 76 Nonfarm, nonresidential 122,013 116,178 121,095 121,174 120,415 113,725 113,697 113,424 77 Farm 18,779 19,974 21,217 21,393 21,886 22,179 22,348 22,586 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 • October 2001 1.55 CONSUMER CREDIT1 Millions of dollars, amounts outstanding, end of period 2001 HHoollddeerr aanndd ttyyppee ooff ccrreeddiitt 11999988 11999999 22000000 Jan. Feb. Mar. Apr. May June Seasonally adjusted 1 Total 1,301,023 1,393,657 1,531,469 1,548,486 1,562,937 1,571,588 1,584,383 1,591,239 1,589,663 2 Revolving 560,504 595,610 663,830 669,780 681,384 689,462 697,636 701,101 703,368 3 Nonrevolving" 740,519 798,047 867,639 878,706 881,553 882,126 886,746 890,137 886,295 Not seasonally adjusted 4 Total 1,331,742 1,426,151 1,566,457 1,560,357 1,558,086 1,559,178 1,570,232 1,576,531 1,581,516 By major holder 3 Commercial banks 508,932 499,758 541,470 539,796 535,137 534,545 540,686 543,162 540,613 6 Finance companies 168,491 181,573 193,189 187.029 187,493 185,862 191,028 191,539 190,908 / Credit unions 155,406 167,921 184,434 184,120 183,548 182,918 184,280 185,971 186,788 8 Savings institutions 51,611 61,527 64,557 64,667 64,777 64,887 64,950 65,014 65,077 9 Nonfinancial business 74,877 80,311 82,662 77,685 73,020 71,757 71,511 70,010 68,107 10 Pools of securitized assets3 372,425 435,061 500,145 507,060 514,111 519,209 517,777 520,835 530,023 By major type of credit4 11 Revolving 586,528 623,245 693,645 681,812 682,143 682,422 690,420 693,679 697.347 12 Commercial banks 210,346 189,352 218,063 211,006 208,192 208,924 215,207 217,438 215,090 13 Finance companies 32,309 33,814 38,251 37,098 36,938 35,626 36,044 37,509 37,350 14 Credit unions 19,930 20,641 22,226 21,714 21,415 20,902 21.068 21.226 21,296 13 Savings institutions 12,450 15,838 16,560 16,701 16,842 16,983 16,975 16,968 16,961 16 Nonfinancial business 39,166 42,783 42.430 38,934 35,290 34,150 33,815 32,690 31,379 1 / Pools of securitized assets3 272,327 320,817 356,114 356.359 363,466 365,837 367,310 367,849 375,271 18 Nonrevolving 745,214 802,906 872,812 878,545 875,943 876,756 879,812 882,851 884,169 19 Commercial banks 298,586 310,406 323,407 328,790 326,945 325,621 325,478 325,724 325,523 20 Finance companies 136,182 147,759 154,938 149,931 150,555 150,236 154,985 154,030 153,558 21 Credit unions 135,476 147,280 162,208 162,406 162,133 162,016 163,212 164,745 165,492 22 Savings institutions 39,161 45,689 47,997 47,966 47,935 47,904 47,975 48,046 48,117 23 Nonfinancial business 35,711 37,528 40,232 38,750 37,729 37,607 37,695 37,321 36,727 24 Pools of securitized assets3 100,098 114,244 144,031 150,701 150.645 153,372 150,468 152,986 154,752 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 11999988 11999999 22000000 Dec. Jan. Feb. Mar. Apr. May June INTEREST RATES Commercial banks' 1 48-month new car 8.72 8.44 9.34 n.a. n.a. 9.17 n.a. n.a. 8.67 2 24-month personal 13.74 13.39 13.90 n.a. n.a. 13.71 n.a. n.a. 13.28 n.a. Credit card plan 3 All accounts 15.71 15.21 15.71 n.a. n.a. 15.66 n.a. n.a. 15.07 4 Accounts assessed interest 15.59 14.81 14.91 n.a. n.a. 14.61 n.a. n.a. 14.63 n.a. Auto finance companies 5 New car 6.30 6.66 6.61 7.45 7.29 7.19 6.80 6.80 6.56 6.15 6 Used car 12.64 12.60 13.55 13.58 13.11 13.34 13.19 12.82 12.57 12.05 OTHER TERMS3 Maturity (months) 7 New car 52.1 52.7 54.9 55.2 54.3 55.5 55.6 56.3 57.0 57.2 8 Used car 53.5 55.9 57.0 56.6 57.8 58.0 58.0 57.9 57.8 57.6 Loan-to-value ratio 9 New car 92 92 92 91 90 91 91 91 92 91 10 Used car 99 99 99 100 98 99 100 100 100 100 Amount financed (dollars) 11 New car 19,083 19,880 20,923 21,867 21,315 21,993 22,131 21,914 21,871 22,124 12 Used car 12,691 13,642 14,058 14,591 14,155 14,095 14,214 14,347 14,350 14,586 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 2000r 2001 Q4r Q! Q2 Q3 Q4 Qlr Q2 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors .. . 705.9r 733. lr 804.4r l,023.5r l,097.8r 999.7 949.6 967.5 801.3 758.0 1,001.1 1,034.9 By sector and instrument 2 Federal government 144.4 145.0 23.1 -52.6 -71.2 -30.0 -217.2 -408.7 -226.2 -331.3 -4.3 -216.0 3 Treasury securities 142.9 146.6 23.2 -54.6 -71.0 -30.1 -215.2 -410.5 -223.8 -330.2 -2.1 -217.1 4 Budget agency securities and mortgages 1.5 -1.6 -.1 2.0 -.2 .0 -2.1 1.8 -2.4 -1.2 -2.2 1.1 5 Nonfederal 561.5r 588.1r 781.3r l,076.2r i,i69.r 1,029.7 1,166.8 1,376.2 1,027.6 1,089.4 1,005.4 1,251.0 By instrument 6 Commercial paper 18.1 -.9 13.7 24.4 37.4 44.0 29.8 110.4 56.1 -4.0 -207.2 -141.5 7 Municipal securities and loans -48.2 2.6 71.4 96.8 68.2 44.8 20.0 30.1 31.0 60.1 106.9 113.9 8 Corporate bonds 91.1 116.3 150.5 218.7 229.9 155.2 186.2 153.8 184.4 175.6 403.7 423.7 9 Bank loans n.e.c 103.7 70.5 106.5 108.2 82.7 84.8 139.5 163.3 50.2 59.4 -6.7 -144.1 10 Other loans and advances 67.2 33.5 69.1 74.3 60.6 23.7 147.1 126.0 18.4 125.2 -12.5 102.8 11 Mortgages 190.6r 211.5' 317.6r 486. lr 595.9' 567.7 498.8 654.6 565.0 549.5 563.1 823.3 12 Home 179. r 242.9r 252.6' 384.2r 429.5r 377.2 356.2 484.6 435.9 392.3 431.5 613.9 13 Multifamily residential 4.5r 9.5r 1.6' 23.8r 42.7r 53.9 30.9 49.0 29.5 41.7 40.4 56.2 14 Commercial 5.1' 22.5r 54.3r 71.5r 117.9r 133.9 104.3 110.9 93.1 111.8 86.7 144.2 15 Farm 1.4' 2.1' 3.1r 6.5r 5.8r 2.7 7.4 10.1 6.5 3.8 4.5 9.1 16 Consumer credit 138.9 88.8 52.5 67.6 94.4 109.5 145.3 137.9 122.5 123.7 158.1 72.8 By borrowing sector 17 Household 339.3r 338.5r 322. lr 454.2r 506.3r 437.8 516.6 612.7 544.4 498.4 549.5 660.9 18 Nonfinancial business 273.7r 256.4r 403.2r 541.7r 610.4r 564.7 637.2 745.2 459.4 537.2 355.8 480.0 19 Corporate 224.9r 183.7r 301.3r 394.8r 449.2r 389.5 487.7 550.8 322.9 388.5 228.2 348.1 20 Nonfarm noncorporate 46. r 61.8' 95.1' 138.9r 155.7r 169.4 135.7 184.7 129.3 134.2 121.3 125.4 21 Farm 2.1' 4.9' 6.2 8.0r 5.5r 5.9 13.8 9.7 7.2 14.5 6.3 6.5 22 State and local government -51.5 -6.8 56.1 80.3 52.3 27.2 12.9 18.2 23.8 53.7 100.1 110.1 23 Foreign net borrowing in United States 78.5 88.4 71.8 43.4r 21.9' 22.8 117.4 50.6 108.7 107.4 9.3 4.2 24 Commercial paper 13.5 11.3 3.7 7.8 16.3 33.6 57.8 12.0 7.0 50.1 -25.4 -5.6 75 Bonds 57.1 67.0 61.4 34.9r 16.8r 2.3 44.7 31.2 91.5 49.6 33.3 36.0 26 Bank loans n.e.c 8.5 9.1 8.5 6.7 .5 2.3 15.4 5.7 11.9 12.2 13.0 -26.9 27 Other loans and advances -.5 1.0 -1.8 -6.0 -5.7 -15.4 -.5 1.7 -1.7 -4.6 -11.6 .7 28 Total domestic plus foreign 784.5r 821.5r 876.2r l,066.9r l,125.8r 1,022.5 1,067.0 1,018.1 910.0 865.4 1,010.4 1,039.1 Financial sectors 29 Total net borrowing by financial sectors 454.0 545.7 653.8 l,073.8r l,077.3r 961.4 601.2 884.8 777.9 976.7 882.9 763.1 By instrument 30 Federal government-related 204.2 231.4 212.9 470.9 592.0 552.4 224.4 381.1 514.8 613.6 432.6 671.2 31 Government-sponsored enterprise securities 105.9 90.4 98.4 278.3 318.2 367.9 104.9 248.9 278.1 304.5 262.3 264.7 32 Mortgage pool securities 98.3 141.0 114.6 192.6 273.8 184.5 119.5 132.2 236.7 309.1 170.3 406.5 33 Loans from U.S. government .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 34 Private 249.8 314.4 440.9 602.9r 485.3 409.0 376.7 503.7 263.1 363.1 450.3 91.8 35 Open market paper 42.7 92.2 166.7 161.0 176.2 404.4 114.6 136.7 106.5 153.2 -134.6 -85.4 36 Corporate bonds 195.9 173.8 210.5 296.9 211.2r -30.1 165.0 227.7 192.1 217.4 456.7 157.7 37 Bank loans n.e.c 2.5 12.6 13.2 30.1 -14.3 -54.4 3.1 10.2 -9.9 -4.4 27.8 14.5 38 Other loans and advances 3.4 27.9 35.6 90.2 107.1 85.9 87.0 119.2 -31.6 -4.8 107.8 -11.0 39 Mortgages 5.3 7.9 14.9 24.8 5.1 3.2 7.0 10.0 6.0 1.8 -7.5 16.0 By borrowing sector 40 Commercial banking 22.5 13.0 46.1 72.9 67.2 44.8 78.3 99.3 43.4 18.8 148.3 -15.6 41 Savings institutions 2.6 25.5 19.7 52.2 48.0 -6.8 57.5 69.0 -37.9 20.4 62.5 16.2 42 Credit unions -.1 .1 .1 .6 2.2 3.3 -2.9 .9 1.1 1.0 -.6 .8 43 Life insurance companies -.1 1.1 .2 .7 .7 -4.4 -.7 -1.1 -.3 -.7 -2.4 .1 44 Government-sponsored enterprises 105.9 90.4 98.4 278.3 318.2 367.9 104.9 248.9 278.1 304.5 262.3 264.7 45 Federally related mortgage pools 98.3 141.0 114.6 192.6 273.8 184.5 119.5 132.2 236.7 309.1 170.3 406.5 46 Issuers of asset-backed securities (ABSs) 142.4 150.8 202.2 321.4 223.4 105.9 175.0 146.0 156.2 307.9 289.8 171.8 47 Finance companies 50.2 45.9 48.7 43.0 62.4 92.1 53.5 177.7 29.6 37.8 -42.8 35.7 48 Mortgage companies -2.2 4.1 -4.6 1.6 .2 6.2 -3.0 2.7 -.3 1.0 .7 .6 49 Real estate investment trusts (REITs) 4.5 11.9 39.6 62.7 6.3 11.3 11.5 9.8 -2.4 -8.1 -6.1 2.2 50 Brokers and dealers -5.0 -2.0 8.1 7.2 -17.2 -37.3 44.4 -.7 25.4 -6.6 -23.7 35.6 51 Funding corporations 34.9 64.1 80.7 40.7 92.2 193.8 -36.8 -.1 48.2 -8.5 24.6 -155.5 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Nonfinancial Statistics • October 2001 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS'—Continued Billions of dollars; quarterly data at seasonally adjusted annual rates 1999 2000r 2001 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999955 11999966 11999977 11999988 11999999 Q41 Ql Q2 Q3 Q4 Qlr Q2 All sectors 5522 TToottaall nneett bboorrrroowwiinngg,, aallll sseeccttoorrss l,238.5r l,367.2r l,530.0r 2,140.7r 2,203.1r 1,983.8 1,668.1 1,902.9 1,687.9 1,842.1 1,893.2 1,802.2 5533 OOppeenn mmaarrkkeett ppaappeerr 74.3 102.6 184.1 193.1 229.9 482.0 202.1 259.1 169.7 199.3 -367.2 -232.5 5544 UU..SS.. ggoovveerrnnmmeenntt sseeccuurriittiieess 348.6 376.4 236.0 418.3 520.7 522.4 7.2 -27.6 288.6 282.2 428.3 455.2 5555 MMuunniicciippaall sseeccuurriittiieess -48.2 2.6 71.4 96.8 68.2 44.8 20.0 30.1 31.0 60.1 106.9 113.9 5566 CCoorrppoorraattee aanndd ffoorreeiiggnn bboonnddss 344.1 357.0 422.4 550.4 457.9r 127.4 396.0 412.7 468.0 442.6 893.7 617.4 5577 BBaannkk llooaannss nn..ee..cc 114.7 92.1 128.2 145.0 68.9 32.7 158.0 179.2 52.2 67.1 34.1 -156.5 5588 OOtthheerr llooaannss aanndd aaddvvaanncceess 70.1 62.5 102.8 158.5 162.0 94.2 233.6 246.9 -15.0 115.8 83.7 92.5 5599 MMoorrttggaaggeess 196.0r 285.3r 332.5r 510.9r 601.0r 570.9 505.9 664.6 571.0 551.3 555.6 839.4 6600 CCoonnssuummeerr ccrreeddiitt 138.9 88.8 52.5 67.6 94.4 109.5 145.3 137.9 122.5 123.7 158.1 72.8 Funds raised through mutual funds and corporate equities 61 Total net issues 146.8r 231.8r 181.8r 102.8r 146.3r 168.2 387.7 163.4 211.3 -166.0 170.0 427.6 62 Corporate equities — .6r -5.8r -83.3r - 171.8r -42.lr 8.0 80.4 -68.7 -68.1 -322.7 73.6 143.8 63 Nonfinancial corporations -58.3 -69.5 -114.4 -267.0 -143.5 -55.0 61.2 -245.2 -87.7 -394.8 -33.9 -35.2 64 Foreign shares purchased by U.S. residents 65.4r 82.8 57.6 101.3r 114.4 71.3 62.6 185.9 61.1 89.4 109.2 208.8 65 Financial corporations -7.7r -19.2 -26.5r —6. lr - 13.0r -8.3 -43.4 -9.3 -41.5 -17.4 -1.8 -29.9 66 Mutual fund shares 147.4 237.6 265.1 274.6 188.3 160.2 307.3 232.0 279.4 156.7 96.4 283.8 1. Data in this table also appear in the Board's Z. 1 (780) quarterly statistical release, tables F.2 through F.4. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A3 7 1.58 SUMMARY OF FINANCIAL TRANSACTIONS1 Billions of dollars except as noted; quarterly data at seasonally adjusted annual rates 1999 2000r 2001 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999955 11999966 11999977 11999988 11999999 Q4r Ql Q2 Q3 Q4 Qir Q2 NET LENDING IN CREDIT MARKETS2 1 Total net lending in credit markets L,238.5R L,367.2R L,530.0R 2,140.7R 2,203.1R 1,983.8 1,668.1 1,902.9 1,687.9 1,842.1 1,893.2 1,802.2 9 Domestic nonfederal nonfinancial sectors —79.3r 69.7r -29.7r 86.3r 189.2r -32.2 -227.3 133.4 -231.3 -155.8 -222.5 -63.2 Household 16.5r I09.4r —20.2r —50.4r 141.5r -.2 -283.0 31.2 -160.1 -136.4 -259.9 13.3 4 Nonfinancial corporate business -8.8 -10.2 -12.7 -16.0 -2.8 -41.1 56.5 61.9 -50.8 -28.7 40.6 -46.5 5 Nonfarm noncorporate business 4.4' 4.2r 3.0r 18.lr 7.1r 6.9 -2.1 .4 -4.0 -2.7 -4.8 -5.2 6 State and local governments -91.4 -33.7 .1 134.5 43.4 2.3 1.2 39.9 -16.4 12.1 1.5 -24.8 7 Federal government -.5 -7.2 5.1 13.5 5.8 -11.8 6.5 7.7 4.5 10.6 4.6 9.4 8 Rest of the world 273.9 414.4 311.3 254.2 208.8r 136.0 315.2 197.9 216.2 387.8 410.8 344.0 9 Financial sectors 1,044.4r 890.3r l,243.3r l,786.7r l,799.2r 1,891.8 1,573.7 1,563.8 1,698.6 1,599.5 1,700.3 1,511.9 10 Monetary authority 12.7 12.3 38.3 21.1 25.7 -49.1 102.0 -5.4 39.1 -.9 53.7 26.4 1 1 Commercial banking 265.9 187.5 324.3 305.2 308.2 500.4 415.8 497.4 363.2 157.0 152.8 158.4 1? U.S. chartered banks 186.5 119.6 274.9 312.0 317.6 417.4 448.2 510.9 324.8 75.3 107.9 179.7 N Foreign banking offices in United States 75.4 63.3 40.2 -11.9 -20.1 34.1 4.5 -22.3 32.8 81.1 41.3 -22.7 14 Bank holding companies -.3 3.9 5.4 -.9 6.2 42.6 -42.2 3.5 -6.7 -3.2 7.3 -2.8 is Banks in U.S.-affiliated areas 4.2 .7 3.7 6.0 4.4 6.3 5.4 5.4 12.3 3.8 -3.6 4.2 16 Savings institutions -7.6 19.9 -4.7 36.1 68.6 23.1 55.6 65.0 62.7 42.5 52.5 56.2 17 Credit unions 16.2 25.5 16.8 19.0 27.5 21.1 35.7 31.6 21.2 33.6 3.9 24.6 18 Bank personal trusts and estates -8.3 -7.7 -25.0 -12.8 27.8 27.8 18.9 13.8 17.6 18.1 10.7 13.4 19 Life insurance companies 100.0 69.6 104.8 76.9 53.5 27.4 65.0 52.9 74.8 38.8 95.3 101.2 20 Other insurance companies 21.5 22.5 25.2 5.8r -3.0' -8.2 -11.2 -18.1 6.2 -11.7 2.1 2.8 21 Private pension funds 19.9 -4.1 47.6 56.4 45.0 49.8 46.8 24.7 64.9 28.7 26.1 20.2 22 State and local government retirement funds 38.3 35.8 67.1 72.1 46.9 46.2 63.3 31.5 37.6 66.1 13.3 17.7 Money market mutual funds 86.5 88.8 87.5 244.0 182.0 355.1 161.5 -118.2 256.1 296.0 303.4 166.2 74 Mutual funds 52.5 48.9 80.9 124.8 47.2 -23.2 -66.9 63.1 50.1 60.8 69.4 130.9 25 Closed-end funds 10.2r 4.6r -2.6 5.5 7.4r 7.4 -8.4 -8.4 -8.4 -8.4 -8.4 -8.4 26 Government-sponsored enterprises 95.4r 97.4r 106.6r 314.6r 291,7r 253.7 205.4 250.9 188.6 318.8 347.8 302.4 27 Federally related mortgage pools 98.3 141.0 114.6 192.6 273.8 184.5 119.5 132.2 236.7 309.1 170.3 406.5 28 Asset backed securities issuers (ABSs) 120.6 120.5 163.8 281.7 205.2 76.1 154.2 111.4 120.9 278.9 269.8 159.4 29 Finance companies 49.9 18.4 21.9 51.9 94.9 96.3 144.0 138.9 91.6 23.1 -3.9 85.5 30 Mortgage companies -3.4 8.2 -9.1 3.2 .3 12.3 -6.0 5.5 -.5 2.0 1.4 1.1 31 Real estate investment trusts (REITs) 1.4 4.4 20.2 -5.1 -2.6 -7.0 -16.3 -2.5 -3.6 -2.8 4.0 1.1 37 Brokers and dealers 90.1 -15.7 14.9 6.8 -34.7 -42.2 101.9 90.0 152.7 -69.0 311.4 13.8 33 Funding corporations -15.7 12.6 50.4 — 12.9r 133.8r 340.1 -7.2 207.7 -72.9 19.0 -175.3 -167.5 RELATION OK LIABILITIES TO FINANCIAL ASSETS 34 Net flows through credit markets L,238.5R L,367.2R L,530.0R 2,140.7R 2,203.1R 1,983.8 1,668.1 1,902.9 1,687.9 1,842.1 1,893.2 1,802.2 Other financial sources 35 Official foreign exchange 8.8 -6.3 .7 6.6 -8.7 -7.0 1.5 -8.8 .7 4.9 -1.5 44..77 36 Special drawing rights certificates 2.2 -.5 -.5 .0 -3.0 -4.0 .0 -8.0 -4.0 -4.0 .0 .0 37 Treasury currency .7 .5 .5 .6 1.0 .0 2.2 3.2 4.2 .0 -1.1 11..11 38 Foreign deposits 35.3 85.9 107.7r 6.5' 61.0r -35.4 313.3 3.4 -40.8 207.4 235.5 --114466..55 39 Net interbank transactions 10.0 -51.6 -19.7 -32.3 17.6 -17.2 -72.9 151.9 -170.6 10.6 -202.4 177.0 40 Checkable deposits and currency -12.8 15.7 41.2 47.4 151.4 368.9 -206.8 -33.8 5.0 -50.2 90.3 101.0 41 Small time and savings deposits 96.6 97.2 97.1 152.4 44.7 44.5 104.6 123.0 224.5 310.8 288.3 193.1 42 Large time deposits 65.6 114.0 122.5 92.1 130.6 348.3 154.1 101.2 152.9 65.2 130.6 65.9 43 141.2 145.4 155.9 287.2 249.1 455.8 239.7 71.5 250.9 371.1 621.4 322.5 44 Security repurchase agreements 110.5 41.4 120.9 91.3 169.7 260.8 275.0 155.2 278.0 -264.6 11.2 155.2 45 Corporate equities — ,6r —5.8r -83.3r -171.8r -42.lr 8.0 80.4 -68.7 -68.1 -322.7 73.6 143.8 46 Mutual fund shares 147.4 237.6 265.1 274.6 188.3 160.2 307.3 232.0 279.4 156.7 96.4 283.8 47 Trade payables 133.7r 123.3r 139.7r 109.2r 222.3r 255.4 193.5 193.9 132.8 105.4 -21.8 -10.1 48 Security credit 26.7 52.4 111.0 103.3 104.3 337.0 485.0 -91.4 94.7 75.6 -64.6 -82.9 49 Life insurance reserves 45.8 44.5 59.3 48.0 50.8 57.6 54.9 45.6 53.0 47.3 52.7 59.7 50 Pension fund reserves 158.8 148.3 201.4 202.1 184.5 166.2 210.8 260.8 227.1 169.0 255.6 196.7 51 Taxes payable 7.8r 19.5r 22.3r 21.3r 22.3r 31.2 30.9 31.8 -1.6 25.9 .6 2.0 52 Investment in bank personal trusts 6.4 -5.3 -49.9 -41.81 -6.5r -7.6 -28.4 -33.1 -29.2 -28.0 -26.1 -22.7 53 Noncorporate proprietors' equity — ,2r — 31.6r —71.8r —74.0r -49.1r -48.2 -48.6 -28.8 -10.7 -34.9 -29.3 -13.0 54 Miscellaneous 496.9r 525.0r 490.6r 1,002.5r 738.lr 677.5 999.5 1,089.7 1,283.9 595.9 570.9 932.1 55 Total financial sources 2,719.2R 2,917.0R 3,240.6R 4,265.8R 4,429.2R 5,035.7 4,764.2 4,093.4 4,350.2 3,283.4 3,973.5 4,165.8 Liabilities not identified as assets (—) 56 Treasury currency -.3 -.4 -.2 -.1 -.7 -2.2 -1.8 -.7 .9 -3.3 -3.6 --..33 57 Foreign deposits 25.1 59.6 106.2r — 8.5r 45.8r 26.2 262.7 -81.9 -99.2 193.3 178.2 -108.3 58 Net interbank liabilities -3.1 -3.3 -19.9 3.4 3.5 -37.7 25.3 5.4 -12.1 51.1 16.7 12.9 59 Security repurchase agreements 25.7 2.4 63.2 60.6r 30.0r -250.9 566.4 52.0 127.4 -302.3 -141.4 121.2 60 Taxes payable 21.1 23.1 28.0 19.7r 6.5r 3.6 9.4 10.0 -7.5 44.5 1.7 -26.9 61 Miscellaneous — 197. r — 124.5r — 126.4r — 137.7r -373.6r -200.1 -417.8 -352.7 -275.6 -403.7 -7.4 -291.1 Floats not included in assets (—) 62 Federal government checkable deposits — 6.0 .5 -2.7 2.6 -7.4 -20.0 18.7 16.3 3.0 -2.1 -29.8 13.8 63 Other checkable deposits — 3.8 -4.0 -3.9 -3.1 -.8 -.2 1.0 1.4 1.9 2.4 3.8 3.9 64 Trade credit 17.4r —25.4r —29.2r — 51.3r 42.9r 185.3 -72.1 -50.0 -49.4 24.1 26.7 -5.0 65 Total identified to sectors as assets 2,840.3R 2,989.2R 3,225.4R 4,380.3R 4,683.0R 5,331.7 4,372.4 4,493.7 4,660.7 3,679.4 3,928.6 4,445.6 1. Data in this table also appear in the Board's Z.l (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. F. 1 and F.5. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Nonfinancial Statistics • October 2001 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING1 Billions of dollars, end of period 1999 2000 2001 Q4 Ql Q2 Q3 Q4r Qlr Q2 Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors 14,440.6r 15,243.5r 16,267.0r 17,399.6r 17,399.6r 17,629.0r 17,807.7r 18,008.0r 18,287.7 18,529.3 18,716.5 By sector and instrument 2 Federal government 3,781.8 3,804.9 3,752.2 3,681.0 3,681.0 3,653.5 3,464.0 3,410.2 3,385.2 3.408.8 3,261.4 3 Treasury securities 3,755.1 3,778.3 3,723.7 3,652.8 3,652.8 3,625.8 3,435.7 3,382.6 3.357.8 3,382.1 3,234.4 4 Budget agency securities and mortgages 26.6 26.5 28.5 28.3 28.3 27.8 28.2 27.6 27.3 26.8 27.0 5 Nonfederal 10,658.8r 11,438.6r 12,514.8r 13,718.5r 13,718.5r 13,975.5r 14,343.8r 14,597.8r 14,902.6 15,120.5 15,455.1 By instrument 6 Commercial paper 156.4 168.6 193.0 230.3 230.3 260.8 296.8 307.0 278.4 253.2 223.3 / Municipal securities and loans 1,296.0 1,367.5 1,464.3 1,532.5 1,532.5 1,539.2 1,551.6 1,550.3 1,567.8 1,596.6 1,629.3 8 Corporate bonds 1,460.4 1,610.9 1,829.6 2,059.5 2,059.5 2,106.0 2,144.5 2,190.6 2,234.5 2,335.4 2,441.3 y Bank loans n.e.c 934.1 1,040.5 1,148.8 1.231.5 1,231.5 1,259.1 1,306.4r 1,311.6 1,334.6 1,324.0 1,295.3 10 Other loans and advances 770.4 839.5 913.8 974.6 974.6 1,020.1 1,049.5 1,052.2 1,089.9 1,096.0 1,119.5 11 Mortgages 4,830.0r 5,147.6r 5,633.7r 6,264.0r 6,264.0r 6.374.3r 6,541.0r 6,690.9r 6,831.0 6,956.7 7,165.3 12 Home 3,717.lr 3,969.7r 4,353.9r 4,783.5r 4,783.5r 4,858.0r 4,982.3r 5,100.0r 5,200.7 5,293.5 5,449.7 13 Multifamily residential 278.2' 285.8r 309.7r 352.61" 352.6r 360.3r 372.6r 319.9' 390.3 400.4 414.5 14 Commercial 747.8r 802.0r 873.5r l,025.6r l,025.6r l,051.7r 1,079.4r l,102.7r 1,130.6 1,152.3 1,188.3 b Farm 86.9r 90.0' 96.6r 102.3r 102.3r 104.2r 106.8r 108.3r 109.3 110.4 112.7 16 Consumer credit 1,211.6 1.264.1 1,331.7 1,426.2 1,426.2 1,416.0 1,454.0 1,495.3 1,566.5 1,558.6 1,581.1 By borrowing sector 17 Household 5,218.6r 5,540.9r 5,995.lr 6,501.7r 6,501.7r 6,566.0r 6,727.4r 6,890.5r 7,063.8 7,133.7 7,307.6 18 Nonfinancial business 4,376.8r 4,778.2r 5,319.9r 5,964.7r 5,964.7r 6,152.2r 6,350.7r 6,444.3r 6,559.4 6,680.2 6,810.2 iy Corporate 3,097.3r 3,396.9r 3,791.6' 4,275.2r 4,275.2r 4,427.2r 4,574.2r 4,634.8r 4,712.7 4,803.3 4,897.5 20 Nonfarm noncorporate l,129.8r l,225.5r l,364.4r 1,520. r l,520.r l,554.3r l,600.3r l,631.5r 1,666.1 1,696.7 1,727.9 21 Farm 149.7r 155.9r 163.9r 169.4r 169.4r 170.7r 176.2r 177.9r 180.7 180.2 184.8 22 State and local government 1,063.4 1,119.5 1,199.8 1.252.1 1,252.1 1,257.3 1,265.7 1,263.1 1,279.3 1,306.5 1,337.3 23 Foreign credit market debt held in United States 542.2 608.0 651.5r 679.6r 679.6r 707.1r 716.4r 749.9r 775.8 776.5 776.3 24 Commercial paper 67.5 65.1 72.9 89.2 89.2 101.6 101.2 109.8 120.9 112.8 110.1 25 Bonds 366.3 427.7 462.6r 479.4r 479.4r 490.6r 498.4r 52I.3r 533.7 542.0 551.0 26 Bank loans n.e.c 43.7 52.1 58.9 59.4 59.4 63.3 64.7 67.7 70.7 73.9 67.2 27 Other loans and advances 64.7 63.0 57.2 51.7 51.7 51.7 52.1 51.2 50.5 47.7 47.9 28 Total credit market debt owed by nonfinancial sectors, domestic and foreign 14,982.7r 15,851.5r 16,918.5r 18,079.2r 18,079.2r 18,336.1r 18,524.2r 18,757.9r 19,063.5 19,305.8 19,492.8 Financial sectors 29 Total credit market debt owed by financial sectors 4,824.5 5,445.2 6,519.1 7,596.3 7,596.3 7,734.2r 7,955.4r 8,148.7r 8,418.4 8,626.0 8,816.7 By instrument 30 Federal government-related 2,608.2 2,821.1 3,292.0 3,884.0 3,884.0 3,940.1 4,035.3 4,164.0 4,317.4 4,425.6 4,593.4 31 Government-sponsored enterprise securities 896.9 995.3 1,273.6 1,591.7 1,591.7 1,618.0 1,680.2 1,749.7 1,825.8 1,891.4 1,957.6 32 Mortgage pool securities 1,711.3 1,825.8 2,018.4 2,292.2 2,292.2 2,322.1 2,355.2 2,414.3 2,491.6 2,534.2 2,635.8 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 3,227.0' 3,712.4 3,712.4 3,794.2r 3,920. r 3,984.6r 4,101.0 4,200.4 4,223.3 35 Open market paper 579.1 745.7 906.7 1,082.9 1,082.9 1,115.7 1,135.2 1,151.6 1,210.7 1,180.8 1,144.5 36 Corporate bonds 1,378.4 1,555.9 1,852.8 2,064.0 2,064.0 2,104.2r 2,173.5r 2,228.0r 2.276.5 2,390.5 2,442.7 3/ Bank loans n.e.c 64.0 77.2 107.2 92.9 92.9 91.4 93.6r 92.5 92.6 97.1 100.3 38 Other loans and advances 162.9 198.5 288.7 395.8 395.8 404.4 436.9 430.2 438.3 450.9 450.7 3y Mortgages 31.9 46.8 71.6 76.7 76.7 78.5 81.0 82.5 82.9 81.1 85.1 By borrowing sector 40 Commercial banks 113.6 140.6 188.6 230.0 230.0 242.2 265.4 265.2 266.7 273.8 274.7 41 Bank holding companies 150.0 168.6 193.5 219.3 219.3 221.4 229.3 236.9 242.5 266.5 269.1 42 Savings institutions 140.5 160.3 212.4 260.4 260.4 266.9 280.7 276.0 287.7 295.1 294.5 43 Credit unions .4 .6 1.1 3.4 3.4 2.6 2.9 3.1 3.4 3.2 3.5 44 Life insurance companies 1.6 1.8 2.5 3.2 3.2 3.0 2.7 2.7 2.5 1.9 1.9 45 Government-sponsored enterprises 896.9 995.3 1,273.6 1,591.7 1,591.7 1,618.0 1,680.2 1,749.7 1,825.8 1,891.4 1,957.6 46 Federally related mortgage pools 1,711.3 1,825.8 2.018.4 2,292.2 2,292.2 2,322.1 2,355.2 2,414.3 2,491.6 2,534.2 2,635.8 4/ Issuers of asset-backed securities (ABSs) 863.3 1,076.6 1,398.0 1,621.4 1,621.4 l,655.8r l,697.0r l,742.3r 1,829.6 1,892.2 1,940.8 48 Brokers and dealers 27.3 35.3 42.5 25.3 25.3 36.4 36.2 42.6 40.9 35.0 43.9 49 Finance companies 529.8 554.5 597.5 659.9 659.9 670.7 712.7r 716.5 734.6 721.4 727.1 50 Mortgage companies 20.6 16.0 17.7 17.8 17.8 17.1 17.8 17.7 17.9 18.1 18.2 51 Real estate investment trusts (REITs) 56.5 96.1 158.8 165.1 165.1 167.9 170.4 169.8 167.8 166.2 166.8 52 Funding corporations 312.7 373.7 414.4 506.6 506.6 510.1 505. r 511.9 507.3 526.9 482.9 All sectors 53 Total credit market debt, domestic and foreign . . . 19,807.2r 21,296.7r 23,437.6r 25,675.5r 25,675.5r 26,070.3r 26,479.6r 26,906.6r 27,481.9 27,931.7 28,309.5 54 Open market paper 803.0 979.4 1,172.6 1,402.4 1,402.4 1,478.1 1,533.3 1,568.3 1,610.0 1,546.8 1,477.9 55 U.S. government securities 6.389.9 6.626.0 7,044.3 7,565.0 7,565.0 7,593.6 7,499.3 7.574.2 7,702.6 7,834.4 7,854.8 56 Municipal securities 1.296.0 1,367.5 1,464.3 1,532.5 1,532.5 1,539.2 1,551.6 1,550.3 1,567.8 1,596.6 1,629.3 5/ Corporate and foreign bonds 3,205.1 3,594.5 4.144.9 4,602.8r 4,602.8r 4,700.8r 4,816.3r 4,939.8r 5,044.6 5,267.9 5,435.1 58 Bank loans n.e.c 1,041.7 1,169.8 1,314.9 1,383.8 1,383.8 1,413.7 1,464.6 1,471.7 1,497.9 1,495.1 1,462.9 59 Other loans and advances 998.0 1,101.0 1,259.6 1,422.1 1,422.1 1,476.2 1,538.5 1,533.6 1,578.6 1,594.6 1,618.1 60 Mortgages 4,861,9r 5,194.4r 5.705.3r 6.340.7r 6,340.7r 6,452.7r 6,622.0' 6,773.4r 6,913.9 7,037.8 7,250.4 61 Consumer credit 1,211.6 1,264.1 1.331.7 1,426.2 1,426.2 1,416.0 1,454.0 1,495.3 1,566.5 1,558.6 1,581.1 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 LIABILITIES' Billions of dollars except as noted, end of period 1999 2000 2001 TTrraannssaaccttiioonn ccaatteeggoorryy oorr sseeccttoorr 11999966 11999977 11999988 11999999 Q4 Ql Q2 Q3" Q4" Ql" Q2 CREDIT MARKET DEBT OUTSTANDING2 1 Total credit market assets 19,807.2r 21,296.7" 23,437.6" 25,675.5" 25,675.5" 26,070.3" 26,479.6" 26,906.6 27,481.9 27,931.7 28,309.5 i Domestic nonfederal nonfinancial sectors 3,007.3r 2,933.8" 2,991.8" 3,251.2" 3,251.2" 3,170.5" 3,184.6" 3,125.5 3,093.8 3,009.6 2,975.0 3 Household 2,082.5r 2.018.6" 1,941.8" 2,151.6" 2,151.6" 2,079.2" 2,065.0" 2,021.3 1,977.3 1,907.4 1,887.4 4 Nonfinancial corporate business 270.2 257.5 241.5 238.7 238.7 230.8" 246.2" 238.9 248.5 235.1 225.1 5 Nonfarm noncorporate business 49.1' 52.7" 69.1" 78.0' 78.0" 77.5" 77.6" 76.6 75.9 74.7 73.4 6 State and local governments 604.8 605.0 739.4 782.8 782.8 782.9 795.8 788.7 792.0 792.4 789.1 7 Federal government 200.2 205.4 219.1 258.0 258.0 259.6 261.6 262.7 265.4 266.6 268.9 8 Rest of the world 1.926.6 2,257.3 2,539.8 2,676.2" 2,676.2" 2,760.7" 2,809.9" 2,861.7 3,004.6 3,112.9 3,198.9 9 Financial sectors 14,673.2r 15,900.1" 17,686.8" 19,490.2" 19,490.2" 19,879.5" 20,223.5" 20,656.7 21,118.1 21,542.6 21,866.6 10 Monetary authority 393.1 431.4 452.5 478.1 478.1 501.9 505.1 511.5 511.8 523.9 535.1 1 1 Commercial banking 3,707.7 4,031.9 4,335.7 4,643.9 4,643.9 4,725.0 4,847.4 4,931.0 5,002.3 5,015.7 5,050.6 1? U.S.-chartered banks 3,175.8 3.450.7 3,761.2 4,078.9 4,078.9 4,171.3 4,295.4 4,368.2 4,418.7 4,424.4 4,463.2 13 Foreign banking offices in United States 475.8 516.1 504.2 484.1 484.1 482.0 478.1 487.5 508.1 515.0 510.7 14 Bank holding companies 22.0 27.4 26.5 32.7 32.7 22.1 23.0 21.3 20.5 22.3 21.6 IS Banks in U.S.-affiliated areas 34.1 37.8 43.8 48.3 48.3 49.6 51.0 54.0 55.0 54.1 55.1 16 Savings institutions 933.2 928.5 964.6 1,033.2 1,033.2 1,045.8 1,062.5 1.082.2 1,089.7 1,101.6 1,116.1 17 Credit unions 288.5 305.3 324.2 351.7 351.7 359.0 370.1" 376.0 382.2 381.7 391.2 18 Bank personal trusts and estates 232.0 207.0 194.1 222.0 222.0 226.7 230.2 234.6 239.1 241.8 245.1 19 Life insurance companies 1,657.0 1,751.1 1,828.0 1,886.0 1,886.0 1,902.2" 1,914.1" 1,935.1 1,943.9 1,967.2 1,991.0 20 Other insurance companies 491.2 515.3 521.1" 518.2" 518.2" 515.4" 510.8" 512.4 509.4 510.0 510.7 21 Private pension funds 627.0 674.6 731.0 775.9 775.9 787.6 793.8 810.0 817.2 823.7 828.8 ?? Slate and local government retirement funds 565.4 632.5 704.6 751.4 751.4 767.2 775.1 784.5 801.0 804.3 808.8 23 Money market mutual funds 634.3 721.9 965.9 1,147.8 1,147.8 1,217.1 1,159.4 1.212.5 1,296.7 1,403.8 1,414.6 74 Mutual funds 820.2 901.1 1,025.9 1,073.1 1,073.1 1,053.7 1,073.9 1,088.5 1,099.9 1,113.8 1,151.5 ">5 Closed-end funds 100.8' 98.3r 103.7" 111.1" 111.1" 109.0" 106.9" 104.8 102.7 100.6 98.5 26 Government-sponsored enterprises 832.8r 939.4" 1,253.9" 1,545.6" 1,545.6" 1,584.0" 1,649.2" 1,704.3 1,793.7 1,866.5 1,944.5 27 Federally related mortgage pools 1,711.3 1,825.8 2,018.4 2.292.2 2,292.2 2,322.1 2,355.2 2,414.3 2,491.6 2,534.2 2,635.8 78 Asset-backed securities issuers (ABSs) 773.9 937.7 1,219.4 1,424.6 1,424.6 1,453.8" 1,486.3" 1,522.9 1,602.9 1,660.5 1,706.0 79 Finance companies 544.5 566.4 618.4 713.3 713.3 747.0 780.6 795.5 812.6 809.4 829.6 .30 Mortgage companies 41.2 32.1 35.3 35.6 35.6 34.1 35.5 35.4 35.9 36.2 36.5 31 Real estate investment trusts (REITs) 30.4 50.6 45.5 42.9 42.9 38.8 38.2 37.3 36.6 37.6 37.9 37 Brokers and dealers 167.7 182.6 189.4 154.7 154.7 194.6 187.9 243.3 223.6 317.7 288.4 33 Funding corporations 121.0 166.7 155.3" 288.8" 288.8" 294.5" 341.3" 320.7 325.4 292.3 246.0 RELATION OF LIABILITIES TO FINANCIAL ASSETS 34 Total credit market debt 19,807.2r 21,296.7" 23,437.6" 25,675.5" 25,675.5" 26,070.3" 26,479.6" 26,906.6 27,481.9 27,931.7 28,309.5 Other liabilities 35 Official foreign exchange 53.7 48.9 60.1 50.1 50.1 49.4 46.5 44.9 46.0 43.3 41.7 36 Special drawing rights certificates 9.7 9.2 9.2 6.2 6.2 6.2 4.2 3.2 2.2 2.2 2.2 37 Treasury currency 18.9 19.3 19.9 20.9 20.9 21.4 22.1 23.2 23.2 22.9 23.2 38 Foreign deposits 521.7 618.5" 642.3" 703.6" 703.6' 781.9" 782.8" 772.6 824.5 883.4 846.8 39 Net interbank liabilities 240.8 219.4 189.0 204.5 204.5 169.7 210.6 173.2 188.0 116.0 163.4 40 Checkable deposits and currency 1,244.8 1,286.1 1,333.4 1,484.8 1,484.8 1,392.9 1,409.7 1,385.7 1,413.3 1,385.2 1,416.8 41 Small time and savings deposits 2,377.0 2,474.1 2,626.5 2,671.2 2,671.2 2,728.0 2,738.8 2,790.9 2,861.9 2,965.3 2,992.0 4? Large time deposits 590.9 713.4 805.5 936.1 936.1 966.5 987.4 1,025.9 1,054.5 1,078.0 1,090.6 43 Money market fund shares 886.7 1,042.5 1,329.7 1,578.8 1.578.8 1,666.0 1,627.1 1,697.8 1,812.1 1,994.7 2,014.8 44 Security repurchase agreements 701.5 822.4 913.7 1,083.4 1,083.4 1,149.2 1,185.0 1,238.7 1,194.3 1,206.0 1,241.1 45 Mutual fund shares 2,342.4 2,989.4 3,610.5 4,553.4 4,553.4 4,863.3 4,759.6 4,814.4 4,457.2 3,999.8 4,269.9 46 Security credit 358.1 469.1 572.3 676.6 676.6 795.4 775.5 800.4 817.6 799.4 781.8 47 Life insurance reserves 610.6 665.0 718.3 783.9 783.9 801.0 806.5 818.7 819.1 823.0 844.6 48 Pension fund reserves 6,325.1 7,323.4 8,193.7 9,041.7 9,041.7 9,237.9 9,166.7 9,307.9 9,054.8 8,603.5 8,885.5 49 Trade payables 1,827.6r 1,967.3" 2,076.5" 2.298.8" 2,298.8" 2,321.7" 2,366.9" 2,412.0 2,455.2 2,425.2 2,418.3 50 Taxes payable 128.8r 151.1" 172.4" 194.7" 194.7" 210.1" 212.7" 214.8 216.4 224.2 219.8 51 Investment in bank personal trusts 871.3 942.5 1,001.0 1,130.4 1,130.4 1,158.0" 1,114.4" 1,106.7 1.019.4 929.1 964.4 52 Miscellaneous 6,386.0r 6,727.4" 7,475.3" 8,040.5" 8,040.5" 8,258.1" 8,539.8" 8,998.1 8,845.1 9,253.4 9,506.9 53 Total liabilities 45,302.7" 49,785.5" 55,186.9" 61,135.1" 61,135.1" 62,646.9" 63,236.0" 64,535.7 64,586.8 64,686.3 66,033.3 Financial assets not included in liabilities ( + ) 54 Gold and special drawing rights 21.4 21.1 21.6 21.4 21.4 21.4 21.5 21.4 21.5 21.5 21.6 55 Corporate equities 10,255.8 13,202.0" 15,492.5 19,494.5 19,494.5 20,147.0" 19,180.8" 18,991.5 17,068.8 14,920.9 15,863.6 56 Household equity in noncorporate business 3,787.8" 4,053.2" 4,398.7" 4,649.9" 4,649.9" 4,675.4" 4,772.2" 4,815.5 4,884.7 4,929.1 4,941.8 Liabilities not identified as assets ( —) 57 Treasury currency -6.1 -6.3 -6.4 -7.1 -7.1 -7.6 -7.9 -7.6 -8.5 -9.4 -9.4 58 Foreign deposits 437.0 537.1" 544.9" 591.1" 591.1" 656.7" 636.3" 611.5 659.9 704.4 677.4 59 Net interbank transactions -10.6 -32.2 -27.0 -25.5 -25.5 -13.9 -11.6 -17.6 -4.3 1.7 5.3 60 Security repurchase agreements 109.8 172.9 233.5" 263.6" 263.6" 410.3" 422.8" 446.0 374.4 357.6 387.5 61 Taxes payable 81.9" 104.2" 122.9" 122.7' 122.7" 118.6" 135.8" 124.4 128.5 112.7 129.0 62 Miscellaneous -1,241.1' -1.562.1' -2,307.3' -2.792.5' -2,792.5' -2,948.5" -3,009.7" -2,818.5 -3,371.8 -3,314.7 -3,222.6 Floats not included in assets ( —) 63 Federal government checkable deposits -1.6 -8.1 -3.9 -9.9 -9.9 -6.5 -5.2 -7.8 -2.6 -21.9 -40.6 64 Other checkable deposits 30.1 26.2 23.1 22.3 22.3 18.7 22.5 15.5 24.0 21.1 25.5 65 Trade credit 165.7" 126.8" 76.6" 120.9" 120.9" 50.1" 12.8" 2.5 88.7 42.1 16.0 66 Total identified to sectors as assets 59,802.7" 67,703.2" 76,443.0" 87,015.2" 87,015.2" 89,212.6" 89,014.9" 90,015.7 88,673.3 86,664.0 88,892.3 1. Data in this table also appear in the Board's Z. 1 (780) quarterly statistical release, tables 2. Excludes corporate equities and mutual fund shares. L. 1 and L.5. For ordering address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • October 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 Nov. Dec. Jan. Feb. Mar. Apr. May June JulyP 1 Industrial production' 134.0 139.6 147.5 148.2 147.3 146.0 145.4 145.0 144.6r 144.2r 143.0 142.8 Market groups 2 Products, total 127.2 131.2 136.2 136.3 136.0 135.0 134.6 134.5 133.8r 133.6r 132.7 132.8 3 Final, total 129.3 133.3 138.8 138.8 139.0 137.8 137.7 137.9 137.2r 137. r 136.1 136.3 4 Consumer goods 118.4 120.8 123.0 122.4 123.1 121.8 122.3 122.4 122.1r 122.6r 122.2 122.8 5 Equipment 147.1 153.8 166.1 169.9 168.9 168.0 166.2 166.8 165.3r 163.7r 161.2 160.8 6 Intermediate 121.0 125.1 128.7 128.5 126.8 126.7 125.5 124.4 123.7r 123.r 122.7 122.3 7 Materials 145.7 154.5 167.8 169.9 167.8 165.9 165.0 163.9 164.1 163.4' 161.5 160.9 Industry groups 8 Manufacturing 138.2 144.8 153.6 154.1 152.6 151.3 150.7 150.0 149.6r 149.2r 147.7 147.7 9 Capacity utilization, manufacturing (percent)". . 81.3 80.5 81.3 80.5 79.3 78.4 77.9 77.3 76.9r 16.6' 75.7 75.6 10 Construction contracts3 122.7 135.3r 142.0r 144.0 140.0 151,0r 152.0r 141.0r 142.0r 141.0 149.0 142.0 11 Nonagricultural employment, total4 115.9 118.6 121.0 121.8 121.9 122.0 122.1 122.2 122.0 122.0 122.0 122.0 12 Goods-producing, total 109.4 109.7 110.5 110.7 110.6 110.3 110.3 110.2 109.4 109.0 108.4 108.1 13 Manufacturing, total 103.9 102.4 101.8 101.5 101.3 100.8 100.5 100.1 99.5 98.7 98.1 97.7 14 Manufacturing, production workers 105.4 103.7 102.9 101.8 101.4 100.9 100.3 99.7 99.0 98.2 97.3 96.8 15 Service-producing 117.7 121.0 123.9 124.8 125.0 125.1 125.3 125.4 125.4 125.6 125.6 125.7 16 Personal income, total 137.8 144.3 154.3 157.9 158.9 159.6 160.3 161.0 161.4 161.7 162.2 163.0 17 Wages and salary disbursements 140.6 149.9 162.2 166.8 167.6 168.4 169.4 170.1 170.7 170.7 171.5 172.2 18 Manufacturing 129.7 134.0 142.3 146.3 146.2 146.1 146.3 146.3 146.8 145.4 144.9 145.6 19 Disposable personal income5 133.7 139.2 147.9 151.1 152.0 152.8 153.4 154.1 154.6 154.9 155.4 158.0 20 Retail sales5 142.8 155.1 167.0 167.8 167.4 169.6 169.2 168.6 170.0 n.a. n.a. n.a. Prices6 21 Consumer (1982-84=100) 163.0 166.6 172.2 174.1 174.0 175.1 175.8 176.2 176.9 177.7 178.0 177.5 22 Producer finished goods (1982=100) 130.7 133.0 138.0 140.0 139.7 141.2 141.4 140.9 141.7 142.5 142.1 140.7 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 Dec. Jan. Feb. Mar. Apr. Mayr June July HOUSEHOLD SURVEY DATA1 1 Civilian labor force2 137,673 139,368 140,863 141,489 141,955 141,751 141,868 141,757 141,272 141,354 141,774 Employment 1 128,085 130,207 131,903 132,562 132,819 132,680 132,618 132,162 131,910 131,937 132,334 3 Agriculture 3,378 3,281 3,305 3,274 3,179 3,135 3,161 3,192 3,193 2,995 3,045 Unemployment 4 6,210 5,880 5,655 5,653 5,956 5,936 6,088 6,402 6,169 6,422 6,395 5 Rate (percent of civilian labor force) 4.5 4.2 4.0 4.0 4.2 4.2 4.3 4.5 4.4 4.5 4.5 ESTABLISHMENT SURVEY DATA 6 Nonagricultural payroll employment4 125,865 128,786 131,417 132,367 132,428 132,595 132,654 132,489 132,530 132,437 132,395 7 Manufacturing 18,805 18,543 18,437 18,349 18,257 18,192 18,116 18,009 17,879 17,766 17,717 8 Mining 590 535 538 548 550 555 557 560 564 565 566 9 Contract construction 6,020 6,404 6,687 6.791 6,826 6,880 6,929 6,852 6,881 6,867 6,868 10 Transportation and public utilities 6,611 6,826 6,993 7,108 7,106 7,123 7,127 7,119 7,130 7,114 7,110 11 29,095 29,712 30,191 30,474 30,482 30,536 30,523 30,583 30,584 30,592 30,598 1? Finance 7,389 7,569 7,618 7,582 7,594 7,609 7,618 7,626 7,644 7,631 7,626 13 Service 37,533 39,027 40,384 40,901 40,984 41,020 41,073 40,993 41,078 41,087 41,064 14 Government 19,823 20,170 20,570 20,614 20,629 20,680 20,711 20,747 20,770 20,815 20,846 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 2001 2000 2001 2000 2001 SSeerriieess Q3 Q4 Ql Q2r Q3 Q4 Ql Q2 Q3 Q4 Ql Q2r Output (1992=100) Capacity (percent of 1992 output) Capacity utilization rate (percent)- 1 Total industry 148.4 148.1 145.5 143.9 180.1 182.1 183.7 184.9 82.4 81.3 79.2 77.9 2 Manufacturing 154.4 153.8 150.7 148.8 189.2 191.5 193.5 194.8 81.7 80.3 77.9 76.4 3 Primary processing1 180.3 178.7 172.6 170.2 211.2 216.0 220.0 222.4 85.4 82.7 78.4 76.5 4 Advanced processing 140.3 140.2 138.5 137.0 175.2 176.2 177.2 178.0 80.1 79.5 78.2 77.0 Durable goods 196.7 196.5 191.6 189.1 238.3 243.6 248.1 251.2 82.5 80.7 77.2 75.3 6 Lumber and products 117.0 113.2 109.6 112.4 147.9 148.4 148.7 149.0 79.1 76.3 73.7 75.5 1 Primary metals 133.4 127.5 121.1 121.8 153.4 153.5 153.5 153.5 87.0 83.1 78.8 79.4 8 Iron and steel 130.5 121.5 114.9 120.8 153.4 153.6 153.6 153.2 85.1 79.1 74.8 78.9 9 Nonferrous 137.0 134.7 128.3 123.3 153.4 153.4 153.5 153.8 89.3 87.8 83.6 80.2 10 Industrial machinery and equipment 257.3 261.9 256.3 246.7 311.1 317.3 322.5 326.5 82.7 82.5 79.5 75.5 11 Electrical machinery 581.1 604.0 593.0 562.6 639.1 694.1 741.7 773.0 90.9 87.1 80.0 72.8 12 Motor vehicles and parts 170.8 159.7 147.5 159.5 209.2 210.1 210.9 211.7 81.7 76.0 69.9 75.3 13 Aerospace and miscellaneous transportation equipment 93.5 94.8 94.1 93.3 130.4 130.2 130.0 130.1 71.7 72.8 7722..33 7711..77 14 Nondurable goods 116.2 115.3 113.6 112.3 144.4 144.6 144.7 144.6 80.5 79.7 78.5 77.7 15 Textile mill products 99.8 94.7 92.7 88.4 123.3 122.8 122.0 120.9 80.9 77.1 76.0 73.1 16 Paper and products 114.0 114.9 110.8 111.1 137.5 137.9 138.3 138.6 82.9 83.3 80.1 80.2 17 Chemicals and products 125.4 124.5 121.9 120.3 164.1 164.8 165.0 165.0 76.4 75.5 73.8 72.9 18 Plastics materials 137.6 131.0 130.9 128.0 151.9 152.3 152.7 153.2 90.5 86.0 85.7 83.5 19 Petroleum products 117.3 116.0 115.5 116.7 123.2 123.1 123.1 123.3 95.3 94.3 93.8 94.7 20 Mining 100.6 100.3 101.7 103.5 116.3 115.8 115.3 114.9 86.6 86.6 88.2 90.0 21 Utilities 121.0 123.7 122.6 120.0 133.4 134.5 135.7 137.0 90.7 92.0 90.4 87.6 22 Electric 123.9 127.5 125.4 125.0 132.3 133.8 135.3 136.8 93.7 95.3 92.7 91.4 1973 1975 Previous cycle5 Latest cycle6 2000 2001 High Low High Low High Low July Feb. Mar. Apr/ Mayr June Julyp Capacity utilization rate (percent)2 1 Total industry 89.2 72.6 87.3 71.1 85.4 78.1 82.3 79.2 78.7 78.4 78.0 77.2 77.0 2 Manufacturing 88.5 70.5 86.9 69.0 85.7 76.6 81.6 77.9 77.3 76.9 76.6 75.7 75.6 3 Primary processing3 91.2 68.2 88.1 66.2 88.9 77.7 85.6 78.6 77.4 77.2 76.7 75.6 75.3 4 Advanced processing4 87.2 71.8 86.7 70.4 84.2 76.1 79.8 78.1 77.9 77.4 77.1 76.4 76.4 5 Durable goods 89.2 68.9 87.7 63.9 84.6 73.1 82.3 77.0 76.8 76.0 75.6 74.3 74.2 6 Lumber and products 88.7 61.2 87.9 60.8 93.6 75.5 80.3 73.3 74.8 74.5 76.5 75.5 75.3 7 Primary metals 100.2 65.9 94.2 45.1 92.7 73.7 87.3 79.0 76.8 79.7 80.0 78.4 78.4 8 Iron and steel 105.8 66.6 95.8 37.0 95.2 71.8 84.8 75.2 73.8 77.2 79.6 79.8 79.8 9 Nonferrous 90.8 59.8 91.1 60.1 89.3 74.2 90.5 83.6 80.3 82.8 80.6 77.1 77.1 10 Industrial machinery and equipment 96.0 74.3 93.2 64.0 85.4 72.3 82.1 79.1 78.9 77.2 75.6 73.9 73.5 11 Electrical machinery 89.2 64.7 89.4 71.6 84.0 75.0 91.8 80.0 77.0 74.5 72.8 71.0 68.6 12 Motor vehicles and parts 93.4 51.3 95.0 45.5 89.1 55.9 78.1 69.9 74.1 73.5 76.8 75.7 79.2 13 Aerospace and miscellaneous transportation equipment 78.4 67.6 81.9 66.6 87.3 79.2 72.7 71.9 72.5 72.3 71.6 71.1 70.6 14 Nondurable goods 87.8 71.7 87.5 76.4 87.3 80.7 80.6 78.8 77.9 78.0 77.7 77.3 77.2 15 Textile mill products 91.4 60.0 91.2 72.3 90.4 77.7 82.1 76.0 76.0 74.8 72.3 72.3 72.4 16 Paper and products 97.1 69.2 96.1 80.6 93.5 85.0 83.6 81.6 77.8 82.1 80.0 78.4 78.1 17 Chemicals and products 87.6 69.7 84.6 69.9 86.2 79.3 76.2 74.3 73.4 72.8 73.3 72.6 72.7 18 Plastics materials 102.0 50.6 90.9 63.4 97.0 74.8 92.8 88.2 85.0 82.7 84.2 83.8 83.9 19 Petroleum products 96.7 81.1 90.0 66.8 88.5 85.1 95.0 94.6 93.4 94.7 94.3 95.0 93.6 20 Mining 94.3 88.2 96.0 80.3 88.0 87.0 86.3 87.9 89.2 90.0 90.3 89.8 89.3 21 Utilities 96.2 82.9 89.1 75.9 92.6 83.4 89.5 89.8 89.6 88.5 86.8 87.4 86.6 22 Electric 99.0 82.7 88.2 78.9 95.0 87.1 91.8 91.6 92.4 93.4 90.3 90.6 89.5 1. Data in this table appear in the Board's G.17 (419) monthly statistical release. The data 3. Primary processing includes textiles; lumber; paper; industrial chemicals; synthetic are also available on the Board's web site, http://www.federalreserve.gov/releases/gl7. The materials; fertilizer materials; petroleum products; rubber and plastics; stone, clay, and glass; latest historical revision of the industrial production index and the capacity utilization rates primary metals; and fabricated metals. was released in 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 • October 2001 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data seasonally adjusted 1992 2000 2001 GGrroouupp pro- 2000 por- avg. tion July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr.' Mayr June July? Index (1992= 100) MAJOR MARKETS 1 Total index 100.0 147.5 147.6 148.6 149.0 148.7 148.2 147.3 146.0 145.4 145.0 144.6 144.2 143.0 142.8 2 Products 60.5 136.2 135.8 136.6 136.7 136.3 136.3 136.0 135.0 134.6 134.5 133.8 133.6 132.7 132.8 3 Final products 46.3 138.8 138.1 139.2 139.3 138.8 138.8 139.0 137.8 137.7 137.9 137.2 137.1 136.1 136.3 4 Consumer goods, total 29.1 123.0 122.9 123.8 123.8 122.7 122.4 123.1 121.8 122.3 122.4 122.1 122.6 122.2 122.8 5 Durable consumer goods 6.1 166.1 166.3r 167.9r 168.3r 169.T 169.9r 168.9r 168.0r 166.2r 166.8' 165.3 163.7 161.2 160.8 6 Automotive products 2.6 128.7 128.7r 128.8r 128.6r 128.7r 128.5r 126.8r 126.7r 125.5r 124.4r 123.7 123.1 122.7 122.3 7 Autos and trucks 1.7 167.8 169.0r 170.5r 171.3' 171.r 169.9r 167.8r 165.9r 165.0r 163.9r 164.1 163.4 161.5 160.9 8 Autos, consumer .9 153.6 153.7r 154.6r 155.lr 154.9r 154.T 152.6r 151.3r 150.7r 150.0r 149.6 149.2 147.7 147.7 Y Trucks, consumer .7 81.3 81.6r 8l.7r 81,7r 81.2r 80.5' 79.3r 78.4r 77.9' 77.3r 76.9 76.6 75.7 75.6 10 Auto parts and allied goods .... .9 142.0 141,0r 139.0r 143.0r 151.0r 144.0r 140.0r 151. 0r 152.0r 141.0r 142.0 141.0 149.0 142.0 n Other 3.5 121.0 121.5R 121.4r 121.6r 121.7r 121.8r 121.9r 122.0r 122.1r 122.2r 122.0 122.0 122.0 121.9 12 Appliances, televisions, and air conditioners 1.0 110.5 110.9r 110.7' 110.61" 110.7r 110.7r 110.6r 110.3r 110.3r 110.2r 109.4 109.0 108.5 108.3 13 Carpeting and furniture .8 101.8 102.5r 102.1r 101.7R 101.6r 101.5r 101.3r 100.8r 100.5r ioo.r 99.5 98.7 98.1 97.9 14 Miscellaneous home goods 1.6 102.9 103.3r 102.8r 102.2r 102.T 101.8r 101.4r 100.9r 100.3r 99.1' 99.0 98.2 97.4 97.0 15 Nondurable consumer goods 23.0 123.9 124.3r 124.3' 124.6r 124.7r 124.81" 125.01" 125.Ir 125.3r 125.4r 125.4 125.6 125.6 125.6 16 Foods and tobacco 10.3 154.3 154.8r 155.4r 156.3r 157.3r 157.9r 158.9r 159.6r 160.3r 161.0r 161.4 161.7 162.2 17 Clothing 2.4 162.2 162.9r I63.2r 164.4r 165.8r 166.8r I67.6r I68.4r I69.4r I70.1r 170.7 170.7 171.4 18 Chemical products 4.5 142.3 143.5' 143.4r 144.0r 145.6r 146.3r 146.2r 146. r 146.3r 146.3r 146.8 145.5 145.1 19 Paper products 2.9 147.9 148.4r 148.8r 149.6r 150.5r 151.r 152.0' 152.8r 153.4r 154.T 154.6 155.0 155.4 20 Energy 2.9 167.0 167.7r 167.4r 169.0r 168.7R 167.8' 167.8r 170.1' 170.4r 169.6r 172.2 172.4 172.2 172.1 21 Fuels .8 172.2 172.8r 172.8r 173.7' 174.0r 174. lr 174.01" 175.lr 175.8r 176.2r 176.9 177.7 178.0 177.5 22 Residential utilities 2.1 138.0 138.6r 138.2r 139.4r 140. r 140.0r 139.7r 141.2' 141,4r 140.9r 141.7 142.5 142.1 140.7 23 Equipment 17.2 166.1 166.3 167.9 168.3 169.1 169.9 168.9 168.0 166.2 166.8 165.3 163.7 161.2 160.8 24 Business equipment 13.2 194.2 195.0 197.8 199.5 200.0 200.6 199.2 197.4 195.3 195.6 193.3 191.5 188.2 187.7 25 Information processing and related 5.4 312.2 313.9 322.1 327.2 332.3 336.7 335.9 337.4 330.6 327.7 326.7 323.3 318.5 313.9 26 Computer and office equipment 1.1 1.157.6 1.182.8 1,229.0 1,264.1 1.286.4 1,305.0 1,318.3 1,310.6 1,307.0 1,304.4 1,295.9 1,286.4 1,280.3 1,270.4 27 Industrial 4.0 144.6 144.4 147.7 146.5 146.9 147.4 145.8 145.7 141.4 142.3 139.7 138.0 133.3 132.1 28 Transit 2.5 127.7 127.6 126.8 127.7 121.6 121.8 117.4 111.7 114.4 117.8 116.3 117.1 116.3 118.6 29 Autos and trucks 1.2 145.6 141.5 142.8 144.2 131.4 130.4 122.0 115.6 120.9 129.0 126.6 130.1 129.2 136.0 30 Other 1.3 145.7 148.1 144.8 149.3 154.2 148.6 153.5 149.3 153.9 151.2 147.6 144.5 144.7 147.7 31 Defense and space equipment 3.3 76.2 77.9 76.1 73.7 75.3 77.0 77.5 78.5 76.7 77.7 78.0 76.4 76.4 76.6 32 Oil and gas well drilling .6 131.8 136.2 137.1 132.8 136.5 138.9 139.1 146.7 147.9 150.7 151.2 152.2 150.4 147.7 33 Manufactured homes .2 116.2 116.8 115.5 109.3 98.8 90.9 83.5 73.5 81.9 83.2 85.2 89.3 87.0 88.0 34 Intermediate products, total 14.2 128.7 128.7 128.8 128.6 128.7 128.5 126.8 126.7 125.5 124.4 123.7 123.1 122.7 122.3 35 Construction supplies 5.3 143.2 143.8 142.7 143.1 142.3 141.6 140.6 140.7 139.9 140.5 139.6 139.4 138.8 138.6 36 Business supplies 8.9 120.1 119.8 120.6 120.0 120.7 120.7 118.5 118.4 117.0 114.9 114.3 113.5 113.2 112.7 37 Materials 39.5 167.8 169.0 170.5 171.3 171.1 169.9 167.8 165.9 165.0 163.9 164.1 163.4 161.5 160.9 38 Durable goods materials 20.8 227.6 230.5 233.8 235.7 235.0 232.9 230.3 226.6 225.2 223.6 223.0 223.2 220.3 219.8 39 Durable consumer parts 4.0 165.3 158.3 168.3 169.0 168.5 161.8 157.6 146.1 149.9 153.1 153.6 158.0 156.5 157.3 40 Equipment parts 7.6 478.3 499.9 505.7 512.1 515.9 521.4 522.3 517.5 514.9 508.2 498.3 492.8 483.9 478.3 41 Other 9.2 134.6 135.3 134.7 135.5 133.7 131.8 129.6 130.1 127.2 125.5 126.9 126.7 125.4 125.8 42 Basic metal materials 3.1 128.7 128.5 127.5 129.2 125.9 124.4 123.6 121.2 118.3 114.5 118.2 118.0 115.8 115.7 43 Nondurable goods materials 8.9 113.8 113.9 112.8 112.7 113.4 110.7 108.6 107.5 107.2 104.6 105.2 103.9 102.3 102.0 44 Textile materials 1.1 97.9 97.9 99.3 95.9 94.0 89.5 90.3 91.0 87.7 87.4 86.3 83.7 82.4 81.6 45 Paper materials 1.8 115.8 114.9 112.8 113.8 117.2 113.4 109.4 110.3 112.4 105.9 111.3 108.5 104.8 104.6 46 Chemical materials 3.9 117.0 117.0 116.8 116.3 115.9 113.7 109.8 108.5 108.2 105.9 104.1 103.7 102.8 102.5 47 Other 2.1 113.0 113.7 110.2 112.0 114.0 111.9 113.9 111.0 110.2 109.1 112.2 110.3 108.8 108.5 48 Energy materials 9.7 103.4 102.9 104.2 104.3 103.9 105.4 104.5 104.4 103.9 104.9 105.8 104.9 104.3 103.6 49 Primary energy 6.3 98.1 98.7 98.9 98.5 97.8 99.3 98.6 100.3 99.3 100.4 101.2 100.8 100.3 99.7 50 Converted fuel materials 3.3 114.3 110.8 115.1 116.6 117.2 118.7 117.3 111.8 113.1 113.7 114.7 112.3 111.4 110.5 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.1 147.2 147.5 148.4 148.7 148.8 148.4 147.8 146.6 145.9 145.1 144.7 144.2 143.0 142.5 52 Total excluding motor vehicles and parts 95.1 146.3 146.9 147.4 147.7 147.8 147.7 147.2 146.5 145.4 144.5 144.1 143.4 142.2 141.6 53 Total excluding computer and office equipment 98.2 140.4 140.5 141.4 141.6 141.2 140.8 139.9 138.6 138.1 137.7 137.3 137.0 135.8 135.7 54 Consumer goods excluding autos and trucks . 27.4 120.6 120.9 121.3 121.2 120.7 120.6 121.9 120.8 121.1 120.6 120.3 120.4 120.2 120.0 55 Consumer goods excluding energy 26.2 123.9 123.9 124.5 124.4 123.6 122.9 122.5 122.0 122.6 122.8 122.6 123.1 122.5 123.2 56 Business equipment excluding autos and trucks 12.0 200.1 201.5 204.5 206.3 208.5 209.4 208.9 207.7 204.6 203.8 201.6 199.1 195.5 193.9 57 Business equipment excluding computer and office equipment 12.1 158.4 158.6 160.3 161.2 161.2 161.5 159.9 158.4 156.5 156.8 154.9 153.4 150.5 150.2 58 Materials excluding energy 29.8 188.5 190.3 191.8 193.0 192.8 190.4 187.8 185.1 184.1 182.0 181.9 181.4 178.9 178.5 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 2000 Group S co IC de Z p p r o o r - - 2 a 0 v 0 g 0 . July Aug. Sept. Apr/ Mayr Julyp Index (1992=100) MAJOR INDUSTRIES 59 Total index 100.0 147.5 147.6 148.6 149.0 148.7 148.2 147.3 146.0 145.4 145.0 144.6 144.2 143.0 142.8 60 Manufacturing 85.4 153.6 153.7 154.6 155.1 154.9 154.1 152.6 151.3 150.7 150.0 149.6 149.2 147.7 147.7 61 Primary processing 26.5 178.0 179.4 180.3 181.2 181.1 178.8 176.1 173.5 173.1 171.1 171.3 170.7 168.7 168.2 62 Advanced processing 58.9 139.3 139.5 140.5 140.8 140.5 140.5 139.6 139.0 138.4 138.3 137.5 137.3 136.1 136.3 63 Durable goods 45.0 193.4 194.7 196.9 198.4 197.6 196.7 195.1 192.3 191.1 191.3 190.1 189.8 187.3 187.5 64 Lumber and products "24 2.0 118.3 118.6 115.5 116.8 114.8 113.2 111.5 108.3 109.1 111.4 110.9 113.9 112.5 112.3 65 Furniture and fixtures 25 1.4 142.9 142.6 143.8 146.6 147.2 145.0 145.3 144.1 143.8 143.2 142.5 143.5 141.8 140.6 66 Stone, clay, and glass products 32 2.1 134.7 136.3 136.1 136.5 137.3 134.6 132.4 135.2 134.3 134.3 133.3 133.1 131.9 132.2 67 Primary metals 33 3.1 133.7 133.9 132.4 133.9 129.0 127.3 126.3 124.0 121.3 117.8 122.4 122.7 120.3 120.3 68 Iron and steel 331,2 1.7 131.1 129.9 129.7 131.9 123.7 122.0 118.7 116.0 115.5 113.3 118.4 121.9 122.1 121.9 69 Raw steel 331PT .1 120.9 126.4 123.9 117.7 115.6 106.3 104.6 108.3 109.1 109.2 101.3 109.0 111.8 112.4 70 Nonferrous 333-6,9 1.4 136.8 138.8 135.7 136.5 135.3 133.6 135.2 133.4 128.2 123.3 127.2 124.0 118.6 118.8 71 Fabricated metal products . . 34 5.0 135.6 136.1 136.3 136.0 136.0 134.7 132.9 133.5 130.3 129.8 129.3 128.8 127.5 127.9 72 Industrial machinery and equipment 35 8.0 252.8 253.9 257.9 260.0 261.5 261.9 262.3 258.4 255.0 255.7 251.0 246.8 242.2 241.7 73 Computer and office equipment 357 1.8 1,343.6 1,370.4 1,421.6 1,464.2 1,487.4 1,502.8 1,508.3 1,497.4 1,484.2 1,477.5 1,464.4 1,451.9 1,442.9 1,431.1 74 Electrical machinery 36 7.3 549.7 571.2 580.0 592.2 597.4 604.4 610.2 604.3 593.7 581.0 569.9 563.5 554.4 539.7 75 Transportation equipment. . . 37 9.5 131.0 128.0 132.4 132.4 129.2 126.8 122.8 116.0 119.8 124.5 123.9 126.8 125.5 128.7 76 Motor vehicles and parts . 371 4.9 170.5 163.1 173.9 175.5 167.2 160.1 151.8 138.6 147.4 156.5 155.4 162.5 160.5 168.0 77 Autos and light trucks . 371PT 2.6 153.0 147.8 156.4 158.8 145.8 140.1 131.5 125.9 131.9 141.8 141.6 147.9 145.0 157.9 78 Aerospace and miscellaneous transportation equipment 372-6,9 4.6 93.8 94.9 93.5 92.1 93.6 95.4 95.3 94.3 93.5 94.3 94.1 93.2 92.5 9911..99 79 Instruments 38 5.4 122.2 122.6 123.3 123.7 123.5 124.6 123.1 125.0 123.3 122.6 123.1 121.5 120.1 120.9 80 Miscellaneous 39 1.3 130.8 132.1 130.8 130.9 131.1 130.2 129.4 130.4 127.6 127.6 128.4 126.3 127.6 128.1 81 Nondurable goods 40.4 116.9 116.3 116.3 116.0 116.3 115.5 114.1 114.0 114.0 112.7 112.8 112.4 111.7 111.6 82 Foods 20 9.4 114.7 115.0 115.1 114.6 114.8 115.0 114.2 114.1 115.0 114.6 114.2 114.6 114.0 113.8 83 Tobacco products 21 1.6 95.3 95.8 96.6 94.5 93.7 93.1 94.2 95.2 93.7 92.2 93.8 92.1 93.1 94.3 84 Textile mill products 22 1.8 100.1 101.4 99.4 98.4 96.7 92.8 94.5 93.0 92.7 92.4 90.7 87.4 87.1 87.0 85 Apparel products 23 2.2 91.7 92.0 90.7 89.5 89.2 89.2 88.2 88.9 88.7 88.4 88.2 87.8 85.6 86.5 86 Paper and products 26 3.6 116.1 114.9 113.3 113.7 117.1 114.7 112.7 111.8 112.8 107.7 113.7 110.9 108.8 108.4 87 Printing and publishing .... 27 6.7 109.9 110.0 110.4 110.9 111.6 111.2 109.2 109.6 107.7 106.2 105.6 105.2 104.8 103.9 88 Chemicals and products .... 28 9.9 128.3 124.8 125.9 125.4 125.8 124.8 122.9 121.8 122.6 121.2 120.1 121.0 119.7 119.9 89 Petroleum products 29 1.4 117.1 117.0 117.6 117.4 116.5 116.9 114.7 115.1 116.5 115.0 116.7 116.2 117.1 115.5 90 Rubber and plastic products . 30 3.5 142.3 144.4 142.1 141.9 141.3 139.1 137.3 138.5 137.3 136.5 136.0 134.6 134.7 135.5 91 Leather and products 31 .3 69.8 70.0 68.8 69.8 68.6 68.9 66.9 67.1 69.3 67.7 65.7 63.9 62.3 61.6 92 Mining 6.9 100.0 100.5 101.0 100.4 100.1 101.1 99.6 101.0 101.4 102.7 103.5 103.8 103.1 102.5 93 Metal 10 .5 97.4 92.9 95.8 99.3 96.3 93.7 99.5 94.6 91.7 85.4 90.4 89.8 87.8 85.9 94 Coal 12 1.0 108.9 110.3 109.3 107.0 110.2 108.6 106.1 115.2 110.7 116.6 116.8 116.5 115.2 111.5 95 Oil and gas extraction 13 4.8 95.0 95.7 96.3 95.7 95.1 96.6 95.2 96.1 96.7 97.7 98.5 98.9 98.3 97.9 96 Stone and earth minerals 14 .6 126.4 124.4 125.0 123.7 124.6 123.2 119.3 121.7 126.4 129.6 129.1 128.2 128.3 128.5 97 Utilities 7.7 120.4 119.1 122.1 121.7 120.0 121.9 129.1 124.0 121.8 122.0 120.9 119.0 120.1 119.6 98 Electric 491.3PT 6.2 123.9 121.1 126.1 124.7 124.2 127.3 131.2 126.7 123.9 125.5 127.2 123.5 124.4 123.3 99 Gas 49L2PT 1.6 109.3 111.0 108.4 110.5 105.8 104.5 120.2 113.7 112.9 109.7 101.2 104.2 105.7 106.6 SPECIAL AGGREGATES 100 Manufacturing excluding motor vehicles and parts 80.5 152.6 153.2 153.5 153.9 154.3 153.8 152.7 152.2 151.1 149.8 149.3 148.5 147.1 146.6 101 Manufacturing excluding computer and office equipment 83.6 145.4 145.4 146.2 146.5 146.2 145.4 143.9 142.7 142.2 141.5 141.1 140.8 139.4 139.4 102 Computers, communications equipment, and semiconductors 5.9 1,195.2 1,248.0 1,281.6 1,310.3 1,334.8 1,358.1 1,368.9 1,351.7 1,334.1 1,312,2 1,283,1 1,261.7 1,241.0 1,210.6 103 Manufacturing excluding computers and semiconductors 81.1 128.3 127.7 128.2 128.4 128.0 127.1 125.6 124.7 124.3 123.8 123.7 123.5 122.4 122.5 104 Manufacturing excluding computers, communications equipment, and semiconductors 79.5 125.1 124.5 124.9 125.0 124.6 123.6 122.1 121.1 120.8 120.4 120.3 120.2 119.1 119.3 Gross value (billions of 1992 dollars, annual rates) MAJOR MARKETS 105 Products, total 2,001.9 2,860.5 2,865.7 2,882.9 2,889.1 2,867.4 2,863.2 2,850.2 2,818.1 2,819.8 2,826.9 2,812.9 2,815.9 2,801.8 106 Final 1,552.1 2,203.4 2,202.8 2,220.5 2,228.1 2,205.4 2,203.7 2,198.2 2,167.1 2,174.5 2,186.0 2,174.7 2,180.8 2,168.4 107 Consumer goods . . . 1,049.6 1,340.0 1,338.7 1,348.7 1,353.7 1,334.7 1,331.2 1,332.8 1,312.2 1,322.8 1,328.2 1,325.5 1,335.4 1,333.9 108 Equipment 502.5 865.7 872.8 880.8 883.3 880.9 883.3 874.9 864.8 859.8 866.4 856.5 850.7 837.9 109 Intermediate 449.9 656.7 661.8 661.5 660.2 661.0 658.6 651.2 649.9 644.5 640.4 637.7 634.8 633.0 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 • October 2001 2.14 HOUSING AND CONSTRUCTION Monthly figures at seasonally adjusted annual rates except as noted 2000 2001 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June Private residential real estate activity (thousands of units except as noted) NEW UNITS 1 Permits authorized 1,612 1,664 1,592 1,549 1,562 1,614 1,553 1,724 1,663 1,627 1,587 1,621 1,587 2 One-family 1,188 1,247 1,198 1.173 1.212 1.203 1,187 1,283 1,228 1,209 1,218 1,205 1,225 3 Two-family or more 425 417 394 376 350 411 366 441 435 418 369 416 362 4 Started 1,617 1,641 1,569 1,508 1,527 1,559 1,532 1,666 1,623 F ,592 1,626 1,610 1.627 5 One-family 1.271 1,302 1,231 1,196 1,218 1,209 1,236 1,336 1,288 1,208 1,295 L,285R 1,285 6 Two-family or more 346 339 338 312 309 350 296 330 335 384 331 325R 342 1 Under construction at end of period' 971 953 934 971 971 969 965 985 989 1,002 1,006 1,016R 11,,000055 8 One-family 659 648 623 658 659 655 652 669 675 676 682 688R 668844 9 Two-family or more 312 305 310 313 312 314 313 316 314 326 324 328R 321 10 Completed 1,474 1,605 1,574 1,526 1,509 1,548 1,527 1,424 1,531 1,478 1,569 1,499R 1,626 11 One-family 1,160 1.270 1,242 1,181 1,172 1,236 1,228 1,090 1,201 1,207 1,232 L,225R 1.259 12 Two-family or more 315 335 332 345 337 312 299 334 330 271 337 274R 367 13 Mobile homes shipped 374 348 250 231 213 196 176 164 177 179 183 188 201 Merchant builder activity in one-family units 14 Number sold 886 880 877 902 922 882 1,001 938 959 953 899R 88 R 906 15 Number for sale at end of period' 300 315 301 301 301 304 297 295 295 289 293R 294R 298 Price of units sold (thousands of dollars)' 16 Median 152.5 161.0 169.0 171.5 176.3 174.7 162.0 171.3 169.1 166.3 175.2R 174.2' 172.4 17 Average 181.9 195.6 207.0 208.3 215.1 210.7 208.1 209.0 211.0 210.2 205.5R 209.8R 208.6 EXISTING UNITS (one-family) 18 Number sold 4,970 5,205 5,113 5,160 5,070 5,300 4,940 5,200 5,190 5,430 5,220 5,360 5,330 Price of units sold (thousands of dollars)' 19 Median 128.4 133.3 139.0 141.6 138.6 139.5 139.7 137.1 138.6 143.4 143.1 145.0 152.6 20 Average 159.1 168.3 176.2 178.6 176.9 176.5 178.5 175.8 174.6 179.5 179.9 183.6 190.2 Value of new construction (millions of dollars)3 CONSTRUCTION 21 Total put in place 703,533 763,914 817,130 815,410 820,805 826,746 838,731 859,815 869,334 869,140 868,703 867,303 861,567 22 Private 550,754 595,667 641,269 638,851 644,836 651,066 660,849 673,715 681,826 681,176 674,856 663,072 658,571 23 Residential 314,514 349,560 375,268 364,372 370,256 374,281 379,593 386,088 398,863 395,080 392,919 393,706 390,878 24 Nonresidential 236,240 246,107 266,001 274,479 274,580 276,785 281,256 287,627 282,963 286,096 281,937 269,366 267,693 25 Industrial buildings 40,547 32.794 31,984 31,384 32,125 33,265 31,398 35,878 33,386 34,823 34,698 31,338 32,992 26 Commercial buildings 95,760 104,531 116,988 121,349 121,760 120,587 125,234 125,402 124,568 128,792 125,438 114,419 114,612 27 Other buildings 39,609 40,906 44,505 45,020 45,645 45,628 45,707 46,567 46,264 47,117 46,039 46,539 44,932 28 Public utilities and other 60,324 67,876 72,523 76,726 75,050 77.305 78,917 79,780 78,745 75,364 75,762 77,070 75,157 29 Public 152,779 168,247 175,861 176,559 175,969 175,680 177,883 186,100 187,508 187,964 193,847 204,231 202,997 30 Military 2,539 2,142 2,334 2,509 1,883 2,629 2,107 2,270 2,342 2,131 2,534 2,280 2,485 31 Highway 45,251 52,024 52,851 53,923 48,764 48,858 50,189 55,368 56,204 57,443 58,188 60,486 61,171 32 Conservation and development 5,415 5,995 6,043 6,425 6,815 5,789 6,339 7,381 7,838 7,573 6,343 6,994 6,672 33 Other 99,575 108,086 114,634 113,702 118,507 118,404 119,248 121,081 121,124 120,817 126,782 134,471 132,669 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 200 lr 2001 JJJuuulllyyy 22000000 22000011 222000000111111 JJuullyy JJuullyy Sept. Dec. Mar. June Mar. Apr. May June July CONSUMER PRICES2 (1982-84=100) 1 All items 3.7 2.7 3.3 2.3 4.0 3.7 .1 .3 .4 .2 -.3 177.5 7 Food 2.6 3.2 4.1 2.1 4.1 3.3 .2 .1 .3 .4 .3 173.5 3 Energy items 19.3 2.1 7.9 3.8 6.0 16.8 -2.1 1.8 3.1 -.9 -5.6 132.4 4 All items less food and energy 2.5 2.7 2.9 2.0 3.5 2.6 .2 .2 .1 .3 .2 186.2 Commodities .4 .4 1.7 .0 1.4 -1.6 -.1 .0 -.4 .0 .1 144.4 6 Services 3.4 3.7 3.2 3.2 4.2 4.5 .3 .3 .3 .5 .2 210.1 PRODUCER PRICES (1982 = 100) 7 Finished goods 4.3 1.5 2.0 2.9 4.7 .3 -,R ,4r .1 -.4 -.9 140.7 8 Consumer foods 2.2 2.7 -1.2 2.7 10.5 .9 ,9r ,5r -.4 .1 -.6 141.2 9 Consumer energy 20.6 -.3 6.4 12.0 9.5 -6.1 -2.4r ,8r .2 -2.5 -5.8 97.0 10 Other consumer goods 1.7 2.1 2.4 1.0 2.3 2.3 ,2r .1' .4 .0 .1 156.8 11 Capital equipment 1.2 .9 1.7 .3 .0 1.2 .1 .3 -.1 .1 .2 139.8 Intermediate materials 12 Excluding foods and feeds 5.2 -.2 3.1 1.2 1.5 -1.2 -,3r -.2' .2 -.2 -1.1 131.0 13 Excluding energy 2.8 -.5 .3 -.3 1.5 -.9 .1 -.1 .1 -.3 -.4 136.5 Crude materials 14 3.2 10.4 -8.2 36.5 15.6 -7.1 3.4r -,6R -1.1 -.1 .6 109.6 15 Energy 58.7 -14.6 20.0 102.6 -42.4 -43.7 — 14.0r 2.2r -3.7 -11.9 -11.5 109.0 16 Other 7.5 -10.3 -8.8 -9.2 -10.8 -13.7 -1.0r -3.3R -.2 -.2 -.9 129.4 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 • October 2001 2.16 GROSS DOMESTIC PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data at seasonally adjusted annual rates 2000 2001 11999988 11999999 2000 Q2 Q3 Q4 Ql Q2 GROSS DOMESTIC PRODUCT 1 Total 8,781.5 9,268.6 9,872.9 9,857.6 9,937.5 10,027.9 10,141.7 10,217.6 By source 3 4 5 2 Per N D S s e o o u r n n r v a a d i b l c u l e r e c s a o b g n l o e s . o . u 7 d m g s o p o t d io s n expenditures 5 3 1 , , , 6 8 4 7 9 5 5 0 3 6 4 8 . . . . 2 0 3 5 6 3 1 . , . 2 7 6 8 5 6 5 3 0 0 8 1 . . . . 2 9 0 3 6 3 1 . . , 7 8 9 9 2 1 1 8 8 9 9 9 . . . . 4 6 2 6 6 3 1 , , , 6 8 8 9 7 1 8 7 4 3 2 8 . . . . 9 8 8 3 6 2 3 . , , 7 0 9 8 8 1 4 2 5 2 7 5 . . . . 5 4 7 4 6 4 2 . . , 0 8 0 8 2 2 7 1 5 7 1 8 . . . . 1 5 4 7 6 2 4 , , , 0 9 8 0 3 4 7 9 8 7 7 2 . . . . 1 1 6 4 7 2 4 , , , 0 1 0 8 6 3 4 4 3 9 2 4 . . . . 1 1 7 9 6 Gross private domestic investment 1,538.7 1.636.7 1.767.5 1,792.4 1,788.4 1,780.3 1,722.8 1,684.4 7 Fixed investment 1.465.6 1,578.2 1,718.1 1,717.0 1,735.9 1,741.6 1,748.3 1.710.3 8 Nonresidential 1.101.2 1,174.6 1,293.1 1.288.3 1,314.9 1,318.2 1,311.2 1,263.1 9 Structures 282.4 283.5 313.6 306.4 321.1 330.9 345.8 339.1 10 Producers' durable equipment 818.9 891.1 979.5 981.8 993.8 987.3 965.4 923.9 11 Residential structures 364.4 403.5 425.1 428.7 421.0 423.4 437.0 447.2 12 Change in business inventories 73.1 58.6 49.4 75.4 52.5 38.7 -25.5 -25.9 13 Nonfarm 123' 60.1 51.1 74.0 55.3 37.8 -26.2 -25.1 14 Net exports of goods and services - 151.7 -250.9 -364.0 -350.8 -380.6 -390.6 -363.8 -349.1 15 Exports 964.9 989.8 1,102.9 1,099.7 1,131.1 1,121.0 1,117.4 1.087.2 16 Imports 1,116.7 1.240.6 1.466.9 1,450.4 1,511.8 1.511.6 1,481.2 1.436.3 17 Government consumption expenditures and gross investment 1,538.5 1,632.5 1,741.0 1,741.1 1,744.2 1,766.8 1,805.2 1,837.4 18 Federal 7 539.2 564.0 590.2 601.0 587.0 594.2 605.3 609.8 19 State and local 999.3 1.068.5 1.150.8 1,140.1 1,157.2 1,172.6 1,199.8 1,227.6 By major lype of product 20 Final sales, total 8,708.4 9.210.0 9.823.6 9,782.2 9,884.9 9,989.2 10.167.2 10,243.5 21 Goods 3.232.3 3.418.6 3.644.8 3.636.0 3,677.2 3.670.6 3.718.8 3,714.4 22 Durable 1.524.4 1.618.8 1,735.2 1.735.2 1,753.8 1.740.7 1,755.8 1,736.0 23 Nondurable 1,707.9 1.799.8 1.909.7 1,900.8 1.923.5 1,929.9 1,963.1 1,978.4 24 Scrviccs 4,678.6 4.939.1 5,268.5 5.243.1 5,296.1 5,393.0 5,482.8 5.545.9 25 Structures 797.5 852.4 910.3 903.1 911.6 925.6 965.6 983.2 26 Change in business inventories 73.1 58.6 49.4 75.4 52.5 38.7 -25.5 -25.9 27 Durable goods 44.7 35.3 34.7 51.0 33.0 31.5 -31.0 -28.5 28 Nondurable goods 28.5 23.3 14.7 24.4 19.5 7.2 5.5 2.6 MEMO 8,508.9 8,856.5 9,224.0 9,229.4 9,260.1 9,303.9 9,334.5 9,351.6 29 Total GDP in chained 1996 dollars NATIONAL INCOME 7,041.4 7,462.1 7,980.9 7,956.1 8,047.2 8,124.0 8,169.7 n.a. 30 Total 4,989.6 5.310.7 5.715.2 5.669.9 5,759.3 5,868.9 5,955.7 6,010.2 31 Compensation of employees 4,192.1 4.477.4 4,837.2 4.798.0 4,875.8 4,973.2 5,049.4 5.099.3 32 Wages and salaries 692.7 724.3 768.4 768.3 772.6 776.6 788.8 798.9 33 Government and government enterprises 3,499.4 3.753.1 4,068.8 4,029.7 4,103.2 4,196.6 4,260.6 4.300.4 34 Other 7 797.5 833.4 878.0 872.0 883.5 895.7 906.3 910.9 35 Supplement to wages and salaries 306.9 323.6 343.8 341.8 345.6 350.8 357.1 358.9 36 Employer contributions for social insurance 490.6 509.7 534.2 530.1 537.9 544.9 549.3 552.1 37 Other labor income 38 Proprietors' income' 623.8 672.0 715.0 717.9 719.3 725.2 735.2 747.2 39 Business and professional' 598.2 645.4 684.4 685.4 687.6 693.5 705.4 717.9 40 Farm' 25.6 26.6 30.6 32.5 31.6 31.7 29.8 29.3 41 Rental income of persons" 138.6 147.7 141.6 141.4 138.3 141.7 139.6 140.9 42 Corporate profits' 777.4 825.2 876.4 892.8 895.0 847.6 789.8 n.a. 43 Profits before tax1 721.1 776.3 845.4 862.0 858.3 816.5 755.7 n.a. 44 Inventory valuation adjustment 18.3 -2.9 -12.4 -14.8 -3.6 -7.3 -1.9 n.a. 45 Capital consumption adjustment 38.0 51.7 43.4 45.5 40.4 38.4 36.0 31.8 46 Net interest 511.9 506.5 532.7 534.1 535.3 540.6 549.4 n.a. With inventory valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.48. 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 2000 2001 AAccccoouunntt 11999988 11999999 22000000 Q2 Q3 Q4 Ql Q2 PERSONAL INCOME AND SAVING 1 Total personal income 7,426.0 7,777.3 8,319.2 8,271.0 8,381.5 8,519.6 8,640.2 8,721.3 2 Wage and salary disbursements 4,192.8 4,472.2 4,837.2 4,798.0 4,875.8 4,973.2 5,049.4 5,099.3 3 Commodity-producing industries 1,038.5 1,088.7 1,163.7 1,151.8 1,173.2 1,195.5 1,206.3 1,205.2 4 Manufacturing 756.6 782.0 830.1 822.0 838.0 852.2 853.3 850.6 Distributive industries 948.9 1,021.0 1,095.6 1,086.1 1,102.4 1,125.9 1,140.3 1,148.0 6 Service industries 1,512.7 1,638.2 1,809.5 1,791.7 1,827.6 1,875.2 1,914.0 1,947.2 7 Government and government enterprises 692.7 724.3 768.4 768.3 772.6 776.6 788.8 798.9 8 Other labor income 490.6 509.7 534.2 530.1 537.9 544.9 549.3 552.1 9 Proprietors' income' 623.8 672.0 715.0 717.9 719.3 725.2 735.2 747.2 10 Business and professional1 598.2 645.4 684.4 685.4 687.6 693.5 705.4 717.9 1 1 Farm' 25.6 26.6 30.6 32.5 31.6 31.7 29.8 29.3 1? Rental income of persons" 138.6 147.7 141.6 141.4 138.3 141.7 139.6 140.9 Dividends 348.3 343.1 379.2 373.3 385.8 396.6 404.8 411.9 14 Personal interest income 964.4 950.0 1,000.6 999.9 1,009.2 1,013.1 1,010.9 1,005.7 15 Transfer payments 983.7 1,019.6 1,069.1 1,066.3 1,074.6 1,089.0 1,123.1 1,138.3 16 Old age survivors, disability, and health insurance benefits 578.1 588.0 617.3 618.6 620.9 626.5 651.4 660.2 17 LESS: Personal contributions for social insurance 316.3 337.1 357.7 355.8 359.4 364.1 372.1 373.9 18 EQUALS: Personal income 7,426.0 7,777.3 8,319.2 8,271.0 8,381.5 8,519.6 8,640.2 8,721.3 19 LESS: Personal tax and nontax payments 1,070.4 1,159.2 1,288.2 1,277.3 1,300.2 1,329.8 1,345.2 1,350.4 20 EQUALS: Disposable personal income 6,355.6 6,618.0 7,031.0 6,993.7 7,081.3 7,189.8 7,295.0 7,371.0 21 LESS: Personal outlays 6,054.1 6,457.2 6,963.3 6,905.6 7,026.9 7,115.1 7,216.2 7,283.4 22 EQUALS: Personal saving 301.5 160.9 67.7 88.1 54.5 74.7 78.8 87.5 MEMO Per capita (chained 1996 dollars) 23 Gross domestic product 31,449.2 32,441.9 33,490.3 33,549.2 33,587.6 3333,,666611..11 33,698.5 3333,,667755..11 24 Personal consumption expenditures 21,007.2 21,862.6 22,720.7 22,632.8 22,822.4 22,941.7 23,063.1 23,127.6 25 Disposable personal income 22,800.0 23,150.0 23,742.0 23,717.0 23,814.0 24,006.0 24,111.0 24,202.0 26 Saving rate (percent) 4.7 2.4 1.0 1.3 .8 1.0 1.1 1.2 GROSS SAVING 27 Gross saving 1,647.2 1,707.4 1,785.7 1,799.4 1,807.4 1,799.7 1,754.0 n.a. 28 Gross private saving 1,375.0 1,348.0 1,323.0 1,345.8 1,329.6 1,332.7 1,307.9 n.a. 29 Personal saving 301.5 160.9 67.7 88.1 54.5 74.7 78.8 87.5 30 Undistributed corporate profits' 189.9 228.7 225.3 238.6 233.9 197.0 147.8 n.a. 31 Corporate inventory valuation adjustment 18.3 -2.9 -12.4 -14.8 -3.6 -7.3 -1.9 n.a. Capital consumption allowances 32 Corporate 620.2 669.2 727.1 719.1 736.0 749.7 776633..88 778822..66 33 Noncorporate 264.2 284.1 302.8 299.9 305.2 311.3 317.5 332.1 34 Gross government saving 272.2 359.4 462.8 453.7 477.8 467.1 446.1 n.a. 35 Federal 132.0 210.9 315.0 305.0 326.9 320.5 303.7 n.a. 36 Consumption of fixed capital 88.2 91.7 96.4 95.9 97.0 97.9 98.4 99.4 37 Current surplus or deficit (-), national accounts 43.8 119.2 218.6 209.1 229.9 222.5 205.3 n.a. 38 State and local 140.2 148.5 147.8 148.7 150.9 146.6 142.5 n.a. 39 Consumption of fixed capital 99.5 106.4 114.9 114.0 116.1 118.0 120.2 121.9 40 Current surplus or deficit (-), national accounts 40.7 42.1 32.8 34.7 34.8 28.6 22.3 n.a. 41 1,616.2 1,634.7 1,655.3 1,690.0 1,651.1 1,649.7 1,633.5 n.a. 4? Gross private domestic investment 1,538.7 1,636.7 1,767.5 1,792.4 1,788.4 1,780.3 1,722.8 1,684.4 43 Gross government investment 277.1 304.6 318.3 315.0 314.0 322.8 330.9 345.7 44 Net foreign investment -199.7 -306.6 -430.5 -417.4 -451.3 -453.4 -420.2 n.a. 45 Statistical discrepancy -31.0 -72.7 -130.4 -109.5 -156.3 -150.0 -120.5 n.a. 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 • October 2001 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data seasonally adjusted except as noted1 2000 2001 IItteemm ccrreeddiittss oorr ddeebbiittss 11999988 11999999 22000000 Ql Q2 Q3 Q4 Ql 1 Balance on current account -217,457 -324.364 -444,667 -104,903 -108.134 -115,305 -116.324 -109,562 2 Balance on goods and services -166,828 -261,838 -375,739 -87,322 -90,784 -97,340 -100,293 -95,015 3 Exports 932,694 957,353 1,065,702 257,256 265,822 272,497 270,131 269,297 4 Imports -1,099,522 -1,219.191 -1,441,441 -344,578 -356.606 -369,837 -370,424 -364,312 5 Income, net -6,202 -13,613 -14,792 -5,657 -4,889 -4.885 642 -3,090 6 Investment, net -1,211 -8,511 -9,621 -4,380 -3,589 -3,620 1,971 -1,730 7 Direct 66,253 67,044 81,231 16,365 18,117 21,049 25,703 23,263 8 Portfolio -67,464 -75,555 -90,852 -20,745 -21,706 -24,669 -23,732 -24.993 9 Compensation of employees -4,991 -5,102 -5,171 -1,277 -1,300 -1,265 -1,329 -1,360 10 Unilateral current transfers, net -44.427 -48,913 -54,136 -11,924 -12,461 -13,080 -16,673 -11,457 11 Change in U.S. government assets other than official reserve assets, net (increase, —) -422 2,751 -944 -127 -572 114 -359 68 12 Change in U.S. official reserve assets (increase, —) -6,783 8.747 -290 -554 2,020 -346 -1,410 190 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -147 10 -722 -180 -180 -182 -180 -189 15 Reserve position in International Monetary Fund -5,119 5.484 2,308 -237 2,328 1,300 -1,083 574 16 Foreign currencies -1,517 3,253 -1,876 -137 -128 -1,464 -147 -195 17 Change in U.S. private assets abroad (increase. —) -352.427 -448,565 -579,718 -197,424 -95,021 -107.495 -179,779 -157,195 18 Bank-reported claims" -35,572 -76,263 -138,500 -56,234 7,455 -18,147 -71,574 -90,027 19 Nonbank-reported claims -38,204 -85,700 -163,846 -75,256 -29,491 -14,585 -44,514 -5,618 20 U.S. purchases of foreign securities, net -136,135 -131.217 -124,935 -27,546 -39,639 -33,129 -24,621 -28,535 21 U.S. direct investments abroad, net -142,516 -155.385 -152,437 -38,388 -33,346 -41,634 -39,070 -33,015 22 Change in foreign official assets in United States (increase, +) -19,948 43.551 37,619 22,498 6,447 12,247 -3,573 4,091 23 U.S. Treasury securities -9,921 12,177 -10,233 16,204 -4,000 -9,001 -13.436 -1,027 24 Other U.S. government obligations 6,332 20,350 40,909 8,107 10,334 14,272 8,196 3,574 25 Other U.S. government liabilities" -3,371 -2.855 -1,987 -474 -1.000 -220 -293 -1,244 26 Other U.S. liabilities reported by U.S. banks" -9,501 12.964 5,803 -2,270 209 6,884 980 1,785 27 Other foreign official assets3 -3,487 915 3.127 931 904 312 980 1,003 28 Change in foreign private assets in United States (increase, +) 524,412 770.193 986,599 234,284 243.560 209.861 298,894 233.412 29 U.S. bank-reported liabilities4 39,769 54,232 87,953 -7.425 53,923 -1,910 43,365 -476 30 U.S. nonbank-reported liabilities 23,140 69,075 177,010 85,188 24,400 19,078 48,344 42,269 31 Foreign private purchases of U.S. Treasury securities, net 48,581 -20,490 -52,792 -9,348 -20,546 -12,503 -10,395 538 32 U.S. currency flows 16,622 22,407 1,129 -6,847 989 757 6,230 2,311 33 Foreign purchases of other U.S. securities, net 218,091 343,963 485,644 136,208 94,400 128,393 126,643 147,132 34 Foreign direct investments in United States, net 178,209 301.006 287,655 36,508 90,394 76,046 84,707 41,638 35 Capital account transactions, net5 678 -3.491 705 173 173 175 184 174 36 Discrepancy 71,947 -48,822 696 46,053 -48.473 749 2,367 28,822 37 Due to seasonal adjustment 8,501 -2,380 -9,977 3.856 8,945 38 Before seasonal adjustment 71,947 -48,822 696 37,552 -46,093 10,726 -1,489 19,877 MEMO Changes in official assets 39 U.S. official reserve assets (increase, —) -6,783 8.747 -290 -554 2,020 -346 -1,410 190 40 Foreign official assets in United States, excluding line 25 (increase, +) -16,577 46,406 39.606 22,972 7,447 12,467 -3,280 5,335 41 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22) -11,531 1.621 11,582 6,143 1,639 3,636 164 -170 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, Suney 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 TRADE1 Millions of dollars; monthly data seasonally adjusted 2000 2001 IItteemm 11999988 11999999 22000000 Dec. Jan. Feb. Mar. Apr. May June 1 Goods and services, balance -166.686 -261,838 -375,739 -33,291 -33,332 -28,610 -33,076 -31,993 -28,469 -29,409 2 Merchandise -246.855 -345,434 -452,207 -39,361 -39,127 -34,614 -38,781 -37,656 -34,449 -35,696 3 Services 79.868 83,596 76,468 6,070 5,795 6,004 5,705 5.663 5.980 6.287 4 Goods and services, exports 933.053 957,353 1,065,702 89,241 90,104 90.475 88,716 86,929 87,701 85.954 5 Merchandise 670.324 684,553 772,210 64,574 65,309 65,748 63,884 62,170 62,846 60.822 6 Services 262,729 272,800 293,492 24,667 24,795 24,727 24,832 24,759 24,855 25.132 7 Goods and services, imports -1,099.739 -1,219,191 -1,441,441 -122,532 -123,436 -119,085 -121,792 -118.922 -116,170 -115,363 8 Merchandise -917.179 -1,029,987 -1,224,417 -103,935 -104,436 -100,362 -102,665 -99,826 -97,295 -96,518 9 Services -182.560 -189,204 -217,024 -18,597 -19,000 -18,723 -19,127 -19,096 -18,875 -18,845 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 2001 AAsssseett 11999977 11999988 11999999 Jan. Feb. Mar. Apr. May June July Aug." 1 Total 69,954 81,761 71,516 67,542 66,486 64,222 64,731 65,254r 64,847 65,736 67,852 2 Gold stock1 11,047 11,046 11,048 11,046 11,046 11,046 11,046 11,044' 11,044 11,044 11.044 3 Special drawing rights2'3 10,027 10.603 10,336 10,497 10,641 10,379 10,420 10,481 10,409 10,518 10.913 4 Reserve position in International Monetary Fund2 18.071 24,111 17,950 15,079 14,107 13,777 13,816 14,283 14,619 14,965 15,297 5 Foreign currencies4 30,809 36,001 32,182 30,920 30,692 29,020 29,449 29,446 28,775 29,209 30,598 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 2001 AAsssseett 11999977 11999988 11999999 Jan. Feb. Mar. Apr. May June July Aug.? 1 Deposits 457 167 71 199 196 70 101 86 102 84 80 Held in custody 2 U.S. Treasury securities2 620,885 607,574 632,482 594,694 603,906 609,440 585,710 583,655 586,607 578.573 590.820 3 Earmarked gold3 10,763 10,343 9,933 9,397 9,343 9,289 9,235 9,154 9,100 9,100 9,100 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 • October 2001 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 2000 2001 IItteemm 11999988 11999999 Dec. Jan. Feb. Mar. Apr.r Mayr Junep 1 Total1 759,928 806,318 845,934 866,883 864,593 865,466 855,152 837,296 834,175 By type 2 Liabilities reported by banks in the United States2 125,883 138,847 144,658 155,293 155,163 154,641 158,441 143.950 143.170 3 U.S. Treasury bills and certificates3 134,177 156,177 153,010 158,967 155,667 155,204 144,158 137,933 139,197 U.S. Treasury bonds and notes 4 Marketable 432,127 422,266 415,964 418,190 418,857 419,106 410,066 410,979 407,736 5 Nonmarketable4 6,074 6,111 5,348 4,923 4,953 4,984 5,017 5,049 5,081 6 U.S. securities other than U.S. Treasury securities5 61,667 82,917 126,954 129,510 129,953 131,531 137,470 139.385 138,991 By area 7 Europe1 256,026 244,805 253,592 259,829 256,180 250,420 247,128 251,505 251,052 8 Canada 10,552 12,503 12,394 11,220 10,794 10,396 10,474 10,967 11,573 9 Latin America and Caribbean 79,503 73,518 76,818 80,115 80,389 79,185 79,457 76.157 79,121 10 Asia 400,631 463.703 488,170 499,925 501,486 511,023 501,092 482,997 478,293 11 Africa 10,059 7,523 9,165 8,965 9,586 9,102 9,341 9,272 9,058 12 Other countries 3,157 4,266 5,795 6,829 6,158 5,340 7,660 6,398 5,078 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 2001 IItteemm 11999977 11999988 11999999 June Sept. Dec. Mar. 1 Banks' liabilities 117,524 101,125 88,537 85,842 78,852 77,935 88,653 2 Banks' claims 83,038 78,162 67,365 67,862 60,355 57,005 71,075 3 Deposits 28,661 45,985 34,426 31,724 26,306 23,407 27,004 4 Other claims 54,377 32,177 32,939 36,138 34,049 33,598 44,071 5 Claims of banks' domestic customers" 8,191 20,718 20,826 18,802 19,123 24,411 20,682 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 Dec. Jan. Feb. Mar. Apr.' May Junep BY HOLDER AND TYPE OF LIABILITY 1 Total, all foreigners 1,347,837 1,408,740 1,515,077 1,515,077 L,606,592R L,568,239R L,537,728R 1,531,265 1,534,073 1,523,809 9 Banks' own liabilities 884,939 971,536 1,045,236 1,045,236 l,123,852r 1,084,406r 1,076,707r 1.094,709 1,116.638 1,099,761 3 Demand deposits 29,558 42,884 33,365 33,365 30,820 35,765 33,893r 30,162 29,1 14 32,895 4 Time deposits- 151,761 163,620 188,154 188,154 187,365 189,531 182,529 190,804 182,982 181.880 5 Other3 140,752 155,853 173,263 173,263 203,269 198,788 200,477 202,423 207,350 215,081 6 Own foreign offices4 562,868 609,179 650,454 650,454 702,398r 660,322r 659,808' 671,320 697,192 669,905 7 Banks' custodial liabilities5 462,898 437,204 469,841 469,841 482,740 483,833 461,021 436,556 417,435 424,048 8 U.S. Treasury bills and certificates6 183,494 185,676 177,846 177,846 182,276 179,277 171,755 160,628 155,924 156,864 9 Short-term agency securities7 n.a. n.a. n.a. n.a. 66,600 74,281 71,454 69,543 62,425 60,081 10 Other negotiable and readily transferable instruments8 141,699 132,617 145,840 145,840 77,464 73,258 64.517 77,595 80,260 79,21 1 11 Other 137,705 118,911 146,155 146,155 156,400 157,017 153,295 128,790 118,826 127.892 12 Nonmonetary international and regional organizations9 . . 11,883 15,276 12,542 12,542 10,938 11,578 12.290 12,833 14,668 13,818 13 Banks' own liabilities 10,850 14,357 12,140 12,140 10,595 11,202 11,746 12,344 14,342 13,479 14 Demand deposits 172 98 41 41 27 19 23 14 15 28 IS Time deposits" 5,793 10,349 6,246 6,246 5,641 4,966 5,302 5,301 3,532 4,228 16 Other3 4,885 3,910 5,853 5,853 4,927 6,217 6,421 7,029 10,795 9,223 17 Banks' custodial liabilities5 1,033 919 402 402 343 376 544 489 326 339 18 U.S. Treasury bills and certificates6 636 680 252 252 294 248 229 170 105 68 19 Short-term agency securities7 n.a. n.a. n.a. n.a. 26 108 137 144 132 134 20 Other negotiable and readily transferable instruments8 397 233 149 149 23 15 177 175 87 137 21 Other 0 6 1 1 0 5 1 0 2 0 22 Official institutions10 260,060 295,024 297,668 297,668 314,260 310,830 309,845 302,599 281,883 282,367 23 Banks' own liabilities 80,256 97,615 97,054 97,054 103,445 99,602 97,068 103,508 96,725 99,332 24 Demand deposits 3,003 3,341 3,952 3,952 3,199 4,444 3,509 2,552 2,522 2,473 25 Time deposits2 29,506 28,942 35,638 35,638 33,026 29,957 28,001 32,032 26.647 33,092 26 Other3 47.747 65,332 57,464 57,464 67,220 65,201 65,558 68,924 67,556 63,767 27 Banks' custodial liabilities5 179,804 197,409 200,614 200,614 210,815 211,228 212,777 199,091 185,158 183,035 28 U.S. Treasury bills and certificates6 134,177 156,177 153,010 153,010 158,967 155,667 155,204 144,158 137,933 139,197 29 Short-term agency securities7 n.a. n.a. n.a. n.a. 45,384 49,594 53,295 51,107 43.193 40,301 30 Other negotiable and readily transferable instruments8 44,953 41,182 47,366 47,366 5,337 5,325 4,064 3,325 3,509 3,067 31 Other 674 50 238 238 1,127 642 214 501 523 470 37 Banks'1 885,336 900,379 976,164 976,164 l,046,398r 1,011,364' 992,003' 965,851 988,549 969,654 33 Banks' own liabilities 676,057 728,492 788,471 788,471 848,029' 814,668r 812,764r 816,718 845,735 818,821 34 Unaffiliated foreign banks 113,189 119,313 138,017 138,017 145,631 154,346 152,956 145,398 148,543 148,916 .35 Demand deposits 14,071 17,583 15,522 15,522 14,297 12,600 16.433 13,029 12,143 15,212 36 Time deposits2 45.904 48,140 66,936 66,936 70,896 77,477 73,017 72,656 70,828 64,351 37 Other3 53,214 53,590 55,559 55,559 60,438 64,269 63,506 59,713 65,572 69,353 38 Own foreign offices4 562,868 609,179 650,454 650,454 702,398r 660,322r 659,808' 671,320 697,192 669,905 39 Banks' custodial liabilities5 209,279 171,887 187,693 187,693 198,369 196,696 179,239 149,133 142,814 150,833 40 U.S. Treasury bills and certificates6 35.359 16,796 16,023 16,023 14,484 13,909 7,922 7,233 8,535 8,455 41 Short-term agency securities7 n.a. n.a. n.a. n.a. 7,569 8,007 2,324 2,824 3,772 3,169 42 Other negotiable and readily transferable instruments8 45,332 45,695 36,036 36,036 31,393 29,868 27,364 25,271 26,580 25,792 43 Other 128,588 109,396 135,634 135,634 144,923 144,912 141,629 113,805 103,927 113,417 44 Other foreigners 190,558 198,061 228,703 228,703 234,996 234,467 223,590' 249,982 248,973 257,970 45 Banks' own liabilities 117,776 131,072 147,571 147,571 161,783 158,934 155,129' 162,139 159.836 168,129 46 Demand deposits 12,312 21,862 13,850 13,850 13,297 18,702 13,928' 14,567 14,434 15.182 47 Time deposits- 70,558 76,189 79,334 79,334 77,802 77,131 76,209 80,815 81,975 80,209 48 Other3 34,906 33,021 54,387 54,387 70,684 63,101 64,992 66,757 63,427 72.738 49 Banks' custodial liabilities5 72,782 66,989 81,132 81,132 73,213 75,533 68,461 87,843 89,137 89.841 50 U.S. Treasury bills and certificates6 13,322 12,023 8,561 8,561 8,531 9,453 8,400 9,067 9,351 9,144 51 Short-term agency securities7 n.a. n.a. n.a. n.a. 13,621 16,572 15,698 15,468 15,328 16,477 52 Other negotiable and readily transferable instruments8 51,017 45,507 62,289 62,289 40,711 38,050 32,912 48,824 50.084 50,215 53 Other 8,443 9,459 10,282 10,282 10,350 11,458 11,451 14.484 14.374 14,005 MEMO 54 Negotiable time certificates of deposit in custody for foreigners 27,026 30,345 34,217 34,217 31,389 30,277 24,518 26,238 25,912 24,884 55 Repurchase agreements7 n.a. n.a. n.a. n.a. 125,225 120,444 129,671 119,577 119,900 126,510 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 • October 2001 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States'—Continued Payable in U.S. dollars Millions of dollars, end of period 2000 2001 IItteemm 11999988 11999999 22000000 Dec. Jan. Feb. Mar. Apr. May Junep AREA 56 Total, all foreigners 1,347,837 1,408,740 1,515,077 1,515,077 l,606,592r l,568,239r l,537,728r l,531,265r l,534,073r 1,523,809 57 Foreign countries 1,335,954 1,393,464 1,502,534 1,502,534 l,595,653r l,556,660r l,525,437r l,518,431r l,519,404r 1,509,990 58 Europe 427,375 441.810 448,712 448,712 477,165R 447.619R 429.91 LR 431,641R 465,006R 461.034 59 Austria 3,178 2,789 2.692 2.692 2.366 2.094 2,178 2,771' 2,593 2,026 60 Belgium12 42,818 44,692 33.399 33.399 7.357 5.709 5,432 5,309 5,895 6,270 61 Denmark 1,437 2,196 3.000 3,000 3,391 4,182 2,919 3.412' 2.910 3.063 62 Finland 1,862 1.658 1.411 1.411 1,155 1,667 1,286 1.769 1,144 2,395 63 France 44,616 49,790 37,833 37,833 49,045 45.435 42,758 39,125 40,209 40.077 64 Germany 21,357 24,753 35.519 35.519 30,250 30,382 30,862 29.591' 30,339' 32,357 65 Greece 2.066 3.748 2,011 2,011 1,888 1,963 1,496 1,336 1,525 1,653 66 Italy , 7,103 6.775 5.072 5.072 4.997 5.071 5.850 5,269 5.530 6.766 67 Luxembourg " n.a. n.a. n.a. n.a. 27,095 24,234 12,585 14.505' 15,046' 16,853 68 Netherlands 10,793 8.143 7.244 7.244 8.504 8,328 7,265 10.337R 10,969' 9,817 69 Norway 710 1,327 2,305 2,305 4,762 6,331 8,361 4.806 2,572 4,583 70 Portugal 3.236 2,228 2,403 2,403 2,571 2,625 1,731 1.949 2,041 2,287 71 Russia 2,439 5.475 19.018 19.018 17,233 19,029 18,625 19.917 21.357' 22.839 72 Spain 15,781 10,426 7,787 7,787 8,130 8,241 9.500 1,141' 7,883 7,410 73 Sweden 3,027 4,652 6.497 6.497 5,648 5,959 6,738 6,025' 5,284 5.507 74 Switzerland 50,654 63,485 74.635 74.635 83,098 64,428 54,028 65,998R 93,198' 73,088 75 Turkey 4.286 7,842 7.548 7,548 7,783 5,382 5,635 4,549 7,169 5.485 76 United Kingdom 181,554 172,687 169.484 169.484 143,474 134,444 147.300 138,134' 139,683 146,038 77 Channel Islands & Isle of Man13 n.a. n.a. n.a. n.a. 36.376 43,087 36.040 36,013 34.742 34,994 78 Yugoslavia14 233 286 276 276 287 292R 292' 303' 301' 297 79 Other Europe and other former U.S.S.R.15 30.225 28,858 30.578 30,578 31,755' 28.736 29,030 32,776' 34,616 37.229 80 Canada 30,212 34,214 30,987 30.987 23,927 23,945 24.278R 27,972'' 25,993R 25,984 81 Latin America 121,327 117.495 120,154 120.154 118,829 120,331' 114,513' 117,448' 113,542' 117.524 82 Argentina 19,014 18,633 19,487 19.487 18,944 18,011 12,878 14,610 12,584 16,417 83 Brazil 15,815 12,865 10,852 10.852 10.527 11,409 10,571 10.851 11.257 12,584 84 Chile 5,015 7,008 5,892 5.892 5.645 5,925 5,175 5,449 5.713 5,536 85 Colombia 4,624 5,669 4,542 4.542 4.536 4,440 4.344 4.618 4.723 4,632 86 Ecuador 1,572 1,956 2,111 2.1 11 2.144 2,254 2,179 2,164 2,115 1,957 87 Guatemala 1,336 1,626 1,604 1.604 1,579 1,535 1,509 1,557 1.585 1.507 88 Mexico 37.157 30,717 32,169 32.169 33.719 34,948 34,084 34,271 33,177' 33,339 89 Panama 3,864 4,415 4.241 4.241 3.610 3,861 4.014 3,476 3.639 3,371 90 Peru 840 1,142 1,427 1.427 1,355 1.459 1.788 1,767 1.532 1,607 91 Uruguay 2,486 2,386 3,003 3.003 2,765 2,844 3.365 3,410 3,332 3.026 92 Venezuela 19,894 20,192 24.733 24.733 26,995 26,525 27,415 27,847 26.875' 26.921 93 Other Latin America16 9.710 10,886 10.093 10,093 7,010 7.120R 7,L91R 7,428' 7.010' 6.627 94 Caribbean 433,539 461,200 574.980 574.980 639,437' 626,260R 615.346R 606.75 lr 601,127R 600,496 95 Bahamas 118,085 135,811 189,332 189,332 186.179 185,369 174,174 177.530' 190,166 187,502 96 Bermuda 6,846 7.874 9.641 9,641 9,488 8.064 8.401 8.316R 7,019' 9.039 97 British West Indies17 302,486 312,278 368.769 368,769 0 0 n.a. n.a. n.a. n.a. 98 Caymen Islands17 n.a. n.a. n.a. n.a. 422,055' 412,349' 413,247' 402.537' 386,101' 385,155 99 Cuba 62 75 90 90 130 84 85 83 84 85 100 Jamaica 577 520 815 815 792 945 1,238 899 1,133 995 101 Netherlands Antilles 5,010 4,047 5,428 5.428 6,558 5.484 4,504 4,515' 3,395 3,885 102 Trinidad and Tobago 473 595 905 905 797 886 1,048 1,114 1,237 1,272 103 Other Caribbean16 n.a. n.a. n.a. n.a. 13.438' 13,079 12,649 1 L,757R 11,992' 12,563 104 307,960 319.489 305,533 305.533 315,129 316,529 320,174 311.164R 291,302' 283,238 China 105 Mainland 13,441 12.325 16,533 16.533 27.451 31,174 39,928 34,694' 23.160' 15.395 106 Taiwan 12,708 13,603 17,352 17.352 19.828 18,192 17,891 19,962 18,119 19.862 107 Hong Kong 20.900 27,701 26.462 26,462 27,014 27,662 29,088 26,581' 27,348 29,180 108 India 5,250 7,367 4,530 4.530 4,197 4,058 4,547 4,113 4,281 4,043 109 Indonesia 8,282 6,567 8,514 8.514 8,536 9,027 8,605 10,733 10,605 10,571 110 Israel 7,749 7.488 8,053 8.053 7,666 7,262 8,803 7,095 8,282 8,696 111 Japan 168,563 159.075 150,415 150,415 148,730 150,801 146,441 144,857R 141,248 137,048 112 Korea (South) 12,524 12,988 7.961 7,961 7,155 6,273 6,096 5,370 5.380 5,968 1 13 Philippines 3.324 3.268 2,316 2.316 1,769 1,422 1.428 1,645 1.660 1,451 114 Thailand 7.359 6.050 3.117 3.117 3.157 3.455 3.252 2,935 3,295 3,310 115 Middle Eastern oil-exporting countries18 15,609 21.314 23.733 23,733 22,425 21.594 21,634 20.515R 19,642 20,519 1 16 Other 32.251 41.743 36.547 36,547 37.201 35,609 32,461 32.664 28,282 27,195 1 17 Africa 8.905 9.468 10.824 10.824 10.552 10.983 10,564 10.821 10.918 10,514 1 18 Egypt 1,339 2,022 2.621 2,621 2,552 2,336 2.282 2,375 2,517 2,227 1 19 Morocco 97 179 139 139 157 139 133 139 116 102 120 South Africa 1,522 1,495 1.010 1,010 843 914 651 791 706 657 121 Congo (formerly Zaire) 5 14 4 4 10 10 8 5 2 13 122 Oil-exporting countries" 3.088 2.914 4.052 4.052 4,317 4,750 4,593 4,753 4,741 4.644 123 Other 2,854 2.844 2,998 2.998 2,673 2.834 2,897 2,758 2,836 2,871 124 Other Countries 6,636 9.788 11,344 11.344 10,614 10.993 10,651 12,634' 11,516' 11.200 125 Australia 5,495 8,377 10.070 10,070 8,854 9,519 9.448 1 L,382R 10,406' 9,836 126 New Zealand20 n.a. n.a. n.a. n.a. 1,035' 328 427' 501' 437' 638 127 All other 1,141 1,411 1.274 1.274 725' 1.146 776' 751 673' 726 128 Nonmonetary international and regional organizations . . 11,883 15.276 12,543 12,543 10,939 11,579 12,291 12,834 14,669 13,819 129 International"1 10.221 12.876 11,270 11,270 9,024 10,793 11.379 11,335 12,965 12,836 130 Latin American regional" 594 1.150 740 740 1,493 223 272 327 886 418 131 Other regional" 1,068 1.250 533 533 422 534 640 620 518 523 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 2001, "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." scries. 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 Dec. Jan. Feb. Mar. Apr. May June'1 1 Total, all foreigners 734,995 793,139 908,242 908,242 961,017 912,886 984,855 989,617 996,256r 991,190 2 Foreign countries 731,378 788,576 903,556 903,556 957,790 909,569 982,079 986,862 992,346r 986,492 3 Europe 233,321 311,686 381.471 381,471 422,114 404.511 443.510 442,431 460,448'' 452.249 4 Austria 1,043 2.643 2.926 2,926 3,664 2,927 3.101 3,728 3.364 2.970 5 Belgium- 7,187 10,193 5,399 5.399 4.635 5.300 4,852 4,375 5.627 4.154 Denmark 2.383 1,669 3.272 3.272 3,402 3.499 3.242 2.954 2,505 2,268 7 Finland 1,070 2,020 7.382 7.382 6.772 7,102 7,185 8,901 8.800 8.460 X France 15.251 29,142 40.035 40.035 43,290 44,038 45.555 46.378 42,190 48,835 9 Germanv 15.923 29,205 36,834 36.834 39,744 39.233 45,763 49.061 55,097 51,241 10 Greece 575 806 646 646 526 454 278 265 285 313 1 1 Italy 7.284 8,496 7.629 7.629 6,310 6.315 6.976 7.274 6.868 8.116 P Luxembourg" n.a. n.a. n.a. n.a. 2.825 2,659 2,569 2,012 1.876' 1,280 13 Netherlands 5.697 11,810 17,044 17.044 18,865 21.517 22,630 22.699 16,495 16,993 14 Norway 827 1.000 5,012 5.012 2.971 5.339 8.228 5.296 2.915 6.502 IS Portugal 669 1,571 1.382 1,382 1.109 1,312 1,426 1.535 1.173 1.304 16 Russia 789 713 517 517 518 561 1.008 813 715 911 17 Spain 5.735 3,796 2,604 2.604 3.808 3,959 4.722 3.445 4.275 3.594 18 Sweden 4.223 3,264 9.226 9,226 10.353 10.131 10,286 11.934 10.986 1 1,049 19 Switzerland 46,874 79,158 82,085 82,085 102,547 97,003 96,489 104,816 137.273 111.492 20 Turkey 1.982 2,617 3.059 3,059 3,301 2,989 2.698 2.770 2.596 2.612 7 1 United Kingdom 106,349 115.971 148.292 148,292 154,339 139.721 166,667 155.535 148.444' 161.729 11 Channel Islands & Isle of Man1 n.a. n.a. n.a. n.a. 3,067 3.069 3.091 3.151 3.838' 3.275 73 Yugoslavia4 53 50 50 50 50 49 49 49 59 49 24 Other Europe and other former U.S.S.R.3 9,407 7,562 8,077 8,077 10,018 7.334 6,695 5,440 5.067 5.102 25 Canada 47,037 37,206 39.860 39.860 41,654 42,377 43,839 45.091 44.584 50.150 76 Latin America 79,976 74,040 76,614 76,614 74,462 74.222 73.798 73,841 73,852 73.778 27 Argentina 9.552 10.894 11.546 11,546 11.319 11.614 11.243 11,541 1 1.732 11.904 78 Brazil 16,184 16,987 20,567 20.567 20,372 20,008 20.275 20,286 20.718 21.531 ^9 Chile 8.250 6.607 5,816 5,816 6.223 5,961 5,823 5,628 5.444 5.449 30 Colombia 6,507 4,524 4.370 4.370 3,816 3,941 4,022 3,720 3,740 3,641 31 Ecuador 1,400 760 635 635 563 584 534 526 482 522 3"> 1,127 1.135 1,246 1,246 1,364 1,176 1.176 1.171 1.227 1,192 33 Mexico 21,212 17,899 17,430 17.430 17.598 17,918 17,762 18.013 17,977 17,384 34 Panama 3,584 3.387 2,935 2,935 2,775 2,908 3,008 3.158 2.873 3,082 35 Peru 3,275 2,529 2,808 2,808 2.689 2,673 2.809 2,771 2.534 2,565 36 Uruguay 1,126 801 675 675 641 455 366 367 368 398 37 Venezuela 3,089 3,494 3,520 3.520 3,306 3,264 3,239 3,154 3.1 1 1 2,984 38 Other Latin America6 4.670 5,023 5,066 5,066 3.796 3,720 3,541 3.506 3,646 3.126 39 Caribbean 262.678 281.128 319.512 319,512 320,547 299,190 325.134 333.197 324,792 322.664 40 Bahamas 96,455 99,066 114,090 114,090 109,284 101.284 105,064 112,424 112,802' 105.772 41 Bermuda 5,011 8.007 9,343 9.343 8,673 7,133 8,186 6,838 5,570 8.453 47 British West Indies7 153,749 167,189 189,315 189.315 0 0 n.a. n.a. n.a. n.a. 43 Caymen Islands7 n.a. n.a. n.a. n.a. 187.790 177,338 199,345 200.045r 195.813' 197,674 44 Cuba 0 0 0 0 117 0 r 45 Jamaica 239 295 355 355 357 331 348 336r 396 301 46 Netherlands Antilles 6.779 5,982 5.801 5.801 9,077 7,156 6.921 9,384 5,738 5.749 47 Trinidad and Tobago 445 589 608 608 658 663 710 783 804 946 48 Other Caribbean6 n.a. n.a. n.a. n.a. 4,591 5.285 4.560 3.386' 3,669' 3.769 49 98,607 75,143 77,887 77.887 90,332 81,487 87,626 83,562 81.242 80.971 China 50 Mainland 1.261 2,110 1,606 1.606 1.562 1.530 1,338 3,171 2,252 4.387 51 Taiwan 1.041 1,390 2.247 2.247 1,037 1.365 1,846 2,253 1.980 2.519 5T Hong Kons 9.080 5,903 6,669 6.669 7,458 8.506 11,068 10.461 9.126 9.247 53 India 1.440 1,738 2.178 2,178 1,886 1,700 1.827 1,675 1.648 1.634 54 Indonesia 1,942 1,776 1.914 1.914 2,075 1.987 2.001 2.033 2,015 1.932 5S Israel 1.166 1.875 2,729 2.729 2.343 3,249 2.339 2,526 2.717 2,417 56 Japan 46,713 28,641 35,032 35,032 38,901 34,778 39,311 32.969 34.510 32.432 57 Korea (South) 8,289 9.426 7.776 7,776 18.736 14,147 12.186 13.937 11.639 11,204 58 Philippines 1,465 1.410 1,784 1,784 1,217 1,172 1.195 1.835 1,788 1.831 59 Thailand 1,807 1,515 1,381 1,381 1,170 1,244 1,258 1,062 1.380 1.541 60 Middle Eastern oil-exporting countries'4 16,130 14,267 9,346 9.346 10,549 8,341 9,120 7,936 9,926 8.641 61 Other 8,273 5.092 5,225 5,225 3,398 3.468 4,137 3.704 2.261 3.186 61 Africa 3,122 2.268 2,094 2,094 2,176 1,899 2.11 1 2,035 1,905 2.134 63 Egypt 257 258 201 201 170 271 343 308 466 529 64 Morocco 372 352 204 204 182 185 189 185 185 177 65 South Africa 643 622 309 309 492 544 586 444 289 528 66 Congo (formerly Zaire) 0 24 0 0 19 0 0 0 0 0 67 Oil-exportina countries'' 936 276 471 471 582 153 217 267 197 143 68 Other 914 736 909 909 731 746 776 831 768 757 69 Other countries 6,637 7,105 6.118 6,118 6,505 5.883 6,061 6,705 5.523 4.546 70 Australia 6,173 6,824 5.869 5,869 6,080 5.587 5,769 6.257 5,211 4.116 71 New Zealand10 n.a. n.a. n.a. n.a. 283 165 166 269 136 279 72 All other 464 281 249 249 142 131 126 179 176 151 73 Nonmonetary international and regional organizations" . . 3,617 4,563 4.686 4,686 3,363 3,317 2,776 2,755 4.535' 4,698 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 • October 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 11999988 11999999 22000000 Dec. Jan. Feb. Mar. Apr. May Junep 1 Total 875,891 944,937 1,099,439 1,099,439 1,195,602 Banks' claims 734,995 793,139 908,242 908,242 961,017 912,886 984,855 989.617 996,256R 991,190 3 Foreign public borrowers 23,542 35,090 37,907 37,907 52,990 54,220 49,123 52,357 49,533 51,892 4 Own foreign offices" 484,535 529,682 630,137 630,137 647,273 610,256 670,909 682,430 708,45 lr 682,910 Unaffiliated foreign banks 106,206 97,186 98,667 98,667 101,605 95,647 105,853 95,318 80,002 92,547 6 Deposits 27.230 34,538 23,886 23,886 23,083 22,848 19,948 21,533 19,717 22,606 7 Other 78,976 62,648 74.781 74.781 78,522 72,799 85,905 73,785 60,285 69,941 8 All other foreigners 120,712 131,181 141.531 141,531 159,149 152,763 158,970 159,512 158,270R 163,841 9 Claims of banks' domestic customers3 140,896 151,798 191,197 191,197 210,747 10 Deposits 79.363 88,006 100,327 100,327 105,554 11 Negotiable and readily transferable instruments4 47,914 51,161 78.147 78,147 91,827 12 Outstanding collections and other claims 13,619 12,631 12,723 12,723 13,366 MEMO 13 Customer liability on acceptances 4,520 4,553 4,258 4,258 2,995 14 Banks' loans under resale agreements' n.a. n.a. n.a. n.a. 122,720 118,705 134,083 126,871 116,938 129,639 15 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States6 39,978 31,125 53,153 53,153 59,893 70,964 67,204 60,796 58,137 66,155 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 2001 MMaattuurriittyy,, bbyy bboorrrroowweerr aanndd aarreeaa"" 11999977 11999988 11999999 June Sept. Dec. Mar. 1 Total 276,550 250,418 267,082 268,905 263,383 281,526 318,275 By borrower 2 Maturity of one year or less 205,781 186,526 187,894 181,815 174,650 188,731 201,518 3 Foreign public borrowers 12,081 13,671 22,811 24,849 23,646 21,399 23,742 4 All other foreigners 193,700 172,855 165,083 156,966 151,004 167,332 177,776 5 Maturity of more than one year 70,769 63,892 79,188 87,090 88,733 92,795 116,757 6 Foreign public borrowers 8,499 9,839 12,013 15,900 16,238 16,258 24,949 7 All other foreigners 62,270 54,053 67,175 71,190 72,495 76,537 91,808 By area Maturity of one year or less 8 Europe 58.294 68,679 80,842 71,492 69,447 73,253 89,639 9 Canada 9,917 10,968 7,859 7,344 8,225 8,395 7,069 10 Latin America and Caribbean 97,207 81,766 69,498 66,096 65,881 77,304 109,590 11 Asia 33,964 18,007 21,802 29,092 23,791 22.751 20,737 12 Africa 2,211 1,835 1,122 1,520 1,594 1,168 970 13 All other1 4,188 5,271 6,771 6,271 5,712 5,860 10,680 Maturity of more than one year 14 Europe 13,240 14,923 22,951 25,417 27,589 33,483 42,341 15 Canada 2,525 3,140 3,192 3,323 3,261 3,312 3,249 16 Latin America and Caribbean 42,049 33,442 39,051 42,291 41,168 41,870 50,222 17 Asia 10,235 10,018 11,257 12,550 13,132 10,154 17,176 18 Africa 1,236 1,232 1,065 924 895 891 763 19 All other3 1,484 1,137 1,672 2,585 2,688 3,085 3,006 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. Banks' Billions of dollars, end of period 1999 2000 2001 Area or country 11999977 1998 Mar. June Sept. Dec. Mar. June Sept. Dec. Mar. 1 Total 721.8 1051.6 993.4 941.2 941.6 945.5 955.7 991.7 955.5 1030.9 1145.4 2 G-10 countries and Switzerland 242.8 217.7 220.4 234.7 219.4 243.4 272.7 313.8 280.9 304.1 337.0' 3 Belgium and Luxembourg 11.0 10.7 15.6 16.2 15.7 14.3 14.2 13.9 13.0 14.2 15.3 4 France 15.4 18.4 21.6 20.7 20.0 29.0 27.3 32.6 29.1 29.6 30.0 5 Germany 28.6 30.9 34.7 32.1 37.4 38.7 37.3 31.5 37.7 45.1 45.2 6 Italy 15.5 11.5 17.8 16.4 15.0 18.1 20.0 20.5 18.6 21.3 20.4' 7 Netherlands 6.2 7.8 10.7 13.3 11.7 12.3 17.1 16.1 17.6 18.4 18.8 8 Sweden 3.3 2.3 4.0 2.6 3.6 3.0 3.9 3.5 4.3 3.6 4.7 9 Switzerland 7.2 8.5 7.8 8.3 8.8 10.3 10.1 13.8 10.9 13.2 13.9 10 United Kingdom 113.4 85.4 67.7 85.5 63.5 79.3 101.9 138.2 112.9 118.9 145.3 11 Canada 13.7 16.8 15.9 17.1 17.9 16.3 17.5 18.3 18.7 16.7 15.4 12 Japan 28.6 25.4 24.6 22.6 25.7 22.1 23.5 25.4 18.1 23.0 28.0 13 Other industrialized countries 65.5 69.0 80.1 79.7 71.7 68.4 62.8 75.2 73.8 74.5 15.1' 14 Austria 1.5 1.4 2.8 2.8 3.0 3.5 2.6 2.8 3.5 4.1 3.8 15 Denmark 2.4 2.2 3.4 2.9 2.1 2.6 1.5 1.2 1.8 1.9 3.1 16 Finland 1.3 1.4 1.5 .9 .9 .9 .8 1.2 2.8 1.5 1.4 17 Greece 5.1 5.9 6.5 5.9 6.6 6.0 5.7 6.8 6.4 8.3 4.1 18 Norway 3.6 3.2 3.1 3.0 3.8 3.3 3.0 4.6 8.5 8.3 10.2 19 Portugal .9 1.4 1.4 1.2 1.2 1.0 1.0 2,0 1.5 2.0 1.9 20 Spain 12.6 13.7 15.7 16.6 15.1 12.1 11.3 12.2 10.5 10.3 12.6 21 Turkey 4.5 4.8 5.2 4.9 4.7 4.8 5.1 5.6 5.6 5.9 5.2 22 Other Western Europe 8.3 10.4 10.2 10.3 9.2 6.8 8.4 8.0 8.4 6.5 7.3r 23 South Africa 2.2 4.4 4.8 4.7 4.0 3.8 4.9 4.6 4.2 3.6 4.1 24 Australia 23.1 20.3 25.4 26.6 21.1 23.5 18.6 26.3 20.5 22.1 21.9 25 OPEC2 26.0 27.1 26.2 26.2 30.1 31.4 28.9 32.3 31.8 28.9 28.2 26 Ecuador 1.3 1.3 1.2 1.1 .9 .8 .7 .7 .6 .6 .6 27 Venezuela 2.5 3.2 3.5 3.2 3.0 2.8 3.0 2.9 2.9 2.5 2.7 28 Indonesia 6.7 4.7 4.5 5.0 4.4 4.2 3.9 4.1 4.4 4.6 4.4 29 Middle East countries 14.4 17.0 16.7 16.5 21.4 23.1 21.1 24.0 22.7 20.3 20.1 30 African countries 1.2 1.0 .4 .5 .5 .5 .2 .7 1.2 .8 .5 31 Non-OPEC developing countries 139.2 143.4 146.4 148.6 144.6 149.4 154.9 158.3 149.6 145.7 144.5 Latin America 32 Argentina 18.4 23.1 24.4 22.8 22.8 23.2 22.4 21.6 21.4 21.4 20.8 33 Brazil 28.6 24.7 24.2 25.2 23.5 27.7 28.1 28.3 28.6 28.8 29.4 34 Chile 8.7 8.3 8.6 8.2 7.7 7.4 8.2 8.1 7.3 7.6 7.3 35 Colombia 3.4 3.2 3.3 3.1 2.7 2.5 2.5 2.4 2.4 2.4 2.4 36 Mexico 17.4 18.9 19.7 18.5 19.4 18.7 18.3 20.4 17.5 15.7 16.7 37 Peru 2.0 2.2 2.2 2.1 1.8 1.7 1.9 2.1 2.1 2.0 2.0 38 Other 4.1 5.4 5.3 5.5 5.5 5.9 6.6 6.9 6.4 6.5 8.7 Asia China 39 Mainland 3.2 3.0 5.0 5.3 3.3 3.6 4.6 3.8 3.4 2.9 3.4 40 Taiwan 9.5 13.3 11.8 12.6 12.3 12.0 12.6 12.6 12.8 10.8 11.1 41 India 4.9 5.5 5.5 6.7 7.0 7.7 7.9 8.2 5.8 9.1 6.5 42 Israel .7 1.1 1.1 2.0 1.0 1.8 3.3 1.5 1.1 2.7 2.2 43 Korea (South) 15.6 13.7 13.7 15.3 16.0 15.2 17.3 21.1 20.8 15.0 19.3 44 Malaysia 5.1 5.6 5.9 6.0 6.1 6.1 6.5 6.8 6.9 7.1 6.5 45 Philippines 5.7 5.1 5.4 5.7 5.8 6.2 5.3 5.3 4.7 5.1 5.2 46 Thailand 5.4 4.7 4.5 4.2 4.0 4.1 4.3 4.0 3.9 4.0 4.2 47 Other Asia 4.3 2.9 3.0 2.8 2.9 2.9 2.6 2.5 2.3 2.4 2.2 Africa 48 Egypt .9 1.3 1.4 1.4 1.3 1.4 1.4 1.3 1.1 1.1 1.2 49 Morocco .6 .5 .5 .5 .5 .4 .3 .3 .4 .3 .3 50 Zaire .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 51 Other Africa3 .8 1.0 .9 1.0 1.0 1.0 .9 .9 .8 .7 .7 52 Eastern Europe 9.1 5.5 6.8 5.7 5.4 5.2 6.3 9.4 9.0 10.1 9.5 53 Russia4 5.1 2.2 2.0 2.1 2.0 1.6 1.7 1.5 1.4 1.0 1.5 54 Other 4.0 3.3 4.8 3.7 3.4 3.6 4.7 7.9 7.6 9.1 8.0 55 Offshore banking centers 155.1 134.4 114.4 107.5 122.5 114.5 53.9 55.5 53.4 61.8 57.9 56 Bahamas 24.2 35.4 22.0 10.4 18.2 13.7 14.4 8.8 9.3 13.5 7.0 57 Bermuda 9.8 4.6 3.9 5.7 8.2 8.0 7.3 6.3 6.3 9.0 7.9 58 Cayman Islands and other British West Indies 43.4 12.8 13.9 7.2 6.3 1.3 .0 5.1 5.9 14.6 14.3 59 Netherlands Antilles 14.6 2.6 2.7 1.3 9.1 1.7 2.5 2.6 1.9 1.9 2.9 60 Panama5 3.1 3.9 3.9 3.9 3.9 3.9 3.4 3.3 2.5 3.2 3.8 61 Lebanon 62 Hong Kong. China 32^2 23.3 22^8 22.0 224 21.0 22.2 20.1 20^6 18J 2L7 63 Singapore 12.7 11.1 13.5 15.2 10.6 10.1 4.1 13.6 12.6 15.2 14.5 64 Other6 .1 .2 .2 .1 .2 .1 .1 .1 .1 .2 .1 65 Miscellaneous and unallocated7 99.1 495.1 430.4 380.2 391.2 387.9 376.1 342.1 351.1 391.2 472.7 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 • October 2001 3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States Millions of dollars, end of period 1999 2000 2001 TTyyppee ooff lliiaabbiilliittyy,, aanndd aarreeaa oorr ccoouunnttrryy 11999977 11999988 11999999 Dec. Mar. June Sept. Dec. Mar. 1 Total 57,382 46,570 53,044 53,044 53,489 70,534 76,644 73,904 74,484 2 Payable in dollars 41,543 36,668 37,605 37,605 35,614 47,864 51,451 48,931 46,870 3 Payable in foreign currencies 15,839 9,902 15,415 15,415 17,875 22,670 25,193 24,973 27,614 By type 4 Financial liabilities 26,877 19,255 27,980 27,980 29,180 44,068 49,895 47.419 48,461 .5 Payable in dollars 12,630 10,371 13,883 13,883 12,858 22,803 26,159 25,246 23,369 6 Payable in foreign currencies 14,247 8,884 14,097 14,097 16,322 21,265 23,736 22,173 25,092 1 Commercial liabilities 30,505 27,315 25,064 25,064 24,309 26.466 26,749 26,485 26,023 8 Trade payables 10,904 10,978 12,857 12,857 12,401 13,764 13,918 14,293 12,657 y Advance receipts and other liabilities 19,601 16,337 12,207 12,207 11,908 12,702 12,831 12,192 13,366 10 Payable in dollars 28,913 26,297 23,722 23,722 22,756 25,061 25,292 23,685 23,501 n Payable in foreign currencies 1,592 1,018 1,318 1,318 1,553 1,405 1,457 2,800 2,522 By area or country Financial liabilities 12 Europe 18,027 12,589 23.241 23,241 24,050 30,332 36,175 34,172 37,990 13 Belgium and Luxembourg 186 79 31 31 4 163 169 147 112 14 France 1,425 1,097 1,659 1,659 1,849 1,702 1,299 1,480 1,557 LS Germany 1,958 2,063 1,974 1,974 1,880 1,671 2,132 2,168 2,745 16 Netherlands 494 1,406 1.996 1,996 1,970 2,035 2,040 2,016 2,169 17 Switzerland 561 155 147 147 97 137 178 104 116 18 United Kingdom 11,667 5,980 16.521 16,521 16,579 21,463 28,601 26,362 29,241 19 Canada 2,374 693 284 284 313 714 249 411 719 20 Latin America and Caribbean 1,386 1,495 892 892 846 2,874 3,447 4,125 3,651 21 Bahamas 141 7 1 1 1 78 105 6 18 22 Bermuda 229 101 5 5 1 1,016 1,182 1,739 1,837 23 Brazil 143 152 126 126 128 146 132 148 26 24 British West Indies 604 957 492 492 489 463 501 406 410 25 Mexico 26 59 25 25 22 26 35 26 32 26 Venezuela 1 2 0 0 0 0 0 2 1 27 Asia 4,387 3,785 3,437 3,437 3,275 9,453 9.320 7,965 5,389 28 Japan 4,102 3,612 3,142 3,142 2,985 6,024 4.782 6,216 4,779 29 Middle Eastern oil-exporting countries' 27 0 4 4 4 5 7 11 15 30 Africa 60 28 28 28 28 33 48 52 38 31 Oil-exporting countries" 0 0 0 0 0 0 0 0 0 32 All other3 643 665 98 98 668 662 656 694 674 Commercial liabilities 33 Europe 10,228 10,030 9,262 9,262 8,646 9,293 9,411 9,629 8,950 34 Belgium and Luxembourg 666 278 140 140 78 178 201 293 251 35 France 764 920 672 672 539 711 716 979 689 36 Germany 1,274 1,392 1,131 1,131 914 948 1,023 1,047 982 37 Netherlands 439 429 507 507 648 562 424 300 373 38 Switzerland 375 499 626 626 536 565 647 502 656 39 United Kingdom 4,086 3,697 3,071 3,071 2,661 2,982 2,951 2,847 2,619 40 Canada 1,175 1,390 1.775 1,775 2,024 2,053 1,889 1,933 1,627 41 Latin America and Caribbean 2,176 1,618 2,310 2,310 2,286 2,607 2,443 2,381 2,166 42 Bahamas 16 14 22 22 9 10 15 31 5 43 Bermuda 203 198 152 152 287 300 377 281 280 44 Brazil 220 152 145 145 115 119 167 114 239 45 British West Indies 12 10 48 48 23 22 19 76 64 46 Mexico 565 347 887 887 805 1,073 1,079 841 792 47 Venezuela 261 202 305 305 193 239 124 284 243 48 Asia 14,966 12,342 9,886 9,886 9,681 10,965 11,133 10,983 11,558 49 Japan 4,500 3,827 2,609 2.609 2,274 2,200 1,998 2,757 2,432 50 Middle Eastern oil-exporting countries' 3,111 2,852 2,551 2,551 2,308 3,489 3,706 2,832 3,359 51 Africa 874 794 950 950 943 950 1.220 948 1,072 52 Oil-exporting countries2 408 393 499 499 536 575 663 483 566 53 Other3 1,086 1,141 881 881 729 598 653 614 650 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 2001 TTyyppee ooff ccllaaiimm,, aanndd aarreeaa oorr ccoouunnttrryy 11999977 11999988 11999999 Dec. Mar. June Sept. Dec. Mar. 1 Total 68,128 77,462 76,669 76,669 84,266 80,731 94,803 90,157 109,443 2 62,173 72,171 69,170 69,170 74,331 72,300 82,872 79.558 96,230 3 Payable in foreign currencies 5,955 5,291 7,472 7,472 9,935 8,431 11,931 10,599 13,213 By type 4 Financial claims 36,959 46,260 40,231 40.231 47,798 44,303 58,303 53,031 7744,,445588 5 22,909 30,199 18,566 18.566 23,316 17,462 30,928 23,374 29,119 6 Payable in dollars 21,060 28,549 16,373 16,373 21,442 15.361 27,974 21,015 26.944 7 Payable in foreign currencies 1,849 1,650 2,193 2,193 1,874 2,101 2,954 2,359 2,175 8 Other financial claims 14,050 16,061 21,665 21,665 24,482 26,841 27,375 29,657 45,339 9 Payable in dollars 11,806 14,049 18,593 18,593 19.659 22,384 20,541 25,142 37,480 10 Payable in foreign currencies 2,244 2,012 3,072 3,072 4,823 4,457 6,834 4,515 7,859 1 1 Commercial claims 31,169 31,202 36,438 36,438 36,468 36,428 36,500 37,126 34,985 P Trade receivables 27,536 27,202 32,629 32,629 31,443 31,283 31,530 33,104 30,493 13 Advance payments and other claims 3,633 4,000 3,809 3,809 5,025 5,145 4,970 4,022 4,492 14 Payable in dollars 29,307 29,573 34,204 34.204 33,230 34,555 34.357 33.401 31,806 15 Payable in foreign currencies 1,862 1,629 2,207 2,207 3,238 1,873 2,143 3.725 3.179 By area or country Financial claims 16 Europe 14,999 12,294 13,023 13,023 16.789 18,254 23,706 23,136 31,946 17 Belgium and Luxembourg 406 661 529 529 540 317 304 296 430 18 France 1,015 864 967 967 1,835 1,292 1.477 1,206 3.149 19 Germany 427 304 504 504 669 576 696 848 1,405 20 Netherlands 677 875 1,229 1,229 1,981 1,984 2,486 1,396 2,313 7] Switzerland 434 414 643 643 612 624 626 699 605 22 United Kingdom 10,337 7,766 7,561 7,561 9,044 11,668 16,191 15,900 21,070 23 Canada 3,313 2,503 2,553 2,553 3,175 5,799 7,517 4.576 4,854 ?4 Latin America and Caribbean 15,543 27,714 18,206 18,206 21.945 14,874 21,691 19.317 28,674 75 Bahamas 2,308 403 1,593 1,593 1.299 655 1,358 1,353 561 26 Bermuda 108 39 11 11 11 34 22 19 1,729 27 Brazil 1,313 835 1,476 1,476 1,646 1,666 1,568 1,827 1.564 28 British West Indies 10,462 24,388 12.099 12,099 15,814 7,751 15,722 12,596 16.366 79 Mexico 537 1,245 1.798 1,798 1,979 2,048 2,280 2.448 2.459 30 Venezuela 36 55 48 48 65 78 101 87 31 31 2,133 3,027 5,457 5,457 4,430 3,923 4,002 4,697 7,444 32 Japan 823 1,194 3,262 3,262 2,021 1,410 1,726 1,631 4,065 33 Middle Eastern oil-exporting countries' 11 9 23 23 29 42 85 80 70 34 Africa 319 159 286 286 232 320 284 411 423 35 Oil-exporting countries" 15 16 15 15 15 39 3 57 42 36 All other3 652 563 706 706 1,227 1,133 1,103 894 1,117 Commercial claims 37 Europe 12,120 13,246 16,389 16,389 16,118 15.935 16,486 15,938 14,534 38 Belgium and Luxembourg 328 238 316 316 271 425 393 452 395 39 France 1,796 2,171 2,236 2,236 2,520 2,693 2,921 3,095 3,480 40 Germany 1,614 1,822 1,960 1,960 2,034 1,905 2,159 1,982 1,763 41 Netherlands 597 467 1,429 1,429 1,337 1,242 1,310 1,729 757 42 Switzerland 554 483 610 610 611 562 684 763 666 43 United Kingdom 3,660 4,769 5,827 5,827 5,354 4,937 5,193 4,502 4.031 44 Canada 2,660 2,617 2,757 2.757 3,088 3,250 2,953 3.502 3,393 45 Latin America and Caribbean 5.750 6,296 5,959 5.959 5,899 5,792 5,788 5,851 5.306 46 Bahamas 27 24 20 20 15 48 75 37 20 47 Bermuda 244 536 390 390 404 381 387 376 418 48 Brazil 1,162 1,024 905 905 849 894 981 957 1,057 49 British West Indies 109 104 181 181 95 51 55 137 131 50 Mexico 1,392 1,545 1,678 1,678 1,529 1,565 1,612 1,507 1,418 51 Venezuela 576 401 439 439 435 466 379 328 292 57 8,713 7,192 9,165 9,165 9.101 9,172 8,986 9,630 9,544 53 Japan 1,976 1,681 2,074 2,074 2,082 1,881 2,074 2,796 2,575 54 Middle Eastern oil-exporting countries' 1,107 1,135 1,625 1,625 1,533 1,241 1,199 1,024 966 55 Africa 680 711 631 631 716 766 895 672 773 56 Oil-exporting countries" 119 165 171 171 82 160 392 180 165 57 Other3 1,246 1,140 1,537 1,537 1,546 1,513 1,392 1,572 1,435 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 • October 2001 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 2001 2000 2001 Transaction, and area or country 1999 2000 J J a u n n . e - Dec. Jan. Feb. Mar. Apr. May Junep U.S. corporate securities STOCKS 1 Foreign purchases 2,340,659 3,605,196 1,632,579 286,161 301,650 259,101 285,528 249,747 276,934 259,619 2 Foreign sales 2,233,137 3,430,306 1,556,524 275.034 277,706 249,423 277,473 243,122 259,604 249,196 3 Net purchases, or sales (-) 107,522 174,890 76,055 11,127 23,944 9,678 8,055 6,625 17,330 10,423 4 Foreign countries 107,578 174,903 75,906 11,145 23,906 9,707 7,929 6,647 17,315 10,402 5 Europe 98,060 164,656 56,820 10,779 12,329 13,713 7,983 3,694 9,805 9,296 6 France 3,813 5,727 6,639 40 243 1,869 1,041 105 338 3,043 / Germany 13,410 31,752 5,124 777 2,380 1,217 174 199 1,025 129 8 Netherlands 8,083 4,915 6,394 1,691 2,206 1,379 790 1,112 573 334 9 Switzerland 5,650 11,960 2,966 -684 70 775 1,237 139 448 297 10 United Kingdom 42,902 58,736 20,567 7,773 3,064 5,120 3,280 598 4,501 4,004 11 Channel Islands & Isle of Man1 0 0 -408 0 -13 -32 -110 -144 59 -168 12 Canada -335 5,956 6,744 1,468 1,490 468 2,464 1,567 628 127 13 Latin America and Caribbean 5,187 -17,812 -1,769 -2,759 5,445 -4,927 -3,516 -1,168 3,436 -1,039 14 Middle East2 -1,066 9,189 157 277 -554 264 442 -56 -173 234 15 Other Asia 4,445 12,494 14,825 1,451 5,565 355 684 2,966 3,532 1,723 (6 Japan 5,723 2,070 4,978 1,615 1,002 -672 512 2,048 1,088 1,000 17 Africa 372 415 -334 -45 -362 52 93 -44 9 -82 18 Other countries 915 5 -537 -26 -7 -218 -221 -312 78 143 19 Nonmonetary international and regional organizations -56 -11 149 -18 38 -29 126 -22 15 21 BONDS3 20 Foreign purchases 854,692 1,208,386 930,137 119,125 138,294 147,852 170,098 148,930 167,363 157,600 21 Foreign sales 602,100 871,416 708,981 90,143 111,327 108,792 124,000 111,505 129,146 124,211 22 Net purchases, or sales (-) 252,592 336,970 221,156 28,982 26,967 39,060 46,098 37,425 38,217 33,389 23 Foreign countries 252,994 337,074 220,938 28,980 27,065 39,019 45,880 37,399 38,205 33,370 24 Europe 140,674 180,917 123,230 17,631 17,397 22,064 26,420 18,169 23,951 15,229 25 France 1,870 2,216 4,281 138 405 660 1,262 519 817 618 26 Germany 7,723 4,067 7,966 -78 2,450 1,352 911 1,639 1,500 114 27 Netherlands 2,446 1,130 2,296 275 664 496 92 -41 509 576 28 Switzerland 4,553 3,973 4,069 -89 321 782 1,564 709 399 294 29 United Kingdom 106,344 141,223 94,356 13,896 11,251 17,893 20,347 12,477 19,324 13,064 30 Channel Islands and Isle of Man' 0 0 756 0 107 118 101 318 -218 330 31 Canada 6,043 13,287 3,936 414 376 1,031 309 1,158 240 822 32 Latin America and Caribbean 58,783 59,444 44,155 4,126 4,969 8,009 6,564 7,546 9,167 7,900 33 Middle East' 1,979 2,076 1,503 1,077 726 443 624 129 -395 -24 34 Other Asia 42,817 78,794 47.669 5,685 3,514 7,162 11,683 10,329 5,412 9,569 35 Japan 17,541 39,356 12.368 3,082 910 914 5,570 344 -480 5,110 36 Africa 1,411 938 254 76 29 46 38 -33 14 160 37 Other countries 1,287 1,618 191 -29 54 264 242 101 -184 -286 38 Nonmonetary international and regional organizations -402 -70 219 2 -97 41 218 26 12 19 Foreign securities 39 Stocks, net purchases, or sales (-) 15,640 -13,088 -37,029 -4,008 -3,664 -3,130 -14,940 -4,103r -8,098 -3,094 40 Foreign purchases 1,177,303 1,802,185 793,350 135,417 148,111 130,974 134,166 120,099 136,046 123,954 41 Foreign sales 1,161,663 1,815,273 830,379 139,425 151,775 134,104 149,106 124,202r 144.144 127,048 42 Bonds, net purchases, or sales (-) -5,676 -4,054 7,898 -1,191 -1,448 1,994 -1,450 5,487 2,267 1,048 43 Foreign purchases 798,267 958,932 639,464 83,713 120,622 104,237 117,444 93,828 101.383 101,950 44 Foreign sales 803,943 962,986 631,566 84,904 122,070 102,243 118,894 88,341 99.116 100,902 45 Net purchases, or sales (—), of stocks and bonds .... 9,964 -17,142 -29,131 -5,199 -5,112 -1,136 -16,390 l,384r -5,831 -2,046 46 Foreign countries 9,679 -17,278 -28,705 -4,780 -4,822 -1,175 -16,085 l,396r -5,976 -2,043 47 Europe 59,247 -25,386 -18,582 -4,891 -5,421 -1,737 -13,650 3,637 -4.803 3,392 48 Canada -999 -3,888 3,128 -1,363 766 1,588 844 -1.406 931 405 49 Latin America and Caribbean —4,726 -15,688 1,471 -241 775 808 17 l,288r 3,047 -4,464 50 Asia -42,961 24,488 -12,408 1,529 -1,184 -1,439 -3,384 -1,537 -4,379 -485 51 Japan -43,637 20,970 -13,083 1.628 57 -2,206 -4,026 -3,194 -3,670 -44 52 Africa 710 943 -144 -5 -70 -15 24 96 -132 -47 53 Other countries -1,592 2,253 -2,170 191 312 -380 64 -682 -640 -844 54 Nonmonetary international and regional organizations 285 150 -425 -419 -289 39 -305 -12 145 -3 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 US. 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 Transactions' Millions of dollars; net purchases, or sales ( —) during period 2001 2000 2001 AArreeaa oorr ccoouunnttrryy 11999999 22000000 Jan.— Dec. Jan. Feb. Mar. Apr. May June'1 June 1 Total estimated -9,953 -54,032 -11,159 -9,789 -9,064 7,011 4,975 -13,711 3,076 -3,446 2 Foreign countries -10.518 -53,571 -10.506 -9.904 -8,531 6.972 4.977 - 13,517 2.831 -3.238 3 Europe -38.228 -50,704 -8,594 -6,850 -5.000 -337 5.363 -5.599 -498 - 2.523 4 Belgium" -81 73 -518 -96 164 -529 -152 240 -216 -25 5 Germany 2,285 -7,304 -1.389 -1.065 -873 -3.180 1.236 1.769 1.176 -1.517 6 Luxembourg" n.a. n.a. 460 n.a. 411 9 -401 204 92 145 7 Netherlands 2,122 2,140 -4,790 -1,622 -793 2.808 -3,704 -2,488 - 1.730 I.I 17 8 Sweden 1,699 1,082 -2,668 328 218 - 1,039 -993 195 -386 -663 9 Switzerland -1,761 -10,326 -3 64 755 161 -120 1 16 -912 -3 10 United Kingdom -20,232 -33,669 1.283 -4,199 -2,695 937 9.838 -4,736 1,120 -3.181 1 1 Channel Islands and Isle of Man' n.a. n.a. 38 n.a. -98 -68 222 -31 -9 22 17 Other Europe and former U.S.S.R -22.260 -2.700 -1,007 -260 -2,089 564 -563 -868 367 1.582 13 Canada 7,348 -550 -636 -1,492 -2,067 -554 -169 1,248 745 161 14 Latin America and Caribbean -7,523 -4,914 -3,913 -245 2,407 3.620 827 -7,095 140 -3,812 IS Venezuela 362 1,288 154 300 227 292 -142 -148 51 -126 16 Other Latin America and Caribbean 1,661 -11,581 8,363 -1,746 3,261 4,279 3,009 -3.228 1.587 - 545 17 Netherlands Antilles -9,546 5.379 -12.430 1,201 -1,081 -951 -2,040 -3.719 - 1.498 -3.141 18 Asia 29,359 1,639 2,945 -458 -4,641 4,387 -41 -2,928 2.704 3.464 19 Japan 20,102 10,580 -382 -3.855 -4,261 1.468 - 1,426 3.099 4.658 -3.920 20 Africa -3.021 -414 -106 -44 -91 36 -60 27 -6 - 12 21 Other 1,547 1.372 -202 -815 861 -180 -943 830 -254 -516 22 Nonmonetary international and regional organizations 565 -461 -653 1 15 -533 39 -2 -194 245 -208 23 International 190 -483 -352 24 -275 - 194 -11 -213 393 -52 24 Latin American Caribbean regional 666 76 26 6 1 -4 10 25 -4 -- MEMO 25 Foreign countries -10.518 -53.571 -10,506 -9.904 -8,531 6.972 4,977 -13.517 2.831 -3.238 76 Official institutions -9,861 -6,302 -8,228 1,068 2,226 667 249 -9.040 913 -3.243 27 Other foreign -657 -47,269 -2,278 -10,972 -10,757 6,305 4.728 -4.477 1,918 Oil-exporting countries 7.8 Middle East4 2.207 3.483 -2,322 48 -176 -719 - 1.240 -383 -120 316 29 0 0 0 0 -6 0 2 0 1 -1 1. Official and private transactions in marketable US. 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 • October 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 2001 11999988 22000000 Mar. Apr. May June July Aug. Exchange rates COUNTRY/CURRENCY UNIT 1 Australia/dollar2 62.91 64.54 58.15 50.31 50.16 51.99 51.80 50.89 52.46 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 2.0955 2.1934 2.2926 2.3788 2.4731 2.5122 5 Canada/dollar 1.4836 1.4858 1.4855 1.5587 1.5578 1.5411 1.5245 1.5308 1.5399 6 China, P.R./yuan 8.3008 8.2783 8.2784 8.2775 8.2771 8.2770 8.2770 8.2769 8.2770 7 Denmark/krone 6.7030 6.9900 8.0953 8.2229 8.3657 8.5256 8.7397 8.6442 8.2632 8 European Monetary Union/euro3 n.a. 1.0653 0.9232 0.9083 0.8925 0.8753 0.8530 0.8615 0.9014 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 n.a. n.a. n.a. n.a. n.a. n.a. 13 Hong Kong/dollar 7.7467 7.7594 7.7924 7.7999 7.7993 7.7999 7.7997 7.7999 7.7997 14 India/rupee 41.36 43.13 45.00 46.65 46.79 46.95 47.04 47.18 47.17 15 Ireland/pound" 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 130.99 113.73 107.80 121.51 123.77 121.77 122.35 124.50 121.37 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 9.599 9.328 9.148 9.088 9.168 9.133 20 Netherlands/guilder 1.9837 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 21 New Zealand/dollar" 53.61 52.94 45.68 41.82 40.69 42.18 41.41 40.81 43.14 22 Norway/krone 7.5521 7.8071 8.8131 8.9859 9.0920 9.1380 9.3014 9.2566 8.9427 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 1.7732 1.8118 1.8141 1.8170 1.8233 1.7613 25 South Africa/rand 5.5417 6.1191 6.9468 7.8980 8.0783 7.9789 8.0595 8.2094 8.3115 26 South Korea/won 1,400.40 1,189.84 1,130.90 1,291.41 1,327.76 1,298.90 1,295.05 1,305.24 1,285.65 27 Spain/peseta 149.41 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 28 Sri Lanka/rupee 65.006 70.868 76.964 85.730 88.205 90.848 90.371 90.314 89.994 29 Sweden/krona 7.9522 8.2740 9.1735 10.0516 10.2035 10.3513 10.7930 10.7603 10.3329 30 Switzerland/franc 1.4506 1.5045 1.6904 1.6908 1.7131 1.7528 1.7856 1.7570 1.6808 31 Taiwan/dollar 33.547 32.322 31.260 32.622 32.941 33.203 34.328 34.821 34.639 3? Thailand/baht 41.262 37.887 40.210 43.988 45.494 45.525 45.263 45.641 44.907 33 United Kingdom/pound" 165.73 161.72 151.56 144.45 143.48 142.65 140.20 141.48 143.72 34 Venezuela/bolivar 548.39 606.82 680.52 706.06 710.39 714.86 717.27 722.72 731.97 Indexes4 NOMINAL 35 Broad (January 1997= 100)5 116.48 116.87 119.93 125.91 126.97 126.77 127.58 128.07 125.97 36 Major currencies (March 1973 = 100)6 95.79 94.07 98.34 103.98 105.09 105.03 105.91 106.07 103.77 37 Other important trading partners (January 1997 100." 126.03 129.94 130.26 135.56 136.30 135.92 136.43 137.37 136.03 REAL 38 Broad (March 1973= 100)5 99.43r 98.75r 102.42"" 108.06r 108.94r 108.92r 109.82r 110.06" 108.01 39 Major currencies (March 1973= 100)6 97.24 96.67 102.86 109.93 111.01 110.82 111,99r 112.14r 109.56 40 Other important trading partners (March 1973 = 100)7 110088..992211"" 108.04r 108.49r 112.60r 113.29" 113.46r 114.08' 114.44" 112.97 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 June 2001 A72 SPECIAL TABLES—Data Published Irregularly, with Latest Bulletin Reference Title and Date Issue Page Assets and liabilities of commercial banks June 30, 2000 November 2000 A64 September 30, 2000 February 2001 A64 December 31, 2000 May 2001 A64 March 31,2001 August 2001 A64 Terms of lending at commercial banks August 2000 November 2000 A66 November 2000 February 2001 A66 February 2001 May 2001 A66 May 2001 August 2001 A66 Assets and liabilities of U.S. branches and agencies of foreign banks June 30, 2000 November 2000 A72 September 30, 2000 February 2001 A72 December 31, 2000 May 2001 A72 March 31,2001 August 2001 A72 Pro forma balance sheet and income statements for priced service operations September 30, 2000 February 2001 A76 March 31,2001 August 2001 A76 June 30, 2001 October 2001 A64 Residential lending reported under the Home Mortgage Disclosure Act 1999 September 2000 A64 2000 September 2001 A64 Disposition of applications for private mortgage insurance 1999 September 2000 A73 2000 September 2001 A73 Small loans to businesses and farms 1999 September 2000 A76 2000 September 2001 A76 Community development lending reported under the Community Reinvestment Act 1999 ' September 2000 A79 2000 September 2001 A79 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 Special Tables • October 2001 4.31 PRO FORMA FINANCIAL STATEMENTS FOR FEDERAL RESERVE PRICED SERVICES A. Pro forma balance sheet Millions of dollars Item June 30, 2001 June 30. 2000 Short-term assets (Note 1) Imputed reserve requirement on clearing balances 694.7 610.7 Investment in marketable securities 6,252.3 5.496.2 Receivables 76.9 76.4 Materials and supplies 3.1 3.3 Prepaid expenses 33.0 28.5 Items in process of collection 3,356.1 3.234.3 Total short-term assets 10,416.0 9,449.4 Long-term assets (Note 2) Premises 472.2 450.6 Furniture and equipment 169.0 165.0 Leases and leasehold improvements 75.9 48.9 Prepaid pension costs 710.2 600.5 Total long-term assets 1,427.3 1,265.0 Total assets 11,843.3 10,714.4 Short-term liabilities Clearing balances and balances arising from early credit of uncollected items 6.567.5 5,893.3 Deferred-availability items 3.735.6 3,448.0 Short-term debt and payables 112.9 108.2 Total short-term liabilities 10,416.0 9,449.4 Long-term liabilities Long-term debt 492.8 405.4 Postretirement/postemployment benefits obligation 251.3 236.0 Total long-term liabilities 744.1 641.4 Total liabilities 11,160.1 10,090.8 Equity 683.3 623.6 Total liabilities and equity (Note 3) 11,843.3 10,714.4 NOTE. Components may not sum to totals because of rounding. The priced services (2) LONG-TERM ASSETS financial statements consist of these tables and the accompanying notes. Consists of long-term assets used solely in priced services, the priced-services portion of (1) SHORT-TERM ASSETS long-term assets shared with non-priced services, and an estimate of the assets of the Board of Governors used in the development of priced services. Effective Jan. 1, 1987, the Reserve The imputed reserve requirement on clearing balances held at Reserve Banks by depository Banks implemented the Financial Accounting Standards Board's Statement of Financial institutions reflects a treatment comparable to that of compensating balances held at corre- Accounting Standards No. 87, Employers' Accounting for Pensions (SFAS 87). Accordingly, spondent banks by respondent institutions. The reserve requirement imposed on respondent the Federal Reserve Banks recognized credits to expenses of $50.4 million in the second balances must be held as vault cash or as nonearning balances maintained at a Reserve Bank; quarter of 2001, $25.2 million in the first quarter of 2001, $57.7 million in the second quarter thus, a portion of priced services clearing balances held with the Federal Reserve is shown as of 2000, $28.9 million in the first quarter of 2000, and corresponding increases in this asset required reserves on the asset side of the balance sheet. The remainder of clearing balances is account. assumed to be invested in three-month Treasury bills, shown as investment in marketable securities. Receivables are (1) amounts due the Reserve Banks for priced services and (2) the share of (3) LIABILITIES AND EQUITY suspense-account and difference-account balances related to priced services. Under the matched-book capital structure for assets that are not "self-financing," short-term Materials and supplies are the inventory value of short-term assets. assets are financed with short-term debt and payables. Long-term assets are financed with Prepaid expenses include salary advances and travel advances for priced-service personnel. long-term debt and equity in a proportion equal to the ratio of long-term debt to equity for the Items in process of collection is gross Federal Reserve cash items in process of collection fifty largest bank holding companies, which are used in the model for the private-sector (CIPC) stated on a basis comparable to that of a commercial bank. It reflects adjustments for adjustment factor (PSAF). The PSAF consists of the taxes that would have been paid and the intra-System items that would otherwise be double-counted on a consolidated Federal return on capital that would have been provided had priced services been furnished by a Reserve balance sheet; adjustments for items associated with non-priced items, such as those private-sector firm. Other short-term liabilities include clearing balances maintained at collected for government agencies; and adjustments for items associated with providing fixed Reserve Banks and deposit balances arising from float. Other long-term liabilities consist of availability or credit before items are received and processed. Among the costs to be obligations on capital leases. recovered under the Monetary Control Act is the cost of float, or net CIPC, during the period (the difference between gross CIPC and deferred-availability items, which is the portion of gross CIPC that involves a financing cost), valued at the federal funds rate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A65 4.31 PRO FORMA FINANCIAL STATEMENTS FOR FEDERAL RESERVE PRICED SERVICES—Continued B. Pro forma income statement Millions of dollars Item Quarter ending June 30, 2001 Quarter ending June 30, 2000 Revenue from services provided to depository institutions (Note 4) 232.6 221.9 Operating expenses (Note 5) 200.8 173.6 Income from operations 31.8 48.3 Inputed costs (Note 6) Interest on float (3.7) .4 Interest on debt 8.0 7.9 Sales taxes 2.5 1.9 FDIC insurance 0.0 6.8 0.0 10.2 Income from operations after imputed costs 25.0 38.1 Other income and expenses (Note 7) Investment income on clearing balances 64.2 98.9 Earnings credits (65.2) (1.0) 93.4 5.5 Income before income taxes 24.0 43.6 Inputed income taxes (Note 8) 7.6 13.7 Net income 16.3 29.9 MEMO Targeted return on equity (Note 9) 27.3 24.6 Six months ending June 30, 2001 Six months ending June 30, 2000 Revenue from services provided to depository institutions (Note 4) 463.4 433.4 Operating expenses (Note 5) 398.7 346.4 Income from operations 64.7 87.0 Imputed costs (Note 6) Interest on float (0.5) 3.2 Interest on debt 16.0 15.8 Sales taxes 5.3 4.2 FDIC insurance 0.0 20.8 0.0 23.2 Income from operations after imputed costs 43.9 63.8 Other income and expenses (Note 7) Investment income on clearing balances 145.1 203.7 Earnings credits (144.0) 1.1 (181.8) 22.0 Income before income taxes 45.1 85.7 Imputed income taxes (Note 8) 14.2 27.0 Net income 30.9 58.7 MEMO Targeted return on equity (Note 9) 54.6 49.2 NOTE. Components may not sum to totals because of rounding. The priced services Unrecovered float includes float generated by services to government agencies and by other financial statements consist of these tables and the accompanying notes. central bank services. Float recovered through income on clearing balances is the result of the increase in investable clearing balances; the increase is produced by a deduction for float for cash items in process of collection, which reduces imputed reserve requirements. The income (4) REVENUE on clearing balances reduces the float to be recovered through other means. As-of adjustments Revenue represents charges to depository institutions for priced services and is realized from are memorandum adjustments to an institution's reserve or clearing position to recover float each institution through one of two methods: direct charges to an institution's account or incurred by the institution. Direct charges are billed to the institution for float incurred when charges against its accumulated earnings credits. an institution chooses to close on a normal business day and for float incurred on interterritory check transportation. Float recovered through direct charges is valued at cost using the federal funds rate and charged directly to an institution's account. Float recovered through per-item (5) OPERATING EXPENSES fees is valued at the federal funds rate and has been added to the cost base subject to recovery Operating expenses consist of the direct, indirect, and other general administrative expenses in the second quarters of 2001 and 2000. of the Reserve Banks for priced services plus the expenses for staff members of the Board of Governors working directly on the development of priced services. The expenses for Board (7) OTHER INCOME AND EXPENSES staff members were $2.5 million in the first and second quarters of 2001 and $2.1 million in the first and second quarters of 2000. The credit to expenses under SFAS 87 (see note 2) is Consists of imputed investment income on clearing balances and the actual cost of earnings reflected in operating expenses. credits. Investment income on clearing balances represents the average coupon-equivalent yield on three-month Treasury bills applied to the total clearing balance maintained, adjusted for the effect of reserve requirements on clearing balances. Expenses for earnings credits (6) IMPUTED COSTS granted to depository institutions on their clearing balances are derived by applying the Imputed costs consist of interest on float, interest on debt, sales taxes, and the FDIC average federal funds rate to the required portion of the clearing balances, adjusted for the net assessment. Interest on float is derived from the value of float to be recovered, either effect of reserve requirements on clearing balances. explicitly or through per-item fees, during the period. Float costs include costs for checks, book-entry securities, noncash collection, ACH, and funds transfers. (8) INCOME TAXES Interest is imputed on the debt assumed necessary to finance priced-service assets. The sales taxes and FDIC assessment that the Federal Reserve would have paid had it been a Imputed income taxes are calculated at the effective tax rate derived from the PSAF model private-sector firm are among the components of the PSAF (see note 3). (see note 3). Float costs are based on the actual float incurred for each priced service, multiplied by the appropriate federal funds rate. Other imputed costs are allocated among priced services (9) RETURN ON EQUITY according to the ratio of operating expenses less shipping expenses for each service to the total expenses for all services less the total shipping expenses for all services. Represents the after-tax rate of return on equity that the Federal Reserve would have earned The following list shows the daily average recovery of float (before converting to float had it been a private business firm, as derived from the PSAF model (see note 3). costs) by the Reserve Banks for the second quarter of 2001 and 2000 in millions of dollars: 2001 2000 Total float 257.2 466.4 Unrecovered float 152.7 Float subject to recovery 104.5 458.4 Sources of float recovery: Income on clearing balances 10.7 46.4 As-of adjustments 438.4 438.8 Direct charges 353.5 279.9 Per-item fees (698.1) (306.8; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

154 Federal Reserve Bulletin • October 2001 Index to Statistical Tables References are to pages A3-A65, although the prefix 'A" is omitted in this index. ACCEPTANCES, bankers (See Bankers acceptances) Federal finance Assets and liabilities (See also Foreigners) Debt subject to statutory limitation, and types and ownership Commercial banks, 15-21 of gross debt, 27 Domestic finance companies, 32, 33 Receipts and outlays, 25, 26 Federal Reserve Banks, 10 Treasury financing of surplus, or deficit, 25 Foreign-related institutions, 20 Treasury operating balance, 25 Automobiles Federal Financing Bank, 30 Consumer credit, 36 Federal funds, 23, 25 Production, 44, 45 Federal Home Loan Banks, 30 Federal Home Loan Mortgage Corporation, 30, 34, 35 Federal Housing Administration, 30, 34, 35 BANKERS acceptances, 5, 10, 22, 23 Federal Land Banks, 35 Bankers balances, 15-21 (See also Foreigners) Federal National Mortgage Association, 30, 34, 35 Bonds (See also U.S. government securities) Federal Reserve Banks New issues, 31 Balance sheet for priced services, 64, 65 Rates, 23 Condition statement for priced services, 64, 65 Business activity, nonfinancial, 42 Discount rates (See Interest rates) Business loans (See Commercial and industrial loans) U.S. government securities held, 5, 10, 11, 27 Federal Reserve credit, 5, 6, 10, 12 CAPACITY utilization, 43 Federal Reserve notes, 10 Capital accounts Federal Reserve System Commercial banks, 15-21 Balanced sheet for priced services, 64, 65 Federal Reserve Banks, 10 Condition statement for priced services, 64, 65 Certificates of deposit, 23 Federally sponsored credit agencies, 30 Commercial and industrial loans Finance companies Commercial banks, 15-21 Assets and liabilities, 32 Weekly reporting banks, 17, 18 Business credit, 33 Commercial banks Loans, 36 Assets and liabilities, 15-21 Paper, 22, 23 Commercial and industrial loans, 15-21 Float, 5 Consumer loans held, by type and terms, 36 Flow of funds, 37-41 Real estate mortgages held, by holder and property, 35 Foreign currency operations, 10 Time and savings deposits, 4 Foreign deposits in U.S. banks, 5 Commercial paper, 22, 23, 32 Foreign exchange rates, 62 Condition statements (See Assets and liabilities) Foreign-related institutions, 20 Construction, 42, 46 Foreign trade, 51 Consumer credit, 36 Foreigners Consumer prices, 42 Claims on, 52, 55-7, 59 Consumption expenditures, 48, 49 Liabilities to, 51-4, 58, 60, 61 Corporations Profits and their distribution, 32 GOLD Security issues, 31, 61 Certificate account, 10 Cost of living (See Consumer prices) Stock, 5, 51 Credit unions, 36 Government National Mortgage Association, 30, 34, 35 Currency in circulation, 5, 13 Gross domestic product, 48, 49 Customer credit, stock market, 24 HOUSING, new and existing units, 46 DEBT (See specific types of debt or securities) Demand deposits, 15-21 INCOME and expenses, Federal Reserve System, 64, 65 Depository institutions Income, personal and national, 42, 48, 49 Reserve requirements, 8 Industrial production, 42, 44 Reserves and related items, 4-6, 12 Insurance companies, 27, 35 Deposits (See also specific types) Interest rates Commercial banks, 4, 15-21 Bonds, 23 Federal Reserve Banks, 5, 10 Consumer credit, 36 Discount rates at Reserve Banks and at foreign central banks and Federal Reserve Banks, 7 foreign countries (See Interest rates) Money and capital markets, 23 Discounts and advances by Reserve Banks (See Loans) Mortgages, 34 Dividends, corporate, 32 Prime rate, 22 International capital transactions of United States, 50-61 International organizations, 52, 53, 55, 58, 59 EMPLOYMENT, 42 Inventories, 48 Euro, 62 Investment companies, issues and assets, 32 Investments (See also specific types) FARM mortgage loans, 35 Commercial banks, 4, 15-21 Federal agency obligations, 5, 9-11, 28, 29 Federal Reserve Banks, 10, 11 Federal credit agencies. 30 Financial institutions, 35 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A67 LABOR force, 42 SAVING Life insurance companies (See Insurance companies) Flow of funds, 35, 36 Loans (See also specific types) National income accounts, 48 Commercial banks, 15-21 Savings deposits (See Time and savings deposits) Federal Reserve Banks, 5-7, 10, 11 Savings institutions, 35, 36, 37-41 Federal Reserve System, 64, 65 Securities (See also specific types) Financial institutions, 35 Federal and federally sponsored credit agencies, 30 Insured or guaranteed by United States, 34, 35 Foreign transactions, 60 New issues, 31 MANUFACTURING Prices, 24 Capacity utilization, 43 Special drawing rights, 5, 10, 50, 51 Production, 43, 45 State and local governments Margin requirements, 24 Holdings of U.S. government securities, 27 Member banks, reserve requirements, 8 New security issues, 31 Mining production, 45 Rates on securities, 23 Mobile homes shipped, 46 Stock market, selected statistics, 24 Monetary and credit aggregates, 4, 12 Stocks (See also Securities) Money and capital market rates, 23 New issues, 31 Money stock measures and components, 4, 13 Prices, 24 Mortgages (See Real estate loans) Mutual funds, 13, 32 Student Loan Marketing Association, 30 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 Trade, foreign, 51 OPEN market transactions, 9 Treasury cash, Treasury currency, 5 Treasury deposits, 5, 10, 25 PERSONAL income, 49 Treasury operating balance, 25 Priced services, Federal Reserve income statements, 64, 65 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 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 Affairs, Department of, 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

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

A69 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 JEFFREY C. MARQUARDT, Associate Director 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 EDGAR A. MARTINDALE III, 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 DAVID L. WILLIAMS, Associate Director DONALD L. ROBINSON, Deputy Inspector General GEORGE M. LOPEZ, 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

158 Federal Reserve Bulletin • October 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 CHRISTINE M. CUMMING, Associate Economist NORMAND R.V. BERNARD, Deputy Secretary JEFFREY C. FUHRER, Associate Economist LYNN S. FOX, Assistant Secretary CRAIG S. HAKKIO, Associate Economist GARY P. GILLUM, Assistant Secretary DAVID H. HOWARD, Associate Economist J. VIRGIL MATTINGLY, JR., General Counsel WILLIAM C. HUNTER, Associate Economist THOMAS C. BAXTER, JR., Deputy General Counsel DAVID E. LINDSEY, Associate Economist KAREN H. JOHNSON, Economist ROBERT H. RASCHE, Associate Economist VINCENT R. REINHART, Economist LAWRENCE SLIFMAN, Associate Economist DAVID J. STOCKTON, Economist DAVID WILCOX, Associate Economist DINO KOS, 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 STEVEN L. SCHEID, Twelfth District JAMES ANNABLE. Co-Secretary WILLIAM J. KORSVIK, Co-Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A71 CONSUMER ADVISORY COUNCIL LAUREN ANDERSON, New Orleans, Louisiana, Chairman DOROTHY BROADMAN, San Francisco, California, Vice Chairman ANTHONY S. ABBATE, Saddlebrook, New Jersey J. PATRICK LIDDY, Cincinnati, Ohio TERESA A. BRYCE, St. Louis, Missouri OSCAR MARQUIS, Park Ridge, Illinois MALCOLM BUSH, Chicago, Illinois JEREMY NOWAK, Philadelphia, Pennsylvania MANUEL CASANOVA, JR., Brownsville, Texas NANCY PIERCE, Kansas City, Missouri CONSTANCE K. CHAMBERLIN, Richmond, Virginia MARTA RAMOS, San Juan, Puerto Rico ROBERT M. CHEADLE, Oklahoma City, Oklahoma RONALD A. REITER, San Francisco, California MARY ELLEN DOMEIER, New Ulm, Minnesota ELIZABETH RENUART, Boston, Massachusetts LESTER W. FIRSTENBERGER, Hopkinton, Massachusetts RUSSELL W. SCHRADER, San Francisco, California JOHN C. GAMBOA, San Francisco, California FRANK TORRES, JR., Washington, District of Columbia EARL JAROLIMEK, Fargo, North Dakota GARY S. WASHINGTON, Chicago, Illinois WILLIE M. JONES, Boston, Massachusetts ROBERT L. WYNN II, Madison, Wisconsin ANNE S. LI, Washington, District of Columbia 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

160 Federal Reserve Bulletin • October 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, 2000. through October 1998. 723 pp. $20.00 each. ANNUAL REPORT: BUDGET REVIEW, 2001. THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A MULTI- FEDERAL RESERVE BULLETIN. Monthly. $25.00 per year or $2.50 COUNTRY MODEL, May 1984. 590 pp. $14.50 each. each in the United States, its possessions, Canada, and INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. Mexico. Elsewhere, $35.00 per year or $3.00 each. 440 pp. $9.00 each. ANNUAL STATISTICAL DIGEST: period covered, release date, num- FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. ber of pages, and price. December 1986. 264 pp. $10.00 each. 1981 October 1982 239 pp. $ 6.50 FINANCIAL SECTORS IN OPEN ECONOMIES: EMPIRICAL ANALY- 1982 December 1983 266 pp. $ 7.50 SIS AND POLICY ISSUES. August 1990. 608 pp. $25.00 each. 1983 October 1984 264 pp. $11.50 RISK MEASUREMENT AND SYSTEMIC RISK: PROCEEDINGS OF A 1984 October 1985 254 pp. $12.50 JOINT CENTRAL BANK RESEARCH CONFERENCE. 1996. 1985 October 1986 231 pp. $15.00 578 pp. $25.00 each. 1986 November 1987 288 pp. $15.00 1987 October 1988 272 pp. $15.00 1988 November 1989 256 pp. $25.00 EDUCATION PAMPHLETS 1980-89 March 1991 712 pp. $25.00 Short pamphlets suitable for classroom use. Multiple copies are 1990 November 1991 185 pp. $25.00 available without charge. 1991 November 1992 215 pp. $25.00 1992 December 1993 215 pp. $25.00 1993 December 1994 281 pp. $25.00 Consumer Handbook on Adjustable Rate Mortgages 1994 December 1995 190 pp. $25.00 Consumer Handbook to Credit Protection Laws 1990-95 November 1996 404 pp. $25.00 A Guide to Business Credit for Women, Minorities, and Small Businesses Series on the Structure of the Federal Reserve System SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SERIES OF The Board of Governors of the Federal Reserve System CHARTS. Weekly. $30.00 per year or $.70 each in the United The Federal Open Market Committee States, its possessions, Canada, and Mexico. Elsewhere, Federal Reserve Bank Board of Directors $35.00 per year or $.80 each. Federal Reserve Banks REGULATIONS OF THE BOARD OF GOVERNORS OF THE FEDERAL A Consumer's Guide to Mortgage Lock-Ins RESERVE SYSTEM. A Consumer's Guide to Mortgage Settlement Costs ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— A Consumer's Guide to Mortgage Refinancings Regulation Z) Vol. / (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 (also available GUIDE TO THE FLOW OF FUNDS ACCOUNTS. January 2000. in Spanish) 1,186 pp. $20.00 each. Making Sense of Savings FEDERAL RESERVE REGULATORY SERVICE. Loose-leaf; updated Welcome to the Federal Reserve monthly. (Requests must be prepaid.) When Your Home is on the Line: What You Should Know Consumer and Community Affairs Handbook. $75.00 per year. About Home Equity Lines of Credit Monetary Policy and Reserve Requirements Handbook. $75.00 Keys to Vehicle Leasing (also available in Spanish) per year. Looking for the Best Mortgage (also available in Spanish) 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

A73 STAFF STUDIES: Only Summaries Printed in the 167. A SUMMARY OF MERGER PERFORMANCE STUDIES IN BANK- BULLETIN ING, 1980-93, AND AN ASSESSMENT OF THE "OPERATING PERFORMANCE" AND "EVENT STUDY" METHODOLOGIES, Studies and papers on economic and financial subjects that are of by Stephen A. Rhoades. July 1994. 37 pp. general interest. Staff Studies 1-158, 161, 163, 165, 166, 168, and 170. THE COST OF IMPLEMENTING CONSUMER FINANCIAL REGU- 169 are out of print, but photocopies of them are available. Staff LATIONS: AN ANALYSIS OF EXPERIENCE WITH THE TRUTH Studies 165-174 are available on line at www.federalreserve.gov/ IN SAVINGS ACT, by Gregory Elliehausen and Barbara R. pubs/staff studies. Requests to obtain single copies of any paper or Lowrey. December 1997. 17 pp. to be added to the mailing list for the series may be sent to 171. THE COST OF BANK REGULATION: A REVIEW OF THE EVI- Publications Services. DENCE, by Gregory Elliehausen. April 1998. 35 pp. 172. USING SUBORDINATED DEBT AS AN INSTRUMENT OF MAR- 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUBSIDI- KET DISCIPLINE, by Study Group on Subordinated Notes ARIES OF BANK HOLDING COMPANIES, by Nellie Liang and and Debentures, Federal Reserve System. December 1999. Donald Savage. February 1990. 12 pp. 69 pp. 160. BANKING MARKETS AND THE USE OF FINANCIAL SER- 173. IMPROVING PUBLIC DISCLOSURE IN BANKING, by Study VICES BY SMALL AND MEDIUM-SIZED BUSINESSES, by Group on Disclosure, Federal Reserve System. March 2000. Gregory E. Elliehausen and John D. Wolken. September 35 pp. 1990. 35 pp. 174. BANK MERGERS AND BANKING STRUCTURE IN THE UNITED 162. EVIDENCE ON THE SIZE OF BANKING MARKETS FROM MORT- STATES, 1980-98, by Stephen Rhoades. August 2000. 33 pp. GAGE LOAN RATES IN TWENTY CITIES, by Stephen A. Rhoades. February 1992. 11 pp. 164. THE 1989-92 CREDIT CRUNCH FOR REAL ESTATE, by James T. Fergus and John L. Goodman, Jr. July 1993. 20 pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

162 Federal Reserve Bulletin • October 2001 Maps of the Federal Reserve System Bos 1 (>N MINNEAPOLIS 7 12 i NEW YORK CHICAGO I CLEVELAND PJ", K D E U MA 4 Q SAN FRANCISCO KANSAS CITY RICHMOND ST. LOUIS 11 ATLANTA DALLAS ALASKA LEGEND Both pages Facing page • Federal Reserve Bank city • Federal Reserve Branch city n Board of Governors of the Federal — Branch boundary Reserve System, Washington, D.C. NOTE The Federal Reserve officially identifies Districts by num- of Puerto Rico and the U.S. Virgin Islands; the San Franber and Reserve Bank city (shown on both pages) and by cisco Bank serves American Samoa, Guam, and the Comletter (shown on the facing page). monwealth of the Northern Mariana Islands. The Board of In the 12th District, the Seattle Branch serves Alaska, Governors revised the branch boundaries of the System and the San Francisco Bank serves Hawaii. most recently in February 1996. The System serves commonwealths and territories as follows: the New York Bank serves the Commonwealth Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A75 1-A 2-B 3-C 4-D 5-E Pittsburgh Baltimore MD , CT on ' f 7 Cincinnati Buffalo MA ™ / NY NJ " - Rl BOSTON NEW YORK PHILADELPHIA CLEVELAND RICHMOND 6-F 7-G -H KY / Ml Wl II. ; IN - Louisville Detroit® J pJ — TN AR • c • Memphis New Orleans Little / Rock ( ATLANTA CHICAGO ST. LOUIS 99--11 Ml ND MN • Helena Ml SO • w I MINNEAPOLIS III .1 12-L WY 1 CO Omaha® KS Denver \L \SKA WWAA Seattle / NM 1 Oklahoma C.it\ • Portland OK OR / KANSAS CITY NV Y 11-K TX g J Salt Uike City NM ; - • • 1 I A —\ — 1T hhii PPaassoo J I \ (-1 r—S Y . f Houst * o n •Los Anyelcs • V* San Antonio HAWAII A/. DALLAS SAN FRANCISCO Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

164 Federal Reserve Bulletin • October 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. McKee1 Birmingham 35283 Catherine Sloss Crenshaw Andre T. Anderson Jacksonville 32231 Julie K. Hilton Robert J. Slack1 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 Gordon R. G. Werkema 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 Maryann Hunter1 Oklahoma City 73125 Patricia B. Fennell Dwayne E. Boggs 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 David K.Webb1 * 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

A77 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, Mail Stop 127, are constructed. It lists each flow series in the Board's Board of Governors of the Federal Reserve System, flow of funds publication, "Flow of Funds Accounts of Washington, DC 20551. the United States" (the Z.l quarterly statistical release), Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

166 Federal Reserve Bulletin • October 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